Better-quality corporate bonds still offer a relatively attractive yield, despite having declined as interest rates have begun to be cut. Although credit spreads (the additional yield over government bonds) are narrow, we believe the backdrop for better-quality fixed interest remains supportive. Further interest rate cuts should also act as a positive tailwind.
This is an investment grade credit portfolio, but we have the flexibility to allocate up to 30% to high yield securities and government bonds.
Without duration restrictions, we can mitigate risk or take advantage of opportunities.
With the majority of portfolio holdings denominated in EUR, there is little or no currency risk for EUR-based investors.
We carry out thorough credit analysis, combining internal and external research, to find good quality companies with attractively valued bonds. The aim is to maximise returns through acceptable and well-understood credit risk exposure. We consider the risk/return profile of any bond relative to cash, core government bonds and the rest of the fixed income universe. We only take risks that we feel will be adequately rewarded.
Our approach is flexible, pragmatic and market driven. We focus on absolute risk and return and are not constrained by an index. This allows us to take on more risk when the opportunities look attractive, or reduce risk in periods where we don’t feel it is justified.
Our time-tested approach is based on fundamental analysis, with a strong emphasis on valuation. Our fund managers are supported by a well-resourced team of analysts.
Access the Invesco Euro Corporate Bond Fund product page to view KIIDs/KIDs and factsheets. The investment concerns the acquisition of units in an actively managed fund and not in a given underlying asset.
Julien Eberhardt and Tom Hemmant are responsible for managing the fund, supported by the rest of Invesco’s Fixed Income Team. Together, the two fund managers have a combined 38 years of industry experience.
Because of the flexibility we have in our mandate and the credit research resources in the team, we believe the fund can deliver attractive risk-adjusted returns from this vital income asset class.
Julien Eberhardt
Fund manager
Diversification – Bonds have played an essential role in diversifying investor portfolios and helping to mitigate strategy losses during periods of negative equity returns.
Income generation – bonds can provide a fixed amount of income at regular intervals in the form of coupon payments.
Corporate bond is debt issued by a company in order for it to raise capital. An investor who buys a corporate bond is effectively lending money to the company in return for a series of interest payments, but these bonds may also actively trade on the secondary market.
A government bond represents debt issued by a government and sold to investors to support spending. Government bonds are considered low-risk investments since the government backs them. Because of their relatively low risk, government bonds typically pay low interest rates.
High-yield bonds tend to have lower credit ratings of below BBB- from Standard & Poor’s and Fitch, or below Baa3 from Moody’s. High-yield bonds are more likely to default and have higher price volatility. They therefore pay higher interest rates than investment-grade bonds.
Duration measures the sensitivity of a bond to changes in interest rates. Time to maturity and a bond’s coupon rate are two factors that affect a bond’s duration. Generally, the higher a bond’s duration is, the more its price will increase when interest rates fall and vice-versa.
A fixed-income portfolio’s duration is computed as the weighted average of individual bond durations held in the strategy – strategy duration can therefore be actively managed by strategy managers to reduce or increase strategy risk as they see fit.
