Invesco Select: Global Equity Income 17 November 2021
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.
Invesco Select Global Equity Income Share Portfolio (IVPG) aims to achieve a growing level of income return each year, with capital appreciation over the long term. Invesco’s Global Equity team, led by Stephen Anness, took responsibility on 1 January 2020, with a view at the time that reorientating the portfolio would be an evolution rather than a revolution. This was unfortunate timing, and IVPG was as a result too exposed to cyclical names in the crash. This affected short-term performance, but as we discuss in the Performance section, relative performance has improved considerably since November 2020.
The new management team are less focussed on ‘value’ opportunities than the previous team, preferring to lend a higher weight to the quality of a prospective business as a determinant of long-term returns. As we illustrate under Portfolio, this has resulted in the trust’s underweight to US equities being reduced, but it also shows through in the recent outperformance partly driven by mega-cap technology names like Microsoft and Facebook. In our view this demonstrates a more pragmatic investment process than was historically the case, and one likely to be less influenced by a single investment factor such as value, thus resulting in a more balanced portfolio over time.
Underpinning the process is a desire to invest in companies that are growing their dividends faster than the wider market. In the Dividend section, we illustrate that IVPG has a track record of delivering progressive dividends year on year, with the board having demonstrated its willingness to support this through capital payments.
With a new team behind Invesco Select’s Global Equity Income share class, the prospects for shareholders are bright, in our view. The team received the baton from the previous Invesco team at an inopportune moment, but there is good evidence that the team and process have both come out the other side stronger. For example, the portfolio is now more balanced between growth, value and core (as defined by Morningstar), which has helped the trust’s relative performance over 2021. Most recently this was seen over the past couple of months where the trust benefitted from its growth holdings, but also from more cyclical names such as JPMorgan and Lundin Energy.
This perhaps exemplifies why IVPG offers a differentiated global equity income exposure. The team clearly follow the ‘typical’ Invesco process by taking a long-term view, but their approach to income growth rather than just a high running yield should ensure that both the income and capital sides of the equation are satisfactory for investors.
Alongside the attractiveness of the strategy, IVPG’s shareholders benefit from the added flexibility afforded by the investment trust structure, which allows dividends to be supported by capital payments. This has seen the progressive dividend record continue, despite the perilous effects of the pandemic on the corporate dividends . With the board focussed on minimising discount volatility, it might be said that investors get all the benefits of the trust structure with fewer of the typical discount risks.
|Stephen Anness has a good long-term track record of outperforming his benchmark for the open-ended funds he has run in the past
|Lower initial yield than that of peer group
|Balanced approach, with a focus on dividend growth, offers differentiated exposure
|New team have a short track record as managers of an investment trust
|Zero-tolerance approach to discount means the trust is much more liquid than its size would suggest
|Gearing can exacerbate the downside