On Tuesday, Invesco Ltd. (IVZ) announced its monthly performance report for July 2011. As per the report, Invesco recorded preliminary assets under management (AUM) of $652.8 billion at the end of July, slipping 0.1% from $653.7 billion at the end of June 2011. The AUM fell primarily due to a drop in Institutional money market and the effects of negative market returns. However, foreign exchange increased AUM by $3.2 billion during the month under review.
Invesco’s preliminary AUM, excluding Exchange Traded Funds (ETFs), Unit Investment Trust (UIT) and passive funds, stood at $557.4 billion at the end of July 2011, down 0.8% from $561.9 billion in the prior month.
As of July 31, 2011, Invesco’s average assets stood at $658.3 billion, while average assets, excluding ETFs, UIT and passive funds, totaled $564.7 billion.
At July end, Invesco’s total equity assets were $299.8 billion, reflecting a slight fall of 0.7% from $301.9 billion recorded in the preceding month. However, the company’s total fixed income assets upped 2.3% to $149.2 billion from $145.8 billion in June 2011.
During the month under review, Invesco recorded $44.8 billion in balanced assets, up 0.7% compared with June 2011. Money market AUM stood at $69.9 billion (including $65.6 billion in institutional money market AUM and $4.3 billion in retail money market AUM) in July, marking a 6.0% dip from the previous month’s figure. Alternative AUM, however, climbed 2.3% to $89.1 billion during the month from $87.1 billion in the prior month.
Peer Performance
On August 8, Franklin Resources Inc. (BEN), one of the peers of Invesco, reported its preliminary month-end AUM for July 2011. The company reported preliminary AUM of $747.2 billion for its subsidiaries as of July 31, 2011, reflecting an increase of 1.8% from $734.2 billion as of June 30, 2011 and 23.9% from $602.9 billion as of July 31, 2010.
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 for 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.
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