Good morning, and welcome to Invesco's Third Quarter Earnings Conference Call. All participants will be in a listen-only mode until the question-and-answer session. This call will last 1 hour. To allow more participants to ask questions, one question and a follow-up can be submitted per participant. As a reminder, today's call is being recorded. Now I'd like to turn the call over to Greg Ketron, Invesco's Head of Investor Relations. Sir, you may begin.

All right. Thanks, Cedric, and to all of you joining us on Invesco's quarterly earnings call. In addition to today's press release, we have provided a presentation that covers the topics we plan to address. The press release and presentation are available on our website at invesco.com. This information can be found by going to the Investor Relations section of the website. Our presentation today will include forward-looking statements and certain non-GAAP financial measures. Please review the disclosures on Slide 2 of the presentation regarding these statements and measures as well as the appendix for the appropriate reconciliations to GAAP. Finally, Invesco is not responsible for and does not edit nor guarantee the accuracy of our earnings teleconference transcripts provided by third-parties. The only authorized webcasts are located on our website. Andrew Schlossberg, President and CEO; and Allison Dukes, Chief Financial Officer, will present our results this morning, and then we'll open up the call for questions. I'll now turn the call over to Andrew.

Thanks, Greg, and good morning, everyone. I'm pleased to be speaking with you today. We continued our positive momentum this quarter, executing across several strategically important areas of our business and finishing this quarter with record long-term AUM, continued robust net long-term inflows, improved operating leverage, a stronger balance sheet and higher return of capital to shareholders. We achieved this despite continued volatility globally. U.S. markets ended the quarter with strong equity returns even though we saw high intra-quarter market fluctuation as ongoing geopolitical concerns, coupled with mixed signals drove cautious investor sentiment. Long-awaited Federal Reserve cuts commenced by the end of the quarter, a new stimulus to China was announced and Japanese policymakers struck a less hawkish tone. All factors that helped us assuage concerns and drive a rally into quarter end as investors began to rotate money off the sidelines and into some risk assets. As a result, we began to see some broadening of investor demand in both the equity and fixed income markets. Conversely, the Chinese markets remain challenging for most of the period and fixed income appetite waned mid-quarter due to a rebound in bond yields, which drove industry redemptions. However, the recent stimulus drove a strong equity rally late in September with only a few trading days to have a material impact on our quarterly returns. Turning to Page 3. As we discussed last quarter, we maintained that our advantageous market position and clearly defined strategic focus gives us conviction in our ability to deliver enhanced operating performance and returns for our shareholders across various market conditions. I'll review specific areas of third quarter performance momentarily, but I first wanted to highlight a few of the areas of meaningful and measurable progress in relation to our strategic priorities and the key performance drivers noted on the right-hand side of this page. First, this quarter, we leveraged our global client network, our extensive product suite and improving investment performance to draw strong net long-term inflows of $16.5 billion or 5.2% annualized organic growth rate. Importantly, we achieved positive long-term organic flow growth from each of our three regions, led by Asia Pacific at 9%, EMEA at 5% and Americas at 4%. At the asset class of vehicle delivery levels, we continue to see strong flows and market share gains in scalable capabilities, including fundamental fixed income, SMAs and ETFs. In each of these areas, we continue to see opportunities to increase operating leverage and profitability. Additionally, within private markets, we're building momentum in wealth management channels, an extension of our historically strong institutional heritage. Second, we ended the period with a record setting $1.8 trillion of total AUM, an increase of 5% over last quarter and a 21% increase from the prior year. Third, we again generated positive operating leverage in the quarter. We grew adjusted operating income by 4% and drove over 70 basis points of operating margin improvement from last quarter. We're improving the financial flexibility of the firm, strengthening the balance sheet, enhancing capital returns to shareholders. Specifically, we met our zero net debt goal and executed $25 million of share buybacks during the quarter. As you can see, we are acutely focused on our strategic priorities and driving profitable growth. We have good reason to be optimistic given our performance of what was a choppy operating environment globally this quarter. As market breadth continues to gain its footing, we are exceedingly well positioned to benefit. We have the strategic and operational clarity required and exceptional talent across the company to continue to execute quarter-by-quarter. Moving on to Slide 4. Let me expand a bit more on the third quarter asset flows results across our investment capabilities. Our growth continues to be led by our ETF platform, which had organic long-term inflows of $17.7 billion, or 16% on an annualized basis. This was among the highest ETF growth quarters in our history. Flows in the U.S. market continued to be led by factor-based equity strategies, our equity NASDAQ Innovation Suite and fixed income BulletShares. We also saw strong growth from the EMEA region with nearly $5 billion of net inflows. We continue to innovate in the quarter, launching five new products in the U.S. and one in EMEA with a focus on extending our active ETF lineup. We feel very well positioned to continue to gain market share and use our scale to drive profitability across both passive and active ETF strategies. Shifting to fundamental fixed income. We garnered nearly $6 billion in net long-term inflows in the quarter or an 8% annualized organic growth rate, marking our best quarterly results in the past three years and three times our flow volume from last quarter. With the Fed now moving more aggressively, tailwinds have declined technically have been strong, and we have seen investors adding duration to lock in yields. Institutional flows were the main driver for us this quarter, comprising 70% of our volume. We recorded sizable new