It has been just over a year since Mark Barnett took over management of the Invesco Perpetual Income, High Income and UK Equity Pension Funds. They now sit within the IA UK All Companies sector, although investing in businesses which can maintain and grow dividends over the long term still forms a cornerstone of his approach. Alongside a sustainable, growing dividend, he seeks businesses he feels are undervalued by other investors, where the management views the company as a precious and rare resource.
The funds are each run using a very similar approach with a high level of overlap in the underlying holdings. The key difference between the funds is their dividend payment schedules.
The most significant change Mark Barnett has made to the portfolios is a reduction in the maximum individual stock weighting to 6%. This reduces risk as each holding now has less of an impact on overall fund returns. For example, AstraZeneca accounted for almost 10% of the Invesco Perpetual High Income Fund when he assumed management of the fund last year. Although he is still positive on the long-term prospects for the firm, he has been reducing the position and it now accounts for 4.4% of the fund.
A proportion of the proceeds from these reductions have been invested in higher-risk medium-sized companies. These companies often offer a lower current dividend yield but in Mark Barnett's view, this is offset by the potential for superior long-term profit and dividend growth.
The manager wishes to sell a number of holdings where the funds' position is minimal in order to reduce the total number of investments within each portfolio. He anticipates this could take some time to achieve as the majority of these minor holdings are in small or unquoted companies which can be difficult to sell.
Mark Barnett will, however, maintain some select positions in these higher-risk unquoted companies and will keep those he believes offer the opportunity to boost the long-term capital performance of the fund. Researching these companies is a time consuming and specialist role, so any new investments will be co-investment opportunities presented to him by companies such as Allied Minds, Imperial Innovations and IP Group. These companies specialise in forming, funding and nurturing start-up companies and so the manager relies on them to provide initial recommendations and due diligence. The manager also has the flexibility to invest in derivatives, which adds risk.
Mark Barnett has retained the fund's bias to healthcare and tobacco companies and has continued to avoid mining stocks and UK banks. However, he has added exposure to the financial sector through investments in life insurance and real estate companies. Elsewhere, he is positive on the consumer services sector. Increasing wages and lower fuel bills have contributed to increased disposable income for the average UK household. He has increased the fund's exposure to this area by adding a position in travel and leisure company Compass Group.
Our view on these funds
Performance has been good over Mark Barnett's short tenure with the Invesco Perpetual High Income and Income Funds outperforming the peer group by 8.9%* and the Invesco Perpetual UK Equity Pension Fund outperforming by 7.4%. Although please remember past performance is not a guide to future returns.
He has built a good long-term track record managing the Invesco Perpetual UK Strategic Income Fund and the Perpetual Income & Growth Investment Trust. Our analysis suggests returns have been led by the manager's strong stock picking along with good sector positioning. While we believe Mark Barnett will do a good job managing the Invesco Perpetual Income, High Income and UK Equity Pension Funds, we currently feel there are superior alternatives within the IA UK All Companies and IA UK Equity Income sectors. The funds are therefore not currently being considered for inclusion on the Wealth 150 list of our favourite funds across the major sectors.
Performance of the Invesco Perpetual Income Funds over Mark Barnett's Tenure
Past performance is not a guide to future returns. * Lipper to 01/05/15
|Annual percentage growth|
| May 10 -
| May 11 -
| May 12 -
| May 13 -
| May 14 -
|Invesco Perpetual Income||14.1%||7.09%%||21.34%||11.6%||14.15%|
|Invesco Perpetual High Income||14.75%||7.24%||21.69%||11.21%||13.94%|
|Invesco Perpetual UK Equity Pension||13.96%||5.79%||21.84%||14.92%||13.87%|
|IA UK All Companies||15.57%||-2.57%||18.39%||13.77%||7.65%|
|FTSE All-Share TR||16.78%||-1%||16.9%||10.5%||7.38%|
Please read the Invesco Perpetual Income Fund's key features/key investor information document, the Invesco Perpetual High Income Fund's key features/key investor information document and the Invesco Perpetual UK Equity Pension Fund's key features/key investor information document in addition to the information above.
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