Release Date: July 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Invesco Ltd (IVZ, Financial) achieved $16.7 billion in net long-term flows, marking a 6% annualized organic growth rate, the best quarter in over two years.
- The company ended the quarter with over $1.7 trillion in AUM, up 12% from the prior year, reaching a record high.
- Invesco Ltd (IVZ) generated positive operating leverage with revenues up over 3% from the first quarter and expanded its operating margin by over 270 basis points to 30.9%.
- The ETF franchise recorded $12.8 billion in net long-term inflows, representing a 13% annual organic growth rate, with a record high of $415 billion in long-term ETF AUM.
- The company saw exceptionally strong net long-term inflows of $6.7 billion in assets managed in the Asia Pacific region, led by its China JV.
Negative Points
- The market environment remained choppy, with general uncertainty and continued higher interest rates impacting client investment behavior and business results.
- The S&P 500 equal-weighted index declined by 3% in the quarter, indicating narrow market returns.
- Equity returns outside the US were mixed, with Europe down 1% and the Bloomberg Global AG index declining by 1% in the quarter.
- Invesco Ltd (IVZ) experienced $6.3 billion in fundamental equity net outflows during the quarter.
- The company continues to face pressure on active fundamental equity flows, although net outflows have slowed compared to previous quarters.
Q & A Highlights
Q: The fee rate came down on ETFs and multi-asset. Is this due to ongoing mix shift and not actual fee adjustments?
A: That is correct. The decline is due to continued mix across the product spectrum, not fee adjustments. (L. Allison Dukes, CFO)
Q: Can you expand on the green shoots for fixed income and the dynamics in APAC flows, particularly in China?
A: For fixed income, it's a combination of RFP volume, flow volume, and demand for longer-duration assets. In China, strong demand is driven by fixed income and balanced strategies, with economic developments supporting client activity. (Andrew Schlossberg, CEO)
Q: What is driving the trend towards a bigger headwind from net distribution and servicing fees?
A: The relationship between service and distribution fees and third-party distribution contra revenue is consistent. The trend is influenced by mix shift and other factors, but remains relatively stable as a percentage of management fees. (L. Allison Dukes, CFO)
Q: How should we think about the lower professional-related fees in G&A? Is this sustainable?
A: These expenses vary quarter to quarter due to factors like legal and consulting fees. They are not a sustainable tailwind but are expected to fluctuate. (L. Allison Dukes, CFO)
Q: Can you elaborate on the strategy around Invesco's ETF business and areas of growth?
A: Growth areas include active ETFs, geographic expansion beyond the US, and fixed income ETFs. The ETF business continues to scale well, contributing to profitability. (Andrew Schlossberg, CEO)
Q: What are the expectations for G&A for the full year and early thoughts on 2025?
A: G&A expenses are expected to be around $3 billion for the year, with some variability. Alpha implementation costs will continue through 2025, with implementation running through 2026. (L. Allison Dukes, CFO)
Q: Can you provide an update on the MassMutual relationship and its impact on alternative franchises and distribution?
A: The relationship remains strong, with significant investments in private markets and real estate debt. MassMutual continues to be a leading provider on our platform, supporting product launches and market expansion. (Andrew Schlossberg, CEO)
Q: Can you size the institutional pipeline and discuss major buckets like factor and solutions?
A: The institutional pipeline remains around $14-$15 billion, with a high fee rate. The strength in flows is driven by gross sales across regions, particularly in public and private credit. (L. Allison Dukes, CFO)
Q: Can you elaborate on your footprint and business in Japan and the outlook for growth?
A: Invesco has a long-standing presence in Japan with around $60 billion in AUM. Growth areas include retail, ETFs, and private markets, supported by recent regulatory changes and market reforms. (Andrew Schlossberg, CEO)
Q: How are you leveraging improved performance in fundamental equity in the sales process, and what is the potential for active ETFs?
A: Improved performance is being leveraged through close collaboration between sales, product design, and investment teams. Active ETFs are expected to grow, particularly in fixed income and equity strategies. (Andrew Schlossberg, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
