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MULTI ASSET 2.0 Investing in ideas can improve the results of investors
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March 2016
Clive Emery This presentation is for Professional Clients in Belgium only and is not for consumer use. Please do not redistribute.
Product Director
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Invesco Global Targeted Returns Fund Investment proposition
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126 ideas as at 31 January 2016. 2MSCI World.
Target return: 3-month EURIBOR plus 5% on a rolling, three-year annualised basis*
Target volatility: Less than half global equity2 volatility over a rolling, three-year period*
Portfolio: Typically 20-30 individual investment ideas across asset classes1
with a time horizon of two to three years
Investment philosophy: Unconstrained research combined with a robust risk based fund management process
For illustrative purposes only.
Portfolio risk
Total independent risk
Div
ers
ific
ation b
enefit
Investing in ideas
*Gross of fees. There is no guarantee this performance target or volatility target will be achieved.
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Credit - European Curve Flattener Credit - Selective CreditCurrency - Chilean Peso vs Australian Dollar Currency - Indian Rupee vs Chinese RenminbiCurrency - Japanese Yen vs Korean Won Currency - Norwegian Krone vs UK PoundCurrency - US Dollar vs Canadian Dollar Currency - US Dollar vs EuroEquity - European Divergence Equity - GermanyEquity - Global Equity - JapanEquity - Selective Asia Exposure Equity - UKEquity - US Large Cap vs Small Cap Equity - US Staples vs DiscretionaryInterest Rates - Australia vs Europe Interest Rates - European Curve SteepenerInterest Rates - Selective EM Debt Interest Rates - Swap SpreadsInterest Rates - Sweden vs Europe Interest Rates - UKVolatility - Asian Equities vs US Equities Volatility - Australian Dollar vs US DollarVolatility - Japanese Yen vs US Dollar Volatility - UK Equity vs Rates
Invesco Global Targeted Returns Fund Current positioning
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Source: Invesco. For illustrative purposes only. This information relates to the portfolio based on market conditions as at 31 January 2016, subject to change. There is no guarantee this target will be achieved.
26 ideas
Each idea is sized to deliver an estimated 25-50 bps contribution to return
5 asset classes
No one asset class should constitute more than 50% of total risk
15 regions
Reduce risk of concentration to a particular country/region
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Seeking additional drivers of return Complementing your holdings of stocks and bonds
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Global balanced portfolio* Invesco Global Targeted Returns
% r
isk a
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Equity risk Interest rate risk Other risks
Source: Invesco as at 31 December 2015. For illustrative purposes only. Subject to change. *Global balanced portfolio comprises of 60% global equities, 40% global bonds. Equity risk is represented by % volatility of MSCI World Index, interest rate risk represented by % volatility of 10 year US government bond, other risks, may include, but are not limited to currency risk, credit risk. **Factor analysis decomposes a portfolio into uncorrelated statistical factors using principal components analysis. This enables us to see how much the returns of a portfolio are driven by a small number of factors. An investment cannot be made directly in an index. Past performance is not a guide to future returns.
Equities and interest rates explain
77% of the risk in
a Global Balanced Portfolio
21% of the risk in
Invesco Global Targeted Returns
30 independent
factors** help explain the risk in Invesco Global Targeted Returns
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Our approach to multi asset investing Discard asset class labels, invest in ideas
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Source: Invesco as at 31 January 2016. For illustrative purposes only. *Ideas shown are examples and subject to change.
Step 2: choose the right asset type to represent that idea
Step 1: Search for good investment ideas*
Strength of the corporate sector
Changing Central Bank policy
Weakening Australian
Economy
“We believe that one way to achieve true diversification is to break away from the focus on asset class constraints which often distract from fundamental longer term thinking. Instead, we focus on good investment ideas.” David Millar, Head of Multi Asset Team
Equities Corporate Bonds
Commodities Currencies Government Bonds
Inflation Products
Real Estate Volatility Instruments
Alpha Strategies
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Invesco A global platform committed to investment excellence
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Source: Invesco as at 31 December 2015. Not all of the Invesco brands listed are available in all countries, nor are they available on all platforms. Please consult your Invesco representative for more information on any of the brands mentioned.
