Invesco Perpetual UK Smaller Companies
Invesco Perpetual UK Smaller Companies Summary Invesco Perpetual UK Smaller Companies (IPU) is an unusual trust, investing in small companies which are traditionally the preserve of growth investors but also offering an income which is among the highest in its peer group, and competitive even with trusts in traditional equity income sectors. The managers aim to achieve above average performance with below average volatility, and over the past five years have broadly achieved this. IPU marginally underperforms in sharp upward moves in the market, but tends to outperform when markets turn sour. Part of the reason for the strong long term performance can be attributed to the disciplined investment process followed by the current management team of Jonathan Brown (pictured) and Robin West, who at all stages throughout the cycle aim to invest in high quality companies. This approach has worked well over the medium to long-term as, over the past five years to the end of September, the trust has delivered an NAV total return of 137%, relative to the benchmark’s return of 102%. In 2015 the board announced steps to significantly increase the dividend by distributing 100% of available income each year through the payment of a small proportion from capital profits. The yield therefore compares favourably relative to other small company funds and trusts, but also those in the equity income sector. The fact that a proportion of the dividend comes from capital means the managers have not had to tilt their investment approach to achieve this level of income for shareholders.
first was a promise to offer shareholders one of several options to realise their investment at or close to NAV around the AGM in 2017. The second was to introduce an enhanced dividend policy, which has resulted in the trust offering a considerable higher dividend than its smaller company trust peers. These actions helped successfully bring the discount in – a situation that continues today. At the AGM earlier this year, the board agreed to offer Shareholders the opportunity to Tender up to 40% of their shareholding at a modest discount to NAV (to account for costs). In the event, 38.3% of shares were tendered by shareholders back to the company, whilst still enabling those shareholders who wished to exit their investment in IPU in full. As well as continuing with the enhanced dividend policy, the board has committed to a further range of options being put to shareholders at or around the time of the annual general meeting in 2020.
1
www.trustintelligence.co.uk/investor
24.10.2017
Portfolio Jonathan and Robin have an investment universe of around 2000 companies, and monitor closely around 500 of them. This universe is comprised of the FTSE 250 and smaller, including AIM, although they will not invest in a company with a market capitalisation of less than £100m. The portfolio typically comprises around 80-90 holdings, and no position is allowed to get much bigger than 3% of NAV. This is a pure stock picking fund, and the managers pick stocks because of their absolute attractions rather than any influence from index considerations. That said, they aim to have a portfolio with exposures to a range of sectors (see below) as well as different themes - “self-help” stories, businesses that can roll out successful concepts or act as consolidators using their concept, and what they view as “structural growth” businesses. Invesco Perpetual UK Smaller Companies Sector exposure as at 30th August 17
The high dividend yield is perhaps one of the reasons why, on a discount of c. 7%, the shares trade on a premium rating to the peer group. Whilst the risks to the discount remain over the short term, the board have announced that a further range of options – perhaps similar to the tender offer earlier this year - will be put to shareholders at or around the time of the 2020 AGM.
Basic Materials Telecoms Oil & Gas Consumer Goods
Industrials
Healthcare
Technology
Recent corporate activity As we show in the discount section, several years ago the board introduced two structural initiatives to narrow the discount. The
Financials
Consumer Services Highcharts
Source: Invesco Perpetual
This article was commissioned by BlackRock Throgmorton Trust and is a marketing document. It should be considered non-independent research as defined in COBS 12.3.2R
Technology stocks might be considered at the racier end of the investment universe. However, there are plenty of other strongly performing but more “traditional” stocks in the portfolio, which Jonathan and Robin have been long term supporters of. CVS, Dechra Pharmaceuticals, Coats and Johnson Service Group will be familiar names to those who have followed this trust for a while, and represent examples of the classic stocks that the managers like to hold, and keep holding. TOP TEN HOLDINGS AS AT 30TH AUGUST 2017 NAME
%
Keyword Studios
3.00%
Dechra Pharmaceuticals
2.80%
FDM
2.70%
Clingen
2.70%
Coats
2.70%
Johnson Services
2.50%
CVS Group
2.40%
Equinti
2.40%
Sanne
2.30%
4imprint
2.20%
TOTAL
25.70%
Source: Invesco Perpetual
We understand that the portfolio (on average) typically trades at a premium valuation to the wider market, which in the view of the managers is justified given the balance sheet strength and quality of underlying earnings. The manager’s say they like to find businesses which they perceive as having robust and scalable business models, often niche businesses with significant growth potential, possibly a growing market share and are cash generative with an ability to re-invest. They try to steer clear of businesses with any form of pension issue. Ideally, they want to see businesses have the potential to double in size in the next five years, and in typical Invesco Perpetual style, hold them for the long term.
