The paragraph is an introduction to Invesco Ltd.'s First Quarter Earnings Conference Call. The operator and Gregory Ketron, Invesco's head of investor relations, open the call, mentioning that a press release and presentation are available on their website. The presentation includes forward-looking statements and non-GAAP financial measures, with disclaimers provided in the slides. Andrew Schlossberg, President and CEO, and Allison Dukes, CFO, will present the company's Q1 results and discuss a new strategic partnership with MassMutual, including a $1 billion repurchase of preferred stock. The call will conclude with a Q&A session.

The paragraph outlines Invesco Ltd.'s strategic focus and strong market position amid global economic uncertainties. The company emphasizes its geographic diversity, broad investment portfolios, and strategic priorities, which aim to drive growth and deliver durable results. Invesco highlights its ability to adapt to various market conditions, evidenced by $17.6 billion in net asset inflows and an 18% increase in adjusted operating income in the first quarter. The company's diversified platform and global scale offer resilience in asset flows and benefits for clients and shareholders, even during turbulent times.

In the third paragraph, the speaker discusses a change in reporting investment capabilities to better isolate the performance of the China JV and India business. Assets previously grouped under Asia Pacific managed capability are now reallocated to representative investment capabilities, mainly fundamental equities, to reflect the business's dynamics better. The speaker highlights the increasing ability to offer international products to local markets, using a UK-managed global equity income fund gaining popularity in Japan as an example. An eight-quarter review aligns with this reporting change, and current reporting will still show assets and flows by client region. Notably, the Asia Pacific and EMEA regions each manage $276 billion in assets, contributing $15 billion in net long-term inflows in Q1, underlining the significance of the company's local presence in key global markets.

In the first quarter, Invesco Ltd. experienced strong client activity and growth across various channels despite market volatility. A highlight was securing a $10 billion mandate from the People's Pension Fund to create customized fixed income portfolios, with $6 billion funded in Q1 and $4 billion in April. The company's global ETF and index platform achieved 13% annualized organic growth, though ETF demand declined due to market volatility in March and April. However, ETF flows expanded across regions and asset classes, with notable growth in the US and EMEA markets. Invesco plans further expansion by launching new active ETFs throughout the year.

In February, Invesco Ltd.'s QQQ ETF was listed on the Hong Kong Stock Exchange, marking its first cross-listing outside North America and expanding ETF markets in Asia. Despite a cautious environment for fundamental fixed income, Invesco achieved $8 billion in net long-term inflows and nearly $9 billion in global liquidity flows. There was strong demand for investment-grade and municipal bonds, with significant inflows into ultra-short duration strategies and stable value platforms. The retail SMA platform, focused on short duration, grew to nearly $30 billion AUM with a 25% annual growth rate. In direct real estate, Invesco recorded $1.1 billion in net inflows, driven by a UK mandate and its Incref real estate debt strategy, with over $5 billion in available capital for opportunities.

In the recent quarter, private credit capabilities experienced modest net outflows due to growing recession fears impacting their bank loan ETF, although client interest in real estate and alternative credit remains high. The China JV and India operations saw continued net inflows, largely driven by fixed income and ETFs, despite trade tensions affecting China's economy. However, expected government stimulus and increased domestic consumption might positively impact capital markets. Multi-asset strategies faced $1.1 billion net outflows, and while global equities experienced outflows in the US, the EMEA and Asia Pacific regions saw modest net inflows. The focus remains on delivering strong results.

The paragraph discusses Invesco Ltd.'s alternative aggregation of assets under management (AUM) and asset flows to provide context for business results, emphasizing the diversity of asset flows across geographies, channels, and investment styles for organic growth. It highlights the importance of achieving top quartile investment performance to maintain market share, with half of funds in the top quartile and over two-thirds of AUM beating benchmarks over three and five-year periods. The paragraph also outlines strategic priorities, including expanding into private markets, especially with wealth management clients, and maintaining balance sheet flexibility. A new partnership with MassMutual and Barings aims to develop and distribute private market products in the US wealth management market and repurchase preferred stock, focusing on private credit-oriented income solutions.

The partnership between Invesco Ltd. and Barings aims to enhance their global private credit and public fixed income capabilities, leveraging Invesco's US wealth management client relationships and both firms' product structuring expertise. MassMutual plans to support this initiative with a $650 million investment, adding to its previous $3 billion commitments to Invesco's strategies. This collaboration with Barings will strengthen Invesco's $130 billion private markets platform, expanding real estate and private credit strategies. Additionally, Invesco is repurchasing $1 billion of its preferred stock from MassMutual, which holds several advantages for Invesco. Allison Dukes will provide further details on this strategic decision and Invesco's financial results.

