Invesco Q1 2025 Earnings Call Transcript

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Provided by Quartr
April 22, 2025

Key Takeaways

  • $17.6bn in long-term net inflows: Invesco delivered a 5.3% annualized organic growth rate with adjusted operating income up 18% and margin expansion of over 30 basis points year-over-year.
  • $1bn preferred stock repurchase: Invesco will repurchase 25% of MassMutual’s preferred shares, funding the deal with floating-rate term loans at a 4.2–4.4% after-tax cost and expects $0.13 of run-rate EPS accretion once loans are repaid.
  • Private markets partnership: Invesco, MassMutual and Barings will co-develop U.S. wealth-management private credit solutions, seeded with $650m from MassMutual to accelerate product launches.
  • Net outflows in equities and multi-asset: Fundamental equities saw $7bn of net outflows and multi-asset strategies lost $1.1bn in Q1 amid market volatility, though fixed income inflows and SMA growth provided some offset.
  • Expense flexibility: About 25% of Invesco’s expenses are inherently variable and can rise to roughly 35% with management action, underscoring disciplined cost control amid uncertain revenue trends.
AI Generated. May Contain Errors.
Earnings Conference Call
Invesco Q1 2025
00:00 / 00:00

Transcript Sections

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Operator

Thank you for standing by, and welcome to Invesco's First Quarter Earnings Conference Call. All participants will be in a listen only mode until the question and answer session. This call will last one hour. 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.

Greg Ketron
Greg Ketron
Head of IR at Invesco

Hey, thanks, Cedric, 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. 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.

Greg Ketron
Greg Ketron
Head of IR at Invesco

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. Daily authorized webcasts are located on our website. Andrew Schlossberg, President and CEO and Allison Dukes, Chief Financial Officer, will present our results this morning, then we'll open up the call for questions. I'll now turn the call over to Andrew.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

Thank you, Greg, and good morning to everyone. I'm pleased to be speaking with you today, not only about our Q1 results, but also the significant developments that we announced in our ongoing relationship with MassMutual, which we are very excited about. Alison and I will walk through the details of this new strategic product and distribution partnership and the $1,000,000,000 repurchase of preferred stock a little later in the call. In recent quarters, I've been commencing our earnings calls with a recap of our strategic focuses and advantageous market position as seen on slide three of your presentation. During this period of uncertainty in capital markets and economies around the world, I cannot think of a more pertinent time to highlight our position and our steadfast focus.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

Our strategic priorities were conceived with conviction that regardless of near term market volatility, cyclical, structural or fundamental developments, our focus would leverage the best of Invesco, ignite our growth engines and deliver durable results. The hallmarks of the global Invesco platform place us in a position of strength to navigate the current operating environment. Our geographic diversity and local presence is a differentiator across The Americas, EMEA and our significant and unique Asia Pacific profile. Furthermore, our broad range of public and private market portfolios and active and passive multi asset range of capabilities provides the opportunity for us to stay closely connected to clients and capture expected reallocations in their portfolios. Furthermore, our diverse profile provides a more resilient asset flow, revenue and profit growth profile.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

Our strategic clarity has helped us drive organic growth through various operating environments and continued to prove effective in the first quarter. We generated $17,600,000,000 in long term net asset inflows or a 5.3% annualized growth rate. And we delivered strong profitable growth with adjusted operating income up 18% and operating margins expanding over three thirty basis points when compared to the same quarter last year. Furthermore, against the backdrop of a turbulent start of the second quarter, our diversified platform provided some resilience in our asset flows and an ability to use our global scale for the benefits of our clients and our shareholders. Turning to Slide four, I'll cover our first quarter flow performance by investment capability and provide some additional context in which to think about the new uncertain operating environment that we have now entered.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

Before I begin though, I want to point out a change we have made to the reporting of our investment capabilities to isolate the performance of our China JV and India business. It's important to note that this line item now only represents products managed through our China JV The approximately $10,000,000,000 in other assets that were previously in the Asia Pacific managed capability, but not managed directly through the JV or India are now allocated to the representative investment capabilities with the majority being allocated to fundamental equities. We made this reporting change to better reflect how we view our business and the unique dynamics in the Asia Pacific region, where we are increasingly able to bring more international products managed outside of the region to our clients in these local markets. A good example of this is our Global Equity Income Fund managed out of The UK, which has rapidly grown to $14,000,000,000 of assets under management, predominantly from clients in the Japanese market. We've provided an eight quarter look back in the appendix of today's presentation to help you align to this adjustment.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

Currently, we'll continue to report our assets and flows sourced from clients and in each region, which you can see on Page five of the presentation. The Asia Pacific and EMEA regions account for $276,000,000,000 each in assets under management, representing nearly a third of the overall company. And between them, they generated $15,000,000,000 in net long term inflows in quarter one, a positive trend we have seen in the past several quarters. This further highlights the importance of our local profile in key markets around the world. Shifting to our recent business results, the year started with a risk on client sentiment, which shifted to a more cautious stance at the end of the quarter continuing through April.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

By illustration, money markets for the industry recently topped $7,000,000,000,000 a record level for the asset class. Thus far in April, we've seen investors largely stay invested, but they remain more muted with new capital deployments as they rethink their asset allocations. Despite the volatility, we continue to see strong client activity in the first quarter with significant growth across channels, asset classes and product vehicles. A key headline for us was the funding of a $10,000,000,000 mandate to deliver a range of customized fixed income portfolios for the Peoples Pension Fund, which is one of the largest master trusts in The United Kingdom. Dollars Six Billion of this mandate funded in the first quarter with the incremental $4,000,000,000 funded during April.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

This is an important mandate as we continue to build Invesco's leadership in the retirement markets in The UK and globally. Our global ETF and index platform continued to produce strong results recording 13% annualized organic growth in the first quarter. More recently, in the March timeframe and continuing into April, ETF demand has cooled as global financial markets experienced increasing volatility. That said, we have continued to see our ETF flows broaden by asset class and factors across our clients in Americas, EMEA and Asia. Strong ETF growth in The U.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

S. Market was augmented by another solid quarter for growth in EMEA, where we saw $8,000,000,000 in net new ETF flows. Top net flowing products in The U. S. Were led by our QQQM with a near record flow of $4,000,000,000 Additionally, our Factor suite drove significant net flows as precision investments become an even more critical buying decision.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

We continue to innovate in the ETF space, launching three new active ETFs in the quarter with plans for increased expansion this year. Further, our QQQ ETF was successfully listed on the Hong Kong Stock Exchange in February. This launch marks the first cross listing of Invesco QQQ outside of North America and represents a milestone in the expanding market for ETFs into Asia. Shifting to fundamental fixed income. In the current environment of uncertainty and tight valuations, there is caution around risk taking.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

