EquitiesMay 1 2013

Morningstar OBSR cuts rating on Invesco’s £1bn European fund

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ByBradley Gerrard

Morningstar OBSR has downgraded Jeff Taylor’s Invesco Perpetual European Equity fund after its confidence in the manager “waned” following “disappointing” performance.

The rating agency said the fund, which has been moved to Neutral from a Bronze rating, had “overarching concerns” about how Mr Taylor had been able to manage the fund in recent years.

“Morningstar OBSR’s overarching concern regards the extent to which its manager, Jeff Taylor, has been able to successfully manoeuvre the fund in recent years, particularly since performance has been disappointing in the context of the degree of risk taken in the management of the fund,” Morningstar OBSR said.

“While Morningstar OBSR acknowledges Mr Taylor’s experience in European equities, its conviction in his ability to add value over the benchmark in a meaningful way through time has waned.

“Moreover, in a competitive peer group, Morningstar OBSR believes a Neutral rating is a more appropriate reflection of our conviction in the fund’s relative merits.”

The fund has produced a third quartile return of 8.8 per cent in five years to April 30 compared with the IMA Europe excluding UK sector’s 14.7 per cent in the same period, according to FE Analytics.

The fund is bottom quartile in three years but has delivered top quartile returns in one, the data provider added.

An Invesco Perpetual spokesperson said Mr Taylor’s valuation-driven investment approach had “remained consistent throughout a period of extreme volatility and stress in European stock markets and economies”.

“While his willingness to stick to his investment principles and not follow the herd into what he believes are generally over-valued ‘safe haven’ stocks has clearly impacted fund performance, since the middle of last year there has been significant turnaround and the manager remains confident in his portfolio positioning.

“Recent events reinforce his view with key policymakers more openly discussing the need to promote growth alongside the significant austerity measures being carried out.

“The continuing reduction in fears about Europe should continue to provide a more supportive backdrop for the fund, which is looking to exploit a substantial number of opportunities especially in less favoured areas, both geographically and on a sector basis”