Invesco Perpetual Global Targeted Returns Fund Webcall July 2017 - - PowerPoint PPT Presentation
Invesco Perpetual Global Targeted Returns Fund Webcall July 2017 Clive Emery, Product Director This presentation is for Professional Clients only and is not for consumer use. 14404/LI/GTR STANDARD INTRO End Jun17 Invesco Perpetual
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Webcall July 2017 Clive Emery, Product Director
This presentation is for Professional Clients
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Past performance is not a guide to future returns. Source: Invesco Perpetual as at 30 June 2017 (unless otherwise stated). Inception date 9 September 2013.
1As at 31 March 2017. 2Fund performance figures are shown in sterling, inclusive of reinvested income, gross of the Ongoing Charge and net of portfolio transaction costs.
The figures do not reflect the entry charge paid by individual investors.
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Past performance is not a guide to future returns. Source: Barclays Point. Data as at 30 June 2017. POINT Portfolio Return is calculated by the attribution system, Barclays POINT, using a portfolio constructed by a daily feed of positions and may differ from the gross return. The contribution figures are estimates and should be used for indicative purposes only. Data cleansing and retrospective information availability may cause changes.
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Commodity - Commodity Carry Commodity - Commodity Short Credit - Selective Credit Credit - US High Yield Currency - Chile and Mexico vs Australia and NZ Currency - Indian Rupee vs Chinese Renminbi Currency - Japanese Yen vs Korean Won Currency - Long EM Carry Currency - Long Sterling Currency - Russian Ruble vs Canadian Dollar Currency - US Dollar vs Canadian Dollar Currency - US Dollar vs Euro Equity - Dispersion Equity - European Divergence Equity - France vs Germany & Italy Equity - Global Equity - Japan Equity - Selective Asia Exposure Equity - UK Equity - US Large Cap vs Small Cap Inflation - Short Real Yields and Inflation Inflation - US vs UK Interest Rates - Australia vs US Interest Rates - Selective EM Debt Interest Rates - Swap Spreads Interest Rates - Sweden Interest Rates - Yield Compression Volatility - Asian Equities vs US Equities
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– Selective Asia Exposure
– Yield Compression
– Selective Credit
– Commodity Carry
– France vs Germany & Italy Bottom 5
– US Dollar vs Euro
– US vs UK
– Chile and Mexico vs Aus and NZ
– Russian Ruble vs Canadian Dollar
– US Dollar vs Canadian Dollar
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Source: Invesco Perpetual as of 30 June 2017. For illustrative purposes only. Where the Invesco Multi Asset team has expressed opinions, they are based on current market conditions and are subject to change without notice. These opinions may differ from those of other Invesco investment professionals.
Global growth remains subdued
Bond yields capped
Fewer challenges to our low inflation view
Caution in risk assets supports opportunities elsewhere
Increased volatility ahead
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Period Change Idea
Q3 2016
Interest Rates – Y ield C ompression (was Interest Rates – U S vs U K) Equity – European Divergence (incorporating Equity – Germany) V olatility – Selective FX (removed Japanese Y en vs U S Dollar leg) C urrency – C hilean P eso vs Australian and New Zealand Dollars (was C urrency – C hilean P eso vs Australian Dollar) V olatility – Interest Rates Q4 2016
+/o
Equity – U S Staples vs Discretionary Interest Rates – U K V olatility – Selective FX Interest Rates – U S Curve Inflation – U S vs U K Interest Rates – Y ield C ompression Interest Rates – European C urve Steepener Interest Rates – Australia vs U S Q1 2017 + + + +
C urrency – Long EM C arry Equity – France vs Germany & Italy Inflation – Short Real Y ields and Inflation C redit – Selective Credit (now includes Credit – European Curve Flattener) C urrency – C hile and M exico vs A ustralia and NZ (was C urrency – C hilean P eso vs Aus and NZ Dollars) Equity – Japan Equity – Selective Asia Exposure Interest Rates – Y ield C ompression Q2 2017 + +
Equity – Dispersion C urrency – Japanese Y en vs Korean Won C urrency – Long Sterling Equity – European Divergence (incorporating Equity – France vs Germany and Italy) Equity – Global Equity – Selective Asia Inflation – U S vs U K Interest Rates – Japanese C urve Steepener Interest Rates – European C urve Steepener
Source: Invesco Perpetual as at 30 June 2017. “+” indicates an idea was added, “-” indicates an idea was removed, “o” indicates an idea has changed. For illustrative purposes only. Portfolio characteristics may change without notice.
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10 20 30 40 50 60 Spain Hungary United Kingdom Portugal Germany United States New Zealand Italy Japan India South Africa Mexico Norway Poland Sweden Switzerland France South Korea Brazil Russia Australia Turkey Canada Singapore Chile China
Percentage point change over 5 years in private sector debt to GDP
Source: Bloomberg as at 30 June 2017. For illustrative purposes only.
