‘No mean feat’: Discount closing adds to global income trust’s track record
Invesco Global Equity Income Trust (IGET ) believes its ‘merits’ are being recognised by investors after the elimination of its discount added to market-beating returns from the portfolio in its first year under a revamped structure.
In annual results published this week, chair Sue Inglis pointed out that the share price discount to net asset value (NAV) stood at a wide 13% in early May 2024, immediately before the consolidation of Invesco Select’s four complex share classes into one global trust run by Stephen Anness.
As Invesco’s head of global equities has continued to deliver the goods on performance since, the trust has moved to trade at a 1.1% premium today.
As sector darling JPMorgan Global Growth and Income (JGGI ) – which like IGET promises a dividend yield set at 4% of NAV or higher – has slipped to a modest discount, the Invesco fund is actually the sector’s only name still trading at a premium (excluding one other tiny trust).
‘Your board is delighted to report that, in addition to your portfolio managers delivering another year of strong absolute and relative investment performance, the investment merits of your company are now being recognised by investors,’ said Inglis in the results.
In the year to the end of May as a whole, IGET bought back a net £0.2m worth of shares. But since early February the trust has been able to raise £4.1m by selling shares at a 4.1% premium.
Businesses on sale
In the results period, IGET’s portfolio delivered an 11.9% NAV total return, outperforming 7.4% for the MSCI World index. Due to the discount closing, shareholders enjoyed an eye-catching return of 24.6%, including dividends reinvested, in the same year to end of May.
Since, the portfolio has delivered 7.7%, the same figure as for the benchmark, according to the results.
Anness (pictured) and deputy Joe Dowling focus the core of the portfolio on companies with a track record of consistently growing their dividends, but up to 20% can be allocated to ‘high growth’ stocks and a further 10% can be put in contrarian ‘turnaround’ opportunities.
Other than Microsoft, none of the other ‘Magnificent Seven’ US tech giants feature in the top 10 positions. American semiconductor stocks are significant holdings, however, with both Texas Instruments and Broadcom near the top of the portfolio.
Alongside Broadcom, Rolls Royce (RR) and 3i (III ) were named as the other biggest contributors to returns over the period. At the end of May, these UK-listed stocks were also the top two holdings at 5.8% and 5.7% of the portfolio, respectively.
There was no sign of Anness and Dowling’s conviction waning on either. The duo said that Rolls-Royce continues to ‘build momentum’ under its current leadership and ‘with ambitious plans, we remain optimistic about the company’s trajectory’.
The Invesco duo said that 3i – which technically remains an investment company and trades on a 48% premium – had rerated as the market sees it as a play on its dominant holding, the fast-growing discount retailer Action.
‘While this reduces the margin of safety, we believe it is a rational adjustment,’ they said.
More broadly, IGET allocates a chunky 22.9% to the UK, or more than seven times London-listed stocks’ weighting in the global benchmark.
The Invesco managers also reiterated their conviction in the two biggest detractors, luxury giant LVHM and chemicals company Azelis, which has suffered from a wider chemical industry downturn.
Anness and Dowling noted a volatile period had led to higher turnover than usual.
‘It isn’t often in your career that almost every business in the market goes on sale, as it did in April following “Liberation Day”. There were many businesses on our shopping list that we had been waiting to buy, and many of those went on sale. This is potentially a very exciting time for future returns,’ said the managers.
A pullback at ASML, which holds a near monopoly in some advanced semiconductor equipment, offered ‘an attractive long-term entry point into one of the most strategically important companies in global tech’. Another buy was QXO, where serial entrepreneur Brad Jacobs is attempting to ‘transform’ US building products distribution.
In terms of the broader outlook, the Invesco duo said they were not looking to ‘second guess’ topics such as US tariffs, slowing growth and economic uncertainty. ‘Diversification is key in this market as we can’t rely on one definitive economic outcome,’ they added.
‘No mean feat’
Following the results, JP Morgan Cazenove head of investment company research Christopher Brown said the trust now has ‘a much simpler and cleaner structure’.
‘As a global equity income portfolio, IGET has built up a strong track record of outperformance, which is no mean feat considering it does not own most of the largest growth stocks in the index that have driven much of the index performance,’ he said.
While noting the material rating in recent years, Brown referenced IGET’s formal policy to target a less than 10% discount. He said there has ‘perhaps been a missed opportunity’ to tighten the terms to targeting a ‘mid single figures’ or even zero discount.
Maintaining a neutral rating, Brown concluded: ‘IGET still faces the headwind of being the smallest company in its peer group in market-cap terms at £241m which may put some investors off, but it is likely sufficiently large to still be relevant in the eyes of many investors.’
Incorporating the track record since Anness took over Invesco Select’s global income portfolio in January 2020, over the past five years IGET has returned 135.9% to shareholders, well ahead of the 74.8% AIC sector average and 83.9% for the MSCI World.
The board has set a 13.5p per share dividend, paid quarterly, for the current financial year to May 2026, representing a 7.8% rise year on year.
