Invesco NYSE: IVZ executives said the firm delivered another quarter of organic growth despite a volatile market backdrop, highlighting strong net inflows, improving profitability and continued investment in product innovation and technology.
Net inflows extended as clients shifted allocations
President and CEO Andrew Schlossberg said market volatility in the first quarter spurred “money in motion,” benefiting the company’s diversified platform. Invesco reported net long-term inflows of $21.8 billion, its 11th consecutive quarter of net inflows, representing 4% annualized organic growth. The firm also posted $11.6 billion of global liquidity inflows, ending the quarter with more than $200 billion in liquidity AUM.
Schlossberg pointed to particularly strong regional growth outside the U.S., with Asia-Pacific and EMEA generating 17% and 8% annualized organic growth, respectively. He also said Invesco recorded its “strongest quarter of active net inflows” with nearly $15 billion and noted institutional demand remained firm, marking a fifth straight quarter of institutional annualized organic growth above 5%.
ETF, fixed income and China JV highlighted as key growth drivers
Invesco’s ETF and index franchise was a focal point of the call. Schlossberg said ETF and index AUM ended the quarter at a record $638 billion, “or over $1 trillion including the QQQ,” with nearly $19 billion of net inflows, or 11% annualized organic growth. He cited record net inflows in the firm’s equal weight S&P 500 offering, strong demand for QQQM, and continued strength in quality and momentum strategies.
The company launched four new active ETFs during the quarter, and Schlossberg said Invesco’s active ETF platform manages more than $20 billion, rising to more than $35 billion when including index strategies implemented by active teams.
Schlossberg also addressed recent news that Nasdaq expanded licensing to allow two additional U.S.-listed ETFs to track the Nasdaq-100. He argued Invesco’s competitive position in QQQ is supported by “unmatched liquidity,” tight spreads, deep derivatives markets, brand recognition, and investor switching costs, including taxes. He added that licensing for the newly filed products is “consistent with our QQQ at 8 basis points,” and said Invesco’s existing licensing agreements are not impacted. He said that after net outflows in the quarter amid rotation and profit-taking, “with abating market volatility in April, we have seen strong demand and net inflows return” for QQQ.
In fundamental fixed income, Schlossberg said Invesco generated $3.7 billion of net long-term inflows, or 5% annualized organic growth. On a broader view that includes related ETF and China-based fixed income assets, he said fixed income net flows totaled $14 billion. He also highlighted continued demand for fixed income separately managed accounts, with the overall SMA platform at $37 billion in AUM and generating 19% annualized organic growth in the quarter.
In the firm’s China joint venture, Schlossberg said AUM reached a record $142 billion and net long-term inflows were $8.7 billion, representing 31% annualized organic growth. He said inflows were driven primarily by fixed income plus strategies, which have reached $40 billion in AUM, and noted the JV launched 14 funds with total AUM of $2.5 billion during the quarter.
Private markets and equities: selective strength amid mixed flows
Schlossberg said private markets posted $400 million of net inflows, driven by direct real estate. He highlighted iINCREF, Invesco’s real estate debt fund for U.S. wealth management, noting that “assets in iINCREF with leverage now total $5 billion after a little more than two years in the market.” Invesco also launched the Invesco Core Plus Real Estate Trust, a collective investment trust aimed at providing U.S. defined contribution plans with access to private real estate, and Schlossberg said the fund launched with an anchor mandate from a large U.S. corporate institutional investor.
Real estate inflows were “modestly offset” by alternative credit outflows driven exclusively by bank loan products, Schlossberg said, citing $400 million of redemptions in BKLN during the quarter. He emphasized that Invesco’s alternative credit platform had “zero software exposure” and said the firm is not in the BDC space.
In multi-asset, Schlossberg said institutional quantitative equity strategies generated $4.7 billion of net inflows. In fundamental equities, he said U.S. value turned to net inflows and demand remained positive in Asia-Pacific and EMEA, led by the Global Equity Income Fund, which he described as the top-selling retail active fund in Japan. The fund posted $3 billion of net inflows in the quarter and grew to $23 billion in AUM, he said. Even so, fundamental equities overall had net outflows of $2.4 billion, including $1.2 billion of outflows from a developing markets fund. Schlossberg said fundamental equity outflows were the smallest in nearly nine years and, on a gross sales basis, the firm had its best quarter for fundamental equities flows since early 2022.
On investment performance, Schlossberg said 46% of active funds were in the top quartile of peers over three years, and “over 70% of our active AUM is beating its respective benchmark on a five-year basis.”