We saw this play out with our fixed income results, particularly during the back end of the quarter. But given our range and strength of our fixed income offering, we garnered 8,000,000,000 in net long term inflows with an additional nearly $9,000,000,000 in global liquidity flows during the quarter. During the period, demand for investment grade and certain municipal bond strategies continued to be strong, and we also had net inflows into our ultra short duration strategies and saw a positive reversal in our stable value platform with net long term inflows for the quarter, a trend line that has strengthened into April. Our retail SMA platform, which tends to be more focused on short duration, continued to capture flows and now stands nearly $30,000,000,000 in AUM. We have one of the fastest growing SMA offerings in The U.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

S. Wealth management market with an annualized growth rate of 25%. Shifting to private markets. In direct real estate, we recorded net inflows of $1,100,000,000 driven by the funding of a large UK mandate as well as continued inflows into INCREAF, which is our real estate debt strategy targeting the wealth management channel where we continue to onboard new platforms and clients. Our real estate team remains very well positioned in the institutional markets with over $5,000,000,000 of dry powder to capitalize on emerging opportunities.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

Our private credit capabilities recorded modest net outflows for the quarter as our market leading bank loan ETF turned from a strong net inflow position at the beginning of the quarter to net outflows in March, which continued into April as recession fears have increased. Client interest in private markets remains high, and we expect to see continued activity in the key areas where we focus in real estate and alternative credit, including the advancements announced today with our partnership with MassMutual and Barings. Moving to our China JV and India capability, we saw continued net long term inflows of $2,200,000,000 which was led by fixed income and augmented by continued growth in ETFs, which have been gaining traction in China. While six new products were launched in our China JV this quarter, our organic growth in this market was largely driven by existing products, which is a good sign for the strength of our platform. Furthermore, within these markets, we've seen resiliency thus far in April with continued positive organic flow growth in these local fund ranges.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

Clearly, the most recent heightened trade tensions have created an overhang for the domestic Chinese economy, but continued anticipated government stimulus, heightened domestic consumption and reforms on social service will have an impact on the development of capital markets and the retirement system, both of which are benefits for our domestic to domestic business. Turning to our multi asset related capabilities. We saw net long term outflows of $1,100,000,000 driven by our global risk parity strategies. Finally, the relative pressure on fundamental equities has continued. We saw outflows in our global equities and developing markets funds in The U.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

S. Region, But importantly, by contrast, in our EMEA and Asia Pacific regions, we had modest net inflows in fundamental equities, which is an important change in the trajectory. Overall, our focus will remain on delivering strong investment performance and gaining market share in key fundamental equity categories in which we compete. Moving on to Slide five. As mentioned earlier, we provide an alternative aggregation of our AUM and our flows to provide additional context for our business results.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

I've covered most of the key highlights, but I will reiterate that the diversity of our asset flows across geography, channel and investment style provide a balance to market conditions and an ability to meet a range of client needs, which is an important part of our organic growth potential through various market cycles. Moving to Slide six, which shows our overall performance relative to benchmarks and peers as well as our performance in key capabilities where information is readily comparable and more meaningful to driving results. Investment performance is key to winning and maintaining market share despite overall market demand. Achieving first quartile investment performance remains our top priority. Overall, roughly half of our funds are performing in the top quartile of peers across the three and five year time horizons.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

Further, over two thirds of our AUM is beating its prospective benchmarks over these measurement periods. Moving on to Slide seven. Two important strategic priorities for Invesco have been expanding our footprint in private markets, particularly with wealth management clients, and ensuring that we have balance sheet and capital management flexibility to continue to invest in our growth and deliver shareholder returns. The partnership we announced today with MassMutual and Bearings for private market product development and distribution in The U. S.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

Wealth management market and the repurchase of part of our preferred stock are exciting developments in driving these strategic priorities for the benefits of our clients and our shareholders. And it also demonstrates the commitment, strength and strategic nature of our relationship with MassMutual. The near term focus of our partnership with Barings will be on delivering differentiated and industry leading private credit oriented income solutions and product structures suitable to reach a wide set of our U. S. Wealth management clients.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

We're going to leverage both Invesco and Barings capabilities in global private credit and public fixed income. The partnership is going to rely on Invesco's deep client relationships in The U. S. Wealth management channels for our distribution and the extensive product structuring and unique asset allocation capabilities of both firms. We're also excited that MassMutual intends to support this initiative with an initial investment of $650,000,000 in seed and co investment capital to accelerate bringing these initial and innovative solutions to our clients.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

This augments MassMutual's previous commitments to Invesco's private market and other strategies, which has exceeded $3,000,000,000 in total. Today's announcement of this partnership with an institutional private markets leader like Barings complements nicely the existing strengths of our $130,000,000,000 private markets platform and will allow us to expand the existing real estate, alternative and private credit strategies that we currently have in market for wealth management clients in The United States. It also demonstrates our ongoing commitment to look for opportunities to broaden our private market offerings to meet client needs across all market cycles and across the full spectrum of sectors and geographies. With that, I'm going to turn the call over to Alison to discuss the important aspects of our announcement with MassMutual, including the details and benefits of the $1,000,000,000 repurchase of preferred stock and also our financial results for the first quarter. I look forward to your questions.

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

Thank you, Andrew, and good morning, everyone. I'll start on Slide eight with the strategic rationale and impact of the $1,000,000,000 repurchase of Invesco's preferred stock. We're very pleased that we were able to reach an agreement with MassMutual to repurchase 25% of the preferred stock, which they hold. There are a number of advantages for Invesco in being able to repurchase the stock. We'll be funding the repurchase with committed floating rate three and five year bank term loans that have a rate in the five point five five point three years range based on SOFR today or an after tax cost in the 4.2% to 4.4% range.

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

This compares favorably to the fixed 5.9% dividend rate on the preferred stock, which is not tax deductible. We expect the transaction, both the repurchase and financing, will close in May. The transaction will be earnings accretive in the second half of this year, and the accretion will increase over time as we pay down the term loan. Ultimately, once the loans are repaid, we expect the EPS accretion related to this transaction will reach $0.13 on a run rate basis. Based on our projected future cash flows, we expect to have the loans fully repaid by mid to late twenty twenty nine.

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

We would also anticipate paying the loans off earlier should cash flows provide the opportunity to do so. By repurchasing the preferred stock, we will save $59,000,000 in annual preferred stock dividends that become earnings available to common shareholders. And while the initial annualized borrowing costs associated with the term loans will be in the 40,000,000 to $45,000,000 range after tax, this will decrease as the loans are paid down through future cash flows. The terms and conditions are similar to our floating rate revolving credit facility, and they're prepayable at any stage with no make whole fees. There are no principal payments required for the first three years.

