High demand for Invesco Bond Income Plus

High demand for Invesco Bond Income Plus - is it worth investing?

The Invesco Bond Income Plus trust, currently the largest in its sector with a market value of £330 million, offers a relatively high yield of 6.7%. This trust, formed through the merger of two sub-scale high-yield funds in 2021, is managed by a team of 13 fund managers, 19 analysts, and eight dealers, with lead manager Rhys Davies at the helm.

Rhys Davies, who also manages £2 billion in Invesco's Monthly Income Plus fund and £2 billion in a segregated mandate, sometimes acquires holdings of companies already in default to benefit from a recovery in value. This strategy, coupled with a portfolio that is nearly 70% sub-investment grade, contributes to the trust's high yield.

Despite the high yield, the yields on higher-quality corporate bonds and government bonds are scarcely higher than 4%. In comparison, the redemption yield of the Invesco Bond Income Plus portfolio is 8%, which rises to 9% with the benefit of borrowings. The yields on funds in the debt, loans, and bonds investment-trust sector are significantly higher, with some exceeding 10%.

The portfolio turnover of the Invesco Bond Income Plus trust is about a third each year. This turnover, combined with the management team's expertise, helps to keep the portfolio diverse and adaptable to market conditions.

Default rates on high yield in the portfolio, according to Moody's, are below 4%. This low default rate, along with the portfolio's high yield, provides compensation for rate risk and credit risk, making it an attractive option for fixed-income investors.

The fund has performed well in the last year, returning 13%, but the three-year return is 4%. Despite this, the shares of the Invesco Bond Income Plus trust have traded at a small premium to net asset value since late 2022.

Interest rates are starting to fall, which could potentially increase the appeal of the Invesco Bond Income Plus trust further. However, it's important to note that better yields may be available elsewhere for fixed-income investors, but the ride is unlikely to be as easy as with the Invesco Bond Income Plus trust.

The trust's performance in the past year is particularly noteworthy. After a 18% fall in the share price in the year to 30 September 2022, due to rising interest rates in the UK and US, the share price has fully recovered and is now at an all-time peak.

While the co-manager of the Invesco Bond Income Plus Trust alongside Rhys Davies is not explicitly named in the available search results, the trust's success is a testament to the combined efforts of its dedicated management team. For those seeking a high-yielding, relatively low-risk fixed-income investment, the Invesco Bond Income Plus trust could be worth considering.