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Invesco Belt and Road Debt Fund


Visions can be powerful growth engines





The initiative

The Silk Road is an ancient network of trade routes that opened long-distance political, economic and cultural relations between the civilizations of Asia, Europe, the Horn of Africa and Arabia. In 2013, the Chinese government launched a strategic initiative towards a new Silk Road, to promote the land and sea connectivity along Asia, Europe, Middle East, and Africa.1

 

Discover more in our whitepaper

Belt & Road - Changing the economical map of the world

We anticipate great investment opportunities

  • China expected to invest USD 150 to 200 billion in the B&R countries per year
  • USA, EU, UK and Japan announced to invest billions of USD
  • Estimated total eligible B&R bonds market size is over USD 1 trillion1



1 Sources: Bloomberg, HSBC, JPMorgan, Invesco. Data as at 10 August 2018.
2Source: ‚Just what is this One Belt, One Road thing anyway?‘, CNN, May 12, 2017. Retrieved on Mar. 13, 2019.
3 Source: WorldBank, Belt and Road Portal (eng.yidaiyilu.gov.cn), Invesco, data as at most recent available full year.


65%

of global population involved into the Belt and Road initiative (B&R)2

40%

of global GDP and more come from the B&R region2

38%

of world trade represented by 68 countries along the road3

The opportunities

The B&R Initiative is generating an enormous need for capital commitments. China is very committed to B&R and is currently changing its business model. Substantial investments in the B&R countries and projects are at the very heart of this change.

At the same time, there is increasing competition with China among major economies. The US and the EU have recently announced that they each plan to invest USD 60 billion in the B&R region, the UK aims to become the G7’s top investor in Africa by 2022, and Japan has been increasing its infrastructure construction in the B&R countries.

The huge capital requirements lead to various investment opportunities - with five key themes.


Improving financial strength

Ghana: How the country benefited from outbound direct investments

The government of Ghana and China Sinohydro signed an agreement for up to USD 2 billion to finance the construction of priority infrastructure projects in July 2018.4 Chinese banks and corporations have signed USD 20 billion worth of memorandums of understanding (MOUs) and loan agreements with Ghana which equals 47% of Ghana’s GDP. 5

4 Source: Bloomberg
5 Source: Adom online

Expanding the infrastructure network

Chengdu/China to Vienna: 14 days by train compared to 42 days via sea route

Chengdu is the capital of Sichuan province, one of the most populous agglomerations in China. It does a lot of trade with Europe, but the sea route takes 42 days.6 This compares to only 14 days for trains with the first direct rail connection to Austria.

6 Source: Spiegel online

Increasing energy, commodities, agriculture and raw material production

Central Asia: oil and gas pipelines connect the region with China

Chinese companies such as oilfield equipment and services companies, as well as companies with strong ties to China, are starting to take advantage of recent developments. Take Siemens7, for example: the German engineering and industrial manufacturing company has a company-wide B&R Task Force. Siemens has signed agreements with at least ten Chinese companies relating to a number of areas such as power generation, energy management, building technology and intelligent manufacturing.

7 Source: OBOReurope; GBtimes; Robotics & Automation news

Rising local income and consumption

180,000 jobs in 20 countries along the road

According to the Ministry of Commerce of China, the B&R Initiative has created more than 180,000 jobs and USD 1.1 billion in tax revenues for 20 countries along B&R.

Modernising economic corridors

Modernisation is underway in Fujian, for example, which will become a core area of the Maritime Silk Road

Fujian is a province on the southeast coast of mainland China. The region is being supported to become a core area of the 21st-century Maritime Silk Road. With improving income and employment, it is likely that consumption will increase, and industries related to this sector will benefit.

 

The strategy

How can European investors benefit from the potential of the B&R Initiative? Our strategic approach is to use the bond market, which offers great capital growth potential.

01

Large market size: over USD 1 trillion8,9 in international bonds issued along B&R provide active managers with a rich universe to capture potential excess return. On average, one to three new US dollar bonds are issued per trading day, “and this large supply of new issues is likely to persist”, says Yifei Ding.

02

Attractive total return potential: economic improvement will most likely benefit both government and corporate bond issuers along B&R, leading investors to find higher interest income and capital gains from selective bonds.

03

First mover advantage: “We are convinced that we are early movers, enabling us to capture investment opportunities”, says Yifei Ding.

8 Source: Bloomberg, HSBC, JPMorgan, Invesco. Data as at 10 August 2018.
9 Source: The State Council Information Office of the People’s Republic of China, China Construction Bank, Agriculture Bank of China, Postal Saving Bank of China, Bank of China, China Development Bank, AsianInvestor, finance.ifeng.com. Data as at 31 January 2018.