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

The five year term loan does have a principal amortization feature in years four and five at 10% per year. Our balance sheet flexibility will be enhanced by the repurchase in the sense that we are pulling forward $1,000,000,000 reduction in the preferred stock that is otherwise non callable until February. This will enable us to further deleverage and increase balance sheet flexibility nearer term. It's important to note that our capital deployment priorities remain intact. We anticipate ample cash flow capacity to repay the bank term loans and a $500,000,000 senior note that matures in January of twenty twenty six without restricting our current capital deployment priorities.

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

These include continued investment in growth initiatives, regular share repurchases and modest dividend increases as underscored by our announced common dividend increase today. We do expect that our cash and cash equivalents will remain near $1,000,000,000 going forward. It's also important to note that the repurchase agreement with MassMutual provides for discussions regarding future repurchases of the remaining $3,000,000,000 of preferred stock. On the next slide, we show the expected progression of the EPS accretion through time that the term loans are repaid in 2029 and the expected run rate EPS accretion after the term loans are fully repaid. There is a 15% premium being paid to MassMutual to repurchase the $1,000,000,000 of preferred stock based on the present value of a 5.9% dividend rate being eliminated fifteen years ahead of the first call date.

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

The premium will be included in our second quarter GAAP results, but it will not impact our adjusted operating results. We also show the expected impact that repurchase will have on our leverage ratios and the progression of our debt by maturity. Looking at the leverage ratio excluding the preferred stock, we do see a near term increase in leverage from the term loans, but to a very manageable level near 1x, followed by significant improvement as we repay the loans. The change to the leverage ratio, including the preferred stock, is not as impacted near term as we are effectively replacing the preferred stock with the term loans. However, with this transaction, we're able to meaningfully improve our leverage profile over the next five years in a way we could otherwise not attain without the repurchase.

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

The leverage ratios shown here are pro form a, assuming no change in EBITDA from what we are reporting as trailing four quarter EBITDA for the first quarter of this year. I'll move on to the first quarter financial results on Slide 10. We continued to see strong growth in assets under management during the first half of the quarter before weaker markets set in during the second half of the quarter. Total AUM at the end of the quarter was $1,840,000,000,000 nearly flat to the end of the fourth quarter of 'twenty four and $182,000,000,000 or 11% higher than the end of the first quarter of twenty twenty four. Average long term assets under management were over $1,300,000,000,000 an increase of 1% over last quarter and 14% over the first quarter of last year.

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

Growth in assets under management during the first quarter was mainly driven by net long term inflows, net inflows into our QQQ ETF, net inflows into money market funds and positive FX impacts. The impact of market declines in the latter half of the first quarter offset this growth at quarter end. Net long term inflows drove an $18,000,000,000 increase in AUM during the quarter, representing an organic growth rate of over 5%. As Andrew noted, net inflows in our ETF and index capabilities, excluding the QQQ, were over $16,000,000,000 Fundamental fixed income contributed $8,000,000,000 inflows. Net outflows of $7,000,000,000 in fundamental equities partially offset these inflows.

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

Net revenues, adjusted operating income and adjusted operating margin all improved from the first quarter of 'twenty four, while adjusted operating expenses continued to be well controlled. Adjusted diluted earnings per share increased by 33% to $0.44 for the first quarter versus prior year EPS of $0.33 We continued to strengthen the balance sheet during the first quarter, ending in a net debt position of $143,000,000 substantially better than the first quarter twenty twenty four's net debt position of $362,000,000 We ended the quarter with only $74,000,000 drawn on the credit facility below historical seasonal levels. We also continued share repurchases on the first quarter, buying back $25,000,000 We intend to continue repurchasing shares at a similar level on a regular basis going forward. Our Board also improved an increase in our quarterly common stock dividend from $0.02 $05 to $0.21 per share, reflective of our strong cash position and cash flow. Moving to Slide 11.

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

As we've noted in prior calls, secular shifts in client demand have altered our asset mix and net revenue yields as our broad set of capabilities has allowed us to capture evolving client product preferences. This dynamic has been increasingly reflected in our results. Client demand has led to continued diversification of our portfolio, a trend we have seen for a number of years now. As a result, concentration risk and higher fee fundamental equities and multi asset products has been reduced. The firm is increasingly better positioned to navigate various market cycles, events and shifting client demand.

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

Consistent with prior quarters, current net revenue yield trends are included on the slide. The ranges by capability are representative of where the net revenue yield has ranged over the past five quarters. We note the net revenue yield drivers and where in the range the yields have trended more recently. To provide context for the net revenue yield trend during the first quarter, our overall net revenue yield was 23.5 basis points, including the impact of two fewer days in the first quarter compared to the fourth quarter, which accounted for 0.5 basis point or 0.5 tenths of a basis point of the decline. Excluding the day count impact, the net revenue yield declined zero six basis point compared to the fourth quarter yield of 24.6 basis points.

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

The exit net revenue yield at the end of the first quarter was 23.8 basis points, only two tenths of a basis point lower than the day count adjusted net revenue yield for the first quarter of 24 basis points. Turning to Slide 12. Net revenue of $1,100,000,000 in the first quarter was $55,000,000 higher than the first quarter of last year, a 5% increase. Investment management fees were $59,000,000 higher than last year. The increase was driven by higher average AUM, partially offset by the AUM mix shift previously noted.

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

Higher performance and other fees were offset by lower service and distribution fees and higher third party expense. Operating expenses continue to be well managed, but total adjusted operating expense is only $2,000,000 higher or 03% from the first quarter of last year. Sequential quarter adjusted operating expenses were $8,000,000 lower despite seasonal expenses and compensation due to payroll tax and other compensation related expense resets that typically occur in the first quarter. Declines in marketing, property office and technology and G and A offset the increase in compensation expense on both a year over year and sequential basis. We did have $7,000,000 of nonrecurring expense benefits in the first quarter that mainly impacted G and A expenses.

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

Alpha platform implementation costs of $13,000,000 were in line with our expectations for the first quarter and consistent with the $14,000,000 incurred in the fourth quarter. We did move a small first wave of AUM on the Alpha platform in the fourth quarter of twenty twenty four. Fees paid on the assets under management that were transitioned over in the first wave were nominal expense wise in the first quarter. As the implementation continues, we expect Alpha related onetime implementation costs to be in the 10,000,000 to $15,000,000 range next quarter. Regarding operating expenses for 2025, we're focused on disciplined expense management.

