Invesco Q4 tops, expects equity funds to attract

(Reuters) - Invesco (IVZ.N), one of the largest U.S. mutual fund companies, posted a market-beating quarterly profit as customers invested more in its bond and alternative funds, and the company said it expects clients to return to risk-assets like equity.

Main Street investors, whose nest eggs were decimated by falling share prices in the wake of the credit crisis, have yanked their cash out of funds tied to the stock market. This has hurt asset managers like Invesco, and rivals BlackRock (BLK.N), Affiliated Managers (AMG.N), who earn fees on actively managed funds.

Although Invesco grew its assets under management at the end of the year, most of that money went into bond and alternative funds and clients continued to withdraw money from equities.

On its post-earnings conference call, however, the company signaled that the investor pull back from equities might begin to reverse.

"I think you know there could be movement again back to risk assets ... I think there is a softening again toward equity products, I would never have told you that six months ago," an Invesco executive said on the call.

Data from the Investment Company Institute showed that U.S. domestic equity-focused mutual funds saw their first week of inflows after 20 straight weeks of outflows in the week ended Wednesday January 11.

PROFIT UP

Buoyed by higher performance fees, Invesco posted a fourth-quarter net income attributable to common shareholders totaling $202.3 million, or 44 cents per share, up 15 percent from a year ago.

Excluding items, the company earned 42 cents a share.

Wall Street analysts had expected Invesco, which also manages the Van Kampen family of mutual funds and Powershares exchange-traded funds, to earn 40 cents a share, according to Thomson Reuters I/B/E/S.

Analysts and investors focus on Invesco's profit before items, excluding merger expenses and consolidated revenue and expenses from certain investments the company oversees.

Performance fees rose 28 percent to $24 million.

Invesco funds shrugged off the market volatility during the quarter. Assets under management rose 4.5 percent from the end of the third quarter to $625.3 billion and were up 1.4 percent from a year earlier.

In the quarter, the company saw $5.6 billion in net long-term inflows and $400 million was added to its short-term institutional money-market offerings.

"Flows were positive across retail, institutional and across asset classes. By geography, volume in the U.S. -- critical catalyst in our view -- accelerated on rising institutional and stabilizing retail," Citigroup analyst William Katz wrote in a note.

Shares of Atlanta-based Invesco were up 3 percent at $22.76 in morning trade on Thursday on the New York Stock Exchange.

(Reporting by Jochelle Mendonca in Bangalore; Editing by Unnikrishnan Nair, Saumyadeb Chakrabarty)