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Invesco reports 6.09% YTD return for pension bond portfolio; trustees question A‑only purchase restriction
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Summary
Dane Hoard, client portfolio manager for Invesco, told the General Employees Pension Plan Board of Trustees on Oct. 23 that the plan’s fixed‑income portfolio stood at just over $15.5 million and produced a year‑to‑date gross total return of 6.09% (5.95% net) through Sept. 30, 2025.
Dane Hoard, client portfolio manager for Invesco, told the General Employees Pension Plan Board of Trustees on Oct. 23 that the plan’s fixed‑income portfolio stood at just over $15.5 million and produced a year‑to‑date gross total return of 6.09% (5.95% net of fees) through Sept. 30, 2025. Hoard said income of roughly $360,000 plus investment appreciation of about $535,000 accounted for the result and that the mandate’s effective fee is 20 basis points.
The portfolio is benchmarked to the Bloomberg Intermediate U.S. Aggregate Index, Hoard said, but the plan’s mandate bars purchases of securities rated below A‑ (the “top three” investment‑grade categories). “The restriction on no securities purchased below single A minus or a 3 rated is really the key structural difference that we have in this portfolio compared to the index,” Hoard said, adding the rule reduces credit risk but can create a yield disadvantage because it excludes many BBB‑rated securities that are part of the index.
Why it matters: trustees pressed Hoard on how much of the benchmark is BBB and what the tradeoffs would be to allow lower‑rated investment‑grade bonds. Hoard estimated BBBs at roughly 8–10% of the stated benchmark and described the top‑three restriction as a legacy mandate “to mitigate credit risk.” He said current market spreads are very tight, which reduces the incremental yield available from lower‑rated investment‑grade bonds.
Trustee questions focused on two operational points: how Invesco computes returns (calendar‑year vs. the plan’s fiscal year) and whether the Investment Policy Statement could be revised to permit some exposure to BBBs. Hoard acknowledged managers typically use the broader investment‑grade universe but said the firm will manage to whatever constraint the IPS specifies.
Board follow‑up: trustees asked staff and Invesco to provide a fiscal‑year return in addition to the manager’s presentation, to quantify the benchmark’s BBB share, and to provide examples of historical spread movements that would materially affect total return. No formal change to the IPS was made at the meeting; a separate motion to amend the IPS was discussed and decided elsewhere on the agenda.