In terms of outlook, Jonathan and Robin retain a degree of caution given the continued economic and political uncertainty. They believe that theirs are resilient companies able to sustainably generate profitable growth in excess of the wider economy through market share gains, exposure to higher growth niches and re-investment of cash flows.
Gearing The managers have authority to gear the trust to the lesser of 30% of net assets or £25m. However, this is a relatively conservative strategy, and it is therefore not surprising that the managers expect to use gearing only in modest amounts, and even then not often. The managers are also theoretically able to reduce exposure by hedging the portfolio using FTSE 250 futures. Given the illiquidity of this instrument, the managers expect to use this very infrequently. Overall, the trust has nearly always been ungeared, and more lowly geared than the average for the investment trust peer group.
Returns IPU has developed a track record of delivering amongst the better risk / reward profiles of the peer group. Indeed, one of the manager’s stated aims is to achieve above average performance with below average volatility.The graph below shows that over the past five years, the managers have outperformed the benchmark and peers, achieving a NAV total return of 137%, relative to the benchmark’s return of 102% (its share price returns have been considerably greater over that time thanks to its narrowing discount). However, it has also produced a considerbaly higher Sharpe ratio (which is a measure of risk-adjusted returns) than the index, its average peer in the AIC UK Smaller Companies sector and the average across the IA UK Smaller Companies sector and delivered a lower maximum drawdown - or the most an investor could have lost if they had bought and sold at the worst possible times - than the index and its sector over that time. Furthermore, the trust has also beaten the average UK small cap fund an the index over one, three, five, ten and 15 years. Performance of Invesco UK Smaller Companies vs benchmarks 05/10/2012 - 30/092017 200
150
100
%
Relative to the index the trust is heavily underweight financials and overweight Technology and Healthcare. In the six months to 31st July 2017, much of the strong recent performance referred to in section above was driven by the Trust’s Technology holdings. Notable performers over the period covered by the interim results included Keywords Studios (+101%), which provides language translation, testing and art services to the computer games sector, online retailer Boohoo.com (+66%), Microgen (+112%) which has world leading high volume processing software, and finally IT services business FDM (+46%).
2
www.trustintelligence.co.uk/investor
24.10.2017
50
0
-50 2013
2014
2015
2016
2017
Invesco Perpetual UK Smaller Ord (Cumulative Fair NAV) Invesco Perpetual UK Smaller Ord (Price) IA OE UK Smaller Companies Morningstar IT UK SMC N Numis SC Ex Invt Com TR GBP
Source: Morningstar
Highcharts
This article was commissioned by BlackRock Throgmorton Trust and is a marketing document. It should be considered non-independent research as defined in COBS 12.3.2R
This characteristic can also be seen in the graph below, in which we break down the performance of the trust relative to the benchmark on a calendar year basis. This graph shows that IPU has in the past modestly underperformed strongly rising markets, but also outperformed falling ones. The managers tell us that their aversion to highly geared, lower quality stocks has been a consistent feature of their stock picking process over the years. Over the past five years, the team have outperformed the benchmark in the past four, and achieved a five year alpha score of 7.1% pa, illustrating the manager’s strong value add over time. 2009 -2017
Annual NAV % (TR)
75
50
25
0
-25 2012
2014
2016
Invesco Perpetual UK Smaller Ord (Total) Invesco Perpetual UK Smaller Ord (Market)
Numis SC Ex Invt Com TR GBP
Source: Morningstar
Highcharts
Dividend In March 2015, the board announced a material change in the company’s dividend policy, committing to a significantly higher, quarterly dividend which comprises 100% of available portfolio income each year, boosted by the payment of a small contribution from capital profits. The board believes that this approach allows them to make a higher proportion of total returns available to shareholders payable through an enhanced dividend, without compromising the manager’s investment approach. Invesco Perpetual UK Smaller Cos - Dividends
Management
The team have employed the same approach and investment philosophy throughout their tenure. They believe in buying financially strong businesses that can deliver growth independently of the wider economy. They believe in running winners – and will continue to own companies even after they have become constituents of the FTSE 100 (although they are not allowed to add to stocks once they reach these lofty heights). At Invesco Perpetual, each manager is responsible and accountable for his/her own performance and so, with no house view, stock selection is the sole responsibility of the two managers. Macro views they glean from colleagues are helpful but not a driver of decisions. Jonathan or Robin will always meet the managers of a company before investing.
