The paragraph introduces Invesco's Third Quarter Earnings Conference Call, highlighting that the call will last an hour, with a listen-only mode until the Q&A session. Participants can ask one question and a follow-up. The call is recorded, and Greg Ketron, the Head of Investor Relations, starts by mentioning the associated press release and presentation available on Invesco's website. These materials include forward-looking statements and non-GAAP financial measures, with disclosures and reconciliations provided. The official webcast can only be found on their website. The presentation will be given by Andrew Schlossberg, President and CEO, and Allison Dukes, CFO. Andrew then begins by expressing satisfaction with Invesco's achievements over the quarter, citing record long-term assets under management, strong net inflows, enhanced operating leverage, a stronger balance sheet, and increased shareholder returns.

Despite global volatility, U.S. markets ended the quarter with strong equity returns, aided by factors such as Federal Reserve cuts, a new Chinese stimulus, and a less hawkish stance from Japanese policymakers. This led to a rally as investor sentiment improved, with increased demand in both equity and fixed income markets. However, Chinese markets faced challenges, and fixed income interest declined mid-quarter due to rising bond yields. The late-September stimulus spurred a strong equity rally in China, impacting quarterly returns. The company leveraged its global client network and product suite to achieve strong net inflows of $16.5 billion, with positive growth across all regions: Asia Pacific, EMEA, and the Americas.

The paragraph discusses the strong performance and strategic advancements of a company in the vehicle delivery and financial asset class sectors. The company saw significant growth in assets under management (AUM), reaching a record $1.8 trillion, and achieved positive operating leverage with improved operating income and margin. They enhanced financial flexibility by reaching a zero net debt goal and conducting $25 million in share buybacks. The firm remains strategically focused and well-positioned for continued growth despite a challenging global environment, driven by strong ETF platform performance and leading flows in the U.S. market, particularly in factor-based equity strategies and fixed income products.

In the latest quarter, the company experienced significant growth in the EMEA region with nearly $5 billion in net inflows and launched new products, focusing on active ETFs. The firm also saw strong performance in fundamental fixed income, achieving nearly $6 billion in net long-term inflows, driven primarily by institutional demand, particularly in the Asia Pacific region. U.S. wealth management flows were robust, largely from the expansion of its SMA platform. In private markets, growth was flat overall, but real estate capabilities, particularly the INCREF real estate debt strategy, recorded positive net inflows of $1.2 billion. The company remains optimistic about capturing more fixed income flows as investors increasingly rotate into this asset class.

The fund launched last year has gained traction, being distributed through key platforms including a major U.S. wealth manager by the third quarter. While alternative credit experienced outflows, strong inflows came from Asia Pacific, notably Japan, which saw $1.2 billion in net flows from global equity and income strategies despite outflows in local equities. In China, despite third-quarter market volatility and outflows, the launch of four equity ETFs through a joint venture highlights growth potential, with optimism tied to government economic stimulus efforts.

The paragraph discusses the positive effects of recent developments on the company's business, particularly in equities, despite short-term volatility. The company's strong prospects in the Asia Pacific region are highlighted, driven by joint ventures in China, Japan, and a new one in India. The company saw modest net inflows from multi-asset and quantitative strategies, while fundamental equity flows faced relative pressure. However, there has been a moderation in global, international, and emerging market outflows, which have slowed down compared to 2022. Strong inflows in global equity, income strategy, and small-cap equities have partially offset these outflows. The company's assets under management (AUM) have increased by 15% due to market gains. The investment leadership team focuses on delivering high-quality performance, enhancing talent, and improving risk management, with an emphasis on gaining market share in fundamental equity categories. Additionally, Slide 5 offers an alternative view of AUM and flows to provide more performance context.

The paragraph discusses the strong performance and results of the firm's diversified investment portfolio, highlighting positive net inflows in the institutional channel and overall client expansion. The firm is committed to achieving first quartile investment performance and has made progress, with over 50% of assets under management (AUM) in the top quartile of peers for one year and 43% over three years. Additionally, 71% of AUM outperforms benchmarks on a five-year basis, with 42% in the top quartile. Fixed income performance is notably strong, with substantial portions of assets leading peers and benchmarks. There is ongoing focus on improving fundamental equity performance, showing incremental progress with a notable percentage of AUM in the top quartile.

