Fixed Income Strategy – Thematic Approach
April 8, 2021
Fixed Income
Introducing the Invesco Global Investment Grade Corporate Bond Fund
A globally diversified corporate bond fund, delivering income and capital growth opportunities.
A world of income opportunities
After a tough 2022, bond markets are now offering meaningful income opportunities for the first time in many years. It’s an exciting time for investors, who are seizing the opportunity to lock in higher yields for the years to come.
While today’s environment looks particularly compelling from an income perspective, we believe our IG credit fund has the flexibility needed to deliver across a broad range of market environments.
As well as benefitting from no geographical constraints, we are free to allocate up to 20% of the fund to high yield bonds (no lower than BB at purchase), if the macroeconomic and issuer-specific circumstances look attractive. We typically use this allowance to invest down the capital structure in high yield bonds that are issued by investment grade companies.
We focus on quality
We focus on high-quality issuers with strong or improving fundamentals. Our experienced global team of 170+ investment professionals includes almost 60 credit analysts. They carry out an independent assessment of every issuer’s creditworthiness, documenting and communicating their findings across our global platform.
We also conduct thorough macroeconomic analysis to understand how the broader backdrop will impact credit markets, issuers and our portfolios.
Why consider this fund?
We focus on investment grade corporate bonds, issued by companies that are highly solvent with strong balance sheets. The default risk on these sorts of securities is typically low, with defaults very rare for investment grade issuers.
Within our portfolios, we invest across a broad range of sectors and geographies. This helps ensure good diversification.
Access the Invesco Global Investment Grade Corporate Bond Fund product page to view KIDs/KIIDs and factsheets.
Unlike traditional corporate bond managers, we don’t just focus on market timing and security selection. Instead, we go further. We identify the big themes driving economies and use this analysis to help drive our issuer selection. These themes could include things like:
- Decarbonisation/net zero transition
- The impact of Russia’s war on the energy and utilities sectors
- The transition of global economies from stagflation to stagnation
- And so on…
We also implement “macro overlays” to manage the overall risk of the fund through the cycle. This involves using derivatives, which help reduce transaction costs compared to trading in and out of corporate bonds.
Our approach to ESG is rooted in a belief that evaluating ESG criteria leads to better long-term risk-adjusted returns. Our credit analysts are tasked with understanding the ESG drivers for the companies they cover and conducting ESG-based analysis along with their fundamental financial analysis.
We also work closely with Invesco’s global ESG team, which coordinates engagement activity across the firm and provides additional support, data and analysis.
Insights from the team
Monthly update
Find out more about our performance and read the latest market commentary.
Meet the team
The lead managers for the fund are Lyndon Man and Luke Greenwood. They have co-managed the team since 2013. Together they have a combined 50 years of industry experience and have navigated a broad range of economic cycles. They are supported by Michael Booth and Matthew Henly and draw on the resources of Invesco’s global fixed income platform. The platform is made up of over 170 professionals, averaging 18 years of industry experience and 11 years with Invesco.
Lyndon Man, Co-Head of Global Investment Grade CreditAfter last year’s selloff, investors are able to lock in an attractive income stream from high-quality companies. Previously, they had been looking to more volatile asset classes like emerging markets or high yield.
Fund facts
As a team, we are responsible for $5.7 billion in active global investment grade assets. Our lead fund managers have a combined 50 years of experience in these markets. Furthermore, the research conducted by our global credit team covers more than 85% of the Bloomberg Barclays Global Aggregate Corporate Index (by market value).
Data as at 31 December.
Potential capital growth
Diversification benefits
Large opportunity set
More opportunities in investment grade credit
FAQs
The term “investment grade credit” is used to describe corporate bonds that have been issued by high quality companies. The three main rating agencies use slightly different definitions. Moody’s defines investment grade securities as having a rating of Baa3 or higher. Meanwhile, Standard & Poor’s and Fitch define it as BBB- or higher.
Investment grade corporate bonds can play an important role as income generators in investor portfolios. This made them popular with investors in the years following the global financial crisis when the world lived through a sustained period of low yields, or even negative yields on government debt.
They can also be good diversifiers. They represent a large portfolio of the global investment universe, which means they allow investors to gain exposure to a broad range of economic sectors and geographies. Furthermore, they typically exhibit significantly lower price volatility than equities.
When the economy takes a downturn, the risk that companies will be unable to meet their financial obligations increases. However, it is worth noting that defaults have historically been very low for IG credit. Even between 2008 and 2009, the default rate peaked at only 0.3-0.4% of the universe. The threat of credit downgrades is more common, but can be mitigated with thorough credit analysis.
When the economy takes a downturn, high quality fixed income assets (government bonds and investment grade credit) tend to outperform more volatile/riskier parts of the market. This is partly because, when markets throw up challenges, many investors prefer relatively “safer” assets, which are able to better navigate periods of slowing growth. IG credit investors can benefit from these moves.
How can we help?
Let us know using this form and one of our specialist team will quickly get back to you.
Important Information
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Data is as at 28 February 2023, sourced from Invesco unless otherwise stated.
This is marketing material and not intended as a recommendation to buy or sell any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication.
Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice.
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