AMVESCAP's first-quarter results, announced April 26, reinforced the faith that many Wall Street analysts profess to have in Mr. Flanagan.
During the earnings call, Mr. Flanagan reported AMVESCAP garnered net inflows of $1.5 billion for the quarter, breaking a string of 14 consecutive quarters of outflows.
In a report the following day, Joanna Nader, a London-based equity analyst with Lehman Brothers said while it's still early, there's growing evidence that Mr. Flanagan's strategy of reforming AMVESCAP's "silo-based organization structure" will strengthen the firm. She maintained her "overweight" recommendation.
Goldman Sachs Group Inc. analyst James Fotheringham said in his April 26 report that AMVESCAP's "blow-out" first quarter — with operating margins expanding to 31.9% from 22.5% in the previous quarter and earnings doubling — had made him a "former skeptic." Still, with AMVESCAP's stock price having already surged in recent months, he maintained his "in-line/neutral" recommendation.
On April 26 — the day AMVESCAP's earnings report was released — the firm's stock price jumped 8.6% to $22.48. That's a gain of more than 50% since July 14, the day Mr. Flanagan was named to lead AMVESCAP. The stock closed April 28 at $21.87.
The steps Mr. Flanagan has taken so far — including buying exchange-traded fund provider PowerShares Capital Management LLC, Wheaton, Ill., and tapping Phil Taylor, who led the group's successful AIM Trimark Canadian mutual fund unit, to run AIM — have been applauded.
But the impressive gains for AMVESCAP's stock have come despite the absence of any charm campaign by the firm's leadership. Mr. Flanagan repeatedly declined requests from Pensions & Investments for an interview.
Industry gatekeepers — including pension and money manager consultants, as well as mutual fund researchers — and even the firm's existing institutional clients said they have yet to get a clear picture from Mr. Flanagan and his team about the changes they're looking to make at the firm.
Eva Goltermann, a spokeswoman for the $36.4 billion Teachers Retirement System of Illinois, Springfield, said the system hasn't gotten any indications recently about organizational developments at AMVESCAP. The pension fund has had AMVESCAP's institutional unit, INVESCO, on watch since mid-2004 because of weak returns for its $923 million international equity portfolio.
Karen Dolan, a Morningstar analyst who tracks a number of funds managed by AIM Investments, said despite "pockets of excellence," AIM continues to suffer net outflows, leaving market watchers eager for more details about plans to turn the situation around. Outflows for AIM came to $12 billion in 2005, down from 2004's $14.1 billion, according to data from mutual fund industry researcher Financial Research Corp., Boston. The first three months of 2006 have shown some signs of improvement, with net outflows of $1.3 billion, $716 million and $647 million respectively.
The lack of detail on the company's plans has surprised some.
Mr. Flanagan's a capable, "bright guy," but "I would have thought he'd have been more dramatic" in terms of making changes at AIM, said Geoffrey Bobroff, president of Bobroff Consulting Inc., an East Greenwich, R.I.-based money management consultant. Mr. Flanagan "has been given the keys to the castle," Mr. Bobroff said. "The question is, has he yet figured out which floor he's on?"Some say the answer is no.
The standard approach in turnarounds is for the leadership to first articulate needed changes internally, said Neil Bathon, president of Financial Research Corp. When that's done, it's natural for the firm to want to get the word out and then keep issuing updates on the progress, he said. The lack of such a public campaign suggests AMVESCAP is still grappling with key strategic decisions, he said.
Roberto De Guardiola, president of De Guardiola Advisors Inc., a New York-based investment advisory firm that has worked with AMVESCAP, said the money management firm remains "a work in progress," but so far "I'm very pleased, as a stockholder." Mr. Flanagan appears to be systematically looking at how the firm's investment strengths can be leveraged "across all business lines," while addressing weaknesses, and rationalizing the various systems capabilities of AMVESCAP's various units, he said.
Despite catching the attention of stock market players, AMVESCAP will have to clear much higher hurdles to win over investment consultants. The head of manager research with one firm, who declined to be named, said AMVESCAP has always had some interesting strategies, but uncertainties about the broader organizational structure have counted against the group.