The bringing together of the two distinct businesses of INVESCO and GT has not been without its casua...
The combined group can truly claim to be a global investment management business. Its physical presence in so many areas, combined with the quality of its fund managers, makes INVESCO GT one of the groups to watch in 2000 and beyond.
A recent addition to Forsyth's fund rating service is the INVESCO GT North American fund, managed by Trent May in Denver. The fund is managed using a distinct bottom-up investment process with the intention of identifying high quality stable growth companies, and firms that operate in the fastest growing areas of the US economy.
The key to stock selection is the identification of sustainable growth that can be driven by either unit sales growth, upward momentum in margins or strong cashflow. Higher margins should result from strong topline growth as operational leverage is being applied to existing assets. Finally, cash flow should ideally be internally generated as opposed to externally financed to ensure shareholders interests are notundermined.
The intention is to build a portfolio around a core of growth companies that will typically account for between 60%-70% of the total portfolio and then weight these fairly aggressively (3%-4% on average).
This core will typically consist of 25 individual names. The balance of the portfolio will be invested in emerging growth stocks that will exhibit the potential to become a core growth stock
One of the group's most accomplished fund managers has been the veteran stock picker Masato Kawada, manager of the INVESCO GT Japan Enterprise fund. The fund's performance in 1999 might suggest that the fund is due for a period of consolidation, but Kawada argues strongly that the driving force behind the small cap rally in Japan remains intact.
He sees an increasing number of growth opportunities in the small companies asset class. The most dynamic growth is identified in services and retailing, the typical beneficiaries of deregulation, tax reform and IT.
Kawada believes that earnings growth has definitely accelerated, although he admits this does not justify some of the valuations in today's market.
Given Japan's diffusion rate of the internet four to five years behind the US, Kawada remains confident of this sector. Mobile communication will be the hottest ticket in the market as the new era of mobile data service takes off with companies such as NTT DoCoMo and NCC.
We also have great admiration for the bond team headed by Paul Griffiths. His fund, the INVESCO GT Bond fund, has a Forsyth rating of AAA.
The investment process emphasises the top-down macroeconomic perspective, with use made of a matrix of economic data based upon economic fundamentals for each market.
The analysis will assess real economic trends, monetary policy and fiscal policy. Information for the matrix is provided by the fixed income teams based in Frankfurt, London and San Francisco, with additional input from the group's economists and equity teams. The intention is to create a global approach with the matrix used to identify the main short-term factors influencing each market under review.
The process is designed to identify value on a six-month time horizon with best, expected and worst case scenarios forecast along the whole yield curve. The team will calculate total returns in local currency and dollar terms, using a Barra bond analysis system to analyse risk. A longer-term perspective is provided by the economics team, where the intention is to identify structural changes that are expected to have a profound effect upon the performance of the markets.
The increase in minimum AE contributions has had little impact on opt-out rates - with cessations after April increasing by less than two percentage points, data from The Pensions Regulator (TPR) shows.
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