INVESCO US Equity Fund

Potential investors will need to look at his performance at Newton and consider whether the period of underperformance is due to the style of management being out of favour, and therefore this may reverse, or whether it is due to poor stock picking.

Investing in the US is very tricky and few managers outperform the index. In 2014 only 20% of active managers achieved this (Source JP Morgan). The Invesco US Equity Fund has been in the market since 1983 however the current team have only been at the helm since 31 July 2012.

There are a number of things that we took away from the update. Firstly the manager’s focus on value stocks and the market has favoured growth stocks which they feel are overvalued. Secondly the managers are contrarian and not afraid to be different to the market. Thirdly they are pure stock pickers, the fund currently has 38 stocks with the top ten making up nearly 40% of the portfolio.

One thing in the update the manager didn’t touch on was performance. We ran the figures from the time the new managers took over and although the fund has slightly outperformed the iShares MSCI North American Fund it has underperformed the S&P500. In fact looking at the performance it doesn’t seem to standout.

Potential investors at this point may decide to read no further but there are two things to consider. Firstly the manager’s approach is value and if this has been out of favour then when it returns to favour he could start to significantly outperform the index, and secondly although his track record appears poor again if his investment approach has been out of favour and this reverses then the track record will improve significantly.

Certainly his approach seems different but with a poor track, which might be due to investing in value stocks, it seems difficult for investors to find something positive about the fund. However, the fact that he is investing in undervalued companies in out of favour sectors means that he has the potential to reverse that underperformance and it will be for potential investors to take a step of faith and see if he can achieve that.

Fund Facts Morningstar


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