Invesco Perpetual has handed in its notice on the Invesco Perpetual Enhanced Income (IPE) investment company managed by its bond stars Paul Causer and Paul Read after a break down in contract talks with the board.
The £132 million Jersey fund disclosed it was in talks with the fund manager over the terms of its management agreement earlier this month. In an update this morning, its board said it had received a letter from Invesco stating its intention to resign.
‘This letter has been sent notwithstanding the detailed and extended efforts of the board to reach satisfactory ongoing contractual arrangements (including in respect of fees payable) for both shareholders and the current manager having regard to prevailing market practice,’ the board, chaired by Donald Adamson, said.
Shares in IPE, which invests in high yield bonds and loans, fell 2p or 2.5% to 78.2p, reducing the 8% premium to net asset value of 74.25p at which they closed on Friday, according to Morningstar data.
Figures from the Association of Investment Companies show IPE is more expensive than its rival Henderson Diversified Income (HDIV) with annual ongoing charges of 1.24% compared to 1.01%. With performance fees included the gap between increases, with IPE costing shareholders 2.16% and HDIV 1.62%.
Under the management agreement the high yielding fund pays Invesco a tiered annual fee of between 1% and 0.7% plus a performance when total annual returns exceed 7%.
Performance fees have become increasingly unpopular with investors with 45 investment trust and investment companies dropping them in recent years, the most recent being BlackRock Smaller Companies (BRSC). This comes amid increased price competition from rival open-ended investment companies and exchange traded funds.
‘The board has subsequently written to Invesco Fund Managers Limited to acknowledge receipt of that letter and that further discussions will be required in respect of any transitional period,’ it stated.
Under the company’s investment management agreement, the contract may be terminated on 12 months’ written notice.
The board has appointed JPMorgan Cazenove to seek potential replacements and expects to reach ‘improved terms from suitably qualified managers’.
Causer (pictured) and Read have managed the £150 million fund since 2001, with Rhys Davies appointed as a co-manager in 2014. Over the last five years its net asset value has risen by 9.5%. It yields 6%.
‘The company has been well served by its current investment manager and whatever the outcome of the process now being initiated, the board wishes to place on record its appreciation of the efforts of Invesco in its management of the company's portfolio,’ the investment company said.