investment grade mandates globally with particularly high demand in the Asia Pacific region. U.S. wealth management flows were also strong, led by our municipal bond strategies. This was in large part driven across our SMA platform, which continues to expand rapidly with AUM reaching nearly $27 billion or a 45% increase over the past year. With our continued strong investment performance across the fixed income risk and duration spectrum, we remain very optimistic about our ability to continue to capture fixed income flows and money increasingly rotating into these asset classes. Shifting to private markets, which in aggregate had flat slow growth in the quarter, leading the category though is our real estate capabilities, which recorded positive net inflows of $1.2 billion in the quarter. Growth was led by INCREF, which is our real estate debt strategy, targeting the wealth management channel. This fund was launched last year and has steadily gained momentum in the wealth space and it has now distributed through several key platforms, including adding one of the largest U.S. wealth managers late in the third quarter. These developments complement our significant real estate presence in institutional markets. I'll also note that we have over $5 billion of dry powder to capitalize on emerging opportunities. Within alternative credit, we've recorded net outflows driven by bank loans, particularly in our ETF. Moving on to Asia Pacific. On a managed basis in the region, we recorded modest outflows of $800 million. Conversely, and as I mentioned earlier, flows sourced from Asia Pacific clients were quite strong at $5 billion in the quarter. This highlights how we're leveraging our broad product suite globally to meet demand across this important region. Specifically, we had very strong inflows in Japan for the quarter, driven by continued success in our global equity and income strategy, which generated $1.2 billion in net flows and is among the top selling active retail funds in the growing Japanese asset management market. Institutional activity was also strong in Japan with inflows in our investment grade fixed income products. This was offset by some outflows in locally managed Japanese equity strategies. In China, market volatility reigned for the third quarter, particularly in fixed income, where we reported some outflows after a strong second quarter. During the period, we were pleased to launch four equity ETFs through our China JV. ETFs are a fast growing part of our China business and build on our strength in the U.S. and EMEA, and we anticipate this vehicle type will continue to see strong demand. At a macro level in China, we're encouraged by the government's recent focus on economic stimulus. We have seen some positive effects of this over the past few weeks and we believe that continued development should ultimately be very helpful for our business, particularly for equities, even if there is some volatility in the near term. Our business profile and our prospects in the Asia Pacific region remained very strong, led by our well-established China JV, our long presence in Japan, and our recently announced JV in India. Turning to our multi-asset related capabilities. We saw modest net inflows in the quarter, driven by quantitative strategies. Finally, the relative pressure on fundamental equity flows continued in the third quarter. However, as I pointed out previously, we have seen some moderation over time in the important global, international and emerging market segments. Net outflows in these strategies have slowed during the past several quarters to approximately $1 billion to $2 billion per quarter, remaining marginally lower than 2022's quarterly peak outflows of $6 billion. Specifically, outflows in our emerging markets equity strategy have been particularly partially offset by continued strong inflows of our aforementioned global equity and income strategy, as well as small cap equities across multiple markets. While asset flows in our fundamental equity capabilities remain below our long-term expectations, AUM has benefited from market gains and stands 15% higher than this time last year. Our investment leadership team continues to focus on driving high quality alpha, upgrading our talent bench, and strengthening our risk management tools. Regardless of client demand, our focus remains on gaining market share in the fundamental equity categories in which we compete. Moving on to Slide 5. We provide an alternative aggregation to our AUM and flows to provide additional context for our performance. I've covered most of the key highlights around the broad strength and results of our diversified profile by geography, investment approach and channel. But one additional item that I will point out is at the bottom right section of the slide, where you can see the continued positive net inflows coming into our institutional channel. We're beginning to see higher levels of money in motion, particularly in fixed income and greater overall client expansion across the firm. Moving on to Slide 6. This slide summarizes our overall investment performance relative to benchmarks and peers, as well as our performance and key capabilities where information is readily comparable and more meaningful to driving results. Achieving first quartile investment performance is a top priority, and we're making progress on this front. On a one and three-year basis, we've increased the percentage of our AUM in the top quartile of peers with over 50% of our funds now hitting that mark for one year and 43% over three years. Further, 71% of our AUM is beating its respective benchmark on a five-year basis with 42% in the top quartile. We continue to have excellent fixed income performance across nearly all capabilities and time horizons. This supports the conviction we have in our ability to track flows as investors deploy money into these strategies. Of note, 64% of our fundamental fixed income capabilities are in the top quartile of peers on a one-year basis, with 70% beating their respective benchmarks. Over five years, 81% of our funds are in the top half of peers with three quarters beating their benchmarks. We are especially focused on improving fundamental equity performance, and we continue to make incremental progress this quarter. We've improved the percentage of our AUM into top quartile peers across each time period shown here with 28% in the top quartile for one and five years and 24% over three years. Additionally, on a five-year basis, we now have 61% of our AUM in the top half of peers. With that, I'm going to leave it here and turn the call over to Allison to discuss our financial results for the quarter, and I look forward to your questions.

