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Invesco Perpetual seeks to oust loan fund chair in fee row

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Invesco Perpetual seeks to oust loan fund chair in fee row

Invesco Perpetual is attempting to sack the chairman and a director of a high yielding loan fund from which it resigned as fund manager last month.

In an escalation of a row over fund management fees, Invesco Perpetual Enhanced Income (IPE) today disclosed it had received a requisition on behalf of Invesco Perpetual, which holds a 16% stake, and two other fund managers to summon a general meeting of shareholders.

Invesco, which is supported by Practical Investment Fund and GAM Star Credit Opportunities, which owns 8%, wants investors to vote on whether Donald Adamson, IPE’s chairman, and Richard Williams, chair of its management engagement committee, should be removed as directors.

In their place they are proposing Hazel Adam, a former Standard Life Investments director recently appointed to the board of Aberdeen Latin American Income (ALAI), and Howard Myles, a former Ernst & Young partner and chairman of Aberdeen Private Equity (APEF).

Unveiling IPE’s half-year results yesterday, Adamson said he had planned to retire but would stay on another year in order to oversee the appointment of a new fund manager.

Invesco’s resignation from IPE, whose star bond fund managers Paul Causer and Paul Read have run the £125 million investment company since launch 17 years ago, is highly unusual. It followed lengthy negotiations over expenses, centring on the performance fee Invesco is entitled to when its managers generate annual returns over 7%.

Writing in last week’s results, Adamson said they showed that investment management costs were absorbing an increasing proportion of gross returns from the 6% yielding fund, as bond yields had fallen during the post-financial crisis rally in fixed income stocks.

‘Having taken relevant advice and carried out detailed research, the board concluded that the current arrangements with Invesco needed to be adjusted,’ he said.

In a comment that may have antagonised Invesco further, he added: ‘A further point in tackling the company’s cost structure rests on the improvement to dividend cover which cost reductions can be expected to make. This will improve the long-term sustainability of the income which can be offered. This point is particularly relevant in that our dividend is not currently fully covered by earnings albeit that the company has significant levels of revenue reserves.’

IPE’s broker JPMorgan Cazenove had contacted a number of leading bond fund managers and had received ‘significant unsolicited interest’ from other experienced bond managers as well, he said.

 

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