Global Targeted Returns Fund
February 2016
Covering the month of January 2016
Fund launch date
9 September 2013
Fund size
£4,750.80m
Yield (Accumulation share class) 0.39%
Historic yield2
Legal status UK authorised ICVC
Accounting period ends
Available within an ISA? Benchmark 31 December
30 June
Yes
UK 3-month LIBOR
Expected fund risk34.10%
Total independent risk
14.67%
Investment objective
The Invesco Perpetual Global Targeted
Returns Fund aims to achieve a positive
total return in all market conditions over a
rolling three-year period.
The fund targets a gross return of 5% per
annum above UK 3-month LIBOR (or an
equivalent reference rate) and aims to
achieve this with less than half the volatility
of global equities, over the same rolling
three-year period. There is no guarantee
that the fund will achieve a positive return
or its target and an investor may not get
back the full amount invested.
Fund strategy
During the month, we added a new volatility idea to the portfolio. We believe that the
volatility of the Japanese yen is likely to be a pinch point in Japan and that its volatility
is currently too cheap when compared to the US dollar. Japan’s extended quantitative
easing programme has doubled its monetary base and its currency is now one of the
cheapest in the world. However, the Bank of Japan is likely to have to act decisively
over the next two to three years and decide whether to stick or twist. Either way,
we believe the currency is likely to be more volatile than is currently priced in. We
implemented the idea using volatility swaps and using the euro, as the euro offered a
more attractive entry level than the British pound. So, we are long volatility in the euro
vs Japanese yen currency pair and short volatility in the euro vs US dollar pair.
Expected diversification from combining investment ideas1
Ideas expressed through Invesco Perpetual/Invesco investment strategies
Other investment ideas
15
Total independent risk 14.67%
Expected fund risk3 4.10%
Expected diversification benefit
Key facts1
10
Expected risk
Fund Management: Dave Jubb, David Millar & Richard Batty
Market commentary
2016 saw one of the worst ever starts to a year for equity markets, as concerns
over global growth and the state of China’s economy, coupled with the fresh lows in
commodity prices, took their toll. Asia suffered the brunt of the bearish sentiments,
with equity markets in China and Hong Kong suffering double-digit losses. The US and
European equity markets suffered from the same bearish sentiments. However, both
experienced a rebound towards the end of the month, with central bank actions, at least
temporarily, supportive of equity markets. The European Central Bank again hinted at
broader stimulus (after December’s disappointment) and the US Federal Reserve also
tempered optimism by again including language that hinted the US economy could fall
victim to a global malaise. Perhaps the biggest surprise came from the Bank of Japan,
which moved interest rates into negative territory, after insisting this would not happen
only a week previously. In the UK, unconvincing economic data also meant money
markets pushed out expectations of an interest rate hike to 2017, which helped weaken
the pound, as the Bank of England’s previous forward guidance struggled for credibility.
January’s equity market mayhem saw demand for the shelter of developed market
government bonds, which helped push yields down. Globally, corporate bond sales
slowed to an 11-year low, as a result of the market’s move away from assets perceived
to be more risky. A long standing Wall Street adage says, “As goes January, so goes the
year”. It remains to be seen whether this will be true for 2016.
50% of global equity risk5
5
0
Independent risk4
Expected fund risk3
Global Targeted Returns Fund
February 2016
Fund performance
The fund moved marginally higher in January. Some of our more ‘risk on’ ideas were
unsurprisingly the biggest detractors, with our more directional equity ideas and our
credit ideas proving a drag on performance. However, our relative value equity ideas
in the US, which take a view on the performance of large caps vs small caps and the
consumer staples sector vs the consumer discretionary sector, were strong performers
offering useful diversification qualities during the equity market sell-off. Our volatility
idea preferring Asian equity volatility to US equity volatility also boosted returns as
Asian markets reacted strongly to the China newsflow. A number of our currency ideas
also performed well during the month, with the Japanese yen strengthening against
the Korean won, the Norwegian krone strengthening against the pound, the US dollar
outperforming both the Canadian dollar and the euro and the Chilean peso appreciating
against the Australian dollar. The Australian dollar is sometimes seen as a trading proxy
for the Chinese economy and was hit hard by the year’s initial bout of volatility.
In terms of fund volatility, the fund’s weekly volatility at the end of January was 3.80%
(since inception), which compared to 12.31% for global equities, as measured by the
MSCI World index.
Since launch performance
Invesco Perpetual Global Targeted Returns Fund (Accumulation share class)
UK 3-month LIBOR
20
15
10
5
0
Sep 13
Mar 14
Sep 14
Mar 15
Sep 15
Mar 16
Past performance is not a guide to future returns. The chart shown above should be viewed in conjunction
with the ‘Standardised rolling 12-month performance’ table below. As there is no suitable IA peer group for the
fund, we are comparing its performance with its benchmark. Source: Lipper. Benchmark source: Bloomberg.
