INVESCO PLC, having established a major presence in the United States, is getting ready to take on the world.
The company this week will list its stock on the New York Stock Exchange, in conjunction with Hong-Kong-based Peregrine Assets Management International Ltd.'s expected sale of nearly all of its 24.9% stake in INVESCO. Meanwhile, INVESCO is readying an expansion effort designed to boost its presence in Europe, Asia, and the Americas.
Besides rebuilding its U.K. institutional operation, target markets include Canada, South America, France, Italy, Germany, Japan and India. Growth might be generated internally or through acquisitions, said Norman Riddell, chief executive of INVESCO Group Ltd., London, the company's European arm.
"In the ideal world, we would like to complement growth with acquisitions, particularly in Europe or Asia. In reality, there are more options for acquisitions in the U.S., a few in Europe and almost none in Asia," he said.
He also said INVESCO - the third-largest independent manager of U.S. tax-exempt assets - would consider purchasing a U.S. firm if it filled a void in the company's strategy.
What's clear to Mr. Riddell is that INVESCO does not have the size to meet its long-term objective of becoming the world's premiere global money management house.
"At (pounds) 46.5 billion ($74 billion), we're not big enough; $100 billion is the immediate target," he said.
Philip Gibbs, an analyst at Barclays de Zoete Wedd Securities Ltd., London, said: "They are a long way behind the big boys in terms of funds under management" and are heavily reliant on the U.S. market, he said.
As part of increasing the firm's global recognition, INVESCO officials will list the company's stock in New York, as American Depository Receipts. Firm officials expect to sell 70% of the 60 million shares held by Peregrine to U.S. investors, with the remainder going to European investors.
Mr. Riddell said the firm always wanted to have a U.S. listing.
"At some time, who knows, we may list in Asia. We are trying to appear to be a global business," he adds, but says the London Stock Exchange always will be the firm's primary listing.
According to the company's offering memorandum, INVESCO nearly doubled its assets under management in the five years ended Dec. 31, 1994, from (pounds) 24.1 billion to (pounds) 41.7 billion, and more than doubled its operating profits, from 14.5 million to (pounds) 37.6 million.
The company's interim results show further improvement. By June 30, INVESCO had grown to 46.5 billion in assets under management, or $74 billion, and had accumulated operating profits of (pounds) 24.9 million, or $39.6 million in the first six months of the year.
U.K. unit's troubled past
Actually, the firm's LSE listing appears anomalous, considering that 83% of the firm's assets are from U.S. clients. North American region accounts total $61.1 billion in assets, while accounts in the European region total $10.5 billion and the Pacific region, only $2.4 billion.
Part of that disproportionate mix of business stems from the company's troubled history in the United Kingdom. Originally the money management arm of Samuel Montagu, London-based MIM acquired INVESCO in two stages, in 1986 and 1988. But the renamed INVESCO MIM PLC's U.K. arm ran into problems from rocky performance, regulatory investigations and involvement in the dubious affairs of the late Robert Maxwell.
The firm's U.K. separate-account pension business plummeted more than 50% from 1988 through 1993. Balanced account business still is suffering: the firm lost a net of 21 more clients last year. (Separate-account assets under management, however, bounced back to (pounds) 1.9 billion from 1.4 billion the year before because of the 1994 acquisition of Bankers Trust Co.'s U.K. structured product operation.)
INVESCO officials, in effect, took on the role of acquirer in 1993, as former MIM executives left the company and INVESCO Chairman Charles Brady took the helm of the entire company. Since then, he has settled regulatory charges and cleaned house in the U.K. operation.
The firm has taken steps to regain its footing, said Mr. Riddell. The acquisition of the Bankers Trust unit, since renamed INTEGRAL, is helping. Mr. Riddell said INTEGRAL executives had talked to more than 100 pension funds potentially interested in a more structured approach. The unit lost two clients when it was acquired, but it now manages (pounds) 1.1 billion to 1.2 billion, said Mr. Riddell.
