Asset Class Opportunities
Invesco does not provide tax advice. Tax information contained herein is general in nature and is not meant to be and cannot be used by any taxpayer for the purpose of avoiding tax penalties that may be imposed on the taxpayer under US federal tax laws. Federal and state tax laws are complex and constantly changing. Investors should always consult their own legal or tax advisor for information concerning their individual situation.
Investors should consider their current and anticipated investment horizon and income tax bracket when making an investment decision.
Neither MSCI nor any other party involved in or related to compiling, computing or creating the MSCI data makes any express or implied warranties or representations with respect to such data (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of such data. Without limiting any of the foregoing, in no event shall MSCI, any of its affiliates or any third party involved in or related to compiling, computing or creating the data have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages. No further distribution or dissemination of the MSCI data is permitted without MSCI’s express written consent.
Standard & Poor’s, S&P, S&P 500 and Dividend Aristocrats are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”), a wholly owned subsidiary of The McGraw-Hill Companies, Inc. Standard & Poor’s Investment Advisory Services LLC (“SPIAS”) is a registered investment advisor and a wholly owned subsidiary of The McGraw-Hill Companies, Inc. SPIAS reviews the Invesco Capital Markets, Inc.’s (formerly Van Kampen Funds, Inc.) investment selections for the S&P Dividend Sustainability Portfolio. SPIAS does not provide advice to underlying clients of the firms to which it provides services. SPIAS does not act as a “fiduciary” or as an “investment manager”, as defined under ERISA, to any investor. SPIAS is not responsible for client suitability. Past performance is not a guarantee of future results.
SPIAS, S&P and their affiliates do not sponsor, endorse, sell, promote or manage any investment fund or other vehicle that is offered by third parties and that seeks to provide an investment return based on a SPIAS investment strategy or the constituents or the returns of any index. SPIAS, S&P and their affiliates make no representation regarding the advisability of investing in any such investment fund or other vehicle. With respect to recommendations made by SPIAS, investors should realize that such information is provided only as a general guideline. SPIAS does not take into account any information about any investor or any investor’s assets when providing its services. There is no agreement or understanding whatsoever that SPIAS will provide individualized advice to any investor. SPIAS does not have any discretionary authority or control with respect to purchasing or selling securities or making other investments. Individual investors should ultimately rely on their own judgment and/or the judgment of a financial advisor in making their investment decisions. There is no assurance that future dividend payouts will equal or exceed past dividend payouts. Standard & Poor’s parent company, The McGraw-Hill Companies, Inc. may be one of the constituents of the S&P 500 Dividend Aristocrats Index and may be included in the portfolio based solely on quantitative measurements.
For additional disclaimers and disclosures for SPIAS, please see http://www. standardandpoors.com/ regulatory-affairs/spias/en/us.
Prices of equity securities change in response to many factors, including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity.
Common stocks do not assure dividend payments. Dividends are paid only when declared by an issuer’s board of directors and the amount of any dividend may vary over time.
Fixed income products are subject to risk, including credit risk of the issuer and the effects of changing interest rates. Market prices of fixed income securities with intermediate lives generally fluctuate more in response to changes in interest rates than do market prices of municipal securities with shorter lives, but generally fluctuate less than market prices of municipal securities with longer lives.
High yield (junk) bonds involve a greater risk of default or price changes due to changes in the credit quality of the issuer.
The risks of investing in securities of issuers located in a single country or a limited number of countries may be affected by the economic, political and social conditions in those countries. Such variables may result in increased volatility and may have a significant impact on investment performance.
Most senior loans are made to corporations with below investment-grade credit ratings and are subject to significant credit, valuation and liquidity risk. The value of the collateral securing a loan may not be sufficient to cover the amount owed, may be found invalid or may be used to pay other outstanding obligations of the borrower under applicable law. There is also the risk that the collateral may be difficult to liquidate, or that a majority of the collateral may be illiquid.
Municipal securities are subject to the risk that litigation, legislation, or other political events, local business or economic conditions or the bankruptcy of the issuer could have a significant effect on an issuer’s ability to make payments of principal and/or interest.
Commodities may subject an investor to greater volatility than traditional securities such as stocks and bonds.
Foreign investments may be affected by changes in a foreign country’s exchange rates, political and social instability, changes in economic or taxation policies, difficulties when enforcing obligations, decreased liquidity, and increased volatility. Foreign companies may be subject to less regulation resulting in less publicly available information about the companies.
The risks of investing in securities of foreign issuers located in developing or emerging countries may be more negatively affected by fluctuations in foreign currencies, political and economic instability, and foreign taxation issues than in more developed countries.
Investments in real estate related instruments may be affected by economic, legal, or environmental factors that affect property values, rents or occupancies of real estate. Real estate companies, including REITs or similar structures, tend to be small and mid-cap companies and their shares may be more volatile and less liquid.
While US Treasuries are backed by the full faith and credit of the US Government, they are subject to interest rate and inflation risk.
