Fund Profile

Invesco Perpetual UK Smaller Companies 27 May 2022

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Invesco Perpetual UK Smaller Companies. 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.

Overview
IPU has delivered strong relative performance year-to-date…
Overview

Invesco Perpetual UK Smaller Companies (IPU) is relatively distinct in the peer group in that the managers employ a process aiming to deliver a strong performance over the long term but with below-average volatility. The consistent way in which they apply their investment process is crucial, having led to strong outperformance of the benchmark and peers over the years whilst having amongst the lowest NAV volatilities of the peer group.

In seeking to achieve this pattern of returns, IPU’s managers pay plenty of heed to portfolio construction, leaving it capable of performing across varied market conditions. This explains their current barbell approach (see Portfolio section), with exposure to both higher-rated growth stocks as well as those which the team believe are fundamentally undervalued. At the same time, their valuation-led stock-picking leads the managers to regularly recycle capital from investments that have performed the best into those stocks which are looking more attractively valued.

The adoption of a new benchmark (the Numis Smaller Companies + AIM excluding Investment Companies Index) from the start of the current financial year does not mark a significant change. Historically, around 30-35% of the portfolio has been invested in AIM over the past few years, which prior to this year would have represented an off-benchmark exposure.

The board’s policy is to pay quarterly dividends that, in aggregate, amount to 4% of the financial-year-end share price, mathematically resulting in changes in the actual dividend paid each year. This policy should ensure that the dividend yield will likely remain attractive on a relative basis when compared to the peer group, which currently offers an average yield of 2.3%.

Analyst's View

Current market conditions are revealing the same pattern of widening discounts in UK smaller companies trusts that we have seen in the past. At the time of writing, IPU is trading on a discount to NAV of 17%, which compares with the average over the past five years of 7.4%. The board do have permission to buy shares back, but with the board effectively returning around 2% of capital per year already, through supporting the annual dividend, we think it unlikely the board will step in whilst market conditions remain volatile.

Whilst the current outlook is very unclear, the managers appear firm in their convictions on underlying earnings for portfolio companies. The team’s focus on ‘quality’ companies means they can potentially continue to grow irrespective of the economic environment. The historic level of takeover activity in the portfolio gives credence to the fact that these companies are in demand from long term investors. The fact that GBP has depreciated so rapidly against the USD means further M&A cannot be ruled out.

We believe the new benchmark, whilst not precipitating a huge change, will give the managers confidence to continue to look for opportunities at the smallest end of the market capitalisation spectrum. Historically, the team have had good success here, and with a new market cycle potentially developing, this could be helpful to long term returns. The current discount to NAV offers investors a potentially interesting entry point.

Bull

  • Consistent investment process has delivered strong results through the market cycle with lower volatility
  • Highly stable and experienced team
  • Attractive dividend, offering a significant yield premium to that of the peer group

Bear

  • Given more balanced positioning, may underperform more style-concentrated peers if growth or value sharply outperform
  • Payment of dividend from capital means trust will remain smaller than it would otherwise
  • Discount could widen out further
Continue to Portfolio

