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Invesco Isn't a Growth Shop Anymore

The Van Kampen acquisition makes the firm bigger and better.

Ryan Leggio, 12/31/2010

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Invesco's stewardship has improved over the past few years and a recent acquisition will replace one of the firm's weakest lineups. 

Invesco IVZ deserves credit for improving its corporate culture so it's increasingly investor-focused. The firm, which was once known primarily for its growth equity investing, has continued to shift away from the momentum-based strategies that characterized its earlier days. Invesco also improved its fund lineup when it acquired Van Kampen, a firm known for its large and successful domestic value funds.

Many of Invesco's improvements have come during the tenure of CEO Marty Flanagan, who took the reins in August 2005. Early on, Flanagan took steps to shake up the leadership team overseeing the Houston-based office of Invesco (which was known as Invesco AIM until early 2010). He and his lieutenants deliberately assessed the strengths and weaknesses of the firm's portfolio-management personnel, a process that continues to this day. Management streamlined the firm's back-office operations, consolidated its mutual fund lineup, and began to repair its tenuous relationship with the funds' board of directors. These moves helped lay the foundation so Invesco could strengthen its investment capabilities.

Notably, several of Invesco's strategies proved relatively resilient in the 2008-09 market slide, and the firm retained all of its investment professionals during the period, even though other large firms laid off money managers and researchers. Among the shop's most solid strategies are those run by the international growth equity team, including Invesco International Growth AIIEX, under CIO Clas Olsson. Other highlights include the U.S. core equity team, which backs Invesco Charter CHTRX and Invesco Mid Cap Core Equity GTAGX and is under CIO Ron Sloan's team. And Meggan Walsh has done well with Invesco Diversified Dividend LCEAX.

Management's co-CIO structure has proved effective since the firm's failed search for a single CIO in late 2007 and early 2008. Invesco has five co-CIOs that head up its U.S. growth equity, U.S. core equity, U.S. value equity, international growth equity, and worldwide fixed income teams. This structure has enabled each co-CIO to take a proactive role in shaping the culture and capabilities of their respective teams, without forcing the team's varying investment styles to gel under one CIO. The strength of this structure was evident in 2008 as Sloan's risk-averse Core funds fared much better than the fully invested Value funds.

Value Funds Get Extreme Makeover
In areas where Invesco's investment lineup has been weak, it's taken steps to address specific problems. For one, it dramatically improved its value funds by buying Van Kampen in 2010 for $500 million in cash and $1 billion in equity. Van Kampen was strong where Invesco was weak: Van Kampen's two largest investment lineups, domestic value equity and municipals, were two of Invesco's smallest. Domestic value was not only one of Invesco's smallest group of funds, but also one of the weakest under U.S. value equity CIO Brett Stanley. Under Stanley, the large-value funds put up devastating losses in 2008 and early 2009.

Invesco, with the support of the funds' mutual fund board, has handled the merger well so far. The integration process has been transparent. Investment personnel at the combined organization have been broadly impacted by the deal. All told, 24 investment professionals and nine investment teams have left the firm, due mainly to overlapping capabilities.

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