Perpetual Income & Growth Investment Trust (PLI) is firing its manager, Mark Barnett, who has run the trust since 1999, after “an extended period of underperformance of its benchmark, the FTSE All-Share index". The trust's board said it had served notice on Invesco, the asset management company where Mr Barnett works, and has begun a search for a new manager.
“This decision has not been taken lightly, particularly given the current market environment, but the board has previously made it clear that it was concerned with poor performance and this continued for the most recent financial year, which ended on 31 March 2020,” explained the trust's board.
The trust’s net asset value (NAV) and share price return have lagged the FTSE All-Share since the start of 2016. Its share price has fallen by 40.9 per cent over the five years to 3 April 2020, according to FE, compared with a 3.2 per cent fall for the FTSE All-Share index over this period when the Association of Investment Companies UK Equity Income sector average return was a 10.5 per cent fall.
The trust's board now wants to engage a new manager “with the credentials and capacity to deliver capital growth and real growth in dividends over the medium to longer term from UK equities”. And it has hired consultancy firm Mercer to lead the search alongside Winterflood, the trust’s broker. Interested parties have until 17 April to contact Winterflood.
The trust’s board had hinted several times at a possible manager change. In December 2019, when Edinburgh Investment Trust (EDIN) dropped Mr Barnett as its manager because of poor performance, Perpetual Income & Growth Investment Trust’s board opted to stick with him in the hope that the trust's exposure to UK domestic stocks would benefit it following greater clarity on the UK's departure from the European Union. However, it warned that it would be “closely monitoring” performance.
The Invesco Income (GB00BJ04HX60) and Invesco High Income (GB00BJ04HQ93) funds, which are also run by Mr Barnett, have performed poorly in recent years as well. Invesco Income fell 34 per cent over the five years to 6 April: the average Investment Association UK All Companies fund lost a much smaller 4.2 per cent.
Invesco recently marked down the value of unquoted holdings held by these two funds by 60 per cent. The markdowns were made after a review by the company’s pricing committee and to reflect market conditions. Invesco plans to entirely dispose of these funds' unquoted investments, which represented 5.2 per cent of Invesco High Income's assets at the end of January, and 5.8 per cent of Invesco Income's assets.
“Our UK equities funds have seen changes in portfolio mix over the last year as we continue to work on behalf of our clients’ best interests over the short and longer term,” said Invesco. “Over that period we have substantially increased liquidity within our UK portfolios and increased allocations to a number of larger-cap names. We have decided that now is the right time to go further with these changes and to dispose of unquoted assets held in those funds in order to redeploy capital raised to publicly quoted assets.”
Fund research company Morningstar downgraded Mr Barnett’s funds in November, citing concerns about liquidity. Mr Barnett responded by saying such concerns were “misplaced”, adding that his funds were “appropriately positioned, well diversified and able to generate liquidity should investors wish to buy or sell”.
