It has been announced today Mark Barnett will step down as manager of the Invesco Income, High Income and UK Strategic Income funds with immediate effect. He will leave Invesco after 24 years at the group.
Barnett's departure follows a broader review of Invesco's UK equity product range by chief investment officer Stephanie Butcher. Butcher was appointed CIO last year, and has since made a number of changes to Invesco's range of funds and their managers.
As part of the UK product review, Invesco's range of UK funds will be streamlined, which means the Invesco UK Strategic Income Fund will merge with the Invesco Income Fund, subject to regulatory approval.
A clearer distinction between the Income and High Income funds will also be announced in due course. The two funds have become increasingly similar over the years, but going forwards there will be a greater difference in the income objective of each fund and, therefore, in their positioning.
James Goldstone and Ciaran Mallon will take over as co-managers of both the Income and High Income funds. Goldstone joined Invesco's UK Equities team in 2012 and has run UK equity funds since 2016. Mallon joined Invesco in 2005 and has since run a number of UK equity funds, including the Invesco Income & Growth Fund.
What investors need to know
Invesco's income funds have been through a particularly tough period of performance in recent years. The funds have fallen significantly behind the FTSE All Share Index, and it's been a disappointing few years for investors.
Barnett focused on unloved companies, which he aimed to buy when their share prices and valuations were low, with the hope of recovery at a later date. But this investment style has been out of favour in recent years, and a bias towards domestically focused UK companies hasn't helped either.
At present, Invesco's income funds invest in companies of all sizes, including large, medium-sized and higher-risk smaller companies. A portion of the funds also invest in unquoted companies (those not yet listed on the stock market). They're less liquid (more difficult to buy and sell) than larger companies, which could potentially make it more difficult to meet large redemptions in the funds. The funds have already seen redemptions in recent years, following the weaker spell of performance.
As at the end of April 2020, 3.75% of the Invesco Income Fund is currently invested in unquoted companies, while 3.36% of Invesco High Income, and 3.27% of Invesco UK Strategic Income, is invested in them. Invesco recently announced their intention to sell the unquoted companies from the funds, which could improve the overall liquidity of the funds.
Please note the less liquid nature of these positions means it could take some time for them to be sold. We would like to see the manager make quick progress in selling this element to ensure they maintain sufficient liquidity to cover any further redemptions.
Ciaran Mallon takes a slightly different approach. We view him as a sensible fund manager with a less aggressive approach to investing. His pragmatic approach means his funds aren't biased too heavily towards one particular style of stock. While Mallon will invest in some lowly-valued companies, he also invests in 'growth' stocks, which are perceived to have more predictable earnings growth.
We intend to speak to the new fund managers about their plans for the funds in due course. At this point we'll update investors with any further changes and our views.
|Annual percentage growth|
| Apr 15 -
| Apr 16 -
| Apr 17 -
| Apr 18 -
| Apr 19 -
|Invesco High Income||-1.6%||12.6%||-1.6%||-2.6%||-31.0%|
|Invesco Income||-2.7%||11.7%||-2.0 %||-0.9%||-31.6%|
|Invesco UK Strategic Income||-1.9%||10.2%||-0.7%||-6.1%||-30.1%|
|IA UK Equity Income||-2.6%||16.3%||5.3%||0.5%||-16.6%|
Past performance is not a guide to the future. Source: Lipper IM to 30/04/2020