Mark Barnett graduated from the University of Reading in 1992 and joined Mercury Asset Management. He moved to Invesco four years later and made his debut as a fund manager in 1999, when he took over the reins of Perpetual Income and Growth Investment Trust. Between 2003 and 2017 he was also the lead manager of the Keystone Investment Trust. He succeeded Neil Woodford as the lead manager of Invesco Perpetual Income and Invesco Perpetual High Income in 2014, when Woodford left to set up his own firm.
What is his strategy?
As an income investor, Mark Barnett focuses on firms paying relatively high levels of dividends. However, this isn’t a case of simply picking those with the highest yield, since it’s crucial to make sure that firms can keep paying out. Barnett also looks for companies with strong balance sheets, resilient earnings and the potential to increase dividend payments. As well as ensuring a steady stream of dividends, this allows them to keep growing during tougher economic times and allows them the potential for capital gains as well as income.
Did this work?
The Perpetual Income and Growth Investment Trust, which Barnett has continued to manage, has returned a total of 500% over the past 17.5 years. This is equivalent to an annual return of 10.17% – double the return provided by the FTSE 100 during the same period. His track record as manager of the Keystone Investment Trust was similarly exceptional: under his management it returned 12.9% per year over 14 years. This was far better than the FTSE, which returned only 8.3% per year.
What were his biggest successes?
In the spring of 2008, Barnett invested in Provident Financial Group, believing that the high yield offered by Britain’s largest subprime lender made it a value bet. He also believed that its past experience in this sector, as well as its focus on home collections, meant that it was likely to survive the fallout from the economic crisis, just as it had survived past downturns. His confidence was amply rewarded since, despite the recent fall in its price, it has returned 407% over the past nine years, after taking dividends into account – an annual return of nearly 20%.
What lessons are there for investors?
Dividends are a large component of stock returns, as well as being the ultimate source of a company’s valuation. Looking for stocks that can consistently grow dividends, as well as delivering capital gains, is one route to earning higher returns.