Invesco's Q3 2025: Contradictions Emerge on Marketing Expenses, Fee Approval, ETF Growth, and Alpha Platform Costs

Date of Call: October 28, 2025

Financials Results

• Revenue: $1.2B net revenue in Q3, $82M higher vs Q3 2024
• EPS: $0.61 adjusted diluted EPS for Q3 (no YOY comparison provided)
• Operating Margin: 34.2% adjusted operating margin, up 300 bps sequentially and up 260 bps YOY

Guidance:

• Alpha hybrid implementation expected complete by end of 2026; implementation costs ~$10–15M in Q4 and peak modestly in 2026
• Q4 non-GAAP effective tax rate expected ~25%–26% (ex-discretes)
• Intelliflo sale expected to close in Q4 for ~$100M cash with up to $65M potential earn-outs
• India majority-sale expected to close in Q4 with $140–150M proceeds; Invesco to retain minority stake
• Plan to repay remaining $240M 3-year term loan by month-end and redeem $500M senior note in Jan 2026
• Continue common share repurchases and target ~60% total payout ratio for this year and 2026

Business Commentary:

• Record AUM and Strong Net Inflows:
• Invesco reported a record Assets Under Management (AUM) of $2.1 trillion, with nearly $29 billion in net long-term inflows, representing an 8% annualized organic growth rate.

• This growth was driven by broad-based progress across strategic investment capabilities, strong demand in both active and passive products, and increased investor confidence due to market dynamics and Fed rate cuts.

• ETF and Index Platform Expansion:

• Invesco's ETF and index offerings reached an important milestone of $1 trillion in AUM, achieving an annualized organic growth rate of 15%.

• This expansion was supported by the launch of 5 new active ETFs, 10 active UCITS ETFs, and significant inflows in products like QQQM and many others, reflecting strategic innovation and client demand.

• Fixed Income Product Performance and Flows:

• The company reported over $4 billion in net long-term inflows in fundamental fixed income products, with a broader view including fixed income ETFs and China JV-based assets, this figure rises to nearly $13 billion.

• The fixed income sector showed strength, particularly in institutional interest for investment-grade bonds in Asia and demand for stable value capabilities, driven by the performance of the company's U.S. Wealth Management SMA platform.

• China JV and India Business Developments:

• Invesco's China JV reached a record high AUM of $122 billion, reflecting a 16% increase over the previous quarter, with robust $8.1 billion in net long-term inflows.
• The India business is in the final stages of being sold to the Hinduja Group, which is expected to close in the fourth quarter. The sale will generate net cash of approximately $100 million, with the potential for additional future earn-outs.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted record AUM of $2.1T, "net long-term inflows of nearly $29 billion," improved net revenue to $1.2B and "adjusted diluted EPS $0.61," and drove operating margin to 34.2% with significant operating leverage, signaling strong underlying performance and confidence.

Q&A:

• Question from William Katz (TD Cowen): Could you put any meat on where you are relative to the quorum/approval rate for the QQQ vote and the SEC's re-categorization of marketing spend — does that raise the probability of approval?
  Response: Cannot disclose vote tallies; management says voting is overwhelmingly in favor but quorum takes time; SEC-driven reclassification of marketing is an accounting reclassification with no change to operating income (~4 bps) and does not alter proposal economics.

• Question from Brennan Hawken (BMO Capital Markets): Is the proxy solicitation firm considered a marketing expense of the fund, and is there a spend threshold that would shift it to Invesco operating expense?
  Response: Proxy solicitation fees are fund marketing expenses accrued in the fund; management does not expect them to become Invesco operating expenses, aside from potential timing differences.

• Question from Brennan Hawken (BMO Capital Markets): Of the three proposals in the proxy, are they progressing similarly or is there divergence among them?
  Response: All three proposals are progressing consistently; no material divergence.

• Question from Glenn Schorr (Evercore ISI): Given fixed income strength, what did you see in October (bank loans, credit volatility) and what are expectations going forward across the fixed income platform?
  Response: No material October impacts; fixed income platform up to $680B with broad-based inflows, strength in SMAs and CLOs; some late-quarter softness in bank loans but overall demand—especially in Asia/EMEA for longer-duration and IG—remains strong.

