Inside information gives Invesco a lift

Invesco Perpetual World Growth manager Ian Brady claims that his impartiality in choosing underlying funds helps keep the fettered fund of funds in the Active Managed sector\'s top 10.

Despite running one of the underlying funds in the Invesco Perpetual World Growth Portfolio, Ian Brady maintains that it is easy for him to be impartial when managing the fettered fund of funds.

Brady, who is head of US equities and manager of the Invesco US Equity, US Aggressive and US Smaller Companies funds, has had charge of the World Growth Portfolio since January. He took over from chief investment officer and chief executive officer Bob Yerbury, who stepped down from day-to-day fund management to focus on his managerial responsibilities.

In addition to the World Growth Portfolio, Brady also manages the World Income fund – another fettered fund of funds. Both, he says, are run using the “Henley all under one roof” philosophy.

He explains: “Managing three of the group’s American funds means I sit on the same floor as all the other Invesco managers. This benefits both of the fettered portfolios because I know what is held in all the actively managed portfolios and how much money they can make me.”

However, despite his close proximity to all the managers, Brady argues that no-one puts any pressure on him to invest in their funds, or makes false claims about performance. “I always get honest assessments from the managers about how their funds are performing. I am compensated from the performance of this fund, so the worst thing I could do is give money to myself and get it wrong.”

In fact, Brady notes, the World Growth Portfolio has been underweight in America for some time. He says that in the market environment of the last six to nine months he was able to generate more money by being invested in British and Asian-orientated funds.

However, just recently he has started to increase his American exposure. “The themes of the fund at present are being underweight in US and UK consumer-related companies and being overweight in the beneficiaries of American corporate spending and in European and Asian domestic consumer plays. The portfolio also has a high weighting towards the strong dividend plays in Britain.”

In terms of geographical allocation the fund has about 62% of its assets under management held in Britain, 15% in continental Europe, 11% in America, 9% in Asia, 3% in Japan and 1.5% in emerging market countries.

“In Asia and the UK you can find a number of companies on 13x price/earnings multiples, double-digit earnings growth and yields above 3.3%. This has helped the fund in performance terms over the last 12 months,” he says.

According to Standard & Poor’s the Invesco Perpetual World Growth Portfolio is ranked 10th out of 30 funds in the Investment Management Association’s Active Managed sector (funds of funds only) over one year to July 25, 2005. This follows a return of 25.74%, compared with the sector average return of 25.06%.

While the objective of the fund is to achieve capital growth by investing primarily in Invesco Perpetual funds, Brady can also hold other investments that he deems appropriate. These include transferable securities, warrants, deposits and derivatives. However, he says that he does not currently hold any of these, with the fund fully invested in 11 underlying Invesco funds.

As well as recently increasing his exposure to America by adding to his holding in his own Invesco US Equity fund, Brady says that recent portfolio activity has also seen him add to the UK Growth and UK Aggressive funds, both of which are managed by Ed Burke. These two funds combined represented 19% of the entire portfolio at the end of June. The top holding was Neil Woodford’s Income fund, which represented 17.6% of the fund’s overall assets.

Brady says: “We recognise that growth, while slowing, is not suddenly going to fall off a cliff. This fund only invests in companies that have the ability to grow their profits and dividends and then return this to their shareholders.”

In order to select the underlying funds that invest in these types of stocks, Brady says that it is vital for him to listen to what the fund managers are saying about their own funds. “I have to know what the underlying managers are saying about their portfolios and the market conditions that are affecting them. I then superimpose my own knowledge of what is taking place in the macroeconomy and choose the appropriate funds.”

For example, Brady says that Stuart Parks, manager of the group’s Asian fund, is more bullish about the prospects for Asia ex Japan than Paul Chesson, manager of the Japan fund, is about for the prospects for Japan. As a result he has allocated more to Parks’ fund, which, he adds, Chesson is comfortable with.

“We are underweight in Japan because we think that the cyclical recovery has peaked. Conversely, we are overweight in Asia as valuations there are more attractive.”