Invesco Perpetual UK Smaller Companies Trust

Last updated 15 October 2019

Fundamental stock pickers, aiming to achieve top quartile performance with below average volatility…

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Invesco Perpetual UK Smaller Companies Trust. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Invesco Perpetual UK Smaller Companies Trust

Jonathan Brown and Robin West are fundamental stock pickers, with a strong valuation discipline. Within their peer group, they aim to achieve top quartile performance with below average volatility. As we discuss in the Returns section, they have consistently achieved this aim – largely through the application of the same investment process year after year, cycle after cycle.

Jonathan and Robin try not to take macro views, and they rely on fundamental bottom-up stock analysis. In terms of market-cap exposure, the trust tends to sit in the middle of the pack relative to peers – neither particularly heavily weighted to mid-caps nor to micro caps. The companies that the managers tend to invest in have both 'quality' and 'growth' characteristics. They look for businesses that have the potential to double in size over the next five years, and in typical Invesco Perpetual style, hold them for the long-term – their typical annual turnover is c. 25%.

The trust has now achieved five consecutive years of outperforming the benchmark. So far in 2019, IPU is ahead of the benchmark by 9.5% (to 2 October), and therefore on track for the sixth straight year of outperformance. The team has a preference for finding high quality businesses that are growing revenues and profits, and likes to buy them at what it sees as the 'right' valuation. When we spoke to the managers recently – consistent with their usual pattern of activity – they reported that they have been selling down more highly rated companies and recycling capital into smaller, less expensive stocks. As a result, with worries about growth faltering, IPU has been better protected and maintained its lead over the benchmark and peers.

With a yield of 3.6% on a historic basis, IPU pays amongst the highest level of dividend yield in the UK smaller companies sector. It is important to note that this yield is not achieved by the managers investing in companies which themselves provide a higher yield, but because the income from the portfolio is supported by capital reserves.

The managers believe that their portfolio of good quality businesses with multi-year growth trajectories will stand them in good stead. Jonathan believes that sticking to their principles is the only way to ride out the current difficult political backdrop.

William Heathcoat Amory
William Heathcoat Amory is a co-founding partner of Kepler Partners LLP and leads the Kepler investment trust research team. William has 18 years of experience as an investment company analyst. Prior to co-founding Kepler Partners in 2008, he was part of the Extel number 1 rated research team at JPMorgan Cazenove.

Fund History

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Key facts

Investment objective

To achieve a long-term total return for shareholders primarily by investment in a broad cross- section of small- to medium-sized UK quoted companies

As at:

07/10/19

Group/Investment

Invesco Perpetual UK Smaller Companies

Ticker

IPU

Management Company

Invesco Advisers, Inc

Manager Name

Jonathan Brown; Robin West;

Association of Investment Companies (AIC) Sector

UK Smaller Companies

12 Mo Yield

3.6%

Dividend Distribution Frequency

Quarterly

Latest Market Capitalisation

£172,144,108

Latest Net Gearing (Cum Fair)

-6%

Latest Ongoing Charge Ex Perf Fee

0.88%

Turnover Ratio

17.4%

Shares Outstanding

32,851,929

(Discount)/ Premium (Cum Fair)

-2.0%

Daily Closing Price

524p

Source: Morningstar

Disclaimer

This report has been issued by Kepler Partners LLP.  The analyst who has prepared this report is aware that Kepler Partners LLP has a relationship with the company covered in this report and/or a conflict of interest which may impair the objectivity of the research.

Past performance is not a reliable indicator of future results. The value of investments can fall as well as rise and you may get back less than you invested when you decide to sell your investments. It is strongly recommended that if you are a private investor independent financial advice should be taken before making any investment or financial decision.

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