Thank you, Andrew, and good morning, everyone. I'm going to begin on Slide 7. The third quarter financial results. Total assets under management at the end of the third quarter was $1.8 trillion or $80 billion and 5% higher than last quarter end and a record high for Invesco. We also had record high long-term assets under management of $1.3 trillion, an increase of 6% over last quarter. Higher markets accounted for $50 billion of the increase, while net long-term inflows drove a $16.5 billion increase in assets under management during the quarter. Of the $50 billion increase due to higher markets, $29 billion were driven by our ETF and index capabilities, including $5 billion by the QQQ. Fundamental equity AUM increased $13 billion and fundamental fixed income AUM increased $6 billion as well due to higher markets. As Andrew noted, net long-term inflows were strong once again at $16.5 billion, which represented organic growth of over 5%. ETF and index capabilities, excluding the QQQ led the way on long-term net inflows totaling $18 billion in the third quarter. Fundamental fixed income capabilities generated $6 billion in net inflows. Partially offsetting this was $6.3 billion in fundamental equity net outflows during the quarter. Average AUM increased $73 billion, a growth rate of over 4% quarter-over-quarter to $1.7 trillion at quarter end. Net revenue, adjusted operating income and adjusted operating margin all improved from the second quarter, and I'll cover the drivers of that shortly. Adjusted diluted earnings per share was $0.44 for the third quarter versus prior quarter EPS of $0.43. We further strengthened the balance sheet during the third quarter. We ended the quarter in a net cash position with cash and cash equivalents exceeding debt better than our goal of zero net debt. We also resumed share buybacks in the third quarter, repurchasing $25 million during the quarter, and we expect to continue buying back shares on a regular basis going forward. Moving to Slide 8. As we mentioned in previous calls, changes in the market and client demand have impacted our asset mix and net revenue yields. Our diverse range of capabilities has enabled us to adapt to changing client product preferences, which is evident in our results. Our portfolio is now more diversified than it was five years ago, and we have reduced our concentration risk in higher fee fundamental equity and multi-asset products. The firm is in a better position to handle various market cycles and shifts in client demand. As we highlighted last quarter, we have included trends in current net revenue yields on the slide. The ranges by capability indicate where the net revenue yield has fluctuated over the past five quarters, and we have noted the drivers of net revenue yield as well as recent trends. We aim to provide clearer insights into current net revenue yield by capabilities. For context regarding the net revenue yield trend in the third quarter, our overall net revenue yield was 25.3 basis points. The exit net revenue yield was 25 basis points, which is 0.3 basis points lower due to ongoing mix shifts during the quarter. Turning to Slide 9. Net revenue of $1.1 billion in the third quarter was $18 million higher than the second quarter, a 2% increase and slightly higher than the third quarter of last year. Investment management fees were $33 million higher than last quarter and $40 million higher than the third quarter of last year. The increases were driven by higher average AUM, partially offset by the AUM mix shift previously noted. Performance fees were $14 million lower than the second quarter due to seasonality as we typically see a decrease in performance fees in the third quarter compared to the second quarter. Total adjusted operating expenses in the third quarter were $756 million, a slight increase of $6 million or less than 1% from the second quarter. This was also a slight increase over the prior year when taking into account the $39 million related to the organizational change expenses that occurred last year. Compensation was $6 million lower than the prior quarter, mainly due to higher performance fee-related compensation last quarter. As we reported in our GAAP operating results, we took a one-time non-cash acceleration of $148 million in expense, resulting from changes to the retirement criteria related to vesting of currently outstanding long-term awards. This is a one-time acceleration of compensation expense for outstanding long-term awards for employees that meet newly defined eligibility criteria for retirement. The change will reduce the recent volatility we have experienced in compensation expense due to retirements. G&A was $11 million higher than the prior quarter. Costs associated with our Alpha platform implementation increased from $12 million in the second quarter to $15 million in the third quarter, and professional-related fees were higher versus the prior quarter. As the implementation of Alpha continues to ramp up, we expect Alpha-related one-time implementation costs to be closer to $15 million in the fourth quarter of 2024. We will continue to update our progress and related costs as we move forward with the implementation. Quarter-over-quarter, positive operating leverage was 100 basis points, driving a $13 million or 4% increase in operating income and a 70 basis point improvement in our operating margin to 31.6%. Our effective tax rate was 21.8% in the third quarter. We estimate our non-GAAP effective tax rate will be near the lower end of our historic range of 23% to 25% for the fourth quarter of 2024. The actual effective rate can vary due to the impact of non-recurring items on pre-tax income and discrete tax items. I'll wrap up on Slide 10. As I noted earlier, we continue to make progress on building balance sheet strength in the third quarter. We ended the quarter in a net cash position with cash and cash equivalents exceeding debt by $155 million better than our goal of zero net debt. We ended the quarter with no draw on our credit facility. Our leverage ratios continue to improve, and we're now down to a leverage ratio excluding the preferred stock of 0.26 times, a significant improvement over the past several years. We resumed share buybacks in the third quarter, buying back $25 million or 1.5 million shares during the quarter. We expect to continue a more regular share buyback program going forward, repurchasing around $25 million in the fourth quarter, depending on market conditions. We further anticipate a total payout ratio, including common dividends and share buybacks, will move closer to 60%, which we expect will continue in 2025 as we continually evaluate our capital return levels. To conclude, the resiliency and strength of our firm's net flow performance is evident again this quarter, and we continue to make progress on simplifying the organization, building a stronger balance sheet, while continuing to invest in areas of growth. We remain committed to driving profitable growth, high levels of financial performance and enhancing return of capital to shareholders. And with that, I'll ask the operator to open up the line for Q&A.

