Invesco's Big Fixed Income Factor ETF Splash
For investors clamoring for more factor-based fixed income exchange traded funds, the holidays arrived in July when Invesco Ltd. (NYSE: IVZ), the fourth-largest U.S. ETF sponsor, rolled out eight new bond funds Wednesday.
Each of the eight new ETFs track in-house indexes. The benchmarks for the new ETFs are based on methodologies already deployed by Invesco's actively managed fixed income products.
What Happened
With the Invesco Emerging Markets Sovereign Debt ETF (NYSE: PCY) and the Invesco Fundamental High Yield Corporate Bond ETF (NYSE: PHB), among others, Invesco has a long-standing tradition of fundamentally-weighted bond ETFs. Including equity funds, Invesco is one of the largest issuers of smart beta ETFs, having introduced its first fundamentally-weighted ETF in 2003. The firm launched its first smart beta bond ETF in 2007.
Invesco also has the largest platform of smart beta fixed income ETFs, both in terms of number of products (nine) and assets under management (AUM) of $6.5 billion (as of June 29, 2018), according to the issuer.
Why It's Important
Invesco's new ETFs include corporate bonds, emerging markets debt and multi-factor strategies. The Invesco Corporate Income Defensive ETF (NYSE: IHYD) follows the Invesco High Yield Defensive Index, which is designed to find higher quality junk-rated corporates.
The Invesco Corporate Income Value ETF (NYSE: IHYV) tracks the Invesco High Yield Value Index. IHYV holdings meet value and quality metrics.
Adding to Invesco's extensive lineup of international bond ETFs, the Invesco Emerging Markets Debt Defensive ETF (NYSE: IEMD) focuses on bonds with positive traits such as higher credit ratings and shorter maturities.
The Invesco Emerging Markets Debt Value ETF (NYSE: IEMV) also looks for higher credit quality bonds with shorter maturities. IEMV debuted with 184 holdings from 10 countries. China and Indonesia combine for nearly 40 percent of the new ETF's weight.
What's Next
The Invesco Investment Grade Defensive ETF (NYSE:IIGD) is a defensive/quality play on investment-grade U.S. corporates. Eighty percent of the new ETF's 64 holdings are rated AA or A, according to issuer data.
A value spin on investment-grade domestic corporate bonds is the Invesco Investment Grade Value ETF (NYSE: IIGV), which holds 61 bonds and tracks the Invesco Investment Grade Value Index. Eighty-four percent of IIGV's holdings are rated A or BBB.
The Invesco Multi-Factor Core Fixed Income ETF (NYSE: IMFC) holds mortgage-backed securities (MBS), short-dated Treasuries, long-date Treasuries, investment-grade corporates and some junk bonds.
The Invesco Multi-Factor Core Plus Fixed Income ETF (NYSE: IMFP) follows a methodology similar to IMFC, but the plus offering features higher allocations to corporate bonds as well as some exposure to emerging markets debt.
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