Invesco has made changes to a number of its funds, including reworking one as a social impact fund, according to a letter to investors.
Invesco Pan European Structured Responsible Equity is set to be reworked in a new global social impact fund, following its shuttering a month ago.
While the fund is currently an Article 8 product, Invesco has shifted it to Article 9 to "compete more effectively in a growing and promising market segment".
It will be renamed Invesco Social Progress from 7 November and materially change the investment objectives to generate positive social impact in line with the UN's sustainable development goals.
This will include strict social-focused filters using proprietary and third-party screening for exclusions.
The €14.3m fund has been closed for subscriptions since 14 September and will be reopened on 7 November when the fund is restructured.
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The cost of the restructuring is estimated at 20 basis points of the fund's current net asset value. Invesco added the rebalancing would affect about 85% of the NAV of the current fund, taking five business days to complete.
An Invesco spokesperson said the fund will continue to be managed by the Invesco Quantitative Strategies team, based in Germany. Manuela von Ditfurth and Erhard Radatz will remain named portfolio managers while Tim Herzig will take over responsibility from Thorsten Paarmann.
Fees for the fund will also be reduced to bring it in line with Invesco's other "theme funds", bringing the A share class management fee from 1.3% to 1%.
Meanwhile, the Invesco Emerging Market Corporate Bond fund has also lowered its management fee, bringing the A share class fee from 1.5% to 1.25%.
Invesco also revealed it was increasing the level of leverage of two funds. The Invesco Bond fund's expected level of leverage would be increased from 150% to 600%, while the firm's Global Flexible Bond fund's level of leverage will rise from 300% to 900%.
The firm said that this was "mainly driven by relative value short term interest rate futures and swaps".
It added: "The short duration exposure combined with the low volatility of near-term interest rates leads to an extremely low volatility in those instruments and therefore requires large notional positions in order to achieve a meaningful exposure in those markets."
Investment objective changes
The investment objectives of seven funds were also updated or clarified, with the firm's Japanese Equity Advantage fund being updated to exclude companies involved in military contracting.
Four funds, namely the firm's Belt and Road Debt fund, Sustainable China Bond fund, Asia Asset Allocation fund and Asian Investment Grade Bond fund, were all updated to allow investment of up to 10% of their NAV in securities that are either in default or at high risk of default.
Invesco said the changes would not have a material impact on the fund's risk profiles, but "distressed securities risk" will become a relevant risk for the funds.
The firm's China A-Share Quality Core Equity and Invesco Sustainable China Bond funds have clarified various parts of their investment objective and policy, including emphasising ESG characteristics and adjusting allowed levels of Chinese government debt securities.
Invesco Sustainable China Bond will see its access to China onshore bonds reformulated, bringing its maximum allocation to the China Interbank Bond Market down from 100% of NAV to 50%, while its maximum allocation to urban investment bonds falls from 100% to 30% of NAV.
Invesco said the clarifications would have no impact on how the funds are being managed.
Benchmark changes
Three Invesco funds have also changed benchmarks, with the Invesco Global High Yield Short Term Bond fund calculating global exposure through the Bloomberg Global High Yield Corporate 1-5 Year Ba/B index (Total Return) USD Hedged from 1 December.
Invesco said the move to a hedged benchmark would "better reflect the currency hedging policy" of the fund and "provide a better indicator to calculate the global exposure".
The Invesco Belt and Road Debt fund and the Invesco Emerging Market Flexible Bond fund will also change benchmarks from 1 December for comparison purposes only, "in light of the cessation of US LIBOR in June 2023".
The emerging market fund will switch from 3 Month USD LIBOR to 3 Month US T-Bills, while the belt and road fund will move to no specific benchmark due to "the unavailability of an appropriate market benchmark".