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

Given the recent market volatility, it's become more difficult to provide specific guidance on operating expenses, but we're managing it carefully day by day. In terms of expense flexibility, without any management intervention, our expenses are approximately 25% variable. With Management Intervention, some of which can take several quarters to fully realize, the variability increases to 30% to 35%. First quarter year over year positive operating leverage was over 500 basis points, driving a $53,000,000 or 18% increase in operating income and over a three thirty basis point improvement in our operating margin to 31.5. Effective tax rate was 24.4% in the first quarter.

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

We estimate our non GAAP effective tax rate will be between 25% to 26% for the second quarter of twenty twenty five, excluding any discrete items. The slight increase in the rate is driven by shift of income across tax jurisdictions. The actual effective rate can vary due to the impact of nonrecurring items on pretax income and discrete tax items. I'll wrap up on Slide 13. As I noted earlier, we continue to make progress on building balance sheet strength in the first quarter.

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

We ended the quarter with a net debt position of $143,000,000 significantly better than the prior year first quarter net debt level of $362,000,000 We ended the first quarter with just $74,000,000 drawn on our credit facility, substantially lower than what we have drawn historically with the first quarter being a seasonally high cash usage quarter. Our leverage ratios continue to show improvement versus a year ago, with the leverage ratio excluding the preferred stock at 0.3 times versus 0.54 times a year ago and including the preferred going from 3.36 times a year ago to 2.77 in the first quarter. We expect continued share repurchases buying back $25,000,000 or 1,500,000.0 shares during the quarter. I'm sorry, we continued share repurchases buying back $25,000,000 or 1,500,000.0 shares during the quarter. And as noted earlier, our Board approved an increase in our quarterly common stock dividend.

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

We intend to continue a regular share repurchase program going forward, and we expect our total payout ratio, including common dividends and share buybacks, will move closer to 60% in 2025 as we continually evaluate our capital return levels. To conclude, the resiliency and strength of our firm's net flow performance is evident again this quarter, and we continue to make significant progress on building a stronger balance sheet enhanced further by the $1,000,000,000 repurchase of the preferred stock. We remain committed to driving profitable growth, a high level of financial performance and enhancing the return of capital to shareholders. With that, I'll ask the operator to open up the line for Q and A.

Operator

Thank Okay. And our first question comes from Alex Blostein with Goldman Sachs. Your line is open.

Alex Blostein
Alex Blostein
Managing Director at Goldman Sachs

Hey, good morning everyone and congrats on the announcement this morning. So maybe starting with a strategic update, I would love to get your perspective on how you envision sort of the product and distribution opportunities develop with Barings and MistMutual. Is it more of a gradual product build, so it might take some time to scale? Or are there places where you guys could see more immediate impact on the business through either kind of a larger sub advisory arrangement or something along those lines?

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

Alex, thanks. Hi, it's Andrew. Let me take that one. The initial phases of this partnership are going to focus, as I mentioned, on areas of private credit. And we have a few capabilities mapped out that we intend to get to market in the next little while, but those need approvals and we need to work through various details.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

But we see that first phase kind of happening relatively quickly. And then we'll look at second and third phases over time as opportunities create themselves. We're really going to focus on these private credit opportunities in The U. S. Wealth management channel to start.

Alex Blostein
Alex Blostein
Managing Director at Goldman Sachs

I got you. Thanks. And then, Allison, one for you on the pref. Nice to see that done. So maybe just kind of couple of comments on what ultimately got MassMutual over the hump to agree to this.

Alex Blostein
Alex Blostein
Managing Director at Goldman Sachs

And as you think about the remaining, I think, 3,000,000,000, how are you guys thinking about opportunities to repurchase more?

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

Sure. Well, look, I think you can tell from the variety of announcements today and just the partnership we've had with MassMutual over this last six years, they're they're a good partner. And while we do have a contract with them and the preferred is non callable for another fifteen years, they also recognize and understand some of the challenges that the preferred has created in terms of the perception overall and just the coupon itself. And so they've been great partners as we continue to look for opportunities and alternatives to make some progress with the preferred and also even bringing this product partnership to bear through the relationship with Barings. So I mean, was really multifaceted and I think a real testament to just the strength of the partnership and the commitment that we have to each other.

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

As a reminder, they are an 18% common shareholder. So they're as invested as everybody else in really continuing to see the stock rerate, and we think this is a positive improvement. In terms of opportunities we have around the remainder of the $3,000,000,000 I think as we said, the repurchase agreement provides opportunities for us to continue to think about ways that we can reduce that in the future in terms that are mutually agreeable to both parties. The way we think about it, it's really going to depend on the nature of our cash flows, the opportunities we have with the free cash flow that we generate, the rate environment, which will be relevant to MassMutual and to ourselves. And really looking at what's the organic and inorganic opportunity set that's out there.

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

I think, look, this is a really strong first step. And we're all very optimistic that this provides opportunities for us to continue discussions in the future.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

Yeah. And just one other thing I'd say is I don't want to have to get lost in this. The commitment from MassMutual to put up to $650,000,000 of capital behind those initial couple of strategies that I mentioned in phase one in this product partnership is not insignificant in helping us get to those U. S. Wealth platforms more swiftly.

Alex Blostein
Alex Blostein
Managing Director at Goldman Sachs

Yes. No, that's great. Congrats to everyone involved.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

Thank you.

Operator

Thank you. The next question comes from Craig Siegenthaler with Bank of America. Your line is open.

Craig Siegenthaler
Craig Siegenthaler
Managing Director at Bank of America

Thanks. Good morning, everyone. My question is also on the MassMutual announcement relating to the Barings U. Wealth partnership. I'm curious, could this potentially be a first step in an Invesco bearing merger, especially given that your capabilities are complementary?

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

We've got a lot to do as two individual companies. And I think we found this opportunity after discussing ways to get into The U. S. Wealth space more productively together and have our complementary capabilities in this particular space come together to put a couple of products to market. And so we're going to focus exclusively on that going forward.

Craig Siegenthaler
Craig Siegenthaler
Managing Director at Bank of America

Thank you, Andrew. And then this past quarter, we saw EQH take a larger stake in AllianceBernstein. And we're watching MassMutual sell part of their preferred. I'm wondering, are there any limitations to them increasing their 18% common equity stake or voting interest in investment in the future?

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

There are limitations. It's all filed in the shareholder agreement, which was initially filed with the closing of the Oppenheimer transaction back in 2019. I believe it limits them to 22.5%. There are a variety of kind of regulatory kind of considerations around that why it's at that level. So there is some ceiling there in the shareholder agreement as it stands today.

