When Neil Woodford announced he was leaving Invesco Perpetual to set up his own fund management business, the industry oscillated between eagerly anticipating his next venture and questioning how Invesco Perpetual would cope without arguably its biggest asset.
After all, the top dog of equity income, Woodford had spent the bulk of his career at Invesco Perpetual, no less than a quarter of a century, and at the time of his announcement was running almost £25bn in assets.
A year after Woodford decided to quit Invesco Perpetual his two funds, High Income and Income, had seen more than £5bn in outflows, The Financial Times reported, although chief investment officer, Nick Mustoe, says outflows from the two funds were “significantly less than some were anticipating and have stabilised”.
Indeed, Mustoe is unwaveringly upbeat in his reflections on the past year.
“We now have more money under management than we did when Neil left,” he says. “Everyone speculated we would lose a lot of assets, and we did lose some from the UK, but we gained assets in other teams.
Invesco Perpetual’s business has changed over the past couple of years, Mustoe says, transforming from being a UK-retail focused firm to finding its fastest-growing business in continental Europe, with sales up by 88 per cent over the past two years. Mustoe says in 2014 the combined retail net sales from the UK and cross border reached £5.5bn, £3bn of which went into funds managed by the Henley investment team, whose assets totalled £77.5bn at the end of December 2014.
“Neil leaving was a positive,” Mustoe continues. “It highlighted what good investment managers we have across the team. Mark Barnett has had a fantastic first year running Neil’s funds. The three main funds, High Income, Income and UK Strategic Income, are up 9 to 10 per cent over the past year, while the peer group has returned 0.5 per cent. All three funds are in the top 10 of the UK universe, which consists of 265 funds. This is an outstanding achievement for the past year.
In the year to 13 April, the £12.9bn High Income fund and the £6.9bn Income fund have returned 19.15 per cent and 18.81 per cent respectively against the IA UK All Companies average of 10.26 per cent, while the £1.1bn UK Strategic Income fund has made 16.19 per cent in the same sector, according to FE.
Mustoe adds: “We have reshaped the UK team and brought in good people, such as product director John Richards and Tim Marshall, an investment analyst who works with Mark Barnett. Life has moved on in a positive way.”
Invesco Perpetual is owned by global investment manager and NYSE-listed Invesco, which has around $800bn in assets. Invesco’s history dates back to 1935, while Perpetual was founded in 1973 and acquired by Invesco (then AMVESCAP) in 2000, cementing the group’s foothold in the UK. Invesco Perpetual is now one of the largest independent investment managers in the UK, with around £80bn in assets under management.
Mustoe joined the group five years ago, filling the well-trodden shoes of Bob Yerbury, Invesco Perpetual’s first CIO, who was retiring.
With three decades in the industry under his belt, Mustoe says he has “always been a fund manager”. Having been inspired by an economics teacher to start investing while still at school, he invested his university grant in the stockmarket and went on to join Phillips & Drew in 1985 as an equity fund manager. More recently Mustoe was CIO at Hermes and Pictet.
“My first passion is investing,” Mustoe says. “I love markets. I love the daily challenge of working out the daily opportunities and I always get to learn new things. My first thought when I get up is ’what is happening in the markets’.”
Indeed, Mustoe is lead manager on six funds; Global Equity Income (onshore and offshore), Managed Growth, Managed Income, Global Select Equity and the Select Trust Global Equity Income Share portfolio. The £913m Global Equity Income fund has returned 16.6 per cent in the past year, against the 15.45 per cent of the IA Global Equity Income sector, according to FE.
“Running global equities gives me the best view of the investment teams,” Mustoe says. “It is the best combination role.”
“I like the people management part of being a CIO. I like trying to manage talent, finding new people and trying to create the stars of the future. It’s a bit like picking investments, trying to weigh up the potential. You have to be very supportive. It is one of the successes of Invesco Perpetual. We are here to be long term and supportive. For me it is the perfect job.”
Mustoe says one of Invesco Perpetual’s strengths is that it has only had two CIOs.
“There is stability and people stay a long time,” he says. “A lot of the desk heads have been at Invesco Perpetual for more than 20 years, giving tremendous stability for the culture and how they invest. Even with all the new people added over time, the average time spent at the company is still nine years, which is unusual; the industry average is three years.”
The group has almost 50 funds in its UK open-ended range, plus around 70 funds domiciled offshore and 13 investment trusts. Performance has been strong across the board for the group’s retail offering, Mustoe says.
“Over three and five years 80 per cent of our assets are upper first quartile. It is what we are here to do, it is what our clients pay us for. To do this across nine investment teams is very pleasing. But we always have to be wary as investors. We can never be complacent. We always worry about what we are missing.”
Meanwhile on the fixed income side are renowned managers Paul Read and Paul Causer, who head up the fixed income team. Among their mandates, the £5.6bn Corporate Bond fund has not kept up with its sector over the past year, returning 5.34 per cent against the 9.7 per cent of the IA Sterling Corporate Bond sector, although it is second quartile over three years, according to FE.
This year marks the 20th anniversary of Invesco Perpetual’s fixed income range, (the Corporate Bond fund was the first portfolio launched in the suite), which Mustoe says saw record flows in 2014.
“2015 is an important year for Invesco Perpetual as we celebrate 20 years since the inception of our fixed interest franchise,” Mustoe says. “Under the leadership of Paul Causer and Paul Read the franchise has grown to become one of the most successful within the industry and 2014 saw record net inflows. The team is now 20 strong managing assets of nearly £30bn across a range of over 20 funds for our clients.”
More recently, in September 2013, the group launched a multi asset mandate, the Global Targeted Returns fund, after David Millar, Dave Jubb and Richard Batty joined the firm from Standard Life Investments. The £1.8bn fund has returned 7.97 per cent over the past year, while the IA Targeted Absolute Return sector rose 4.66 per cent, according to FE.
“We tend not to launch many funds,” Mustoe says. “But this fund has been very important for me and a great development for the whole investment team as we have taken a new approach.”