Investments  

Invesco told to improve performance of £190m trust

Invesco told to improve performance of £190m trust

Invesco has been warned by the board of the £190m Invesco Income Growth trust that it must improve the investment returns of the trust "sooner rather than later".

The remarks were made by chairman Hugh Twiss in the annual report of the trust, which covers the period to 31 March 2018 and was released this morning.

In his statement Mr Twiss said: "It is important that our investment performance improves and that the qualities and benefits of the company and its portfolio manager are better recognised by investors so that the currently wide discount can be substantially reduced.

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"The board is encouraged by Invesco‘s determination to achieve this and whilst we have every confidence that they will succeed, the board recognises that it is important that the benefits are seen to be coming through to shareholders sooner rather than later."

The trust, managed by Ciaran Mallon, has markedly underperformed against its sector, AIC UK Equity Income, over the past one and three-year time periods.

Over the past year to 17 July, it returned 0.03 per cent, compared with more than 6 per cent for the sector average, while over the past three years to the same date it returned 10 per cent, compared with more than 20 per cent for the sector.

The trust trades at a discount to net assets of 12 per cent.

Mr Twiss acknowledged the recent performance of the trust had been hurt by the value style of investing used by the manager being out of favour.

He said the investment styles currently dominating the market will "eventually run their course" and that is why he has confidence in Mr Mallon, but he warned that time was running out.

For his part, Mr Mallon said he considers it prudent to have a low level of debt on the trust given the current level of political and economic uncertainty.

In his statement in the trust’s annual report he said: "I continue to believe it is sensible to remain conservative in my investment approach and I seek to invest in companies whose prospects are not dependent on an improving economic outlook.

"I remain confident in the long term return potential of the holdings in my portfolio, particularly in respect of the investment trust’s objective of delivering dividend growth."

Mr Mallon also said: "It can be tempting when a company suffers sustained periods of underperformance to abandon ship and move my clients’ money to where the market is signalling positive returns at that given time. But I believe this would prove fatal to long-term returns.

"Where I believe that an investment case is well-supported and rational, I feel that as a truly active and responsible investor I should hold firm."

He said 'active' was a misnomer. "It means creating a portfolio that reflects independent thought, one which does not look like the stock market, he said.

" It does not mean high turnover, or changing investments to reflect the market’s daily sentiment. Sometimes appearing to do nothing – whilst reviewing and reassessing the original investment case – is the only way to be truly independent," he added.