Fund Research

Invesco Perpetual UK Smaller Companies Trust

19 June 2018 View latest version

Invesco Perpetual UK Smaller Companies Trust is a client of Kepler Trust Intelligence. Material produced by Kepler Trust Intelligence should be considered as factual information only and not an indication as to the desirability or appropriateness of investing in the security discussed.

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Jonathan Brown and Robin West continue to apply the same consistent investment process that has been used for over a decade. They aim to achieve above average returns through the cycle with lower volatility.

Invesco Perpetual UK Smaller Companies Trust (IPU) tends to sit in the middle of the pack relative to peers on most portfolio metrics. In terms of market-cap exposure it is neither particularly heavily weighted to mid-caps, nor to micro-caps. The managers look for high-quality businesses with growth characteristics, and a clear preference for companies with balance sheet strength.

Since the start of the year, the managers report being slightly frustrated in what they view as a momentum led market, which has better suited competitors such as Standard Life and Old Mutual. However, they observe that as much as offering a strong following wind to the “winners”, the market has been “absolutely brutal” to those perceived as “losers”. Particularly badly hit has been any traditional retail exposure. Jonathan and Robin have been taking advantage of this volatility, by top-slicing into strength, and adding to positions where they feel that share prices have been pushed down too far.

Over the past five years, the trust has delivered a NAV total return of 105%, relative to the benchmark’s return of 68%, and has beaten the index in four of the past five calendar years. The five-year alpha score is 4% pa, illustrating the manager’s strong value add through their lower volatility approach.

The dividend, which currently yields 4%, is achieved by distributing all the available income arising from the portfolio, boosted by a small proportion from capital profits. The yield therefore compares very favourably relative to other small company funds and trusts, but also those in the equity income sector. And more importantly, the fact that a proportion of the dividend comes from capital means that the managers have not had to tilt their investment approach to achieve this level of income for shareholders.

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Fund History: Invesco Perpetual UK Smaller Companies Trust

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