Invesco plans fixed income ETF range for UK market

Invesco is planning to broaden its UK Powershares exchange traded funds (ETF) range with the launch of alternative-weighted fixed income products, Wealth Manager understands.

The group, which has 15 equity ETFs listed in London, is looking to launch a high yield ETF among other bond products, subject to regulatory approval.

The launch, in conjunction with Research Affiliates (RAFI), aims to provide more efficient passive exposure to fixed income rather than using the traditional cap-weighted approach.

The RAFI methodology is based on alternative indexing, looking at the ‘economic footprint’ of constituents, rather than the amount of debt outstanding.

Investors has long expressed concerns about the cap-weighted methodology in the bond markets, as these benchmarks have the highest weighting in companies or countries that have the most debt and are therefore arguably less creditworthy.

The launch would mark a significant development for Powershares in the UK, which has so far only focused on equity products.  Its suite comprises its ‘intelligent exposure’ range of RAFI country funds and its ‘intelligent access’ range, based on thematic exposure.

The firm also hired David Bower at the start of the year, formerly head of EMEA marketing at BlackRock and previously head of UK at its ETF business, iShares.

Although Invesco has a successful ETF range in the US, its UK-listed products have not gained as much traction to date.