PSigma Investment Management CIO Tom Becket has sold out of the £11bn Invesco Perpetual Income fund after ten years following news of manager Neil Woodford's departure.
Becket (pictured) had held the fund since 2003 and had a 2% weighting in his balanced portfolios, but said it is the "wrong fund in the wrong situation". He said at present he is more interested in backing cyclicals than defensives.
Woodford has announced he will be leaving Invesco Perpetual next April after 25 years with the group, handing his funds to Mark Barnett.
Becket said: “We are uncomfortable with both the earnings growth prospects and valuations of some of the defensive sectors. We have held the fund for ten years and could not fail to be impressed by Woodford’s success. But we feel now it is the wrong fund for the wrong environment in the wrong situation.”
Invesco Perpetual Income has returned 19.5% over the year to 11 October compared to a sector average of 21%, according to Morningstar.
PSigma had already placed the fund under review as the firm moved towards cyclical and recovery stocks.
Becket added it is likely he would have sold it as part of this process even if Woodford had remained as manager.
“The fund formed part of the defensive element of the equity barbell we have been running for the past three years. However, we have been increasingly tilting that barbell towards cyclical and recovery stocks, such as financials and industrials, seeding funds including River & Mercantile World Recovery in Q2.
Woodford’s announced departure was an immediate cause, in addition to the aforementioned underlying causes,” he said.
Instead of IP Income, Becket is now invested in the L&G International index tracker, which is more than 50% allocated to the US.
Becket admitted PSigma was hurt by a lack of US exposure in the second quarter of 2013 and, while things improved in Q3, he is looking to increase US weightings in the portfolios.
Speaking at Professional Adviser's conference
Equity release panel
Speaking at PA360
TISA's Peter Smith
Shone a light on 'closet trackers'