Invesco’s overall corporate culture is headed on the right path.
When CEO Marty Flanagan took the reins in 2005, he took over a firm that was still reeling from several missteps, and his actions since then have inspired some confidence that he could be able to right the ship. A previous co-president at Franklin Templeton, Flanagan and his Invesco executive team have improved the firm’s funds and their performance. Importantly, Flanagan and his team improved communication among the firm’s global teams and provided better support to the funds’ board of directors.
Invesco has continued to expand under Flanagan’s watch. Two large transactions in recent years created major transformations for the firm. The first was the acquisition of PowerShares in 2006. PowerShares was a pioneer in the exchange-traded fund marketplace, most well-known for its PowerShares QQQ
Invesco’s 2010 purchase of a suite of mutual funds from Van Kampen strengthened the firm’s open-end mutual fund lineup. The merger provided access to a strong suite of value-style equity and municipal-bond funds, two areas where Invesco historically had weak product offerings. Invesco did an exemplary job integrating the funds into its lineup. While manager changes and fund mergers can be disruptive to an organization and its fundholders, Invesco was swift and efficient about it, and also communicated clearly with employees and investors, saying which funds—and management teams—would stay in place and which would not.
There are signs that the firm is focused on building a sustainable investment culture. After a failed attempt to hire a firmwide chief investment officer in 2009, Invesco established a co-CIO structure. On the equity side, there are group CIOs for U.S. Growth Equity, U.S. Core Equity, U.S. Value Equity, and International Growth Equity, while the fixed-income side is managed by a single CIO. Each area has retained its independence and unique investing culture. For example, U.S. Core Equity CIO Ron Sloan gives analysts responsibility for managing a sleeve of his funds, while U.S. Growth Equity CIO Juliet Ellis emphasizes mentoring analysts coming up the ranks, rotating them through various sectors to broaden their experience. Even so, efforts to cross-pollinate research among the teams, such as shared sector-based teams and more frequent communication between the teams, seem to be losing steam among some groups.
Meanwhile, continued turnover among certain groups is concerning. Manager retention across the firm is relatively low compared with other similarly sized firms, a result of both recent mergers and ongoing changes. For example, the Negative-rated Invesco Global Core Equity
On the fixed-income side, Invesco has been adding resources to its relatively lackluster taxable-bond funds. Greg McGreevey, former CIO for all of Hartford’s insurance portfolios, was hired in late 2011 to head up Invesco’s fixed-income capabilities. The firm has also invested in technology for the group and is making an effort to consolidate several regional offices. The team has also made external hires to add macroeconomic analysis capabilities. While an increase in resources could be beneficial, the new structure is unproven. It is worth watching to see whether the changes are additive to results.
The firm has made some strides in communicating with fundholders and the financial advisors that sell its funds. Market commentaries as well as frequent videos and reports from portfolio managers posted on the firm’s website provide timely insights for investors, for example. The sales team also asserts that it’s more focused on educating advisors and investors on the nuances involved in the somewhat complicated structure of the firm’s first risk-parity fund, Invesco Balanced-Risk Allocation
Invesco’s overall corporate culture is headed on the right path. While the directives from top management seem to demonstrate the firm is keeping investors front of mind, it will take time to see whether the changes throughout the firm are sticky and whether this iteration of the firm can stand at the same level of more-established peers and deliver consistent results for investors.