Invesco Balanced-Risk Allc E EUR Acc

Analyst Report
Morningstar's Take

by Matias Möttölä
A thoughtful research process, run by industry veterans, has ensured that the investment approach of Invesco Balanced-Risk Allocation has been fortified over time. Both the People and Process pillars are rated Above Average.

This strategy remains a priority for CIO and lead portfolio manager Scott Wolle, who is also overseeing the work of multiple teams across asset-allocation and factor-based investing. Wolle actively contributes to research alongside five other portfolio managers, four of whom have worked with Wolle on the strategy since its 2009 inception. In addition, the team profits from two dedicated analysts and can lean on the broader researcher team at Invesco. Most of the managers have large personal investments in the strategy, aligning their interests with those of investors.

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 in 2021 by introducing put options and equity factors to complement bonds, based on research indicating that, in a low-yield environment, bonds protect the downside less effectively. In 2023 the U.S. fund saw its neutral volatility target lifted to 10% to better fit the peer group and the long-term expected volatility of allocation indexes.

The team applies measured tactical tilts. These had added value in each full calendar year since inception, until in 2022 the team’s models were not able to navigate the double-whammy of falling equity and bond prices successfully, and the strategy saw losses from the tactical sleeve for the first time. In 2023 through the end of November, the tactical sleeve was close to a zero result for the year with bond market-timing causing headaches for the team. Still, since inception the tactical models have benefited investors with a 1.3% annualized contribution.

The fund’s diversification benefits have led to strong risk-adjusted returns compared with peers and the Morningstar Category indexes but has fallen short in pure return terms. This is not that surprising considering that commodities have brought a disappointingly small contribution to returns during the fund’s existence.
Morningstar Medalist Rating™A strong risk-balanced approach.
To find out how Morningstar rates a fund click here.
Morningstar Pillars
PeopleAbove Average
ProcessAbove Average
Morningstar Medalist RatingMorningstar assigns the Medalist Rating to funds that are qualitatively and quantitatively assessed through manager research and algorithmic processes. The assessment turns on three key “pillars” – People, Process, and Parent – that yield an estimate of how well a fund will perform before fees but after adjusting for risk.
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