The fund

Access to attractive yield opportunities

The fund primarily invests in USD sovereign bonds, investment grade and high yield corporate bonds from Asia, Africa, the Middle East, and Europe10

Flexible and diversified approach

The fund managers take a benchmark-unconstrained approach to explore a wide range of securities, with active country allocations and investments of up to 10% in equities from the B&R region

First of its kind

The fund’s “New Issue Premiums” strategy aims to capture the capital gain potential of new issues of high yields and investment grade bonds.11,12

Download the fund flyer

10 It does not represent the whole investment universe and there is no assurance that the above aim will be achieved. Please refer to the fund’s offering documents for the fund’s detailed objectives and investment strategy.
11Source: Morningstar. Data as at September 2018.
12 Source: Invesco, data as at September 2018. For illustrative purposes only. Based on current market conditions and subject to change without notice.


Responsible investment

The fund managers systematically include ESG aspects in the country selection process, and emphasise issuers with high or improving ESG standards. They believe that environmental, social and governance factors can lead to better long-term risk-adjusted returns, and that ‘worst-in-class’ ESG issuers may negatively impact the portfolio returns.

Invesco’s ESG efforts are recognized

67 bn

US$ AUM in sustainable Investment13

A+ PRI

rating for Strategy & Governance in 2017 and 201814

ESG leader

among brokers and asset managers in North America15

13 Source: Invesco. As of 30 June 2018.
1414 PRI: Principles for Responsible Investing. 2018 Assessment Report for Invesco Ltd.
15As of 30 September 2017


Award-winning, experienced team

The fund managers aim to achieve long-term total returns by integrating a thematic approach. They seek to capture fixed income investment opportunities from selective bond issuers that sustainably benefit either directly or indirectly from increasing capital and trade flows catalysed by the B&R Initiative.

“Best-in-class”
Asia Fixed Income

Fund name Invesco Belt and Road Debt Fund
Fund managers Yifei Ding and Jeff Feng
Launch date 08 November 2018
Legal status Luxembourg SICAV with UCITS status
Target volatility 5-6%
Reference Index USD LIBOR 3 month

The Invesco Difference

 

Why do our clients entrust us with over $987.817 billion in assets?

At Invesco, diversity of thought isn’t a buzzword, but an ethos reflected in how we work and how our investment capabilities are structured.

17 Source: Invesco. Data as at 31 December 2018. $ = USD.



Invesco Fixed Income

Invesco is strongly committed to fixed income investing. All of the Invesco Fixed Income team members – headquartered in Atlanta – share a key conviction: that team depth, perspective and collaboration are critical for assessing and implementing investment opportunities for clients.

The team’s global breadth and local depth provide a comprehensive network of subject-matter experts across the globe. With direct access to the experience of its global team members and over 170 investment professionals, the Fixed Income team benefits from experienced local experts connected through open dialogue and a common, integrated approach to macro analysis, credit research and portfolio management.


Passion for exceeding expectations

One reason, we believe, is that our clients appreciate our passion for exceeding expectations – a passion shared by everyone of our 7,000 dedicated team members. This attitude shapes the way we work, in a closely integrated global network, with branches in 20 countries and a long-standing presence in Europe. We have investment centres in London and Henley (UK), Frankfurt, Munich and Paris, along with offices in Amsterdam, Brussels, Madrid, Milan, Stockholm, Vienna and Zurich. It also shapes our approach to understanding our clients’ business and their very individual needs.

Investors appreciate the fact that we care about results, and that we realise that ‘results’, of course, mean performance. We understand this. But we also understand that there is more to their expectations than just results. We are convinced that our clients do not “invest to invest”, but to achieve their individual aspirations and dreams.


Pure focus on investment

Clients also tell us that they value our pure focus on investment, with no conflicting activities that could compromise results. This is why we can purely focus on exceeding investor expectations in everything we do: in the day-to-day work of every individual within our company. We help clients to get ahead. We aim to remove uncertainty. And we provide our clients with actionable ideas.

Diversity of thought

We not only allow but we encourage diversity of thought. We celebrate boundless thinking, we embrace incoming talents to challenge existing views, and we encourage everybody at Invesco to contribute new ideas and approaches. This attitude has often sparked initiatives that benefit our clients, and it is based on innovative thinking, open-mindedness and constant collaboration between all teams at Invesco.

At the same time, diversity of thought means that our different investment teams can follow their convictions, without a global CIO and without a rigid in-house viewpoint. Thus, investors enjoy freedom of choice from truly different investment styles and products, including clearly profiled multi asset strategies. We do not limit the choices of our clients by limiting ourselves.

So, why Invesco? Because we are different: we aim to deliver an investment experience that helps investors get more out of life. Why not experience it for yourself?