View the article online at http://citywire.co.uk/money/article/a743502
Should Invesco drop names of Woodford's old funds?
Neil Woodford's biggest fund at Invesco Perpetual is changing sector, proof that investment income wasn't what the star was all about.
Invesco Perpetual has moved the High Income fund formerly run by star manager Neil Woodford from the IMA Equity Income sector into the IMA UK All Companies sector.
The significance of this switch in sector is that it confirms what many have known for a long time: that Neil Woodford's income funds were famous for generating a tremendous total return but were not the best at providing a high income.
The company says the change is necessary because it does not want to meet a requirement from the Investment Management Association (IMA) that UK equity income funds generate an income, or yield, of 10% more than the FTSE All Share. The £13 billion fund, which Mark Barnett took over last month, yields 3.2% compared to the All Share's 3.8%. The IMA target would require a yield of nearly 4.2%.
Ian Trevers, head of UK retail business at Invesco Perpetual, said another of Woodford's former big funds, the £8 billion Income fund, and the Strategic Income fund, both also managed by Barnett would also probably move to the UK All Companies sector this year.
Funds in the UK All Companies sector do not have to meet a yield target but simply have to be invested 80% in the UK stockmarket with the aim of growing their investors' capital. Income and Strategic Income currently yield 3.2% and 3.1% respectively.
Trevers said: ‘The interests of clients in these particular funds are best served by us continuing to focus on providing a growing level of income, balanced with the opportunity for capital growth over the long term.'
Trevers added: ‘We are comfortable that these three funds will have a different IMA classification. Our clients and their advisers can be confident that this sector change will not impact the way their investments are managed.’
Quite true, the move to a more appropriate sector should not change the way the funds are managed, rather it should confirm the way they have been run.
But perhaps it should give Invesco Perpetual reason to consider a change in the name of the funds if it wants to avoid misleading investors. There are only two 'Income' funds in the 257-strong UK All Companies sector and neither are well known. It's a funny name for funds in a sector primarily about capital growth.
'Income & Growth' would be a good name. It's a popular tag in this sector already and looks to be a better label for funds aiming to deliver on both sides of the investment equation. Given that Invesco Perpetual's Income and High Income funds yield virtually the same and invest in a similar way they could be called 'Income & Growth 1 and 2'.
Unfortunately, Invesco Perpetual already has an Income & Growth fund run by Citywire AA-rated Ciaran Mallon. It remains in the equity income sector although with a 3.3% yield you have to wonder for how long. Maybe 'Growth & Income' might work instead!
Or perhaps the name of the funds doesn't really matter. If investors know what the funds are about and are delivering what they need, who cares what they are called?
Maybe it's more of an issue for Woodford as he prepares to launch his first fund. Anyone for the Woodford UK Income & Growth fund? It suits his record better.
We explored Neil Woodford's record in more detail in 'How good was Woodford really?' in issue one of our Income Investor ezine.
Barnett, who has a top Citywire AAA-rating, replaced Woodford who has left to set up his own firm under the shelter of Oakley Capital.
The High Income fund has returned 52.3% over the last three years versus a 34% rise in the benchmark. Barnett built his reputation on the Invesco Perpetual UK Strategic fund, which has returned 64.6% over the last three years.
Woodford's new business has had a good start, yesterday winning £3.5 billion of funds from St James's Place that he used to run at Invesco Perpetual.
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Look up the funds
- Invesco Perpetual High Income Inc
- Invesco Perpetual Income Inc
- Invesco Perpetual UK Strategic Inc (No Trail) Inc
- Invesco Perpetual Income & Growth Inc
Look up the fund managers
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- UK All Companies fund sector
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by Michelle McGagh on Sep 27, 2016 at 05:00