Invesco Perpetual Distribution Fund
September 2015 (Content as at 31 August 2015)
The Invesco Perpetual Distribution Fund aims to achieve a combination of income and capital growth over the medium to long term. The Fund seeks to achieve its objective by investing primarily in corporate and government debt securities globally (which may be unrated or sub-investment grade) and equities. The Fund may also invest in cash, cash equivalents, money market instruments, collective investment schemes, and other transferable securities. Financial derivative instruments can be used for investment purposes and for efficient portfolio management. They may include derivatives on currencies, interest rates, credit and equities and can be used to achieve both long and short positions.
Corporate bond markets underperformed government bond markets during August as concerns about the economic slowdown in China and associated weakness in commodity and other emerging markets dominated market sentiment. Data from Barclays shows that the energy and basic industry sectors were the worst affected given their high exposure to these markets. Subordinated bank debt did also come under pressure as a result of the overall negative market sentiment to markets; however, the impact was limited and selling pressure was focused on banks with significant emerging market exposure. Core government bonds, such as gilts, were the main beneficiary of the markets concerns. However, the Peoples Bank of China’s decision on August 25th to cut interest rates and lower bank reserve requirements helped to lift sentiment and core government bond markets gave back much of their earlier strong performance. Data from Merrill Lynch showed sterling investment grade corporate bonds had a total return for the month of -1.1%, while euro investment grade corporate bonds returned -0.7%. European currency high yield bonds delivered a total return of -0.9%. This compared to 0.3% for Gilts and -0.9% for Bunds. All returns shown are total returns, sterling hedged. August saw the UK equity market react to heightened concern over China’s economic health and the manner in which its economic issues are being addressed by the Chinese authorities. The FTSE All-Share index fell by 5.3% (total return; £), exhibiting high levels of volatility during the month. Overseas negative macro-economic factors, such as falling commodity and oil prices, and the timing of a US rise in interest rate appeared to outweigh any positive UK economic and company specific news.
Corporate bond yields remain low by historical standards and we believe many areas of the market offer limited value. Our strategy is defensive. Many of our holdings are within the financial sector, particularly the subordinated debt of high quality European banks. The creditworthiness of the sector has improved significantly since the global financial crisis and we find these securities continue to provide a reasonable level of income for the risk. We also see some opportunities in junior debt across other sectors. We continue to believe that core government bonds such as Gilts offer limited value and are therefore happy to maintain a low sensitivity to interest rates relative to the wider UK fixed income market. We took the opportunity of this month’s weakness in equity markets to add exposure to companies that we already hold and that we are still happy with the fundamentals. Overall in equity markets, we favour companies which offer visibility of revenues, profits and cash-flows, which are managed for the primary purpose of delivering shareholder value in the form of a sustainable and growing dividend. We continue to believe that well managed companies, which seek to deliver sustainable dividend growth, provide the best long term investment opportunities.
|Launch date||26 January 2004|
|Sector||IA Mixed Investment 20-60% Share Sector|
|Available in an ISA?||Yes|
|Title:||Co-Head of Fixed Interest|
|Team:||Invesco Perpetual - Fixed Interest|
|Team:||Invesco Perpetual - UK Equities|
|Title:||Co-Head of Fixed Interest|
|Team:||Invesco Perpetual - Fixed Interest|
|Accounting period ends||
|Accumulation (No Trail)||B1W7J08||GB00B1W7J089|
|Income (No Trail)||B1W7J19||GB00B1W7J196|
|Accumulation (No Trail Gross)||B8N4714||GB00B8N47143|
|Income (No Trail Gross)||B8N4725||GB00B8N47259|
|Y (Acc) Gross||BJ04FK9||GB00BJ04FK91|
|Y (Inc) Gross||BJ04FL0||GB00BJ04FL09|
|Z (Acc) Gross||B8N4554||GB00B8N45543|
|Z (Inc) Gross||B8N4565||GB00B8N45659|
|Minimum lump sum||£500|
|Minimum additional lump sum||£100|
|Minimum monthly amount||£20|
One-off charges taken before you invest
The entry charge for the fund is up to 5%. This is the maximum that might be taken out of your money before it is invested. For example, if you invest £1,000, an entry charge of 5% means £950 of your money will be used to buy shares in the fund.
The entry charge covers the costs of setting up your investment.
If you invest through a third party (such as a financial adviser), but do not receive financial advice on your investment, this charge may include payments to that third party. For more details see "What share classes are available for your ICVC funds?".
There is no exit charge for the fund.
Charges taken from the fund over a year
The ongoing charge figure is based on a fixed, all-inclusive fee and excludes portfolio transaction costs. The ongoing charge for each share class can be found in the relevant Key Investor Information Document available under 'Literature'. Investors will be provided with advance notice if any increases to this figure occur.
The ongoing charge covers all aspects of operating the fund during the year, including fees paid for investment management, administration and the independent oversight functions.
If you invest through a third party (such as a financial adviser), but do not receive financial advice on your investment, this charge may include payments to that third party. Once invested, your contract note or acknowledgement letter will show the amount of any payment in cash terms. For more details see "What share classes are available for your ICVC funds?".
Charges taken from the fund under specific conditions
No performance fee is charged.
Portfolio transaction costs1
On average, over the last three financial years, the fund incurred broker commissions of 0.01% and transfer taxes of 0.06%, as a necessary part of buying and selling the fund's underlying investments in order to achieve the investment objective. The commission and transfer taxes only relate to the equity (shares) portion of the fund. A proportion of these costs is recovered directly from investors joining and leaving the fund.