The paragraph discusses a company's plan to repurchase preferred stock using floating rate bank term loans with a 5.5% to 5.3% interest rate. The move will save $59 million in annual preferred dividends and is expected to be earnings accretive, increasing EPS by $0.13 once loans are repaid, projected by mid to late 2029. The loans will cost $40 million to $45 million annually after tax but will decrease as the principal is paid down. With terms similar to a floating rate credit facility, the loans have no prepayment penalties and no principal payments for the first three years, with amortization of 10% in years four and five. The transaction allows early reduction of a $1 billion non-callable preferred stock not due until 2040, enhancing balance sheet flexibility while maintaining capital deployment priorities.

The company anticipates sufficient cash flow to repay bank term loans and a $500 million senior note due in 2026, without affecting its capital priorities like investments, share repurchases, and dividend increases. Cash and equivalents are expected to stay around $1 billion. Discussions with MassMutual about repurchasing the remaining $3 billion of preferred stock are ongoing. A 15% premium will be paid to MassMutual to repurchase $1 billion of preferred stock early, impacting GAAP results but not adjusted operations. The repurchase will affect leverage ratios, initially increasing leverage due to term loans but improving significantly as loans are repaid. Overall, this transaction will enhance the company’s leverage profile over the next five years.

The paragraph discusses the financial performance of a company in the first quarter. Despite encountering weaker markets in the latter half of the quarter, the firm saw significant growth in assets under management (AUM), ending at $1.84 trillion. This growth was driven by net long-term inflows, which contributed an $18 billion increase, and positive impacts from their QQQ ETF, money market funds, and FX gains. However, these gains were partially offset by $7 billion in net outflows from fundamental equities. On the financial side, net revenues, adjusted operating income, and adjusted operating margin improved compared to the first quarter of 2024, and adjusted diluted earnings per share rose by 33% to $0.44. The company also improved its balance sheet, reducing net debt to $143 million from $362 million in the previous year.

The company ended the quarter with $74 million drawn on its credit facility, below usual seasonal levels, and repurchased $25 million in shares during the first quarter, with plans for continued regular repurchases. The board increased the quarterly dividend from $0.205 to $0.21 per share, reflecting strong cash flow. The firm has adapted to changes in client demand, resulting in a more diversified asset portfolio and reduced concentration risk in higher fee equities and multi-asset products. The net revenue yield for the first quarter was 23.5 basis points, down from 24.6 basis points in the previous quarter, with a portion of the decline due to two fewer days in the quarter.

In the first quarter, the company experienced a net revenue yield of 23.8 basis points, slightly lower than the adjusted yield of 24 basis points. Net revenue increased by 5% to $1.1 billion compared to the previous year, driven by higher investment management fees despite a shift in the Asset Under Management (AUM) mix. Operating expenses rose minimally by 0.3% from the previous year but declined by $8 million from the prior quarter due to reduced marketing, property, technology, and general expenses, offsetting increased compensation costs. Non-recurring benefits of $7 million were noted, primarily impacting G&A expenses. The alpha platform's implementation incurred costs of $13 million, and future one-time costs are expected to be $10 to $15 million. The company emphasizes disciplined expense management for 2025.

The company is navigating market volatility by managing its operating expenses, which are 25% variable without intervention and can increase to 30-35% with management actions. In the first quarter, they achieved over 5% positive operating leverage, resulting in a significant increase in operating income and an improved operating margin. The effective tax rate for Q1 was 24.4%, with an estimated non-GAAP tax rate of 25-26% for Q2 2025 due to income shifts across jurisdictions. The company is strengthening its balance sheet, reducing net debt to $143 million from $362 million in the prior year, and decreasing credit facility usage to $74 million. Leverage ratios have improved, and the company continues share repurchases and dividend increases.

The company plans to maintain a regular share repurchase program with a goal to have their total payout ratio, including dividends and buybacks, approach 60% by 2025. They highlight their strong net flow performance and progress in strengthening their balance sheet, which was enhanced by a $1 billion repurchase of preferred stock. Committed to profitable growth and high financial performance, they aim to enhance capital returns to shareholders. In a Q&A session, Alex Blostein from Goldman Sachs asks about the strategic opportunities with Barings and MassMutual. Andrew Schlossberg explains that the initial focus will be on private credit with plans to launch products quickly, followed by additional phases as opportunities arise.