In the third quarter, Invesco achieved a record high total assets under management (AUM) of $1.8 trillion, a 5% increase over the previous quarter, with long-term AUM reaching $1.3 trillion. Higher market conditions contributed $50 billion to this growth, while net long-term inflows added $16.5 billion. ETF and index capabilities, particularly the QQQ, were significant contributors to this growth. Although fundamental fixed income saw net inflows of $6 billion, there were net outflows of $6.3 billion in fundamental equity. Average AUM increased by $73 billion to $1.7 trillion by the quarter's end. Financial metrics such as net revenue, adjusted operating income, and adjusted operating margin improved, with adjusted diluted earnings per share rising to $0.44 from $0.43 in the previous quarter. The balance sheet was further strengthened during this period.

In the third quarter, the firm achieved a net cash position surpassing its zero net debt goal and resumed share buybacks totaling $25 million, with plans for regular buybacks in the future. Client demand shifts have diversified the firm's portfolio, reducing concentration risk in high-fee equity and multi-asset products, and improving its ability to handle market changes. Net revenue yield trends are outlined, with a slight decrease to 25 basis points due to mix shifts. The firm's net revenue increased to $1.1 billion, up $18 million from the previous quarter and higher than last year, driven by increased investment management fees and higher average assets under management (AUM).

In the third quarter, performance fees declined by $14 million due to seasonal trends, while total adjusted operating expenses rose slightly by $6 million to $756 million compared to the second quarter. Compensation expenses decreased by $6 million quarter-over-quarter because of lower performance fee-related compensation, but a one-time non-cash acceleration of $148 million occurred due to changes in retirement criteria for long-term awards. These changes aim to stabilize compensation expense fluctuations and align retirement accounting with market practices. General and administrative expenses increased by $11 million, primarily due to higher costs associated with the Alpha platform implementation and professional fees. The Alpha-related implementation costs are expected to be approximately $15 million in the fourth quarter of 2024.

The paragraph discusses the company's financial progress in the third quarter, highlighting a positive operating leverage that led to a 4% increase in operating income and an improvement in the operating margin. The effective tax rate for the third quarter was 21.8%, and the non-GAAP effective tax rate for the fourth quarter is expected to be at the lower end of 23% to 25%. The company ended the quarter with a strong balance sheet, having $155 million in net cash and no credit facility draw. Leverage ratios improved to 0.26 times, and they resumed share buybacks, purchasing $25 million worth of shares. The company plans to maintain regular share buybacks and aims for a total payout ratio closer to 60% by 2025. Overall, the firm is focused on profitable growth, financial performance, and enhancing shareholder returns.

In the paragraph, during a Q&A session, Brennan Hawken from UBS asks about the impact of Chinese stimulus on IGW. Andrew Schlossberg responds, stating that while the stimulus hasn't significantly impacted the third quarter, there have been recent positive effects. He notes a shift in focus from fixed income towards equities and balanced portfolios in China. IGW's business is predominantly in fixed income and balanced portfolios, with 30% in equities, 30% in fixed income, 20% balanced, and 20% money market. Brennan then inquires about IGW's balance sheet management, noting Allison's effective deleveraging and the resumption of a buyback program. He asks if IGW has considered negotiating a buyback of preferred shares with MassMutual instead of buying back common shares.

In the paragraph, Allison Dukes discusses ongoing negotiations with MassMutual regarding a preferred instrument that they wholly own. While it's not easy to repurchase due to its non-call nature and associated liabilities, the company is focused on deleveraging efforts around it. These discussions have been ongoing for years, with the next maturity due in 2026. Meanwhile, the company aims to strengthen capital and liquidity, returning capital to common shareholders. Separately, Daniel Fannon from Jefferies inquires about changes in accounting for awards that led to a charge this quarter, seeking clarification on the implications for future adjusted results.

The paragraph discusses the changes in retirement criteria within a company to align with typical industry standards, providing clarity and transparency for employees regarding retirement. This change enables better planning from an accounting perspective by accelerating expenses related to retirement-eligible employees, thus reducing volatility in compensation expenses and earnings. This adjustment comes after experiencing significant volatility in the past due to executive retirements and aims to smoothen the financial impact of such events.

