Asset management outfits have faced severe headwinds over the
past three years as volatile markets have eaten into assets under
management and cut into fee income. These concerns have kept
investors wary, preventing this firm from getting due credit for
a recent transformative deal.
) product lineup includes a family of mutual and closed-end funds
as well as separately managed accounts and the third-fastest
growing lineup of exchange-traded funds (
). All told, the company holds over $557 billion in assets under
In the second quarter Invesco completed its acquisition of Van
Kampen Investments and its other retail asset management businesses
from Morgan Stanley (
), bumping up its AUM by more than $100 billion.
The deal marks the beginning of a major growth period for
Invesco; the pairing of the Van Kampen fund family and distribution
channels with Invesco's ETF offerings creates a midsize powerhouse
The combined firm leveraged this strength to close a $16 billion
deal to run a passive investment strategy inJapan that will use
Invesco's PowerShares ETFs, among other vehicles.
Although Invesco has made its fair share of acquisitions,
management doesn't take a willy-nilly approach, instead focusing on
businesses that complement existing operations.
The Van Kampen deal is a case in point. In addition to deeper
distribution channels, the transaction also adds teams focused on
equity-value investing and municipal bonds, a gap in the company's
existing lineup. The deal also brought along Van Kampen's strong
presence in closed-end funds and unit investment trusts, new
product lines with sticky assets.
Management was also wise to advise its fund managers to avoid
riskier investment strategies over the years; most of the firms'
investment products have outperform their peers, a key to
More than 75 percent of Invesco's offerings are ranked in the
top half of their peer groups on a 3-year basis. Over the trailing
five years, that percentage increases to 79.
Like T. Rowe Price (
), a name we covered in May 2009, Invesco has an extremely sticky
client base. After the merger, institutional accounts represent 40
percent of AUM, while private wealth-management services account
for 5 percent of AUM. Clients in these business lines tend to be
less fickle than retail customers.
Invesco also has a strong global presence, with products
available in 13 countries. Plans to expand offerings in emerging
markets also bode well for future growth; as the middle class
inBrazil,China and other countries expands, so does demand for
Earnings may be choppy over the next few quarters as the company
merges or liquidates duplicate offerings, but at this valuation the
shares are attractive given the firm's prospects for revenue
Lumpy earnings aside, the market hasn't given Invesco much
credit for its acquisition of Van Kampen; in fact, the stock is
down over 18 percent since the deal was announced. Savvy
investors seeking long-term growth should take advantage of this
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