Discount
Financial year (end Jan) 20
Annual dividend (pps)
At a historic yield of 3.4%, IPU offers a higher yield relative to the wider sector, where the average yield for investment trusts is 2.3%, and the average for the open-ended sector is 0.99% (that figure is for those that actually pay a dividend; the average across every fund in the sector is 0.78%).
Having been part of the Invesco Perpetual team in Henley for more than a decade, Jonathan Brown started co-managing the trust in 2011. After the retirement of Richard Smith in 2014, he was joined by a deputy manager in the form of Robin West, who re-joined Invesco Perpetual after a period as a UK smaller companies manager at Aviva Investors. They are assisted by Luis Mesquita on the small cap desk and run around £800m in total.
IPU: discrete annual total returns rel. benchmark
2010
the share price at the year-end date (31st Jan). At the historic dividend level of 17.1p per share, the trust yields 3.4%.
3
www.trustintelligence.co.uk/investor
24.10.2017
As the graph below shows, the board’s announcement in March 2015 concerning the enhanced dividend had an impact on the discount. Having historically traded at a wider discount than the peer group, it has since consistently traded at a narrower discount. The trust briefly traded at a premium after the tender offer, and then settled back into the 5-7% range, a considerably narrower discount than the average for peers.
15
10
5
0 2008
2010
2012
2014
2016
Invesco Perpetual UK Smaller
Source: Morningstar, Kepler Partners
Highcharts
The board have so far declared a first interim dividend of 3.55p for the year ending 31 January 2018, payable to shareholders on the register on 4 August 2017. This marks a 2.9% increase over the interim paid at the same time last year of 3.45p. In the past, the board have targeted a dividend that equates to 4% of
There are several features to IPU that the board have designed to try to protect the trust’s rating. As we discuss in the corporate activity update above, the Board has committed to a further range of options being put to shareholders at or around the time of the annual general meeting in 2020. In the immediate term, they continue to pay an enhanced level of dividends to shareholders meaning that the trust yields 3.4%, relative to the weighted average yield for the smaller companies trust sector of
This article was commissioned by BlackRock Throgmorton Trust and is a marketing document. It should be considered non-independent research as defined in COBS 12.3.2R
2.3% (Source: JPM Cazenove). The board have also stated that they will continue to monitor the discount level and may “seek to limit volatility through the prudent use of share buy-backs”. IPU: Discount rel. sector average past five years 0
-5
%
-10
-15
-20
-25 2013
2014
2015
IPU
Source: Morningstar
2016
2017
Average Highcharts
4
www.trustintelligence.co.uk/investor
24.10.2017
Charges With an OCF of 0.82% for the last financial year, IPU is in line with the average for the investment trust sector and considerably cheaper than the wider OEIC peer group, which has average OCFs of 0.78% and c.1.1% respectively. A small point, but perhaps one worth being aware of, is that 85% of the management fee and other costs are charged to capital. In addition, the board anticipates using capital of around 2% of NAV per year to augment the distributable income earned by the portfolio. So whilst it hasn’t been a problem in the past given the excellent capital growth delivered by the managers, in a sustained period of negative NAV growth, the trust’s capital will be eroded if the current distribution policy is maintained. In common with many smaller company investment trusts, the managers are entitled to a performance fee. IPU’s arrangement is that the managers are due 12.5% of any outperformance of the Numis Smaller Companies Index (excluding Investment Companies), but this figure may not exceed 1.0% of the value of the investment trust’s average funds under management in any one year. 100% of the performance fee will be charged to capital.