The paragraph discusses the current opportunities and trends in the financial sector, particularly regarding fixed income investments. Andrew Schlossberg highlights the increasing movement of money into fixed income due to greater clarity around interest rates and the resumption of previously delayed mandates. Institutional investors are leading this trend, with a notable increase in fixed income flows. In the retail and wealth management space, there is a strong focus on municipal investments in the U.S., both active and passive, with separately managed accounts growing rapidly. Allison Dukes adds that their pipeline has been stable, consistently around $15 billion, varying slightly each quarter.

The paragraph discusses the flow of institutional funds, indicating that while a third comes from a specific pipeline, two-thirds originate elsewhere. The flow amounts to about $15 billion, with a growing interest in fixed income investments. Andrew Schlossberg mentions their substantial $350 billion long-term fixed income platform, emphasizing improved profitability and increased interest in longer-duration investments. William Katz, an analyst, questions the company's position regarding trends in M&A and opportunities in the alternative investment space. Andrew responds by highlighting their focus on organic growth in private markets, particularly through leveraging real asset and alternative credit capabilities in wealth management.

The paragraph discusses Invesco's strategy in the U.S. wealth management sector, particularly in real estate debt, highlighting the high interest and successful integration into major platforms in the third quarter. The company sees significant opportunity in expanding private markets within wealth management due to their distribution strength and product origination capabilities. Invesco is open to inorganic growth strategies but feels confident in organic growth opportunities. William Katz raises a question about maintaining positive operating leverage despite constant growth drivers. Allison Dukes responds affirmatively, noting strong growth across various investment areas and their focus on driving incremental progress and positive operating leverage, supported by insights from their presentation slides.

The paragraph discusses the organization's focus on strengthening its capabilities, improving investment performance, and broadening distribution to retail and institutional clients to achieve positive operating leverage. It emphasizes expense management and revenue growth demonstrated in the latest quarter, with a particular interest in growth opportunities in Asia Pacific beyond China. The conversation highlights the commitment to profitability and expanding revenues. The dialogue mentions the brand's significant gross sales and the potential for organic growth or acquisitions to meet client needs.

The paragraph discusses the role of partnerships in business strategy, specifically highlighting their importance in expanding brand and distribution capabilities. Andrew Schlossberg mentions that partnerships have been a historical and ongoing strategy, citing examples in India and China, as well as in growing the company's ETF business. He emphasizes the intention to pursue partnerships geographically and in terms of distribution and investment capabilities. The discussion also touches on the partnership with MassMutual, highlighting the potential for growth through model portfolios within MassMutual's broker-dealer network and expanding sub-advised services in their insurance products across equities and fixed income.

The paragraph discusses the financial expectations and timeline for Invesco's integration of its AUM onto the Alpha platform. Integration expenses increased by $3 million in the third quarter due to implementation costs and fees paid to State Street. These costs are expected to remain consistent in the fourth quarter and peak next year, with guidance to be provided in 2025. The transition will continue into early 2026, after which Invesco anticipates cost savings from consolidating into a single platform, leading to improved profits.

The paragraph consists of a conversation about the performance and future expectations for BulletShares ETFs and private real estate flows. Andrew Schlossberg highlights strong recent growth in BulletShares, a leading fixed income franchise, attributing it to investor demand within wealth and institutional spaces. He anticipates this growth will continue, partially due to maturities in December that are reinvested in the first quarter. Alexander Blostein then inquires about the healthy contribution from private real estate flows, questioning whether this growth was primarily due to a one-time addition of a platform at the end of the quarter or if the strength has been more widespread.

The paragraph discusses the current state of the real estate market, focusing on flows and redemptions in the industry. Andrew Schlossberg notes that the addition of a large U.S. wealth platform offers opportunities but hasn't yet contributed to flows, while highlighting strong demand for their real estate debt strategy. Allison Dukes complements this by emphasizing growth in real estate separately managed accounts (SMAs) and an overall improvement in demand for real estate assets. She also mentions that redemption pressures are easing due to broader market improvements, although they remain slightly higher than usual.

The paragraph discusses the current state of real estate assets and interest rates, noting some cautious optimism as pressures ease. Andrew Schlossberg mentions that out of $70 billion in real estate assets, only half are in funds, with the rest in separate accounts and closed-end vehicles globally. Alexander Blostein raises a question about a sequential decrease in service and distribution fees despite higher markets and assets under management, which typically correlate. Allison Dukes explains the interplay between service and distribution fees and third-party distribution contra revenue, noting a trend towards higher fees due to a shift in product mix towards higher ETF flows in recent quarters.

