Invesco(IVZ) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total assets under management (AUM) reached over $1.7 trillion, an increase of$53 billion or 3.2% from the previous quarter, marking a record high for the company [30] - Net revenues for the second quarter were $1.1 billion, a$33 million increase or 3% from the first quarter, and nearly unchanged from the second quarter of the previous year [35] - Adjusted diluted earnings per share rose to $0.43 from$0.33 in the prior quarter, reflecting improved financial performance [32] Business Line Data and Key Metrics Changes - The ETF franchise recorded $12.8 billion in net long-term inflows, representing a 13$1.6 billion in net long-term inflows, while private markets reported $2.6 billion in net inflows [19][21] - Fundamental equity experienced net outflows of$6.3 billion during the quarter, indicating challenges in this segment [31] Market Data and Key Metrics Changes - Strong net long-term inflows of $6.7 billion were generated in the Asia Pacific region, primarily driven by the China joint venture, which saw inflows of$8.5 billion [22] - The U.S. markets led equity returns, with the NASDAQ gaining 8% and the S&P 500 increasing 4% [8] - Mixed performance was noted in international equity markets, with MSCI emerging markets up 4% and Europe down 1% [9] Company Strategy and Development Direction - The company aims to enhance operating performance and returns for shareholders by focusing on investment performance and expanding its ETF capabilities [10][12] - A strategic priority is to improve the quality of active equity strategies to drive greater retention and net flows [12] - The company is also focusing on profitable organic growth through scalable investment capabilities and delivery vehicles [13] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about increasing market clarity and investor appetite for duration risk and global-oriented assets [9] - The company anticipates continued strong demand in the Asia Pacific region, particularly in fixed income and balanced strategies [22] - Management highlighted the importance of investment performance, with 70% of AUM beating benchmarks, indicating a positive outlook for attracting flows [27] Other Important Information - The company paid down its credit facility to zero, improving its net debt position to nearly zero, and plans to resume share buybacks in the third quarter [32][39] - The implementation of the Alpha platform is ongoing, with costs expected to be approximately $10 million per quarter for the remainder of 2024 [36][67] Q&A Session Summary Question: Fee rate changes in ETFs and multi-assets - Management confirmed that the fee rate decrease is due to ongoing mix shifts rather than actual fee adjustments [42][43] Question: Comments on fixed income and APAC flows - Management noted an increase in RFP volume and demand for longer-duration assets, particularly in fixed income [44][45] Question: Distribution and servicing fee dynamics - Management indicated that the relationship between service and distribution fees and third-party distribution revenue is consistent, with some mix shift impacting the dynamics [48][50] Question: Retail democratization efforts - Management highlighted the growth in real estate debt and alternative credit strategies as key areas of focus [55][56] Question: Capital return versus M&A strategy - Management emphasized a balanced approach, focusing on returning capital to shareholders while remaining open to M&A opportunities [57][59] Question: Organic revenue growth relative to AUM growth - Management indicated that organic revenue growth is trending positively, with improvements noted in various asset classes [61][64] Question: Alpha platform implementation expenses - Management expects implementation costs to continue through 2025, with a phased transition of AUM onto the Alpha platform [66][67] Question: Fee rate trajectory and monthly cadence - Management pointed to the exit rate for the second quarter as a key indicator, with ongoing fluctuations expected [70][72] Question: Safety of the China joint venture amid political tensions - Management reassured that the joint venture operates domestically, with performance tied to the Chinese economy rather than external political factors [74][76] Question: Growth opportunities in the ETF business - Management identified active ETFs, geographic expansion, and fixed income strategies as key growth areas for the ETF business [80][81]