Fund in Focus: Invesco Global Bond Fund

Active management style delivers results

As of March, about US$10 trillion worth of intermediate and long-term bonds were trading at negative yields, according to a report from U.S. brokerage firm Charles Schwab Corp. That’s about 10% of the total global bond market. Still, the diversification benefits of global bonds are worth considering. Launched in 2016, Invesco Global Bond Fund is a strong global bond offering managed by the Invesco Global Bond Investment team and headed by Michael Hyman.

The managers use a core-plus investment strategy, with high-quality investment-grade global bonds serving as the core. At least 75% of the fund’s portfolio must be invested in the core, which is designed to provide stable income and help protect capital.

For the “plus” side of the strategy, managers have a number of alternatives, including high-yield issues and emerging market bonds. This sleeve aims to provide a higher level of income as well as potential growth.

While this is a go-anywhere fund, the managers note that North America is one of the few places to find attractive yields. To benefit from this, the fund has 52% of assets invested in U.S. and 12% in Canada. The managers are also finding some good yield-enhancing opportunities in European corporates, emerging-market sovereign bonds, and non-agency mortgage bonds. As of June 30, the fund’s yield to maturity was listed at 2.5%, while duration was 6.6 years. Duration must be kept within 1.5 years of the benchmark.

Performance has been above average, with the fund posting a 3-year average annual compounded rate of return of 2.9% to the end of June, outpacing the category average 2.8%. Volatility has been significantly lower than the peer group with a 3-year average standard deviation of 5.3. The managers are very active, and portfolio turnover levels have averaged more than 350% for the past three years.

Costs are reasonable, with the fund carrying an MER of 1.61% for the Class A units, and 0.95% for the fee-based units.

Given the well-resourced investment team and disciplined, repeatable investment process, this is a very strong global bond fund that can play a role in a diversified portfolio.

Invesco Global Bond Fund
Fund company: Invesco Canada Ltd.
Fund type: Global Fixed Income
FundGrade: B (June)
Style: Top-down macro/Bottom-up security selection
Risk level: Low
Load status: Optional
RRSP/RRIF suitability: Fair
Managers: Michael Hyman, Matthew Brill, Todd Schomberg, Avi Hooper
MER: 1.60%
Fund codes: AIM4195 (Low-load); AIM4193 (Front-end load);
Minimum investment: $500

Dave Paterson, CFA, is a money manager and an expert on investment fund research and due diligence on a variety of investment products.

Notes and Disclaimer

Commissions, trailing commissions, management fees and expenses all may be associated with fund investments. Please read the simplified prospectus before investing. Mutual funds are not guaranteed and are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer. There can be no assurances that the fund will be able to maintain its net asset value per security at a constant amount or that the full amount of your investment in the fund will be returned to you. Fund values change frequently, and past performance may not be repeated. No guarantee of performance is made or implied. This article is for information purposes only and is not intended as personalized investment advice. Dave Paterson is employed as an advising representative (portfolio manager) by Empire Life Investments Inc. (ELII), a subsidiary of Empire Life Insurance Company. ELII is the investment fund manager and portfolio manager of the Empire Life Mutual Funds and the portfolio manager of the Empire Life Segregated Funds (collectively, the Empire Funds). As such, his employment and his compensation may be connected to the success of ELII and the Empire Funds. From time to time, the Empire Funds may buy, sell, hold, or otherwise have an interest in securities that may be discussed in this report.