Model Portfolio News December 2013

This is a copy of a letter sent to a number of BLM Investment clients in December 2013:

We would normally only write to you in respect of individual funds in your Model Portfolio when we recommend a switch.  However, due to the high profile nature of the fund managers referred to in this letter, we thought we would let you know what our thoughts are.

Neil Woodford
Invesco Perpetual High Income Fund

You may be aware that Neil has decided to leave Invesco Perpetual, after 25 years, to start his own business next April. There is no doubt that he is an excellent fund manager. However there is no way of knowing what his investment proposition(s) will be until his new venture is established.

In the meantime, we have a predicament. Do we recommend all of our clients move to an alternative fund or retain the one that has always held them in good stead?

Unfortunately, we do not have a crystal ball and can only base our views on knowledge and experience.

BLM have decided that the fund should be placed on our monitored list with immediate effect.  This will mean that BLM will officially monitor the performance of the fund on a quarterly basis. In reality, we do on-going research into fund performance.

We have studied various articles, spoken to Invesco Perpetual regarding our initial concerns and met with the new fund manager, Mark Barnett.

We feel Invesco are replacing Neil with an excellent fund manager.  He carries some excellent fund ratings in his own right.  Our concern would be that Mark has not managed funds of this size previously.  However, we feel confident that Invesco have an excellent UK Equity team in place and will do all they can do to ensure the transition of management goes through as smoothly as possible.

Please remember that other well established managers in the UK Equity Income sector would have similar problems, should everyone decide to transfer capital away from Invesco. In fact, we could see some of the other funds ‘soft closing’ due to influx of significant capital. This in itself would create more complications.

Mark Barnett’s UK Strategic Equity Income Fund has returned top quartile performance over the last 1,3,5 and 10 years (according to Invesco’s Website). He carries a AA rating by Citywire, is FE Rated by Trustnet and the fund has a 5 Star Crown Rating.

We are comfortable retaining this fund at present within the Model Portfolios.  However, this will continue to be monitored closely.

Graham French
M&G Global Basics Fund (does not apply to investors in our Cautious Portfolio)

Graham French, manager of the Global Basics Fund, decided to retire from M&G on the 18th November 2013.  He will continue to work alongside the new fund manager, Randeep Somel, for the next 6 months, in an advisory capacity only. Randeep has been deputy manager of the fund and has worked closely with Graham for the past 5 years.

Randeep will bring his own ideas to the fund, for example investing in technology and financial areas, where the fund has not been invested previously. As a result, certain opportunities may have missed, leading to the fund underperforming in its sector (Global Growth).

Graham carried excellent fund ratings and had very good performance over the longer term. However, performance has suffered recently and, as a result, is currently on our monitored list.

Randeep also manages the M&G Managed Growth Fund, but does not hold any significant fund ratings due to the relatively short time he has run the fund.

Members of BLM’s investment committee are attending two events in the near future, at which Randeep will be highlighting his views and intentions. We will make a decision as to whether clients should hold or switch the fund in due course.

We are, therefore, not recommending that you take any action at this time.  However, if you wish to discuss the issue in greater detail, feel free to get in touch.

Christopher G Malkin Dip.FA   M.ifs
David T Needham ACII, DipPFS


This post is not ‘advice’ to the general public and is only
relevant to certain clients of the BLM