Although bonds generally present less short-term risk and volatility than stocks, the bond market is volatile and investing in bond funds involves interest rate risk; as interest rates rise, bond prices usually fall, and vice versa. Bond funds also entail issuer and counterparty credit risk, and the risk of default. Additionally, bond funds generally involve greater inflation risk than stocks.
Investments in convertible securities are subject to the risks associated with both fixed income securities, including credit risk and interest rate risk, and common stocks. Convertible securities may have lower yields because they offer the opportunity to be converted into stocks, and if the stock is underperforming and the bond does not convert, the bond may have a lower return than a non-convertible bond.
A value style of investing is subject to the risk that the valuations never improve or that the returns will trail other styles of investing or the overall stock markets.
Rising rates are typically negative for fixed income investments including municipals, and falling rates are typically positive for fixed income investments due to the inverse relationship between yields and prices.
Diversification does not guarantee a profit or eliminate the risk of loss.
The opinions expressed herein are based on current market conditions and are subject to change without notice. These opinions may differ from those of other Invesco investment professionals.
There is no guarantee any outlooks mentioned will come to pass. Past performance cannot guarantee comparable future results.
Barclays 10-Year U.S. Treasury Bellwethers Index is a universe of Treasury bonds, and used as a benchmark against the market for long-term maturity fixed income securities. The index assumes reinvestment of all distributions and interest payments.
Barclays Emerging Markets Hard Currency Aggregate Index is a flagship hard currency emerging markets debt benchmark that includes US dollar-, Euro-, and British pound-denominated debt from sovereign, quasi-sovereign, and corporate emerging markets issuers.
Barclays Global Aggregate Credit USD Hedged Index is an unmanaged portfolio of globally issued debt securities.
Barclays Global Aggregate ex-U.S. Index is an unmanaged index considered representative of bonds of foreign countries.
Barclays High Yield Municipal Index is generally representative of bonds that are noninvestment grade, unrated or rated below Ba1.
Barclays Global High Yield USD Hedged Index provides a broad-based measure of the global high-yield fixed income markets.
Barclays Municipal Bond High Yield Index is generally representative of bonds that are noninvestment grade, unrated or rated below Ba1.
Barclays Municipal Bond Index is an unmanaged index considered representative of the tax-exempt bond market.
Barclays Municipal Intermediate 5-10 Year Bond Index is an unmanaged index of long-term, fixed-rate, investment-grade, tax-exempt bonds representative of the municipal bond market.
Barclays U.S. Aggregate Index is an unmanaged index considered representative of the US investment-grade, fixed-rate bond market.
Barclays U.S. Corporate High Yield Index is an unmanaged index that covers the US dollar-denominated, non-investment grade, fixed-rate, taxable corporate bond market.
Barclays U.S. Corporate Investment Grade Index is an unmanaged index consisting of publicly issued US Corporate and specified foreign debentures and secured notes that are rated investment grade (Baa3/BBB- or higher) by at least two ratings agencies, have at least one year to final maturity and have at least $250 million par amount outstanding.
Barclays U.S. Government Bond Index is a market value weighted index of US Government and government agency securities (other than mortgage securities) with maturities of one year or more.
Barclays U.S. Government Credit Index includes treasuries and agencies that represent the government portion of the index, and includes publicly issued US corporate and foreign debentures and secured notes that meet specified maturity, liquidity and quality requirements to represent the credit interests.
Barclays U.S. Government Intermediate Index represents intermediate-maturity government securities within the Barclays U.S. Aggregate Index.
Barclays U.S. TIPS Index is an unmanaged index that measures the performance of the US Treasury Inflation Protected Securities (“TIPS”) market.
Bloomberg Commodity Index is a broadly diversified index that allows investors to track commodity futures through a single, simple measure.
BofA Merrill Lynch 3-Month U.S. Treasury Bill Index represents an unmanaged market index of US Treasury securities maturing in 90 days that assumes reinvestment of all income.
BofA Merrill Lynch All U.S. Convertibles Index is a market-capitalization weighted index of domestic corporate convertible securities. In order to be included in the index, bonds and preferred stocks must be convertible only to common stock and have a market value or original par value of at least $50 million.
BofA Merrill Lynch Municipal 3–7 Years Index consists of bonds with an outstanding par greater than or equal to $25 million and a maturity range between three and seven years.
BofA Merrill Lynch High Yield Master II Index tracks the performance of below investment grade US dollar-denominated corporate bonds publicly traded in the US domestic market.
Credit Suisse Leveraged Loan Index represents tradable, senior-secured, US-dollar-denominated, noninvestment-grade loans.
FTSE EPRA/NAREIT ex-U.S. Index is designed to track the performance of listed real estate companies and REITS.
FTSE NAREIT All Equity REITs Index is an unmanaged index considered representative of US REITs.
JP Morgan GBI-Emerging Markets Diversified Index is a comprehensive global local emerging markets index, and consists of liquid, fixed-rate, domestic currency government bonds.
Morningstar Category: Intermediate-Term Bond portfolios invest primarily in corporate and other investment-grade US fixed income issues and typically have durations of 3.5 to 6 years. These portfolios are less sensitive to interest rates, and therefore less volatile, than portfolios that have longer durations.
