Invesco Perpetual fixed income duo see Global Bond vehicle drop to AA as ratings agency deems it has less scope for outperformance
Invesco Perpetual's Paul Read and Paul Causer were the only managers to suffer a downgrade from Standard & Poor's in the latest review of its Global Fixed Interest sector.
The managers' fund and the offshore Invesco Global Bond vehicle were both downgraded from AAA to AA.
S&P recognised that Read and Causer have been one of the UK's most successful fixed income teams in the past 10 years. However, James Tew, head of fund research at the agency, said their best results have come in years when they have had invested heavily in undervalued securities that were reverting to more normal levels. They held such assets when credit rallied in 2003.
"They have had a relatively low level of conviction in the past three years and the fund's positions have been relatively unaggressive," Tew said. "Therefore the results have been closer to median than in conviction years, although still in the second quartile."
Tew pointed out the managers strongly reject suggestions that the rapid growth in their assets under management has led them to dilute their flair or focus, with Read and Causer remaining committed to outperforming their peer group.
He said the managers do not intend to use wider Ucits III powers on their funds. While S&P does not believe the powers would automatically lead to better results, competitors are using them to profit from grossly overvalued as well as undervalued issues in future.
"Standard & Poor's has the greatest respect for Read and Causer's flair but it seems this fund's mandate is lagging developments in the peer group and therefore has less scope for outperformance in current market conditions. For this reason, the rating is reduced to AA," Tew added.
Among the products upgraded in the review were Legg Mason Multi Strategy, from A to AA, and Old Mutual International Bond and Convertible, from under review to AA.
On the latter, Tew said manager Andrew Tunks' disciplined process impressed the ratings agency, as did his intention to apply a more aggressive approach than his predecessor, Sofia Skalistiri. "Tunks joined Old Mutual in March 2005 as team head, bringing valuable experience from leading F&C's fixed income desk," Tew said.
"He works closely with Jonathan Tierney on this fund and makes effective use of the team's UK credit specialists when opportunities arise. Judged against his own objectives, the manager has got off to a good start, achieving top-quartile performance in the first three months of his tenure and beating the benchmark by 80 basis points."
On the Legg Mason vehicle, Tew said S&P was impressed by the consistent, effective process employed by manager Mike Zelouf, which is evidenced by the fund's strong results.