Invesco Ltd. has expanded its smart beta line up into the fixed-income asset class with the launch of a new suite of factor-based bond exchange traded funds.
Invesco recently rolled out 8 factor-based bond ETFs, including:
- Invesco Corporate Income Defensive ETF (NYSEArca: IHYD), 0.23% expense ratio
- Invesco Corporate Income Value ETF (NYSEArca: IHYV), 0.23% expense ratio
- Invesco Emerging Markets Debt Defensive ETF (NYSEArca: IEMD), 0.29% expense ratio
- Invesco Emerging Markets Debt Value ETF (NYSEArca: IEMV), 0.29% expense ratio
- Invesco Investment Grade Defensive ETF (NYSEArca: IIGD), 0.13% expense ratio
- Invesco Investment Grade Value ETF (NYSEArca: IIGV), 0.13% expense ratio
- Invesco Multi-Factor Core Fixed Income ETF (NYSEArca: IMFC), 0.12% expense ratio
- Invesco Multi-Factor Core Plus Fixed Income ETF (NYSEArca: IMFP), 0.16% expense ratio
The new Invesco Fixed Income Factor ETF Suite combine the expert research of Invesco’s active management team with the newly formed Invesco Indexing division to provide rules-based, proprietary indices.
“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,” Andrew Waisburd, Head of Invesco Indexing, said in a note. “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.”
A Look at Index Composition
The composition of each index was selected based on Invesco Indexing from U.S. dollar-denominated bonds issued by global companies, governments, and government agencies, including bonds that meet the index’s eligibility qualifications.
“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,” Dan Draper, Global Head of ETFs at Invesco, said in a note. “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.”
Related: Invesco Launches New Suite of Factor ETFs
The Fixed Income Factor ETFs tilt toward a number of factors through a single quality or value factor, or investors can enhance portfolio efficiency through a multi-factor methodology that combines the individual factors.
The quality score is calculated based on the bond’s maturity and credit rating. Each bond is scored based on the number of years remaining to maturity, with bonds having fewer years to maturity receiving higher scores. Each rating agency’s rating is converted into a numerical value and a bond’s credit factor score is calculated as an equally-weighted average of the numerical scores of each agency that has rated the bond. The Quality Score for each bond is computed as a weighted-average combination of these two factors, with weights of 75% and 25% for maturity and credit rating, respectively.
The value score is calculated based on a combination of value and quality factors. A value score is assigned to each eligible bond based on the bond’s option adjusted spread. Specifically, the Value Score for each bond is calculated as its percentile ranked OAS within its bond type, region and credit rating category.
For more information on new fund products, visit our new ETFs category.