- Mark Barnett is focused on businesses that make money in the UK
- This hasn’t worked recently and performance has been poor, but we think he’ll do well over the long-term
- He sees opportunities in the consumer, financial and property sectors
Mark Barnett is a hugely experienced income investor. But all fund managers perform poorly sometimes. It’s happened to Mark Barnett over the past couple of years. Investments in domestically-focused businesses, and problems at some individual companies, have held back performance.
We think the setback is temporary. The fund is invested quite differently from other UK income funds. This means performance will be different, but over the long-term it could help deliver strong returns. To perform better than the stock market you must do something different.
This fund doesn’t currently feature on the Wealth 150. Mark Barnett is a good fund manager, but the Wealth 150 is focused on other excellent funds, which are also managed with lower ongoing charges.
The fund fell 3.7% over the past year. This compares with a rise of 6.5% for the UK stock market*. Please remember past performance isn’t a guide to the future.
Mark Barnett focuses on unloved, but financially strong companies. He invests when their share prices and valuations are low, then waits patiently for the business to improve or the sector to return to favour.
This has led him to increase his investments in domestic companies over the past couple of years. However, they’ve remained out of favour and this held performance back. Investments in companies such as Provident Financial and Capita haven’t helped either. Their shares prices fell after they announced profits would be lower than expected.
|Annual percentage growth|
|May 2013 -
|May 2014 -
|May 2015 -
|May 2016 -
|May 2017 -
|Invesco Perpetual High Income||10.8%**||16.4%||-3.0%||15.0%||-3.7%|
Past performance is not a guide to the future. Source: *Lipper IM to 31/05/2018.
**Performance data for 31/05/2013 to 31/05/2014 relates to the 'inclusive' share class.
Mark Barnett won't change how he invests based on a short spell of poor performance. We think this is sensible. Investment styles come in and out of favour and we think his approach will reward the patient investor.
He invests in large, medium-sized, and higher-risk smaller companies. The smaller companies could boost long-term growth. Around 5% of the fund is invested in private companies (those not listed on the stock market), for example. The investments in smaller companies includes those that take technology out of leading universities and aim to commercialise it. It’s high risk and some don’t work. Investing in a lot of companies means hopes aren't pinned on a single product or drug trial.
Larger businesses often contribute more to the fund’s income. The fund offers a reasonable yield – currently 3.3%, variable and not an indication of future income – with the potential for capital and income growth over the long term.
How is the fund invested?
Brexit and other economic issues might cause some companies to struggle. Not all domestic companies will though. Yet this is what lots of investors think will happen. It's caused the share prices of companies selling to UK consumers to fall. Mark Barnett feels investors are too negative.
Financial, consumer and real estate companies offer some of the best opportunities, in his view. Huge amounts of ‘baby boomers’ are set to retire over the coming years so demand for life insurance could rise, for example, and benefit insurance companies.
He also expects well-run companies, such as Next and easyJet, to cope with any challenges posed by Brexit and do well over the long term. Next is improving its online business and overseas sales, while easyJet could benefit from less competition because some of its competitors have gone bankrupt.
Big, international companies haven’t been ignored. There are investments in BP and Shell, for example, as Mark Barnett believes both companies have invested more wisely in recent years. This should mean they'll continue to pay good dividends, but there are no guarantees.
The fund’s charges are taken from capital. This boosts income, but reduces the potential for capital growth.