Mark Barnett is back! Fallen income star joins Tellworth

Former Invesco UK equity head Mark Barnett has been hired by Tellworth Investments 11 months after leaving the group after it was sacked by Edinburgh and Perpetual Growth & Income investment trusts.

Mark Barnett has been hired by investment boutique Tellworth Investments 11 months after leaving Invesco after the group was sacked by Edinburgh (EDIN) and Perpetual Growth & Income investment trusts.

Barnett (pictured) has joined the business, founded by former Schroders pair Paul Marriage and John Warren in 2017, with the intention of launching an income and growth fund in the near future.

The move gives Barnett the opportunity to rebuild his reputation as a fund manager after the performance of his funds and investment trusts deteriorated in the four years after the 2016 European Union referendum.

In the run-up to his departure from Invesco as UK equity head last May after a career of 24 years, Barnett spoke of his regret and concern after a series of stock blow-ups in his funds.

The problems could have led Barnett to question his future in the profession. However, speaking to Citywire’s Wealth Manager, said he had never thought about turning his back on fund management, although he admitted he needed some time out to reflect.

‘I stopped everything for three months, and when I started reading the financial press again, I really enjoyed it, and I thought, “I’ve missed this”. It was very clear to me that this was the direction I had to go,’ he said.

‘After leaving Invesco I’ve had the opportunity to reflect on what it was I enjoyed about the job, which was analysing markets and companies, understanding business models and meeting management while thinking about putting portfolios together.

He added: ‘This time out gave me a sense of what I really want to be doing, what I’m really passionate about. This is about going back to basics and enjoying the essence of the job, which is a fascination over share prices and making money out of the stock market. These are the building blocks of a fund manager’s job and chimes with what John and Paul do at Tellworth.’

Private exclusion 

In Barnett’s final years at Invesco, he faced scrutiny over his holdings in unquoted companies and hard-to-trade smaller companies, many of which he inherited from his predecessor, Neil Woodford.

The examination became more intense following the collapse of the investment firm Woodford went on to set up, with his own income fund’s exposure to illiquid stocks at the heart of its demise.

As outflows mounted, Barnett was forced to reassure investors about the liquidity in the Income and High Income funds, which had shrunk to £1.9bn and £4.3bn at the time of his exit, down from over £10bn apiece at their peak.

In March 2020, Invesco wrote down 60% from Barnett’s Income and High Income  portfolios after deciding to exit less-liquid holdings.

With Tellworth awaiting the regulatory green light to launch a fund, Barnett was not in a position to disclose how his new portfolio would be structured. However, he did say the fund would not have any exposure to private companies.

In another key difference, Barnett will not face the same challenge of running billions in assets under management as he did at Invesco. Tellworth has a different ethos when it comes to capacity.

‘The way Mark thinks about running money chimes with the Tellworth philosophy,’ Warren (pictured) said.

‘We’ve always said at Tellworth [that] we put clients first and pay attention to capacity. We work very closely with clients and discuss the type and size of funds they want.’

Blank canvas

The ability to launch a fund from scratch and not deal with legacy issues gives Barnett the opportunity to rebuild his reputation.

‘The Invesco stuff has been well-documented. The starting point here is not about me; it’s about Tellworth and joining a business which has been really successful and is primed for the next level of growth,’ Barnett said.

‘Their compliance, sales and brand are now established, and they are doing really well in small companies and adding an income franchise is an obvious next step.’

He added: ‘I’ve done my due diligence over the last six months and there is an alignment at Tellworth with my understanding of how you generate client outcomes and service clients properly and how you think about active fund management.

Tellworth controls £800m in assets under management across four funds, including the £420m TM Tellworth UK Smaller Companies fund, which launched in November 2018.

In the 12 months to the end of February, the fund has returned 20%, beating the peer group average of 12.6%. The fund has risen 50% since its launch.

Barnett’s appointment comes shortly after Tellworth hired Artemis Investment Management’s former wealth head, Lawrence Brennan, as co-director of business development.

As Tellworth has evolved, co-founder Marriage said management had been thinking about its next stage of development to take it beyond the ‘Paul and John’ show.

‘Income has always been something that we thought was a logical addition,’ Marriage (pictured) said.

‘Tellworth is a bottom-up brand, and we wanted to find someone in income who is a real icon. We spoke to a couple of people and it didn’t quite work out and fortuitously Mark was put in contact with us.

The UK opportunity

The demise of value investing, which accelerated when investors flocked to growth funds as the pandemic ripped through markets, was another major factor behind Barnett’s struggles.

However, he is re-entering the profession in a very different climate, with the long-awaited rotation into value gathering momentum as the UK opens up following strict lockdowns.

Barnett believes this is a long-term opportunity for value investing, as dividend-paying companies come off the ‘naughty step’ and become more appealing to investors.

‘Last year was a watershed moment for dividends given there were so many that were removed or trimmed. I think that’s an event that is behind us, and I would now argue dividend security in the market is better now than it was two to three years ago,’ he said.

‘The yield is not only more sustainable; it’s got a better chance of seeing some growth than we have seen in the recent past.’

With these factors at play, Barnett said it was an interesting time to be launching a fund.

‘In the UK, we’ve had one of the most successful vaccine rollouts in the world, and we’ve got huge pent-up household spending demand because the economy has been locked up for months,’ he said.

‘The Brexit debate is largely behind us. Although there have been a few teething problems, the paperwork’s out of the way.’

He also highlighted that many investors have turned their back on the UK, leaving it on a valuation discount to major developed markets.

‘The confluence of these factors suggests to me that it’s a really opportune time to be launching a fund, and it’s great to be back on the pitch,’ Barnett added.

Investment company news brought to you by Citywire Financial Publishers Limited.