Invesco Ltd Q4 2024 Earnings Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Dan Fannon - Jefferies LLC - Analyst : I wanted to follow up on the outlook for expenses in 2025. The $20 million to $25 million increase of the Alpha versus '24, can you just remind us what '24 was? And then also, just given some of the seasonality of -- (technical difficulty)

Question: Dan Fannon - Jefferies LLC - Analyst : Yeah, so then maybe some sequential -- the sequential expense bills for the first quarter, given the seasonality of things like payroll.

Question: Dan Fannon - Jefferies LLC - Analyst : Great. Thank you. And hopefully, I come in clear here for the second one, but wanted to follow up on capital management, and just given the improved liquidity position, how your M&A and inorganic thought processes evolve, given the stable and/or improving liquidity profile.

Question: Dan Fannon - Jefferies LLC - Analyst : Thank you.

Question: Alex Blostein - Goldman Sachs & Company, Inc. - Analyst : Also another one on expenses for you, just to make sure I have that clear. So the Alpha implementation will run $10 million to $15 million per quarter. It will peak at some point of time at the end of '25, maybe early '26, at which point you will also start to have sort of the expenses that you'll start paying State Street ramp as well. So maybe help us understand kind of what are the run rate expenses you expect to pay State Street once all the assets migrated over, so which I guess will be at some point of time in 2026. And then ultimately, are there any legacy costs that you expect to fall off once Alpha is sort of fully implemented? Or is that kind of baked into your $10 million to $15 million guidance?

Question: Alex Blostein - Goldman Sachs & Company, Inc. - Analyst : I got you. Yes. I was just kind of trying to get like once those costs fade out, like what is the net expense benefit we should expect, which sounds like some of that 10% to 15% will start to leave, but the ultimate benefit of that really won't show up until '27, if that -- if I hear you correctly? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 28, 2025 / 2:00PM, IVZ.N - Q4 2024 Invesco Ltd Earnings Call

Question: Alex Blostein - Goldman Sachs & Company, Inc. - Analyst : Yes. Got you. Okay. And then my follow-up question, I didn't want to ask you guys around China. It sounds like things have been up there, you and I had a conversation about this later last quarter just in terms of the momentum you guys are seeing in the ground that's showing up in flows. So talk to us maybe a little bit about the pipeline that you're seeing in the products there and your expectations for flows over the next couple of quarters.

Question: Brennan Hawken - UBS Securities LLC - Analyst : A couple just sort of clarification items on the expenses, sorry to dwell here. But the 1% increase, that's versus the $3.30 billion adjusted reported base. Just want to confirm that. And then the $10 million to $15 million that we should expect in 2025 those construction costs and then that's not expected to go into '26. I just wanted to confirm that. And Allison, I believe you noted a $22 million charge related to organizational change. Could you maybe give some color around what that is and what impact we could expect from that?

Question: Brennan Hawken - UBS Securities LLC - Analyst : It does. Thanks for clarifying on the organizational change. I guess I didn't hear that correctly. One of the things you guys talked -- I'd like to shift gears on Alpha, and not talk about the actual expense blocking and tackling. You've spoken in the past how you expect that this migration is going to enhance your operational effectiveness across the organization. So -- and it sounds like you're beginning to migrate cohorts over it might be too early, but like what has been the experience so far? What are your expectations for some of that operational -- increased operational effectiveness? And how should we expect that to manifest itself as you continue to progress through this rather substantial change in the organization?

Question: Bill Katz - TD Cowen (Research) - Analyst : Okay. I'm going to spend more time on Alpha, and I again, apologize, but the guidance here, I think, is very constructive versus where the Street is sitting today. But I think the bigger question that I have, I think investors have is, what does this look like in the end state? And I think Alex was trying to get you there. So what percentage of your assets would you anticipate being migrated over in 2025? And then as we get into some kind of quote-unquote normalized world where everything is migrated over and implementation costs phase out, how do we think about or how do we model to the onboarding costs on a go-forward basis? That's my first question. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 28, 2025 / 2:00PM, IVZ.N - Q4 2024 Invesco Ltd Earnings Call

Question: Bill Katz - TD Cowen (Research) - Analyst : Okay. And then maybe I'm just sticking with you for a question. I think some of the themes out in terms of the opportunity set going forward are more on the alternative side. So I was wondering if you could click a layer deeper and speak to your strategy to grow Private Markets, you gave a little bit of a detail on your retail democratization, maybe where you can grow there on INCREF, maybe even leveraging on the insurance side. And then it's related to that, if there's not a lot of deals to be had, how should we be thinking about the payout rate, 60% seems relatively low given that you've enhanced the balance sheet and you have pretty good diversification and scale.

