Weakness in Invesco AAA CLO Floating Rate Note ETF's People and Process Pillar ratings limits this strategy to a Morningstar Medalist Rating of Negative. The portfolio maintains a cost advantage over competitors, priced within the second-cheapest fee quintile among peers.  

 The strategy’s management team earns a Below Average People Pillar rating. The strategy gets a Below Average Process Pillar rating.  The strategy's parent organization earns the firm an Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

Morningstar's evaluation of this fund's process seeks to understand management's investment philosophy, and whether it has been applied consistently over time and can add value across the market cycle. Invesco Aaa Clo Floating Rate Note ETF earns a Below Average Process Pillar rating.    The process benefits from low expenses across its parent firm's funds, whose fees rank in their respective category's middle quintile on average. The pattern of low fees at the firm suggests that it is focused on delivering strong results for investors. However, the rating is weakened by the parent firm's five-year risk-adjusted success ratio of 44%. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median Morningstar Risk-Adjusted Return for the period. The parent's modest success ratio suggests that the firm could do better across its fund lineup. The parent firm's five-year retention rate of 68% also holds the rating back.

 Compared with other funds in the Ultrashort Bond Morningstar Category, this fund takes on significantly lower credit risk. But in terms of long-term interest-rate sensitivity, it hews closely to its average peer over the past few years. Opening the analysis to additional factors, the portfolio has displayed biases over time, whether towards or away from certain fixed-income instruments. Relative to the category average, the managers have been meaningfully underweight corporate bonds in recent years. In the latest month, the strategy has also relatively underweighted corporate bonds compared with Morningstar Category peers. Additionally, there's been a notable underallocation from A rated bonds over the past few years. Similarly, in recent months, the strategy also had less exposure to A rated bonds than peers. Finally, during the past few years, the fund leaned meaningfully towards debt with 10- to 15-year maturities. In this month, the strategy also leaned more towards debt with 10- to 15-year maturities compared with its peers.

 This strategy has an 8.0% 12-month yield, higher than its average peer's 4.8%. It also has a 7.0% 30-day SEC yield (a standardized, point-in-time estimate of the fund’s future income return). While a higher yield may deliver more income, it also tends to indicate higher credit risk. But that isn't always the case. Over the past 12 months, the average yield of the fund has been higher than the average yield of its Morningstar Category peers. The portfolio holds assets with a higher average surveyed credit quality of AAA, compared with the category average of A, and it holds no non-investment-grade assets, despite the average peers' 3%. Strategies with less credit risk may help to provide a reliable ballast during periods of market stress.

Below Average

Process

Invesco Aaa Clo Floating Rate Note ETF earns a Below Average People Pillar rating. Scott Baskind, the longest-tenured manager on the strategy, provides strong guidance, offering 23 years of listed portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 3.2 stars, indicating that their risk-adjusted returns have been in line with the category average. Scott Baskind has an experienced listed co-manager. Together, they average 12 years of listed portfolio management experience.  

 Note: The People Pillar rating is indirectly assigned by an analyst. The longest-tenured manager of the fund also manages a different product rated by an analyst. Their analyst-assigned People Pillar rating is combined here with the People scores (algorithmic or analyst-assigned) for the fund’s other managers on a tenure-weighted basis.

People

Invesco succeeds in a number of areas but also has its share of subpar offerings, along with many others that land somewhere in the middle. A mid-2023 change of CEO, from longtime chief Marty Flanagan to veteran Invesco executive Andrew Schlossberg, is noteworthy, and several other executives retired or departed in 2023. Portfolio-manager shuffles aimed at bolstering poor performers, which began under Flanagan, have continued under Schlossberg, who told Morningstar his most important aim is bolstering “investment quality.” However, major changes of direction or approach are unlikely. The firm retains a Morningstar Parent rating of Average. 
Invesco’s international-equity teams in Texas and New York remain solid. However, the extensive U.S.-equity lineup needs improvement. Fixed-income offerings run the gamut: The multisector and short-term-bond areas are good, but corporate high-yield is less impressive. The firm’s exchange-traded fund lineup includes the popular Nasdaq-focused QQQ; passive strategies make up around 37% of Invesco’s assets under management. Invesco has not been averse to trying new types of strategies, and it was among the firms that immediately launched a spot bitcoin ETF after SEC approval in early 2024.
The picture outside the United States is mixed. Fund performance has been subpar in Asia, and while the picture has brightened in the United Kingdom and Europe, that region still can’t be considered a strength.

