recovery fund will be marketed to advisers once track record has been established
Invesco Perpetual is to launch a UK Recovery unit trust to be managed by Ian Carstairs, however the fund will not be widely marketed until a track record has been established.
The fund will initially form a rollover option for investors in the £17.7m Invesco Convertible investment trust, which has been run as a recovery vehicle. In time, however, the fund will slot into Invesco Perpetual's UK range of equity income, growth, smaller companies and aggressive growth funds.
As such the fund has the same charging and commission structure as the other UK funds with 3% commission, 0.5% trail and an initial charge of 5.26%.
The firm says the fund will aim for capital growth through a portfolio of primarily UK securities considered to offer recovery prospects because their prices are depressed by unjustified adverse sentiment and where a re-rating is expected.
The fund is to be launched as a vehicle to retain investors following the reconstruction of the Invesco Perpetual Convertible investment trust, which is due to wind up by 31 August.
The convertible trust has returned -16.0% over the 12 months to 12 August, compared to a sector average of -37.3%.
Investors also have the option to roll their holdings in the trust into ordinary shares or convertible unsecured loan stock in the Invesco Income Growth investment trust, or accumulation units in the Invesco Perpetual Money unit trust.
Carstairs also manages the £43.1m Invesco Recovery 2005 split-cap investment trust, which has returned -11% over the 12 months to 12 August against a sector average of -42.9%, according to Standard & Poor's, and the £46.5m Invesco Geared Opportunities split-cap trust, which has returned 0.6% over the period.
Both trusts invest primarily in UK equities with some debt mixed in.
Carstairs said the new fund will be run along very similar lines to the existing splits, but will invest exclusively in equities. He said he expects a high degree of duplication between the equity holdings.
'It's going to use the same methodologies, thinking and brief. The portfolios will be almost exactly the same apart from any fixed interest content,' he said.
The fund is anticipated to be quite small at launch, with less than half the rollovers expected to land in the new unit trust.
It is expected to be more widely marketed in 2003 once it builds up a saleable track record, but Carstairs said the time is ripe to launch a recovery-style trust. 'There are quite a lot of distressed stocks ' it is a relatively good time to launch recovery-type vehicles when markets are generally depressed, because often stocks can bounce back quite quickly,' he said.
Carstairs defines recovery stocks as those where 'the price has fallen a long way, and we expect that to reverse'.
Unlike previous downturns, new-economy stocks and lower-yielding equities are now included among the recovery prospects, he said.
'The recovery splits have been gradually investing money into some of the old technology names that have come down a long way that probably will survive. Recently, with the fall-off in the market, some of the larger stock names that haven't been recovery stocks for a while have turned up on the doorstep,' he said.
However, Carstairs said not all stocks that have suffered during the downturn are candidates for recovery.
'Many sectors that fall relative to the market come back again, but some won't, the steel and textiles industries have been declining for years, for example. But even within those industries that I wouldn't expect to re-establish their relative importance to the All-Share Index that they had before, you can still find individual stocks which may be attractive,' he said.
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