Invesco Balanced-Risk Allc E EUR Acc

Analyst Report
Morningstar's Take

by Matias Möttölä, CFA

Recent process changes have again demonstrated the thoughtful way in which the team, led by experienced Scott Wolle, continues to improve this strong risk parity strategy. Invesco Balanced-Risk’s cheapest share classes earn a Morningstar Analyst Rating of Silver, while other shares are rated Bronze and Neutral.Wolle was promoted in 2019 as head of a new group that oversees asset allocation and factor-based strategies. This strategy remains one of his priorities, and he actively contributes to it, and the team now benefits from a larger group of researchers. Wolle and the four other named managers have worked together since its 2009 inception. The team includes 17 investment professionals in total and has experienced relatively little turnover, with just the third departure since inception coming in 2021.The process starts with roughly equal-weight exposure (on a risk basis) to growth, defensive, and real return assets. The growth sleeve remains invested in equities and the real return sleeve in commodities, yet the team further diversified the defensive sleeve by introducing put options and equity factors to complement bonds, based on research indicating that, in today’s low-yield environment, bonds protect the downside less effectively. Previous process enhancements include the exclusion of negatively yielding bonds.The team applies measured tactical tilts, which have added value each year since inception at an annualized 1.7% clip. In 2021 through the end of October, an overweight in equities has garnered most of the value added from the tactical bets. In 2020, the team profited especially from commodities, which it kept at an underweight during the peak of the March 2020 volatility, and then by going slightly overweight for a limited period as commodities rebounded from their lows. The fund’s diversification benefits have led to strong risk-adjusted returns compared with peers but falling short of the Morningstar Europe Moderate Global Target Allocation Index through the end of November 2021. This is not that surprising considering that commodities have brought a disappointingly small contribution to returns during the fund’s existence.

Morningstar Analyst Rating™
To find out how Morningstar rates a fund click here.
Portfolio RoleThe fund could reasonably serve the role of a diversifier as part of a broader portfolio.
Morningstar Pillars
PeopleAbove Average
An experienced asset-allocation team.
Some positive developments offset by areas needing improvement.
ProcessAbove Average
Mostly equal-risk, but there are significant tactical tilts.
Successful tactical allocation has supplemented returns.
Morningstar Analyst RatingMorningstar evaluates funds based on five key pillars, which it's analysts believe lead to funds that are most likely to outperform over the long term on a risk-adjusted basis.
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