Invesco's $1 Billion Preferred Stock Buyback and Barings Partnership: A Strategic Move to Boost Returns?

Invesco (IVZ) and MassMutual have announced two major strategic moves: a $1 billion repurchase of Invesco’s Series A Preferred Stock and a new partnership with Barings—a $442 billion asset manager under MassMutual—to develop private credit solutions for the U.S. wealth market. The moves aim to reduce Invesco’s capital costs, enhance its balance sheet, and tap into high-margin opportunities. But how will this play out for investors?

The $1 Billion Preferred Stock Buyback: Cutting Costs with Debt

Invesco is repurchasing $1 billion of its $4 billion outstanding Series A Preferred Stock from MassMutual, its largest shareholder (owning 18.2% of Invesco’s common shares). The repurchase, funded via debt financing, is expected to close in May 2025. While the specific terms of the debt are undisclosed, the transaction is projected to be earnings accretive starting in late 2025, as the cost of the new debt is likely lower than the dividends Invesco would otherwise pay on the preferred shares.

This move reduces Invesco’s leverage and improves its flexibility to invest in growth initiatives. As of March 2025, Invesco had $964.8 million in debt and $821.7 million in cash. The repurchase will increase debt levels, but the company remains confident in its ability to manage it, having raised its quarterly dividend to $0.21 per share—up from $0.205—while maintaining share buybacks.

This data will help gauge whether the repurchase strains the balance sheet or reinforces its financial health.

The Barings Partnership: Tapping into Private Credit’s Growth Potential

The partnership with Barings, MassMutual’s subsidiary, focuses on private credit solutions for the U.S. wealth market. MassMutual is committing $650 million in seed capital to accelerate the initiative, which combines Invesco’s client relationships with Barings’ expertise in private markets and fixed income.

Private credit—a sector offering higher returns than traditional fixed income—has seen rapid growth as investors seek alternatives to low-yielding public markets. Barings’ $442 billion in AUM and Invesco’s $1.84 trillion under management create a formidable platform. The collaboration aims to deliver income-focused products to wealth clients, including structured funds and institutional-grade private credit solutions.

The partnership’s success hinges on its ability to scale efficiently, leveraging MassMutual’s seed capital and Invesco’s distribution network.

Financial Implications: Lower Costs, Higher Flexibility

The repurchase and partnership are twin pillars of Invesco’s strategy to improve profitability and shareholder returns:
1. Cost Reduction: Eliminating $1 billion of preferred stock dividends (which carry a fixed 4.90% coupon) will save Invesco ~$49 million annually.
2. Balance Sheet Strength: The remaining $3 billion of preferred stock remains noncallable until 2040, but the repurchase reduces near-term capital obligations.
3. Growth Opportunities: The Barings partnership could unlock fee-based revenue streams, as private credit products typically command higher fees than traditional mutual funds.

Invesco’s CEO, Andrew Schlossberg, emphasized that the moves allow the firm to “continue investing in growth while maintaining capital returns.” The dividend increase and $25 million in Q1 2025 share buybacks underscore this commitment.

Investors will watch whether the stock price reacts positively to these moves, given its current yield of ~1.2%.

Risks and Considerations

While the strategy is promising, risks remain:
- Debt Costs: The repurchase’s earnings accretion hinges on the debt’s interest rate staying below the preferred stock’s dividend. Rising rates could pressure margins.
- Private Credit Demand: Success depends on client demand for these products, which are less liquid and carry higher risk.
- Regulatory Scrutiny: Complex partnerships often face compliance hurdles, particularly in the wealth management space.

Conclusion: A Bold Bet on Structural Shifts

Invesco’s moves reflect a strategic pivot to capitalize on two trends: cost-cutting through capital structure optimization and growth via alternative assets. The $1 billion repurchase reduces a costly obligation, while the Barings partnership targets a high-margin sector with strong demand.

Key data points reinforce this thesis:
- MassMutual’s existing $9 billion in Invesco-managed assets via its platforms signals prior success in collaboration.
- The $650 million seed capital underscores MassMutual’s confidence in the partnership’s potential.
- Invesco’s dividend increase and share buybacks show financial flexibility, even after taking on debt.

For investors, the question is whether these moves will translate into sustained earnings growth. If successful, Invesco could emerge as a leader in wealth management’s shift toward private markets—a space where competitors like Blackstone (BX) and KKR (KKR) already dominate. The stakes are high, but the combination of cost discipline and strategic partnerships positions Invesco to compete.