High equity bias brings good returns for Invesco fund

High equity bias brings good returns for Invesco fund

With 82.4 per cent of the portfolio invested in equities, the Invesco Perpetual Managed Income fund is close to reaching its equity limit – a tactic which appears to be working in its favour.

The £304m fund has consistently outperformed its sector over the past three years, delivering a good 19.5 per cent return, against the Investment Association Mixed Investment 40-85 per cent sector average of 7.4 per cent, FE figures reveal.

A fifth of the fund is invested in international equities, 17.6 per cent is in European equities, and 16.2 per cent is exposed to UK equities.

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The portfolio, which is ranked 17th in its peer group, is comprised primarily of qualifying funds as fund manager Nick Mustoe aims to achieve capital growth and a high level of income.

The portfolio’s top holdings include Invesco Perpetual UK strategic Income at 16.4 per cent, Invesco Perpetual Income at 16.2 per cent, and Invesco Perpetual US Equity at 14.8 per cent.

Its minimum investment is £500, and the ongoing charge is 1.5 per cent.

By comparison, the NFU Mutual Mixed Portfolio 40-85 per cent fund has underperformed the IA 40-85 per cent peer group, scoring a modest 1.5 per cent over a three-year period, according to the latest FE figures.

Ranked 115th in the sector, the fund began to dip below the peer group average in summer last year, having previously outpaced it since 2012.

Two thirds of the asset allocation is in the UK, primarily equities, at 53 per cent, while the £175m fund also has smaller pockets of exposure to the US, Europe, emerging markets, and Asia.

The fund invests principally in other funds managed by NFU mutual unit managers, with the balance invested in third-party funds with compatible objectives.

According to Morningstar, top holdings include NFU Mutual UK Growth I at 31.3 per cent, NFU Mutual Gilt & Corp Bond I at 21 per cent, and NFU Mutual Global Growth I at 18.6 per cent.

The minimum investment is £1,000 and the annual charge is 1.5 per cent.

Invesco Perpetual Managed Income NFU Mutual Mixed Portfolio 40-85
1. Invesco Perpetual UK Strategic Income 16.4%1. NFU Mutual UK Growth 31.3%
2. Invesco Perpetual Income 16.2%2. NFU Mutual Gilt & Corp Bond 21%
3. Invesco Perpetual US Equity 14.8%3. NFU Mutual Global Growth 18.6%
4. Invesco Perpetual Corporate Bond 13.6%4. NFU Mutual UK Equity Income 15.1%
5. Invesco Perpetual European Equity Income 13.1%5. NFU Mutual Global Emerging Market 11.3%

Adviser view

John Stirling, director of Essex-based Walden Capital, said: “Many active fund managers have been accused of charging like an active fund while following the herd when it comes to investment decisions.

“The NFU fund’s historic performance and risk rating would suggest the managers were guilty of this until a year or two ago. There is a clear divergence from the majority and it’s easy to see that NFU took a decision to stay ‘risk on’ when many others lowered the exposure.

“Sadly, this has come at a time when risk has not been well rewarded - and so it has hit performance.

“There is nothing wrong with being a tracker – provided you are only charging like a tracker. I don’t think this fund offers much to either camp.