Invesco Bond Income Plus Share Discussion Threads

[panshanger1] 22/9/2023 08:40

Been a decent recovery here over the last few months

[speedsgh] 31/8/2023 14:16

Invesco bond trust maintains premium despite Credit Suisse exposure -

[speedsgh] 28/8/2023 09:42

In this week’s edition of the Weekly Investment Trust Podcast, Jonathan Davis, editor of the Investment Trusts Handbook, talks to Max King, the market and investment trust commentator and former Investec fund manager. Jonathan also talks to Rhys Davies, manager of the Invesco Bond Income Plus Investment Trust (BIPS); the first half of that discussion can be heard in the podcast, with the full interview available below...

[speedsgh] 22/8/2023 19:23

Half-year Report -

from the Portfolio Managers' Report:

Q. How did the Company perform?
A. Over the six months to 30 June 2023 the share price fell from 166p to 162p, but with dividends reinvested, the Company delivered a positive share price total return of 1.0%. The net asset value per share total return (with dividends reinvested) was 2.1%.

Q. What were the key contributors and detractors of performance?
A. The portfolio's exposure to credit risk was the main driver of the positive return. Within this, high yield bonds were the largest contributor. Investment grade, corporate hybrids and senior bank debt also contributed. Exposure to subordinated financial debt was a small negative. The portfolio's duration (sensitivity to interest rates) was a negative factor as interest rate expectations rose. A rise in the value of sterling meant that the modest non-sterling exposure in the portfolio was also negative.

The unexpected write-down of Credit Suisse Additional Tier 1 (AT1) bonds when the bank was acquired by UBS was a negative factor. The portfolio holding in Credit Suisse as of the end of February was 0.54%. However, the portfolio's other holdings in AT1 and its holdings in Credit Suisse senior debt recovered strongly after this event. While two Credit Suisse AT1s were in the bottom 10 performing bonds in the portfolio, some other financials such as Banco Comercial Portugues and Piraeus Financial were among the portfolio's top five contributors.

Q. What changes were made to the portfolio?
A. The Company was active in the period with a mixture of primary and secondary market purchases. The focus of purchases was on higher quality BB rated bonds that we feel offer a relatively attractive balance of return to risk.

We participated in a new issue from generics drug manufacturer Teva Pharmaceutical Finance, a company that we have invested in for several years. Other new issues purchased included lottery operator Allwyn Entertainment and car battery manufacturer Clarios. Although these are two very different businesses, we believe that both are well placed to weather any economic downturn. We also bought new hybrid corporate bonds from Swedish state-owned utility Vattenfall, Portuguese utility company EDP, Vodafone Group and BT.

In the secondary market we added to existing positions in UK holiday park operator Center Parcs and retailer Ocado. Center Parcs is expected to perform well again in 2023. Ocado's bonds earn an attractive yield but also have, in our view, good potential capital upside from any good news around the company's technology licensing. During the period of weakness in bank bonds following the write-down of Credit Suisse's AT1s, we added to the position in Nationwide AT1.

Several bonds of companies with weaker balance sheets were sold. These included telecom and retail names. Credit concerns led us to sell French furniture retailer Mobilux Finance and European residential landlord Heimstaden. Heimstaden is an example of a credit where the investment case has changed dramatically due to a rising rate environment. The European real estate sector is an area about which we remain cautious. We fear that some business models built on low borrowing costs are no longer commercially viable.

Following these transactions, the allocation to corporate high yield was reduced from 48.4% to 43.7%. Exposure to subordinated bank and insurance was gradually increased from 30.7% to 33.7%.

We view financials as providing a more favourable risk-reward profile than similar-rated high yield bonds with the Company holding a well-diversified portfolio of more than 20 European banks. We continue to assess and adjust exposures to the banking sector and while we believe fundamentals are strong for the banks held in the trust, we are aware of the risks that a crisis of confidence can pose to the sector and to individual banks.

In other activity, long-dated UK gilts were added and now account for 1.6% of the portfolio.

Net gearing was increased from 15.7% to 16.9%. Gearing is one of the tools we can use to adjust the level of risk in the portfolio to align it with the level of opportunity we see in the market. Although the cost of borrowing has gone up, we believe gearing is still an attractive option given the higher level of yield we can now receive from the bonds we want to buy...

Q. What is your outlook from here?
A. Uncertainty around the outlook for the economy and inflation, combined with the ongoing impact of the interest rate hiking phase of the cycle has fuelled volatility in financial markets, leading to market strain, as seen most clearly in the banking sector. We will continue to monitor our allocations within the banking sector. For now, we are comfortable that the levels of yield provide an attractive reward for the credit risks, especially with a well-diversified spread of risk across many banks. It is certainly encouraging that attractive yields are available from so many more sources today, but we also expect volatility to be a defining feature of 2023. It is therefore important to remain nimble and be prepared to sell bonds that have performed well, especially whilst our outlook for the global economy and high yield bond markets, particularly the weaker parts, remains cautious.

[speedsgh] 10/8/2023 11:53

James Carthew: Soft landing vs recession weighs on bond funds -

The fortunes of Henderson Diversified Income, Invesco Bond Income Plus and CQS New City High Yield depend on getting this crucial forecast right...

