XAXCX
Invesco Dynamic Credit Opportunity-AX
Introduction to Invesco Dynamic Credit Opportunity-AX
The Invesco Dynamic Credit Opportunity-AX (XAXCX) is a mutual fund designed to provide investors with a high level of current income through exposure to bank loans. As part of the Invesco family, this fund is categorized under bank loans, which are known for their floating interest rates and potential for high yields. With a yield of 11.27%, XAXCX is particularly appealing to income-focused investors looking for opportunities in the credit markets. However, it is important to note the fund’s relatively high expense ratio of 4.15%, which may impact net returns.
At A Glance
Executive Summary
XAXCX offers a high yield of 11.27% with unique bank loan exposure, but has a high expense ratio of 4.15%.
High yield of 11.27% for income-focused investors. Unique exposure to bank loans. Positive alpha indicating potential outperformance.
High expense ratio of 4.15%. Negative beta indicating potential volatility. Limited correlation with benchmark.
Performance Amidst Market Dynamics
XAXCX has demonstrated a notable performance over the past year, with a 1-year return of 9.70%, outperforming its benchmark, the BBG Barclay Agg Bond- US Composite TR Ix, which returned 7.85% over the same period. This performance is indicative of the fund’s ability to capitalize on market opportunities within the bank loan sector. Despite its high yield, the fund’s annualized returns since inception stand at 1.98%, suggesting that while it can perform well in certain market conditions, investors should be mindful of its long-term performance trends.
Risk Metrics and Volatility Considerations
The risk profile of XAXCX is characterized by a negative beta of -0.24, indicating that the fund may move inversely to the market, which can be a double-edged sword. While this can provide diversification benefits, it also suggests potential volatility. The fund’s Sharpe Ratio of 0.31 and Treynor Ratio of -7.73 highlight the need for investors to weigh the risk-adjusted returns carefully. Additionally, the fund’s low correlation with its benchmark (-23.42%) and R-Squared value of 5.48% suggest that it may not track the broader bond market closely, which could be advantageous or disadvantageous depending on market conditions.
Max Drawdown and Recovery Analysis
XAXCX experienced a maximum drawdown of -1.7%, with a drawdown length of 2 months and a recovery length of 0 months, indicating a swift recovery from its lowest point. This resilience can be attributed to the fund’s strategic allocation within the bank loan sector, which often benefits from rising interest rates. The peak and valley dates from January to March 2024 highlight the fund’s ability to navigate short-term market fluctuations effectively. Investors should consider this aspect when evaluating the fund’s potential for capital preservation during volatile periods.
Comparative Analysis with Similar Funds
When compared to similar funds such as First Eagle Credit Opportunities-I (FECRX), Calvert Floating-Rate Advantage-R6 (CFORX), and BlackRock Credit Strategies-Inst (CREDX), XAXCX offers a competitive yield of 11.27%. However, its expense ratio of 4.15% is significantly higher than its peers, which range from 0.020000 to 0.036400. This higher cost could impact net returns, making it crucial for investors to weigh the benefits of its high yield against the cost of investment. Additionally, while XAXCX’s 1-year return is strong, it is slightly lower than some of its peers, which have returns ranging from 9.58% to 11.15%.
Portfolio Composition and Asset Allocation
The fund’s portfolio is primarily composed of bank loans, which are known for their floating interest rates and potential to provide a hedge against rising interest rates. This asset class allocation is designed to generate high income while maintaining a level of capital preservation. The fund’s strategy focuses on identifying opportunities within the credit markets that offer attractive risk-adjusted returns. Investors interested in diversifying their fixed-income portfolios with exposure to bank loans may find XAXCX’s asset allocation strategy appealing, particularly in a rising interest rate environment.
Suitability for Income-Focused Investors
XAXCX is particularly suitable for income-focused investors seeking high yields from their investments. The fund’s yield of 11.27% is one of its most attractive features, providing a steady stream of income. However, potential investors should be aware of the fund’s high expense ratio and the associated costs. The fund’s unique exposure to bank loans offers diversification benefits, but it also requires a tolerance for potential volatility due to its negative beta and low correlation with traditional bond benchmarks. Investors should consider their risk tolerance and investment goals when evaluating the suitability of XAXCX for their portfolios.
Conclusion: Weighing the Pros and Cons of XAXCX
In conclusion, the Invesco Dynamic Credit Opportunity-AX (XAXCX) stands out for its high yield and unique exposure to bank loans, making it an attractive option for income-focused investors. However, the fund’s high expense ratio and potential volatility due to its negative beta and low correlation with the benchmark are important considerations. Investors seeking high income with a willingness to accept the associated risks may find XAXCX a suitable addition to their portfolios. As always, it is crucial to conduct thorough due diligence and consider personal investment objectives before making any investment decisions.
Similar Securities
FCFRX: Franklin Floating Rate Daily Access-C | High Income Floating Rate Fund
FCFRX offers high current income with a focus on floating rate loans, boasting a yield of 8.41% and a low beta of 0.18, ideal for income-focused investors.
XAXCX: Invesco Dynamic Credit Opportunity-AX | High-Yield Bank Loan Fund
XAXCX offers a high yield of 11.27% with unique bank loan exposure, but has a high expense ratio of 4.15%.
RPIFX: TRPrice Inst Floating Rate-Inst | High Income, Low Volatility Investment
RPIFX offers high current income with a low expense ratio of 0.57% and a strong yield of 8.67%, making it a standout in the bank loans category.
AFRAX: Invesco Floating Rate ESG-A | High Income & Capital Preservation
AFRAX offers high yield and capital preservation with a focus on senior debt securities, boasting a 9.20% yield and low beta of 0.21.
XPRTX: Invesco Senior Loan-IB | High Yield Bank Loan Fund
XPRTX offers a high yield of 9.81% with low volatility, making it ideal for income-focused investors. Its bank loan focus provides unique market exposure.
Futher Reading
https://www.morningstar.com/funds/xnas/XAXCX/quote
https://finance.yahoo.com/quote/XAXCX/”>Yahoo: Invesco Dynamic Credit Opportunity-AX
https://ftcloud.fasttrack.net/web/chart/XAXCX
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