Debt levels in China have continued to rise
Commodity prices are likely to remain under pressure as global growth continues its stuttering
total return swap indices that have a higher beta with a slightly negative outlook on commodities. A premium is extracted in a flat market, but returns will be enhanced if commodity prices fall. We also sold total return swaps against an index of energy and base metals. 5
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10 20 30 40 50 60 70 80 90 100 Jan 11 Jan 12 Jan 13 Jan 14 Jan 15 Jan 16 Jan 17 3-month realised correlation of S&P500 constituents relative to the index (%)
Source: Bloomberg as at 30 June 2017. For illustrative purposes only.
The realized correlation of stocks within the S&P500 has fallen. This reflects the less ‘macro’ nature of the equity market relative to the past and means that individual stock returns are starting to diverge. We believe this will continue and have implemented a view which captures the rising dispersion between stock returns. We implement this view through an options-based index that captures the volatility of the 50 largest constituents of the S&P 500 index rising relative to the index as a whole.
Increased dispersion between stocks within the index
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0.1 0.2 0.3 0.4 0.5 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Basis points difference Japan 2y forward 20y swap - Japan 2y forward 10y swap
Source: Bloomberg as at 30 April 2017. For illustrative purposes only.
The Japanese Interest rate curve steepened as did most rate curves through the end of 2016 and this benefited our position. Since the turn of the year the curve has stabilised and we think further steepening is unlikely from here and hence we exited the idea. 7
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0.1 0.2 0.3 Jan 15 Apr 15 Jul 15 Oct 15 Jan 16 Apr 16 Jul 16 Oct 16 Jan 17 Apr 17 Basis points difference 4y forward 30y swap rate - 4y forward 5y swap rate
Source: Bloomberg as at 30 April 2017. For illustrative purposes only.
The European curve steepened from mid 2016 to the end of the year , which benefited this idea. More hawkish positioning by the ECB suggests that the short rates might not be anchored as much which could see the curve flatten from a front end increase, which would be negative for the position and hence the idea was removed. 8
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Source: Bloomberg as at 31 May 2017. For illustrative purposes only.
7 8 9 10 11 12 1.20 1.25 1.30 1.35 Jan-17 Feb-17 Mar-17 Apr-17 May-17 GBPUSD Exchange Rate GBPUSD 1Y Implied Volatility % (rhs) GBPUSD exchange rate has recovered slightly, while volatility has moved lower
The UK pound recovered towards 1.30 US dollars from around 1.20, at the same time, volatility had moved lower . Given the price level and volatility conditions, we were less comfortable deriving an income from selling puts and so closed our long sterling idea. 9
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Currency – Japanese Yen vs Korean Won
previously used for the Korean won position with forwards. Equity – European Divergence
and Italy’ idea was merged into this idea. Equity - Global
see alpha potential in this investment idea, and have changed the composition
the sleeve to reflect three Invesco global equity strategies rather than two. The strategy added was the Invesco Global Opportunities strategy managed in Henley, UK. Equity – Selective Asia Exposure
in Taiwanese equity futures to the idea and changed the composition
the sleeve to diversify our alpha generation. The sleeve now reflects two Invesco Asian equity strategies rather than one. Inflation – US vs UK
hold our relative position between US and UK inflation expectations, where we believe the difference will narrow. However, we have now added a view on the inflation curve to this idea. We believe the curve is too flat (so the difference between near-term and longer-term inflation expectations is too small) and have used inflation swaps to capture any increase in this differential.
Source: Invesco as at 30 June 2017. For illustrative purposes only. Portfolio characteristics are subject to change without notice.
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Source: Invesco Perpetual. For illustrative purposes only. This information relates to the portfolio based on market conditions as at 30 June 2017, subject to change.
1There is no guarantee these targets will be achieved.
Commodity - Commodity Carry Commodity - Short Credit - Selective Credit Credit - US High Yield Currency - Chile and Mexico vs Australia and NZ Currency - Indian Rupee vs Chinese Renminbi Currency - Japanese Yen vs Korean Won Currency - Long EM Carry Currency - Russian Ruble vs Canadian Dollar Currency - US Dollar vs Canadian Dollar Currency - US Dollar vs Euro Equity - Dispersion Equity - European Divergence Equity - Global Equity - Japan Equity - Selective Asia Exposure Equity - UK Equity - US Large Cap vs Small Cap Inflation - Short Real Yields and Inflation Inflation - US vs UK Interest Rates - Australia vs US Interest Rates - Selective EM Debt Interest Rates - Swap Spreads Interest Rates - Sweden Interest Rates - Yield Compression Volatility - Asian Equities vs US Equities
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Source: Bloomberg. Period covered: inception of the Invesco Perpetual Global Targeted Returns Fund (9 September 2013) through 30 June 2017. Weekly data
50 index. Emerging Market stocks are represented by the MSCI EM index. Global government bonds are represented by the Bloomberg Global Developed Sovereign Bond index. Global bonds are represented by Barclays Global Agg index. Commodities are represented by the Bloomberg Commodity index. Currency is represented by the US Dollar index.
