Ideas for income – the Invesco Perpetual Global Targeted Income Fund
Article | 30 November 2016
David Millar introduces our new Multi Asset fund – the Invesco Perpetual Global Targeted Income Fund.
We believe our flexible approach to multi asset investing, which ignores asset class or geographic constraints and focuses on good, long-term investment ideas can help provide a diversified and sustainable source of income while aiming to preserve the capital of investors. In recent years, there has been a clear and growing need for investments that can provide investors with a sustainable income. We have applied our unconstrained approach to investing to meet these income needs and have launched the Invesco Perpetual Global Targeted Income Fund.
Financial markets are currently providing a unique set of challenges – years of ultra-loose monetary policy have depressed traditional sources of income and at the same time inflated the value of assets perceived to be more risky, such as equities. Against this backdrop, multi asset investing helps investors spread the overall risk taken while providing the opportunity for more stable returns compared to investing in just one asset class.
Our fund’s objective has three parts. Firstly, we aim to provide a gross annual income of 3.5% above UK 3-month LIBOR (the interest rate at which UK banks lend to each other for a period of three months). With this LIBOR rate currently at 0.4%, this means the fund is currently aiming to achieve a gross annual income of 3.9%.1 Secondly, the fund aims to preserve capital over the long term, even after fees. Finally, we aim to limit the volatility of the fund to less than half that of global equities, so the fund should produce smoother returns than investing in global equity markets. We believe we have the ability to achieve the above over any given three-year period. However, please note that there is no guarantee that these targets will be achieved.
The fund will be jointly managed by Richard Batty, Sebastian Mackay and Gwilym Satchell, who will be supported by myself and the other seven members of the Invesco Perpetual Multi Asset team. With over 45 years’ combined investment experience, all three fund managers have a proven track record of employing an unconstrained approach to sourcing income and return ideas, and combining them together into risk managed portfolios.
The team will use the same repeatable, three-step investment process which underpins the Invesco Perpetual Global Targeted Returns Fund – searching for good investment ideas unconstrained by asset class and geography and then combining them into a highly diversified, robust and risk-managed portfolio.
The Global Targeted Income Fund will typically invest in 20 to 30 individual investment ideas at any one time, all of which are expected to contribute positively to returns over a two- to three-year investment horizon. We believe that our approach will provide the fund managers the freedom to put together a diversified portfolio which aims to provide a stable monthly income, while managing downside capital risk.
Given Invesco Perpetual’s long and established track record of income investing and our growing reputation for multi asset investing, the Global Targeted Income Fund is a logical step in meeting the need for predictable monthly income while aiming to deliver it with relatively low volatility and with a focus on capital preservation.
1Income from some of the assets held in the fund is subject to corporation tax (currently set at 20%). This means that if, for example, the fund generates 3.90%, and income from all the assets in the fund is subject to corporation tax, you will receive 3.12%.
The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.
As one of the key objectives of the Invesco Perpetual Global Targeted Income Fund is to provide income, the ongoing charge is taken from capital rather than income. This can erode capital and reduce the potential for capital growth.
The Invesco Perpetual Global Targeted Returns and Global Targeted Income Funds make significant use of financial derivatives (complex instruments) which will result in the funds being leveraged and may result in large fluctuations in the value of the funds. Leverage on certain types of transactions including derivatives may impair the funds’ liquidity, cause them to liquidate positions at unfavourable times or otherwise cause the funds not to achieve their intended objective. Leverage occurs when the economic exposure created by the use of derivatives is greater than the amount invested resulting in the funds being exposed to a greater loss than the initial investment.
The funds may be exposed to counterparty risk should an entity with which the funds do business become insolvent resulting in financial loss. This counterparty risk is reduced by the Manager, through the use of collateral management.
The securities that the funds invest in may not always make interest and other payments nor is the solvency of the issuers guaranteed. Market conditions, such as a decrease in market liquidity for the securities in which the funds invest may mean that the funds may not be able to sell those securities at their true value. These risks increase where the funds invest in high yield or lower credit quality bonds and where we use derivatives.
Although the Invesco Perpetual Global Targeted Income Fund invests mainly in established markets, it can invest in emerging and developing markets, where there is potential for a decrease in market liquidity, which may mean that it is not easy to buy or sell securities. There may also be difficulties in dealing and settlement, and custody problems could arise.
Where David Millar has expressed opinions, they are based on current market conditions and are subject to change without notice. These opinions may differ from those of other Invesco Perpetual investment professionals..
For the most up to date information on the fund, please refer to the relevant fund and share class-specific Key Investor Information Documents, the Supplementary Information Document, the Annual or Interim Short Reports1 and the Prospectus, which are available from the Literature section of the website.
1 As the Invesco Perpetual Global Targeted Income Fund launched on 30 November 2016, the first reports will be issued on or before the following dates:
Interim: 30 June 2017
Annual: 31 December 2017