Head of Structured Investments
Last week you listed the first closed-end fund in more than 10 years. Why now?
We are not typical issuers of closed-end funds. Invesco is one of the larger managers of closed-end funds but we haven't issued one in a long time because there hasn't really been an opportunity to do so. So we think now with the change-over of the new funds, with the target term, and the fact that they've traded really well on the Exchange, we thought we could bring together our experience and couple it with putting something on the Exchange that clients would really like.
Where do you see the growth area for ETFs?
The growth area in ETFs is definitely going to be in fixed income on a go forward basis. You know, we’re partnered with PowerShares – we own PowerShares - and we issue lots of things on the stock side but fixed income is really just in its nascent stages. And we think, going forward, fixed income is going to be the growth area.
What are your views on active vs. passive ETFs?
We think there's an opportunity for both active and passive. We’re active managers at heart and we think there's plenty of opportunity. From the client perspective, they need to think about things in terms of what their return objective is. You can certainly get a higher return from an actively managed asset portfolio, so we think there’s room for both active and passive. So it really boils down to what the client is looking for. Are they looking for passive? Are they looking for low fee? We have that on our platform. Are they looking for active? Looking to get a better return objective over a longer period of time? We have that as well.
What is a target term closed end fund?
What people have been searching for is an investment where they can put their money up front, harvest that monthly distribution over the life of the deal, and get paid back their principal or original NAV at the end of the deal. And we think the new target term funds do exactly that.
The features of a target term closed-end fund are really to make it look a lot more like a bond.
Do you anticipate more issuance of target term funds?
Without a doubt, there’s going to be a lot more issuance of target term funds.
In the closed-end fund space with fixed income as an underlying asset, there are many investors looking for a way to get higher income. We’re in a yield starved environment and this is a great way to do it without, from my aspect as a portfolio manager, not forcing any redemption. You can bring in assets so that you can get paid the “illiquidity premium” and put it in a closed-end fund, which works really well for investors. So you're able to bring assets that retail investors wouldn't normally be able to invest in by using the closed-end fund.
Can you provide an overview of your newly launched Invesco High Income 2023 Target Term Fund?
We just brought a transaction which we call Invesco High Income 2023 Target Term Fund (IHIT). It's largely invested in real estate related assets, mostly commercial debt. The reason we are looking to bring that in this wrapper is so that we can bring what has been historically an institutional product to the retail masses. And this wrapper allows us to do that.
We’re able to do that because there are no forced redemptions. We’re able to buy big blocks as you would in an institutional space but still hold them to maturity.
So we have a complex product that we can bring active asset management to and we can provide high conviction trades within this wrapper for the retail client.
Tell us how it feels to be on the floor of the New York Stock Exchange, ringing the bell.
It's an amazing feeling. Outstanding. I mean, for a fixed income guy, I wouldn't have normally put it on my bucket list – I thought you could never do it – but I've attained it today. This is just an unbelievable feeling. It’s hard to replicate so it’s been a fantastic day.
Hear Mario Clemente Discuss the Growth Area for ETPs