‘We backed the banks right after they crashed’
Generating income from a portfolio of funds is a challenge many face in retirement. Ensuring that income is delivered regularly is a particularly difficult task, as shares, bonds and funds all tend to deliver their income at different times.
One solution is a fund that does it for you. The Invesco Perpetual Monthly Income Plus fund, which contains £3.2bn, aims to do just that.
The fund is a favourite among income investors and is a member of our Telegraph 25 list of top portfolios (visit telegraph.co.uk/go/25funds for more).
The fund was launched in 1999 and invests predominantly in high yield and riskier forms of bonds, as well as some shares.
Telegraph Money spoke to Paul Causer, one of the fund’s managers, who heads Invesco Perpetual’s bond team with Paul Read. Together they manage around £30bn across a range of funds.
Here Mr Causer explains how he delivers income month on month, why he invested in the financial sector right after it crashed and why Lloyds is the best bank for investors.
As the name suggests, the fund is geared towards income generation. The people who hold money with us are typically older savers who need income distribution to live day-to-day.
The income can move up and down, but we always try to invest in a way that provides a decent flow of money for our investors.
Well, you don’t get anything for free. In order to get a good level of income we have to expose ourselves to a certain degree of risk. You have to accept there will always be volatility, and we’ve been through some serious bouts of turmoil.
The only time we ever get complaints is when the income goes down. The level of income is
CV: Paul Causer
With a BSc in Economics from the London School of Economics, Paul Causer heads Invesco Perpetual’s fixed ed interest team. His investment t career began in the Eighties with Asahi Bank, before he joined Invesco Perpetual in 1994. based on what the wider market is doing and how we position our portfolio in relation to that.
We generally target higher-risk bonds that pay out more income, and shares with strong dividends.
In bonds, we have a lot in subordinated bonds [an unsecured bond that will be paid back only after other creditors have been paid if the company goes bust] from banks, as well as some from insurers.
We have another significant proportion in high-yield bonds, including those from emerging markets.
It’s essentially a corporate bond fund with some shares, with the idea of adding some capital growth as well as income.
When we’re nervous about the market we reduce risk, and when we’re more bullish we add a bit more. However, we can’t fight the market. If it’s in a downward cycle, it’s hard for us to buck that trend.
Some countries in recent years have taken interest rates down to zero, which has obviously had an effect on yield.
Based on £10,000 invested in the fund, in 2000 we were paying out our highest income ever, nearly £750. In 2014 it was at its lowest, closer to £450. Last year we were paying out arou around £575 – so it does change.
Veteran manager Paul Causer tells Harry Brennan how he invests to achieve a stable monthly income