Invesco Ltd

Welcome to Invesco's fourth quarter earnings conference call. All participants will be in a listen-only mode until the question and answer session. At that time to ask a question, press star one. This call will last one hour. To allow more participants to ask questions, one question and a follow-up can be submitted per participant. As a reminder, today's call is being recorded. Now I would like to turn the call over to Greg Ketron, Invesco's head of investor relations.

Thanks, Operator, and to all of you joining us on Invesco's quarterly earnings call. In addition to today's press release, we have provided a presentation that covers the topics we plan to address today. The press release and presentation are available on our website, Invesco.com. This information can be found by going to the investor relations section of the website. Our presentation today will include forward-looking statements and certain non-GAAP financial measures. Please review the disclosures on slide two of the presentation regarding these statements and measures as well as the appendix for the appropriate reconciliation of the gap. Finally, Invesco is not responsible for and does not edit nor guarantee the accuracy of our earnings teleconference transcripts provided by third parties. The only authorized webcasts are located on our website. Marty Flanagan, President and Chief Executive Officer, and Alison Dukes, Chief Financial Officer, will present our results this morning. After we complete the presentation, we will open the call up for questions. Now I'll turn the call over to Marty.

Thank you, Greg, and thanks, everybody, for joining us. And I'm going to start on slide three if you're following along, which is the fourth quarter highlights. The fourth quarter concluded a year of significant headwinds in volatility in global markets. Seemingly, no geography or asset class was immune to the S&P. Experienced the worst year since 2008. NASDAQ composite declined over 30%. MSCI emerging markets index sank nearly 20%. In bond markets, you know, typically the safe haven when equities suffer. declined significantly due to the rise in interest rates, with the global aggregate bond index declining by more than 15% for the year. This resulted in the worst markets we've seen in decades. Rising COVID infections in China and tax loss harvesting in developed economies as the year came to a close made for a challenging organic growth dynamic in our industry. Despite industry challenges in 2022, we're pleased to see key capabilities in areas of high client demand continued to deliver organic growth, offsetting net outflows and capabilities that experienced redemption pressure as investors expressed a preference for risk-off assets. Key capabilities that delivered net long-term inflows for the year included ETFs, fixed income, greater China, and institutional channel. The firm's ability to deliver these outcomes demonstrates the strength and resilience of our Diversite platform in the face of extraordinary market headwinds. Although markets showed signs of stabilization in the fourth quarter, the uncertain backdrop continued to weigh on investor sentiment and impacted client demand. Invesco separated itself from most industry peers by generating net inflows in key capability areas led by strong growth in ETFs in the quarter. Our fixed income business institutional channel continued to build on their track record of organic growth, generating net inflows for 16 and 13 consecutive quarters, respectively. The depth and breadth of our investment capabilities that Invesco brings to the market have positioned the firm to return to organic growth when investor sentiment improves. Invesco ETFs delivered $4.3 billion in net long-term inflows during the quarter. For the full year, ETFs brought in $28 billion of net long-term inflows, the equivalent of 11% organic growth rate. Our ETF lineup remains differentiated from most competitor offerings with a focus on higher value, higher revenue market segments, like smart beta, and we continue to drive innovation in space with products such as our QQQ innovation suite. Fixed income capabilities in the institutional channel have been pillars of organic growth for several years now, and growth persisted in both of these areas in the fourth quarter, with 800 million and 900 million net inflows respectively. As Alison will discuss later, our institutional pipeline remains at healthy levels, And as interest rates stabilize, we have a significant opportunity to capture growth and fixed income capabilities in 2023. Our business in Greater China performed exceptionally well during 2022, building on our leading position in the world's fastest growing market for asset managers. We experienced modest net long-term outflows of $600 million in the fourth quarter due to significantly higher redemptions in fixed income throughout the industry in China. and rising bond yield stroke net asset values for fixed income securities lowered. Despite these challenges, we raised over $3 billion in new product launches during the quarter in China. For the full year, our China joint venture delivered $7 billion in net inflows, the equivalent of 11% organic growth rate. Market sentiment in China will be mixed for the next few months as the country works through the transition period. of higher COVID infections stabilizing interest rates and redemptions turned to more moderate levels. That said, there are also signs that the outlook for the remainder of 2023 is improving, and I'm optimistic for a return to organic growth rate throughout 2023 in China. Although we maintain momentum and key capabilities, the firm experience net long-term outflows this quarter of $3.2 billion. Active global equity remains the biggest drag on organic growth with $6 billion of net outflows in the fourth quarter, including $3 billion in our developing markets fund. As we've discussed previously, client appetite for these assets have been lower than in the past, but I'm optimistic redemptions will slow as client appetite for risk assets will eventually return. We enter 2023 with a strong balance sheet, giving us the needed flexibility to operate strategically in this environment. Long-term debt remains at low levels the lowest in 10 years, and our cash balance increased to over $1.2 billion at year end. As we discussed last quarter, we continue to be disciplined in our approach to expenses, tightly managing discretionary spending and limiting hires for roles that are critical to support the organization and future growth. We are thoughtfully managing market headwinds while investing for the long term. We remain focused on identifying areas of expense improvement that will deliver positive operating leverage as the market recovers and organic growth resumes. We are being extremely thoughtful about capital resource allocation in this environment, and we will be well-positioned to maintain investments in areas that deliver future growth. Looking ahead, we are partnering with our clients to meet their most pressing needs in this dynamic environment. We've dedicated the past decade to building a breadth of investment capabilities, a solutions mindset, and operating scale at Invesco that few in the industry can match. I'm proud of our talented when our talented employees have accomplished in 2022 on behalf of clients and stakeholders, and I'm optimistic for return to organic growth when market sentiment eases. Market direction may be uncertain, but I'm confident that Invesco is prepared to meet challenges that will arise in 2023 and well-positioned for future growth. With that, Allison, I'll turn it over to you.