• Question from Alexander Blostein (Goldman Sachs): On Intelliflo and the India JV divestitures, how will proceeds be used (deleveraging vs. capital return) and what are expense implications into 2026?
  Response: Expect ~$140–150M proceeds from India and ~$100M from Intelliflo (total ~$240–250M); India removal reduces quarterly operating income by roughly $6M and Intelliflo is negligible; capital priorities remain balanced—improve balance sheet, ~60% payout, and invest in growth; expect expenses to remain well managed in 2026.

• Question from Daniel Fannon (Jefferies): With Alpha implementation costing $10–15M in Q4, how do you expect implementation costs to trend in 2026 and what is the long-term expense impact?
  Response: Implementation will continue through 2026 with costs peaking in 2026 (modest increase vs 2025); decommissioning and run-rate savings are expected to materialize starting in 2027 once platforms can be retired.

• Question from Benjamin Budish (Barclays): Given constructive markets and flows, how are you thinking about variable expenses into 2026/2027 and opportunities to drive more operating leverage?
  Response: Variable expenses (~25% of revenue) will fluctuate with revenue; primary focus is reducing the fixed expense base via simplification, globalization of teams, removing redundancies and platform consolidation to drive operating leverage.

• Question from Benjamin Budish (Barclays): Any initial feedback on the MassMutual co‑managed credit fund and how distribution will roll out (wires vs RIAs)?
  Response: Repurposed legacy fund (~$250M seed) targeting U.S. wealth channels (traditional advisers, RIAs); early market rollout only weeks old, product is dynamic across credit spectrum and positioned for one-ticket wealth distribution.

• Question from Patrick Davitt (Autonomous Research): Non-comp was low in 3Q—should we expect that run rate in 4Q?
  Response: Non-comp was a bit low in Q3 and could be modestly higher in Q4 due to seasonality (marketing, professional services); full-year compensation ratio ~43% YTD and fourth-quarter context likely around that level.

• Question from Patrick Davitt (Autonomous Research): Are the new active ETF launches bringing new AUM or cannibalizing existing wrappers?
  Response: Launches (~a couple billion so far) are largely incremental and a mix of new strategies and existing strategies in new format, with early signs of net-new assets rather than pure cannibalization.

• Question from Brian Bedell (Deutsche Bank): As RIAs adopt active ETF strategies, should we expect flows to shift into the ETF/index bucket versus fundamental equities?
  Response: Flows will span ETFs, SMAs and model portfolios; underlying capabilities (fundamental equity/fixed income/private assets) will be delivered across vehicles—ETF/index growth is strong, especially in fixed income, with equity active ETFs expected to pick up over time.

• Question from Brian Bedell (Deutsche Bank): For the India sale, which AUM category does the $15B come out of, and if QQQ is approved Dec 5 when does the P&L conversion occur?
  Response: The $15B is in the China JV & India category and will be removed from that line; if the shareholder meeting achieves quorum and approval, the QQQ fee/structure conversion would be effective the next day.

• Question from Michael Cyprys (Morgan Stanley): Why sell a majority interest in India and why partner with the Hinduja Group—how will they accelerate growth?
  Response: Partnering with Hinduja provides strong local distribution, brand and institutional relationships; this structure lets Invesco retain minority upside while leveraging Hinduja's local capabilities to scale the business faster and free Invesco resources for other priorities.

• Question from Michael Cyprys (Morgan Stanley): On China JV momentum, what steps drove improved flows and what is active vs passive demand there?
  Response: China JV's 22‑year presence built a large domestic platform ($122B AUM: ~30% equities, 30% bonds, 20% balanced, 20% money market); growth driven by established active products (fixed income plus, ETFs gaining), product launches and improving market sentiment; ETF AUM ~$12–13B and ETF demand is rising but active remains the bigger driver today.

