Invesco Select scraps umbrella structure to focus on global income

Invesco Select’s four share classes will all be pooled into the Global Equity Income share class, run by Stephen Anness as the board looks to improve liquidity and narrow the discount.

Invesco Select, an umbrella trust with four portfolios, is proposing to fold away its unwieldy structure and combine its share classes under their strongest performer, the Global Equity Income (IVPG ) spoke.

Invesco Select launched in 2006 with a multi-share class arrangement, which allowed shareholders to invest in different asset classes - Global Equity Income, UK Equity Income (IVPU ), Balanced Risk Allocation (IVPB ) and Managed Liquidity (IVPM ).

The theory was shareholders could rebalance portfolios by converting between the different share classes in a tax-efficient manner. However, in a stock exchange announcement today the board said there had been limited take-up of the conversion option in recent years. It added that the Balanced Risk and Managed Liquidity share classes were unpopular, making up just 3.6% of overall assets, or £7.5m, while trading on 22% and 14% respectively.

‘With demand from investors for larger, more liquid investment vehicles, the board believes it could be increasingly challenging to market separately the Global share class and the UK share class in their current form, with the structure potentially presenting an additional hurdle for those looking to invest,’ the company said.

Goodbye UK Select

Under the proposals all the shareholders will be brought into the £75.2m global share class, which will have a combined £182m of assets and continue to be run by Stephen Anness.

That means an end to the biggest £125m UK share class managed, which merged with Invesco Income Growth a few years ago and is managed by James Goldstone and Ciaran Mallon. Its shareholders will be offered a partial exit with a 15% tender offer.

By contrast, shareholders in Balanced Risk and Managed Liquidity will get a full cash exit as they will be able to sell all their shares close to asset value in a tender offer as they have ‘significantly differentiated risk profiles and asset exposures’ to the global share class.  

The tender offer prices will be based on the net asset values (NAV) of the respective share class less the costs of the proposals and a 2% discount.

Enhanced dividend and vote

The board intends to improve the dividend policy of the remaining global portfolio and, subject to shareholder approval, the company will deliver at least 1% of NAV paid quarterly, calculated on the unaudited year end NAV.

‘The intention would be that these dividends would be paid from the company’s revenues and capital reserves as required,’ it said. Adding that ‘once the relevant NAV is known, a smoother, predictable income stream to shareholders’.

The board also intends to introduce a discount control policy, which would seek to maintain the discount at less than 10% in normal market conditions. The share classes are sitting on discounts ranging from 14% to 22%, with the global equity share class on a 16% discount despite its strong performance that won it a Citywire award last month. 

Historically, the board, chaired by Victoria Muir, has not bought back shares, despite having a discount control polichy since 2013. Dissatisfaction with that record may also lie behind the reorganisation. 

The proposals, which the board said it has received ‘indications of support for’, will be published in a circular with a notice of a meeting in the first quarter next year. If they are approved the board will put forward a continuation vote in 2026, then in 2031 and every fifth year following.

Over three and five years the Global Equity Income share class has outperformed its Association of Investment Company peer group, delivering 52.2% and 68% in NAV returns compared to 37.3% and 65%.

Shareholders, however, have not done as well, receiving 33.2% and 48% across three and five years, compared to 31% and 60% for the peer group. 

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