[continues]

[shieldbug] 24/5/2023 18:17

Presentation on the Invesco website dated 18th April 2023 by Rhys Davies.

hxxps://www.invesco.com/uk/en/insights/aj-bell-webinar-delivering-steady-income-uncertain-world.html

[shieldbug] 24/5/2023 18:16

Thanks Alan - All good so far...

[alan pt] 30/3/2023 22:57

@shieldbug You'll also find quite a bit of helpful discussion on the SMIF thread, as it has plenty of AT1's/CoCo's

Interesting post on David Stevensons blog today as well:
davidstevenson.substack.com/p/investment-ideas-cocos-a-contrarian

I hadn't invested in bonds for a long time until recently, so I also had a bit of catching up to do! Some of the posts from CC2014 helped a lot with that

I do like to know about some of the detail, but I also take comfort that I'm investing with a manager who knows what they are doing and investing along with others who know a lot more than me :)

[shieldbug] 30/3/2023 13:14

Thanks CC2014 - its a bit of a learning experience for me. First time I have invested in bonds.

I thought I was investing in high yield corporate bonds which I understood to be clearly ranked above equity. Until Credit Suisse my attention had never settled on bank funding requirements and their clear differences to corporate debt.

[cc2014] 30/3/2023 11:59

Yes and no.

The investor cannot force redemption of the bond, thus "perpetual".

However, the bank or insurer has a call option which allows the redemption at 5 or 10 years or whatever or even earlier. In addition there will be likey be an interest rate reset at the 5, 10 year date etc. Because of the interest reset I can see why the manager wouldn't mention this.

Banks often call the AT1's or do tender for partial or full redemption. It's part of how they manage their capital.


At the end of the day BIPS is a high yield bond trust and to generate the high yield some of the investments are in risky stuff. You get nothing for free. Some of the investments are AT1.


The good news is that AT1's are now bouncing fast and the market has come to the view they have been panic oversold.

I suspect BIPS have been buying more as the gearing has gone up in the last few days. All good for us holders.

[shieldbug] 30/3/2023 11:56

So it seems AT1 perpetual bonds can be "called" (paid off) but only after 5 years from issuance. Depending on how they are structured there will be call dates when this can happen. This presumably allows to resize their AT1 debt level if needed.

[shieldbug] 30/3/2023 11:33

Perhaps I was hasty to feel reassured. While it seems the exposure to CS AT1 bonds was about 0.65%, according to the document posted on Invescos website BIPS overall exposure to AT1s is 20.93% as of 31/01/2023. That's one thing, then I learn that AT1s have to be perpetual. What I find really annoying about this is the recent inverview with the manager where he is asked about maturity he did not mention that 20% of the portfolio is perpetual. Not quite accurate in how he explained their offering in my view. Am I wrong about this?

[shieldbug] 22/3/2023 10:29

Thanks CC2014 & Alan PT. Nerves calmed.

[stansmith1] 21/3/2023 18:53

the trouble with being diversified....you catch a bit of whatever happens...

[cwa1] 21/3/2023 14:03

HEADLINE: 1st Interim Dividend

The Directors of Invesco Bond Income Plus Limited (the “Company”;) are pleased to announce the 1st interim dividend, in respect of the year ended 31 December 2023, of 2.875 pence per share. This dividend will be paid on 19 May 2023, to shareholders on the register at close of business on 21 April 2023. The shares will be marked ex-dividend on 20 April 2023.

[cc2014] 21/3/2023 11:33

I'm not sure it matters now Shieldbug as the daily NAV will have been updated to value them at zero.

As at Dec 23 0.4% of BIPS portfolio was in Credit Suisse bonds which are now valued at zero.

Not that it matters either but it's my view that there will be legal action over the burning of the AT1's resulting in either a full or partial recovery. Expect that to take 5 years.

[alan pt] 21/3/2023 11:27

Full portfolio listing is on the website. Assuming that it hadn't changed by the point of implosion, Credit Suisse was 0.4% of the portfolio

BIPS is so diversified that you only really have to worry about widespread/systemic problems. Of course those might still appear, but it doesn't feel like 2008 yet :)

[shieldbug] 21/3/2023 08:23

I'd like some clarification as whether BIPS had exposure to CT1 debt. Bloomberg are reporting Invesco apparently held $370m of Credit Suisse CT1 bonds.

[alan pt] 20/3/2023 16:01

Missed this on the bounce last time around, been waiting for an opportunity

Invested 6% today - my rule is that anything less than 5% is just playing, won't really make a difference to your portfolio

[stansmith1] 03/3/2023 19:19

Thanks for replies, I must say with portfolio allocations of around 1% for BIPS I do wonder what occupies the other 99%...

[hindsight] 02/3/2023 10:45

cc2014, tend to agree, think funds or etfs depending on discount situation ie below chart, cover thier fees in that they can buy institutional bonds that are yielding higher than retail

[cc2014] 02/3/2023 09:16

#195

Can sharing holdings or portfolios be helpful as we all have different objectives and attitudes to risk?

Having said that what you get with BIPS is a fund managed by a reputable manager Invesco that has been around for decades and has delivered. It also has a low management fee. That goes some way to explaining why it's currently trading at a premium and why people are prepared to pay it.

It's a good reputable fund. There are others in the same sector which more or less risk

[flyer61] 02/3/2023 08:27

Hold NBMI as well. Currently liquidating but probably annual double digit return until it's completed.