Invesco reported $1.59 trillion in assets under management at the end of the fourth quarter, up 6.6% from the prior quarter and up 12.5% year over year, as inflows into the firm's exchange-traded funds outpaced continued outflows from active equity strategies.
The shift in product mix left Invesco's adjusted operating margins under pressure for the year, falling to 26.3% in the final quarter of 2023 from 30.6% in the fourth quarter of 2022.
Company executives said they expect the appetite of clients for higher-margin offerings — including clients in the wealth management segment Invesco is focusing more on now — to improve going forward as they become more confident that the rate increases of the past two years have crested and could be heading down.
For the moment, ETFs remain the engine of Invesco's AUM growth.
The firm reported $6.7 billion in net long-term inflows for the final quarter of 2023, with $13.9 billion in passive inflows, predominantly ETFs, partially offset by $7.2 billion in outflows from active strategies.
More than $15 billion in money market outflows left Invesco with total net outflows of $8.3 billion for the quarter.
For the year, Invesco reported total net inflows of $5.3 billion, down from $52.7 billion in 2022 when the firm's money market business garnered inflows of $56.4 billion.
Net long-term inflows for the year totaled $10.2 billion, with $39.2 billion garnered by passive offerings — mostly ETFs — partially offset by $29 billion in outflows from Invesco's actively managed products.
For 2023, Invesco reported operating revenues of $5.7 billion, down 5.5% from the year before.
In addition to ETFs, executives pointed to demand for the firm's products in the Asia-Pacific region — notably from Chinese and Japanese retail investors — as another bright spot.
For the fourth quarter, "Asia-Pacific delivered net long-term inflows of $5.8 billion, representing organic growth of 12%, driven by growth in Japan and a resumption of growth in our China joint venture," said Allison Dukes, senior managing director and chief financial officer, on its Jan. 23 earnings call.
Andrew Schlossberg, Invesco's president and CEO, noted on the earnings call that the firm's global equity and income strategy achieved "top retail selling status in Japan," with incremental net inflows of $1.4 billion for the fourth quarter.
Inflows from Invesco's U.S. business, which accounts for 72% of the firm's total AUM, came to a more modest $1.5 billion for the quarter, while Europe, the Middle East and Africa saw outflows of $600 million.
Dukes said Japan accounted for $3 billion in long-term flows, while Invesco's China joint venture generated $1.7 billion in inflows, helped by the launch of seven new strategies there.
Dukes said boosting Invesco's margins — with an initial goal of lifting them to 30% of revenues and then working toward the mid-30s — is "absolutely the goal over the next handful of years," with expense discipline a key to reaching that target.
Schlossberg, while not ruling out bolt-on acquisitions in private markets down the line, said for now his team remains "very focused on the work we have to do organically."
