Invesco Ltd. (IVZ) reported its preliminary month-end assets under management (AUM) for the month of August 2011. Its AUM for the reported month dropped 3.6% to $629.4 billion from $652.8 billion at the end of July 2011, mainly due to the effects of negative market returns. Also, the foreign exchange lowered the AUM by $1.5 billion during the month under review.
Invesco’s preliminary AUM, excluding Exchange Traded Funds (ETFs), Unit Investment Trust (UIT) and passive funds, stood at $538.2 billion at the end of August 2011, down 3.4% from $557.4 billion in the prior month.
As of August 31, 2011, Invesco’s average assets stood at $641.9 billion, while average assets, excluding ETFs, UIT and passive funds, totaled $549.1 billion.
At August end, Invesco’s total equity assets were $276.4 billion, reflecting a fall of 7.8% from $299.8 billion recorded in the preceding month. Similarly, the company’s total fixed income assets fell slightly to $149.0 billion from $149.2 billion in July 2011.
During the month under review, Invesco’s balanced assets were $43.4 billion, down 3.1% from July 2011. Additionally, alternative AUM also inched down 1.5% to $87.8 billion during the month from $89.1 billion in the prior month.
However, Invesco’s money market AUM stood at $72.8 billion (including $68.3 billion in institutional money market AUM and $4.5 billion in retail money market AUM) in August, showing a 4.1% improvement from $69.9 billion in July 2011.
Peer Performance
Concurrently Franklin Resources Inc. (BEN), one of the peers of Invesco, also reported its preliminary month-end AUM for August 2011. The company reported preliminary AUM of $716.4 billion for its subsidiaries as of August 31, 2011, reflecting a decrease of 4.1% from $747.2 billion as of July 31, 2011.
Our Take
Improving long-term investment performance, propelled by a gradual recovery in the global equity market, is likely to boost Invesco’s operating results over the mid to long term. Though a significant improvement in operating leverage from Invesco’s cost control initiatives is expected over the long term, rising operating expenses will remain a near-term headwind to the company.
Invesco is also poised to benefit from improved global investment flows resulting from its broad diversification. However, we remain concerned about increased redemptions and a volatile U.S. dollar.
Invesco currently retains a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating. Also, considering the fundamentals, we are maintaining our long-term “Neutral” recommendation on the stock.