Thank you. And our first question comes from Brennan Hawken with UBS. Your line is open.

Good morning. Thanks for taking my questions. Andrew, you spoke to the stimulus in China not really impacting the third quarter, but that you've seen some positive effects over the past few weeks. Could you maybe provide a bit more specificity to that? What have you seen and how should we be thinking about the potential impact of this stimulus on IGW?

It's still early in China, and we recognize the volatility in that market. We've observed the effects of the stimulus on the markets, which is positive for our business and investor sentiment. There has been a shift in focus from fixed income to equities or a balanced portfolio, which we refer to as fixed income plus. It's also crucial to note that our business mix at IGW in China leans more towards fixed income and balanced investments. Our IGW portfolio consists of approximately 30% equities, 30% fixed income, 20% balanced, and 20% money market. We anticipate improved demand, but it's too soon to make definitive predictions.

Got it. Thanks for that. That's helpful. And then, Allison, you have effectively delevered the balance sheet really well and it's certainly encouraging to see the buyback restart. But I'm curious if you considered rather than buying back common to approach MassMutual to see whether or not you could do a buyback program for the preferreds. When you talk to investors, the preferreds are one of the big issues and executing on that type of buyback could effectively continue the delevering efforts that you guys have done so well in the past few years.

Thanks, Brennan. Yes. We have ongoing conversations with MassMutual about the preferred. It is a non-call instrument, as you know, and they own 100% of it. So it is certainly a negotiated conversation and one that given the duration of that piece of paper and the liabilities that they were against it, it's not a straightforward exercise to think about any opportunity that might exist to repurchase any element of that. Certainly top of mind for us and something we've been talking about for years now, but not straightforward, not simple and one that I think they certainly understand as well as they are, as you know, our largest common shareholder and take quite a bit of attention into how that preferred impacts from both sides of the equation as well. In the meantime, our strategy has been, and as you noted, to successfully delever around that preferred instrument everywhere we can. And I think we've done a nice job doing that. We’ve got a little bit further to go, the next maturity isn’t until 2026. In the meantime, we’re really focused on continuing to build capital and liquidity and returning capital to our common shareholders.

Got it. Thanks. Well, good luck with those continued discussions. Hope they go well.

Thank you. The next question comes from Dan Fannon with Jefferies. Your line is open.

Thanks. Good morning. Allison, I wanted to follow up on the change in some of the accounting associated with the awards you obviously took a charge this quarter. Curious about the benefit as we think about things going forward, if there's anything to the adjusted results. And also, are you anticipating any change in the pace of retirements or is this to incent some behavior internally as well?

Thank you for the question. We haven't had clear criteria for retirement before, and that is why we're making this change. There are multiple benefits to this approach. Firstly, it aligns us more closely with how most companies manage retirements, acknowledging that everyone will eventually retire. Establishing clear criteria based on both age and years of service is beneficial as it enhances clarity and transparency for our employees. Additionally, it allows us to plan better from an accounting standpoint for these events. This acceleration pertains to all employees who currently meet the eligibility requirements and expedites the awards that have already been granted. While these will eventually be paid, this change enables us to accelerate the associated expenses. Recently, we've experienced about $60 million in retirement costs, and without eligibility criteria in place, we couldn't recognize the acceleration of those awards until employees officially announced their retirement, which leads to a significant expense impact at that time. This results in a level of volatility and uncertainty in our compensation expenses and consequently in our earnings. Thus, this change will help reduce that volatility. We observed significant fluctuations last year linked to executive retirements and various organizational adjustments. If we had implemented these criteria earlier, we wouldn't have seen such volatility in our earnings in 2023, as awards for those already eligible for retirement would have been amortized over a shorter timeframe.

Okay. Understood. And then, Andrew, just following up on fixed income. Obviously, a good quarter for you in terms of flows. Can you talk about the dialogue and where you see opportunity, particularly both I guess, the U.S. and globally? And maybe in the context also you guys used to give us a backlog of unfunded wins? Just curious how that sits today and the makeup of that in terms of the contribution of asset classes?

Thank you for the question. I'll begin and then Allison can add some insights on the pipeline. From a fixed income standpoint, I noted that 70% of the inflows we experienced this quarter came from institutions. To start, I believe we're seeing more capital begin to flow, partly due to clearer guidance on interest rates, but also because of backlogs and reallocations that had been delayed in previous quarters. In the institutional sector, there's definitely a noticeable increase in activity, especially in fixed income. In the retail and wealth management segments, we continue to experience positive inflows, particularly in the municipal market in the U.S., which has been robust, mainly through active management but also some passive strategies. Additionally, there is a growing interest in separately managed accounts within wealth management in the U.S., particularly in fixed income, an area where we have a competitive advantage and were early movers. Overall, we are seeing a significant increase in volume across fixed income, as reflected in our flows this quarter. Now, I'll turn it over to Allison regarding the pipeline.

