Thriving in the new world order
Martin L. FlanaganPresident and CEOInvesco Ltd.
All information as of All information as of Sept. 30, 2012, unless Sept. 30, 2012, unless otherwise noted. Please refer to the Appendix for important otherwise noted. Please refer to the Appendix for important information.information.
We are a leading independent global investment manager, headquartered in Atlanta
Our profile in the U.S. Invesco founded in Atlanta in 1978 Global headquarters in Atlanta, GA Top 10 U S fund manager Top 10 U.S. fund manager 3,000 U.S.-based employees
in 18 U.S. cities NYSE-listed company and
member of the S&P 500 San Francisco
Portland
Boston
New YorkBaltimoreChicagomember of the S&P 500 $474 billion in assets under
management for U.S. investors; $687 billion in AUM worldwide.
Manage pension assets for
Denver
San Francisco
Newport Beach
Washington DC
BaltimoregWheatonOakbrook
Louisville
AtlantaSan Diego
~600 plans in the U.S.
Our global profile $687 billion in AUM
M th 6 000 l
Dallas
Austin HoustonPalm Harbor
More than 6,000 employees worldwide
Publicly traded on NYSE and S&P 500; market cap of approximately $10 billion
2
approximately $10 billion
Source: Invesco. All data as of Sept. 30, 2012.
Our discussion today
The world is changing around us
Staying ahead of trends in the US
Thriving in the new world order
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Some of the top in-demand jobs in 2012 jobs in 2012 …
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didn’t exist … didn t exist in 2005.
Source: US Labor Department “Job openings and labor turnover survey,” 2011; US News & World Report, Oct. 5, 2011
Almost half of the revenue of S&P 500 companies companies …
MMM-PPT-1 10/126
comes from … comes from overseas.
Source: RBC Capital Markets Research, Capital IQ. Data as of December 31, 2011. As referenced in businessinsider.com article entitled, “A Breakdown of Where S&P 500 Companies Get Overseas Business”.
72 percent of Apple’s total revenue revenue …
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is derived … is derived from products you couldn’t purchase five purchase five years ago.
Source: Apple earnings reports 2007 Source: Apple earnings reports 2007 –– 2012; as of Sept. 30, 2012.2012; as of Sept. 30, 2012.
During the course of this presentation presentation …
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402 babies will be born in the US
MMM-PPT-1 10/1211
Source: U.S. Census Bureau, International Program (International Database) http://www.census.gov/population/international/data/idb/region.php (Oct. 11, 2012)
402 babies1,644 babies will be born in China
MMM-PPT-1 10/1212
Source: U.S. Census Bureau, International Program (International Database) http://www.census.gov/population/international/data/idb/region.php (Oct. 11, 2012)
402 babies1,644 babies2,370 babies will be born in India,
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Source: U.S. Census Bureau, International Program (International Database) http://www.census.gov/population/international/data/idb/region.php (Oct. 11, 2012)
402 babies1,644 babies2,370 babies,4,416 potential new investors
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Global population has grown to 7 billion people worldwide
People, in millions(in order of GDP)
1,3431,205
314
12781 206 63 66 61
US China India Japan Germany Brazil UK France Italy
MMM-PPT-1 10/1215
Sources: Invesco; USA Today; US Census Bureau, Population Division, International Programs Center — data estimate as of July 2012; CIA World Fact Book, Eurostat
China’s 2020 GDP projection is equal to the combined GDPs of several countries
Thailand
Israel
Malaysia
Netherlands
S th Af i
Sri Lanka
Kenya
KazakhstanSouth Africa
Denmark
Saudi
Korea
Argentina
Colombia
Turkey
Canada
Russia
ZambiaSwitzerland
Egypt
ArabiaTurkey Russia
Belgium
GreeceIran
IndonesiaPoland
Australia
Above $1 000bn
$500bn–$1,000bn
$100bn–$500bn
Below $100bn
NigeriaVenezuela
Singapore
Spain
ArgentinaAbove $1,000bn
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Sources: HSBC, CEIC, IMF, CIA as of December 2011. Actual results may differ from current projections.
Sudan
Disposable income is expected to grow exponentially in developing countries
No. of Households(Milli )
Household disposable income more than US$10,000
(Millions)
250
300
China
100
150
200
IndiaUS
0
50
100
1991 1996 2001 2006 2011e 2016e 2020e
Russia
BrazilJapan
1991 1996 2001 2006 2011e 2016e 2020e
China US India Brazil Japan Russia
MMM-PPT-1 10/1217
Sources: Bloomberg L.P., Invesco as of December 2011. Actual results may differ from current expectations.
