Last year the profile of Mark Barnett, already a well regarded fund manager, shot up a level as it was announced that he would be taking over a number of the funds run by star manager Neil Woodford after he leaves Invesco Perpetual at the end of April (read more on this).
Although already a successful manager, Mr Barnett's impending appointment as manager of the flagship Invesco Perpetual Income (GB0033053827) and High Income (GB0033054015) funds, on top of his substantial existing duties, has been greeted with concern due to the large amount of money he will be running (read more on this). Mr Barnett already runs Invesco Perpetual UK Strategic Income (GB00B1W7J535), IC Top 100 Fund Perpetual Income and Growth (PLI), Keystone Investment Trust (KIT) and Invesco Perpetual Select Trust's (IVPU) UK equity portfolio.
Read more on the prospects for the Invesco investment trusts
On top of all this, it was announced at the end of January that Mr Barnett has taken over IC Top 100 Fund Edinburgh Investment Trust (EDIN) with immediate effect (read our tip on this). So how will he cope?
"My style has always been to see myself as a long-term investor and with much larger sums of money that's reinforced in that you can't make decisions to swing funds about easily or quickly. You have to take views that will last," says Mr Barnett. "The turnover on my funds historically has been low, which is reflective of the fact that my average holding period has been four to five years. So my approach, style and philosophy lend themselves to larger sums of money. And I'm not doing it on my own: there is a team around me and we share ideas, research and analysis."
Mark Barnett CV Mark Barnett is manager of Invesco Perpetual UK Strategic Income Fund; Perpetual Income and Growth, Keystone, and Edinburgh investment trusts; and Invesco Perpetual Select Trust's UK equity portfolio. He has worked at Invesco Perpetual since 1996 after beginning his investment career at Mercury Asset Management in 1992. He has a degree in French and Politics from Reading University, and passed the examinations of the Association for Investment Management and Research. |
Due to Mr Woodford's departure, money has already been withdrawn from Invesco Perpetual Income and High Income, and there may be further redemptions.
"My stance will be to try, very much in the same way that [Neil Woodford] has done, to effect the changes or fund the redemptions in a way which is unpredictable, while being as anonymous as possible," says Mr Barnett. "You don't want to make changes where the market can see you coming, both on the sells and the buys, because I can use the redemptions to try and reshape the fund in a way that I want."
With regard to the Edinburgh Investment Trust, Mr Barnett says the approach he has used for all his funds will be reflected in this one too. "Over time I will be making changes," he says. "But the kinds of portfolios that I've been managing are not drastically different from the sort of funds that Neil's been managing. There are lots of stocks there that I own and that I want to continue to own, just maybe not in the same proportions. We're not looking at a wholesale take-out of its entire list of companies and a brand new list."
In taking on Mr Woodford's portfolios, he will inherit a heavy weighting to pharmaceutical and healthcare shares. At the end of December, healthcare accounted for more than a third of assets in Invesco Perpetual Income and High Income funds, and Edinburgh Investment Trust. But Mr Barnett is positive on the prospects for these and holds them in his existing funds.
"In the pharmaceuticals sector, my biggest holdings are non-UK-listed pharmaceutical companies," says Mr Barnett. "I think that, in many respects, companies like Roche and Novartis are better businesses than their UK counterparts, though might be more highly rated. What we're finding is that the stock market, having de-rated pharmaceuticals substantially, has started to re-rate them, but is still only applying a pretty low probability of success to a lot of the pipeline products."
He is also comfortable with another of Mr Woodford's favoured sectors - tobacco.
"The valuations of these companies are certainly a lot lower than they were last year. These businesses have been de-rated and, to a certain extent, are vulnerable to emerging market currency weakness as well - particularly British American Tobacco (BATS)," he says. "But they have the characteristics that I have wanted to own historically: very strong cash generation, managements very aligned with shareholders and very substantial cash returns to shareholders. These companies offer quite substantial value in the market and are an area I would be interested in increasing."
Mr Barnett believes that the UK market is "on the expensive side of fair value" as "one of the key features of the market move over the last few years has been the lack of earnings and profit growth. But I do see pockets of value. I think you need to be much more vigilant on where you look for value in the market: you've got to be sure that you have strong absolute valuation and support for the equity you're buying. If there aren't earnings and profit performance in terms of growth coming through, there will be price vulnerability and the scope to lose money. It may just be the case that what we can expect from the equity market this year is a lot lower return overall".
But, ultimately, the key to running money successfully is being patient, taking a long-term view, and considering that you are buying not just a share in a business but the whole business.
Mr Barnett concludes: "You have try to understand what is it about the value of the business that attracts you and keep focused on that, and not get bumped around by what the market's telling you on a day-to-day or hour-to-hour view. Focus in on the fundamental strengths of the businesses and stick to that as a point of reference as to whether or not this is going to be a good investment. That's the biggest challenge for a fund manager who's trying to cut out the noise, but just stick to your knitting because that's what's going to deliver the best returns."
