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UPDATE 2-Invesco profit rises as assets grow on new client money

Ashley Lau
Thursday, 31 Oct 2013 | 12:34 PM ET

* Net inflows of new client money total $9.1 bln

* Assets under management grow to $745.5 bln

* Top fund manager Neil Woodford to leave in April

NEW YORK, Oct 31 (Reuters) - Asset manager Invesco Ltd said on Thursday that its third-quarter profit rose 34 percent as strong net inflows, primarily in its retail business, helped boost assets.

The Atlanta-based money manager, which oversees the PowerShares line of exchange-traded funds, said net inflows of new client money totaled $9.1 billion, of which $7.3 billion came from the retail channel.

"Clearly the retail engagement is there as markets go higher, whereas institutions tend to strategically reallocate when you get expectations in volatility around assets classes," said analyst Mac Sykes at Gabelli & Co in New York.

Assets under management at Invesco grew by $39.9 billion during the quarter to total $745.5 billion at the end of September, a 12.4 percent increase from a year earlier. The company benefited from market gains and foreign exchange rate movements.

Invesco's shares were up 2.0 percent at $33.56, after earlier rising as much as 4 percent. The shares have gained about 30 percent year to date.

Rival asset managers saw a greater impact from institutional outflows during the third quarter as investors pulled billions of dollars, reflecting increasing caution among institutional clients.

At T.Rowe Price Group Inc, Franklin Resources Inc , Janus Capital Group Inc, and Federated Investors Inc, clients withdrawals exceeded inflows during the quarter.

Analysts focus on flow data because asset managers' revenue and profits are closely tied to market indexes not under their control.

Net long-term flows at Invesco, not including flows into institutional money market funds, were $5 billion. The total included $4.6 billion put into equity products, $1.4 billion into alternative funds, and $200 million into balanced accounts.

Fixed-income was a weaker spot, with customer withdrawals of $1.1 billion. Money market customers pulled out $100 million in the third quarter.

Invesco's PowerShares QQQ fund added $800 million in net new money. PowerShares is the fourth largest U.S. provider of ETFs by assets, following BlackRock Inc, Vanguard and State Street Corp.

IMPACT OF FUND MANAGER'S DEPARTURE MUTED

Although the announcement earlier this month of the planned departure of one of Invesco's top fund managers has drawn speculation that the firm could lose clients, Invesco executives in a conference call on Thursday said that so far there was no cause for alarm.

Neil Woodford, one of the investment industry's most closely watched fund managers, is to leave the firm's Invesco Perpetual unit in April to start his own business after 25 years with the firm.

Market participants and analysts have said that Woodford's departure could pose a challenge to persuading investors to stick with Invesco, given his consistent performance and cult-like following.

Woodford is to be replaced by Mark Barnett as head of British equities and take over management of his funds.

Invesco Chief Executive Martin Flanagan said that in the days since Woodford's departure was announced, redemptions from the two largest funds he manages, which total $38 billion, were less than $1.5 billion, or slightly more than 4 percent.

"It's early days, but the redemption experience has been very much toward the positive end of the scenarios we modeled and planned for, and considerably less than we've seen reported in the media," Flanagan said. "We find the results encouraging."

PROFIT RISES

Invesco's third-quarter net income increased to $228.1 million, or 51 cents per share, from $170.6 million, or 38 cents per share, a year earlier.

Excluding certain costs from the expected sale of its Atlantic Trust unit, Invesco earned 55 cents per share. Analysts on average had expected 52 cents, according to Thomson Reuters I/B/E/S.

Invesco said the planned sales of its Atlantic Trust Private Wealth Management unit, which manages roughly $20 billion in client assets, to the Canadian Imperial Bank of Commerce is expected to close in the fourth quarter.

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