This fund seeks to achieve a high level of income and long-term capital growth by investing in continental European equities and bonds.

Managed by Paul Causer and Paul Read, co-heads of fixed income at Invesco Perpetual, and Katharina Hoyland, manager of the Invesco Perpetual European Equity Income Fund, the allocation of the fund is equally split 50/50 between European equities and bonds.

Read explains, ‘While conditions since last summer have undoubtedly presented a challenge, the sharp and indiscriminate widening of credit spreads has left credit markets in a position in which they are now beginning to offer us compelling value. The greater differentiation between the pricing of different credit risks, which we are now experiencing, is something we welcome. I believe that we have a great opportunity to add yield to portfolios, providing a strong income flow and, from current levels, capital
growth over the long term.’

The fund was launched on 1 May 2008 with a target yield of six per cent. It is also available for new ICVC and ISA investments, as well as ISA transfers.

Minimum investment: £500 lump sum, £100 top-up and £20 for monthly savings
Initial charge: 5%
Annual management charge: 1.5%
Contact: www.invesco.com
 
Philip Johnson says:
This European High Income Fund aims to achieve a high level of income and capital growth through a portfolio of primarily European equity and fixed-interest securities.
At launch, the fund is targeting a dividend yield of six per cent. With the attraction of regular income, together with long-term growth potential, this fund presents an opportunity for those looking to add diversification to their investment portfolios.

Following the turbulence in global markets, many corporate and high-yield bonds are trading at highly attractive valuations. These opportunities should continue for some time, as other fixed-interest investors may be forced to shrink their portfolios. In European equities, too, this should be a good time to invest. Years of neglect as ‘unfashionable investments’ have left many large-capitalisation blue-chip stocks attractively priced.

With expanding and sustainable earnings, sound balance sheets and relatively high dividend payments, these are the very companies least exposed to economic uncertainties, and which also offer potential for both income and growth.

While tighter credit conditions are a global phenomenon, there are sound reasons to expect Europe to remain resilient. Europeans have much lower levels of mortgage and other debts, which mean Europe’s economies are not so reliant on a ready supply of credit. Furthermore, fast growth in the region’s eastern countries is supporting the rest of Europe.

These new European Union members are both stimulating growth elsewhere and supplying competitive low-cost labour.

Investors must be aware that this fund has a significant proportion of high-yielding bonds, which means there is more risk to investors’ capital and income than from a
fund investing in government or investment-grade bonds. Moreover, income from the investment will fluctuate and is not guaranteed. However, the top-quality fund managers at Invesco Perpetual should ensure this does what it says on the tin.