Invesco Perpetual has launched a second targeted absolute return fund for David Millar, the Invesco Perpetual Targeted Income fund, which will be managed jointly by Richard Batty, Sebastian Mackay and Gwilym Satchell.
The fund aims to deliver a gross income of 3.5 per cent per annum above three-month UK LIBOR before tax and preserve capital in all market conditions over rolling three-year periods. It will also aim to keep volatility to less than half that of global equities over the same rolling three-year period, according to the firm.
Investing in between 20 and 30 ‘investment ideas’ with a time horizon of two to three years, the firm claim the approach will allow the fund’s managers to construct a diversified portfolio providing upside in financial markets.
Performance of fund vs sector and benchmark since launch
Source: FE Analytics
This is a similar investment process to the asset manager’s existing targeted absolute return fund - the £7.3bn Invesco Perpetual Global Targeted Returns fund.
Invesco Perpetual Global Targeted Returns has delivered a 16.59 per cent return since launch in September 2013, compared with an 8.04 per cent gain for the average IA Targeted Absolute Return fund over the same period. The fund has an ongoing charges figure of 0.87 per cent.
David Millar, head of multi asset investment at Invesco Perpetual, said: “Conversations with our clients have highlighted a clear and growing need for sustainable income due to a challenging macro-economic climate and an ever-lengthening retirement period.
“In today’s low yield environment, multi-asset investing helps investors spread the overall risk taken while providing the opportunity for more stable returns compared to investing in just one asset class.
“Given Invesco Perpetual’s long and established track record of income investing, alongside the success of its multi-asset investment approach, the Global Targeted Income fund seeks to help those clients looking for predictable monthly income, relatively low volatility and a focus on capital preservation.”
The IA Targeted Absolute Return sector has been the best-selling retail peer group in seven months of the past 10 and was the most bought sector in 2015, according to data from the Investment Association. The sector reported net sales of £426m in October alone.
The sector is home to a number of high profile funds and managers, including the £26.3bn Standard Life Investments Global Absolute Return Strategies fund.
There are few income funds, however. The £1.7bn Aviva Investors Multi-Strategy Target Income fund has generated a total return of 6.77 per cent since launch in 2014. An investment of £10,000 at launch would have since generated £842.56 in income payments, according to FE Analytics.
Ben Willis, head of research at Whitechurch Financial Consultants, said: “The demand for income has not gone away and with [the Invesco launch] you have something that aims to be non-cyclical, can control volatility and active level of income. It’s basically doing what bonds used to do pre-financial crisis. You can see why they’ve launched it.
“They have seen that Aviva Investors have been successful and feel they can replicate that in a similar manner. It has a good team behind it and have been successful in running the Global Targeted Returns fund, they have the confidence that they can do similar things with an income fund. It’s good that Aviva has now got some competition.”