The bond portion of the fund invests in fixed interest securities which have no separately identifiable transaction costs; these costs form part of the dealing spread between the buying and selling prices of the underlying investments.
When the fund buys or sells equities or bonds, broker commissions and transfer taxes are paid by the fund on each transaction. In addition, there is a dealing spread between the buying and selling prices of the underlying investments. Dealing spreads vary considerably depending on the transaction value and market sentiment. The estimated average dealing spread for the fund is 0.74% of the transaction value.
Comparing portfolio transaction costs for a range of funds may give a false impression of the relative costs of investing in them, for the following reasons:
- Transaction costs do not necessarily reduce returns. The net impact of dealing is the combination of the effectiveness of the manager's investment decisions in improving returns and the associate costs of investment
- Historic transaction costs are not an effective indicator of the future impact on performance
- Transaction costs for buying and selling investments due to other investors joining or leaving the fund may be recovered from those investors. For further information see Pricing policy note below
- Transaction costs vary from country to country
- Transaction costs vary depending on the types of investment in which a fund invests
- As the manager's investment decisions are not predictable, transaction costs are also not predictable
Pricing policy note1
We operate a single pricing methodology for this fund and reserve the right to adjust the fund's price to protect your investment from the costs of buying and selling investments that result from other investors joining or leaving the fund. The amount of any such adjustment is calculated by reference to the estimated costs of dealing in the underlying investments, including any dealing spreads, broker commissions and transfer taxes.
Typical adjustments to the fund's price are to increase it by 0.37% for net inflows or decrease it by 0.37% for net outflows.
We usually adjust the price to the maximum extent possible when the value of net contributions or withdrawals is significant, which helps to protect your investment from the costs of the resultant transactions.
1The fund's financial year end is 30 April 2015. Figures in these sections are as at 30 April 2015.
Top 10 bond issuers (%)
|Bank of Ireland||1.31|
|Lloyds Banking Group||6.49|
Top 10 holdings (%)
|British American Tobacco||2.35|
Top 10 equity holdings (%)
|British American Tobacco||2.35|
Breakdown by asset type
Breakdown by currency exposure
Breakdown by credit rating
Product & fund information
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. Past performance is not a guide to future returns.
The securities that the fund invests 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, may mean that it is not easy to buy or sell securities. These risks increase where the fund invests in high yield bonds and where we use derivatives.
The fund has the ability to make use of financial derivatives (complex instruments) which may result in the fund being leveraged and can result in large fluctuations in the value of the fund. Leverage on certain types of transactions including derivatives may impair the fund’s liquidity, cause it to liquidate positions at unfavourable times or otherwise cause the fund not to achieve its intended objective. Leverage occurs when the economic exposure created by the use of derivatives is greater than the amount invested resulting in the fund being exposed to a greater loss than the initial investment.The fund may be exposed to counterparty risk should an entity with which the fund does business become insolvent resulting in financial loss.
Yield and performance figures are based on the accumulation share class.
All fund portfolio figures are as at date shown (source: Invesco Perpetual).
Performance figures are shown in sterling on a mid-to-mid basis, inclusive of net reinvested income and net of the ongoing charge and portfolio transaction costs to date shown. The figures do not reflect the entry charge paid by individual investors. Sector average performance is calculated on an equivalent basis (source: Lipper). In August 2015, Lipper made an improvement to their methodology in calculating sector performance. This may result in a slight variance in performance in comparison with previous historic performance sector data stated.
The yields shown are expressed as % per annum of current NAV of the fund. They are estimates for the next 12 months, assuming that the fund’s portfolio remains unchanged and there are no defaults or deferrals of coupon payments or capital repayments. They are not guaranteed. They do not reflect the entry charge of the fund. Investors may be subject to tax on distributions. Cash income is estimated coupons from bonds and, where applicable, estimated dividends from equities. The running yield estimates expected cash income into the fund from coupons of current bond holdings and, where applicable, dividends from current equity holdings. The running yield for this fund is gross of the ongoing charge, which is charged to capital. The redemption yield estimates the annualised total return: in addition to expected cash income, it includes the amortised annual value of unrealised capital gains/losses of current bond holdings, calculated with reference to their current market price and expected redemption value. The redemption yield is net of the ongoing charge. The distribution yield estimates the cash distribution to the shareholders: in addition to expected cash income, it includes the amortised annual value of unrealised capital gains/losses of current bond holdings, calculated with reference to their historic purchase price and expected redemption value (known as ‘effective yield from purchase price’ method). The distribution yield for this fund is gross of the ongoing charge, which is charged to capital. The underlying yield is calculated in the same way as the distribution yield, but is always net of the ongoing charge. The underlying yield for this fund is, therefore, lower than the distribution yield by the amount of the ongoing charge. Where, in the Manager’s judgement, there is significant uncertainty that a bond holding will be redeemed at par, the amortised capital component for that holding is retained in the fund’s capital and not distributed. This has the effect of reducing the estimated redemption, distribution and underlying yields and the actual distribution rate.
Where Invesco Perpetual has expressed views and opinions, these may change. Where securities are mentioned they do not necessarily represent a specific portfolio holding and do not constitute a recommendation to purchase, hold or sell.
For the most up to date information on our funds, please refer to the relevant fund and share class-specific Key Investor Information Documents, the Supplementary Information Document, the Annual or Interim Short Reports and the Prospectus, which are available using the contact details shown.