Invesco Perpetual may have to overhaul its investment trust range should it retain the £1.4bn Edinburgh trust mandate after the departure of manager Neil Woodford, analysts have said.
News of Woodford’s (pictured) impending departure to set up a rival fund management business has led to speculation he will seek to take the mandate with him.
But in a letter to shareholders last week, the board of Edinburgh hinted it will look to remain with Invesco Perpetual, noting the succession plan in place, and paving the way for Woodford’s replacement Mark Barnett to take over the trust.
“We are mindful that, as has been the case since we appointed Invesco Perpetual, working with Neil is a highly experienced investment team backed by the resources of a global company,” said chairman Jim Pettigrew.
If the board sticks with Invesco, this would put Barnett in the almost unheard-of position of running four investment trusts – he already manages the £968m Perpetual Income and Growth trust, the £268m Keystone trust and the £62m IP Select UK Equity trust.
This could lead to the mandates of Invesco Perpetual’s existing UK trusts being altered to differentiate the range from an Edinburgh trust run by Barnett.
Close correlations between Edinburgh and Perpetual Income and Growth have moved higher in recent years, according to FE data.
Over five years, the trusts have a correlation of 0.77 (where 0.6 means a strong positive correlation), with a figure of 0.85 over three years and 0.87 over a one- year period.
Barnett’s other investment trusts produce similar figures, with Keystone exhibiting correlation of 0.87 with the Edinburgh trust over one year.
Invesco Perpetual will be keen to avoid two flagship vehicles run as ‘copycat’ portfolios by the same manager, according to Winterflood.
“If Mark Barnett is involved in four trusts, questions will be asked about how they are going to be differentiated,” said head of investment trust research Simon Elliott.
“The portfolios are about 60% the same. They may move Perpetual Income and Growth to more of a large-cap vehicle: to have two copycat ITs would be difficult.”
The two portfolios overlap in terms of their major holdings, with large positions in AstraZeneca, BAE Systems, British American Tobacco, BT, and Roche, but Barnett has outperformed his mentor over one, three and five years.
The Edinburgh trust has swung from a 5% premium on 15 October to a 4.9% discount as investors rushed to sell on news of Woodford’s exit.
Barnett v Woodford – common trust holdings
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