EUR 850.00 For Business Accounts Only

Morningstar | Invesco's path to prosperity depends on solid organic growth and improved profitability levels.

A confluence of several different issues--poor relative active investment performance, the growth and acceptance of low-cost index-based products, and the expanding power of the retail-advised channel--has made it increasingly difficult for asset managers running predominantly active portfolios to generate organic growth, leaving them more dependent on market gains to drive assets under management levels higher. While we continue to believe there will be room for active management, which is hard to do in an environment where an overwhelming majority of the flows are going into index funds and ETFs, we feel that the advantage when it comes to getting placement on platforms will go to asset managers that have greater scale, established brands, solid long-term performance, and reasonable fees.With $987.8 billion in total AUM at the end of July 2018, Invesco has the size and scale necessary to be competitive in the industry. It is the 18th-largest asset manager in the world, with a fairly diverse product portfolio, including generating 25% of its total AUM from passive products (with 37% of its equity portfolio and 27% of its fixed-income platform invested in passive products). Invesco's U.S. retail business (which includes its PowerShares ETF operations) is one of the 10 largest nonproprietary fund complexes in the United States. In Canada, the firm is a top 10 competitor for long-term assets with its Invesco, Trimark, and PowerShares fund offerings, and its Perpetual division is one of the largest retail fund providers in the U.K.During the past five (10) calendar years, Invesco's organic growth rate averaged a positive 1.8% (positive 1.7%) with a standard deviation of 1.6% (3.1%), better than the industry, which generated negative 0.6% (positive 0.7%) average annual organic growth with a standard deviation of 2.1% (3.1%). While we expect the headwinds to be stiffer as we move forward (even forecasting in a major equity market decline midway through our five-year forecast), we continue to believe Invesco can generate 0%-2% average annual organic AUM growth, with similar levels of revenue growth and slightly lower margins on average during 2018-22.