Invesco Ltd.([stock]IVZ[/stock]) reported preliminary assets under management (AUM) of $ 641.9 billion at the end of March 2011, marking a modest increase of 0.1% from $ 641.1 billion at the end of February 2011. The marginal improvement in AUM was primarily driven by positive returns from financial markets and net long term flows. However, these positives were partially offset by increased foreign currencies volatility against the U.S. dollar that resulted in $ 0.9 billion decline in AUM.
Invesco’s preliminary AUM, excluding exchange traded funds (ETFs), Unit Investment Trust (UIT), and passive funds, came in at $ 550.2 billion at the end of March 2011, down 0.4% from the prior month.
At the end of March, Invesco’s total equity assets stood at $ 303.0 billion, showing a meager sequential drop of 0.3%. On the other hand, the company’s total fixed income assets increased 2.5% from $ 136.3 billion at February 2011 to $ 139.7 billion.
At March end, Invesco recorded $ 44.7 billion in balanced assets, slightly up compared with February 2011. Money market AUM was $ 71.0 billion (including $ 66.9 billion in institutional money market AUM and $ 4.1 billion in retail money market AUM), showing a 3.9% fall from the prior month money market AUM of $ 73.9 billion. However, alternative AUM notched up 1.1% to $ 83.5 billion in March from $ 82.6 billion in the prior month.
Peer Performance
Concurrently, Franklin Resources Inc. ([stock]BEN[/stock]), one of the peers of Invesco, reported preliminary month-end AUM of $ 703.5 billion of its subsidiaries as of March 31, 2011, up 1.4% from $ 693.7 billion as of February 28, 2011.
Our Take
We expect Invesco’s improving long-term investment performance to boost the operating results. Moreover, the company appears well poised to benefit from the improvement in global investment flows. However, we remain concerned about the augmented operating expenses and higher redemptions. Furthermore, near-to mid-term challenges related to the municipal money market fund could add to Invesco’s woes.
Invesco currently retains a Zacks # 2 Rank, which translates into a short-term ‘Buy’ rating. However, considering the fundamentals, we are maintaining our long-term “Neutral” recommendation on the stock.
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