Invesco Mutual Funds. Invesco Balanced-Risk Retirement Funds An innovative approach to saving for retirement

Transcription

1 Invesco Mutual Funds Invesco Balanced-isk etirement Funds n innovative approach to saving for retirement

2

3 Invesco Balanced-isk etirement Funds Offering risk-aware portfolios that can help investors of all ages reach, and enjoy, retirement Innovation is about building on existing concepts with new ideas. It s advancing an existing product in form and function to improve performance. Think vacuum tube to transistor, telegraph to smartphone, wood stove to microwave. The Invesco Balanced-isk etirement Funds offer an innovative approach to saving for retirement. They use Invesco s balanced-risk, multi-asset strategies to advance the concept of traditional target date funds portfolios that are constructed and managed based on the specific time at which investors are expected to begin making withdrawals. The principal value of a target date fund is not guaranteed at any time, including at the target date. ll five of Invesco s Balanced-isk etirement Funds are underpinned by Invesco Balanced-isk llocation Fund (IB), a risk-balanced approach to asset allocation designed to preserve capital and generate competitive returns in a variety of economic environments. In addition, the three funds with the longest target dates 2030, 2040 and 2050 have Invesco Balanced-isk ggressive llocation Fund (IB) as an underlying investment, providing a higher risk-return profile for investors who have more time until retirement. The two funds with the closest target dates 2020 and Now include an allocation to cash, providing a lower risk profile for investors whose retirement is imminent. Invesco Balanced-isk llocation Fund: The balanced-risk approach to investing Managing portfolio risk is one of the biggest challenges investors face. Too much risk could deplete savings, while investments with too little risk might not earn enough for retirement. Investors commonly try to manage risk by allocating some of their investment dollars to stocks for growth potential and some to bonds for capital preservation. Many consider a 60% stock/40% bond allocation a balanced portfolio. But allocating dollars isn t the same as allocating risk. Because stocks are riskier than bonds, a 60/40 portfolio could actually derive a large portion of its risk from the stock allocation. s a result, a stock market drop could have a much bigger effect on 60/40 retirement portfolios than investors realize. Invesco Balanced-isk llocation Fund, which forms the foundation of all five target date funds, takes an innovative approach to this dilemma. It attempts to equalize how much risk each asset class contributes to the fund and that calculation drives the allocation of investment dollars. This approach seeks to limit the effect that one underperforming asset may have on overall fund performance. The goal is to build a portfolio that can perform well in all three major types of economic environments: ecessionary Noninflationary growth Inflationary growth sset allocation does not guarantee a profit or eliminate the risk of loss. Under normal conditions, the strategy invests in derivatives and other financially-linked instruments whose performance is expected to correspond to US and international fixed income, equity and commodity markets. However, the performance of the asset classes cannot be guaranteed. The derivative investments and enhanced investment techniques (such as leverage) used by the portfolio are subject to greater risks than those associated with investing directly in securities or more traditional instruments. The Invesco Balanced-isk llocation Fund and the Invesco Balanced isk ggressive llocation Fund are expected to be volatile over the short to intermediate term because of the significant use of derivatives and other instruments that provide economic leverage. Invesco Balanced-isk etirement Funds 1

4 In addition, while many investors split their investment dollars between stocks and bonds, the fund includes a third asset class: commodities. Here s why: ommodities have historically performed well in inflation-driven markets. The historically low to moderate correlation of commodities to other assets provides a diversification benefit. Our research suggests that including commodities should help generate positive excess returns relative to the funds benchmarks. The charts below illustrate how IB s diversification strategy is designed to equalize the risk contribution of each asset to mitigate the effect on fund performance if one asset underperforms. Diversification Framework Designed to Limit the Effect of dverse Environments Inflationary growth Non-Inflationary growth ecession Inflation hedges Growth assets Included: ommodities Excluded: Included: Developed Equities Excluded: Long-Term Government Bonds (hedged) Direct eal Estate Private Equity Infrastructure High ield/redit Deflation hedges Treasury inflationprotected securities (TIPS) hedge is an investment to reduce the risk of adverse price movements in an asset. Normally, a hedge consists of taking an offsetting position in a related security, such as a futures contract. isk llocation Drives Fund sset Weights Invesco Balanced-isk llocation Portfolio epresentative Strategic isk ontribution ommodities Fixed Income Stocks isk allocation drives weights epresentative Strategic sset Weight % Unlevered Portfolio isk 5.9% 1 IB Portfolio isk 8% 1 IB Portfolio isk 12% 1 1 isk target. bove figures do not represent specific time periods or actual portfolio results. The risk targets are expected averages over a complete economic and market cycle and actual volatility levels for longer or shorter periods may be materially higher or lower than the targets, depending on market conditions. llocations are subject to change and are not buy/sell recommendations. For illustrative purposes only. isk is measured by standard deviation. Standard deviation measures a fund s range of total returns and identifies the spread of a fund s short-term fluctuations. Invesco Balanced-isk llocation Fund may help investors: Manage portfolio risk by balancing risk rather than dollar contributions across asset classes. Mitigate inflationary risk, which is important for achieving real growth, wealth accumulation and a comfortable retirement. ommodities may subject an investor to greater volatility than traditional securities such as stocks and bonds and can fluctuate significantly based on weather, political, tax, and other regulatory and market conditions. Diversification does not guarantee a profit or eliminate the risk of loss. 2