• Question from Kenneth Worthington (JPMorgan): Given industry M&A chatter, is Invesco considering M&A to accelerate strategic priorities given improved balance sheet?
  Response: Primary focus remains organic growth and strengthening the balance sheet; management will monitor M&A opportunistically—especially in private markets—but current priority is investing organically while improving leverage and returning capital.

Contradiction Point 1

Marketing Expense and Revenue Impact

It involves the impact of marketing expenses on revenue, which is crucial for financial forecasting and investor expectations.

Is the fund's marketing expense considered an operating expense for Invesco above a certain threshold? - Brennan Hawken (BMO Capital Markets)

2025Q3: We are using a proxy solicitation firm, and it is considered a marketing expense of the fund. Those expenses are accrued in the fund. I don't foresee that happening with those expenses bleeding over into operating expenses for Invesco. - Allison Dukes(CFO)

Why the shift in marketing spend reduction now, and how do you expect this to impact cash flows? How do you plan to allocate incremental margins—retaining them as profit or reinvesting for growth—and can you quantify this allocation? - William Raymond Katz (Crédit Suisse AG)

2025Q2: Regarding marketing, we anticipate a marketing budget of $60 million to $100 million, translating to 2 to 3 basis points of annual assets. The proposed change is expected to add 4 basis points to net revenue and operating income with no additional operating expenses. - Allison Dukes(CFO)

Contradiction Point 2

Progress on Fee Change Approval

It highlights the differing perspectives on the progress and challenges in obtaining shareholder approval for a fee change, impacting strategic decision-making and investor confidence.

Can you elaborate on your progress with the SEC regarding reclassification of marketing spend accounting and whether this improves the likelihood of securing the required vote for the transition? - William Katz (TD Cowen)

2025Q3: We're pleased with the progress, and it's an overwhelming majority that's voting in favor of the fee change. We're pleased, it's not unexpected that these things take a lot of time, especially for a fund as large and widely held as this one. It takes a little more time to get to the quorum, but we're pleased with the progress we're making. - Allison Dukes(CFO)

Past reports suggested the main obstacle was difficulty in securing a quorum for the vote. Do you now believe it would be easier to achieve this quorum for any reason? - Michael Patrick Davitt (Bernstein Autonomous LLP)

2025Q2: We cannot speculate on the degree of difficulty. I'll point you back to the proxy for more detail. - Laura Allison Dukes(CFO)

Contradiction Point 3

ETF and Index Growth

It involves the company's strategy and growth expectations for its ETF and index businesses, which are critical for understanding future revenue streams and market positioning.

How are ETF strategies affecting the ETF and index bucket, and are they showing long-term growth? - Brian Bedell (Deutsche Bank)

2025Q3: At the moment, it's -- we're seeing a lot of growth in the past in the index side of the business. The active side is kind of just getting going. - Andrew Schlossberg(CEO)

What is the strategic vision for product and distribution opportunities with Barings and MassMutual? Are there immediate impacts or gradual product builds? - Alexander Blostein (Goldman Sachs)

2025Q1: On the ETF front, we'd highlight that our ETF inflows for the quarter were $15.6 billion, with the largest inflows coming from the index side of the business. - Andrew Schlossberg(CEO)

Contradiction Point 4

Alpha Platform Integration Costs and Timeline

It involves the expected timeline and costs associated with the Alpha platform integration, which impacts operational expenses and strategic planning.

Can you provide an update on Alpha platform integration costs and their impact on long-term expense growth? - Daniel Fannon (Jefferies)

2025Q3: We expect the pace of implementation and implementation costs to remain high throughout 2026. I expect these run rate expenses that are associated with the hybrid implementation to peak in 2026, and then we will begin aggressively planning for how we streamline our operating platforms going into 2027. - Allison Dukes(CFO)

When do you expect the alpha platform migration costs to stabilize? - Alex Blostein (Goldman Sachs)

2024Q4: Implementation costs for Alpha will continue at $10 million to $15 million quarterly in 2025. While the costs are expected to decrease as assets transition, they will not fully fade until the transition is complete. The significant benefits will be seen post transition. - Allison Dukes(CFO)