(By Mani) Fund manager Invesco Ltd. (NYSE:IVZ) is better positioned than most other asset managers to respond to the growing trend toward responding to client needs and offering solutions.
The real long-term appeal of Invesco goes beyond ETFs and real estate and in its ability to give clients virtually all of the products they look for— customized fresh solutions to their investment requirements rather than generic existing products.
Invesco is a leader in passive investing, with its PowerShares ETF platform. The company is also a leader in asset allocation with its successful IBRA product, and it has global investment capabilities with professionals "on the ground" in 20 countries.
"We believe the winners in the future in money management will also be extremely innovative since, especially since the financial crisis, what investors say they want from money managers seemingly changes by the quarter," RBC Capital Markets analyst Eric Berg said in a client note.
Depending on the period in question, PowerShares is the fourth, fifth, or sixth-largest ETF provider after such other major players in ETFs as BlackRock, Vanguard, and State Street Bank. Invesco‘s signature in the marketplace is "niche" ETFs that allow an investor to gain quick access at extremely low cost to a narrow corner of the marketplace such as companies that sell green technology.
Meanwhile, Invesco is far more global than the typical asset managers, with 31 percent of its customers outside the United States. Invesco has its ear to the ground, meaning it is more likely to be aware of global trends in investing than would be the case if Invesco were a domestic player only.
"Invesco has some of the broader investment capabilities out there—from fixed income to equities to alternatives, from domestic to global to international, and from actively managed funds to index funds to actively managed ETFs. Invesco, therefore, is more likely to have the inventory in stock when a client need arises," Berg added.
In addition, Invesco has investment professionals and distribution staff in 20 countries, which develops products for a particular geographic market. Moreover, product can be transplanted to another market, e.g., from Asia back to the US should the demand arise.
Invesco has many of the critical attributes that should determine success as the money management business evolves due to its global client base, the broad investment capabilities, the far flung employee group.
These attributes would help the company to grow and to gain market share at a time when stock picking alone will likely not cut it any longer. It appears that Invesco would be at the vortex of this important trend.
Invesco‘s signature in the marketplace is the use of commodities, in addition to stocks and bonds, in the asset-allocation process.
"We expect Invesco‘s IBRA asset-allocation product to continue to enjoy strongly positive flows as growing numbers of investors identify asset allocation as an investment onto itself," Berg noted.
With major operations outposts in China, Japan, and Hong Kong, Invesco‘s Asian business has been the fastest growing part of the company, with Asian assets increasing 1.7 times over the last five years. The rapid expansion is a reflection of the growing wealth in the region, the resulting interest in investment products, and of Invesco‘s well established efforts in real estate investing.
"We think that Asia would be contributing increasingly to Invesco‘s asset flows because GDP growth in the region outpaces that in Europe and the US," Berg said.
From an investment-performance point of view, Invesco had a very difficult first half of 2009, a six-month period that is still depressing Invesco‘s three-year performance figures. But that unfortunate chapter in Invesco‘s history as a money manager is about to go away as far as the company‘s three-year numbers are concerned.
The first-half 2009 figures will roll off, leaving Invesco with a much better three-year track record than it has at present. However, five-year numbers do not matter greatly because the three-year numbers are the ones financial advisors look at most.
'We expect the brighter picture from an investment-performance point of view to contribute to continued strong, new, money flows at Invesco, especially in 2013," said Berg who sees Invesco to increase its total assets under management to $691 billion in 2012 and $766 billion in 2013 from $625 billion in 2011, mainly driven by growth in equity and fixed-income asset classes.