Financial results: higher revenues, improved margin, and capital actions
Chief Financial Officer Allison Dukes said end-of-period AUM was $2.2 trillion, “nearly the same level as the end of the fourth quarter,” as net inflows largely offset a $42 billion market-driven AUM decline. She said average long-term AUM reached nearly $2 trillion, up more than $400 billion sequentially, “largely due to the QQQ,” and added that April market strength lifted AUM into the “$2.3 trillion range” more recently.
Dukes said net revenues, adjusted operating income and adjusted operating margin improved meaningfully year-over-year, generating “500 basis points of positive operating leverage” and a 300 basis point operating margin improvement to 34.5%. Adjusted diluted EPS was $0.57, compared with $0.44 in the prior-year quarter.
Dukes said the firm redeemed a $500 million senior note that matured in January and increased share repurchases to $40 million, or 1.6 million shares, during the quarter. She also noted the board authorized an additional $1 billion in repurchases in February. The company ended the quarter with $1.1 billion drawn on its revolving credit facility, which Dukes said reflected the December preferred stock repurchase and the January debt redemption; she said Invesco expects to reduce the revolver draw as the year progresses.
On fees and mix, Dukes said net revenue yield was 22.9 basis points in the first quarter, with an exit yield of 22.8 basis points, and described recent stabilization following a period of mix-driven pressure. She said the increase in net revenue versus the prior year was largely driven by higher average AUM and the reclassification of QQQ to fee-earning assets.
Operating expenses rose $69 million year-over-year, driven mainly by employee compensation and marketing. Dukes said compensation increased $43 million, including a $33 million first-quarter impact related to changes in retirement eligibility criteria for long-term awards. Marketing expenses rose $21 million due to QQQ marketing now being recognized in marketing expense following reclassification.
On the hybrid investment platform, Dukes said first-quarter implementation costs were $12 million. She said implementation costs are expected to continue at $10 million to $15 million per quarter, with completion targeted by the end of 2026, and incremental costs tied to AUM moved onto the platform are expected to build toward $10 million per quarter later in the year. Looking beyond implementation, Dukes said the cost base is expected to be “at least $60 million” in calendar 2027, with run-rate savings building as 2027 progresses.
Dukes provided an operating expense outlook for 2026, stating Invesco expects operating expenses to be about $3.275 billion “under flat markets” from the higher April AUM level around $2.3 trillion. She said the firm still believes its operating expense base is approximately 25% variable relative to changes in net revenue. Dukes also said the first-quarter effective tax rate was close to 24% and that the firm estimates a 25% to 26% non-GAAP effective tax rate for the second quarter, excluding discrete items.
Q&A: QQQ dynamics, distribution economics, and AI adoption
During the Q&A, Schlossberg downplayed the near-term earnings impact of securities lending within QQQ, telling BMO Capital Markets’ Brennan Hawken, “we don’t see that as a huge opportunity.”
On longer-term strategic priorities, Schlossberg said Invesco is focused on personalization in wealth management, demand for income, growth opportunities in Asia and Europe, and expanding private markets into wealth and defined contribution channels, alongside technology-driven innovation.
Responding to questions on platform fees and third-party distribution costs, Schlossberg said Invesco evaluates platform fees based on distribution value and expects mutual fund platform fees to decline as assets migrate to ETFs. He said Invesco does not see the issue having a material impact and will assess economics on a case-by-case basis. Dukes added that the Canadian partnership with CI is expected to close at the end of the second quarter, involving about $19 billion in AUM, with a modest operating income impact of roughly $5 million to $10 million in the third and fourth quarters that she expects to improve over time as sub-advisory revenue grows.
On QQQ marketing spend, Dukes reiterated that marketing is discretionary and expected in a $60 million to $100 million range, and said Invesco has been spending “quite a bit of marketing money outside of the United States” and expects to continue doing so as international demand grows.
Schlossberg also discussed international extensions of the “Q” lineup, saying the company extended the lineup in Hong Kong last year and plans to do so in Japan this year. He described the broader “Innovation Suite” around QQQ as representing about $550 billion of AUM globally.
Finally, asked about AI, Schlossberg said Invesco is using AI to “accelerate capabilities” and augment teams across areas including data analysis, content creation and operational efficiency. He said the firm has invested in tools and education for employees and estimated that “close to 80%” of employees use AI tools daily. He cited use cases in investment processes and client growth functions, while emphasizing the need to protect client data and integrity as adoption expands.
About Invesco NYSE: IVZ
Invesco Ltd. is an independent global investment management firm headquartered in Atlanta, Georgia, and publicly traded on the New York Stock Exchange NYSE: IVZ. With origins dating back to 1935, the company is dedicated to offering a wide array of investment strategies and solutions to both individual and institutional clients worldwide.
The firm's product suite encompasses actively managed equity and fixed income funds, passive index funds, exchange-traded funds (ETFs), closed-end funds, and unit investment trusts, alongside specialized offerings such as private markets, real estate, and structured products.
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