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Invesco Balanced-Risk Allc E EUR Acc

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Morningstar's Take
|12/01/2021
by Matias Möttölä, CFA
Invesco has introduced new elements into the “Deflation Hedges” bucket of the Balanced-Risk strategy, which has a 33% strategic risk weight. Long equity puts and a mix of equity factor bets are partly replacing government bond futures in this part of the portfolio. The aim is to strengthen the portfolio’s ability to weather downturns. Invesco’s recent research has concluded that as yields have approached or crossed the zero bound, the 10-year government bond futures used exclusively thus far in the deflationary sleeve have become less resilient.

The changes have already been implemented in the U.S. 40-act fund and are expected to be included in the UCITS and U.K. vehicles in March.

As we have come to expect from Invesco’s global asset-allocation team, the changes are the end result of a long and considerate research process to evolve the strategy as markets see structural changes. We maintain our pillar scores and Morningstar Analyst Ratings for all three covered funds.

Because of a technical error, the Analyst Rating for one or more share classes of this fund was incorrect. We have resolved the error and corrected the Analyst Rating for all share classes affected by it. For further details, go to morningstar.com/learn/ar. Despite lead manager Scott Wolle's expanding workload, he remains focused on setting and contributing to a robust research pipeline for Invesco Balanced-Risk Allocation. That and an already proven approach to risk-parity investing drive a Morningstar Analyst Rating of Silver for the fund’s cheapest share classes, with other classes rated Bronze and Neutral.Wolle was promoted as head of a new group that oversees asset allocation and factor-based strategies in November 2019. This strategy remains one of his priorities and he actively contributes to it. Wolle and the four other managers have worked together since its 2009 inception. The team includes nine investment professionals in total, with just two departures since the fund's inception.The process starts with roughly equal-weight exposure (on a risk basis) to stocks, bonds, and commodities. By risk-weighting rather than dollar-weighting, commodities and fixed income receive a higher weight than equities, which drive most of the performance in traditional 60/40 stock and bond portfolios. The team supplements this approach with research into security selection and product design, which has led to incremental improvements. Its current focus has been identifying alternatives to fixed income in a low-rate environment.The team applies measured tactical tilts, which have added value each year since inception. Its commodity calls were most additive in 2020, first by underweighting their exposure during the peak of March 2020 volatility, and then by going slightly overweight starting in June as they 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 Eurozone Moderate Global Target Allocation Index through end-November 2020. This is not that surprising considering that commodities have had a slightly negative return during the fund’s existence.

Morningstar Analyst Rating™
To find out how Morningstar rates a fund click here.
Portfolio RoleThe fund could reasonably serve as a small portion of a sophisticated investor's larger portfolio as a diversifier.
Morningstar Pillars
PeopleAbove Average
An experienced asset-allocation team.
ParentAverage
Some positive developments offset by areas needing improvement.
ProcessAbove Average
Mostly equal-risk, but there are significant tactical tilts.
Performance
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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A fim de prover consistência para todos os relatórios fornecidos por diferentes Asset Managers, os data points calculados apresentados são gerados usando uma metodologia de cálculo proprietária da Morningstar, que pode ser conferida com mais detalhes em(https://www.morningstar.com/research/signature)
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