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

I don't think anyone should view their agreement for us to repurchase a billion dollars of the preferred as anything other than just continued progress on the partnership on all sides, inclusive of, as Andrew said, the continued capital commitment on top of the $3,000,000,000 they've already committed and just their real willingness to continue to support Invesco's growth in a variety of facets.

Operator

You. The next question comes from Mike Brown with Wells Fargo Securities. Your line is open. Mike, please check your headset. I've got a bad connection with you.

Michael C. Brown
Michael C. Brown
Equity Research Analyst - Asset Managers, Brokers and Exchanges at Wells Fargo

Hi. Good morning. Sorry. Can you hear me now?

Operator

Yep. We can hear you.

Michael C. Brown
Michael C. Brown
Equity Research Analyst - Asset Managers, Brokers and Exchanges at Wells Fargo

Okay. Great. Thank you. So on the partnership announcement, just given Invesco and Barings current capabilities, can you just expand on that $650,000,000 How will that be used specifically? That's just to see the new fund vehicle?

Michael C. Brown
Michael C. Brown
Equity Research Analyst - Asset Managers, Brokers and Exchanges at Wells Fargo

Or is it also to kind of help add capabilities, for example, to maybe expand in the investment grade private credit side a bit more? And then in terms of the vehicle, to clarify, is it planned to launch like an interval fund type of structure with a public private sleeve and that would then be targeting the below accredited threshold? Thank you.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

Yeah. Let me try to address both questions. The initial seed capital is to launch and instigate the initial product or two that we'll bring to market exclusively. That's what it's meant to do. And just it's not new capabilities for either firm.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

And just to clarify, the strengths of Barings and the things that we're going to use in these capabilities include specialty finance and special situations in the higher upper end parts of direct lending where we, Invesco, really aren't today. And it's going to complement where we are today, which is in distressed credit, lower mid direct lending, bank loans, CLOs and real estate debt. So think of it truly as just complementary investment capabilities seeded with this initial capital or instigated with this initial capital and brought into a multi asset type solutions to the marketplace. In terms of structures and the like, not something we can get into today. They're not these products aren't filed and things like that.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

But do think of them as vehicles that will be relevant, credible and easy to attain by the wealth management platforms that we serve today. And similar to strategies we have out there in market already in the real estate and alternative credit space.

Michael C. Brown
Michael C. Brown
Equity Research Analyst - Asset Managers, Brokers and Exchanges at Wells Fargo

Okay. Great. And then, Allison, just on expenses, understanding the market volatility here makes it very challenging to kind of forecast where that could be for the year. But maybe if we consider markets stay flattish from here, is that kind of a baseline? How should we think about, what expenses can look like for the year?

Michael C. Brown
Michael C. Brown
Equity Research Analyst - Asset Managers, Brokers and Exchanges at Wells Fargo

Could they be kind of flattish year over year? Does that variable component give you the ability for them to actually be a bit lower year over year? Just some helpful thoughts there would be helpful. Thank you.

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

Yes. Maybe I'll take maybe a couple of component pieces just to think through all of that. I'd say compensation, of course, is the most variable component of our expense base as you think about the revenue environment. I think, you know, our compensation as a percentage of revenue has been running in that 43 to 44% range. That's probably a reasonable expectation of a range as I think about the revenue environment for this year if revenue were to stay flat.

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

So I think that gives you some sense around a pretty major element of our expense base. Alpha expenses, keep in mind, we are continuing to implement alpha. And as I said, we expect implementation costs to continue to be in that 10,000,000 to $15,000,000 range. And so that's sort of with or without any improvement or deterioration in the revenue environment. We do intend to continue moving forward in the implementation of alpha.

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

So that doesn't have a lot of variability to it. Everything else, we're certainly looking at all of our expenses from a very disciplined perspective, as you would expect in this revenue environment. I I want to be careful to read too much into three weeks of volatility. It's been three pretty volatile weeks, but it remains to be seen how things will unfold from here. Nonetheless, we're being very thoughtful about every element of discretionary expenses we have and think about it from everything from travel and entertainment to slowing down, hiring, all the things we can do to just really slow the growth of our expense base.

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

So if revenue is flat from here, could expenses be flat? It's not an unreasonable expectation, but we're gonna be looking at everything we can do to continue to pull forward some of the transformational opportunities. We've done a lot of work, as you know, over the last few years on our simplification of our organization. We still we're working on that all the time. We came into this year continuing to make progress on that.

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

We're going to stay focused and execute and accelerate with speed wherever we can so we can continue to recognize some real disciplined expense management, which we think has really become a hallmark of our operating performance for a number of years now.

Michael C. Brown
Michael C. Brown
Equity Research Analyst - Asset Managers, Brokers and Exchanges at Wells Fargo

Great. Thank you very much.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

Thank you.

Operator

Thank you. Our next question comes from Dan Fannon with Jefferies. Your line is open.

Dan Fannon
Managing Director - Research Analyst at Jefferies & Company Inc

Thanks. Good morning. Andrew, you talked about some of the trends in April. If you could talk more broadly, I think you mentioned China was positive. But as you think about other regions or client conversations in this type of market backdrop, how you're seeing things unfold?

Dan Fannon
Managing Director - Research Analyst at Jefferies & Company Inc

And maybe also just from a backlog perspective, do you anticipate fundings to maybe be slowed as a result of all the uncertainty?

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

Yes. Thanks, Ann. Look, we're three weeks into a relatively volatile month, and we're also three weeks away from releasing our April flows. And the facts, as you can imagine, continue to evolve. What I'd say thus far in April, though, is that we've seen investors largely stay pretty well invested, but they are absolutely moving to a more defensive stance as it relates to their how they're deploying new capital, as they're kind of rethinking asset allocations, but also trying to assess the market environment.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

As I mentioned in my comments earlier, I mean, this is where the diversified nature of our business is really helpful. And it puts us in a position to navigate the current operating environment and capture flows as investors gain clarity. What I would say is that in the fixed income, the focus really has remained more on the shorter duration side. And with equity strategies in The U. S.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

Facing headwinds, what we are seeing is a broadening and in many instances a more positive investment flow environment in places like Europe and in Asia, which is going to be a helpful mitigant for some of those headwinds in The U. S. That you can see on a daily basis. I'd say on the institutional side of the business, we it remains pretty resilient and frankly pretty positive. We funded the key retirement mandate that I mentioned in The UK, but also seeing strength in our U.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

S. Retirement platform places like Stable Value and that resiliency and those commitments haven't changed. And then I think China, what I'd say is that given that our business is a fully domestic to domestic business as you know, and that we're in very strong position in that marketplace, a known brand, we've seen a lot of resiliency in the region with actually positive organic flow growth into April and in April, which is helping to offset some of the market declines. So, you know, it's a mixed bag, and we'll see when we release in a couple of weeks where the month shakes out.

