The investment manager highlights the Invesco Perpetual Global Targeted Returns fund, managed by former GARS manager David Millar, as having a much better chance of delivering its cash plus 5 per cent over rolling three year periods, with half the volatility of equities.“We became concerned about GARS for a couple of reasons. First of all, it has seen a lot of senior people move on. Firstly you had David Millar and his team go to Invesco [in September 2012], and then Euan Munro [join Aviva Investors as chief executive in July 2013],” said Deverell (pictured).
“Secondly, we have concerns over size. It’s not just that the fund is £20bn in size – it’s the total size of the strategy. The Standard Life team also runs the pension fund and there are US mandates as well. I wouldn’t be surprised if the total money under management was £50bn.”
“This is a global fund that invests in many different asset classes, and so fund size isn’t as important as in a fund that is more constrained. However, this is a vast amount of money.”
Deverell says any further exits from the GARS team would deal a major blow to the fund.
Munro is considered by industry experts to be the “architect” of Standard Life GARS, while Millar – alongside current lead manager Guy Stern – were his team leaders.
Munro will help oversee Peter Fitzgerald and Dan James’ Aviva Multi Strategy Target Return portfolio, which was officially launched last week.
Millar (pictured) and former GARS team members Dave Jubb and Richard Batty launched the Invesco fund in September last year.Deverell has backed the £170.7m Invesco Perpetual Global Targeted Returns fund almost since day one, and says he will continue to do so.
He made the switch from GARS to Invesco in Equilibrium’s balanced and speculative models, which he uses for his own ISA and pension portfolio, respectively.
One of the biggest advantages of GARS that experts point to is its vast resources. However, Deverell thinks this point is exhausted.
“We really like the structure they have in place over there,” he said. “Millar is a very impressive individual. I think that he was more instrumental to GARS than perhaps Standard Life would have you think.”
“It’s that bit smaller and more nimble, and we really like what they’re doing. We think it has a better chance of outperforming compared to GARS.”
“It is very similar in the way it is put together and draws on many of the same ideas and structures. Invesco feel they almost have more resources at their disposal than they did at Standard Life, as they can draw on the resources from not only Invesco Perpetual but the [subsidiaries in US as well.]”
Performance of funds and index since Sep 2013
Source: FE Analytics
“We backed the fund very early on, and have been pleased to see that it’s done quite a bit better than GARS, with a low risk-profile.”
Invesco Perpetual Global Targeted Returns has returned 7.02 per cent since its launch in September last year, beating GARS by 1.45 percentage points.
It has a slightly higher volatility over the period, though the all-important max drawdown – which measures how much an investor would stand to lose if they bought and sold at the worst possible time – is in favour of Invesco Perpetual.
Millar’s fund has a drawdown of 0.76 per cent compared with Stern’s 1.6 per cent.
While it’s early days, and Invesco targets cash plus 5 per cent over rolling three year periods, investors will be encouraged to see that the fund has always been ahead of its benchmark since launch.
Deverell’s decision to sell GARS coincided with a very poor period in mid-2013, when the fund shed more than 7 per cent during the “taper tantrum”. It has only recent recovered its losses from the turbulent period.
Performance of fund and index over 3yrs
Source: FE Analytics
There’s little to differentiate the funds when it comes to costs, with Standard Life charging 0.89 per cent and Invesco charging 0.87 per cent.
Commenting of Aviva’s new absolute return range, Deverell said: “I’m most interested in the proposed inflation-linked product which they are set to launch a little later.”
“It’s always good to have some competition, but as I say, I’ve been happy with the Invesco fund.”
