On Thursday, Invesco Ltd. (IVZ) announced its monthly performance report for May 2011. As per the report, Invesco recorded preliminary assets under management (AUM) of $661.4 billion at the end of the May, slipping 4.2% from $668.6 billion at the end of April 2011. The AUM decline was mainly attributable to net outflows principally in the PowerShares QQQ exchange traded funds (ETFs), negative foreign exchange and negative market returns.
Invesco’s preliminary AUM, excluding ETFs, Unit Investment Trust (UIT), and passive funds, stood at $568.0 billion at the end of May 2011, down 0.6% from $571.4 billion in the prior month.
As of May 31, 2011, Invesco reported average assets of $655.5 billion. However, average assets, excluding ETF, UIT and passive funds, totaled $561.4 billion.
At May end, Invesco’s total equity assets were $311.6 billion, reflecting a fall of 1.6% from $316.6 billion recorded in the preceding month. However, the company’s total fixed income assets inched up 1.1% to $144.1 billion from $142.6 billion in April 2011.
During the month under review, Invesco recorded $45.1 billion in balanced assets, down 2.6% compared with April 2011. Money market AUM stood at $74.9 billion (including $70.9 billion in institutional money market AUM and $4.0 billion in retail money market AUM) in May, marking a 1.2% dip from the previous month’s figure. Alternative AUM, however, was up modestly to $65.6 billion during the month from $65.4 billion in the prior month.
Peer Performance
On June 8, Franklin Resources Inc. (BEN), one of the peers of Invesco, reported its preliminary month-end AUM. The company’s preliminary AUM was $735.8 billion of its subsidiaries as of May 31, 2011, reflecting a 0.4% increase over $733.1 billion as of April 30, 2011.
Our Viewpoint
Improving long-term investment performance, propelled by a gradual recovery in the global equity market, is likely to boost Invesco’s operating results over the mid to long term. Though rising operating expenses will remain a near-term headwind to the company, a significant improvement in operating leverage from Invesco’s cost control initiatives is expected over the long term.
Invesco is also poised to benefit from improved global investment flows resulting from its broad diversification. However, we remain concerned about increased redemptions and a volatile U.S. dollar.
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 stock.
FRANKLIN RESOUR (BEN): Free Stock Analysis Report
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