Fund Profile

Invesco Select: UK Equity 04 December 2018


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IP Select UK Equity shares owns an actively managed portfolio of UK equities held for the long term, with the manager, James Goldstone, aiming to identify undervalued companies and take advantage of the under-pricing.

James has repositioned the UK equity portfolio since taking over in October 2016, and the focus is on companies exposed to the UK economy and consumer, which James thinks are currently undervalued. However, this exposure is balanced out by holdings with international earnings, although these positions are all held because of the manager’s conviction in them as businesses and the attractiveness of their valuations, rather than simply risk-management tools.

The trust has underperformed this year due to the exposure to domestic earnings, with the UK market being unloved thanks to the uncertainty around Brexit. However, negotiations over the UK’s exit from the EU are nearing a conclusion with the “divorce” scheduled for the first quarter of next year.

Gearing has remained at the upper end of the permitted range under James’ management. However, this debt is not structural but reflects the valuation opportunity the manager sees in the UK market.

The company tends to trade quite closely to NAV, supported by a strong buyback policy, and in fact traded on a premium prior to the June 2016 referendum.

The dividend yield is 4%, paid quarterly, and the board’s intention is to at least maintain the dividend in each year going forward. It has backed this up by using capital reserves to pay when necessary.

Kepler View

‘The best time to invest is when there’s blood on the street’, is the adage. That isn’t, happily, a literal description of the state of British politics, but the turmoil within parliament over Britain’s exit from the EU has worsened significantly in recent weeks. In our view this is a good time to be increasing UK domestic exposure, albeit slowly and cautiously. Any resolution should lead to a relief rally in UK assets over the medium term, we believe, meaning that it is sensible to be picking up exposure on the dips. James has positioned his portfolio in the most appealing cheap stocks in the market, which has led to significant exposure to the domestic UK economy. This is, incidentally, in good shape, which we all seem to have forgotten in a period dominated by fears for the future. The depressed valuations of UK assets are not justified by any likely outcome in our view, and the risk/reward profile of UK assets is attractive for those with a medium to long term perspective. Recent share price falls means that investors can bake in a yield of 4% if they buy the trust now.

Bull Bear
A highly attractive yield from a growth-first mandate Brexit uncertainty could be prolonged
A portfolio of attractively-priced stocks with rebound potential The manager is relatively inexperienced
Limited discount risk relative to peers The performance fee will be unpalatable to some
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Fund History

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21 Oct 2020 A closer look at gold mining companies and ESG
In this article, we hear from James Goldstone - fund manager of Keystone Investment Trust and Invesco Perpetual Select Trust: UK Equity Share on assessing mining companies within an ESG framework...
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30 Jul 2020 James Goldstone
James Goldstone manages a number of UK and pan-European equity mandates at Invesco’s Henley-on-Thames office, including Keystone Investment Trust and the UK Equity Share Portfolio of Invesco Perpetual UK Select Trust...
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24 Jun 2020 Ciaran Mallon
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15 Jun 2020 Investment Trust outlook
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15 Apr 2020 Hold fast
Investment trusts' revenue reserves could make them a vital stronghold for investors facing UK dividend cuts of as much as 47%....
08 Apr 2020 James Goldstone's UK equity strategy update
The sell-off across global markets has been widespread in recent weeks. Joanna Smith, UK Equities Product Director at Invesco, questions whether we have seen the market lows of this crisis yet...
23 Mar 2020 An approach to governance: creating long-term value for our clients
James Goldstone outlines why they advocate for proper and effective corporate governance and sustainable business practices within the Invesco UK Equities team...
18 Mar 2020 Fund Analysis
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17 Mar 2020 Driven by the prospects of businesses
Ciaran Mallon, UK Equites Fund Manager, describes his investment philosophy and why it’s more about picking the shares that go in the portfolio than about taking big economic views...
18 Dec 2019 The squeeze continues: how trust costs keep falling
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28 Aug 2019 Fund Analysis
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20 Jun 2019 Balancing risks of regulation in the UK Utilities sector
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26 Mar 2019 Fund Analysis
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04 Dec 2018 Fund Analysis
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