Information from Invesco on their funds pricing error
An accounting error was identified in the accounts of the Invesco Global Targeted Returns Fund (UK) (“GTR”) and the Invesco Global Targeted Income Fund (UK) (“GTI”) in 2023. The error started in March 2017.
The accounting error was in relation to the margin accounts for a Brazilian Real (BRL) equity index futures contract initially entered into in March 2017. The foreign exchange transactions relating to the margin accounts were erroneously omitted from the accounts. As a result, the funds’ net asset values were misstated every day from 22 March 2017 up to and including 17 June 2022.
Following the identification of the error, Invesco re-calculated the net asset value for both funds for every day of the pricing error. On 20 June 2022, accounting entries were made to correct the net asset value of the funds and therefore, the funds’ share prices.
These accounting entries included entries to reflect the amount that Invesco, as the Manager of the funds, needed to contribute to compensate the fund for:
- the net shortfall in amounts received by the fund for shares created during the period of the pricing error; and
- the net overpayments made by the fund for shares cancelled during the period of the pricing error
with the net asset value being overstated on most days during that period and understated on a minority of days during that period (10 days for GTI and 74 days for the GTR).
On 29 June 2022, the compensation was paid to the funds.
In January 2023 Invesco implemented a remediation plan to ensure that investors who have been net disadvantaged by the pricing error are compensated. Since then Quilter has been working with Invesco and their administrator, BNY Mellon, to ensure accurate calculation of the compensation for Quilter customers.
How Invesco have calculated what customers are owed
The methodology Invesco has used to calculate any net loss for each shareholding of each investor, is set out below:
- For all transactions in the error period, Invesco has calculated, the number of shares that should have been purchased/redeemed using the original consideration of the transaction and the correct share price
- Invesco calculated the correct share position based on the recalculation of each transaction
- Any difference between the existing share position and the newly calculated share position has been multiplied by the correct share price at the end of the error period (i.e. 17 June 2022) or, if the shareholding had been sold in full before the end of the error period, the correct price on the day the shareholding was sold. This final calculation provided the net loss made in cash terms.