EUR 850.00 For Business Accounts Only

Morningstar | Invesco needs to prove it can generate solid AUM and revenue growth to win back investors.

Invesco has impressed us with its ability to overcome the hurdles that get thrown in its way. During 2013 and 2014, the firm was affected by two major events--the sale of Atlantic Trust (in April 2013) and the departure of Neil Woodford from Invesco Perpetual (in April 2014)--both of which led to the loss of more than $20 billion in assets under management. Yet the firm's managed assets still increased from $667 billion at the end of 2012 to $776 billion at the end of 2015, with organic growth averaging 1.9% during those three years. The company's shares were once again pummeled by the Brexit vote in June 2016, but the event ended up having relatively little impact on its AUM, which rose 5% that year to $813 billion. More importantly, AUM sourced from the U.K. closed out 2016 at $98 billion, down just 6% year over year (and currently stands at $101 billion).We do, however, expect the road ahead to be difficult, as the firm faces regulatory changes around the globe aimed at increasing transparency around fees and performance, as well as pushing for a greater degree of fiduciary responsibility in retail-advised relationships. This has raised the hurdles for firms like Invesco, with the gatekeepers for retail intermediary platforms becoming much more focused on fees and performance than they ever have been when it comes to deciding what it takes to maintain a presence on their platforms (with poorer performing active managers and firms with funds that have higher-than-average expense ratios losing out to low-cost passive products).The best way for asset managers to combat the fee and margin pressure that these changes will force on the industry is to tap into areas of the market that have potential for AUM growth, which Invesco has done this past year with its purchase of the ETF operations at Source and Guggenheim. With the Source acquisition, Invesco picked up a European specialist ETF provider with $26.0 billion in managed assets, expanding its reach outside of the U.S. As for Guggenheim, which brought in $38.2 billion in AUM, the deal onboards a specialist in strategic beta products for Invesco, further diversifying the firm's ETF operations.