Fund History

10 Aug 2022 Get ‘em while they’re hot
Wide discounts in the UK Smaller Companies sector may present long term investors with good entry opportunities…
17 Jun 2022 What does more PE activity in the UK mean for investors?
More acquisitions are arguably a sign the UK still offers good value for money…
15 Jun 2022 Staying active
We highlight several alternatives to passive investments for investors looking for core exposure in uncertain markets...
27 May 2022 Fund Analysis
IPU has delivered strong relative performance year-to-date…
25 Mar 2022 Slides and Audio: Invesco Perpetual UK Smaller Companies
Download the presentation and listen to the audio from our 'Ideas for your ISA' virtual Spring event on 15 March...
23 Mar 2022 Fifteen ideas for your ISA
Slides and audio from our event last week, featuring fund managers running money in every major market in the world...
02 Mar 2022 Investing in the UK with investment trusts
How closed-ended funds can help investors in UK companies...
31 Jan 2022 Investing for income with investment trusts
How investment trusts can support your dividend goals…
05 Jan 2022 The UK market’s hidden gems
London-listed small caps have flourished over the past decade and the Invesco Perpetual team believes that’s likely to continue into 2022…
30 Dec 2021 Great expectations
As the last of the mince pies wilts in the fridge, topped with a generous helping of stilton, the Kepler Trust Intelligence team stick a finger in the air and point toward their top picks for the year ahead…
03 Nov 2021 Fund Analysis
With stock-picking once again being rewarded, IPU is performing well…
28 Jul 2021 How are the mighty fallen
Dividend culture as we knew it is dead, according to Kepler's David Johnson, but investment trusts offer a solution...
26 May 2021 Stand and deliver
Is a high OCF daylight robbery or should investors keep calm and carry on? Our analysts debate the perennial question…
17 Mar 2021 Fund Analysis
IPU is back up the performance tables once again, thanks to the managers’ valuation led approach...
06 Jan 2021 This time next year Rodney...
We review the performance of the team’s ‘top picks’ for 2020 – including some proper plonkers – and place our bets for the year ahead…
25 Nov 2020 Britannia Redux?
UK equities have been despised for almost five years and could offer extreme rebound potential…
19 Nov 2020 Fund Analysis
On a material discount once again, IPU looks attractive for long term investors...
11 Nov 2020 Now that's what I call a discount!
Presentations and audio from our conference focussed on discount opportunities in the investment trust sector…
11 Nov 2020 Slides and Audio: Invesco Perpetual UK Smaller Companies
View the presentation and listen to the audio from our 'Discounts in Focus' event on 05 November...
22 Oct 2020 Spotlight on discounts
As our event focussed on discounts approaches, we update our portfolio of discount opportunities and review discounts across the wider IT universe…
17 Sep 2020 Five small cap trusts on very wide discounts
The UK Smaller Companies Sector is battered and bruised, but bombed out valuations among trusts in the sector look interesting...
17 Jun 2020 Jonathan Brown & Robin West
This stockpicking duo have managed the Invesco UK Smaller Companies trust as a team since 2014...
06 May 2020 The fight in the dog
We look at the characteristics which have separated the winners from the losers among small-cap trusts in the current crisis, with some surprising results...
01 May 2020 Fund Analysis
IPU has performed defensively during the selloff, and now trades on a small discount once again...
11 Mar 2020 Seeking big opportunities in UK smaller companies
20 Nov 2019 Making the grade: Kepler's rated trusts report strong performance in 2019
Earlier this year, we launched our new ratings for income and growth. Since then, the 40 trusts to have been awarded the elite Kepler Trust Intelligence ratings have performed strongly…
30 Oct 2019 Steady hands lead to smaller companies success
Invesco Perpetual UK Smaller Companies offers investors a proven approach to a particularly compelling sector...
15 Oct 2019 Fund Analysis
Fundamental stock pickers, aiming to achieve top quartile performance with below average volatility…
06 Sep 2019 Realising potential on the financial front line
Invesco UK Equities managers Jonathan Brown and Robin West discuss three stocks that have fulfilled their investment thesis over the last few years...
01 Aug 2019 Rethinking UK equity income
Despite being a popular allocation for investors, the UK Equity Income sector is currently plagued by the problem of concentration. Our analysis suggests smaller companies could be a strong alternative source of diversified income…
27 Mar 2019 NEVeR MiND tHE B*LL*CKS
We cut through the histrionics and discover, with surprising results, what life has really been like for British investors since David Cameron put it to 'the people'....
21 Mar 2019 Fund Analysis
A UK smaller companies fund which aims to achieve above average returns through the cycle with lower volatility...
06 Feb 2019 Income for the long haul
With 'ISA season' looming we identify investment trusts which offer long-term, dependable income streams for yield-hungry investors...
13 Dec 2018 Efficiency is everything
With fee structures under increasing scrutiny, we analyse which trusts limit their costs without sacrificing standards...
24 Oct 2018 Fund Analysis
A consistent and cautious approach has contributed to Invesco Perpetual UK Smaller Companies outperforming over the longer term...
12 Sep 2018 Fake news...
Small cap funds, despite their reputation to the contrary, are less volatile and have delivered better risk adjusted returns than their large cap peers...
15 Aug 2018 The income edge
Last year saw investment trusts soar in popularity among both retail investors and wealth managers. We examine why this has happened, as well as the structural advantages of investment trusts for income-hungry investors...
19 Jun 2018 Pretty little things
Many smaller companies managers have been shifting into micro caps in 2018, should investors be following suit?
19 Jun 2018 Fund Analysis
A UK smaller companies fund which aims to achieve above average returns through the cycle with lower volatility...
08 Jun 2018 Unearthing opportunities in smaller companies
Jonathan Brown and Robin West, UK Equities Fund Managers, explain how they identify prospects in the small cap market and how they have applied it to their portfolios.
05 Apr 2018 The search for discounted yield
We scour the investment trust universe for trusts offering chunky yields on a discount...
24 Oct 2017 Fund Analysis
A smaller companies portfolio with a strong track record and an experienced management team offering an unusually high income...
View all

