Invesco Perpetual Income & High Income funds

JDinho

wombat42 wrote: »

Thanks. What would be your choice of UK equity income fund ? Would you pick one of those two ?

One that at least yields 110% of the FTSE All Share Index otherwise it isn't technically doing its job. Good funds are available from Rensburg, Artemis & Schroders.

EdInvestor

jamesd wrote: »

Invesco Perpetual High Income has way more holdings than just the 10-15 of the HYP,

HYP has a minimum 15 shares, which gets rid of the vast majortity of the risk.From then on adding shares doesn't make much difference.

IPHI has at least 14% in tobacco, and nearly 15% in highky regulated firms like utilities. This wouldn't be allowed in an HYP as it breaks the principle of diversification which cuts risk.

You need to look at the effect on the income if a company went bust, not the effect on the capital value.At 10% of capital value Land Secs will probably make up around 5% of the income, so that if its divi were lost the investor would barely notice and the loss would probably be made up quite quickly as other divis rose in following years.

You can see the effect in HYP1,where divis from two insurance companies were slashed in 2002-03, but the income rapidly recovered and is now well ahead of its starting point.

More of the total returns come in growth from Invesco Perpetual High Income, so that 3.1% or so yield is from a more rapidly growing capital value.

In many ways, it's not a classic equity income fund (not least due to the lack of income!) , more a hybrid based on the manager's personal style.OTOH the HYP is designed as an income strategy for people who have retired. Young people can use it as a growth strategy by reinvesting divis but that's not its main aim.

Of course one of the HYP's great charms is that it can deliver both a rising capital value and a rising dividend.Would that Mr Woodward could do the same.

jamesd

EdInvestor wrote: »

HYP has a minimum 15 shares, which gets rid of the vast majortity of the risk.From then on adding shares doesn't make much difference.

The potential loss from bankruptcy of Land Securities in HYP 1 was more than 10%. The potential loss from the largest company holding in Invesco Perpetual High Income was 5.2%. The difference is almost twice the loss.

Buy and hold with no rebalancing is part of why 15 shares took it to a 10% loss risk even though a 15 way split started out at 6.7% per company.

It's really worse than that for HYP 1 because HYP encourages ignoring the markets and share news, while Invesco Perpetual High Income is actively managed and may well sell before bankruptcy.

EdInvestor wrote: »

You need to look at the effect on the income if a company went bust, not the effect on the capital value.

Value of Land Securities holding at the end of 2006 was 14081, yield was 4131, less the 304 from Land Securities drops it to 3827. 14081/3827 = 3.8 years before the income pays back the loss. Yield would be 3.38%.

Invesco Perpetual High Income instead pays 3.1% yield on a larger capital size and with just a 5.2% largest holding would recover using income alone in a little over half the time even if it did hold the share until bankruptcy.

But you're really trying to talk about volatility, while I'm talking about risk. You should take a look at HYP 1's own concentrations.

EdInvestor wrote: »

Of course one of the HYP's great charms is that it can deliver both a rising capital value and a rising dividend.

For HYP 1:

Year	Value	YieldGBP	Yield%
2002	75414	3474		4.61
2003	69687	3197		4.59
2004	79226	3205		4.05
2005	91542	3546		3.87
2006	115502	4131		3.58

You should rethink that claim. HYP 1 has delivered falling yields every year since it started. Meanwhile, the percentage from Invesco Perpetual High Income has been pretty stable but the rising capital compared to HYP1 is doing a nicer job for its investors. HYP 1 seems to have compromised growth too much to get its high initial yield and the numbers are showing the effect. Which is no surprise, since this is one of the major criticisms of the HYP approach: that it picks mainly low growth shares, so long term potential is reduced.

I'll take Mr Woodward and his active management to avoid problems and grow the long term income prospects.

dunstonh

Inv Perp High Income is the market leader but you do have to remember that out of all the UK equity income funds, it is one of the highest risk in it's sector.

The time has been right for it. However, going forward, will the time still be right for a uk equity income fund with that risk or a lower risk version? (maybe Premier Dividend or Hendersons UK equity income or if you really want to reduce the risk but remain in the sector or even Norwich Union or Threadneedle, although Threadneedle is just below sector average risk whereas Norwich Union is a fair bit below it).

maypole

I have an Invesco Perpetual European growth acc, this performed well until years ago, when the tech stocks crashed and I lost half the value, It's creeping back slowly, would my money be better else where, it is only just over £4000

wombat42_2

maypole wrote: »

I have an Invesco Perpetual European growth acc, this performed well until years ago, when the tech stocks crashed and I lost half the value, It's creeping back slowly, would my money be better else where, it is only just over £4000

I was in Invesco Perpetual European growth during the tech crash. It was absolutely scandalous. No-one realised that Invesco Perpetual European growth was almost entirely invested in very high risk tech stocks. The fund had an industry recognised top ranking which was a joke. To make matters worse the fund was so huge that it took a long time to recover as the share prices of the individual stocks got diluted.

I think the fund is basicaly OK these days (but probably still too large) but something like New Star European growth may well perform better.

dunstonh

No-one realised that Invesco Perpetual European growth was almost entirely invested in very high risk tech stocks.

Easy to remember that the sort of data we get nowadays wasnt available back then.

Inv Perp Euro is now at the lower risk end of the sector. Although its performance is at the lower end as well. New star is high risk but performance has been comparable so I dont see the point of moving between those two. Indeed, very recent performance may highlight the extra risk that new star has (down 4.4% in last 6 months compared to down 0.2% with inv perp and sector average being up 1.3%).

I quite like SWIP European (slightly lower risk than sector average).

EdInvestor

wombat42 wrote: »

I was in Invesco Perpetual European growth during the tech crash. It was absolutely scandalous. No-one realised that Invesco Perpetual European growth was almost entirely invested in very high risk tech stocks.

This is of course a fundamental danger with funds: unless you check every day, you never know what you are invested in.

HYP 1 has delivered falling yields every year since it started.

Not on the original capital it hasn't, quite the opposite.HYPs should be compared with annuities and cash - or rental property.They are basically an investment style for retired people seeking a rising income - long term capital growth is a bonus.

dunstonh

HYPs should be compared with annuities and cash - or rental property.

That is crazy comment. Since when can you lose 20-40% of your capital on cash?

Whilst HYP has its merits, you totally understate it's risks.

purch

In my personal opinion if you want to invest Purely for Income using an open ended fund is bonkers !!! :eek: