Invesco Targeted Returns fund seeks a wider audience

Invesco’s new multi-asset team has been explaining its objectives as it rolls out product across Europe.

One of manager Invesco’s more recent product launches has been the Global Targeted Returns (GTR) fund.

This is a multi-asset product which has been developed and is managed by a team including those who joined Invesco from Standard Life Investments,
where they previously helped manage a similar offering, the Global
Absolute Returns Strategies.

Among those who came over to join Invesco were David Millar (pictured), now its head of Multi Asset and joint fund manager, and Richard Batty and Dave Jubb, also joint managers of GTR.

Also joining as part of the move was Gwilym Satchell, now risk manager.
Other members of Invesco’s GTR team include Georgina Taylor, product director, and Simon Ferguson, senior dealer alternatives and foreign exchange, along with Saul Shaul and Steven Hawes as fund analyst and trainee analyst respectively.

The new fund launched in December 2013, and the manager is now keen to explain its objectives to a wider audience of European investors.

The key concept, explains Millar, is “investing in ideas”. This means that
whereas an equity manager would discuss individual stocks in his portfolio, the GTR fund does the same but in reference to some 20-30 macroeconomic themes or ideas, which are brought together to achieve positive return over a 2-3 year horizon.

Developing the ideas relies on a process broken into ‘thematic, economic,
analytic, managers’ or TEAM approach. The actual portfolio management
looks at risks, scenarios, structure and liquidity tests before the implementation stage that involves orders, compliance, and execution of trades.

Ideas will be reviewed at least quarterly, and the process seeks to ensure
that there is a constant renewal and review of ideas supporting the portfolio
object of delivering against its reference of 3-month Euribor + 5%
on a rolling 3-year annualised basis.

The prospectus actually says the fund can use 5-50 ideas, but there will typically be 20-30 in the portfolio at any time, Millar says. There is a balance between having enough ideas to achieve sufficient diversification,
but not too many that they start to replicate themes. GTR will take a particular approach to achieving this diversification, Millar adds.

“The best way to achieve diversification is to separate the research from
the fund management. This allows us to have an unconstrained research
agenda, which is at the core of the fund’s philosophy.

“However, if you are going to have freedom to do research in an unconstrained way, then you need a robust risk-based process governing the portfolio management.”

The importance of the unconstrained approach is that it reflects the idea that whatever a multi-asset portfolio may look like today, this will change over time as markets themselves change.

The GTR approach is subject to stress and scenario tests, driven by a belief
that investors going forward are likely to want access to returns with lower

“We wouldn’t have come to Invesco to set this up if we didn’t expect growth in multi-asset in future. It’s a growing asset class, and Invesco was looking to bring people in to do that.”

As to the role of Invesco around the GTR team, Millar notes that the platform of support available is a key reason why they sought to develop
the strategy with this particular manager.

The set-up at Invesco’s Henleyon- Thames, UK office also facilitates sharing of ideas, particularly with other long term investors, which Millar describes as offering a potent source of ideas, alongside the quantitative and fixed income expertise available from Invesco’s Frankfurt and Atlanta offices.

Sergio Trezzi, head of European Retail at Invesco, added that there is an increasing amount of feedback from clients across Europe, which products such as GTR will address.

“While multi-assets is a long term trend we have identified a few years ago, today talking with retail distributors across Europe, we definitely feel a strong demand in the market for fundamental multi-asset solutions,” he says.

Investors see a need to respond to pressure on yield, but without necessarily taking on more volatility risk. Structuring vehicles that can
offer daily liquidity is another burgeouning requirement GTR seeks to answer.

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