UPDATE 2-Invesco 2nd-quarter profit jumps as assets rise

Thu Jul 31, 2014 10:54am EDT

(Adds comments from earnings call and analyst)

By Ashley Lau

NEW YORK, July 31 (Reuters) - Invesco Ltd, which oversees the PowerShares line of exchange-traded funds, said on Thursday that second-quarter profit jumped 35.5 percent as strong markets boosted assets under management.

Net profit rose to $274.5 million, or 63 cents per share, from $202.6 million, or 45 cents per share, a year earlier.

Excluding discontinued operations from the sale of its Atlantic Trust business and other one-time items, Atlanta-based Invesco earned 65 cents per share. Analysts, on average, expected profit of 59 cents, according to Thomson Reuters I/B/E/S.

Invesco ended the quarter in June with $802.4 billion in assets under management, up $15.1 billion from the end of March.

Net long-term outflows at Invesco were $6.9 billion for the quarter, pressured by a single client withdrawal of $13.1 billion, after the company lost a contract to manage funds for wealth manager St. James's Place.

Much of the money that left with St. James's Place is following Neil Woodford, a longtime Invesco British fund manager who departed in April. His departure had sparked concerns about potential client defections from the Invesco Perpetual High Income fund he ran, but executives said on an earnings call with analysts on Thursday that client reaction to the departure news has since been subdued.

Chief Executive Officer Martin Flanagan said that the company saw no spike in redemptions at the time of Woodford's competing fund launch in June, though they expect to see some smaller platforms making much smaller moves through the end of the year.

"The key point is these are smaller platforms," said Edward Jones analyst Jim Shanahan in an interview after the call. "There aren't any large accounts that are left at this point that could result in a massive outflow," he said, noting that any more outflows should be at least partially if not entirely offset by robust sales in the U.K.

Woodford, who had been with the company for more than 25 years, has started his own firm, Woodford Investment Management, where he has launched a new fund.

Excluding the single client withdrawal, Invesco said total long-term net inflows would have been $6.2 billion in the second quarter.

Invesco's PowerShares QQQ fund had net outflows of $3 billion during the quarter.

Net revenue at Invesco rose 14 percent from a year ago to $901 million, driven by higher investment management fees, which grew by $65.5 million during the quarter, as adjusted, to about $1 billion.

Invesco introduced a new single fund management fee in April for retail funds in its U.K. Invesco Perpetual business, replacing the separate annual management fee and registration fee. That resulted in an increase of $29.6 million in investment management fees during the quarter.

Invesco shares were down 1.1 percent at $37.97 on Thursday on the New York Stock Exchange. (Reporting by Ashley Lau in New York; Editing by Franklin Paul, Jeffrey Benkoe and W Simon)