The pipeline has remained quite consistent quarter-to-quarter over the last few quarters, hovering around $15 billion. There are some variations, with some quarters a bit higher and others a bit lower, but overall, it shows consistency. This is why we didn't find it particularly valuable; about a third of our institutional flows come from the pipeline, while about two-thirds come from outside it. It's an interesting indicator but not the best for predicting future outcomes. The pipeline is around $15 billion and fairly balanced across our regions. Additionally, as Andrew mentioned, we're seeing increasing interest in fixed income.

I mean, we have about $350 billion of long-term fixed income. It’s a scaled platform, profitability will continue to improve. And in particular, as people sort of go further out this – the duration curve, which is what we’re seeing.

Great. Thank you.

Thank you. And our next question comes from Bill Katz with TD Cowen. Your line is open.

Thank you very much for taking the questions this morning. So maybe a big picture question now that your balance sheet is more healed, there's been a significant amount of M&A around you, whether it be some of the traditional managers trying to bulk up in the alts or the all managers trying to bulk up further into the alt space, all with a sort of focus on driving opportunity to fix income replacement or retail democratization. I was wondering, if you could talk a little bit about how you're positioned to participate in those trends, either de novo or perhaps inorganically? Thank you.

The primary focus for us, as you pointed out, is the private market space, which presents significant opportunities for growth. In wealth management, we see a lot of organic potential, especially by leveraging our real asset and alternative credit capabilities. We're noticing an increase in momentum, particularly with our real estate debt strategy, which has garnered considerable interest within the U.S. wealth management sector. Recently, we were included in one of the largest platforms towards the end of the third quarter. This indicates that we have abundant organic opportunities to integrate private markets into wealth management, where we possess strong distribution and product origination capabilities. We have already invested in the specialized skills and tools necessary to facilitate this process and minimize friction in the marketplace. While we will also explore inorganic opportunities to enhance our strategies, we are confident that we have substantial opportunities right here at Invesco.

Okay. Thank you. Just as a follow-up. As you think about the go-forward mix of the business, it sounds like at the edges, some of the higher fee products could have some incremental demand into the new quarter. But broadly speaking, it continues to be passive in fixed income and SMA. So as you think about the interplay between the fee rate and operating leverage, I was wondering, can you continue to drive positive operating leverage if there's really no change to the underlying drivers to growth?

Yes, we can. Yeah. I would say, a couple of things. And hopefully, Slide 8 does help you in seeing some of this. I mean, we are certainly seeing good strong growth across a number of our investment capabilities. And we are seeing, underlying, I would say, green shoots and positive dynamics just about everywhere. We're really focused on driving that positive operating leverage by driving growth, incremental progress in every single one of these investment capabilities. These are really the areas where we have deliberately chosen to compete. We are focused on strengthening our capabilities inside of each one, strengthening our investment performance, really driving broad distribution across both our retail and institutional clients and it's incremental progress in each one that drives that positive operating leverage. I think notably, we're working very hard. I think we've demonstrated that strength around expense management and really demonstrating expense discipline and controlling our expenses, so that we can generate that positive operating leverage with all incremental growth on the top line. So, certainly, net revenue yield is just a mathematical sort of output of how we grow across these investment capabilities. Our key focus is on revenue growth, and I think we demonstrated that again this quarter.

And Bill, just to further emphasize what Allison was saying, I mean, we’re going to be – we’re focused on each of these areas on profitability quarter-on-quarter and continuing to show operating leverage. I think there’s some other areas of growth across Asia Pacific, and we’ve talked about that market beyond just China as really giving us some good positive growth in a place where we can continue to see revenues expand over time.

Thank you, both.

Thank you, Bill.

Thanks, Bill.

Thank you. And our next question comes from Glenn Schorr with Evercore. Your line is open.

Hi. Thank you. So as you said some, like, $170 billion in gross sales. So there's obviously huge brand and powerful distribution. And so a follow-on to maybe Bill's question is, if you don't have everything now that clients want, you can build organically, it takes a long time. You could buy stuff. You commented on that. Is there a room in the repertoire? And I'm curious, how you think about the general concept of partnerships to lever your brand, lever your distribution, and strike while the iron's hot and client preferences are changing for something that you might not have on the shelf?

Yeah. Let me start. I mean partnerships have been part of our history and even our recent history with what we did in India with our joint venture. We're going to continue to look for ways to create partnerships. And we'll continue to look for them geographically. We'll continue to look for them from a distribution standpoint and as well as investment capabilities. And so while there's nothing specific more to point out this quarter, just look to what we did in India, looked to what we did in China, looking at how we grew our ETF business over time, just to indicate how much we see partnership being an avenue to our future growth.

Maybe I'll stay on theme and ask a follow-up on MassMutual. I feel like you commented plenty on the press issue, but there is a great opportunity to grow within their channel, further penetrate their retail network and do more with them. Can you talk about some of the things you're thinking about working on with them as obviously a big distribution partner and not just a big owner?

