Competition in one of the UK’s fastest of growing sectors has intensified with Invesco Perpetual launching its eagerly anticipated multi-asset fund.
The Invesco Perpetual Global Targeted Returns (GTR) fund is managed by multi-asset head David Millar (pictured), Dave Jubb and Richard Batty and sits in the IMA's Targeted Absolute Return sector.
The trio joined the firm earlier this year from Standard Life Investments (SLI) where they played key roles in the management of the popular Standard Life Global Absolute Return Strategies (Gars) fund, which has amassed around £18 billion in assets under since its launch in May 2008.
The three will be supported by fellow ex-SLI colleague Gwylim Satchell, who takes up the post of risk manager after a spell managing a range of liability-driven investment funds at his previous team.
Georgina Taylor completes the team. She joins as product director from State Street Global Markets, where she headed its equity strategy.
While the market sees the fund as a natural competitor to Gars, Millar is reluctant to pitch the two against each other.
‘There is a certain alignment [between GTR and Gars] and its a philosophy I appreciate,' Millar told Wealth Manager, 'but I don’t want to compare the two.’
Central to GTR’s strategy is the dispensation of asset classes and focusing instead on a three step approach. This starts with the selection and of approval of investment ideas from across asset classes and geographies, followed by the combination of these ideas into a portfolio using a robust risk framework. The final step is the implementation through the firm’s global trading desk.
The fund has 22 ideas at launch with a basic premise being that each one will deliver a positive return over a three-year period to help the fund beat its target of topping its Libor three-month GBP benchmark by 5% on a three-year rolling basis. It aims to achieve this at less than half the global equity volatility of the MSCI World Index.
‘I’m a great believer in an unconstrained research agenda that allows you to build a diversified portfolio,' Millar said. ‘For absolute return to be effective it’s about targeting equity like returns for half the risk.’
To ensure the fund is properly diversified it will have exposure to three asset classes. The fund has positive exposure to European and US equities and a negative position in emerging markets. It also has limited exposure to corporate bonds and accesses government bonds mainly through derivatives.
One sector Millar is struggling to find decent ideas in at the moment is emerging market debt (EMD). ‘There are some value arguments for looking at EMD but we are concerned about flows which have all been one way for some time and you have to worry about countries in deficit if things get messy. However, we have started to think how we will re-enter the EMD market.’
Depth of talent
A striking difference between GTR and GARs is the size of their management teams, with the latter boasting around 30 to the former’s five.
This is not of concern to Millar as he highlights the strength of Invesco Perpetual’s wider team. ‘Being provided with the opportunity to bring our multi asset experience to a truly global firm such as Invesco Perpetual, and to sit amongst some of the best like-minded long-term fundamental thinkers is a privilege,' Millar said.
'As a team we believe that the way to achieve true diversification is to break away from the constraint of asset class labels and bring good investment ideas, which cross asset classes and geographies, together into a single diversified portfolio. This strategy, combined with the fact that we can draw on the immense intellectual capital of Invesco Perpetual gives us the ability to create something market leading.
Miller added: ‘There are five of us in this team and we are completely dedicated to this. We have been brought in here to build a multi-asset business here and we’ve got exactly what we need and will take the future in our stride.’
The multi-asset opportunity
Invesco Perpetual has spent the best part of a year honing the fund. Millar joined the firm at the start of the year, followed by Jubb and Batty in March. Shortly after, the trio established a model portfolio, which Millar said had produced ‘very good results’ over the last five months.
The Henley-based firm sees the fund launch as a crucial stage in its evolution, which has already seen it develop strong equity and fixed income franchises under Neil Woodford, and Paul Causer and Paul Read, respectively.
The firm’s chief investment officer Nick Mustoe underlined the opportunity: ‘As investors in the UK seek to grow their money without taking excessive levels of risk there has been consistent demand for multi asset investing, but there are very few managers doing it well.
'At Invesco Perpetual we have waited to find the right people, with the ability to create a market leading product in response to this demand. Building a leading multi asset capability is central to our vision for the Invesco Perpetual business.'
Its distribution head Ian Trevers added: ‘A recurring theme in our conversations with clients has been the challenges they face in constructing portfolios that not only combine diversification with the control of volatility, but also the need to deliver returns. These talented managers have a proven track record and capability in building risk-managed portfolios that deliver for clients.’
Trevers also indicated there would be more products being launched for the team over the longer term. ‘There is scope to expand but we want to do a good job with this first and not get distracted.’
Victoria Hasler, a fund analyst at Brewin Dolphin, welcomes the increased choice the fund brings to the market. 'I think it's a good thing they're [Invesco Perpetual] launching it because there wasn't a huge amount of competition for Gars and I think competition is healthy.'
Ongoing charges for GTR range from 1.6% for accumulation units, which includes trail, to clean pricing of 1.1% and and further discount of 0.90% on a Z share class.