Invesco Ltd

All participants will be in a listen-only mode until the question and answer session. At that time, to ask a question, press star 1. 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'd like to turn the call over to Greg Ketron, Invesco's Head of Investor Relations. Thank you. You may begin.

Thanks, Operator, and to all of you joining us today. In addition to the press release, we have provided a presentation that covers the topics we plan to address. 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 reconciliations to GAAP. 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. Andrew Schlossberg, President and CEO, and Allison Dukes, Chief Financial Officer, will present our results this morning, and then we'll open up the call for questions.

I'll now turn the call over to Andrew. Thanks, Greg, and good morning to everyone. I'm pleased to be speaking with you today. But before I begin my commentary on the quarter, I did want to take a moment to acknowledge the humanitarian crisis in the Middle East. We are deeply saddened by the loss of life and devastation and the impact it's had on civilians across the region. We're focused on the safety and the well-being of our colleagues and their families, and our thoughts are with everyone who has been impacted by the heartbreaking recent events. But now turning to the topic of the third quarter earnings, I'll start today's presentation on slide three. Volatility and uncertainty continue to define global financial markets. With interest rates rising and investors awaiting more clarity from central bankers, there's an extraordinary amount of cash that's been moved to the sidelines where investors can earn acceptable returns while they await more certainty. The slowing and narrowing investor activity has been a near-term challenge for our industry, but it also sets the course for an eventual reallocation and money moving back into higher risk-based assets. Our results, which are highlighted on slide three, in many ways reflect these dynamics. However, our unique positioning with deep client relationships, a strong geographic mix, and a broad suite of investment solutions helped us deliver positive net long-term inflows in the third quarter. One of the primary contributors to our relative net flow strength is our robust ETF and SMA platforms. Our ETF business delivered record flows in the third quarter, which were concentrated in our leading factor-based capabilities. It was one of the strongest ETF quarters we have experienced. As we continue to gain market share, we captured nearly three times our industry share of net asset flows to our market share of AUM, and importantly, over three times of our industry share on a revenue flow basis as well. Additionally, we continue to enhance the commercialization of our SMA platform and are seeing strong momentum in flows, particularly within fixed income, where we have posted 12 consecutive quarters of positive net flows, despite the challenging market environment. Within these vehicles, we are well positioned to meet the increasing interest around personalization and tax optimization that we're seeing by wealth management clients in both the U.S. and around the world. While areas of growth like ETFs, SMAs, and fixed income have been strong for us this year, we continue to see flow pressure in active equities. While headwinds have persisted in this asset class industry-wide, we are beginning to see marked improvement in Invesco, in particular in the global, international, and emerging market equity segments. In aggregate, our net outflows in these strategies are significantly lower than what we experienced in 2022 and have stabilized at around $1 billion in outflows each of the last two quarters. We continue to put considerable effort into further improving investment quality, product differentiation, and client engagement in these capabilities to ensure we are well situated ahead of the eventual renewed demand in these important and higher fee-yielding asset classes. We're going to spend some time on the call today highlighting how we're positioning the firm against shifting investor demand, its impact on our asset mix, net revenue and our net revenue yield, and how we're organizing to meet the evolving client demand in both the near and the longer term. As we've outlined previously, we are undertaking a multi-quarter plan to simplify and streamline the organization to position the firm around rapidly evolving client demands. Our aim is to operate with more agility, improve our consistency of investment quality, create a more seamless client experience, and more efficiently leverage our size and our global scale to enable better outcomes for our clients and drive even greater profitability. We have already made meaningful progress in these areas, and we will continue to execute a pace in the coming quarters. Some of the key highlights on the evolved investment platform that we have achieved to date include the following. We've established a unified, globally integrated fixed income platform. We're creating a single, highly focused multi-asset group from three distinct teams. We're bringing together leadership across our fundamental active equity teams, and we're further strengthening our private market platform that spans both real estate and private credit capabilities. Notably, all of these simplification efforts will enable us to more fully take advantage of the benefits of our State Street Alpha platform as a single global investment operation engine across asset classes. On the product and