Average

Parent

Invesco AAA CLO Floating Rate Note ETF

ICLO is actively managed to invest in USD-denominated floating rate CLOs that are rated AAA or equivalent.

SPDR Bloomberg 1-3 Month T-Bill ETF

iShares Floating Rate Bond ETF

ProShares Investment Grade-Interest Rate Hedged

InfraCap REIT Preferred ETF

FolioBeyond Rising Rates ETF

iShares Short Treasury Bond ETF

The bets over imminent Fed rate cuts weakened on central banks' cues. These ETFs that offer protection against rising rates are at a 52-week high currently.

Fed Rate Cut Bets Ease: 5 ETF Areas at a 52-Week High

Invesco

Invesco China Technology ETF

Invesco S&P 500 BuyWrite ETF

Invesco Raymond James SB-1 Equity ETF

PBP, CQQQ and RYJ to reduce fees; fee waiver extended for ICLO ATLANTA , Jan. 4, 2024 /PRNewswire/ -- Invesco Ltd. (NYSE: IVZ), a leading global asset management firm, has announced that it will implement changes to four ETFs, as further outlined below.

Invesco Announces Changes to Four ETFs

Whenever a crisis hits, opportunity can arise. When the banking crisis potentially put the stability of the U.S. financial system in question during Q1, opportunities in collateralized loan obligations (CLO) were a byproduct.

Q1 Banking Crisis Put This CLO-Focused ETF in Perspective

Invesco Total Return Bond ETF

Invesco High Yield Select ETF

Invesco Municipal Strategic Income ETF

Invesco Short Duration Bond ETF

Invesco 1-30 Laddered Treasury ETF

Invesco has cut fees on a trio of fixed income ETFs totaling $1.7 billion in assets. The affected funds include the $985 million Invesco Total Return Bond ETF (GTO), the $654 million Invesco 1-30 Laddered Treasury ETF (PLW), and the $33 million Invesco AAA CLO Floating Rate Note ETF (ICLO).

Invesco Slashes Fees on 3 Fixed Income ETFs: GTO, PLW, ICLO

Invesco Senior Loan ETF

Simplify Enhanced Income ETF

SPDR Bloomberg High Yield Bond ETF

 SPDR Blackstone Senior Loan ETF

Invesco Variable Rate Investment Grade ETF

BondBloxx BB-Rated USD High Yield Corporate Bond ETF

BondBloxx CCC-Rated USD High Yield Corporate Bond ETF

Bull vs. Bear is a weekly feature where the VettaFi writers' room takes opposite sides for a debate on controversial stocks, strategies, or market ideas — with plenty of discussion of ETF ideas to play either angle. For this edition of Bull vs.

Bull vs. Bear: Are High Yield ETFs Worth the Higher Risk?

Invesco Taxable Municipal Bond ETF

Invesco BulletShares 2025 Corporate Bond ETF

Invesco BulletShares 2026 Corporate Bond ETF

Invesco PureBeta 0-5 Yr US TIPS ETF

With uncertainty around interest rates, inflation, and the possibility of recession, most investors will benefit by staying within the short to intermediate part of the curve when allocating to fixed income ETFs. Similarly, opting for balanced fixed income exposure as opposed to making big bets is recommended in the current environment.

7 Fixed Income ETFs to Consider in the Current Environment

Bonds have been following the downward selling pressure of stocks amid rising interest rates and inflation for the majority of 2022. However, the stage is set for a comeback in 2023 for bond-focused exchange traded funds (ETFs).

4 ETFs to Consider as the Stage Is Set for a Bond Comeback

Invesco has launched four new active ETFs, expanding the firm's lineup of fixed income solutions.

News for Invesco AAA CLO Floating Rate Note ETF ETF (ICLO)