The paragraph is a transcript of a discussion focusing on the dynamics and trends in the investment industry, particularly the shift from mutual funds to ETFs. Alexander Blostein acknowledges this shift and discusses its implications, including a change in revenue ratios due to service and distribution fees and third-party expenses associated with ETFs. The conversation moves on to Benjamin Budish from Barclays, who asks about the competitive landscape in the fixed income business. Andrew Schlossberg responds by stating that it is difficult to pinpoint the exact source of investment flows, but attributes the movement largely to prevailing market trends and changes in interest rates, rather than direct competition or market share gains.

The paragraph discusses the competitive landscape for assets in fixed income markets, noting that there's a global influx of assets from regions like Asia and Europe into investment-grade and emerging markets, including U.S. municipals. Benjamin Budish and Andrew Schlossberg talk about Invesco's distribution capabilities in private markets, emphasizing the use of a generalist-specialist model, particularly in the U.S. wealth space, to effectively market their products. They have been strengthening this setup by adding specialists, which has shown positive results. Invesco plans to focus on leveraging existing products and minimizing operational friction rather than further investing in distribution enhancements.

The paragraph discusses a joint venture (JV) in India, highlighting ongoing regulatory approvals and plans for completion in the first quarter. The speaker emphasizes the importance of choosing a good partner, noting their partner's strong banking-oriented distribution capabilities, which will help expand their client base in India. They believe in the potential of the Indian market, and although their involvement as a minority investor is less about India specifically, it is part of a strategic focus on critical areas. The JV allows them to contribute investment capabilities and participate in the market effectively.

The paragraph discusses the company's strategy for maintaining positive operating leverage and improving operating margins. Michael Cyprys asks about the expense outlook and its impact on future performance. Allison Dukes responds by emphasizing that the company aims to achieve positive operating leverage through strong organic growth and disciplined expense management, even without relying on market gains. The focus is on reaching a mid-30s operating margin, and although progress has been made, there is still work to be done. The goal is to build the business to deliver results regardless of market conditions.

In the discussion, Allison Dukes addresses questions about fees and expenses related to Alpha and State Street. The fourth-quarter fees are deemed immaterial (less than $5 million) due to the staged movement of assets under management (AUM), which affects next year's fees based on the amount and level of AUM moved in each wave. She mentions that more guidance will be provided as more details become clear. Quarterly expenses, particularly in marketing, general and administrative (G&A), and compensation, tend to rise due to performance fees. Overall, the expenses for the year have been tracking the initial $3 billion forecast for 2024, but due to revenue and market improvements, expenses might exceed this forecast slightly. Dukes confirms these points to Michael Cyprys, and then Brian Bedell from Deutsche Bank acknowledges that his questions have been mostly addressed.

In the paragraph, Andrew Schlossberg discusses the potential for an improved fee rate for the Great Wall JV due to a possible shift from fixed income to equities in China, impacting their business positively. He notes the market and business dynamics have changed significantly, leading to a more favorable position by the end of the quarter. Despite volatility, the company observed high asset rates. Brian Bedell inquires about global liquidity and seasonality in the fourth quarter. Schlossberg mentions that most of their cash liquidity assets are institutionally oriented and considers the impact of the rate-cutting cycle on liquidity flows.

The paragraph discusses how institutions are utilizing tools beyond money market and cash options in response to changing interest rates. The company's liquidity business, valued at $170 billion, remains profitable and is expected to continue growing. It differs from other asset managers due to its institutional focus. The conversation then shifts to Patrick Davitt from Autonomous Research, who inquires about the allocation origins fueling strong bond inflows, noting that both money funds and bond funds have been seeing significant inflows. Andrew Schlossberg responds, explaining that it's more about clients reallocating their own funds, with a trend towards longer durations in SMAs and core fixed income for both institutional and retail clients.

In the paragraph, Andrew Schlossberg explains that Invesco is well-equipped to help clients navigate changing market conditions. He notes that improvements in market sentiment and client conviction should lead to better performance and profitability for the company. Schlossberg expresses confidence in Invesco's future, credits colleagues for their efforts, and appreciates the interest of those on the call, encouraging them to contact Investor Relations with further questions. The conference call is then concluded by the operator.

This summary was generated with AI and may contain some inaccuracies.