HEAD-TO-HEAD: Invesco versus Pimco

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Introduction

Rising inflation and escalating geopolitical tensions in Ukraine are likely to send fixed investors running for the cover provided by short duration and high-quality government and corporate bonds.

Many analysts expect the US Federal Reserve to raise interest rates several times this year, with futures markets indicating a high probability of at least six rate hikes, according to RBC Wealth Management.

However, perhaps the markets are over-gloomy. As RBC WM argues, “it’s critical for investors to remember that the impetus for tightening comes from the success of the fiscal and monetary response to Covid-19; with significant fiscal tightening on the way in 2022 and the likely normalisation of supply chains later this year, we believe the Fed will be able to move at a more measured pace”.

The bank thinks that investors with a longer-term perspective, and the appropriate risk tolerance and liquidity profile, can use this uncertainty to allocate to longer-maturity government bonds and additional credit risk in their fixed income allocation.

Amundi, on the other hand, recommends “flexibility and a short duration bias”. The French asset manager identifies opportunities across yield curves and geographies and in higher-yielding assets such as emerging market bonds, which “will be crucial to extracting additional value in a negative real yield environment”.

FSA asked Isaac Poole, global chief investment officer, Oreana Portfolio Advisory Service, to select and compare two investment grade fixed income products: the Invesco Global Investment Grade Corporate Bond Fund and the Pimco GIS Global Investment Grade Credit Fund.

Source: FE Fundinfo, Morningstar. (Data in US dollars, 17 February 2022)

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