Invesco Enhanced Income Ltd - IPE

[flyer61]

Over the last couple of days i have been looking at Investment Trusts given that many have had substantial changes to the underlying assets and also discounts have moved around.

IPE seems to have dropped sharply yesterday and again slightly today with what looks like substantial turnover. The NAV seems to be stable. Does anybody have a view on this one given it is now yielding nearly 8%? I am assuming there are quite a few holders here.

[Newroad]

Hi Flyer61.

Didn't want to leave you responseless!

I am a holder of IPE - not far off 25% of my SIPP - looking to rebalance to around 20% of my SIPP, but mainly for technical reasons. The target is 40% bonds, in the form of around 20% IPE and 20% VAGP.

In short, not looking to go specifically active or passive, but down the middle. Same for the equity component - targeting 60% overall - around 30% ATST and 30% VWRL.

However, I'm in no hurry to rebalance, and if you made me do anything at present, I'd be a buyer rather than a seller of IPE for some of the reasons you allude to. However, the longer term outperformance/underperformance is likely to depend on continued central bank support for the underlying assets - as least in the short to medium term. This is what rescued them this time around in the recent past - they started the recent crash better than equities, then got worse and then back to something similar (the exact conclusion depends on which trusts you are comparing).

Regards, Newroad

[monabri]

Out of interest I looked at the factsheet. The yield is high because of the quality of the bonds it holds...mainly B,BB or BBB. For some, this degree of raciness might ok, but the risks should be pointed out.

[Newroad]

Hi Monabri.

That's true (it has a high yield due to the bond profile) but not directly pertinent. Similarly, the net gearing, around 25% as I recall, will also have a (non pertinent) effect.

The price (65.4p) is lower that the most recently published NAV (69.43p, though the current estimate is 70p) - the latter of which has been rising over the last few days. That the NAV is based on predominantly non-investment grade bonds the relative risk of which is, or at least should be, marked to market in that price.

So, all other things being equal, if you want to be in this type of investment at all, then now would seem to be a buying opportunity - shame for me, as I indicated earlier, as I would prefer to be a part seller for rebalancing reasons

Regards, Newroad

[scotia]

Over the last couple of days i have been looking at Investment Trusts given that many have had substantial changes to the underlying assets and also discounts have moved around.

IPE seems to have dropped sharply yesterday and again slightly today with what looks like substantial turnover. The NAV seems to be stable. Does anybody have a view on this one given it is now yielding nearly 8%? I am assuming there are quite a few holders here.

I think the 8% yield is somewhat illusory. Over 5 years the total return is less than 18%. So the majority of the 8% high yield may simply be a return of your own money.
But more worrying was the dramatic volatility in share price in March. Ok - it now seems to be operating at a discount around 9%, compared to an average premium around 1%. But its still not a choice for my SIPP.

[Newroad]

Hi Scotia.

You may be right about the yield - but that would be a separate conversation.

However, my point still stands - this should be taken into account in the NAV - which in turn should take into account the market price of the assets. This market price should take into account ...

The risk of market support for the asset class, i.e. opinion, and
The risk of default for constituent bonds within the portfolio, i.e. (in due course) fact

I personally think the discount reflects the former more than the latter - it goes to the Fed support for the asset class (by buying ETF's) - which minimised the March volatility to which you refer.

Regards, Newroad

[flyer61]

scotia,

I am inclined to agree. Where 'junk' is concerned it should trade within an IT at a sizeable discount. For the life of me I cannot fathom why New City High Yield NCYF trades at a premium. Maybe the lack of gearing. But it seems odd versus CMHY and IPE.

It is certainly interesting times for Investment Trusts with many managers having made substantial changes to their underlying assets.

[Newroad]

Hi Flyer61.

They would not be a bad, if imperfect, arbitrage trade (buy IPE at the discount, sell CMHY at the premium) as they are similar and run by the same managers. However, I believe the gearing is considerably less for CMHY - maybe high single digits.

I hold both, or more accurately, the kids hold the latter (in their JISA's).

Regards, Newroad

[Alaric]

It is certainly interesting times for Investment Trusts with many managers having made substantial changes to their underlying assets.

Whilst they will have accounting reserves to justify the practice, if they distribute more in dividends than they receive from their investments, the shortfall will need to be financed. That's either borrowing or from disposal of assets. That can be done as a part of a reconstruction by reinvesting less than the sale proceeds.

[Wuffle]

What is the discount control policy?
Will they be having a nibble themselves?
They don't even need to do any actual work, just set a bot off.

W.

[CryptoPlankton]

I think the 8% yield is somewhat illusory. Over 5 years the total return is less than 18%. So the majority of the 8% high yield may simply be a return of your own money.

