No time for silence from Invesco as the Provident fallout widens
IT WAS not just shareholders in sub-prime banking group Provident Financial who got a nasty shock last week as the shares collapsed in response to a ‘quadruple whammy’ – a dire profits warning, a U-turn over a promised dividend, a regulatory probe into its banking subsidiary Vanquis and the resignation of chief executive Peter Crook.
Millions of investors in highprofile equity income funds were also affected, including those in the £9.8 billion Woodford Equity Income, Woodford Income Focus and a number of high-profile funds run by Invesco Perpetual.
This is because Provident Financial provided a rich source of dividends for these income hungry vehicles – and their investors – and was a top 10 holding in both Woodford funds and four key ones at Invesco.
Though Neil Woodford, founder of Woodford Investment Management and formerly of Invesco, was out of the office all week and unavailable to respond to press enquiries, he did file a comment on his firm’s website about Provident Financial.
Expressing disappointment at last week’s announcement, he tried to put a positive spin on it by declaring that once the company addresses some key weaknesses, the share price ‘deserves to be appreciably higher than it is today’. But will the company dig itself out of the hole it has dug for itself?
Invesco was even more tightlipped, with a spokesperson declaring the investment house ‘is not commenting on Provident Financial at present’.
We were also told Mark Barnett, Woodford’s successor there and manager of mega funds Invesco Perpetual Income and High Income, would be on holiday this week. Not even James Goldstone, a member of the UK equities team at Invesco and new manager of the Keystone Investment Trust, would speak about the key issue.
Indeed, Goldstone has been stony silent since taking over at Keystone on April Fool’s Day. A request for an interview earlier this month was politely declined, with the excuse being given that ‘for now he is focusing on his portfolio responsibilities’.
At the time of Goldstone’s appointment, the trust’s board, led by Beatrice Hollond, described him as a ‘rising star’. It declared he would bring his ‘own portfolio construction style to Keystone’, giving the trust ‘a distinctive position within the investment trust universe and sustain its longstanding attractiveness to discerning investors’.
Yet for all his focus and star attraction, Goldstone has yet to make his mark. Like Barnett, the trust’s previous manager, he still holds Provident shares, though it is no longer a top 10 holding.
Sceptics will say this is hardly evidence of bringing his own ‘portfolio construction’ to the trust. In his defence, Provident’s shares bounced on Friday.
Since April, the fund has underperformed the FTSE All-Share Index. But maybe it is too early to judge Goldstone. Meanwhile, investors should take comfort in the trust’s solid – but not unblemished – income record, though Provident’s scrapping of its promised dividend is bound to put a spanner in the works.
They should also be happy with the lower annual management charge – the main, but not only, fee levied. This fell from 0.6 per cent to 0.45 per cent to coincide with Goldstone’s appointment.
Disappointingly, a one-way performance fee remains intact (in Invesco’s favour). But underperformance does not result in Invesco handing back some of its annual fee.