Invesco's Barnett takes 60% haircut on unlisted shares

Invesco's Barnett takes 60% haircut on unlisted shares
Mark Barnett

Invesco has wiped five per cent off the value of Mark Barnett's High Income and Income portfolios after writing down the value of its unlisted holdings in order to focus on other investments.

The embattled fund house is understood to have told clients today (March 31) it had downgraded the valuations of the unquoted positions, which had accounted for around 8 per cent of either fund.

A statement subsequently posted on Invesco's website indicated the firm was looking to sell its unquoted positions in full.

"Once realised, this capital will be reallocated to publicly listed equities which in our view have been heavily discounted due to the fall in equity markets as a result of the current Covid-19 outbreak," the company added.

Today's news follows a month in which the coronavirus crisis has badly damaged investor sentiment, with equity funds among the worst affected. The FTSE 100 is now down 25 per cent since the start of the year, and the valuations of unlisted companies have also started to be repriced by the likes of venture capital trusts.

Juliet Schooling-Latter, research director at Chelsea Financial Services, said Invesco's impending repositioning of the funds via the haircuts looked "a little drastic" in comparison to the VCT space, where writedowns have been in the region of 5 to 22 per cent.

"We understand Invesco’s wish to move away from these assets into more attractive parts of the market, but the amount of writedown is unjustified in our view."

“While there may be investor appetite for the funds to hold fewer unquoted stocks, I would doubt that investors would want this at the cost of a five per cent drop in the value of their investments.” 

Mr Barnett's flagship £2.1bn Income and £4.6bn High Income strategies had lost more than 25 per cent this month prior to today's move, according to FE Analytics, compared with a UK All Companies sector average loss of 20 per cent.

Adrian Lowcock, head of personal investing at Willis Owen, said the writedowns were disappointing but did not necessarily represent the underlying value of the companies.

He added: “Mr Barnett has been working hard to reduce exposure to unlisted stocks but against significant outflows from the fund it has been a bit like swimming uphill."

Last November ratings agency Morningstar downgraded the Invesco funds, citing their exposure to smaller and illiquid companies. Mr Barnett said at the time he "fundamentally disagreed" with those assessments, adding he had "materially changed" the way the funds invested in unquoted companies, as well as halving their overall exposure to such businesses, since taking over the portfolios from Neil Woodford in 2014.

The funds have now lost roughly 30 per cent over the past one, three and five-year periods, according to FE Analytics, putting them in the bottom quartile of the UK All Companies sector over each of those time horizons.

With performance suffering, redemptions from the strategies have compounded the pressure on Invesco. Morningstar data estimated investors pulled almost £1bn from the asset manager as a whole in February, bringing the total withdrawn from the fund house over the past year to £9.9bn.