We are currently managing a little over $13 billion to $14 billion in assets for MassMutual, which includes both their general account and affiliated distribution. One significant opportunity lies in integrating model portfolios into their broker dealer network, an area we believe has substantial growth potential. They have seen success in this space, and we have a robust models business along with many capabilities to enhance our offerings alongside other participants. Additionally, as we expand our sub-advisory services into their insurance products, we see opportunities across both equities and fixed income. These are just a few initiatives we are consistently collaborating on with MassMutual, and I share the belief that our partnership can continue to thrive and become even more impactful.

Thanks, Andrew.

Thank you.

Thank you. And our next question comes from Craig Siegenthaler with Bank of America. Your line is open.

Hey. Good morning, everyone. I had a question on Alpha. It looked like integration expenses rose $3 million sequentially in the quarter, so when should expenses peak and when will you start to see a net quarter-over-quarter improvement in profits on Alpha, especially because Alpha will save Invesco money over time?

Thank you, Craig. As we mentioned last quarter, we expect to transition our assets under management onto the Alpha platform in several phases, starting in the fourth quarter of this year and continuing through 2025. We may even be testing and learning with these phases into early 2026. We are incurring implementation costs during this process, and we anticipate paying State Street fees on the assets as we transition them. To answer your question, the implementation costs did increase slightly in the third quarter, and we expect them to remain relatively stable in the fourth quarter as we ramp up the transition. As we move into next year, we’ll continue to incur State Street fees on the transitioning assets while still paying fees on some of the other platforms, which will be running in parallel for a while. We expect overall costs to peak next year, and we will provide more guidance on this as we approach 2025. In 2026, we anticipate starting to see the benefits of phasing out some of the other systems and realizing the advantages of consolidating onto a single platform. This has been a long process, and we are deeply engaged in testing and learning, but we will keep you updated as we progress toward this goal in 2025.

Thank you, Allison. And for my follow-up on the ETF business, BulletShares flows were particularly strong in the quarter. So I was hoping you could talk about the key drivers and if you expect this to continue over the next few quarters, given that interest rates are somewhat declining now, which may benefit longer duration strategies.

BulletShares are a strong franchise with a well-developed and diverse range. They represent one of our leading fixed income offerings within our ETF capabilities. The trends in investor demand that I mentioned earlier, particularly in the wealth management and institutional sectors, also apply to BulletShares. We've experienced solid growth in BulletShares not just last quarter but also in the previous quarter, and I expect this trend to persist. There are maturities that occur every December, which then get reinvested in the first quarter, so I'm keeping a close eye on that. Overall, we have a positive outlook on the BulletShares range.

Thank you.

Thank you. And our next question comes from Alex Blostein with Goldman Sachs. Your line is open.

Hey, everybody. Good morning. Thanks for the question. I was hoping to double-click into the private real estate flows you highlighted in the prepared remarks and a couple of times in the Q&A. So it sounds like the contribution was relatively healthy from maybe one of the platforms that got added towards the end of the quarter. Was that the bulk of the growth and does that come from almost kind of like one-time-ish sort of benefit since you just got added or the growth and the strength there has been a little bit more broad-based? And I guess on the institutional side, could you update us on what the queue and redemptions look like? It sounds like that's starting to ease a little bit for the industry. So I'm just curious, if you're seeing the same.

Yeah. Thanks for the question. And let me clarify a little bit on the real estate credit side. The platform that we got added to the large U.S. wealth platform that happened at the end of the quarter, doesn't come with flows, it just comes with opportunity. And so none of the flows in the quarter really were materially related to that, so that's maybe call it on the come. The demand for our real estate debt strategy is where a significant part of the real estate flows for this quarter came from though. That strategy has been out in the market for the better part of a year. It is already on one other large U.S. wealth platform and several others that relate to the independent and RIA channel. So we started to see that volume pick up, and hopefully, that flywheel continues as we get into next year. Allison, you want to talk about the redemptions?

Sure. I mean, and I would just add, maybe, Alex, to double down on that. While that product was a strong driver of the real estate flows, it wasn't the only driver of our real estate. And so we also saw really strong growth in our real estate SMAs. And I think just improvement overall in demand for this asset class, which is really encouraging. As it relates to the redemption queue, yes, I mean, the pressures have certainly started to moderate there a little bit with just the overall improvement in the broader markets that has an impact on the denominator effect. Still maybe a little bit higher than they are through sort of a normal cycle as we start to see slow improvement. But certainly, I would say, some cautious views on that as people are really trying to get their arms around the path of interest rates and what that means for transaction activity overall, but certainly seeing the pressure abate there and overall, more encouraging signs in the private real estate business.

And just to remind everybody, of our real estate assets, the $70 billion or so that's direct, only about half of it is in funds. The rest are in separate accounts and closed-end vehicles on a global basis.

Great. That's helpful. And Allison, just a quick question for you, the service and distribution fee looks like came down sequentially despite higher markets and higher AUM levels, which tends to correlate. It's something that I think started to become a little more disconnected recently. And I guess, at the same time, distribution expense increased sequentially. So kind of the net effect of that on profitability continues to become a bigger drag. I know they're not perfect. There's a few things that go in there, but maybe just expand on kind of what drove the decline on the revenue side and kind of further creep up on the expense side?

