Invesco Ltd. (IVZ) reported preliminary assets under management (AUM) of $641.1 billion at the end of February 2011, up 2.9% from $623.1 billion at the end of January 2011. The increase in AUM was primarily driven by positive returns from financial markets, strengthening of foreign currencies against the U.S. dollar (resulting in an AUM spike of $2.3 billion) and net inflows into institutional money market funds.

Invesco’s AUM excluding, exchange traded funds (ETFs), Unit Investment Trust (UIT) and passive funds, came in at $552.4 billion, up 2.8% from the prior month.

At the end of February, Invesco’s total equity assets were $304.0 billion, up 1.3% sequentially. The company’s total fixed income assets were $136.3 billion, a hike of 2.2% from $133.4 billion as of January 2011.

Invesco recorded $44.3 billion in balanced assets, slightly up compared with January 2011. Money market AUM was $73.9 billion (including $70.0 billion in institutional money market AUM and $3.9 billion in retail money market AUM), showing a surge of 11.6% from the prior month money market AUM of $66.2 billion. Alternative AUM came in at $82.6 billion, up 3.4% compared with $79.9 billion in the prior month.

Peer Performance

Yesterday, Franklin Resources Inc. (BEN), one of the closest competitors of Invesco, had reported preliminary month-end AUM of $693.7 billion of its subsidiaries as of February 28, 2011, up 1.9% from $681.0 billion as of January 31, 2011.

Our Take

We expect Invesco’s improving long-term investment performance to boost the operating results. Moreover, the company appears well positioned to benefit from the improvement in global investment flows, thanks to its broad diversification. However, we remain concerned about the augmented operating expenses and higher redemptions. Invesco could also face near-to mid-term challenges related to the municipal money market fund.

Invesco currently retains a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating. Further, considering the fundamentals, we are maintaining our long-term ‘Neutral’ recommendation on the stock.

 
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