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Fund Spy

Invesco Moves Swiftly After Its Acquisition of OppenheimerFunds

It's reasonable for investors to expect more changes.

Late Friday, Invesco announced several investment personnel changes, roughly one month after its acquisition of OppenheimerFunds closed on May 24, 2019. Some investment team members are shifting assignments, while some others have left or will leave the firm.

Change itself here is hardly a surprise. For one, Invesco has been transparent about its motivation for the acquisition--scale and efficiency--as it plays in an industry facing intense fee pressure. And two, Invesco made quick moves after a similar major acquisition in 2010 when it bought Van Kampen's suite of funds from Morgan Stanley. After the dust had settled back then, investment teams had been shuffled and funds had been combined or liquidated.

Get Ready, Get Set
Even prior to the close of the acquisition, the wheels were in motion. It was announced in February 2019 that OppenheimerFunds' CEO and veteran portfolio manager Art Steinmetz would leave the firm at the deal's close (he has). And the late-May Statements of Additional Information for the old OppenheimerFunds showed Invesco's legacy board as the combined fund complex's overseer. Subsequently, effective June 10, 2019, the board appointed five additional trustees who had previously served on the old OppenheimerFunds' boards. The board can prove critical, as it's the trustees who will ultimately determine fund mergers and expense controls, such as cuts, caps, and waivers. (That being said, both firms had roughly average fees overall prior to the merger. It's also likely that the now-19-member board will shrink through attrition in time.)

Invesco did a nice and transparent job of outlining the latest slew of changes.

Perhaps not surprisingly for a firm addressing scale, much of the change to specific investment strategies has come on smaller offerings. For example, Helena Lee, who launched Invesco Oppenheimer Preferred Securities and Income in February 2018 as its sole manager after 10 years as an analyst at Oppenheimer, left the firm on June 19. That fund has roughly just $20 million in assets and will now be run by Chuck Burge, who is part of Invesco's taxable-investment fixed-income team.

More changes on smaller funds don't mean there aren't big takeaways. Ron Sloan, who had resurrected flagship Invesco Charter (CHTRX) (and other funds that previously merged into it) through the early to mid-2000s, left the firm after a more-recent stretch of particularly poor performance. Sloan had spent more than 40 years in the industry and more than 20 at Invesco; he was one of his small team in San Francisco that didn't relocate to Atlanta several years ago, so it's probably safe to call this a retirement. Mani Govil of Oppenheimer's Main Street franchise will take the lead portfolio manager role at Invesco Charter. Govil has a stable team and strong process on  Invesco Oppenheimer Main Street (MSIGX), but performance has been mixed over the longer term. The fund has a Morningstar Analyst Rating of Bronze and $9.6 billion in assets. With Invesco Charter, Govil adds $3.3 billion in assets. Both are large-blend funds.

Like Govil, Invesco's Meggan Walsh now has a bigger footprint. In addition to being the lead manager on  Invesco Diversified Dividend (LCEAX) (rated Silver) and  Invesco Dividend Income (FSTUX) (Bronze), she's also taking over  Invesco Oppenheimer Equity Income  (Neutral) and Invesco Oppenheimer Dividend Opportunity . Together they'll add more than $3 billion in assets under management. Invesco Diversified Dividend and Invesco Dividend Income today total more than $20 billion. Walsh has proved to be a bright spot in Invesco's investment house, producing strong risk-adjusted results with using a total-return approach to investing in dividend-paying stocks and dividend growers.

The combined shop's fixed-income offerings have also seen their share of change. Of note is the eventual departure of Krishna Memani, who had been Oppenheimer's CIO and fixed-income portfolio manager. At the new company, Greg McGreevey has the job of overseeing all of Invesco's group CIOs. Memani will leave the firm at the end of March 2020, serving in the meantime as an advisor and reporting to McGreevey. Memani has been removed from the funds he had been comanaging, including  Invesco Oppenheimer Total Return Bond (OPIGX),  Invesco Oppenheimer Global Strategic Income (OPSIX), and  Invesco Oppenheimer Capital Income . In some cases, his comanager remains on the fund with additional managers, in other cases, not.

Status Quo
Most of these changes aren't surprising, for they involve relatively small funds or those with weak performance. Many of the bigger, and better, funds and their managers were left alone. Notably, Invesco took a hands-off approach to the international funds from both the Invesco and former Oppenheimer sides. That may be because they are among the group's strongest processes, teams, and performers.

But two international-fund portfolio managers departed Oppenheimer prior to the acquisition close. In September 2018, prior to the official merger announcement, Rezo Kanovich left  Invesco Oppenheimer International Small-Mid Company (OSMAX) with two of his analysts for Artisan. Then in March 2019, Rajeev Bhaman retired, leaving Invesco Oppenheimer Global (OPPAX), though Bhaman had announced his retirement a year prior. In both cases, experienced successors took the reins.

Meanwhile, Invesco's legacy international group remains stable in Austin, Texas, but it runs a much smaller pool of assets (though still tens of billions of dollars). With the exception of giving the U.S. sleeve of Invesco Global Small & Mid Cap Growth to Ryan Amerman, the team's resident domestic-equity portfolio manager, nothing has changed.

What's Next?
Through all the changes to investment teams and assignments, Invesco says that there are no modifications to any of the funds' investment strategies; however, considering the overlap here, it's reasonable to consider that some of these offerings will eventually be merged. That could ultimately eliminate some redundancies, and importantly costs, which should bring down expenses, benefiting those investors.

Of the 56 funds (including variable insurance accounts and money market funds) that have experienced some kind of manager change, Morningstar covers 13 of them (and they are among the larger offerings affected). Three are currently Under Review; the other 10 haven't had their Analyst Ratings changed as a result of these announcements.


Bridget B. Hughes does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.