- Mark Barnett is focused on businesses that make money in the UK
- This includes consumer, financial and property companies
- Whilst performance has been poor recently, we think Mark Barnett will do well over the long-term
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.
He’s a hugely experienced income investor though and 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. 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.
How is the fund invested?
Lots of investors think the UK economy will struggle because of Brexit. It's caused the share prices of companies selling to UK consumers to fall. Mark Barnett feels investors are too negative.
There are areas that might struggle, but to tar all domestic companies with the same brush is short sighted. He doesn’t think the low share prices and valuations reflect the long-term potential of some of these companies.
Financial, consumer and real estate companies offer some of the best opportunities. 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 fell 4% over the past year. This compares with a rise of 6.5% for the UK stock market*. As well as having too much invested in domestic companies, performance was affected by companies such as Provident Financial and Capita. 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 Income||10.6%**||16.6%||-3.9%||14.1%||-4.0%|
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.
We think Mark Barnett is right to stick to his approach and focus on unloved, but financially strong companies. 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.
The fund’s charges are taken from capital. This boosts income, but reduces the potential for capital growth.