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Mercantile spots a sea of opportunity

New investment boutique River and Mercantile Asset Management has launched two funds investing in UK equities.

The company can trace its roots back to the River Plate Trust Loan and Agency Company in 1881. This became River and Mercantile Trust in the 1960s and a specialist UK equities fund management business was developed when Pacific Investments took over the company in the 1990s.

The business became Liontrust in 1999 but Pacific Investments retained the original name as a holding company and formed River and Mercantile Asset Management earlier this year.

The funds – UK equity high alpha and UK smaller companies – will be managed by Hugh Sergeant and Dan Hanbury respectively.

Sergeant joined River and Mercantile in August following four years at SG Asset Management. Previous employers include UBS, Phillips & Drew and Gartmore. Hanbury joined River & Mercantile in October following six years at Investec. He previously worked for Schroders.

Sergeant’s fund will hold 35-45 large and mid caps alongside 20-40 small caps. Stock selection will be based on River and Mercantile’s PVT philosophy – potential, valuation and timing – to identify price anomalies and assess the likelihood of a rise in share prices over the medium term. This was based on a similar strategy used by Sergeant at SG Asset Management.

The next stage in the investment process is IVR – ideas, verification and risk. Sergeant will look for ideas, further analyse stocks in relation to the PVT process and ensure the portfolio does not carry too much risk.
.Hanbury’s fund will use a similar strategy to Sergeant’s fund but will contain 60-100 stocks comprising smaller companies, mid-caps and Aim-listed stocks.

While focusing on opposing ends of the market cap spectrum, both funds offer diversification within their respective perimeters. While Sergeant’s fund is able to take advantage of good quality blue chips at relatively cheap prices, it shares the FTSE Mid Cap hunting ground with Hanbury’s fund, which will be able to take advantage of growth companies and recovery situations at the smaller end of the market.

However, it may take time for investors to switch on to new funds from a new management group, although the managers’ previous track records may help to speed up this process.

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