Invesco Select: Global Equity Income 05 May 2023
Disclosure – Non-Independent Marketing Communication
This is a non-independent marketing communication commissioned by Invesco Select: Global Equity Income. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.
The managers of Invesco Select Global Equity Income (LON:IVPG) seek to generate a sustainable, but also importantly, growing level of income, alongside long-term capital appreciation. As we discuss in Performance, since taking over the management of the trust in January 2020, lead portfolio manager, Stephen Anness, has demonstrated that his balanced approach to portfolio management can perform across a range of uncertain market conditions, with IVPG’s performance leading the sector over both one and three years.
Stephen takes a truly benchmark-agnostic approach to portfolio construction, as we discuss in Portfolio. The focus on bottom-up, fundamental analysis is core to the investment process and has led to a reduction in IVPG’s exposure to any excessive stylistic biases or specific factor risks. The board’s ability to add to the Dividend from capital has afforded Stephen the freedom to invest in a relatively flexible manner, which is less restricted by specific yield targets. This allows him to consider a wider opportunity set, with a greater focus on the sustainability of future cash flows and future investment that can fuel longer-term dividend growth. The approach is highly active, as illustrated by the 89% active share, as at 28/02/2023, which results in a less correlated exposure to the benchmark, compared to other strategies within the global equity peer group.
IVPG currently trades at a historically-wide Discount of 13.4%, significantly wider than its five-year average and that of the peer group.
Since taking over the management of IVPG in 2020, Stephen has gradually shifted the portfolio away from value to a more core portfolio positioning. This has resulted in strong performance across the market cycle, resulting in IVPG’s sector-leading NAV Performance over the past three years. We think the consistency of the performance has been particularly impressive, considering the heightened levels of volatility seen across financial markets and the different stylistic biases that have been driving returns over this period.
Given the sharp increase in the cost of capital and rising input costs, Stephen’s focus on bottom-up fundamentals, particularly the sustainability of cash flows, is arguably more important than ever. We believe Stephen’s more cautious approach to portfolio management, through a tactical reduction of Gearing and a shift into more defensive, somewhat inflation-protected sectors, such as real estate and more recently consumer staples, has been timely. This is because elevated levels of volatility remain across financial markets. Given the lingering threat of a recession and elevated geopolitical tensions, Stephen’s expectations for rising dividend income on the portfolio over the next three years is an attractive feature and could play an increasingly important role for total returns in an environment where capital growth is harder to come by. Combined with the Discount trading at a historically-wide level of 13.4%, we think this may offer an opportune entry point for long-term investors.
- Sector-leading three-year performance track record
- Discount trading at historically-wide levels
- Balanced approach and focus on dividend growth leading to high active share and less correlated exposure to the benchmark and peer group
- Balanced approach may lag in stylistically-driven environments
- Gearing may exacerbate losses on the downside, although this has been reduced
- Lower initial yield than the peer group average