Dan Fannon
Managing Director - Research Analyst at Jefferies & Company Inc

Great. That's helpful. And then, Allison, just one more on expenses. Just you mentioned a one time benefit of $7,000,000 in G and A. Can you also remind us how much of the seasonal kind of comp was in first quarter to try to get a sense of just the starting points of the jump off points for 2Q?

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

Sure. On the second question, seasonal comp usually runs about $15,000,000 higher in the first quarter. And then again, I think about that comp as a percentage of revenue guidance and that 43% to 44% context tends to run on the higher side when revenue is down and of course, lower as revenue increases. On the $7,000,000 onetime, yes, it's predominantly in G and A. There were some in property, office and technology, too.

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

And so as you think about those two line items quarter over quarter, expect some increase just removing those one timers as we roll into the second quarter.

Dan Fannon
Managing Director - Research Analyst at Jefferies & Company Inc

Great. Thank you.

Operator

Thank you. The next question comes from Brian Bedell with Deutsche Bank. Your line is open.

Brian Bedell
Director at Deutsche Bank Securities

Great. Thanks. Good morning. Congrats also on the partnership with MassMutual and Verint. Maybe just on that, can you talk a little bit about the economic participation for Invesco?

Brian Bedell
Director at Deutsche Bank Securities

Is it simply a matter of the assets that you are managing in the partnership and you're getting your fees for that for the economics? Are there other sharing arrangements? And do you expect your asset management participation to be commensurate with bearings? Might it skew one way or the other? And I don't know if there's any guideposts of how large you think this could end up being over the next, say, couple of years. Maybe it's too early for that one.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

Yes. Thanks for the questions. Partnership is pretty straightforward just to put a line under it. These are going to be Invesco products that we're going to bring to market into The U. S.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

Wealth management channel with parts of the assets managed by Barings and parts by Invesco. And we'll be sharing management fee revenues in an undisclosed way. So we didn't disclose the terms of the arrangement. But Invesco is going to be the distributor. Invesco is going to be the product operator.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

We'll be compensated for that as well. In terms of the growth, it's really too early to say. We think these are compelling going to be compelling offerings, private credit broadly in an allocated way across all elements of the spectrum that I described before, inclusive of things like real estate debt. And being able to do that with all of the education that we have, all of the boots on the ground we have around wealth management is going to be a nice complement to the offering we already have and we think accelerate our brand in private markets in the wealth channel as well as the capabilities that we can put forward to those advisers who are looking for things like this. So we'll continue to update you as this develops over the next several quarters, but too early to describe how big this could be.

Brian Bedell
Director at Deutsche Bank Securities

Yes. That's helpful. And maybe just to go to the global landscape, your local profile globally, both in China and really across the world, How are you seeing or I guess, are you seeing any substantial differences within those local regions given the all of the tariff negotiations that are going on and any kind of sentiment globally towards investment products and investment in U. S. Products?

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

Okay. Yes, thanks. Maybe just before we discuss how it's looking right now, just a reminder, dollars $550,000,000,000 of our assets are held by clients outside of The United States, and that's evenly dispersed between Asia Pacific and EMEA. And as I mentioned, Asia Pacific has been a fast grower for Invesco and a really differentiated position because we're so local and because we've been so long term in those markets. And the capabilities that are being brought to those markets are both domestic and international capabilities.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

And then EMEA, where we've been for a long, long time, has started to show some very good growth over the last few quarters from an asset flow perspective, strong investment performance and a similar sort of local profile that I was mentioning around Asia. So we're really well positioned in those places and those businesses have been moving forward. So as the current market environment takes hold, that diversity is I think we think is really going to continue to pay off. And as people continue to invest internationally, but also invest in their domestic markets, this will be good for the resiliency of Invesco. As I mentioned on our April flows, it's still a little bit early to get a full picture of things.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

But we will set I will say in the short run, the markets outside of The U. S. In terms of asset flow and resiliency have been better than the flows in The United States. But there's just so many moving parts right now that it's hard to call things a trend.

Brian Bedell
Director at Deutsche Bank Securities

And that's super helpful. Thank you.

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

Thanks, Brad.

Operator

Thank you. And our next question comes from Bill Katz with TD Cowen. Your line is open.

William Katz
Senior Equity Analyst at TD Cowen

Great. Thank you very much and congrats on all the news today. Just maybe on the retirement market, sort of curious as an increasing focus for that market to potentially have great allocation to alternatives. I was wondering if you could talk a little bit about how you're positioned both maybe the opportunity set or if there are any threats to the extent that that would move forward and sort of see a pickup in all allocations? Thank you.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

Yes. The retirement markets have been a focus for Invesco for a long time, and we're an investment only manager, meaning we don't record keep assets. And we really are not a target date player per se. So the opportunity is, I think, they're endless, really. If and as alternatives in private markets can find their way into defined contribution plans in The U.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

S. Or around the world, we have active we have the active strategies to do that that are stood up. The partnership today could present even more opportunities for us to create product for that market. And we're going to utilize the relationships we have with plan sponsors and consultants and record keepers and other inputs into that market to find a way to be a part of whether it's growth and target date for alternatives or some other vehicle types. We have all the requisite pieces to do it.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

And I think that's not just a US phenomenon. That's a global phenomenon. And I think examples of that we talked about today of our growing retirement business in The United Kingdom or advances were made in The United States, or in the long run-in Asia Pacific, if and as, alternatives find their way into defined contribution, we'll be right there.

William Katz
Senior Equity Analyst at TD Cowen

Okay. Thank you. And just as a follow-up, think you mentioned in your prepared commentary and not surprising that the institutional decision maker has been pushed off a little bit. I was wondering in those conversations that you are having with them, are allocation dynamics shifting? And if so, to where might they be shifting?

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

Yeah. Mean, it's really a bit early to say. I mean, one of the key things is the fundings that we expected in April have happened. And so they're not stopping their fundings. I think during periods like this we've seen in the past and conversations we're having, they tend to pause a little bit in thinking about their future asset allocations.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

I think they're all trying to digest the same things we're all trying to digest. The conversations are really active. They're looking for consultation and are looking for partners that can bring a range of solutions to them, custom or otherwise. And that's generally what we're seeing in the market. It's too early to say exactly where they're placing bets because they're not making those changes.

William Katz
Senior Equity Analyst at TD Cowen

You.

Operator

Thank you. The next question comes from Patrick Davitt with Autonomous Research. Your line is open.

