Invesco Perpetual Global Targeted Returns Fund Webcall July 2017 - PowerPoint PPT Presentation

Invesco Perpetual Global Targeted Returns Fund Webcall July 2017 Clive Emery, Product Director This presentation is for Professional Clients only and is not for consumer use. 14404/LI/GTR STANDARD INTRO – End Jun17

Invesco Perpetual Global Targeted Returns Fund Global Targeted Returns Strategy Team Assets under management: £18.5bn across three  domiciles. £10.4bn in the UK-domiciled fund Team: No changes to the existing team over the quarter  Performance: +6.34% 2 annualised from inception to 30 June  2017, +127bp Q2 14404/LI/GTR STANDARD INTRO – End Jun17 Volatility: 3.66% annualised from inception to 30 June 2017,  2.99% over last 12m Past performance is not a guide to future returns. Source: Invesco Perpetual as at 30 June 2017 (unless otherwise stated). Inception date 9 September 2013. 1 As at 31 March 2017. 2 Fund performance figures are shown in sterling, inclusive of reinvested income, gross of the Ongoing Charge and net of portfolio transaction costs. The figures do not reflect the entry charge paid by individual investors. 1

Contribution of ideas for Q2 2017 Basis point contribution (+146 bps) Top 5 -50 -25 0 25 50 Equity  Commodity - Commodity Carry – Selective Asia Exposure Commodity - Commodity Short Interest Rates  Credit - Selective Credit Credit - US High Yield – Yield Compression Currency - Chile and Mexico vs Australia and NZ Credit  Currency - Indian Rupee vs Chinese Renminbi – Selective Credit Currency - Japanese Yen vs Korean Won Currency - Long EM Carry Commodity  Currency - Long Sterling – Commodity Carry Currency - Russian Ruble vs Canadian Dollar Equity  Currency - US Dollar vs Canadian Dollar – France vs Germany & Italy Currency - US Dollar vs Euro Equity - Dispersion Equity - European Divergence Bottom 5 Equity - France vs Germany & Italy Currency Equity - Global  Equity - Japan – US Dollar vs Euro Equity - Selective Asia Exposure Inflation  Equity - UK 14404/LI/GTR STANDARD INTRO – End Jun17 – US vs UK Equity - US Large Cap vs Small Cap Inflation - Short Real Yields and Inflation Currency  Inflation - US vs UK – Chile and Mexico vs Aus and NZ Interest Rates - Australia vs US Currency  Interest Rates - Selective EM Debt – Russian Ruble vs Canadian Dollar Interest Rates - Swap Spreads Interest Rates - Sweden Currency  Interest Rates - Yield Compression – US Dollar vs Canadian Dollar Volatility - Asian Equities vs US Equities Past performance is not a guide to future returns. Source: Barclays Point. Data as at 30 June 2017. POINT Portfolio Return is calculated by the attribution system, Barclays POINT, using a portfolio constructed by a daily feed of positions and may differ from the gross return. The contribution figures are estimates and should be used for indicative purposes only. Data cleansing and retrospective information availability may cause changes. 2

Approving ideas Our central economic thesis Global growth remains subdued European growth momentum needs to navigate structural issues and politics  US business and consumer data suggest current cycle remains intact for now  Structural pressures (e.g. China) may manifest sooner than expected  Bond yields capped Monetary and/or fiscal policy choices becoming more difficult, e.g. Draghi, Trump  Policy tightening is adding to existing funding strains (e.g. EM)  Lower trend growth and policy rates likely to cap the upside for bond yields  Fewer challenges to our low inflation view Disinflationary forces still in place e.g. discretionary pricing and debt overhang  Risk that non-discretionary and/or protectionism inflationary pressures persist  Imbalances (e.g. inflation versus growth) impacting China’s policy choices  Caution in risk assets supports opportunities elsewhere Further equity and credit market returns dominated by income  14404/LI/GTR STANDARD INTRO – End Jun17 Seeking alternative return sources to reduce reliance on broad markets  Diversified alpha as an additional source of value  Increased volatility ahead Despite macro uncertainty volatility has remained surprisingly low  Long-term impacts from the misallocation of capital (e.g. through leverage)  Threat of removal of accommodative policy  Source: Invesco Perpetual as of 30 June 2017. For illustrative purposes only. Where the Invesco Multi Asset team has expressed opinions, they are based on current market conditions and are subject to change without notice. These opinions may differ from those of other Invesco investment professionals. 3