Sure. I mean, just a couple of things. One, there is a relationship between service and distribution fees and the third-party distribution contra revenue line item, because there's an element of pass-through between those categories. And so you really do have to look at them together and you can net them against management fees. When you do that, you look over kind of historical time period of the last few quarters, several years. Over several years, it's really run historically in that 13% to 14% range as a percentage of management fees. But in more recent quarters, it's trending towards the higher end of that range and that's really due to the product mix shift towards the higher ETF flows in the more recent quarters. And ETFs don't generate as much service and distribution fee revenue as mutual funds do and there are third-party expenses such as licensing fees. So it tends to make that ratio skewed slightly higher. Yeah. I think that mix shift and is something obviously we're increasingly seeing as we're seeing not just in our own mix, but just across the industry, that demand for ETF outstripping the demand for the mutual fund wrapper. If you expect that to continue, then I'd say it's reasonable to expect that relationship to be closer to 14% than it has been historically 13%. So I know that was kind of a detailed answer there, but I think it's the way to really look at it, the way we're wrapping our heads around it year-to-year kind of quarter-to-quarter right now.

I know. That makes perfect sense. All right. Thank you very much.

Thank you.

Thank you. And our next question comes from Ben Budish with Barclays. Your line is open.

Good morning and thank you for the questions. I would like to start by asking about the competitive dynamics in the fixed income business. In your prepared remarks, you mentioned several factors, including new investment grade mandates and U.S. wealth management flows. I'm curious to know if you have any insight into where these flows are originating. Is there an opportunity for gaining market share in this area? Did you observe anything noteworthy this past quarter? Do you see this as a chance for the fourth quarter or is it more about money in motion, with rates declining and a natural increase in activity?

It's a great question, and it's a bit challenging to fully analyze. The trends indicate that there is significant movement of funds for the reasons we previously discussed. The fixed income market is competitive, and thus we need to attract assets from competitors. While there may be growth due to money in motion, it can also lead to shifts in management mandates. There isn't a specific aspect from this quarter that stands out. Additionally, many of the assets flowing into fixed income are not only from the United States but also from Asia and Europe, making it a global trend for us across various sectors, including global investment grade and corporates, as well as emerging markets. Municipals in the United States are also part of this trend.

Got it. Very helpful. Maybe one more kind of follow-up on the private wealth side. Just you mentioned that you launched on a very large distributor. Just curious, how would you describe your current distribution capabilities relative to kind of broader in Invesco as it applies to just the private markets products? Thank you.

Yeah. So we have a generalist specialist model in how we take private markets, both in the institutional and in the wealth space. Over the last several years, we've been strengthening that mix. And so, we've been adding specialists to the team to sit alongside our generalists in private markets, in particular in the U.S. wealth space. And we think that's working pretty well, given the pickup that we're seeing. We've made those investments already. I don't expect to see us doing a whole lot more there in terms of investing behind those areas of distribution. Now it's just a matter of taking the products that we have on platform and growing the volume and continue to find a few new products that we can bring to that wealth space. I'd say, we’ve also and we’ll continue to invest in beyond just distribution. It’s all the things that are required to minimize the friction that’s in place in bringing mandates on, servicing those mandates, and the specialized things that are required in private markets. So it’s more in the product and distribution to win in private markets in the wealth space. We feel like we’ve made most, if not all, those investments.

Got it. Thank you very much.

Thank you. Our next question comes from Michael Cyprys with Morgan Stanley. Your line is open.

Thank you. Good morning. I would like you to discuss the India joint venture that you established. Could you provide more details about the opportunities you see, how the marketplace is evolving, and the steps you plan to take in your strategy? Additionally, please share any insights gained from your past experience with the Religare relationship and how that might influence your current approach. Thank you.

We're currently in the process of obtaining regulatory approvals for our joint venture and the sale of our stake in it, which we expect to finalize in the first quarter. Regarding opportunities and lessons learned, it’s crucial to select a strong partner. We feel confident about our partnership in India, which offers dedicated distribution channels and a bank-oriented approach. This collaboration will help us broaden our client base and continue our growth in the Indian market, where we have significant faith. For us, the focus is not just on India but also on ensuring we are strategically concentrating our efforts in critical areas we've discussed. We are excited to engage in the Indian market as a minority investor in this joint venture, contributing our investment capabilities to support our partner and the overall venture's market presence. Additionally, our experience has shown that partnerships are an effective strategy for expanding in various global markets, and we intend to seek out these opportunities for distribution and product development moving forward. Each partnership provides valuable insights, and our appreciation for them continues to grow.

Great. Thanks. And then just a follow-up question on the expense outlook. It was something you could maybe elaborate on how you see that taking shape here into the fourth quarter or next year? How you see expenses trending? And if you can maybe help quantify how much the State Street Alpha fees on AUM might be? How meaningful might that be next year? And as you think about scope for continued positive operating leverage as you look out from here, how much uplift in market beta do you need to drive that positive operating leverage? Thank you.