5 Invesco Balanced-isk ggressive llocation Fund: Higher risk and return potential The three target date funds that are designed for younger investors 2030, 2040 and 2050 include IB as an underlying investment. Both IB and IB have similar investment objectives, investment strategies and portfolio managers. However, IB boosts investors exposure to the underlying asset classes through a higher use of derivatives. Including this strategy in the longer-dated funds meets the demand of investors who seek more return potential in their younger years, when their tolerance for risk and volatility is higher. The glide path: Shifting investors asset allocation over time s illustrated below, investors with the most time until retirement have the highest allocation to IB as high as 100% 40 years from retirement. That aggressive exposure tapers down to 66% at 30 years and 33% at 20 years. t 10 years before retirement, IB is taken out of the mix and cash is included. Investors cash exposure rises during the decade before retirement, maxing out at a 40% cash/60% IB split at their retirement date and beyond. Shifting Investors Exposure to Meet Their Needs Over Time ash IB 8% risk target IB 12% risk target sset Weights % 2050 Fund 2040 Fund 2030 Fund 2020 Fund Now Fund ears to retirement In retirement ctual asset allocations for the funds may differ. isk Targets % 2050 Fund 2040 Fund 2030 Fund 2020 Fund Now Fund ears to retirement In retirement For illustrative purposes only. Invesco Balanced-isk etirement Funds 3

6 Key benefits The outcome of innovation is improved benefits for the user. The Invesco Balanced-isk etirement Funds offer investors these benefits: One strategy versus many. Instead of incorporating multiple underlying funds with differing strategies, Invesco s target date funds are underpinned by a single balanced-risk strategy invested across major asset classes. This structure reduces the number of managers and positions that must be researched and monitored on an ongoing basis. isk tolerance flexibility. IB increases the risk in the 2030, 2040 and 2050 target date funds to meet the demand of investors seeking more return potential in their younger years. Innovative asset allocation path. Ten years before each fund reaches its target date, it will begin to gradually reduce its allocation to IB, eliminate exposure to IB and introduce an allocation to cash. Each fund s allocation will hold steady at 60% IB and 40% cash at the retirement date. Economic positioning. Because assets perform differently as they move through the economic cycle, it s important to have exposure to assets that have low correlation with one another and that have historically performed well during these periods: Noninflationary environments. The strategy seeks growth when equities have historically performed well. ecessionary environments. The strategy seeks to protect on the downside and preserve portfolio value through its exposure to long-term government bonds, which have historically performed better during recessions than corporate, high-yield or emerging market bonds. Inflationary environments. The strategy strives to preserve purchasing power with its commodity component. isk-balanced approach. proprietary risk-balanced weighting approach seeks to create a strategic allocation that weights the assets classes stocks, bonds and commodities so that they contribute a relatively equal amount of risk to the portfolio. We believe this approach diversifies risk much more effectively than a traditional 60/40 stock-bond allocation. The strategy invests in derivatives and uses enhanced investment techniques (such as leverage) which are subject to greater risks than those associated with investing directly in securities or more traditional instruments. Tactical llocation. Within the risk-balanced framework, there is a defined amount of room for IB and IB to make tactical asset-class adjustments on top of the strategic allocation. These adjustments allow the fund managers to pursue stock, bond and commodity opportunities as they arise during the economic cycle. Management expertise. IB and IB reflecting Invesco s extensive expertise in global asset allocation strategies are actively managed by five seasoned portfolio managers, who average more than 19 years of investment experience. Fund features Nasdaq Symbols: Invesco Balanced-isk etirement Now Fund etire before 2014 INX INX INX INX 5 INIX 6 INFX Invesco Balanced-isk etirement 2020 Fund FTX FTX TFX FTX 5 FTSX 6 VFX Invesco Balanced-isk etirement 2030 Fund TNX TNX TNX TNX 5 TNIX 6 TNFX Invesco Balanced-isk etirement 2040 Fund TNDX TNDX TNDX TNDX 5 TNDIX 6 TNDFX Invesco Balanced-isk etirement 2050 Fund TNEX TNEX TNEX TNEX 5 TNEIX 6 TNEFX 4

