The Invesco Perpetual UK Smaller Companies Trust (IPU) management team has been in place for many years, with Robin West joining long-term manager Jonathan Brown in 2014. Over the cycle they aim to achieve top quartile performance with below average volatility compared to their peers. The team aim to achieve this through a diversified portfolio and fundamental stock picking, and by applying a consistent investment philosophy.
The UK’s smaller companies equity market was hit harder than most during Q1 2020. As we discuss in the Performance section, IPU declined slightly less than most peers but has not rebounded as strongly. This trend is in line with what shareholders might expect, based on previous cycles.
With reference to the lockdown and expected economic downturn, the managers have closely reviewed their portfolio. As we discuss in the Portfolio section, they view the majority of holdings as ‘low’ and ‘medium’ risk to COVID-19 related issues. The 13% that the managers classify as ‘high’ risk are companies within the retailing and leisure sectors. Overall Jonathan and Robin believe they are well placed to support any investee companies that require additional financing, having gone into the crisis with cash of around 6-7%. Their preference for well financed businesses means they believe that 76% of the companies in their portfolio are unlikely to need equity financing to get them through the crisis.
IPU recently announced that the 2020 dividend will be held at last year’s level. However, in view of current circumstances, the board will pay a dividend for the current financial year of no less than 2% of the 31 January 2021 share price.