Okay. Lots there. Let me actually take your last one first. We can drive positive operating leverage without market beta, so long as we continue to drive good, strong organic growth, and maintain that expense discipline that I think we have been able to demonstrate over these last couple of years. Positive market beta is obviously tremendously helpful, but we're really focused on delivering operating leverage and operating income and margin improvement with or without market gains. And that's really fundamental to how we're planning for the company. And as we've said several times before, our focus is on getting ourselves back to a mid-30s operating margin. We've demonstrated two quarters of operating margin growth. We're pleased with that, but we're nowhere near where we want to be or intend to be. And so our focus is on really building the business so that we can outperform or at least deliver positive operating leverage with or without market improvement. It's not easy, but that's the focus. In response to your question regarding Alpha and the State Street fees, I can confirm that the impact for the fourth quarter is minimal, as it largely depends on the assets under management that we move in phases. The fees we incur will be significantly influenced by the amount of assets managed in each phase. For the fourth quarter, the fee impact is expected to be less than $5 million. The situation for next year remains uncertain as we continue to assess these phases. Regarding expenses, we typically experience some seasonal increases in marketing, general and administrative costs, and compensation during the fourth quarter, often influenced by performance fees. Those three areas should see modestly higher expenses. Overall, our expense levels are aligning with the guidance we provided earlier this year, which projected total expenses around $3 billion for 2024 without considering any market improvements. With recent revenue and market enhancements since the start of the year, we anticipate our expenses to be somewhat higher than that, and we expect to see some seasonal increases in the fourth quarter as well.

Great. Thank you.

There was a lot of that question, hope I covered it all.

Thank you.

Thank you. Our next question comes from Brian Bedell with Deutsche Bank. Your line is open.

Thank you. Most of my questions have been addressed. I have just a couple more, specifically regarding the Great Wall joint venture. Andrew, you mentioned this earlier in the presentation. Is there a chance for the fee rate to improve considering the fee reductions and the shift away from fixed income? If I'm not mistaken, you believe we might see a favorable mix shift toward equities in the Great Wall in the fourth quarter. Could you elaborate on that situation and whether we could anticipate a rebound in that fee rate as soon as the fourth quarter compared to the third quarter?

Yeah. Thanks for the question. And as mentioned earlier, the dynamics that have occurred in the last several weeks certainly have changed a lot in China and will have an impact. Both have had an impact on the market and certainly have an impact on our business. Equities, as I mentioned before, is an important part of the business, it's 30% though, just keep that in mind. But we certainly exited the month feeling a lot better than we did or exited the quarter a lot better than we did intra-quarter, and you continue to see what's happened in the marketplace since then. With flows coming out of fixed income and more going into equity over time, both passive and active from a fee rate perspective, that's a generally a good thing for our business. But again, lots of volatility in China. But we exited, as you can see, the quarter at some of the highest asset rates that we've seen in some time.

Thank you. Regarding global liquidity, could you provide some insights? We had outflows in the third quarter, so could you discuss any seasonal factors that may impact the fourth quarter? Also, do you anticipate liquidity flows will improve due to the rate-cutting cycle, or are there other factors that might put pressure on the flows?

Yeah. Thanks. On the cash liquidity business, just a reminder, most of our assets and liquidity business are institutionally oriented, about 85% of them. And so these institutions do have other tools that they can use outside of money market and our cash tools when interest rate pictures are changing. I think that probably was the most material part of the impact in the third quarter and things were skewing a lot more towards the banks that have dominated that space going forward. Our liquidity business is $170 billion. It's a profitable part of our company. It's a place that we're continuing to expect a lot out of and we have the scale. So I think time will tell here in the fourth quarter, what occurs. But do keep in mind, it's different than a lot of other asset managers given the institutional skew that we have.

Okay. Fair enough. Okay. Great. Thank you.

Hey, Cedric. We have time for one more question.

Sure. Thanks. Our last question comes from Patrick Davitt with Autonomous Research. Your line is open.

Thanks a lot. I have a quick follow-up on that last question. Obviously, a narrative a lot of people have been trying to push for a while now is this idea that cash on the sidelines will fuel the bond allocations. But we're seeing both money funds and bond funds broadly with big inflows over the last few months. You have a sense of where in the allocation stack, I guess, these strong bond flows are coming from for you, where it's rotating from within your clients' allocations because it certainly doesn't appear to be money funds at this point? Thank you.

I'm not sure it's related to our client allocation as much as it is to their individual allocations. We're definitely noticing that people are extending their investment duration. This trend is evident in our SMA business, which has shifted from very short to more intermediate durations. We're observing this across the core fixed income space, both in institutional and retail sectors. We're seeing money coming off the sidelines and also moving up the duration curve. As for the source of this in our business, it's not stemming from our money market fund business, which has a different dynamic. We believe this capital is coming from either the sidelines or from our competitors. Thank you.

Okay. And back to you, Mr. Schlossberg.

Okay. Well, thanks, operator. In closing, we are well-positioned to help clients navigate the impact of evolving market dynamics and subsequent changes to their portfolios. As market sentiment improved and client convictions strengthen, this should translate to even greater scale performance and improve profitability for Invesco as we've discussed today. Given all the work that we have done to strengthen our ability to anticipate, understand and meet evolving client needs, I'm very excited for the future of Invesco. I really want to thank all my Invesco colleagues for their continued hard work, I'm proud of our collaboration with one another and our focus on our clients. Thanks, everybody, for joining the call today. Please reach out to our Investor Relations team for any additional questions, and we appreciate your interest in Invesco and look forward to speaking with all of you again soon.

Thank you. That concludes today's conference. You may all disconnect at this time.