Question: Glenn Schorr - Evercore ISI Institutional Equities - Analyst : Okay. So in the fourth quarter, we had the insurance reimbursement. But besides that, the margin was still up markets, big inflows, down fee rate, controlled expenses. So my question is, I'm hoping for better than flat assets this year. But what's your thoughts around the margin knowing what we know -- what you just said about the 1% expense growth knowing that you're still inflowing nicely, but the fee rate does have some compression. How are you thinking about the margin in '25?

Question: Glenn Schorr - Evercore ISI Institutional Equities - Analyst : Well, that's a perfect lead into the follow-up I had was -- and maybe, a, how do you defend Fundamental Equities besides just, hey, everybody put up great performance. But my question is on what do you -- how are you thinking about the active ETF lineup. Your ETF business has been growing. How do you think about what to transition to have an active tag along product, if you will? And can that be part of the solution?

Question: Ben Budish - Barclays Capital Inc. - Analyst : Just a high-level question around fee rates. It looked like the ranges for most of your categories were either kind of lower at the midpoint or narrowed. If you could kind of comment on what's been going on there? Is it sort of ongoing mix shift within each category? Is it sort of competitive forces? And then I'm particularly curious in China, there's some headlines last quarter around some ongoing pressures to kind of lower ETF fee rates. So any color on what's going on there would be helpful.

Question: Ben Budish - Barclays Capital Inc. - Analyst : Understood. And maybe a follow-up, sticking on the ETF side. Andrew, I was wondering if you could talk a little bit more about, I think you mentioned $2.5 billion for a finished pension insurer that sounded fairly interesting. I'm curious what the pipeline is like for those sorts of opportunities, you sort of custom indexing within liquid ETFs. How do you see that opportunities had evolving?

Question: Patrick Davitt - Autonomous Research - Analyst : There are signs that ETF adoption in Europe is really picking up steam, while some even starting to call the long anticipated quote-unquote catch-up with the US has really started. Firstly, do the trends you're seeing suggest that catch-up is in progress? And secondly, given your legacy book of much higher fee active funds in Europe, do you see that shift as a net positive or a net negative for Invesco?

Question: Patrick Davitt - Autonomous Research - Analyst : Got it. And then as a quick follow-up, it seems like you started to ahead that you've been working with MassMutual on options for the preferred. Any updates on that front, as I imagine that the now higher for longer mentality could conceivably make the paper less attractive to them?

Question: Ken Worthington - J.P. Morgan Securities LLC - Analyst : I'd love to dig into the institutional business a bit more broadly. Where is Invesco having success in building the pipeline and winning new business? I know you called out Alternatives, but other areas as well? And how does the business that you're winning compared to the business you're losing?

Question: Ken Worthington - J.P. Morgan Securities LLC - Analyst : Great. And then the other side of the equation, the business you're losing, what does that look like?

Question: Brian Bedell - Deutsche Bank Securities Inc. - Analyst : Most of my questions have been asked and answered, but maybe to one just back on the operating margin outlook. Maybe Allison, just your view on the comp to revenue ratio that's within your 1% guide under flat markets. And then, let's say, if equity markets are up 10% on a linear basis throughout the year. How would that impact your comp to revenue ratio.

Question: Brian Bedell - Deutsche Bank Securities Inc. - Analyst : Great. That's helpful. And then just lastly, just to come back to the active ETFs, and I thank Andrew for your comments on that prior question. Maybe more specifically for active equity ETFs, if you can talk about the -- your view on cloning active, like current active mutual fund strategies. Obviously, the ones that you think are successful and have and would have demand for either a clone or something that was very similar to those strategies within the ETFs? And I guess, is the only pushback either on fee pressure, from a cannibalization perspective? Or are you seeing maybe potential pushback from the distribution channels that prefer -- that may prefer the mutual funds, in terms of the sales practice.