I've noticed you do seem to set great store by these 5 year figures when assessing investment trusts, but, given their "snapshot" nature, are they really that useful? For instance, the same metric taken earlier this year would have been more like 65%. The ten year total return (according to the AIC) is 160% - what does that tell us?

I suppose I can see some benefit in using such figures for peer comparison and IPE seems to compare favourably with the rest of the "Debt, loans and bonds" AIC sector, which has a five year total return of -0.7%. Of course, we are facing "challenging times" as all fund managers are reminding us at the moment, but, unless feeling nervous enough to get out of equities all together, I see no reason to flea from this one at the moment. Having said that, I don't think I feel brave/greedy enough to add to my existing holding - I am content with its current (fairly modest) contribution to my income...

[jackdaww]

Hi Flyer61.

They would not be a bad, if imperfect, arbitrage trade (buy IPE at the discount, sell CMHY at the premium) as they are similar and run by the same managers. However, I believe the gearing is considerably less for CMHY - maybe high single digits.

I hold both, or more accurately, the kids hold the latter (in their JISA's).

Regards, Newroad

========================

do you know if invesco are still managing these funds?

i heard perpetual had sacked invesco .

[everhopeful]

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do you know if invesco are still managing these funds?

i heard perpetual had sacked invesco .

[/quote]
Invesco Perpetual dropped the Perpetual to become Invesco in a simple name change in 2018. You may be confusing this with a dispute that Invesco Perpetual had with the Board of IPE which led to Invesco resigning as managers. This was resolved with a new fee structure and some resignations from the Board. Invesco is the current manager.

[flyer61]

Finally bought today sub 63P even though the spread was 62-67p. I make it about a 10% discount at purchase and an 8% yield.

[barchid]

flyer
Whilst researching Invesco did you ever look at IVI (Invesco Income Growth) which can normally be bought on a 12% discount with a yield today of 4.75% ?
It holds income reserves for the best part of a year & it has always been run apart from the Barnett team, is my understanding.
The rather ineffective board (imho) has been disturbed about the discount & is threatening a winding up vote at the AGM due in a few months. My feeling is that vote will not prevail, but if it did that would be a swift uplift to an investment. I suggested more than once to the Chair that the name was way too similar to Barnetts "death cycle" trust but for some reason he did not see that many investors would mistake "income growth" for "income & growth", the portfolio of IVI is non controversial, mainly ftse 100 stocks with a smattering of ftse 250 as well, consisting of perceived growth stocks as well as income stocks & its top 10 holdings represents almost 50% of assets.
Nothing in there that would cause someone to lose sleep at nights. Just a thought as Scotia makes a good point in raising the 5 year performance and where the dividends were derived from in "enhanced growth"
IVI has paid increased dividends for, I believe, over 20 years continuously and is classed as a dividend hero if that means anything ?

[jackdaww]

Finally bought today sub 63P even though the spread was 62-67p. I make it about a 10% discount at purchase and an 8% yield.

==========================

ive followed suit at 63p.

my first foray into bonds .

[Newroad]

Hi Jackdaww.

Nothing is truly safe at present, but I think IPE is a sound option at the current price level you and Flyer61 are in at.

Like I said, I'd like to sell some for portfolio level purposes, but at these prices, better to keep with it - latest NAV estimate 71.38p, latest yield estimate 7.69%.

Regards, Newroad

[Newroad]

Hi All.

For what it's worth, re-balancing done this morning. Price didn't get to where I wanted it to, circa 64.5p - I'm kicking myself for turning down nearer 66.5p a couple of weeks ago (an actual previewed order on II)

So, in similar magnitudes, I did the following (twice, once for my SIPP, once for my wife's SIP)

Sold IPE
Bought VWRL
Sold VAGP
Bought ATST

To get the equity/bond ratio's where I want them and then active/passive ratios where I want them.

Regards, Newroad

[Newroad]

Hi again, all.

Found myself investing back into IPE again this morning (as well as ATST, VWRL and VAGP) as the proceeds from my better half's Prudential Stakeholder Pension got transferred into her II SIPP.

As can be seen above, last time, we shed for her around £4K's worth at around 64.5p. This time, bought back in around £13K's worth at around 63.9p. In the meantime, it's been as high as 68p.

Anyway, NAV is currently 71.45p, so we'll see how we go from here.

Regards, Newroad

[richfool]

Hi again, all.

Found myself investing back into IPE again this morning (as well as ATST, VWRL and VAGP) as the proceeds from my better half's Prudential Stakeholder Pension got transferred into her II SIPP.

As can be seen above, last time, we shed for her around £4K's worth at around 64.5p. This time, bought back in around £13K's worth at around 63.9p. In the meantime, it's been as high as 68p.

Anyway, NAV is currently 71.45p, so we'll see how we go from here.

Regards, Newroad

My understanding is that you may be securing a good income, but at significant risk to the capital.