Invesco Perpetual Enhanced Income’s interim results for the six months to the end of March 2015 show the fund generating a total return on net assets of 7.9%. They compare this to a 0.6% return on three month LIBOR. The return to shareholders was 8.8%. The quarterly dividends are holding steady at 1.125p per quarter.
They say that , according to data from Merrill Lynch, European currency high yield bonds returned 4.2% (in sterling hedged terms). The aggregate yield of the market fell 14bps to 4.68%. This return compares to 8.0% for sterling investment grade corporate bonds and 9.1% for Gilts. Euro investment grade corporates returned 3.1% and Bunds 6.8%. Within investment grade, non-financials outperformed financials both in the UK and the Eurozone.
The portfolio holds a core of high yield corporate bonds, focused on seasoned issuers that they consider to be relatively safe (lower level of default). They have significant exposure to
areas of the market which they believe still offer relatively attractive yield, including subordinated bank debt where they think banks’ efforts to rebuild their balance sheets and regulatory changes, mean that the creditworthiness of these bonds has been enhanced. They also have holdings in hybrid capital instruments, across sectors including telecoms and utilities. They believe the subordination risk of these more junior debt instruments is attractive in the context of these companies’ relatively strong balance sheets. Many of the securities they hold are in high yielding investment grade names. They are holding a relatively high level of cash, to protect against weaker markets and giving the them ability to take advantage of more difficult
market conditions.
IPE : Invesco Perpetual Enhanced positioned defensively