This article was commissioned by BlackRock Throgmorton Trust and is a marketing document. It should be considered non-independent research as defined in COBS 12.3.2R
Important Information Invesco Perpetual UK Smaller Companies is a client of Kepler Trust Intelligence. Research produced by Kepler Trust Intelligence covering Invesco Perpetual UK Smaller Companies should be considered a marketing communication, and is not independent research. This report has been issued by Kepler Partners LLP solely for information purposes only and the views contained in it must not be construed as investment or tax advice or a recommendation to buy, sell or take any action in relation to any investment. If you are unclear about any of the information on this website or its suitability for you, please contact your financial or tax adviser, or an independent financial or tax adviser before making any investment or financial decisions. The information provided on this website is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation or which would subject Kepler Partners LLP to any registration requirement within such jurisdiction or country. Persons who access this information are required to inform themselves and to comply with any such restrictions. In particular, this website is exclusively for non-US Persons. The information in this website is not for distribution to and does not constitute an offer to sell or the solicitation of any offer to buy any securities in the United States of America to or for the benefit of US Persons. This is a marketing document, should be considered non-independent research and is subject to the rules in COBS 12.3 relating to such research. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research. No representation or warranty, express or implied, is given by any person as to the accuracy or completeness of the information and no responsibility or liability is accepted for the accuracy or sufficiency of any of the information, for any errors, omissions or misstatements, negligent or otherwise. Any views and opinions, whilst given in good faith, are subject to change without notice.
5
www.trustintelligence.co.uk/investor
24.10.2017
This is not an official confirmation of terms and is not to be taken as advice to take any action in relation to any investment mentioned herein. Any prices or quotations contained herein are indicative only. Kepler Partners LLP (including its partners, employees and representatives) or a connected person may have positions in or options on the securities detailed in this report, and may buy, sell or offer to purchase or sell such securities from time to time, but will at all times be subject to restrictions imposed by the firm’s internal rules. Past performance is not necessarily a guide to the future. The value of investments can fall as well as rise and you may get back less than you invested when you decide to sell your investments. It is strongly recommended that Independent financial advice should be taken before entering into any financial transaction. Please see also our terms and conditions
Kepler Partners LLP is a limited liability partnership registered in England and Wales at 9/10 Savile Row, London W1S 3PF with registered number OC334771. Kepler Partners LLP is authorised and regulated by the Financial Conduct Authority.
This article was commissioned by BlackRock Throgmorton Trust and is a marketing document. It should be considered non-independent research as defined in COBS 12.3.2R
first was a promise to offer shareholders one of several options to realise their investment at or close to NAV around the AGM in 2017. The second was to introduce an enhanced dividend policy, which has resulted in the trust offering a considerable higher dividend than its smaller company trust peers. These actions helped successfully bring the discount in – a situation that continues today. At the AGM earlier this year, the board agreed to offer Shareholders the opportunity to Tender up to 40% of their shareholding at a modest discount to NAV (to account for costs). In the event, 38.3% of shares were tendered by shareholders back to the company, whilst still enabling those shareholders who wished to exit their investment in IPU in full. As well as continuing with the enhanced dividend policy, the board has committed to a further range of options being put to shareholders at or around the time of the annual general meeting in 2020.
1
www.trustintelligence.co.uk/investor
24.10.2017
Portfolio Jonathan and Robin have an investment universe of around 2000 companies, and monitor closely around 500 of them. This universe is comprised of the FTSE 250 and smaller, including AIM, although they will not invest in a company with a market capitalisation of less than £100m. The portfolio typically comprises around 80-90 holdings, and no position is allowed to get much bigger than 3% of NAV. This is a pure stock picking fund, and the managers pick stocks because of their absolute attractions rather than any influence from index considerations. That said, they aim to have a portfolio with exposures to a range of sectors (see below) as well as different themes - “self-help” stories, businesses that can roll out successful concepts or act as consolidators using their concept, and what they view as “structural growth” businesses. Invesco Perpetual UK Smaller Companies Sector exposure as at 30th August 17
The high dividend yield is perhaps one of the reasons why, on a discount of c. 7%, the shares trade on a premium rating to the peer group. Whilst the risks to the discount remain over the short term, the board have announced that a further range of options – perhaps similar to the tender offer earlier this year - will be put to shareholders at or around the time of the 2020 AGM.