Performance
% growth
Since
Since 9.9.13 10 year
3 months 6 months 1 year 3 years 9.9.13 ACR* 10 years
ACR*
Fund (Accumulation share class)
-0.35
0.86
-2.78
n/a
13.20
5.31
n/a
n/a
Benchmark 0.15 0.290.58 n/a 1.340.56
n/a n/a
* ACR – Annual Compound Return
Standardised rolling 12-month performance
% growth
31.12.1031.12.1131.12.1231.12.1331.12.14
31.12.1131.12.1231.12.1331.12.1431.12.15
Fund (Accumulation share class)
n/a
n/a
n/a
7.84
0.93
Past performance is not a guide to future returns. Fund performance figures are shown in sterling on a mid-to-mid basis, inclusive of net
reinvested income and net of the ongoing charge and portfolio transaction costs to 29 January 2016. The figures do not reflect the entry
charge paid by individual investors. The accumulation share class presented is subject to an ongoing charge. Other share classes offering lower
ongoing charges are available. The standardised past performance information is updated on a quarterly basis. As the fund was launched on
9 September 2013, performance figures are not available for the complete period covered by the table. Fund performance source: Lipper.
Benchmark source: Bloomberg.
Global Targeted Returns Fund
February 2016
Independent risk breakdown
by asset type %1,4
Independent risk and performance contribution breakdown by idea1
Idea Name
Equity Interest Rates Currency Volatility Credit Total independent risk
5.02
3.81
3.28
1.37
1.19
14.67
Independent risk breakdown
by region %1,4
Europe
US
UK
Global
Japan
Australia
China
Asia
Germany
Korea
India
Sweden
Chile
Norway
Canada
Total independent risk
3.42
2.39
1.95
1.57
1.08
0.77
0.74
0.66
0.62
0.37
0.35
0.29
0.27
0.16
0.02
14.67
Credit - European Curve Flattener
Credit - Selective Credit10
Currency - Chilean Peso vs Australian Dollar
Currency - Indian Rupee vs Chinese Renminbi
Currency - Japanese Yen vs Korean Won
Currency - Norwegian Krone vs UK Pound
Currency - US Dollar vs Canadian Dollar
Currency - US Dollar vs Euro
Equity - European Divergence
Equity - Germany10
Equity - Global
Equity - Japan10
Equity - Selective Asia Exposure
Equity - UK
Equity - US Large Cap vs Small Cap
Equity - US Staples vs Discretionary
Interest Rates - Australia vs Europe
Interest Rates - European Curve Steepener
Interest Rates - Selective EM Debt
Interest Rates - Swap Spreads
Interest Rates - Sweden vs Europe
Interest Rates - UK
Volatility - Asian Equities vs US Equities
Volatility - Australian Dollar vs US Dollar
Volatility - Japanese Yen vs US Dollar8
Volatility - UK Equity vs Rates
Cash & Residual FX9
Total
Independent
Risk %4
Performance contribution
(basis points)6
Q4
1 year
0.64
14
-2
0.547 41
0.54
-21
-21
0.70
9
11
0.74
-20
15
0.32
-2
-39
0.05
2
74
0.71
10
85
0.69
19
22
0.6231
-9
0.61
-4
-3
0.6549 15
0.66
-2
-88
0.72
12
112
0.50
18
25
0.57
2
8
0.59
-20
-28
0.60
10
18
0.73
-23
-70
0.58
-5
-5
0.58
-24
-24
0.73
-10
-15
0.79
1
62
0.40
-3
79
0.12n/a n/a
0.06
-12
-43
0.22-4
2
14.6734
Investment risks
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.
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 Managers, 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 guaranteed. Market conditions, such as a decrease in market
liquidity, may mean that it is not easy to buy or sell securities. These risks increase where the
fund invests in high yield or lower credit quality bonds and where we use derivatives.
Contact information
Important information
Client Services
Telephone 0800 0858677
Facsimile 01491 416000
Email enquiry@invescoperpetual.co.uk
1
www.invescoperpetual.co.uk
All fund portfolio figures within this leaflet are as at 29 January 2016 (Source:
Invesco Perpetual).
2
The Historic Yield reflects distributions declared over the past twelve months as a
percentage of the mid-market price of the fund, as at the date shown. It does not
include any entry charge and investors may be subject to tax on their distributions.
3
Expected fund 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.
4
Independent risk - the expected volatility of an individual idea as measured by its
standard deviation over the last three and a half years.
5
Global 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. This was 12.45% on
29 January 2016.
6
Performance contribution figures reflect each idea’s contribution to the overall
performance of the fund’s portfolio of ideas. These figures are calculated before
taking into account the accrued income of the fund, the ongoing charge and the
portfolio transaction costs. Therefore the total performance contribution figures
differ from the net fund performance figures shown on the page 2. (Source: POINT
Portfolio Returns, Barclays POINT)
7
These ideas contributed to the performance during the quarter to 29 January 2016
and are no longer included in the portfolio.
8
A new idea included this month.
9
Residual FX refers to risk arising from unhedged currency exposure rather than an
individual investment idea.
10
The name of this idea changed in December 2015 and Q4 performance includes the
pre-name change contribution.
Where Invesco Perpetual has expressed views and opinions, these may change. 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.
The contribution figures are estimates and should be used for indicative purposes only.
Data cleansing and retrospective information availability may cause changes.
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 ICVC ISA Key Features and Terms & Conditions, the Annual
or Interim Short Reports and the Prospectus, which are available using the contact
details shown.
Invesco Perpetual’s ISAs are managed by Invesco Asset Management Limited.
Telephone calls may be recorded.
Invesco Perpetual is a business name of Invesco Fund Managers Limited and
Invesco Asset Management Limited
Perpetual Park, Perpetual Park Drive, Henley-on-Thames, Oxfordshire RG9 1HH, UK
Authorised and regulated by the Financial Conduct Authority
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