UK Edition
Questor: as Invesco bond veterans step down from their funds, should investors worry?
Questor investment trust bargain: Invesco Enhanced Income and City Merchants High Yield have a new manager. What does it mean for investors?
When very long-serving fund managers step down from their portfolios it is natural for investors to worry. When the change comes against a backdrop of upheaval at the fund management company concerned those worries can only deepen.
This is the position in which shareholders in two bond funds, Invesco Enhanced Income and City Merchants High Yield, find themselves.
The very experienced and stable partnership of Paul Read and Paul Causer at the helm of both portfolios has departed, and their previous deputy, Rhys Davies, has taken over with the help of a newly appointed deputy. These events have taken place against a backdrop of widespread change at Invesco.
However, Mr Davies is not exactly a new boy. He has worked at the firm for more than 18 years – his entire investment career – and has been on the two trusts’ management teams since 2014. Invesco remains a very well resourced fixed-income investor.
- Sign up to our Business Briefing newsletter for a snapshot of the day's biggest business stories
- Read Questor’s rules of investment before you follow our tips
Analysts at Numis, the stockbroker, said: “We do not expect this to result in any significant changes for either fund, given that Rhys is a long-standing member of the team who has already been involved in the running of the two portfolios for several years.
“The Invesco fixed-interest team is well respected and currently manages several large open-ended funds including Invesco’s flagship Corporate Bond, Distribution, Monthly Income Plus and Tactical Bond funds, which in aggregate have assets of more than £8bn.”
We will maintain a hold stance on both trusts but will keep an eye on performance under the new management.
Questor says: hold
Tickers: IPE, CMHY
Share prices at close: 67.2p, 172.5p
Update: Augmentum Fintech
As a previous investment trust tip of the year we would normally update on this fund in early January but it is of particular interest now because of its holdings in tech stocks, all of them unlisted, in light of the pandemic. So we will take a quick look at its full-year results, published last month.
Scrutiny of its holdings, which number just 18, is worthwhile. The opportunity for some of them to shine in the face of coronavirus is clear.
Interactive Investor, the investment platform, for example, operates online and provides a means for people to save for long-term goals such as retirement. BullionVault and WhiskyInvestDirect are also online exchanges, this time for gold and whisky; the former has experienced huge demand during the precious metal’s strong bull run.
Monese is a digital bank tailored to those who move between Britain and Europe, and most customers use it for their main account. It looks well placed to benefit from the rise of itinerant remote working in the post-Covid world. Other holdings appear to this column to offer similar promise.
Tim Levene, one of the portfolio managers, said: “Covid-19 has fundamentally changed behaviours. This has accelerated the digitisation of financial services, which has created significant opportunity for disruption.
"The opportunity to capitalise on the shifts in consumer and business behaviour in regard to digital financial services is greater than ever. Incumbent players still control more than 90pc of the global market and many of the financial services giants of tomorrow are yet to emerge.”
He said performance had been sustained despite the pandemic and the portfolio had achieved a return of 18pc on invested capital.
The fund illustrated what it saw as the advantage of investing in unlisted firms by pointing out that just 4pc-5pc of sales of “fintech” companies over the past three years had taken place via a flotation; the rest had been takeovers of one form or another, denying stock market investors any chance to participate directly.
The trust offers something truly different and the wisdom of its choice of holdings appears proven by their ability to withstand the epidemic.
Questor says: hold
Ticker: AUGM
Share price at close: 118p
Read the latest Questor column on telegraph.co.uk every Sunday, Tuesday, Wednesday, Thursday and Friday from 6am.