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Invesco Perpetual Income & Growth Fund research update

Richard Troue | Tue 03 March 2015

Investments can go down as well as up so there is always a danger that you could get back less than you invest. Nothing here is personalised advice, if unsure you should seek advice.

When looking for companies Ciaran Mallon, manager of the Invesco Perpetual Income & Growth Fund, focuses on a few key qualities. They must have a strong balance sheet with low levels of debt, a reliable dividend, and dependable management at the helm. The fund operates a concentrated portfolio which allows each holding to have a significant impact on performance but this is a higher risk strategy.

Croda International currently represents almost 2.5% of the fund, and exemplifies these qualities. The company manufactures chemicals for a wide variety of industries. The high quality of their products allows them to keep prices high and maintain good profit margins. The company generates great cashflow and is disciplined in using this for the benefit of shareholders. Crucially, the valuation of the company has been depressed. It has risen from its lows but, in the manager's view, still does not fully reflect the long-term potential of the company.

Ciaran Mallon will look at every industry to see if there are companies that meet his criteria, but he is not compelled to invest in all of them. He has tended to avoid mining companies, which have suffered in the face of falling commodity prices, and this has proved a benefit to the fund. Additionally, he currently holds few financial companies, relative to the FTSE All-Share index. Exposure to this industry has been reduced ever since the global financial crisis.

One area he favours is the consumer services sector, where many companies have been beneficiaries of increased consumer spending during the UK economic recovery. One of his favourite companies in this sector is Young & Co's Brewery. The company owns and operates a number of pubs, mainly in London and the South East. It is family run and cautiously managed, boasting a healthy balance sheet. Ciaran Mallon views this as an exceptional company with long-term potential. It has been a key contributor to the fund's strong recent performance and the manager expects it to play an important role in the future.

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Our view on this fund

Over the past three years Ciaran Mallon has delivered good returns for investors. The fund has returned 49.5% compared with 44.6% from the IA UK Equity Income sector and 34.9% from the FTSE All-Share index over that period. Please note that past performance is not necessarily a guide to future returns.

Annual percentage growth
Mar 10 -
Mar 11
Mar 11 -
Mar 12
Mar 12 -
Mar 13
Mar 13 -
Mar 14
Mar 14 -
Mar 15
Invesco Perpetual Income & Growth 14.58% 7.32% 16.86% 17.15% 9.18%
IA UK Equity Income 15.47% 2.03% 14.88% 16.87% 7.72%
IA UK All Companies 18.54% 0.76% 13.90% 17.71% 5.35%
FTSE All-Share TR 14.83% 3.42% 13.26% 11.20% 7.15%

Past performance is not a guide to future returns. Source: Lipper IM * to 2/03/2015

The fund is not currently part of the Wealth 150 list of our favourite funds across the major sectors. Our analysis suggests that, with the exception of the past three years, the manager's stock selection and sector positioning have not added significant value. There are a number of exceptional managers in this sector, and we would prefer to see Ciaran Mallon continue his recent success before considering the fund for inclusion on the Wealth 150 of our favourite funds across the major sectors.

Investors should note this fund has been moved from the IA UK Equity Income sector to the IA UK All Companies sector, with effect from 27 February 2015. This is because the fund's yield has fallen below the level required to remain in the UK Equity Income sector. Invesco Perpetual have confirmed that this will not affect the management of the fund.

Find out more about this fund including how to invest

Please read the key features/key investor information document in addition to the information above.

The value of investments can go down as well as up, this means you could get back less than you invested. Therefore all investments should be regarded with a long term view. No news or research item is a personal recommendation to deal. If you are unsure about the suitability of an investment please contact us for advice.
Important information - Please remember the value of investments, and any income from them, can fall as well as rise so you could get back less than you invest. This article is provided to help you make your own investment decisions, it is not advice. If you are unsure of the suitability of an investment for your circumstances please seek advice. No news or research item is a personal recommendation to deal.


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