IIPUL10

Invesco Global EconomicPulse EUR VT10 Index

Rising to the challenge of ever-changing markets

See Index Performance
Dynamic Multi-Factor

Stock exposure adjusts to the current economic regime by selecting companies with qualities suited for potential outperformance, while maintaining diversification across these varying global market environments

Adaptive Exposure

Adapt with a rules-based allocation process developed by Invesco’s Multi Asset Solutions

Adaptive Asset Allocation

Exposures to stocks and cash adjusted daily seeking to deliver a smoother performance profile for the Index over time

About Invesco Global EconomicPulse EUR VT10 Index

Stock market exposure built from a dynamic global multi-factor approach. A target volatility control that responds to changes in market conditions. Daily, adaptive allocations seek to mitigate wild swings in the market. All delivered in a single, comprehensive package.

How it works

Dynamic Multi-Factor

Dynamic multi-factor strategy seeks to take advantage of changing market environments using a disciplined approach to determine the current economic regime and then increase exposure to factors that tend to be rewarded in that climate while decreasing exposure to those that do not, in order to seek to deliver better returns than generic stock market exposure:

We have identified four key macroeconomic regimes that help to put the current rate of economic growth into context. In the Recovery regime, economic growth is below trend and accelerating. While in Expansion, growth is above trend and accelerating. In Slowdown, growth is above trend, but decelerating. And in Contraction, growth is below trend and decelerating. Our research shows that the contribution from stocks with particular characteristics varies with each of the four key macroeconomic regimes. For instance, in the Recovery regime, companies of smaller Size and more attractive Value tend to perform better than those with high Momentum, lower Volatility, or strong Quality. In the Expansion regime, small Size, Value, and Momentum tend to be rewarded. While in Slowdown, Low Volatility and Quality are often stronger. And in Contraction, Momentum, Low Volatility and Quality are typically in the lead. Disclosure: Indexes are unmanaged and it is not possible to invest directly in an index. Exposure to an asset class or trading strategy represented by an index is only available through investable instruments (if any) based on that index. Invesco Indexing LLC does not issue, sponsor, endorse, market, offer, review or otherwise express any opinion regarding any fund, derivative or other security, financial product or trading strategy that is based on, linked to or seeks to track the performance of any Invesco Indexing LLC index.

Uses a rules-based approach that assigns securities a score for each investment style: Value, Momentum, Quality, Low Volatility and Size. Security weights are then tilted in a rules-based manner based on the factors most relevant to the current economic regime.

Why Factors Work

The centerpiece of the Invesco Global EconomicPulse EUR VT10 Index is a global dynamic multi-factor approach. Value, Momentum, Quality, Low Volatility and Size are stock characteristics, or factors, shown by academics and practitioners to deliver more attractive returns historically than the broad market:1

Value

Investment Rationale:
Attractively priced stocks tend to outperform those that are expensive

Factor Metrics: Cash flow, earnings and sales multiples

Momentum

Investment Rationale:
Trends in recent company stock performance tend to continue

Factor Metrics:
Recent stock performance

Quality

Investment Rationale:
Well-run companies in a position of financial strength tend to be rewarded

Factor Metrics:
Profitability, leverage ratio

Low Volatility

Investment Rationale:

Investor biases often lead them to overpay for attention-grabbing stocks with lottery-like payoffs as compared to low-volatility stocks

Factor Metrics:
Recent stock performance

Size

Investment Rationale:
Small companies tend to perform better than larger companies

Factor Metrics:
Market capitalization

Resources

Methodology

Rules and guidelines followed to build and maintain the Index

1. Sloan, R. 1996. Do stock prices fully reflect information in accruals and cash flows about future earnings? The Accounting Review 71 (July): 289-315. Ikenberry, D., J. Lakonishok, and T. Vermaelen. Market underreaction to open market share repurchases. Journal of Financial Economics 39 (1995): 181-208. Novy-Marx, R. The other side of value: the gross profitability premium. Journal of Financial Economics 108 (2013): 1-28. Narasimhan J., S. Titman. Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency. The Journal of Finance Vol. 48, No. 1. (1993): 65-91. Malcolm, B., B. Bradley, and J. Wurgler. Benchmarks as Limits to Arbitrage: Understanding the Low-Volatility Anomaly. Financial Analysts Journal Volume 67 (2011): 1-15. Rosenberg B., K. Reid, and R. Lanstein. Persuasive evidence of market inefficiency. Journal of Portfolio Management 11.3 (1985): 9-16. Basu S. Investment Performance of Common Stocks in Relation to Their Price-Earnings Ratios: A Test of the Efficient Market Hypothesis. Journal of Finance Volume 32, No. 3. (1977) 663-682.

Forward-looking statements are not guarantees of future results. They involve risks, uncertainties and assumptions. There can be no assurance that actual results will not differ materially from expectations. Diversification/Asset allocation cannot eliminate the risk of fluctuating prices and uncertain returns and does not assure a profit or protect against loss. Factor investing is an investment strategy in which securities are chosen based on certain characteristics and attributes that may explain differences in returns. Factor investing represents an alternative and selection index based methodology that seeks to outperform a benchmark or reduce portfolio risk, both in active or passive vehicles. There can be no assurance that performance will be enhanced or risk will be reduced for strategies that seek to provide exposure to certain factors. Exposure to such investment factors may detract from performance in some market environments, perhaps for extended periods. Factor investing may underperform cap-weighted benchmarks and increase portfolio risk. There is no assurance that the index discussed in this material will achieve their investment objectives. Holding cash or cash equivalents may negatively affect performance.

Although bonds generally present less short-term risk and volatility than stocks, the bond market is volatile and investing in bonds involves interest rate risk; as interest rates rise, bond prices usually fall, and vice versa. Bonds also entail issuer and counterparty credit risk, and the risk of default. Additionally, bonds generally involve greater inflation risk than stocks.

In periods of high volatility, it may be possible for the index to be comprised heavily or fully of bonds and / or cash, which may persist as volatility is elevated.  Due to excess return index construction, cash allocations in the index are non-remunerated.

This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions.

Invesco Indexing LLC is an indirect, wholly owned subsidiary of Invesco Ltd. The group is legally, technologically and physically separate from other business units of Invesco, including the various global investment centers. 

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