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Watch out Gars: five experts ask if Invesco Perpetual can challenge SLI
We ask five industry experts whether the new multi-asset fund launched for the team Invesco Perpetual poached from Standard Life Investments can challenge Gars' dominance of the sector.
Major investors have reacted coolly to the news that the team poached by Invesco Perpetual from Standard Life Investment’s giant Global Absolute Return Strategies (Gars) fund is to establish its own rival offering, to be called Global Targeted Returns (GTR).Invesco Perpetual has confirmed that the new vehicle for the Gars alumni David Millar (pictured), Dave Jubb and Richard Batty will sit in the IMA’s Targeted Absolute Return sector and aim to beat its Libor three-month GBP benchmark by 5% on a three-year rolling basis. It aims to achieve this with less than half the global equity volatility of the MSCI World Index, prompting direct comparisons between the two funds, even if both groups are keen to play this down.So can GTR steal some of Gars’ thunder?Tim Cockerill, investment director at Rowan Dartington‘This new fund will be using existing Invesco funds, so that does add a certain element of differentiation because what you’re getting is active management whereas Gars uses more exchange-traded products and derivatives.I’ve not used Gars because although I have looked at the individual strategies and been through them with the managers, I have never quite got my head around how the whole thing works. It did perform well at the beginning, although it was a little more volatile than I had imagined.But this new fund has the advantage of the Gars experience, what worked well and what worked less well. I can actually see it being an evolution of the Gars fund, a more mature version having been there through the life of Gars.The manager should be able to take all that accumulated knowledge and apply it, hopefully in a more refined manner. The differentiation may be at a subtle level rather than at a major level, but GARS has been successful.In some ways, just having another choice will be positive too.’Shauna Bevan, collectives investment manager at Charles Stanley‘I’m quite happy with Gars, to be honest. I think it’s going to be hard for Invesco Perpetual to differentiate itself from Gars, which has a substantial following after putting in lots of effort to educate advisers. Invesco does have a great brand though.A 5% target is quite punchy, but I don’t yet know how achievable that will be within its risk levels. Half the volatility is fine, but how is it going to perform in the event of a major sell-off? It will also be interesting to see how what happens when interest rates rise. There are some interesting macroeconomic factors that have to play out.What I am trying to get head my around is, I don’t think the product can be run in isolation. It is very much based on different sources of alpha and idea generation across the group and SLI has built this up for a number of years.Invesco’s bond team is quite separate and I not sure how it will tie together. I am not doubting whether Invesco Perpetual has the investment expertise, just whether they can pull it together for a strategy as successful as Gars.My slight concern is the capacity for the total strategy, with the largest such fund in the US – Bridgewater – about the same size as Gars. There is then counterparty risk, as we don’t know whether all the funds are going to end up with the same counterparty.But more choice is always a good thing, as long as you know how to navigate your way through those choices.’Ian Aylward, head of multi-manager research at Aviva Investors‘Clearly it is very early days to say whether this fund will emerge as a serious rival to Gars, and initial meetings with the portfolio managers are not taking place until next week. That said, Invesco Perpetual is a large firm both globally and in the UK and so it has the resources to back this launch. The team is clearly very experienced, but it is far smaller than at SLI.Regarding how it will distinguish itself from Gars it seems to have similar parameters. Perhaps a differentiator will be the significant use of in-house funds, but a greater performance target would have been a clear differentiator.What would persuade me to back it rather than Gars? Ultimately, one will need to see a competitive track record built out. Gars really only started to gather the huge assets it now has after several years of good performance, in particular in the 2008 crisis. I would also like to fully understand the new fund’s risk controls.’Michael Paul, investment manager at City Asset Management‘I don’t really see it emerging as a serious rival to Gars in the short term, as I think with these types of strategies a good performance track record is key.To differentiate the new fund, if possible we would like to see it have a higher return target with similar levels of volatility, and cheaper fees. However, it does not seem to have any of these. The performance targets are incredibly similar, and the fees on an on-going charges basis appear slightly more expensive – 0.84% on the institutional class of Gars and 0.9% on the cheapest share class of GTR.The main ways they are different is the size of the team and the size of assets they run. The size of the team I see as a disadvantage for GTR, particularly within risk management, which is a key element of both funds. There are five people across the entire multi-asset team at Invesco, in contrast to SLI which has six people in a subset within Gars that they call risk investigation.However, we believe the size of the fund could be a real benefit to Invesco. Hopefully this size will allow them to target some markets that Gars is unable to due to liquidity constraints, and also enable them to invest in the strategies that they identify in a more cost efficient manner.We would have to see the new fund generate a strong track record to consider switching assets.’Gary Potter, co-head of the multi-manager team at F&C‘Gars has had a good run, but with Munro moving away people will quite rightly question the fund. That said, Guy Stern is a very capable manager and someone I have worked with before.However, Gars is not something I invest in. It’s more of an IFA product than something for a multi-manager. I’m not negative on Gars but we’ve just never used it.’