Alternatives The fund provided good diversification with commodities and currency Bonds Fund performance was largely unrelated to fixed income The Invesco Perpetual Global Targeted Returns Fund typically has between 20-30 independent investment ideas which seek to deliver truly diversified returns. This approach means the strategy could complement more traditional asset allocation approaches. Equities The fund provided good diversification with both global and US equities Asset class Correlation with Invesco Perpetual Global Targeted Returns Fund Global stocks 0.36 US stocks 0.30 European stocks 0.44 Emerging markets stocks 0.42 Global government bonds
Global bonds
Commodities 0.06 Currency (USD) 0.23
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Source: (Portfolio Gross Returns) Invesco Perpetual as at 30 June 2017. 1Inception date 9 September 2013. 2Fund performance figures are shown in sterling, inclusive of reinvested income, gross of the Ongoing Charge and net of portfolio transaction costs. The figures do not reflect the entry charge paid by individual
Source: (Portfolio Net Returns) Lipper as at 30 June 2017. 1Inception date 9 September 2013. 3Fund (Z-Accumulation share class) performance figures are shown in sterling, inclusive of reinvested income and net of the Ongoing Charge and portfolio transaction costs. The figures do not reflect the entry charge paid by individual investors. Reference index source: Datastream, in sterling.
4Standard deviation of weekly returns. Global equities represented by MSCI World index. Volatility data is annualised.
*Portfolio target is 3-month Libor plus 5% on a rolling, three-year annualised basis, gross of fees. There is no guarantee this performance target will be achieved. Numbers subject to rounding.
Returns 3 mths 6 mths 1 year 3 years (Ann) Since inception1 Calendar year (Cum) (Ann) 2014 2015 2016 Portfolio target* 5.55 5.67 Portfolio gross returns2 1.27 3.11 6.30 5.20 26.36 6.34 9.55 2.55 4.52 3-month Sterling Libor 0.08 0.17 0.41 0.52 1.99 0.52 0.54 0.57 0.53 Relative to 3-month Libor +1.18 +2.94 +5.89 +4.68 +24.37 +5.82 +9.01 +1.97 +3.99 Portfolio net returns3 1.05 2.67 5.38 4.21 21.97 5.35 8.60 1.55 3.50 Realised volatility4 2.99 3.85 3.66 3.45 3.79 3.86 Realised volatility of global equities4 7.21 11.87 11.29 10.73 13.23 11.10 Realised volatility as a percentage of equity volatility 41.56% 32.46% 32.40% 32.10% 28.68% 34.83% Past performance is not a guide to future returns.
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95 105 115 125 135 145 155 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 IP Global Targeted Returns Fund MSCI World 100% hedged to GBP index
Past performance is not a guide to future returns. Source: Invesco Perpetual and Bloomberg as at 30 June 2017.
1Inception date 9 September 2013.
Global equities represented by MSCI World 100% hedged to GBP index, net total return. Fund performance figures are shown in sterling, inclusive of reinvested income, gross of the Ongoing Charge and net of portfolio transaction costs. The figures do not reflect the entry charge paid by individual investors. Data rebased to 100 as at 9 September 2013.
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This presentation is for Professional Clients only and is not for consumer use. The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested. Past performance is not a guide to future returns. 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. Invesco Perpetual Global Targeted Returns The fund makes significant use of financial derivatives (complex instruments) which will result in the fund being leveraged and may result in large fluctuations in the value of the fund. Leverage on certain types of transactions including derivatives may impair the fund’s liquidity, cause it to liquidate positions at unfavourable times or otherwise cause the fund not to achieve its intended objective. Leverage occurs when the economic exposure created by the use of derivatives is greater than the amount invested resulting in the fund being exposed to a greater loss than the initial investment. The fund may be exposed to counterparty risk should an entity with which the fund does business become insolvent resulting in financial loss. This counterparty risk is reduced by the Manager, through the use of collateral management. The securities that the fund invests in may not always make interest and other payments nor is the solvency of the issuers
liquidity for the securities in which the Fund invests, may mean that the Fund may not be able to sell those securities at their true value. These risks increase where the Fund invests in high yield or lower credit quality bonds and where we use derivatives. For the most up to date information on our funds, please refer to the relevant fund and share class-specific Key Investor Information Documents, the Supplementary Information Document, the Annual or Interim Short Reports and the Prospectus, which are available using the contact details shown.
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Invesco Perpetual is a business name of Invesco Fund Managers Limited. Perpetual Park, Perpetual Park Drive, Henley-on-Thames, Oxfordshire RG9 1HH, UK. Authorised and regulated by the Financial Conduct Authority.