Invesco Pan European Hi Inc E EUR Acc

Analyst Report
Morningstar's Take
|25/06/2021

by Thomas De Fauw
Invesco announced that Alexandra Ivanova will be named comanager of the firm's Pan European High Income strategy on 31 Aug 2021 to support lead manager Thomas Moore. Ivanova boasts more than five years of managing internal credit portfolios at Invesco and was named comanager on Invesco Global Income in August 2020. She has been coordinating global asset-allocation committee discussion for the past three years, but her experience of managing multi-asset portfolios is only with that fund.

We downgraded Invesco Pan European High Income's Morningstar Analyst Rating to Neutral for all share classes after the announced retirement of longtime managers Paul Causer and Paul Read at the end of 2021. At that point, Moore and Ivanova will be the named managers responsible for asset allocation and fixed-income, while CIO Stephanie Butcher will continue to steer the fund's equity sleeve. This announcement does not affect the strategy's Analyst Rating.



We are downgrading Invesco Pan European High Income’s Morningstar Analyst Rating to Neutral for all share classes after the announced retirement of long-time lead managers Paul Causer and Paul Read. Its cheapest share classes were previously rated Silver. The fund continues to be comanaged by Causer, Read, Stephanie Butcher, and Thomas Moore until the end of 2021 when Causer and Read will withdraw after highly successful careers at Invesco beginning in the mid-1990s. At that point Moore will become lead manager and responsible for allocation calls. Butcher will continue to steer the fund’s equity sleeve on top of her CIO role, and Invesco intends to add a comanager from the fixed-income team to round out the group. Moore was a credit analyst and leader at a sell-side fixed-income team before joining Invesco in 2016 to manage a high-yield fund. He was only named as comanager here in August 2020 and has no previous track record of managing multi-asset funds.The team invests across the fixed-income spectrum and is willing to back its convictions aggressively. This has been shown by material exposure to riskier areas like subordinated financials and corporate high yield. The fund can include up to 30% in equities, but the 22% level in the beginning of 2018 was the highest since its strategy was changed in 2007-08 to include fewer equities, and in 2019 through end-May 2021 the equity weight has mostly drifted lower. The fund's equity sleeve is run separately by Butcher, who has been at this fund from February 2012 with an even longer tenure at Invesco Perpetual's equity income strategies. Although the fund sits in the EUR cautious allocation Morningstar Category, it can look like a higher-risk fund at times, as measured by volatility, downside-capture ratio, and other risk measures. While this aggressiveness has ultimately paid off, it can hurt at times, such as in the first quarter of 2020 when the fund's Z AD share class lost 13.4% and underperformed the category average by 5.1 percentage points. Over Causer and Read’s tenure, the fund has been among the strongest performers in its category and has compensated investors for the risks taken.

Morningstar Analyst Rating™
To find out how Morningstar rates a fund click here.
Portfolio RoleCore
Morningstar Pillars
PeopleAverage
High-profile departures leave a big gap to fill.
ParentAverage
Some positive developments offset by areas needing improvement.
ProcessAbove Average
Portfolio positioning and security selection are value-driven and can be aggressive.
Performance
The fund has delivered significant outperformance, but investors should be aware of its risks.
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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