Welcome to Kepler Trust Intelligence

Kepler Trust Intelligence is authorised in the UK by the Financial Conduct Authority.
Please enter a valid email address
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid email address
{{item.msg}}
Please check your email. If an account exists you'll be sent instructions on how to reset your password.
Kepler Trust Intelligence is authorised in the UK by the Financial Conduct Authority. To ensure that we are able to provide content which is appropriate for you, please tell us a little about yourself.
Please choose an option
{{item.msg}}
Please enter a company name
{{item.msg}}
Please enter a location name
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a platform
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a trust
{{item.msg}}
?
The information contained herein is not for distribution and does not constitute an offer to sell or the solicitation of any offer to buy any securities in the United States to or for the benefit of any United States person (being residents of the United States or partnerships or corporations organised under the laws thereof). The investment funds referred to herein have not been registered in the United States under the Investment Company Act of 1940 and units or shares of such funds are not registered in the United States under the Securities Act of 1933.
Please confirm
{{item.msg}}
Please select an option
{{item.msg}}
See benefits
A free Kepler Trust Intelligence account allows you to access premium content including the ‘Kepler View’ – our verdict on the trusts we cover – and historical research so you can see how our view has changed over time. An account also unlocks useful facilities like the ‘follow’ button which lets you keep track of the trusts you’re interested in and as a logged in user you can also download PDFs of our research, and choose the layout of the page you’re reading to suit your preference. We will not share your details unless you give us permission to do so, and we won’t bombard you with emails – we only send one a week.
Please select an option
{{item.msg}}
Please enter your first name
{{item.msg}}
Please enter your last name
{{item.msg}}
Please enter a valid email address
An account already exists with this email - have you forgotten your password?
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid password
{{item.msg}}
How will this information be used? Your answers help us to tailor our content to relevant investment trusts, and to ensure that the asset allocation and portfolio strategy research we produce is appropriate to our userbase.
Our Website uses Cookies Cookies are small text files held on your computer. They allow us to give you the best browsing experience possible and mean we can understand how you use our site. Some cookies have already been set. You can delete and block cookies, but parts of our site won’t work without them. By using our website you accept our use of cookies. For further information please refer to the Kepler Privacy Notice.
Need help?

One more thing...

Did you know, you can 'follow' individual trusts on Kepler Trust Intelligence? Use the functions below to set up alerts and we'll send you research and updates on your chosen trusts.

Suggested trusts to follow

Browse all funds
Need help?
Current Site Kepler Trust Intelligence is produced by the investment companies team at Kepler Partners and is the UK’s premier source of detailed qualitative research on investment trusts. Absolute Hedge is a market leading UCITS research database providing proprietary research on funds, themes and strategies in the UCITS space. Kepler Liquid Strategies is a Dublin domiciled UCITS fund platform featuring a number of best-of-breed fund managers. Kepler Partners is a corporate advisory and asset raising boutique specialising in the regulated funds market in Europe and investment trusts in the UK.