Morningstar Category: Multi-Sector Bond portfolios seek income by diversifying their assets among several fixed income sectors, usually US Government obligations, US corporate bonds, foreign bonds, and high-yield US debt securities. These portfolios typically hold 35% to 65% of bond assets in securities that are not rated or are rated by a major agency such as Standard & Poor's or Moody's at the level of BB (considered speculative for taxable bonds) and below.
Morningstar Category: Non-Traditional Bond portfolios contain funds that pursue strategies divergent in one or more ways from conventional practice in the broader bond-fund universe. Many funds in this group describe themselves as "absolute return" portfolios, which seek to avoid losses and produce returns uncorrelated with the overall bond market; they employ a variety of methods to achieve those aims. Another large subset are self-described "unconstrained" portfolios that have more flexibility to invest tactically across a wide swath of individual sectors, including high-yield and foreign debt, and typically with very large allocations. The category is also home to a subset of portfolios that attempt to minimize volatility by maintaining short or ultra-short duration portfolios, but explicitly court significant credit and foreign bond market risk in order to generate high returns. Funds within this category often will use credit default swaps and other fixed income derivatives to a significant level within their portfolios.
MSCI EAFE Index is an unmanaged index considered representative of stocks of Europe, Australasia and the Far East.
MSCI Emerging Markets Index is an unmanaged index considered representative of stocks of developing countries.
MSCI USA Index is a free float adjusted market capitalization index that is designed to measure large and mid-cap US equity market performance.
MSCI World Index is an unmanaged index considered representative of stocks of developed countries.
Russell 1000 Index is an unmanaged index considered representative of large-cap stocks.
Russell 1000 Growth Index is an unmanaged index considered representative of large-cap growth stocks.
Russell 1000 Value Index is an unmanaged index considered representative of large-cap value stocks.
Russell 2000 Index is an unmanaged index considered representative of small-cap stocks.
Russell Midcap Index is an unmanaged index considered representative of mid-cap stocks.
S&P 500 Index is an unmanaged index considered representative of the US stock market.
S&P 500 Dividend Aristocrats Index measure the performance of S&P 500 companies that have increased dividends every year for the last 25 consecutive years.
S&P 500 Pure Value Index measures value in separate dimensions across six risk factors. Value factors include book value to price ratio, earnings to price ratio, and sales to price ratio. The Pure Style Index only includes those stocks from the parent index that exhibit strong Value Characteristics, and weights them by style score.
S&P/Case-Shiller U.S. National Home Price Index is a composite of single-family home price indices for the nine US Census divisions. As the broadest national measurement of home prices, the index captures approximately 75 of US residential housing stock by value.
S&P/LSTA Leveraged Loan Index is a weekly total return index that tracks the current outstanding balance and spread over Libor for fully funded term loans.
The Russell Indices are trademarks/service marks of the Frank Russell Co. Russell® is a trademark of the Frank Russell Co.
Unmanaged index returns do not reflect fees, expenses, or sales charges. An investment cannot be made directly in an index.
5- and 10-Year Treasury, US Government Obligations may be, (i) supported by the full faith and credit of the US Treasury, (ii) supported by the right of the issuer to borrow from the US Treasury, (iii) supported by the discretionary authority of the US Government to purchase the agency’s obligations, or (iv) supported only by the credit of the instrumentality. There is a risk that the US Government may choose not to provide financial support to US Government-sponsored agencies or instrumentalities if it is not legally obligated to do so. In that case, if the issuer were to default, a portfolio holding securities of such issuer might not be able to recover its investment from the US Government.
10-Year Treasury Constant Maturity Rate is based on the average yield of a range of Treasury securities, all adjusted to the equivalent of a 10-year maturity. Yields on Treasury securities at constant maturity are determined by the US Treasury from the daily yield curve. That is based on the closing market-bid yields on actively traded Treasury securities in the over-the-counter market.
Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care. The CPI is calculated by taking price changes for each item in the predetermined basket of goods and averaging them; the goods are weighted according to their importance. Changes in CPI are used to assess price changes associated with the cost of living.
Correlation indicates the degree to which two investments have historically moved in the same direction and magnitude. A greater positive correlation (+1.00 maximum) means the two investments have behaved more similarly; a greater negative correlation (1.00 maximum) means the two have performed less similarly.
Duration is a measure of the sensitivity of the price (the value of principal) of a fixed income investment to a change in interest rates. Duration is expressed as a number of years.
Gross Domestic Product (GDP) is the monetary value of all the finished goods and services produced within a country's borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all of private and public consumption, government outlays, investments and exports less imports that occur within a defined territory.
Price-Book (P/B) Ratio is a financial ratio used to compare a company's current market price to its book value.
Purchasing Managers Index (PMI) is an indicator of the economic health of the manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment.
Real Estate Investment Trust (REIT) is a closed-end investment company that owns assets related to real estate such as buildings, land and real estate securities. REITs sell on the major stock market exchanges similar to common stock.
Standard Deviation measures a fund’s range of total returns and identifies the spread of a fund’s short-term fluctuations.