Global Money Manager Needs More Respect

04/26/2007 12:00 am EST


John Christy

Founding Editor, Forbes International Investment Report

John H. Christy III, editor of Forbes International Investment Report, says money management firm Amvescap doesn’t get credit for its global reach and a continuing restructuring plan.

Amvescap PLC (NYSE: AVZ) is a unique firm. Although its primary stock exchange listing is in London, and it has a big European presence, its roots are firmly planted in the US.

A Southern gent named Charles—“Charlie”—Brady started Invesco in 1978. The London connection came 10 years later, when Invesco bought Brittania Arrow, a UK-listed asset manager. In 1997, Invesco merged with Houston-based AIM and the firm was rechristened as Amvescap.

But Brady’s shopping spree didn’t end there. In the ensuing years, Amvescap went on to acquire more asset management companies, notably Perpetual in the UK, Canada’s Trimark Investments, and Stein Roe in Chicago. Amvescap scooped up ETF vendor PowerShares last year, along with noted “vulture” investor Wilbur Ross’s New York-based private equity firm.

At the end of March, Amvescap managed $471 billion in assets—more than a thousand times the amount that Brady (who is now retired) and his colleagues started the firm with nearly 30 years ago.

While Amvescap has built an impressive global empire, it has also had its share of growing pains. Two of its flagship brands, Invesco and AIM, have a long tradition of growth investing. That was a tremendous asset in the 1990s during the technology boom, but it quickly turned into a liability as the bubble burst and value stocks regained market leadership in recent years.

Amvescap’s latest headache comes at the hands of Deutsche Bank, which lured away 16 fixed-income money managers. Poachings like this are fairly routine, but the group plucked by Deutsche Bank was responsible for about 20% of Amvescap’s assets under management.

Amvescap has filed suit in New York State Supreme Court and is seeking unspecified damages, [but its] shares plunged 6% on the news. (The shares changed hands at around $24 Thursday—Editor.) That seems a bit too extreme. After their recent nosedive, Amvescap shares are now trading at just a little more than 13x next year’s estimated earnings. That compares with multiples of 18x earnings for competitors such as T. Rowe Price and 17x for Legg Mason.

Short term, Amvescap’s fixed-income business is likely to take a hit no matter what happens with the Deutsche suit. But replacing a team of bond managers is arguably much less of a challenge than losing a star stock-picker or hedge fund wizard.

Besides, Amvescap has plenty of ways to ease the pain of lost revenue from client defections. One area is cost-cutting: The firm is in the midst of a multiyear restructuring effort and it expects further savings as it consolidates global IT infrastructure, real estate, and back-office operations. 

Another growth engine is alternative investments—including private equity funds and real estate. These activities account for 18% of Amvescap’s assets under management. While the Deutsche lawsuit is likely to be an expensive distraction for Amvescap, the long-term damage should be limited.

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