Invesco’s Mark Barnett is to continue with the same investment priorities in 2019, despite a year of severe underperformance.
The fund manager’s flagship Invesco Perpetual Income fund has lost 11 per cent this year to date, which is worse than the 10 per cent average loss for funds in the IA UK All Companies sector in the same time period.
The fund is invested mainly in banks and other businesses exposed to the UK property market and those areas of the market have suffered as investors fled the UK domestic economy ahead of the UK’s exit from the European Union.
But the underperformance has not impacted on Mr Barnett’s investment outlook.
He said: "The political uncertainty has been especially damaging and has resulted in a wide degree of polarisation within the market. Companies with substantial overseas revenues have benefitted from the devaluation of sterling and by contrast, UK domestic-facing stocks have generally performed poorly and remain undervalued relative to the broader market."
Mr Barnett added: "The extent of this relative cheapness is substantial, and although the overall market is not expensive at present, the most obvious opportunities, in my view, rest within domestic sectors."
He explained: "Many are valued at multi-year lows both in absolute terms and relative to the wider market and are discounting a sharp deterioration in profits and a slowdown in the UK economy, both of which look overly pessimistic. Recently published economic indicators point to continued steady, if unspectacular, economic growth in the UK.
"As we look out towards 2019, we expect gross domestic product to be supported by continued robust employment growth and a recovery in real wages, which in turn should help to strengthen consumption growth.
"Given the forecasted increase in government spending next year and the Treasury’s flexibility to provide further injections after the Brexit date, it is reasonable, in our view, to expect the UK economy to be more resilient than most forecasts assume."
He said the key investment themes underpinning his funds had "remained consistent" over the course of this year.
But the exposure to sterling revenues had been modestly increased as the drawn-out Brussels negotiations exacerbated a pessimistic consensus towards the UK.
Laith Khalaf, senior analyst at Hargreaves Lansdown said: "Lots of investors can’t see past Brexit. So UK companies, and those that invest in them, have fallen out of favour.
"Barnett tries to pay high and rising dividends. Profitable, cash-generative companies should be well-placed to do this."
david.thorpe@ft.com
