The past 12 months have seen many changes atInvesco, but the new chief executive officer Mark Armour is quick to point out the investment team has remained stable.
“The team has remained fairly consistent during that period,” he says. “The big changes were in the middle management team.”
The changes saw a number of people from distribution and marketing come and go, although the most recent departure was Stephen Daly, head of investments.
Armour arrived at Invesco two months ago after a short spell as chief investment officer atANZ Funds Management. He had joined ANZ only to find it was about to do the joint venture withING, which led to the demise of its funds management operation.
“Invesco is a fabulous opportunity to work with a specialist global funds manager,” he says.
“I have now completed a review of operations and Australia is very much part of Invesco’s integrated global fund manager operations.”
Armour says the Australian operation is being pitched as a specialist fund manager without distribution.
“We will be targeting the major segments in fund management and our key clients will be institutional business,” he says.
Invesco includes master trusts and platforms in that description, which will give the manager exposure to the retail market.
Armour cites research byRainmakerto reinforce his argument against owning distribution.
According to Rainmaker, in the last 12 years the relative growth of the financial services industry was about 450 per cent. Companies owning distribution achieved relative growth of about 325 per cent, while those not owning distribution achieved growth of about 750 per cent.
The major banks achieved the lowest relative growth with 300 per cent.
“It is very hard to be an independent fund manager and a specialist manager,” Armour says.
“I think there is a demand in the marketplace for an independent fund manager.”
Again, according to Rainmaker research, the specialist fund manager area is growing.
Specialist fund managers achieved 1,200 per cent growth in funds under management during the last 12 years compared to 300 per cent growth for comprehensive fund managers.
The star performers were boutiques, which achieved 1,800 per cent relative growth in funds under management.
Invesco’s growth as a specialist manager in Australia has been achieved through acquisition. Firstly, GT Management was acquired and then County.
Armour says Invesco is now a style-diverse manager that can offer growth funds and indexed funds through being part of a global manager.
“We now have access to a lot of different investment styles and we can bring in a product to suit the local market when there is a demand,” he says. “In future, we will have a mixture of home-grown funds and those brought in from our global partners.”
An example of a ‘brought in’ product is the US Global Value fund, which is managed out of Invesco’s offices in Atlanta.
“In Australia we are strong in small caps, property securities and fixed income,” Armour says.
“However, we can now diversify and use our global capacity in fixed income.”
Invesco’s small companies fund has achieved top quartile performance with a 5.7 per cent return based on one-year figures.
In the last three months it has outperformed the -3.9 per cent benchmark with a 0.6 per cent return, giving a rare positive return in a climate where fund manager performance is measured in degrees of negativity.
The other strong performer has been the International Fixed Interest Fund, which has a 7.4 per cent return on one-year figures. Again, this is well above the 0.4 per cent benchmark.
Armour admits there needs to be further work on its international equity funds, which are at the bottom of the negative scale.
“We admit we need to fix up our overseas equity funds and that is why we need to bring some new products in,” he says.
“We also need to rationalise the number of products we are offering and in the next three months we hope to be in the low 30s of products available.”
Armour says the aim is to maintain a core of traditional products with some specialist funds that can be sourced either locally or globally. The breakdown would be 30 per cent globally and 70 per cent domestically sourced funds.
“It is also important we make these changes because it helps our balanced funds, which are suffering from poor performance in some sectors,” Armour says.
“We need to get a different edge on these funds with an emphasis on higher risk to achieve higher returns.”
Armour is quick to point out the investment team is stable and will be working on a target of putting Invesco funds in the top-performance quartile.
“Our large cap Australian companies fund is in the middle ground of performance and that needs some work on it,” he says.
“We also need to work on selling the products where we are achieving good performance such as property and fixed interest.”
Armour says in six months time he hopes to see Invesco offering good performance on its funds, with a number of global products being offered in Australia for the first time.
“We will sell the concept of Invesco being a global manager with equity funds that are sourced out of New York and Frankfurt and that will include indexed products,” he says.
“However, we will need to be convinced about niche products, such as hedge funds, before bringing those into the Australian market.”
Armour says the next six months will also see the Australian operations integrated with the global company. Its past pedigree of growth through acquisition has resulted in the fund manager operating as a stand-alone business.
“It will be an integrated global business and it is important we have the business in good shape,” he says.
“Invesco is now committed to the Australian market and we certainly won’t be pulling out.”