Patrick Davitt
Partner at Autonomous Research

Hi. Good morning, everyone. I have a follow-up to Brian's question. I think he was trying to get to this, but chatter about like large institutions pulling money from U. S.

Patrick Davitt
Partner at Autonomous Research

Institutions for either ESG or just anti American sentiment. I think you guys actually won some of that money in motion to your point earlier. So could you speak to what extent you are hearing any of those conversations? How non U. S.

Patrick Davitt
Partner at Autonomous Research

Investors are evaluating those issues? And to what extent you believe having that established local presence is enough to avoid being tainted with The U. S. Manager tag? Thank you.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

Yeah. I mean, part of it, mentioned in your answer, I mean, we're winning mandates. So we really haven't seen that. And I you know, we haven't heard any of that sort of antiretoric. What I will say though is the broadening out of the markets, and where people are looking at valuations in Europe or where they're looking at diversification into value or, into domestic markets away from, where money has, you know, predominantly just been very, very focused in The U.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

S. Equity markets, large cap growth. We're seeing people rethink those allocations, but I we have not heard it's an anti movement. It's a it's a broadening out of markets. That's to the point of our local presence in these local markets.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

We'll we should do just fine in terms of capturing some of that sentiment of flows trying to even out. And frankly, it's a good thing for Invesco because we have such a diverse book of assets. I don't know if you'd add anything else.

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

I mean, I think you've said it a few times, but I I would just underscore our business in China, in particular, is a domestic to domestic business. And so Mhmm. You know, it is very much viewed as a business that has started locally over twenty years ago, has grown organically this whole time. And that's really a testament to, I think, where how our business has grown across all continents. While we happen to be headquartered in The U.

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

S, our business is very local on a number of levels and our clients see us that way. We've got that broad set of diversified capabilities, and I think that's important as well as you think about some of the trends that are out there in macro environment right now.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

Yes. Mean, seeing positive flows in that market in April is one good sign.

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

Yes.

Patrick Davitt
Partner at Autonomous Research

Okay. Helpful. And obviously, you've been more focused on fixing the balance sheet, organic growth. But historically, big dislocations like this have opened up rare inorganic opportunities for asset managers.

Patrick Davitt
Partner at Autonomous Research

So could you update us on your willingness to do a larger transaction if something came up? And if so, what would be at the top of your wish list for kind of a once in a lifetime type deal? Thank you.

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

Well, I I think nothing's changed in terms of our perspective around that and the the way we've answered it probably for a few quarters, even a few years now. I mean, we we are always looking. And so I would say our willingness has not changed. One of the things we are always focused on is overlap with existing capabilities and really needing to make sure we're being thoughtful about where we've got capability gaps. We have been consistent in saying we probably don't have our, suite of products that's fully built out as we would like in areas like private credit and infrastructure.

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

I think the partnership today, is good progress towards actually, starting to build that out in a slightly inorganic way. It's a mix of an organic and inorganic, I would say, opportunity as you think about how we can continue to fill those gaps in. So I don't think anything has changed in our willingness. The announcements we made today in terms of the balance sheet are designed to give us additional capacity. By pulling forward this $1,000,000,000 that we otherwise could not have done anything about for fifteen years, it gives us an opportunity to fully transition that away over the next few years.

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

It gives us increased flexibility and opportunity in our balance sheet to do something larger and more substantial on the inorganic side. So I would say nothing's changed. If anything, the announcements today underscore our forward focus on making sure we've got the opportunity to be opportunistic.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

Yeah. And partnerships, like the one we announced today and we've talked about in previous quarters, you know, we really we really like, and we're really excited about this with MassMutual and Barings. And the ability to do alliances and things like this, like we've done in geographic markets around the world are great opportunities and we're going to continue to be looking to advance those opportunities.

Operator

Okay. Our next question comes from Ken Worthington with JPMorgan. Your line is open.

Ken Worthington
Ken Worthington
Financial Analyst at JP Morgan

Hi, good morning and thanks for taking the questions. So maybe first, Allison, you mentioned in the prepared remarks the ability to make expenses more variable if needed. Is this largely comp? And how far can you take it? And given that the market volatility or market levels have been more recent but deeper correction, have you already started to take the steps to adjust to the more challenging environment?

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

Yes. Maybe kind of doubling back on that. So what we noted in the prepared remarks is that the variability in our expense base, if there's no management intervention, is about a 25% variable component. That's without us doing anything. And that primarily comes out of compensation.

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

There are some other elements of operating expenses that are variable in nature, but it is largely driven by compensation. That's without any management intervention. We start to actually take action. I think we can drive that to something that's more like 30 to 35% as we noted. And, yes, as I said earlier, we have already started to take action.

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

There are things we can be doing immediately like slowing down hiring, and slowing down some of our plans there. Slowing down things like, internal travel. We are focused on clients. We're gonna make sure we are, putting that first in everything we do right now, but there are a number of other kind of discretionary decisions that get made every day that we can slow down to make sure we try to bend the curve on the expense base as meaningfully as possible and as quickly as possible in light of the volatility in the revenue line that we've seen just over the last few weeks. But in addition to all of that, as I said earlier, we're going to stay focused on pulling forward some of the transformational opportunities that we have had underway for a number of years now.

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

You've seen our expense base be very well managed over the last several years as we're constantly looking for opportunities to simplify our organization, to create capacity, to reinvest that capacity or perhaps in this environment to delay reinvesting some of that capacity. And those are some of the ways in which we'll continue to manage the expense base.

Ken Worthington
Ken Worthington
Financial Analyst at JP Morgan

Okay. Thank you. On the wealth management side with the announcement today, is what you plan to launch different from what you're seeing in the market already either by structure distribution or target customer? What we're seeing is maybe more success from the alternative managers sort of launching alternative products into the wealth management channel than traditional asset managers launching alternative product into the wealth channels. So if your products or focus is similar to what's already there, how do you frame what drives success for you when maybe some of your direct peers have not been as successful going along this path?

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

Yes. I mean, look, Invesco is a private markets player. I mean, have $130,000,000,000 in assets. We've been serving institutions for a long time. What we've done over the last few years is bring those capabilities into interval type vehicles and leverage our very, very strong U.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

S. Wealth management distribution relationships that we have. And we have been seeing success, in particular with our real estate debt strategy that we mentioned before, INCREAF, working through those networks and channels. And we, going forward, expect to use capabilities like we described today with Invesco and Barings to bring similar type capabilities with all those same attributes of our distribution, our product structuring, all the education that we have and the success that we've started to build. And so we think those attributes differentiate managers that are going to win and those that aren't going forward into the marketplace.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

We think we have all those attributes, and we're going to continue to progress them.

