despite recent rally in global markets, invesco's graham kitchen believes the world economy is not out of the woods yet
Two years after the merger of Invesco and Perpetual, it seems there is room for two leading equity income fund managers in the one company. Initially, when Perpetual's Neil Woodford and Invesco's Graham Kitchen came together, some intermediaries doubted that two such high profile managers in the same sphere could work together.
Kitchen manages the Invesco Perpetual Income & Growth fund. He has managed this fund, formerly called Invesco Income, since November 1995. In June 1998 Invesco and GT merged, and the manager of the GT Income fund Nick Train left the company. Money from the GT fund was subsequently merged into Kitchen's fund.
Following the merger of Invesco with Perpetual in November 2000, Kitchen's fund was renamed Invesco Perpetual Income & Growth to distinguish it from Neil Woodford's Invesco Perpetual Income and High Income funds.
While Woodford has a lot of the limelight at the company, Kitchen's results are also impressive. The £678m Income & Growth fund is ranked 29 of 75 funds in the UK Equity Income sector over three years with returns of -15.9%, offer to bid, according to figures provided by Standard & Poor's.
Do you feel overshadowed by Neil Woodford?
No, not at all. We all work for the same company, and although we work in different offices (Kitchen is in London and Woodford in Henley) and have different personalities, we have a huge degree of respect for each other.
Despite what everybody said at the time ' that either Neil or myself would leave ' that hasn't come to fruition, because frankly we get on really well.
Yes, Neil is very high profile, but I see that as a good thing. Having Invesco Perpetual in the news and being high profile is beneficial for everybody in the company.
It was always assumed that one of us would leave. We are different in what we do. From my point of view ' why would I want to give up what is now a seven-year track record with a company I like working with?
If there was one fund in the sector that you could beat, would it be Neil's fund?
No, because I benefit from his fund doing well. It is not a competition as such. It is probably more to do with my character. If you are confident in what you do, confident in yourself and confident in your ability, then it really doesn't matter.
How closely do you work with Neil?
When it comes to day-to-day investment, I take no notice of what Neil does. I'm aware of it, but we work independently. If for example he wants to take a dim view of UK banks at a time that I like them, then that is absolutely fine as the idea of our funds is to offer variety to investors.
Although we don't share ideas, we do communicate on corporate issues. Clearly, if we own large stakes in a company and there is an issue, then we co-operate and talk about it. If we have a meeting with a company he owns, then we communicate, and vice versa. If Neil wants to take an aggressive view of a sector, or stock, then I'm aware of it but we don't actually discuss it. We certainly work as individuals rather than within a structured team framework.
What does your fund try to achieve and has this changed since the integration of the Perpetual funds?
My fund has the same three objectives that it has always had. These are to grow the capital, grow the income and to achieve an above average income.
The process has not really changed, it is still very bottom up and driven by stock picking. I do have a top down view, and it does impact on the biases within the portfolio, but primarily it is about bottom-up stock selection.
What do you look for when choosing companies?
Fundamentally, what I try to do is find undervalued companies. Usually they are undervalued as the market is mis-pricing them. Therefore, I look for anomalies.
I have never actually chased yield, although clearly the portfolio has to have a yield that is higher than the All Share in order to meet sector requirements.
This high yield is achieved through some of the stocks in the portfolio having low yields and some having high yields. It has
FUND MANAGER: Graham Kitchen
Kitchen joined Invesco Perpetual 11 years ago as a graduate trainee
Since November 1995, he has managed UK income mandates, including both unit trusts and investment trusts.
He was promoted to head of Pan-European equities, London, in September.
He holds a BA (Hons), History from Lancaster University and an MA in Modern History from Oxford University.
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