Invesco believe the best investment insights come from specialised investment teams with discrete investment perspectives, operating under a disciplined philosophy & process framework with strong risk oversight.
Corporate access Global product
distribution Independent risk
management
Global operating
platform
Invesco Asia-Pacific
Invesco Canada Invesco Fixed
Income
Invesco Fundamental
Equity
Invesco Global Core Equity
Invesco Perpetual
Invesco Powershares
Invesco Private Capital
Invesco Real Estate
Invesco Unit Investment
Trusts
WL Ross & Co.
Invesco Global Asset Allocation
Invesco Quantitative Strategies
AUM US$775.6bn/£526.2bn More than 750 investment professionals and
more than 6,000 employees
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54%
18%
1% 1%
5%
25%
22% 12%
27%
41%
23%
28%
14% 16%
54% 59%
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YTD 1 year 3 years 5 years
4th Quartile 3rd Quartile 2nd Quartile 1st Quartile
Invesco Perpetual A world class centre of investment excellence
€117.4bn assets under management
66 Investment Professionals
– > 16yrs average experience
– > 8yrs average tenure at Invesco
– Heads of teams 28 years and 16 years
respectively
9 Investment Teams
– Equities – Asian, Emerging, Europe,
Japanese, UK & US, Global
– Fixed Interest
– Multi Asset
Based in Henley-on-Thames
– Away from the noise
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The data relates to a past period and past returns are not a guarantee of future returns. Source: Invesco as at 31 December 2015. RHC source: Lipper and © Morningstar 2015 as at 31 January 2016. Excludes fund-of-funds and passively managed products. May not sum due to rounding.
Committed to high conviction, long term, non benchmark active investing across diverse range of asset classes.
Funds managed by the Henley investment team Asset Weighted Performance to 31 January 2016
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Investment Team Experienced core investment team
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Source: Invesco as at 31 December 2015. Years of experience subject to rounding.
A team of macro specialists solely focused on the Invesco Global Targeted Returns Fund
Years of experience
David Millar, FIA: Head of Multi Asset, Fund Manager 27
Dave Jubb, FIA: Fund Manager 33
Richard Batty, PhD: Fund Manager 21
Gwilym Satchell, PRM: Risk Manager 7
Georgina Taylor: Product Director 15
Clive Emery: Product Director 18
Danielle Singer, CFA: US-based Product Director 14
Saul Shaul: Fund Analyst 9
Steve Hawes: Research Analyst 5
Mike Marshall, CFA: Risk Analyst 9
Invesco: broad multi discipline support
Investment expertise
Invesco Ltd.’s Chief Economist
– Monthly economic update
66 Henley-based investment professionals
– Monthly global equity meetings
More than 750 Invesco investment professionals worldwide
– Global investor forum
Invesco infrastructure
Governance
Dealing
Operations
Marketing support
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Idea – Global Equities Outlook may be muted but there is still global growth
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2011 2012 2013
2014 2015 2016
Consensus global GDP forecasts by year (% annual change)
Source: ASR, Bloomberg and Invesco, all data as at 31 December 2015. For illustrative purposes only.
Equity Earnings Yield
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jan/15 apr/15 jul/15 okt/15 jan/16
Equally weighted basket of two Invesco global strategies
MSCI World (TR Net) index
Invesco global strategies vs MSCI World
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Global ‘safe’ income has declined Our Fixed Interest team expect search for yield continuing
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Market Size Dec 07
Size today
Rate Dec 2007
Rate now
US Deposits $6.7 trillion $10.7 trillion 4.38% 0.21%
US Money Funds $3.1 trillion $2.7 trillion 3.24% 0.07%
US Treasury Bills $0.5 trillion $1.0 trillion 3.19% 0.12%
US Govt Bonds 1-5 yrs $1.2 trillion $3.9 trillion 3.16% 0.99%
Eurozone Deposits $4.6 trillion $3.9 trillion 4.38% -0.18%
Eurozone Govt Bonds 1-5 yrs $2.1 trillion $2.5 trillion 4.10% -0.02%
UK Deposits $2.5 trillion* $2.3 trillion 5.70% 0.33%
UK Govt Bonds 1-5 yrs $0.2 trillion $0.5 trillion 4.40% 0.89%
Total Market $20.9 trillion $27.5 trillion Grown 32%
Total Income $0.89 trillion $0.07 trillion Declined 92%
Source: Government bonds and bills, Barclays, 31 Oct 2015. US Money Funds, ICI Factbook, 2015. US Deposits, Federal Deposit Insurance Corporation, 30 June 2015. UK Deposits, Bank of England, 30 September 2015. Eurozone Deposits, ECB, September 2013. Calculation of lost income assumes size unchanged (lost income = 2007 assets x (2007 rate – rate now). *UK 2007 is based on British Banking Association data – discontinued. $ = USD.
