Invesco, a leading global provider of exchange-traded funds, seeks to push the creative envelope in the fixed income space with its new suite of factor ETFs that fuses the best of Invesco’s passive and active strategies. The Invesco Fixed Income Factor ETF Suite incorporates eight products that will leverage the intellectual capital of Invesco’s Fixed Income team by partnering with the recently-formed Invesco Indexing division.
The ETFs included in Invesco’s Fixed Income Factor suite are the first to apply the expert research of Invesco’s active management to create rules-based, proprietary indexes created at Invesco. Invesco Indexing, Invesco’s self-indexing business unit, has developed all underlying indexes for the Invesco Fixed Income Factor ETF Suite.
This is the first ETF suite where Invesco harnesses its in-house expertise of Invesco’s active managers to work in conjunction with its rules-based indexes.
“Self-indexing is a natural extension of Invesco’s commitment to pursuing better outcomes for our clients and we are excited to have the capacity to address their diverse needs,” said Andrew Waisburd, Head of Invesco Indexing. “Our ability to internally build index instruments will allow Invesco to leverage our company-wide factor and fixed income proficiency to create more nuanced products that better incorporate the full range of its investment capabilities.”
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Self-Indexing Capabilities
With the introduction of self-indexing, Invesco expands its ability to create client-driven new products by joining its internal research and investment expertise within an ETF wrapper. Invesco can now use its internal experience to design indexed products that deliver precise, innovative solutions in multiple asset classes and various vehicles.
Invesco Indexing collaborated with Invesco’s Fixed Income Team to create a methodology based on the same models that the team utilizes in several of its active funds. The strategic composition of each index was selected by Invesco Indexing from an investment universe of all U.S. dollar-denominated bonds issued by global companies, governments, and government agencies, including bonds that meet the index provider’s eligibility qualifications. The resulting indexes, which are rebalanced on a monthly basis, were then used as the underlying indexes for the new suite of factor ETFs.
Invesco Indexing will oversee and maintain the underlying indexes it designed and has chosen ICE Data Services, which is part of Intercontinental Exchange as its source for the underlying constituent pricing and reference data. ICE Data Services will provide the daily calculation and dissemination of the fixed income factor indexes.
Growth of Factor ETF Product Line
Invesco’s long history in factor investing starts with the launch of the first factor ETF in 2003. Investors implementing factors to create personalized portfolio outcomes with Fixed Income Factor ETFs will benefit from Invesco’s tenure in this space as well as its deep expertise.
“Invesco was the pioneer in the smart beta fixed income ETF space with our first launch in 2007 and based on client demand we continue to introduce new fixed income ETFs that can serve as attractive portfolio diversifiers,” said Dan Draper, Global Head of ETFs at Invesco. “With the launch of the new self-indexed Fixed Income Factor Suite, investors have a new way to gain broad-based exposure in fixed income, while using factors to navigate the challenges in the current rising rate environment.”
The Fixed Income Factor Suite offers investors low-cost fixed income factor solutions. Similar to Invesco’s equity factor ETFs, the Fixed Income Factor ETFs can help tilt a portfolio to a number of factors through a single factor fund, or help enhance portfolio efficiency through a multi-factor fund.
The funds will be overseen by a team of experienced factor ETF experts led by Peter Hubbard, Director, ETF Portfolio Management, and Jeff Kernagis, Senior ETF Portfolio Manager for Fixed Income. The two Investment Grade style bond ETFs are the first of a kind in the factor space.
With the addition of these funds, Invesco now has a total of 84 ETFs in its factor line-up. This robust suite of factor ETFs, the largest from any ETF provider, offers investors access to factor exposures that expand portfolio construction opportunities.
The new Fixed Income Factor ETFs represent the first instance of Invesco directly leveraging investment ideas from Invesco Fixed Income’s Multi-Sector & Global Strategies team into a rules-based strategy that emphasizes consistency. Invesco’s Fixed Income team shared its unique perspective and specialized background so that Invesco Indexing could capture the team’s proficiency within fixed income factor indexes. These strategies seek to take advantage of recurring market risk premia found in fixed income to deliver key outcomes across a variety of fixed income asset classes.
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Invesco’s Fixed Income team has more than 34 years of experience in fixed income investing and fixed income active management. Invesco offers fixed income products across the firm in various types of investment vehicles including a robust fixed income ETF suite. Additionally, Invesco also has the largest platform of smart beta fixed income ETFs, both in terms of number of products (nine) and assets under management (AUM) of $6.5 billion (as of June 29, 2018).
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