Established markets currently have the lion’s share of $52 trillion global AUM …
25 000
Total AUM 2011 Estimates US$Billions
23,207
15 37415,000
20,000
25,000
4 390
15,374
1 446 3 2 1 428 1 3805,000
10,000
4,390 1,446 379 4,372 345 1,428 1,380
0
Asia Pacific
ex Japan
United States
Western Europe
Latin America
Eastern Europe
Japan Africa Middle East
Canada
p
MMM-PPT-1 10/1218
Green color in chart denotes developed economies as defined by the IMF’s World Economic Outlook Report, April 2012.Source: McKinsey & Company Global Banking Pools; Empirical Research Partners, as of August 2012.Note: Includes all institutional and retail AUM.
… However, China and other emerging markets are experiencing the greatest growth
14Total AUM Growth 2011-2014 Estimated CAGR %
12.3 11.9 11.810
12
5.8 6.37.3 7.2
4 34
6
8
2.9
4.3
0
2
Asia Pacific…United… Western… Latin… Eastern… Japan Africa Middle… Canadap
MMM-PPT-1 10/1219
Green color in chart denotes developed economies as defined by the IMF’s World Economic Outlook Report, April 2012 Source: McKinsey & Company Global Banking Pools; Empirical Research Partners, as of August 2012.Note: Includes all institutional and retail AUM.
Summary of significant global trends
US remains the dominant market
Critical to be an established market leader in developed markets
Strong presence in emerging markets a key driver of long-term success
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Our discussion today
The world is changing around us
Staying ahead of trends in the US
Thriving in the new world order
MMM-PPT-1 10/1221
Key US market realities
1 Post-crisis uncertainty and broad structural reform creating instabilitycreating instability
2 Risk mitigation driving evolution of asset allocation2
3 Aging US population driving need for income solutions3 Aging US population driving need for income solutions
4 I d k t l it l ti d f d i4 Increased market complexity accelerating need for advice
22 MMM-PPT-1 10/12
Post-crisis uncertainty and broad structural reform creating instability
1
Advisors and investors are concerned
Uncertainty around tax policy
Eurozone crisis
G t d bt d i di fi l liff Government debt and impending fiscal cliff
Market volatility
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Then and now1
The Great Depression The Great Recession
Increased legislation driving financial reform
Government spending to
Increased legislation driving financial reform
Government spending to Government spending to drive employment
Enduring market volatility
Government spending to drive employment
Enduring market volatility
Prolonged investor anxiety Prolonged investor anxiety
MMM-PPT-1 10/1224
Then and now1
The Great Depression The Great Recession
Increased legislation driving financial reform
Government spending to
Increased legislation driving financial reform
Government spending to Government spending to drive employment
Enduring market volatility
Government spending to drive employment
Enduring market volatility
Prolonged investor anxiety Prolonged investor anxiety
Globalization
Aging population
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Lack of confidence in peripheral Eurozone countries continues
1
G t l Why adopting the
The Collapse of Europe’s Welfare State Exposes its F l H Greece to leave
Euro Zone on June 18(CNBC)
Eurozone set for deeper recessionSeptember 6(fundweb)
euro is a trap for some nationsSeptember 10(NBC)
False Hopes —Is America NextAugust 29(Forbes)
Did Europe missSoros tells G “l d
Merkel tries to l
Euro crisis down t fid t its chance?
