S&P assigns Fund Management Ratings to two INVESCO Funds

Standard & Poor’s Fund Services, the provider of qualitative fund management ratings, has assigned Fund Management Ratings to two INVESCO Funds, following a detailed qualitative evaluation of the investment process and management of these funds:

INVESCO Emerging Local Currencies Debt Fund "A (New)"
INVESCO Perpetual Latin American Fund "A"
INVESCO Emerging Local Currencies Debt Fund "A (New)"

This fund, launched in December 2006, invests at least 65% of its assets in local currency emerging market debt, or in credit-linked notes that perform in line with local currency issues.

It is managed by the same team and manager as the more mainstream INVESCO Funds - Emerging Markets Bond Fund. While this team has been stable since 2005, the wider INVESCO fixed-income team has suffered some high-level departures recently. INVESCO's approach is very structured and team-driven and nearly all (with the exceptions of the Slovak Koruna and Czech Koruna) the alpha sources that relate to this fund are the responsibility of the members of this team.

The fund is benchmarked against the JPMorgan GBI EM Broad Diversified index and aims to outperform by 600bps before fees with target tracking error of 600bps. Half the alpha is expected to come from currency positioning but country, duration and curve could make up a third with general market beta accounting for the rest. Security selection, particularly in corporate bonds, may add a small amount.

The fund's tracking error has been 200-300bps in the first few months and it has thus outperformed the benchmark by 60bps gross, less than target. However, it has outperformed many other local currency emerging bond funds. Calich and her team have consistently done well with their mainstream fund, with country and currency selection both adding value.

The fund has achieved a Standard & Poor's "A/V5 (New)" fund rating, in line with the existing mainstream fund.

INVESCO Perpetual Latin American Fund "A"
This fund is managed in a pragmatic, risk-aware fashion to provide a broad exposure to the Latin American region. Fund manager Dean Newman brings all his experience to bear on this mandate. He started his career in 1985 covering UK equities and has focused on emerging markets since 1994.

Invesco Perpetual's resources dedicated to emerging markets are less strong than in other areas but are gradually growing and appear to be used effectively. Newman is supported by one analyst and has also recently started to use the input from Lusight, an independent research house focused on emerging markets.

The approach combines elements of top-down and bottom-up while keeping an eye on benchmark and peers.

Top-down considerations are used to create a broad picture of the region and direct stock research. Like most Latin America managers, Newman needs to have a view on the largest stocks in the region, which represent a large portion of the benchmark and are unlikely to be zero-weighted at any time. He then looks to add incremental value by fishing in the mid- and small-caps arena. Stock selection criteria are flexible and can range from deep value to growth. The manager aims to build a portfolio that at any given time has a good balance of large-/small-caps in terms of risk and opportunities.

Although he officially took over the portfolio in March 2004, Newman has been instrumental in achieving the fund's three-year second quartile ranking.

Newman is an experienced manager who shows considerable common sense and understanding of risk. The fund achieves a S& P "A" rating.