Twenty years, one approach | The Invesco Euro Corporate Bond Fund turns 20 this year

Past performance does not predict future returns.

For two decades, our team has managed money in one of fixed income's most competitive corners, a market where the average annual yield has been just 2.7%¹. Delivering the top-ranked cumulative return in our peer group , with annualised outperformance of 1.5% against the EAA Fund EUR Corporate Bond², demands a repeatable process, the discipline to apply it across different market regimes, and the conviction to hold course when short-term results disappoint. Our 20-year track record reflects each of those qualities.

Active management in both directions

Active management is the fund’s defining characteristic. We manage both credit risk and duration within meaningful ranges in order to align risk with reward at each stage of the market cycle. That flexibility operates in both directions: when yields are attractive and spreads wide, we add risk; when the opposite is true, we reduce it.

For example, adding credit risk in the market stress of 2011 weighed on our performance in that calendar year, as spreads continued to widen. Then credit markets rallied sharply in 2012, producing a period of strong outperformance. The same pattern played out in 2018 and 2019: increasing credit and duration risk as yields rose and spreads widened led to short-term underperformance, followed by strong relative returns as bond markets recovered.

The most recent example of risk reduction was our duration management heading into 2022. With bund yields below zero, we chose not to hold the full market level of duration risk, keeping it near the bottom of our band of approximately 1.5 years above or below the index. When inflation expectations shifted rapidly and yields rose, that positioning added 143 basis points of relative performance in the 12 months to November 2022.

Where we stand today: Cautious on credit

Credit spreads have compressed to historically tight levels. In our view, that degree of compression does not justify significant credit risk-taking.

Spreads have spent most of the last two years very close to the bottom of their historical range. Investors who maintained higher levels of credit risk have continued to earn incremental returns over that period. We have chosen to reduce credit risk in our portfolio, with our level of credit spread falling faster than the index, foregoing that incremental return to protect against spread widening and to build the liquidity we would need to invest at better prices. 

We are therefore defensively positioned, with higher-than-usual exposure to A-rated securities and limited exposure to BBB-rated bonds. Our sector allocation favours defensive industries like utilities, telecoms and technology, over cyclicals such as industrials and autos. We retain modest exposure to Additional Tier 1 bonds (AT1s), corporate hybrids and subordinated insurance securities, reflecting a selective rather than wholesale retreat from credit risk.

Where we stand today: Constructive on duration

On duration, we hold a modest overweight relative to the index. Government yields are a lot higher than in 2021 and, the recent flattening notwithstanding, the curve is substantially steeper. The risk to reward has improved, in our opinion. In this current uptick of geopolitical risk, interest rate markets have not played their traditional role as a risk hedge, benefitting from flight-to-safely. But we think that relationship could re-assert itself if investors see a threat to growth. 

Recent performance in context

Credit has remained strong for longer than we expected. Spreads rallied in 2024 and have stayed near historic lows throughout 2024 and 2025, and investors who maintained higher levels of credit risk continued to earn incremental return. We underperformed our peer group in both years as a result, returning 4.4% against 4.9% in 2024, and 2.6% against 2.8% in 2025.

Over the medium and long term, the picture is different. We rank first quartile over five years and since inception within our peer group. Over the past 10 years, our investment approach has outperformed the benchmark on 78% of rolling three-year periods⁴, a measure of consistency that matters as much as any single year's return.

Our defensive posture may continue to lag if spreads remain compressed, but our rationale is consistent with an approach that has successfully navigated the Global Financial Crisis, the European sovereign debt crisis and the COVID-19 pandemic. 

With the opportunity cost of holding higher-quality credit relatively low, we believe we are well placed to protect capital if conditions deteriorate and to deploy it at better prices if spreads widen.

After 20 years, that discipline - accepting short-term trade-offs to preserve long-term positioning - remains the consistent thread through our track record. It has not paid off in every period. It has paid off over time.

Find out more about the Invesco Euro Corporate Bond Fund here.