More than $800bn fall in annual income
from these assets since Dec 2007*
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Idea – Selective Credit Widening yields suggest some selective opportunities
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Source: Macrobond, BoAML as at 30 November 2015.
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Central bank co-ordination turning competitive? Implication – competitive devaluation. Is China the reluctant outlier?
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Source: Bloomberg as at 11 January 2016. Rebased to 100 at 2 July 2010.
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2010 2011 2012 2013 2014 2015
EURUSD Currency JPYUSD Currency CNYUSD Currency FXJPEMCS Index
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Idea – Japanese Yen vs Korean Won Competitive devaluation
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Korea has lost competitiveness
Source: Invesco, Bloomberg as at 31 December 2015. For illustrative purposes only.
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Japanese Yen Korean Won
Because of the strength of the Korean Won
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Idea added to the fund
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Volatility has been very low relative to history 2014 saw the most depressed levels
Source: BofA Merrill Lynch Global Research. Implied volatility data from: 5-Jan-90 for Equity (VIX Index) and Rates (MOVE Index); 1-Jan-99 for FX (avg. 3m implied vol on EUR/USD, USD/JPY, USD/CHF); 4-May-07 for Commodity (Merrill Lynch Commodity 3 month volatility Index). 6M realized volatility data from: 3-Jan-95 for FX (EUR/USD, USD/JPY), Equity (S&P500) and Rates (10 Year US Swap Rate); 1-Jul-97 for Credit (US High Grade Corporate, US HY Corporate); 6-Jul-00 for Commodity (DJ UBS). All data through 8-Jan-16.
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Average Z-Score of Equity, Rates, FX, Credit and Commodity Realized VolatilityAverage Z-Score of Equity, Rates, FX and Commodity Implied Volatility
Previous to 2014, the largest historical depression in
volatility recorded was in 2007 as liquidity flooded
markets and leverage ran rampant pre GFC
Both average cross-asset implied and realized volatility hit an all time low in the summer
of 2014, and the recent "bounce" has just taken us back to long-term normal levels
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Idea – Asian equity volatility vs US equity volatility Expect higher levels to persist
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HSI Volatility index
Hang Seng index implied volatility is low versus history
Source: Bloomberg as at 6 January 2016.
Spread between HSI & S&P500 1y Implied Volatility
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Investing in ideas A repeatable, three-step process
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For illustrative purposes only.
Approving ideas
Thematic
T
Economic
E
Analytic
A
Managers
M
Implementing ideas
Order Comply Execute Review
Combining ideas
Risk Scenarios Structure Liquidity
1 Research
3 Implementation
2 Fund management
32 ideas approved
53 ideas researched
14 ideas implemented
2015
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Independent risk³ Portfolio risk²
Volatility - UK Equity vs Rates
Volatility - Japanese Yen vs US Dollar
Volatility - Australian Dollar vs US Dollar
Volatility - Asian Equities vs US Equities
Interest Rates - UK
Interest Rates - Sweden vs Europe
Interest Rates - Swap Spreads
Interest Rates - Selective EM Debt
Interest Rates - European Curve Steepener
Interest Rates - Australia vs Europe
Equity - US Staples vs Discretionary
Equity - US Large Cap vs Small Cap
Equity - Japan
Equity - Germany
Currency - US Dollar vs Euro
Currency - US Dollar vs Canadian Dollar
Currency - Norwegian Krone vs UK Pound
Currency - Japanese Yen vs Korean Won
Currency - Indian Rupee vs Chinese Renminbi
Currency - Chilean Peso vs Australian Dollar
Credit - European Curve Flattener
Credit - Selective Credit
Equity - UK
Equity - Selective Asia Exposure
Equity - Global
Equity - European Divergence
A portfolio designed to target equity-like returns for less than half the risk of global equities over a rolling, three-year period1
Combining ideas Achieving diversification
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Source: Invesco as at 31 January 2016. 1There is no guarantee this target will be achieved. For illustrative purposes only. 2Portfolio risk – the expected volatility of the fund as measured by the standard deviation of the current portfolio of ideas over the last three and a half years. 3Independent risk – the expected volatility of an individual idea as measured by its standard deviation over the last three and a half years. 4Global equity risk is the expected volatility of the MSCI World index as measured by its standard deviation over the last three and a half years, 12.45% on 31 January 2016.
