Twitter icon Email alerts icon Latest News RSS icon Magazine icon Stay connected:

View the article online at http://citywire.co.uk/wealth-manager/article/a750973

Trust Insider: an under-the-radar Invesco trust arbitrage

by James Carthew on May 20, 2014 at 00:01

Trust Insider: an under-the-radar Invesco trust arbitrage

While the launch of Neil Woodford’s new fund management company has been hogging the headlines, I thought I would look at one of the more obscure funds run by his former home, Invesco Perpetual.

Invesco Perpetual Select Trust was born in 2006 after the reconstruction of Merrill Lynch Asset Allocator. It is an umbrella vehicle, a structure that comes into its own if investors fear triggering capital gains tax (CGT) but want to be able to switch between asset classes, to match changes in their risk appetite or to time markets.

Invesco Perpetual Select is essentially four funds in one – UK Equity (IVPU), Global Equity Income (IVPG), Balanced Risk (IVPB) and Managed Liquidity (IVPM). Each class has its own portfolio, run by managers who are experts in those fields. The first two use moderate amounts of gearing to enhance returns but, for IVPB, gearing cannot exceed 5% and gearing is not permitted on IVPM.

I would expect the board is keen to keep gearing under control but, from a legal standpoint, Invesco Select is one company and so, in an extreme situation, shareholders of the other classes would be liable if one of the geared classes defaulted on its debt.

The fees are 0.25% on net assets for IVPM and 0.75% on the other classes. There is a performance fee on the two equity classes. Capped at 0.75%, the fee kicks in if the managers beat their benchmarks by at least 1%, and is 12.5% of the excess return.

The UK Equity portfolio is managed by Mark Barnett (who is also manager of Woodford’s old funds) with the aim of maximising long-term total returns. Like other funds in the Invesco stable, IVPU’s composition is driven by stock selection and without much reference to the benchmark, which in IVPU’s case is the FTSE All-Share.

Though IVPU doesn’t have a growth and income remit, Barnett’s investment style is pretty consistent across all the funds he runs and so IVPU’s portfolio looks a lot like that of Edinburgh Investment Trust or Keystone . Despite its name IVPU even has exposure to overseas equities. His performance record is pretty good, boosted recently by a large holding in AstraZeneca, and, maybe for that reason, this is the biggest of the four classes.

The global class, IVPG, aims for growing income and capital appreciation over the long term from a diversified portfolio of global equities. Over the past year or so, under the management of Nick Mustoe, it has outperformed the MSCI World index.

The balanced risk portfolio replaced one that was managed in a fund of hedge fund style by Fauchier Partners. This fell out of favour after failing to protect its NAV during the credit crisis, like many other listed funds of hedge funds. IVPB invests in debt and commodities as well as equities with the aim of minimising the downside and performing even in adverse economic conditions.

The balance of IVPB, run by Scott Wolle, is determined by the manager’s estimate of the risk contribution from each of the three investment types and is mostly invested in ETFs but with an overlay of derivatives (IVPB will not run net short positions).

Sign in / register to view full article on one page

leave a comment

Please sign in here or register here to comment. It is free to register and only takes a minute or two.

News sponsored by:

Sponsored Video: Bringing it all back home


As the UK coalition government strives to rebalance the national economy, so called 'reshoring' looks set to play an increasingly important role in economic recovery.

Today's top headlines

The Citywire guide to investment trusts

Investment trusts have proved to be a highly effective way to invest in the market. Citywire has interviewed the experts to find out more.

Sponsored Video: Barings on investing in Frontier Markets


From Nigeria to Pakistan and from Kenya to Kuwait, frontier markets are catching investors' attention as never before.

More about this:

Look up the shares

  • Invesco Perpetual Select Trust PLC
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Invesco Perpetual Select Trust PLC
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Invesco Perpetual Select Trust PLC
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Invesco Perpetual Select Trust PLC
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Edinburgh Investment Trust Closed Fund
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • AstraZeneca PLC
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them

Look up the investment trusts

  • Keystone (Ordinary Share)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them

Look up the fund managers

  • Neil Woodford
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Mark Barnett
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Nick Mustoe
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Scott E. Wolle
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Stuart Edwards
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them

More from us

Archive

On the road

Click here to find out more from the Audience Development team.

Sorry, this link is not
quite ready yet