The European high income fund will target a 6 per cent yield in the first year and will sit in the IMA Cautious Managed sector.
Invesco Perpetual co-heads of fixed interest Paul Causer and Paul Read manage the fixed income part of the portfolio, which will follow the whole spectrum from government bond to high yield. They each have more than 20 years’ investment experience and have worked together for 13 years, managing fixed interest portfolios in a range of market conditions.
Katharina Hoyland, who runs Invesco Perpetual’s European Equity income fund, will manage the equity part of the portfolio. She has been part of the company’s European equity team for six years.
Asset allocation between the equity and fixed interest elements will vary, depending on where the best opportunities are as market conditions change. Invesco Perpetual believes this flexibility will provide a diversified income stream and allow investors to benefit from compelling valuations in both asset classes within Europe.
Invesco Perpetual believes that Europe’s relatively low consumer debt and low reliance on credit give it greater resilience than other markets during difficult times for the global economy. Another promising factor is that strong growth in eastern Europe is supporting the rest of the region.
Following the credit crunch, bond prices in Europe are at their lowest levels for several years. Causer and Read believe the market has priced in an overly pessimistic view and that even though defaults are expected to rise, there is value to be had in the bond market.
On the equity side, many big blue chip companies are attractively priced because they have been viewed as unfashionable investments. The companies that Hoyland will select are those with sustainable earnings growth, strong balance sheets and relatively high dividend payments. These companies will be chosen due to their ability to thrive in difficult market conditions.
Investing for income across equities and fixed interest securities may appeal to investors who are keen to diversify away from the UK, while benefiting from active allocation between the asset classes. Having three managers on board bridges the gap between conventional funds and multi-manager portfolios, but the skills and expertise is limited to the Invesco Perpetual group.
Some advisers may prefer to make asset allocation decisions for Europe themselves by opting for separate bond and equity funds for their clients. Others may look to funds such as John Husselbee’s City Financial multi-manager income fund, which invests globally for income across different asset classes.