Total portfolio risk 4.20%²
Total independent risk 14.60%³
50% of global equity risk4
Diversification benefit
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Combining ideas Scenario analysis – focus on not getting it wrong
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1Green line indicates probability-weighted best estimate, red line indicates worst case using lower quartile outcomes. For illustrative purposes only.
Scenario Characteristics
UK Macro Meltdown GBP trade-weighted index -15%, UK 10yr yield -75bps, UK 2 year yield +50bps
Emerging Markets Dead Stop
EM currency index falls 13%, South African 10yr bond yields rise to 15%
US Policy Positive S&P 500 to 2300, US dollar index up (+25%)
Oil Spill Brent to US$100, Oil stocks outperform (+20%), LatAm FX strengthens (+20%)
Recession 2016 S&P 500 falls (-50%), US 2yr yield +200bps, US 10yr yield -100bps, Investment grade bond spreads widen (+150bps)
Euro Exit Spanish 10 yr yields +500bps, European bank volatility doubles, EUR weakens (-15%)
Cash is King S&P 500 falls to 1000, yield on US 10yr Treasuries to 5%
Japan’s Third Arrow JPY weakens (-20%), Nikkei rises (+30%)
Distribution of potential fund returns for a given scenario1
Source: Invesco as at 31 January 2016.
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Our approach to risk Fund managers are also risk managers
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For illustrative purposes only.
Idea
Return Risk
Risk management is embedded in:
1. The targets of the fund
2. The concept of Investing in Ideas
3. Our fund management process
4. Our forward looking scenario analysis
5. Crash protection in some ideas
6. Two risk managers
7. Three fund managers
8. Invesco’s independent risk function
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Invesco Global Targeted Returns Fund Performance (%)
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Source: Invesco Perpetual as at 31 January 2016. 1Inception date 18 December 2013. 2Performance figures are shown in euro on a mid-to-mid basis, inclusive of net reinvested income and gross of ongoing charges and portfolio transaction costs. The figures do not reflect the entry charge paid by individual investors. Benchmark source: Bloomberg, total return, in euro. 3Fund (A Accumulation share class) performance figures are shown in euro on a mid-to-mid basis, inclusive of net reinvested income and net of ongoing charges and portfolio transaction costs. The figures do not reflect the entry charge paid by individual investors. Benchmark source: Invesco Perpetual, total return, in euro. 4Standard deviation of weekly returns. Global equities represented by MSCI World Index.
A share
Returns 3 months
6 months
1 year Since inception1 2014 2015
(Cum.) (Ann.) (Calendar year)
(Calendar year)
Portfolio gross returns2 -0.25 1.01 -1.70 12.84 5.87 9.62 2.28
3-month Euribor -0.03 -0.04 -0.04 0.19 0.09 0.21 -0.02
Out/under performance -0.22 +1.05 -1.66 +12.65 +5.78 +9.41 +2.30
Portfolio net returns3 -0.59 0.36 -2.90 9.88 4.55 8.25 1.04
3-month Euribor -0.03 -0.04 -0.04 0.19 0.09 0.21 -0.02
Out/under performance -0.56 +0.40 -2.86 +9.69 +4.46 +8.04 +1.06
Realised volatility4 3.76 3.97 3.38 4.01
Realised volatility of global equities4 14.53 12.64 10.73 13.23
Realised volatility as a percentage of equity volatility 25.86% 31.43% 31.49% 30.30%
Past performance is not a guide to future returns.