The paragraph discusses the focus on private credit opportunities in the U.S. wealth management channel and addresses a question about a preferred deal involving MassMutual. Allison Dukes explains that despite the non-callable nature of the preferred for 15 years, MassMutual understands the challenges it poses, especially regarding the coupon, and is a strong partner in seeking alternatives. MassMutual, an 18% common shareholder, is invested in seeing stock improvements. The partnership with MassMutual and Barings reflects a multifaceted approach to manage $3 billion in preferred shares, with possibilities for mutually agreeable repurchase terms in the future.

The paragraph discusses a partnership between MassMutual and Invesco Ltd., with MassMutual committing up to $650 million in capital to support initial strategies in a new product partnership. This collaboration aims to help both companies access US wealth platforms more quickly. Andrew Schlossberg highlights the complementary capabilities of the two firms in the US wealth space and emphasizes their focus on this partnership. The paragraph ends with a mention of EQH increasing its stake in AllianceBernstein and MassMutual selling part of their preferred shares. Craig Siegenthaler of Bank of America inquires if this partnership could lead to a potential merger between Invesco Ltd. and Barings, but Schlossberg emphasizes their current focus on the collaboration.

The paragraph discusses the limitations on increasing an 18% equity stake or voting interest in Invesco Ltd., which is capped at 22.5% as per a shareholder agreement established during the Oppenheimer transaction in 2019. Despite the limit, progress continues in the partnership, including a $1 billion repurchase of preferred shares and an additional capital commitment of $3 billion. Mike Brown from Wells Fargo Securities inquires about the use of a $650 million commitment in the partnership, questioning whether it will be used to seed a new fund or expand capabilities like investment-grade private credit. He also asks if the structure is an interval fund targeting below-accredited investors. Andrew Schlossberg attempts to address these questions.

The paragraph discusses the use of initial seed capital to launch new products that complement Barings' existing investment capabilities, such as distressed credit and real estate debt, by expanding into specialty finance and higher-end direct lending. These new multi-asset solutions will be relevant and accessible to wealth management platforms. Mike Brown inquires about expense forecasts amid market volatility, questioning whether expenses could remain flat or decrease if markets stabilize. Allison Dukes responds, noting that compensation is the most variable expense factor, influenced by the revenue environment.

The paragraph discusses the company's financial strategy, focusing on maintaining compensation at 43% to 44% of revenue if revenue remains flat. Despite this, they plan to continue with the implementation of a project called Alpha, costing $10 to $15 million, which will proceed regardless of revenue changes. The company is scrutinizing all expenses, particularly discretionary ones like travel and hiring, to slow expense growth. Even with recent market volatility, they aim to manage costs effectively and pursue transformation opportunities while continuing to simplify their organization.

The paragraph features a conversation between Andrew Schlossberg and Daniel Fannon regarding market trends and investment strategies. Andrew discusses how investors, amid a volatile market, are maintaining investments but shifting towards a more defensive stance with new capital. They are reassessing asset allocations due to market uncertainty. The diversified nature of the business aids in navigating the current environment and capturing investment flows as clarity emerges. In fixed income, there's a focus on shorter durations, while equity strategies face challenges in the US. However, there's a positive investment flow trend in Europe and Asia, helping to offset US headwinds.

The paragraph discusses the resilience and positive performance of the institutional side of a business, especially in retirement platforms in the UK and US, and positive growth in China despite market declines. Allison Dukes mentions a $7 million one-time benefit in G&A expenses and explains that seasonal compensation is typically $15 million higher in the first quarter. As they move into the second quarter, there will be an expected increase in expenses due to these one-time benefits being removed. Additionally, Brian Bedell from Deutsche Bank congratulates the company on its partnership with MassMutual and Barings.

In the paragraph, Andrew Schlossberg from Invesco Ltd. discusses a new partnership focused on introducing Invesco products to the U.S. wealth management channel. This collaboration involves shared management fee revenues with Barings, although specific terms remain undisclosed. Invesco will serve as the distributor and product operator, with a focus on private credit and real estate debt offerings. Schlossberg emphasizes that while it's premature to predict the partnership's growth potential, these offerings are expected to strengthen Invesco's brand and appeal in private markets, and updates will be provided in the future.

The paragraph discusses Invesco Ltd.'s global asset distribution and market presence, highlighting that $550 billion of their assets are held by clients outside the United States, with a balanced distribution between Asia Pacific and EMEA. Asia Pacific has been a fast-growing region for Invesco due to its long-term presence and local capabilities. EMEA has also experienced good growth recently in asset flows and investment performance. The diversity in these regions contributes to Invesco's resilience in the current market environment. Despite many uncertainties, international markets have shown better asset flow and resilience compared to the US. However, it's still too early to determine if this is a trend.