Basic Materials Telecoms Oil & Gas Consumer Goods
Industrials
Healthcare
Technology
Recent corporate activity As we show in the discount section, several years ago the board introduced two structural initiatives to narrow the discount. The
Financials
Consumer Services Highcharts
Source: Invesco Perpetual
This article was commissioned by BlackRock Throgmorton Trust and is a marketing document. It should be considered non-independent research as defined in COBS 12.3.2R
Technology stocks might be considered at the racier end of the investment universe. However, there are plenty of other strongly performing but more “traditional” stocks in the portfolio, which Jonathan and Robin have been long term supporters of. CVS, Dechra Pharmaceuticals, Coats and Johnson Service Group will be familiar names to those who have followed this trust for a while, and represent examples of the classic stocks that the managers like to hold, and keep holding. TOP TEN HOLDINGS AS AT 30TH AUGUST 2017 NAME
%
Keyword Studios
3.00%
Dechra Pharmaceuticals
2.80%
FDM
2.70%
Clingen
2.70%
Coats
2.70%
Johnson Services
2.50%
CVS Group
2.40%
Equinti
2.40%
Sanne
2.30%
4imprint
2.20%
TOTAL
25.70%
Source: Invesco Perpetual
We understand that the portfolio (on average) typically trades at a premium valuation to the wider market, which in the view of the managers is justified given the balance sheet strength and quality of underlying earnings. The manager’s say they like to find businesses which they perceive as having robust and scalable business models, often niche businesses with significant growth potential, possibly a growing market share and are cash generative with an ability to re-invest. They try to steer clear of businesses with any form of pension issue. Ideally, they want to see businesses have the potential to double in size in the next five years, and in typical Invesco Perpetual style, hold them for the long term.
In terms of outlook, Jonathan and Robin retain a degree of caution given the continued economic and political uncertainty. They believe that theirs are resilient companies able to sustainably generate profitable growth in excess of the wider economy through market share gains, exposure to higher growth niches and re-investment of cash flows.
Gearing The managers have authority to gear the trust to the lesser of 30% of net assets or £25m. However, this is a relatively conservative strategy, and it is therefore not surprising that the managers expect to use gearing only in modest amounts, and even then not often. The managers are also theoretically able to reduce exposure by hedging the portfolio using FTSE 250 futures. Given the illiquidity of this instrument, the managers expect to use this very infrequently. Overall, the trust has nearly always been ungeared, and more lowly geared than the average for the investment trust peer group.
Returns IPU has developed a track record of delivering amongst the better risk / reward profiles of the peer group. Indeed, one of the manager’s stated aims is to achieve above average performance with below average volatility.The graph below shows that over the past five years, the managers have outperformed the benchmark and peers, achieving a NAV total return of 137%, relative to the benchmark’s return of 102% (its share price returns have been considerably greater over that time thanks to its narrowing discount). However, it has also produced a considerbaly higher Sharpe ratio (which is a measure of risk-adjusted returns) than the index, its average peer in the AIC UK Smaller Companies sector and the average across the IA UK Smaller Companies sector and delivered a lower maximum drawdown - or the most an investor could have lost if they had bought and sold at the worst possible times - than the index and its sector over that time. Furthermore, the trust has also beaten the average UK small cap fund an the index over one, three, five, ten and 15 years. Performance of Invesco UK Smaller Companies vs benchmarks 05/10/2012 - 30/092017 200
150
100
%
Relative to the index the trust is heavily underweight financials and overweight Technology and Healthcare. In the six months to 31st July 2017, much of the strong recent performance referred to in section above was driven by the Trust’s Technology holdings. Notable performers over the period covered by the interim results included Keywords Studios (+101%), which provides language translation, testing and art services to the computer games sector, online retailer Boohoo.com (+66%), Microgen (+112%) which has world leading high volume processing software, and finally IT services business FDM (+46%).
