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Invesco launches two new UCITS funds

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Invesco added to its allocation and fixed income offering with the launch of two new funds; the Invesco Sustainable Allocation Fund and the Invesco Global High Yield Short Term Bond Fund.

Launched on 12 December 2017, both funds are Luxembourg-domiciled UCITs and will be registered widely across Europe.
 
The Invesco Sustainable Allocation Fund extends Invesco’s suite of outcome-oriented funds. The new cross-border fund with an integrated sustainable responsible investment (SRI) focus is designed to meet investors’ growing demand for sustainable and responsible investment products. The fund aims to achieve a positive total return over a market cycle and an efficient risk-return profile with stable returns, modest drawdowns and controlled risk across all market scenarios by investing primarily in a flexible allocation of equities and debt securities globally, which meet its criteria on sustainability.
 
The new fund will be managed by Manuela von Ditfurth, Senior Portfolio Manager, Invesco Quantitative Strategies (IQS), and an expert for sustainable investment, and Martin Kolrep, Senior Portfolio Manager, IQS, with a focus on multi-asset strategies. While the Invesco Sustainable Allocation Fund is the first ESG (environmental, social and governance) product in Invesco’s cross-border range, the Frankfurt-based team has extensive experience managing ESG mandates.
 
Sergio Trezzi, Head of Retail Distribution EMEA (ex UK) & LatAm, comments: “Demand for ESG and SRI products is clearly growing, and we believe this is a secular trend. The Invesco Sustainable Allocation Fund addresses investors’ needs for long-term total return through investment in global fixed income and equities with an integrated ESG approach.” In particular, Invesco sees rising demand for allocation products managed with an ESG approach.
 
ESG will be implemented throughout the portfolio. The fund’s sustainability criteria will include ESG as well as ethical guidelines, which will be reviewed and applied on an ongoing basis by the investment team. Screening will be employed to exclude companies and/or issuers that do not meet the fund’s criteria. The fund will also use a best-in-class approach to identify those companies and/or issuers with best practices and standards in terms of ESG and sustainable development for inclusion in the fund’s universe.
 
The fund will employ an active asset allocation to equities and debt securities, which is based on a structured and clearly defined investment process and risk overlay intended to reduce downward risks and volatility while taking into account systematic ESG considerations and constraints. “With the flexible asset allocation and focus on managing volatility we aim to provide an attractive return compared to traditional balanced funds at relatively lower volatility,” Trezzi notes.
 
The Invesco Global High Yield Short Term Bond Fund offers investors a new product investing in the global high yield sector with a short-term focus. It aims to provide income and to a lesser extent longterm capital growth, with an average portfolio duration between 1 and 3 years.
 
The investment universe will primarily encompass global high yield bonds. However, the investment team intends to also harvest other income opportunities generated from elsewhere on the global Invesco Fixed Income (IFI) platform, including emerging market debt, convertibles and unrated debt securities.
 
The fund will be managed by Joe Portera and Jennifer Hartviksen, two highly seasoned fixed income managers based in the United States and Canada, respectively, and will be supported by IFI’s 18-member high yield team located in the United States and Europe. Investment ideas will be sourced from IFI’s macro, sector and security specific teams.
 
Trezzi says: “Offering investors a product that aims to deliver consistent income at lower duration risk allows us to consolidate and expand our product range along two lines. First, this offering represents another step in our efforts to enrich our high yield offering; second, it will help us to further address the growing need for income and risk-adjusted income that we observe in the cross-border market.”
 
The fund’s income tilt should be achieved through multiple layers: a primary investment in high yield instruments with a buy and hold approach to lock in income return; a tactical bucket with high income instruments, and a risk management overlay to further enhance the fund’s profile.
 
The fund will leverage IFI’s extensive credit research platform with the aim to identify issuers across the global credit markets with attractive yields to support the income characteristics of the fund but where default risk should be materially less than the market expects. As the team views default risk as the greatest threat to permanent capital loss, default risk assessment is central to the overall investment process. The team’s investment hypothesis is that default risk for securities with less than three years until maturity, even those rated sub-investment grade, is in practice much lower than credit spreads typically continue to imply as the securities near maturity.
 

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