In the paragraph, Bill Katz from TD Cowen asks about the increasing focus on alternative investments in the retirement market and how Invesco Ltd. is positioned in this potential shift. Andrew Schlossberg responds by explaining that Invesco has long focused on retirement markets and is positioned to capitalize on opportunities as alternatives and private markets integrate into defined contracts. He highlights Invesco's active strategies and relationships with plan sponsors and consultants as key advantages, emphasizing that this trend is not only occurring in the US but globally. He mentions growth in retirement business in the UK, the US, and Asia Pacific as examples. Additionally, Bill Katz notes that institutional decision-making has been delayed.

In the paragraph, the discussion involves Andrew Schlossberg addressing whether allocation dynamics are shifting among investors. He notes that while it's too early to definitively say where investments are being directed, fundings have occurred as expected, and investors are actively seeking consultation and diverse solutions. In response to concerns raised by Patrick Davitt about possible anti-American sentiment affecting investments, Schlossberg clarifies that they haven't encountered such rhetoric and are instead winning mandates and seeing active engagements with global investors.

The paragraph discusses a shift in market trends, with investors broadening their focus beyond US large-cap growth equities towards European markets and other segments such as value and domestic markets. This diversification is seen positively by Invesco Ltd. due to their diverse asset base. Moreover, their business in China is highlighted as a strong, locally-grown domestic operation. Allison Dukes emphasizes Invesco's local presence and diversified capabilities across continents. Andrew Schlossberg notes positive market flows in April, while Patrick Davitt inquires about Invesco's openness to larger transactions during significant market dislocations.

The paragraph discusses the company's strategic approach to expanding its product suite, particularly in private credit and infrastructure, through a mix of organic and inorganic means. Allison Dukes emphasizes that their willingness to fill capability gaps remains unchanged, and recent announcements aimed at enhancing their balance sheet provide increased flexibility for potential significant expansions. Andrew Schlossberg highlights their enthusiasm for partnerships, like the one announced with MassMutual and Barings, as a way to seize strategic opportunities and continue growing in various markets.

In the paragraph, Allison Dukes explains that their company's expense base has a 25% variable component, primarily linked to compensation, which can be adjusted without management intervention. With management action, this variability can be increased to 30-35%. In response to recent market volatility, the company has started taking measures such as slowing down hiring and internal travel. While focusing on client needs, they are also making other discretionary cuts to manage expenses. Additionally, they are prioritizing ongoing transformation opportunities for more efficient operations.

The paragraph discusses Invesco Ltd.'s strategy in the wealth management sector, emphasizing their focus on launching alternative products that leverage their strong U.S. distribution relationships. Invesco has successfully adapted their institutional capabilities, such as real estate debt strategies, to cater to the wealth management channel. By partnering with Barings and utilizing their distribution, product structuring, and educational resources, Invesco aims to differentiate itself from peers and drive success in the market.

The paragraph discusses the success and growth of the SMA (Separately Managed Account) platform, particularly in fixed income, where the platform is differentiated from competitors. It highlights that the growth largely stems from short and intermediate-duration strategies, with a focus on tax-free options. The platform also features several equity strategies, including traditional fundamental equity and tax-optimized strategies using unique indexes. The paragraph notes that they are well-positioned in income-oriented strategies and the SMA vehicle due to investments in deep technology, which support scaling efforts.

The paragraph is a discussion about the implementation costs and timing of an alpha platform update. Allison Dukes explains that they anticipate spending $10 to $15 million on implementation costs each quarter through 2025. A small wave of assets was moved to the platform at the end of the fourth quarter, and another is expected in the second half of the year. Full implementation might extend into late 2026 or early 2027, after which benefits such as reduced system redundancy are expected. Michael Cyprys seeks clarification that these costs will eventually trail off after 2027. However, any updates to the guidance will be provided later as the implementation progresses. The section concludes with the facilitator allowing one final question from Benjamin Budish of Barclays Capital.

In the conversation, Andrew Schlossberg addresses questions about the distribution timeline and investment requirements for the Barings deal. He explains that Invesco Ltd. has already established the necessary distribution infrastructure and will leverage their existing platform, though timelines for full distribution are uncertain and may take several quarters. Schlossberg also emphasizes the company's readiness to help clients navigate uncertain market conditions, expressing confidence that client convictions will lead to future opportunities for growth, performance, and profitability.

The paragraph concludes a conference call for Invesco Ltd., expressing optimism about the company's future and gratitude to participants. It encourages attendees to contact the investor relations team for further questions and looks forward to future interactions. The operator then ends the conference.

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