2
www.trustintelligence.co.uk/investor
24.10.2017
50
0
-50 2013
2014
2015
2016
2017
Invesco Perpetual UK Smaller Ord (Cumulative Fair NAV) Invesco Perpetual UK Smaller Ord (Price) IA OE UK Smaller Companies Morningstar IT UK SMC N Numis SC Ex Invt Com TR GBP
Source: Morningstar
Highcharts
This article was commissioned by BlackRock Throgmorton Trust and is a marketing document. It should be considered non-independent research as defined in COBS 12.3.2R
This characteristic can also be seen in the graph below, in which we break down the performance of the trust relative to the benchmark on a calendar year basis. This graph shows that IPU has in the past modestly underperformed strongly rising markets, but also outperformed falling ones. The managers tell us that their aversion to highly geared, lower quality stocks has been a consistent feature of their stock picking process over the years. Over the past five years, the team have outperformed the benchmark in the past four, and achieved a five year alpha score of 7.1% pa, illustrating the manager’s strong value add over time. 2009 -2017
Annual NAV % (TR)
75
50
25
0
-25 2012
2014
2016
Invesco Perpetual UK Smaller Ord (Total) Invesco Perpetual UK Smaller Ord (Market)
Numis SC Ex Invt Com TR GBP
Source: Morningstar
Highcharts
Dividend In March 2015, the board announced a material change in the company’s dividend policy, committing to a significantly higher, quarterly dividend which comprises 100% of available portfolio income each year, boosted by the payment of a small contribution from capital profits. The board believes that this approach allows them to make a higher proportion of total returns available to shareholders payable through an enhanced dividend, without compromising the manager’s investment approach. Invesco Perpetual UK Smaller Cos - Dividends
Management
The team have employed the same approach and investment philosophy throughout their tenure. They believe in buying financially strong businesses that can deliver growth independently of the wider economy. They believe in running winners – and will continue to own companies even after they have become constituents of the FTSE 100 (although they are not allowed to add to stocks once they reach these lofty heights). At Invesco Perpetual, each manager is responsible and accountable for his/her own performance and so, with no house view, stock selection is the sole responsibility of the two managers. Macro views they glean from colleagues are helpful but not a driver of decisions. Jonathan or Robin will always meet the managers of a company before investing.
Discount
Financial year (end Jan) 20
Annual dividend (pps)
At a historic yield of 3.4%, IPU offers a higher yield relative to the wider sector, where the average yield for investment trusts is 2.3%, and the average for the open-ended sector is 0.99% (that figure is for those that actually pay a dividend; the average across every fund in the sector is 0.78%).
Having been part of the Invesco Perpetual team in Henley for more than a decade, Jonathan Brown started co-managing the trust in 2011. After the retirement of Richard Smith in 2014, he was joined by a deputy manager in the form of Robin West, who re-joined Invesco Perpetual after a period as a UK smaller companies manager at Aviva Investors. They are assisted by Luis Mesquita on the small cap desk and run around £800m in total.
IPU: discrete annual total returns rel. benchmark
2010
the share price at the year-end date (31st Jan). At the historic dividend level of 17.1p per share, the trust yields 3.4%.
3
www.trustintelligence.co.uk/investor
24.10.2017
As the graph below shows, the board’s announcement in March 2015 concerning the enhanced dividend had an impact on the discount. Having historically traded at a wider discount than the peer group, it has since consistently traded at a narrower discount. The trust briefly traded at a premium after the tender offer, and then settled back into the 5-7% range, a considerably narrower discount than the average for peers.
