Costs of Invesco trust’s boardroom battle hit £460k

Slashed fees help soften the hit for Enhanced Income shareholders

Invesco trust chair faces removal over fees fallout

Invesco Enhanced Income has revealed the final cost of its tiff between the board and the fund house as the £114.3m investment trust publishes its full-year results for the year ended 30 September 2018.

In April, Invesco revealed it was resigning as investment manager of the Global High Income sector trust due to failed negotiations with the board of directors over fees and the notice period. Despite terminating the mandate, the US asset management giant, which held a large stake in the investment trust, then led a campaign with other major shareholders, including Gam Investments, to oust chairman Donald Adamson.

The standoff spilled over into a public war of words, whereby Adamson slammed Invesco’s “self-interested onslaught” while fund managers Paul Read and Paul Causer accused him of making their continued management of the investment trust untenable. Finally, in June, Invesco and the board announced a truce had been reached with Adamson agreeing to make an early exit as chairman, having previously being due to retire in January 2019.

Final bill

In the full-year results, published on Thursday morning, Adamson’s interim replacement Paul Yates, revealed the final bill for the spat totaled £460,000, slightly in excess of the estimated £440,000 that the board provided to shareholders in June. Yates said the bill was related to legal and other professional advice.

The interim chairman said a goodwill payment from Invesco would reduce the costs. This combined with lower management fees backdated to 1 January 2018 was equivalent to half the bill incurred by the board.

Revised management fees are 0.80% on the first £80m of net assets, 0.70% on the next £70m and 0.60% on any excess over £150m. The performance fee has also been dropped. The total ongoing charges figure for the year was therefore 1.06% down from 2.15%, including the performance fee, for 2017.

“A search has been initiated for two independent candidates to join the board, one of whom will take the chair,” Yates said. Richard Williams, the primary fixed income expertise on the board, stood down following Adamson’s exit.

Spat knocks share price

The share price of the investment trust rose just 0.1% behind its 3-month Libor benchmark, which returned 0.8%. The net asset value performed in line with Libor. In contrast, the managers were able to deliver share price and NAV returns of 10.5% and 10.7% respectively in the previous financial year.

The disagreement between the board and the investment managers knocked the share price, which traded within the range of –2.2% discount to NAV to a 9.0% premium. The current discount is -1.2%, according to the Association of Investment Companies.

An annual general meeting will take place on 25 February 2019, whereby shareholders will have the chance to vote on the continuation of the investment trust. The vote takes place every five years.

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