Invesco's AUM Rises in December - Analyst Blog

On Tuesday, Invesco Ltd. (IVZ) reported preliminary assets under management (AUM) of $616.0 billion at the end of December 2010, up 0.8% from $611.1 billion at the end of November. The increase in AUM was primarily attributed to the strengthening of foreign currencies against the U.S. dollar (resulting in an AUM spike of $2.9 billion) and positive returns from financial markets internationally.

However, Invesco's AUM excluding, exchange traded funds (ETFs), Unit Investment Trust (UIT) and passive funds, stood at $535.7 billion, up 3.7% from the prior month.

During the month, Invesco completed the acquisition of the Asia fund and asset management business of AIG Global Real Estate Investment Corp. This led to an inclusion of $5.4 billion of alternatives AUM, out of which $0.2 billion was classified as ETF/UIT/Passive alternative AUM.

At the end of December, Invesco's total equity assets were $294.1 billion, down 1.1% sequentially. The company's total fixed income assets were $131.9 billion, down 0.1% from $132.0 billion as of November 2010.

Invesco recorded $43.5 billion in balanced assets compared with $42.0 billion in November 2010. Money market AUM was $68.4 billion (including $64.2 billion in institutional money market AUM and $4.2 billion in retail money market AUM), down 0.7% from $68.9 billion in November 2010. Alternative AUM came in at $78.1 billion, up 10.3% compared with $70.8 billion in November 2010.

On January 10, Franklin Resources Inc. (BEN), one of the peers of Invesco, had reported preliminary month-end AUM of $670.7 billion of its subsidiaries for December, up 4.4% from $642.3 billion as of November 30, 2010.

Invesco operates as an independent investment manager and offers a diverse array of investment products and services. We expect a significant improvement in operating leverage from Invesco's cost control initiatives and benefit from the improvement in global investment flows attributable to its broad diversification.

However, we remain concerned about the increased redemptions and the volatility of the U.S. dollar. Also, the company could 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. Also, considering the fundamentals, we are maintaining our long term ‘Neutral' recommendation on the shares.

 
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