Invesco Perpetual World Income fund manager Ian Brady works closely with the managers of the funds in which he invests and is not prepared to sacrifice capital appreciation in pursuit of yield.
When Invesco Perpetual launched the World Income fund in February 1997, its primary aim was to strive for a yield of about 4% a year, as well as provide investors with some capital appreciation. Nearly 10 years on and the fund’s manager, Ian Brady, says, as a result of changes in market conditions, the current yield on the portfolio is 2.84%.Indeed, while the fettered fund of funds has an income tag, Brady does not want to turn it into a fixed income portfolio just to boost the yield. “Capital gains are important and will not be sacrificed just to boost the yield,” he says. Brady, who is head of US equities and manager of the US Equity, US Aggressive and US Smaller Companies funds at Invesco, has run the World Income fund since January 2005. He took over from chief investment officer and chief executive Bob Yerbury, who stepped down to focus on his managerial responsibilities. As a member of Invesco’s asset allocation team, Brady says he listens to each of the group’s fund managers at its monthly meetings, as well as speaking to them each informally every day. “None of Invesco’s funds are run using an index-plus strategy; they are all active stockpicking portfolios and my job is to decide what will perform best on a 12-month basis,” he says. Last year, Brady says, the view taken on the portfolio was to be anti Anglo-Saxon consumer companies, pro Asian Far East and pro European domestic holdings. As a result, he says, the fund was overweight in the Invesco Perpetual Pacific fund and extremely overweight in the group’s UK managed portfolios, as none held consumer-related companies. Conversely, it was underweight in America and held almost as little as it could in bonds. However, while Brady says the group has been bullish on markets and economies since the first quarter of 2001, thus year most Invesco funds are becoming more defensive in their approach. “Interest rates have risen in America, a lot of liquidity has been withdrawn from the system, the European Central bank has raised rates and just last week the Bank of China announced it wants to address the overbuilding in capacity stock,” he says. “As a result, most of our portfolios are trying to invest more of their assets in less-economically sensitive stocks and are investing more in larger-cap companies, which have more predictable earnings streams.” These changes in markets and the portfolio have led Brady to take some money out of Pacific fund and up his exposure to his American managed portfolios. In addition, he says that later in the year he is likely move more of the fund’s assets into government bonds rather than corporate bonds. “credit is so good that the only way it can go from here is that it gets worse as the impact of increased interest rates kicks in,” he says. Nine Invesco funds sit in the World Income fund. Brady says the advantage of running a fund of internally managed funds, as opposed to a fund of externally managed funds (unfettered), is the constant contact he has with all the managers. “We call it the Henley all-under-one-roof-philosophy,” he says. “By working on the same floor as all the managers, I know what they are all thinking and what is in all the portfolios. If I was picking funds externally I would not have this ability.”