Invesco’s Mark Barnett (pictured) is not jumping on the trend of transferring unquoted stocks from his open-ended funds to his trusts, drawing a line in the sand between him and his predecessor Neil Woodford.
Open-ended funds that invest in unlisted equities have come under greater scrutiny since the suspension of the Woodford Equity Income fund with many arguing the fund structure is inappropriate for less liquid assets.
Merian recently decided to shift the bulk of the unquoted companies in its small and mid-cap funds into its closed-ended Chrysalis investment trust via a £175m share placing, in a move that was apparently motivated by the Woodford blow-up.
In April, Woodford swapped £73m of unquoted stocks into his Woodford Patient Capital trust in exchange for a 9% stake in the closed-ended fund as questions mounted about the true level of his exposure to illiquid assets.
Barnett not considering unquoted transfer
But Barnett does not intend to follow in the footsteps of Merian or Woodford.
Relaying a message on behalf of the Invesco UK equities head, an Invesco spokesperson stressed Barnett would not consider switching any unquoted stocks into the pair of investment trusts he runs – Edinburgh Investment and Perpetual Income and Growth.
Barnett has been trying to distance himself from his predecessor at Invesco since the blow-up of the Woodford Equity Income fund given the cross-over between their unlisted holdings.
Like Woodford Barnett’s unquoted exposure has been rising as his fund has been hammered by redemptions.
The fund has seen net outflows year-to-date of £477m with two fifths of those redemptions happening after Woodford’s fund was suspended in June.
Unlisted investments in Invesco Income were at 5.29% as of the end of August, up from 4.62% in April.
Take the hit and move on
AJ Bell head of active portfolios Ryan Hughes is sceptical a transfer would make sense in Barnett’s case.
“The trusts seem more like a mirror of his broader fund rather than a specialist trust to hold small caps and unquoteds,” said Hughes.
“Where Woodford was doing it and where Merian is doing it, it’s more of a complementary approach. Mark Barnett doesn’t really have the right vehicle to do that.”
Fund Expert managing director Brian Dennehy likewise said it wouldn’t necessarily be in the best interest of investors.
“Probably better to just sell for cash at best possible price (which might be quite low), and get the unquoted proportion to under 5%,” said Dennehy. “Take the hit. Move on.”
The Invesco spokesperson did not respond to PA’s queries about whether Barnett was looking to reduce his unquoted exposure.
Woodford Barnett crossover
Barnett’s unquoted stocks comes from legacy Woodford holdings and include Ombu, one of the stocks Woodford quietly listed on the Guernsey exchange that was temporarily suspended, and cancer gene therapy company Psioxus.
His most meaningful unquoted position is gene sequencing company Oxford Nanopore, which makes up 2.1% of Invesco Income.
The UK biotech firm is also a significant holding for Woodford and was the third largest holding in Woodford Patient Capital trust (7.54%) at the end of May. Woodford stopped publishing all but his top 10 holdings across his trio of funds after Woodford Equity Income shuttered on 3 June so it is unclear how much he still owns.
On Wednesday it was reported that Woodford ditched his 142 million shares in IP Group, the intellectual property incubator that Oxford Nanopore was spun out of, for £76m. Relations between the two had soured, with IP blaming the Woodford blow-up for its portfolio being written down by 3% earlier this month.
Another Woodford biotech favourite Benevolent AI was revealed as the mystery company that suffered a write down which triggered a 4p reduction in his trust’s net asset value.