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Invesco Global Targeted Returns Fund Gross performance versus equities (since inception)
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Past performance is not a guide to future returns. Source: Invesco and Bloomberg as at 31 January 2016. MSCI World, in euros, total return. Inception date 18 December 2013. Fund performance figures are shown in euro on a mid-to-mid basis, inclusive of net reinvested income and gross of ongoing charges and portfolio transaction costs. The figures do not reflect the entry charge paid by individual investors.
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Invesco Global Targeted Returns Fund MSCI World index
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A closing thought….. What is a reasonable investment return? Is experience skewed by the 80s & 90s?
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Past performance is not a guide to future returns. Source: Ibbotson. Period represented: 1940 – 2015, as at 30 September 2015. Stocks are represented by S&P 500 Index, bonds are represented by Ibbotson U.S. Long-Term Government Bond Index.
1940's
1950's
1960's 1970's
1980's 1990's
2000's
Last 10 years
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Standard deviation
Risk and return of a 60% US stocks / 40% US bonds portfolio over time
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Important information
This marketing document is for Professional Clients in Belgium only and is not for consumer use. Data as at 31.01.2016, unless otherwise stated. Please do not redistribute.
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. Where Invesco has expressed views and opinions, these may change. The information provided on the investments and investment strategy (including current investment themes, the research and investment process, and portfolio characteristics, weightings, and allocation) represents the views of the fund managers at the time this material was completed, and is subject to change without notice.
Where securities are mentioned in this document they do not necessarily represent a specific portfolio holding and do not constitute a recommendation to purchase, hold or sell. This document should not be construed as investment advice.
Past performance is not a guide to future returns.
The fund may hold debt instruments which are exposed to credit risk which is the ability of the borrower to repay the interest and capital on the redemption date..
The fund will invest in derivatives (complex instruments) which will be significantly leveraged resulting in large fluctuations in the value of the fund.
The fund may hold debt instruments which are of lower credit quality and may result in large fluctuations of the value of the fund.
The attribution and contribution figures are estimates and should be used for indicative purposes only. Data cleansing and retrospective information availability may cause changes.
The distribution and the offering of the fund or its share classes in certain jurisdictions may be restricted by law. Persons into whose possession this document may come are required to inform themselves about and to comply with any relevant restrictions. This is not investment advice and does not constitute an offer or solicitation by anyone in any jurisdiction in which such an offer is not authorised or to
any person to whom it is unlawful to make such an offer or solicitation. Persons interested in acquiring the fund should inform themselves as to (i) the legal requirements in the countries of their nationality, residence, ordinary residence or domicile; (ii) any foreign exchange controls and (iii) any relevant tax consequences. The fund is available only in jurisdictions where its promotion and sale is permitted.
Please refer to the most up to date relevant fund and share class-specific Key Investor Information Document for more information on our funds. Further information on our products is available using the contact details shown.
Whilst great care has been taken to ensure that the information contained herein is accurate, no responsibility can be accepted for any errors, mistakes or omissions or for any action taken in reliance thereon. This marketing document is not an invitation to subscribe for shares in the fund and is by way of information only, it should not be considered financial advice. The performance data shown does not take account of the commissions and costs incurred on the issue and redemption of units. As with all investments, there are associated risks. This document is not financial advice and is by way of information only. Asset management services are provided by Invesco in accordance with appropriate local legislation and regulations. Not all share classes of this fund may be available for public sale in all jurisdictions and not all share classes are the same nor do they necessarily suit every investor. There may be differences in fee structures, in minimum investment amounts, etc. Please check the most recent version of the fund prospectus in relation to the criteria for the individual share classes and contact your local Invesco office for full details of the fund registration status in your jurisdiction. Please be advised that the information provided in this document is referring to Class A (accumulation- EUR) exclusively.
Issued in Belgium by Invesco Asset Management S.A. Belgian Branch (France) situé Avenue Louise 235 - 1050 Bruxelles, Belgique.
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