7 bout risk Invesco Balanced-isk llocation Fund, Invesco Balanced-isk etirement 2020 Fund, Invesco Balanced-isk etirement 2030 Fund, Invesco Balanced-isk etirement 2040 Fund, Invesco Balanced-isk etirement 2050 Fund, Invesco Balanced-isk etirement Now Fund The tax treatment of commodity-linked derivative instruments may be adversely affected by changes in legislation, regulations or other legally binding authority. If, as a result of any such adverse action, the income of the fund from certain commodity-linked derivatives was treated as non-qualifying income, the fund might fail to qualify as a regulated investment company and be subject to federal income tax at the fund level. ommodity-linked notes may involve substantial risks, including risk of loss of a significant portion of principal and risks resulting from lack of a secondary trading market, temporary price distortions, and counterparty risk. ommodities may subject an investor to greater volatility than traditional securities such as stocks and bonds and can fluctuate significantly based on weather, political, tax, and other regulatory and market developments. hanges in the value of two investments or asset classes may not track or offset each other in the manner anticipated by the portfolio managers, which may inhibit their risk allocation process from achieving its investment objective. n issuer may be unable to meet interest and/or principal payments, thereby causing its instruments to decrease in value and lowering the issuer s credit rating. The dollar value of foreign investments will be affect ted by changes in the exchange rates between the dollar and the currencies in which those investments are traded. Derivatives may be more volatile and less liquid than traditional investments and are subject to market, interest rate, credit, leverage, counterparty and management risks. n investment in a derivative could lose more than the cash amount invested. n investment in emerging market countries carries greater risks compared to more developed economies. In general, stock values fluctuate, sometimes widely, in response to activities specific to the company as well as general market, economic and political conditions. n investment in exchange-traded funds (ETFs) may trade at a discount to net asset value, fail to develop an active trading market, halt trading on the listing exchange, fail to track the referenced index, or hold troubled securities. ETFs may involve duplication of management fees and certain other expenses. ertain of the ETFs the fund invests in are leveraged, which can magnify any losses on those investments. Exchange-traded notes (ETNs) are subject to credit risk of the issuer, and the value of the ETN may drop due to a downgrade in the issuer s credit rating, despite the underlying market benchmark or strategy remaining unchanged. Issuers of foreign government debt or the governmental authorities that control repayment may be unable or unwilling to repay principal or interest when due, and the fund may have limited recourse in the event of default. Without debt holder approval, some governmental debtors may be able to reschedule or restructure their debt payments or declare moratoria on payments. The risks of investing in securities of foreign issuers can include fluctuations in foreign currencies, political and economic instability, and foreign taxation issues. Interest rate risk refers to the risk that bond prices generally fall as interest rates rise and vice versa. The fund may hold illiquid securities that it may be unable to sell at the preferred time or price and could lose its entire investment in such securities. The investment techniques and risk analysis used by the portfolio managers may not produce the desired results. The prices of and the income generated by the fund s securities may decline in response to, among other things, investor sentiment, general economic and market conditions, regional or global instability, and currency and interest rate fluctuations. By investing in the Subsidiary, the fund is indirectly exposed to risks associated with the Subsidiary s investments. The Subsidiary is not registered under the Investment ompany ct of 1940, as amended (1940 ct), and, except as otherwise noted in this prospectus, is not subject to the investor protections of the 1940 ct. hanges in the laws of the United States and/or the ayman Islands, under which the fund and the Subsidiary, respectively, are organized, could result in the inability of the fund and/or the Subsidiary to operate as described in this prospectus and the SI, and could negatively affect the fund and its shareholders. Obligations issued by US Government agencies and instrumentalities may receive varying levels of support from the government, which could affect the fund s ability to recover should they default. Underlying investments may appreciate or decrease significantly in value over short periods of time and cause share values to experience significant volatility over short periods of time. Invesco Balanced-isk etirement 2020 Fund, Invesco Balanced-isk etirement Now Fund From time to time, an underlying fund may invest more than 25% of its assets in unsecured bank