Invesco Perpetual Corporate Bond Fund
January 2017 (Content as at 31 December 2016)
The Invesco Perpetual Corporate Bond 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 investment grade corporate debt securities. The Fund may also invest in government, unrated and sub-investment grade debt securities, 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 and credit and can be used to achieve both long and short positions.
After three months of negative performance corporate bond markets ended the year with a month of strong performance as the sell-off in government bond markets moderated. This positive performance came against a backdrop of some potentially challenging macro-economic events. First, as was widely expected, the US Federal Reserve hiked US interest rates by 0.25%. Second, the Italian government lost its referendum on constitutional reform leading to the resignation of the prime minister. Finally, the European Central Bank confirmed that it would extend its asset purchase programme, but at a lower level. At a company level, there were also some significant events. The Italian government announced it would bailout the troubled bank Monte dei Paschi di Siena after a private sector rescue plan failed. Meanwhile, Deutsche Bank announced it had reached a US$7.9bn settlement with the US Department of Justice (DoJ). This is significantly below the potential $14bn fine originally announced in the summer. Barclays report €9.3bn of euro investment grade bond supply and £1.6bn of sterling investment grade bond supply. This compares to €11.6bn and £1.9bn for each respective markets in December 2015.
Financial bonds, particularly the subordinated bonds of high quality European banks, remain our preferred area of the corporate bond market. We also see some value in junior debt across other sectors including utilities, telecoms and insurance. The fund’s interest rate sensitivity (duration) remains lower than the broader sterling corporate bond market reflecting our view that credit risk provides the better balance of risk and reward. As at 31 December, the fund had a modified duration of 5.4. This compares to the broader sterling corporate bond market, as represented by the Merrill Lynch sterling corporate bond index, which had a modified duration of 8.6.
|Launch date||24 July 1995|
|Sector||IA £ Corporate Bond NR|
|Available in an ISA?||Yes|
|Title:||Co-Head of Fixed Interest|
|Team:||Invesco Perpetual - Fixed Interest|
|Team:||Invesco Perpetual - Fixed Interest|
|Accounting period ends||
|Accumulation (No Trail)||B1W7HY8||GB00B1W7HY84|
|Income (No Trail)||B1W7HZ9||GB00B1W7HZ91|
|Accumulation (No Trail Gross)||B8N46Z1||GB00B8N46Z18|
|Income (No Trail Gross)||B8N4703||GB00B8N47036|
|Y (Acc) Gross||BJ04F98||GB00BJ04F984|
|Y (Inc) Gross||BJ04FB0||GB00BJ04FB01|
|Z (Acc) Gross||B8N4510||GB00B8N45105|
|Z (Inc) Gross||B8N4521||GB00B8N45212|
|Minimum lump sum||£500|
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
The fund invests in bonds (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. Dealing spreads vary considerably depending on the transaction value and market sentiment. The estimated average dealing spread for the fund is 0.86% 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.
Typical adjustments to the fund's price are to increase it by 0.43% for net inflows or decrease it by 0.43% 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 2016. Figures in these sections are as at 30 April 2016.
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 for the securities in which the fund invests, may mean that the fund may not be able to sell those securities at their true value. These risks increase where the fund invests in high yield or lower credit quality 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.<br/>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 z (accumulation) share class. As this was launched on 12 November 2012, for the periods prior to this launch date, performance figures are based on the accumulation share class, without any adjustment for fees. Performance figures for all share classes can be found in the relevant Key Investor Information Document.
All fund portfolio figures are as at date shown (source: Invesco Perpetual).
Performance figures are shown in sterling, inclusive of 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).
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 are shown net of the ongoing charge and 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 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 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). For this fund the distribution yield is the same as the underlying yield. 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.