Richard Laing chairs the board of the trust which removed Invesco’s joint head of UK equities, Mark Barnett, as manager of the trust on April 6, following an extended period of poor performance.
Though much of the of the speculation about his replacement has thus far centred on alternative managers who deploy the same style of investing - the value style - Mr Laing said it’s possible the manager eventually selected will use a different style of investing.
He said: “The board is focussed on the objectives of the company. There are clearly different investment approaches to meeting those objectives, but whilst the portfolio was producing excellent dividend returns, it was delivering poor capital and total returns and we attributed part of that underperformance to issues with the investment process and a significant number of individual stock selection errors rather than the style alone.
"We are not dedicated to any one particular style. Style will form part of the discussions with prospective new managers. We believe in active management and in-depth fundamental research to identify attractive companies. Our concerns lie around the effectiveness of the investment process and not the individual investment style.”
Mr Barnett had managed the trust since 1999, but over the past five years it has lost 33 per cent, and is ranked as the second worst performer in its sector.
In addition to deploying the value style, which has been sharply out of favour with the wider market for most of the past decade, Mr Barnett also had investments in individual stocks that performed poorly, including Burford Capital and Provident Financial.
Mr Barnett's removal came after a warning issued in November 2019 by Mr Laing that the performance of the trust needed to improve.
That warning cited the general election as a potential driver of change for the value style of investing. But since the election, which happened on December 12, and the end of February, a period before the impact of Covid 19 had become apparent to the wider market, the trust lost 14 per cent.
According to data from the Association of Investment Companies (AIC), the trust has a dividend yield of 6.6 per cent, and trades at a discount to net assets of 11.4 per cent.
The process for choosing a new manager has already begun, although Invesco is presently serving a six month notice period.
Mr Laing said he expects the new manager to be appointed within that time frame and that the board will “endeavour to avoid” a situation where it ends Invesco’s management of the fund early.
The current ongoing charge of the Perpetual Income and Growth investment trust is 0.76 per cent. But data from the AIC shows the average ongoing charge for the AIC UK Equity Income sector, in which Perpetual Income and Growth sits, is below that, at 0.64 per cent.
Mr Laing said a discussion around the level and structure of the management fee will be part of the consideration for choosing a new manager.
He said: “Fees will be an important factor in our review. The board is committed to delivering returns for shareholders at a competitive cost and will continue to look for ways to reduce charges, however there is always a balance to be struck between accessing quality, active investment capacity and lower fees.
"As part of the selection process we will be asking each manager submitting to detail their proposed fee structure. This will be evaluated alongside other factors, including the capacity and ability to manage a portfolio the size and type as [this one].
"[We would also want a] strong track record of achieving investment objectives over the medium and long term investment process, governance and oversight, relevant experience and track record, strength of the management team and broader infrastructure. [Also] demonstrable resource in supporting the company’s marketing, sales and shareholder communications.
"The board will select a manager that it is confident is capable of meeting these objectives of the company over the long term and will act in the best interests of shareholders.”
Fund houses that wish to pitch for the mandate have until April 17 to send a proposal.
Mr Laing is also chairman of 3i, an infrastructure investment company, and of the JP Morgan Global Emerging Markets investment trust.
david.thorpe@ft.com
