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Invesco Perpetual fined £18.6m for risk failings linked to Woodford funds
by Dylan Lobo on Apr 28, 2014 at 11:10
The Financial Conduct Authority (FCA) fined Invesco Perpetual £18.6 million for exposing investors to greater levels of risk than they had been led to expert.
According the financial watchdog, Invesco Asset Management Limited and Invesco Fund Managers Limited broke the rules designed to limit the risks to investors on 33 occasions across 15 funds, representing more than 70% of assets under management.
The breaches were said to have taken place between May 2008 and November 2012 and the losses from this risk taking amounted to £5 million, which Invesco compensated to the funds.
Invesco Perpetual confirmed the compensation was made to three funds, two of which were managed by the firm's former star manager Neil Woodford - the Invesco Perpetual High Income and Income funds, which he relinquished earlier this year to set up a boutique. The funds are now managed by Mark Barnett.
The third fund is Invesco Perpetual Managed Income , which is now managed by chief investment officer Nick Mustoe. Between January 2008 and December 2010 the fund was managed by Bob Yerbury and Invesco Perpetual said vehicle was impacted as a result of its investment in the Income and High Income funds.
According to Lipper, both the Income and High Income funds beat the benchmark between May 2008 and November 2012, returning 24% and 25.25% respectively, versus a 14.9% rise in the FTSE 100 and a 17.25% rise in the FTSE All Share.
The FCA said Invesco Perpetual did not comply with investment limits during this period, which are designed to protect consumers by limiting their exposure to risk.
While it noted the £5 million compensation was paid promptly, it highlighted the losses could have been greater.
In addition, the watchdog said Invesco Perpetual did not clearly inform investors or explain the associated risks of its use of derivatives which introduced leverage into the funds, although the firm was allowed to use derivatives in this way.
It also said the firm failed to record trades on time, meaning the funds had been wrongly priced, and failed to monitor whether trades were allocated fairly between funds, creating a risk some funds may have been disadvantaged.
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