He noted the unit has won three mandates from the Netherlands and a cash mandate from a U.K. local authority fund. He would not identify the clients.
INVESCO's U.K. balanced portfolios have not won any new business, but Mr. Riddell said he knew it would take time to rebound from the previous performance problems. INVESCO's balanced portfolios rank in the bottom decile for the five years ended Dec. 31, 1994, though are close to median performance for the three-year period.
Mr. Riddell noted the U.K. market is moving away from dominance by a handful of firms; consultants, for example, are more willing to consider other companies in searches, he said.
And with the United Kingdom expected to move toward defined contribution schemes, INVESCO hopes to capitalize on the knowledge it has gained in the U.S. market, he said.
George Henshilwood, partner at consultant Hymans Robertson & Co., Glasgow, said the British operation still hasn't shown "they have the people or the approach to be genuine contenders in the balanced business."
"They are trying to rebuild their credibility. I haven't seen any particular evidence that things are back on track," he said.
European and Asian prospects
Elsewhere in Europe, the firm is taking a country-by country approach to growth, through a combination of acquisitions and initiatives. The problem is INVESCO doesn't have critical mass in all of its businesses in Europe, Mr. Riddell said.
In France, for example, INVESCO is building up its own retail presence, expecting to be in a strong position when pension legislation is approved. In Italy, it sells INVESCO products through an independent firm. In Germany, where INVESCO has no representation, it sells institutional products from London, although the INVESCO board recently asked company executives to look at going into the German retail and institutional markets.
Prospects in Europe are improving. In the six months ended June 30, assets in Europe as a whole rose 6.3%, from (pounds) 6.21 billion ($9.75 billion) in Dec. 31 to (pounds) 6.6 billion ($10.5 billion) - the first time the region had shown a gain in assets since 1991.
INVESCO is trying to build its presence in Asia, its newest market, but it has found it hard to penetrate both the Japanese pension fund and retail markets because of the bureaucracy there, said Mr. Riddell.
He noted INVESCO and Peregrine officials have talked about sharing information on different markets, particularly in more esoteric Asian areas such as Myanmyar (Burma).
In Hong Kong, INVESCO has been addressing options in mainland China, said Mr. Riddell. Last year, it started the INVESCO Dailin Fund, in concert with the municipality of Dalian, China, which will channel investments in companies and enterprises connected to the municipality. The firm also is looking at the retail market in India.
In the United States, INVESCO is seeking to tap the U.S. assets flowing into overseas markets, said Mr. Riddell. So far, the company has not taken up as much of that business as its management would like.
INVESCO Global Asset Management, a Bermuda-based subsidiary, was formed in 1994 to specialize in global asset allocation, primarily for U.S. clients. IGAM constructs portfolios for INVESCO clients seeking global services and markets those services worldwide.
Overall, though, INVESCO has been a huge success story in America. Assets under management rose 13.8% in the six months ended June 30 - to $61.06 billion from $53.68 billion, of which $1.6 billion represented new business. North American institutional accounts grew from 550 by the end of 1991 to 716 by June 30, 1995, and mutual fund shareholder accounts grew from 240,000 at the end of 1990 to 802,000 on June 30, 1995.
The firm is well-rounded, with about 800 institutional accounts and 1 million mutual fund shareholders; it manages $17.8 billion alone for about 170,000 defined contribution plan participants.
North American assets are spread over eight main subsidiaries: INVESCO Capital Management, a core manager with $31.3 billion in assets; INVESCO Funds Group, $10.4 billion in 34 no-load mutual funds; PRIMCO Capital Management, $13 billion in stable value assets; INVESCO Trust Co., $256 million in growth equity; INVESCO Realty Advisors, $1.1 billion; INVESCO Retirement Plan Services, a defined contribution plan record-keeping and administration vendor; INVESCO Management & Research, formerly Gardner & Preston Moss, a quantitative manager with $2.2 billion; and INVESCO Services Inc., $480 million in load mutual funds.