UPDATE 3-Invesco acquisition starts to pay off in 3rd qtr

* Adjusted EPS 39 cents vs Street view 35 cents

* Assets under management up 35 pct to $604.5 bln

* Net inflow totals $4.9 billion

* Net $6.1 bln into bond funds, $1.2 bln out of stocks

* Shares down 0.9 pct
(Revises first sentence, adds analyst comments, sales details,
updates stock movement)

By Aaron Pressman

BOSTON, Oct 25 (BestGrowthStock) – Money manager Invesco Ltd
(IVZ.N: ) said its acquisition of Morgan Stanley’s retail fund
business bolstered third-quarter sales and aided a 47 percent
jump in profit.

Marking Invesco’s first full quarter since the acquisition
closed in June, Chief Executive Martin Flanagan said
integration of the unit with $115 billion under management was
nearly complete. The only significant task remaining is closing
and merging some redundant funds in coming months, he said.

“We’re seeing strong momentum of that combined business,”
Flanagan told analysts on a conference call. “We’re still very,
very early in what we expect.”

Average monthly sales to retail customers were up 40
percent to $3.5 billion in the four months since the deal
closed compared with the first five months of the year,
Flanagan said. The average withdrawal rate declined 12
percentage points, he added.

Still, total net inflow from retail investors was flat
since the deal has closed, some analysts noted. The bulk of the
firm’s $4.9 billion in net inflow during the third quarter came
from lower-margin institutional investors.

The purchase, which included Morgan Stanley’s Van Kampen
line of funds, should eventually help Invesco’s entire line-up
of funds garner more attention from brokerage and adviser sales
forces at major firms, analysts said.

Daniel Fannon, an analyst at Jefferies & Co, said Invesco
is gaining favor at retail brokerage firms like Edward D. Jones
& Co, LPL Financial and Morgan Stanley (MS.N: ) (Read more about the money market today. ).

“As we look into 2011, we anticipate the benefit of the
expanded distribution network,” he said.

Invesco is “starting to see some benefits from the deal
with enhanced distribution,” Mark Lane, an analyst with William
Blair & Co, added.

INTO BONDS, OUT OF STOCKS

Atlanta-based Invesco said net income attributable to
common shareholders was $154.7 million, or 32 cents a share, up
from $105.2 million or 24 cents a share a year earlier.

Excluding costs from the acquisition, Invesco said it
earned 39 cents a share, 4 cents above the average forecast of
analysts surveyed by Thomson Reuters I/B/E/S.

Analysts largely discounted the beat, which they attributed
to tax benefits. Invesco’s shares were down about 21 cents or
0.9 percent at $22.11 in late morning New York Stock Exchange
trading. The stock has lost 5 percent this year.

Invesco, which also runs the Powershares family of
exchange-traded funds, benefited from rising markets as well as
the $4.9 billion of net inflow during the quarter. Assets under
management totaled $604.5 billion as of Sept. 30, up 8 percent
during the quarter and 35 percent higher than a year earlier.

As at many of Invesco’s competitors, the firm’s investors
favored bonds funds in the third quarter. Invesco’s fixed
income funds attracted $6.1 billion during the quarter while
equity funds experienced $1.2 billion of outflow. Balanced
funds and alternative assets had slight inflows that were
offset by slight outflow from money market funds.

Asked by analysts if he saw any signs investors were
shifting into higher-fee stock funds, Invesco CEO Flanagan said
customers were “moving out the risk curve a little bit.”
(Reporting by Aaron Pressman; editing by John Wallace, Maureen
Bavdek and Matthew Lewis)

UPDATE 3-Invesco acquisition starts to pay off in 3rd qtr