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Underperforming Invesco trust could be shut

Underperforming Invesco trust could be shut

Investors in a £200m UK equity trust run by Invesco will have the opportunity to force the company to wind up in a vote in September.

The Invesco Income Growth trust trades at a sizeable discount to net assets, and has sharply underperformed the AIC UK Equity Income sector over the past five years, returning 24 per cent, compared with 35 per cent for the average trust in the sector. 

In a stock market announcement released this afternoon (27 January) the board of the trust revealed that, following consultation with shareholders, a vote will be held at the trust’s next AGM. Shareholders will be asked to vote on whether the trust should continue or be wound up and the cash returned to investors.

With the shares trading at a discount to net assets of 12.7 per cent, investors would theoretically get 12.7 per cent more cash if the trust were wound up than if they simply sold their shares today. 

The statement read: “The directors believe that shareholders wish the company to continue but, in view of the persistently wide discount level, the board has determined that it is appropriate to give the shareholders the opportunity to confirm their support for the company’s continuation. 

"This will allow the company to move forward with confidence in delivering the company’s investment objectives for the benefit of all shareholders.

"The directors intend to vote their shares in favour of the continuation and will be recommending to other shareholders to do likewise."

The board stated it had reached this determination after "careful consideration with its financial [adviser] and having taken into account shareholder views."  

The statement added: "The board wishes to affirm its continued faith in Invesco’s management of the company and hopes that the discount will continue to narrow from recent highs on the back of the current improved investment performance and greater interest by investors in the UK stock market, together with any other actions the board may decide to take.”

The trust is managed by Invesco’s Ciaran Mallon.

The announcement added an additional layer of pressure to the UK equity desk at Invesco, which has been operating in the teeth of substantial outflows from the Income and High Income funds run by Mark Barnett.

The board of another UK investment trust run by Mr Barnett, the £941m Perpetual Income and Growth trust, warned Invesco in November that performance needed to improve or a change could be made. 

The board of the Edinburgh Investment trust announced in December that Invesco would no longer manage the trust, which Mr Barnett had run since 2015. 

Martin Walker was promoted to co-head of UK equities at Invesco, alongside Mr Barnett, in November.

The UK equities team at Invesco has taken the view since the UK voted to leave the EU in 2016 that shares focused on the UK domestic economy represented the best investment opportunity, despite the waves of economic uncertainty gripping the country.