UPDATE 3-Invesco profit jumps 81 pct on unit sale, strong markets

Thu Jan 30, 2014 12:43pm EST

By Ashley Lau

Jan 30 (Reuters) - Invesco Ltd said on Thursday its fourth-quarter profit jumped 81 percent, boosted by strong markets and the sale of its Atlantic Trust Private Wealth Management unit.

The Atlanta-based money manager, which oversees the PowerShares line of exchange-traded funds, said net profit rose to $287.4 million, or 64 cents per share, from $158.7 million, or 35 cents per share, a year earlier.

Excluding the sale of its Atlantic Trust unit, which Invesco sold to the Canadian Imperial Bank of Commerce for $210 million, the company earned 58 cents per share. Analysts on average had expected 57 cents, according to Thomson Reuters I/B/E/S.

Strong markets and demand for alternative and equity products helped drive growth in assets under management at the firm during the quarter.

"In risk-on environments, clients shift demand toward equities," Chief Executive Officer Martin Flanagan said on a call with analysts on Thursday. "This is exactly what we experienced."

Invesco shares were up 1.8 percent at $33.64 in midday trading on the New York Stock Exchange. Invesco shares gained 39.5 percent in 2013, mirroring the rise in the broader stock market.

MARKET RALLY BOOSTS ASSETS

Invesco ended the year with $778.7 billion in total assets under management, an increase of $33.2 billion during the three months ended Dec 31, and up 16.7 percent from a year ago.

A market rally in 2013 in which the S&P 500 gained 29.6 percent over the year drove those gains at Invesco and boosted funds flowing into the asset management industry.

Among other major asset managers, both BlackRock Inc and T.Rowe Price Group Inc reported a 24 percent increase in profit during the fourth quarter.

Net long-term flows at Invesco, not including flows into institutional money market funds, were $1 billion. They were largely lifted by investors pouring money into equity and alternative products, which had net inflows of $1.5 billion and $2.5 billion during the quarter, respectively.

"When you look at the big, core publicly traded asset management firms, they're doing the best on flows" over the past two years, said Luke Montgomery, a New York-based analyst at Sanford C. Bernstein & Co. "This quarter may not be as relatively robust, but it's still pretty good."

Flanagan said Invesco launched more funds during the fourth quarter than it did in any full calendar year over the past five years.

"These product launches are designed to further solidify our position as one of the largest managers of alternatives for U.S. institutional investors," he said.

Invesco's PowerShares QQQ fund added $2.6 billion in net new money. PowerShares is the fourth-largest U.S. provider of ETFs by assets, following BlackRock Inc, Vanguard and State Street Corp.

Analysts focus on flow data because asset managers' revenue and profits are closely tied to market indexes not under their control.

TOP MANAGER DEPARTING

One of Invesco's top fund managers, Neil Woodford, is set to depart in April after 25 years with the firm, which analysts and market participants have said could lead to the defection of clients loyal to Woodford.

"I think it's inevitable that there will be outflows," Montgomery said, noting that the bulk of the potential client departures would likely come around the time of Woodford's departure. "You're going to see the most amount of noise around that time."

Still, "there's enough strength in the rest of (Invesco's) platform to offset what's going on with (Woodford's) departure," Montgomery said.

Woodford, one of the investment industry's most closely watched fund managers, has developed a strong client base over the years, given his consistent performance and cult-like following.

Flanagan sought to allay concerns about client defections during the investor and analyst call.

"We continue to see strong evidence that many clients are choosing to remain invested in the funds," Flanagan said, referring to Tuesday's announcement that Edinburgh Investment Trust will retain Invesco as manager of the trust.

Invesco first announced Woodford's departure in October. He is being replaced by Mark Barnett, who will take over management of Woodford's funds as head of British equities.

"The market has been extremely receptive toward Mark," Flanagan said.

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