Invesco's third quarter earnings call revealed a positive net long-term inflow, particularly in their ETF and SMA platforms, despite challenges in active equities. The company is progressing with a multi-quarter plan to streamline the organization and improve profitability. Invesco's strategic partnership with MassMutual continues to support their private markets business, and the company remains focused on capturing market share and driving profitability amid market volatility.
Key takeaways from the call:
- Invesco's ETF business experienced record flows, gaining market share.
- The SMA platform saw momentum in fixed income flows.
- The company faces flow pressure in active equities, with marked improvement in global, international, and emerging market equity segments.
- Invesco reported solid investment performance, with a majority of actively managed funds outperforming peers.
- AUM was $1.49 trillion at the end of the third quarter, with $2.6 billion in net long-term flows.
- Invesco plans to close its global targeted return strategy fund and focus on capabilities with stronger client demand.
- The company is making progress in building balance sheet strength, aiming to bring net debt down to zero by the second half of the next year.
Invesco reported that funds in the top half of peers have outperformed benchmarks on a three-year and five-year basis. The company generated $2.6 billion in net long-term flows, with strong demand for passive capabilities and ETFs. The Asia-Pacific region delivered net inflows, driven by growth in Japan, while Greater China experienced net outflows. Despite the outflows in the alternatives and fixed income, equities generated $7.4 billion in net long-term inflows.
In terms of financials, net revenues were $1.1 billion, and adjusted operating income was $309 million, with an operating margin of 28.2%. The company has made significant progress in building balance sheet strength, with a cash balance exceeding $1.2 billion and net debt standing at less than $250 million. The company aims to bring net debt down to zero by the second half of next year.
During the earnings call, the company discussed various aspects of its business, including its healthy institutional pipeline, real estate-oriented dry powder, and plans to bring new products to market in both the real estate and private credit spaces. The company also highlighted its efforts to improve its fundamental equities franchise and explore opportunities in active ETFs and SMAs.
Invesco executives also discussed the impact of shifting market trends and the performance of their funds. Despite the increased demand for passive investments and weaker demand for active investments, they highlighted the positive growth in their APAC managed funds and the expected growth in private markets and multi-asset offerings. They anticipate improved margins from the growth of their ETF business and a potential for fee rate stabilization from growth in APAC managed, private markets, and multi-asset offerings.
Invesco representative, Allison Dukes, mentioned that the ETF business is now accretive to the firm's margin and that scaling the business will improve the firm's margin overall. Andrew Schlossberg discussed the MassMutual partnership, stating they are now focused on executing and growing third-party assets from institutions and wealth managers, building on their current momentum.
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