Invesco Select: Global Equity Income 23 January 2024

Invesco Select Global Equity Income (IVPG) has been managed by Stephen Anness since January 2020. Stephen has transformed the Portfolio to provide investors with a balanced, all-weather strategy to minimise exposure to stylistic biases or specific factor risks, with the aim of delivering a growing level of income alongside long-term capital appreciation.

In December 2023, the board announced the proposed merger of assets within the Invesco Select Trust. The proposals are for IVPG to absorb the Invesco UK Equity (IVPU) share class and the smaller share classes. In addition, the board intends to amend the dividend policy in order to pay at least 1% of cum-income net asset value, paid quarterly, utilising the revenue and capital reserves when appropriate (see Dividend). This will lead to a substantial increase in the yield IVPG offers whilst allowing Stephen to continue to run the portfolio to the same strategy which has delivered strong Performance in recent years. Since he took over in 2019, IVPG has generated a NAV total return of 54.4% compared to the 37.2% and 49.1% generated by the global equity income sector and the MSCI World Index.

Additionally, the board intends to tighten the discount control policy, which will seek to keep the discount at less than 10%, in normal market conditions. The board believes the consolidation should have a beneficial impact on liquidity and a narrowing of the Discount, which is currently 9.6%. Net assets will increase, allowing IVPG to spread fixed costs over an enlarged assets base which will reduce Charges.

This is a significant package of proposals which brings with it several advantages. Chiefly, we believe the new dividend policy will be attractive to income-seeking investors by boosting the yield whilst allowing Stephen to continue to follow the investment strategy that has delivered such attractive total returns.

Importantly, the investment strategy will remain the same, and we think Stephen has demonstrated the value of his balanced strategy over the long term, delivering impressive performance. The current economic environment remains uncertain, and we believe his well-balanced, benchmark-agnostic approach and focus on fundamentals could continue to do well. Performance has been helped at different times by a well-timed reduction in gearing and an increased allocation to lower-leveraged companies with greater predictability of cash flows. It was also helped in 2023 by Stephen identifying a range of attractively valued opportunities further down the market cap spectrum which had been overlooked by the market—particularly those exposed to AI. With interest rates expected to fall by the end of the year, a softer landing continuing to be priced and investor sentiment improving, these mispriced companies and IVPG may be well placed to benefit, in our view.

We believe the proposed introduction of a tighter discount control policy and the increased simplicity of the investment proposition may provide a catalyst for the discount to narrow.