15
10
5
0 2008
2010
2012
2014
2016
Invesco Perpetual UK Smaller
Source: Morningstar, Kepler Partners
Highcharts
The board have so far declared a first interim dividend of 3.55p for the year ending 31 January 2018, payable to shareholders on the register on 4 August 2017. This marks a 2.9% increase over the interim paid at the same time last year of 3.45p. In the past, the board have targeted a dividend that equates to 4% of
There are several features to IPU that the board have designed to try to protect the trust’s rating. As we discuss in the corporate activity update above, the Board has committed to a further range of options being put to shareholders at or around the time of the annual general meeting in 2020. In the immediate term, they continue to pay an enhanced level of dividends to shareholders meaning that the trust yields 3.4%, relative to the weighted average yield for the smaller companies trust sector of
This article was commissioned by BlackRock Throgmorton Trust and is a marketing document. It should be considered non-independent research as defined in COBS 12.3.2R
2.3% (Source: JPM Cazenove). The board have also stated that they will continue to monitor the discount level and may “seek to limit volatility through the prudent use of share buy-backs”. IPU: Discount rel. sector average past five years 0
-5
%
-10
-15
-20
-25 2013
2014
2015
IPU
Source: Morningstar
2016
2017
Average Highcharts
4
www.trustintelligence.co.uk/investor
24.10.2017
Charges With an OCF of 0.82% for the last financial year, IPU is in line with the average for the investment trust sector and considerably cheaper than the wider OEIC peer group, which has average OCFs of 0.78% and c.1.1% respectively. A small point, but perhaps one worth being aware of, is that 85% of the management fee and other costs are charged to capital. In addition, the board anticipates using capital of around 2% of NAV per year to augment the distributable income earned by the portfolio. So whilst it hasn’t been a problem in the past given the excellent capital growth delivered by the managers, in a sustained period of negative NAV growth, the trust’s capital will be eroded if the current distribution policy is maintained. In common with many smaller company investment trusts, the managers are entitled to a performance fee. IPU’s arrangement is that the managers are due 12.5% of any outperformance of the Numis Smaller Companies Index (excluding Investment Companies), but this figure may not exceed 1.0% of the value of the investment trust’s average funds under management in any one year. 100% of the performance fee will be charged to capital.
This article was commissioned by BlackRock Throgmorton Trust and is a marketing document. It should be considered non-independent research as defined in COBS 12.3.2R
Important Information Invesco Perpetual UK Smaller Companies is a client of Kepler Trust Intelligence. Research produced by Kepler Trust Intelligence covering Invesco Perpetual UK Smaller Companies should be considered a marketing communication, and is not independent research. This report has been issued by Kepler Partners LLP solely for information purposes only and the views contained in it must not be construed as investment or tax advice or a recommendation to buy, sell or take any action in relation to any investment. If you are unclear about any of the information on this website or its suitability for you, please contact your financial or tax adviser, or an independent financial or tax adviser before making any investment or financial decisions. The information provided on this website is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation or which would subject Kepler Partners LLP to any registration requirement within such jurisdiction or country. Persons who access this information are required to inform themselves and to comply with any such restrictions. In particular, this website is exclusively for non-US Persons. The information in this website is not for distribution to and does not constitute an offer to sell or the solicitation of any offer to buy any securities in the United States of America to or for the benefit of US Persons. This is a marketing document, should be considered non-independent research and is subject to the rules in COBS 12.3 relating to such research. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research. No representation or warranty, express or implied, is given by any person as to the accuracy or completeness of the information and no responsibility or liability is accepted for the accuracy or sufficiency of any of the information, for any errors, omissions or misstatements, negligent or otherwise. Any views and opinions, whilst given in good faith, are subject to change without notice.
5
www.trustintelligence.co.uk/investor
24.10.2017
This is not an official confirmation of terms and is not to be taken as advice to take any action in relation to any investment mentioned herein. Any prices or quotations contained herein are indicative only. Kepler Partners LLP (including its partners, employees and representatives) or a connected person may have positions in or options on the securities detailed in this report, and may buy, sell or offer to purchase or sell such securities from time to time, but will at all times be subject to restrictions imposed by the firm’s internal rules. Past performance is not necessarily a guide to the future. The value of investments can fall as well as rise and you may get back less than you invested when you decide to sell your investments. It is strongly recommended that Independent financial advice should be taken before entering into any financial transaction. Please see also our terms and conditions
Kepler Partners LLP is a limited liability partnership registered in England and Wales at 9/10 Savile Row, London W1S 3PF with registered number OC334771. Kepler Partners LLP is authorised and regulated by the Financial Conduct Authority.
This article was commissioned by BlackRock Throgmorton Trust and is a marketing document. It should be considered non-independent research as defined in COBS 12.3.2R