distribution side of our business, we've also made considerable progress in repositioning growth and efficiency. We've combined our ETF, SMA, and model portfolios efforts into a single strategy and group. Going forward, we believe that these capabilities will be the leading vehicles of choice for our clients. Our established infrastructure, brand, and innovation will enable us to continue to lead and bring both active and passive capabilities to investors in an even more personalized and efficient way. We're also continuing to prune our product line, and we've reduced it by over 150 products in the past year. Further, by globalizing many aspects of our marketing and digital delivery, we're finding opportunities to leverage our scale simplify our applications, unify our data, and use technology to strengthen these capabilities while lowering costs. There are efficiencies to be gained from all of these simplification efforts, which we are beginning to realize, and we will continue to do so over time. However, these efforts are about much more than just expense savings. We view these as drivers of revenue acceleration, which will allow us to improve our investment quality, reallocate our expenses and capital base much more effectively, and deliver sustainable profit growth and margin expansion in time. Moving ahead to slide four. As investors gain greater clarity on inflation and central bank interest rate policy, we expect clients to move out of cash and extend their duration profiles of their fixed income allocations into a wider range of strategies. Fixed income is a clear area of strength for Invesco, and we're focused on ensuring we are well positioned to capture what we believe will be an outsized share of this reallocation. As you can see on this slide, our $500 billion plus fixed income platform has strong investment performance, requisite scale, diversity across asset classes and client geography. It spans public and private investments, and it has a robust offering of both active and passive products. The globally integrated institutional quality platform has been a consistently strong grower for Invesco having posted long-term net flows over the previous 18 quarters and has very strong top tier investment returns across a wide range of fixed income capabilities. A few highlights to note on our favorable position that are on the page include our global liquidity capabilities, which have grown AUM by over 150% over the past five years. And we're now squarely in the top 10 of institutional money fund managers in the top five. amongst non-bank-owned providers. Our stable value capability is well-placed in DC platforms and ranks as a top manager in the U.S. institutional marketplace. Our municipal capabilities rank in the top five largest among mutual fund managers in the U.S. and number two amongst high-yield muni fund managers. Within our investment-grade capabilities, our relative performance has been improving since the recent mini banking crisis, and our long-term performance strength has helped us nearly double our AUM in the past five years. Furthermore, our global and emerging markets fixed income capabilities have stellar performance and are very well placed for growth in the UK, European, and Asian institutional and retail markets. And finally, we believe that significant opportunity exists for even greater expansion of our fixed income ETF and bank loan capabilities, which are two notable strengths of Invesco. So against the backdrop where clients are seeking to work with fewer asset managers to meet the breadth of investment requirements, fixed income is clearly an area of our business that is poised to continue to gain market share and drive even greater profitability as the eventual rotation beyond cash unfolds. Finally, and before I turn the call over to Alison, I want to take a moment to highlight on slide five another important piece of the Invesco investment thesis, our strategic relationship with MassMutual. Our engagement with MassMutual has many facets that create a meaningful, mutually beneficial strategic relationship. First, MassMutual is one of our largest investors as both a common equity and preferred shareholder, so we're mutually aligned to delivering profitable growth and long-term success against the backdrop of an evolving industry. MassMutual is also a significant investor over the past years in supporting many of our newly launched private market and other key strategies with a total of $3.5 billion of commitments. Notably, this is three to four times the multiple of seeding of our own products on our own balance sheet. MassMutual has significantly increased their commitment since the inception of our relationship, and this is meaningfully bolstering our growth trajectory in our private markets business both institutionally and in our wealth management channels, where early access to capital is paramount to setting the course for growth. Finally, we work closely with MassMutual on behalf of their clients, and we are pleased to be a third-party manager of $9 billion of assets through their insurance and broker-dealer channels, where we rank as the largest sub-advised and defined contribution investment-only manager on the MassMutual platform. To summarize, this is a powerful and important relationship for Invesco with significant potential ahead. We continue to explore avenues with MassMutual to make this relationship even more meaningful in the future. With that, let me turn the call over to Allison for a closer look at our results, and I look forward to your questions.