instruments, including but not limited to certificates of deposit, time deposits and bankers acceptances. To the extent an underlying fund focuses its investments in these instruments or invests in securities issued or guaranteed by companies in the banking and financial services industries, the underlying fund s performance will depend on the overall condition of those industries and the individual banks and financial institutions in which an underlying fund invests. Financial services companies may be dependent on the supply of short-term financing. The value of bank instruments and securities of issuers in the banking and financial services industry can be affected by and sensitive to changes in government regulation and interest rates and to economic downturns in the United States and abroad. The risk of holding bank instruments is also directly tied to the risk of insolvency or bankruptcy of the issuing banks, which risk may be higher for larger or more complex financial institutions that combine traditional, commercial and investment banking. Holding cash or cash equivalents may negatively affect performance. U.S. dollar-denominated securities carrying foreign credit exposure may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. The fund is subject to the risks of the underlying funds. Market fluctuations may change the target weightings in the underlying funds and certain factors may cause the fund to withdraw its investments therein at a disadvantageous time. lthough the underlying fund seeks to preserve the value of your investment at $1.00 per share, you may lose money by investing in the underlying fund. ou should not rely on or expect the underlying fund s adviser or its affiliates to enter into support agreements or take other actions to maintain the underlying fund s $1.00 share price. The credit quality of the underlying fund s holdings can change rapidly in certain markets, and the default of a single holding could have an adverse impact on the underlying fund s share price. dditionally, the underlying fund s yield will vary Municipal securities are subject to the risk that legislative or economic conditions could affect an issuer s ability to make payments of principal and/ or interest. einvestment risk is the risk that a bond s cash flows (coupon income and principal repayment) will be reinvested at an interest rate below that on the original bond. If the seller of a repurchase agreement defaults on its obligation or declares bankruptcy, delays in selling the securities underlying the repurchase agreement may be experienced, resulting in losses. The absence of an active secondary market for certain variable and floating rate notes could make it difficult to dispose of the instruments, and a portfolio could suffer a loss if the issuer defaults during periods in which a portfolio is not entitled to exercise its demand rights. n underlying fund s yield will vary as the short-term securities in its portfolio mature or are sold and the proceeds are reinvested in other securities. dditionally, inflation may outpace and diminish investment returns over time. Invesco Balanced-isk etirement 2030 Fund, Invesco Balanced-isk etirement 2040 Fund, Invesco Balanced-isk etirement 2050 Fund The fund is subject to the risks of the underlying funds. Market fluctuations may change the target weightings in the underlying funds and certain factors may cause the fund to withdraw its investments therein at a disadvantageous time. The fund is non-diversified and may experience greater volatility than a more diversified investment.

8 Explore Intentional Investing with Invesco t Invesco, all of our people and all of our resources are dedicated to helping investors achieve their financial objectives. It s a philosophy of investment excellence we call Intentional Investing, and it guides the way we: Manage investments Provide choices onnect with our clients Our dedicated investment professionals search the world for the best opportunities, and each investment team follows a clear, disciplined process to build portfolios and mitigate risk. We manage investment strategies across all major asset classes and deliver them through a variety of vehicles. Our wide range of choices allows you to create a portfolio that s purpose-built for your needs. We re committed to giving you the expert insights you need to make informed investing decisions, and we are well-equipped to provide high-quality support for investors and advisors. FO US USE ONL Before investing, investors should carefully read the prospectus and/or summary prospectus and carefully consider the investment objectives, risks, charges and expenses. For this and more complete information about the fund(s), investors should ask their advisors for a prospectus/summary prospectus or visit invesco.com/fundprospectus. orrelation indicates the degree to which two investments have historically moved in the same direction and magnitude. Past performance cannot guarantee future results. Not all products, materials or services available at all firms. dvisors, please contact your home office. ll data provided by Invesco unless otherwise noted. invesco.com/us IB-BO-1 06/14 Invesco Distributors, Inc 7184