(Adds comment from analyst, updates share price)
By Ashley Lau
NEW YORK May 1 Invesco Ltd, which
oversees the PowerShares line of exchange-traded funds, said on
Thursday its first-quarter profit fell 15.5 percent, pressured
by an increase in operating expenses that included a fine from
The Atlanta-based money manager said net profit fell to
$187.8 million, or 43 cents per share, from $222.2 million, or
49 cents per share, a year earlier.
The company's Invesco Perpetual unit was fined 18.6 million
pounds ($31.3 million) by British financial regulators who said
the fund manager exposed clients to more risk than they knew
about between May 2008 and November 2012, resulting in their
losing money. The fine reduced Invesco's quarterly diluted
earnings per share by 7 cents, the company said.
Excluding that charge and other one-time items, Invesco
earned 60 cents per share. Analysts on average expected 55
cents, according to Thomson Reuters I/B/E/S.
Invesco shares closed up 2.3 percent at $36.02 on Thursday
on the New York Stock Exchange.
Operating expenses, including the fine from the U.K.
Financial Conduct Authority, rose 21.3 percent from a year ago
to $1 billion. They also included $43 million associated with
vacating leased properties and staff severance as part of
business relocations during the quarter.
The Invesco Perpetual fine, announced on Monday, was another
blow to the unit, which has already seen client defections
following the announced departure of the company's best-known
fund manager, Neil Woodford.
Woodford is leaving to start a new venture and Invesco
Perpetual lost mandates to run 7.7 billion pounds ($12.81
billion) of funds for wealth manager St James's Place in
April. Much of that money is following Woodford.
In addition to the April outflows, which will be recorded in
second-quarter results, Invesco's U.K. equity income assets
under management had first-quarter net outflows of $3.4 billion.
Some analysts say the biggest potential outflows following
Woodford's departure are over, however.
"I think the best news of the day is that the worst of it is
behind them in terms of institutional outflows," said Luke
Montgomery, a Sanford C. Bernstein analyst.
Woodford, who joins Oakley Capital Management this month, is
being replaced by Mark Barnett, who takes over management of
Woodford's funds as head of British equities.
"The transition to Mark Barnett has gone very well,"
President and Chief Executive Officer Martin Flanagan said in a
call with analysts on Thursday, noting the market has been
"extremely receptive" to Barnett's leadership and team.
Net long-term flows at Invesco, not including flows into
institutional money market funds, were $6.5 billion.
Invesco's PowerShares QQQ fund had net outflows of
$1.3 billion during the quarter. PowerShares is the
fourth-largest U.S. provider of ETFs by assets, following
BlackRock Inc, Vanguard and State Street Corp.
"ETF flows can be really volatile," Montgomery said, noting
that the bigger question going forward for PowerShares is
addressing how to scale and diversify the platform. "Even as the
number four player, they're still a distant fourth," he said.
Among other asset managers, BlackRock Inc reported a
20 percent rise in quarterly profit, while T.Rowe Price Group
had a 25 percent rise.
Invesco ended the quarter with $787.3 billion in assets
under management, up $8.6 billion from the end of December.
(Reporting by Ashley Lau in New York; Editing by Chizu
Nomiyama, Meredith Mazzilli and Tom Brown)