Ken Worthington
Ken Worthington
Financial Analyst at JP Morgan

Great. Thank you.

Operator

Thank you. Our next question comes from Michael Cyprys Your line is open.

Michael Cyprys
Michael Cyprys
Managing Director at Morgan Stanley

Hey, good morning. Thanks for taking the question. Just wanted to dig in for a moment on the SMA platform. It sounds like you guys are having some good traction and success there. Think you mentioned $30,000,000,000 of assets, dollars 20 5 percent organic growth.

Michael Cyprys
Michael Cyprys
Managing Director at Morgan Stanley

Maybe just remind us how many strategies you guys offer in SMAs today, how you see that evolving? And if you could just talk about your ambitions, how you think about meaningfully scaling these capabilities as you look out on the next couple of years?

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

Yes. The growth there has been almost exclusively on fixed income. And it's actually one of the reasons we've been able to grow is that we're pretty differentiated in the fixed income space in particular. There are several dozen strategies. They're placed on all the well known platforms.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

A lot of that growth has been in short and intermediate duration, you know, some taxable, mostly tax free. But it's right in the sweet spot of growth for both SMAs as a vehicle into wealth as well as fixed income being a little less represented by some of our competitors. And so that's where we've been able to pick up a lot of that growth, and we expect to continue. On the equity side, we have several traditional fundamental equity strategies, but also tax optimized strategies that we brought to market on some unique indexes. So it's pretty well placed, but I think it's hitting the sweet spot of two big trends, which are more income oriented strategies and the SMA vehicle.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

You know, it scales well with deep technology, and we've made those investments in those technology platforms. We already have all the requisite distribution. And we'll continue to kind of invest behind the operational elements of it so that we can get continue to get incremental margin and profit expansion too.

Michael Cyprys
Michael Cyprys
Managing Director at Morgan Stanley

Great. Thank you. And then just a quick follow-up on the Alpha implementation. I think you mentioned, Allison, dollars ten million to $15,000,000 range for the next quarter. If you could just remind us how we should think about the cadence of that throughout the remainder of the year and into 2026?

Michael Cyprys
Michael Cyprys
Managing Director at Morgan Stanley

And ultimately, how do we see the path of that and timing for that falling off?

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

Yes. So 10,000,000 to $15,000,000 is the implementation cost guidance. And in terms of timing of waves, as I noted, we moved a small wave over at the end of the fourth quarter. We are expecting to move a second wave of assets onto the platform sometime in the second half of the year. And then timing on additional waves would progress into late into 2026.

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

It could even drag into that first quarter twenty twenty seven. So I think we're really looking at 2027 before we actually start to see kind of the benefit of reducing some of the redundant seats of systems, that we currently run today.

Michael Cyprys
Michael Cyprys
Managing Director at Morgan Stanley

So that 10 to 15 continues till early twenty seven, is that right? And then trails off pretty quickly after that?

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

That 10 to 15, we said, was an expectation for this year, for 2025. Back in January, we gave the guidance of expect 10,000,000 to $15,000,000 a quarter for this year. And reiterating that is a good guide for the second quarter. Beyond 2025, too hard to say. As you start to get waves behind you, the nature of the implementation changes.

Allison Dukes
Allison Dukes
Senior MD & CFO at Invesco

And so we'll update that guidance as we get later into this year.

Michael Cyprys
Michael Cyprys
Managing Director at Morgan Stanley

Thank you.

Greg Ketron
Greg Ketron
Head of IR at Invesco

Patrick, we have time for one more question.

Operator

Okay. Our last question for today comes from Benjamin Butish with Barclays Capital. Your line is open.

Ben Budish
Ben Budish
Director at Barclays

Hi. Good morning and thanks for squeezing me in. Just one final follow-up perhaps on the Barings deal. Could you just maybe talk about the sort of distribution timeline? You have the relationships already with a lot of the platforms, the wires, RIAs.

Ben Budish
Ben Budish
Director at Barclays

Once you sort of are able to file a registration statement, how long does it take to start getting the product available on the platforms? When might we start to see some more meaningful inflows? And could you maybe provide some color on the investment required here in terms of advisor education, placement fees, anything like that? Thank you.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

Yes. Let me start on the back end. We have all of the we have everything built out in terms of the distribution, product structuring, specialists, relationships. And so we're going to leverage off of that complete existing platform that we've developed with private market specialization. So that's those have already been made.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

In terms of time lines, it's difficult to speculate, I'll say quarters from now. We're also going to look at ways to enhance existing strategies that we have. So some could be sooner than others, but it's going to be I would think quarters is the best way for you to think about that. And we'll look forward to giving everybody an update on the next quarterly call.

Ben Budish
Ben Budish
Director at Barclays

Great. Thanks again for squeezing me in.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

No problem. Okay. Well, thanks, everybody. And let me say in closing that we feel very well positioned to help clients navigate the impact of evolving market dynamics and the subsequent changes to their portfolios. As market sentiment has become more uncertain, it's important that we stay close with our clients.

Andrew Schlossberg
Andrew Schlossberg
President & CEO at Invesco

And while we do think that uncertainty creates challenges over the short term, we do believe over the long term the client convictions will strengthen and should create opportunities in the future for greater scale, performance and improved profitability for Invesco. Given all the work we've done to strengthen our ability to anticipate, understand and meet evolving client needs, we are very excited for the future of Invesco. I want to thank everybody for joining our call today. Please reach out to our Investor Relations team for any additional questions. And we very much appreciate your interest in Invesco and look forward to speaking with you all again soon.

Operator

Thank you. And that concludes today's conference. You may all disconnect at this time.

Executives
    • Greg Ketron
      Greg Ketron
      Head of IR
    • Andrew Schlossberg
      Andrew Schlossberg
      President & CEO
    • Allison Dukes
      Allison Dukes
      Senior MD & CFO
Analysts
    • Alex Blostein
      Managing Director at Goldman Sachs
    • Craig Siegenthaler
      Managing Director at Bank of America
    • Michael C. Brown
      Equity Research Analyst - Asset Managers, Brokers and Exchanges at Wells Fargo
    • Dan Fannon
      Managing Director - Research Analyst at Jefferies & Company Inc
    • Brian Bedell
      Director at Deutsche Bank Securities
    • William Katz
      Senior Equity Analyst at TD Cowen
    • Patrick Davitt
      Partner at Autonomous Research
    • Ken Worthington
      Financial Analyst at JP Morgan
    • Michael Cyprys
      Managing Director at Morgan Stanley
    • Ben Budish
      Director at Barclays
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