Portfolio changes A slowly evolving portfolio Period Change Idea o Interest Rates – Sweden (was Interest Rates – Swedish Curve Flattener) o Interest Rates – Y ield C ompression (was Interest Rates – U S vs U K) o Equity – European Divergence (incorporating Equity – Germany) Q3 2016 o V olatility – Selective FX (removed Japanese Y en vs U S Dollar leg) o C urrency – C hilean P eso vs Australian and New Zealand Dollars Portfolio review and oversight (was C urrency – C hilean P eso vs Australian Dollar) - V olatility – Interest Rates - C urrency – Norwegian Krone vs U K Pound - Equity – U S Staples vs Discretionary - Interest Rates – U K - V olatility – Selective FX Q4 2016 +/- Interest Rates – U S Curve +/o Inflation – U S vs U K o Interest Rates – Y ield C ompression o Interest Rates – European C urve Steepener o Interest Rates – Australia vs U S + C urrency – Long Sterling + C urrency – Long EM C arry + Equity – France vs Germany & Italy + Inflation – Short Real Y ields and Inflation Q1 2017 o C redit – Selective Credit (now includes Credit – European Curve Flattener) o C urrency – C hile and M exico vs A ustralia and NZ (was C urrency – C hilean P eso vs Aus and NZ Dollars) 14404/LI/GTR STANDARD INTRO – End Jun17 o Equity – Japan o Equity – Selective Asia Exposure o Interest Rates – Y ield C ompression + C ommodity – Commodity Short + Equity – Dispersion o C urrency – Japanese Y en vs Korean Won o/- C urrency – Long Sterling o Equity – European Divergence (incorporating Equity – France vs Germany and Italy) Q2 2017 o Equity – Global o Equity – Selective Asia o Inflation – U S vs U K - Interest Rates – Japanese C urve Steepener - Interest Rates – European C urve Steepener Source: Invesco Perpetual as at 30 June 2017. “+” indicates an idea was added, “ - ” indicates an idea was removed, “o” indicates an idea has changed. For illustrative purposes only. Portfolio characteristics may change without notice. 4

New idea: Commodity – Commodity Short Commodity prices are likely to remain under pressure as global growth continues its stuttering progress. Taking advantage of the shape of the commodity curve, this idea is implemented through total return swap indices that have a higher beta with a slightly negative outlook on commodities. A premium is extracted in a flat market, but returns will be enhanced if commodity prices fall. We also sold total return swaps against an index of energy and base metals. Debt levels in China have continued to rise China Chile Singapore Canada Turkey Australia Russia Brazil South Korea France Switzerland Sweden Poland Norway Mexico 14404/LI/GTR STANDARD INTRO – End Jun17 South Africa India Japan Italy New Zealand United States Germany Portugal United Kingdom Hungary Spain -50 -40 -30 -20 -10 0 10 20 30 40 50 60 Percentage point change over 5 years in private sector debt to GDP Source: Bloomberg as at 30 June 2017. For illustrative purposes only. 5

New idea: Equity – Equity Dispersion The realized correlation of stocks within the S&P500 has fallen. This reflects the less ‘macro’ nature of the equity market relative to the past and means that individual stock returns are starting to diverge. We believe this will continue and have implemented a view which captures the rising dispersion between stock returns. We implement this view through an options-based index that captures the volatility of the 50 largest constituents of the S&P 500 index rising relative to the index as a whole. 100 90 80 70 60 50 40 Increased 14404/LI/GTR STANDARD INTRO – End Jun17 30 dispersion between 20 stocks within 10 the index 0 Jan 11 Jan 12 Jan 13 Jan 14 Jan 15 Jan 16 Jan 17 3-month realised correlation of S&P500 constituents relative to the index (%) Source: Bloomberg as at 30 June 2017. For illustrative purposes only. 6

Removed idea: Interest Rates – Japanese Curve Steepener The Japanese Interest rate curve steepened as did most rate curves through the end of 2016 and this benefited our position. Since the turn of the year the curve has stabilised and we think further steepening is unlikely from here and hence we exited the idea. 0.5 0.4 Basis points difference 0.3 0.2 14404/LI/GTR STANDARD INTRO – End Jun17 0.1 0 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Japan 2y forward 20y swap - Japan 2y forward 10y swap Source: Bloomberg as at 30 April 2017. For illustrative purposes only. 7