September 11(CNN Money)
Germany “lead or leave euro”September 9(Investment Week)
calm uproar over Eurozone crisis plansAugust 26(Economic Times)
to confidence, not currency, says German Foreign MinisterAugust 31
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g(CNN)
Total US government debt is approaching 100% of GDP
1
140
Percent of GDP
100
120
40
60
80
0
20
1940 1960 1980 2000 2017
Projected Actual
MMM-PPT-1 10/1227
Sources: US Office of Management and Budget data through Dec. 31, 2011, Congressional Budget Office’s (CBO) January 2011 baseline budget projections
The importance of restoring confidence1
Interest30
Percent of GDP
Medicare and
Interest
20
25
Social Security
Medicaid
10
15
Other Federal Spending
Social Security
0
5
1962 1987 2012 2037 2062 2087
MMM-PPT-1 10/1228
Source: Congressional Budget Office (CBO), The Long-Term Budget Outlook, July 2012; extended-baseline scenario
Uncertainty driving market volatility and investor anxiety
1
VIX - CBOE Market Volatility Index
50
60
70
20
30
40
0
10
ec-9
9
ul-
00
eb-0
1
ep-0
1
pr-
02
ov-0
2
un-0
3
an-0
4
ug-0
4
ar-0
5
ct-0
5
ay-0
6
ec-0
6
ul-
07
eb-0
8
ep-0
8
pr-
09
ov-0
9
un-1
0
an-1
1
ug-1
1
ar-1
2
ct-1
2
Source: Bloomberg L P Invesco Data as of Oct 31 2012
De J Fe Se Ap
No Ju Ja Au Ma
O Ma
De J Fe Se Ap
No Ju Ja Au Ma
O
29
Source: Bloomberg L.P. , Invesco. Data as of Oct. 31, 2012.VIX is based on real-time option prices, which reflect investors' consensus view of future expected stock market volatility. During periods of financial stress, which are often accompanied by steep market declines, option prices - and VIX - tend to rise. The greater the fear, the higher the VIX level. As investor fear subsides, option prices tend to decline, which in turn causes VIX to decline. It is important to note, however, that past performance does not necessarily indicate future results.
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Post-crisis uncertainty and broad structural reform creating instability
1
How to stay ahead of the trend
Stay invested for the long term
Find low-volatility opportunities
C t i k b l d tf li t f Create risk-balanced portfolios to prepare for various outcomes
Invest in equities for the long term q g
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Risk mitigation driving evolution of asset allocation
2
Advisors are focused on managing risk
Increasing allocations to income (equity and fixed)
Alternatives are no longer alternativeg
Growth of risk parity and world allocation strategies
Bl di f t l f d d ETF i li t Blending of mutual funds and ETFs in client portfolios
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Invesco research indicates advisors are focused on managing risk post-crisis
2
Delivering OtherDelivering absolutereturn11%
Other12%
Exceeding a benchmark12% Managing risk
40%
Wealth preservationpreservation25%
MMM-PPT-1 10/1232
Source: Invesco RIA Survey conducted by Cogent Research, 2012. Results based on web survey of 189 registered investment advisors with $50M+ in AUM.
Flows into fixed income underscore challenges of risk mitigation
2
400
US$Billions
200
300
100
0
100
-200
-100
2006 2007 2008 2009 2010 2011 YTD 9/12
Alternative Fixed Income US Equities International/Global EquitiesAlternative Fixed Income US Equities International/Global Equities
MMM-PPT-1 10/1233
Source: Strategic Insight 9/30/12 (LT-OE Mutual Funds & ETFs; Includes fund of funds). Values represent sum of annual net flows for each category.
Alternative mutual fund assets have experienced significant growth and diversification
2
2001: $27B 2012: $374B
Real Estate Bank Loan Nontraditional BondCommodities Broad Basket Global Real Estate Long/Short EquityEquity Precious Metals Market Neutral Multi-alternativeCurrency Managed Futures Bear Market
MMM-PPT-1 10/1234
Source: Simfund. Data as of July 31, 2012. Includes fund of funds.
Currency Managed Futures Bear MarketTrading-Based
Major shift from traditional balanced funds to target date and world allocation funds
2
2001: $208B 2012: $1,287B
Balanced andTarget Risk
Target Date World Allocation Retirement Income
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Source: Simfund. Data as of July 31, 2012. Includes fund of funds.
ETF growth continues2
16,000
Projected Mutual Fund and ETF Assets (US$Billions)
1,3001,400
1,5001,700
10,000
12,000
14,000
,
7 005 8,109 8,031 9,200 10,100 11,100 12,200
536
7861,005 1,061
1,300
4,000
6,000
8,000
5,236 7,005
0
2,000
2008 2009 2010 2011 2012E 2013E 2014E 2015E
Mutual Funds ETFs
MMM-PPT-1 10/1236
Source: Strategic Insight and Cerulli. 2012-2015 estimated projections, not actual figures.
Risk mitigation driving evolution of asset allocation
2
How to stay ahead of the trend
Identify and understand risk before you try to mitigate it
Reconsider sources of risk
Adj ti t ll ti i ld i tf li Adjusting asset allocation mix could improve portfolio outcomes
Invest in equities for the long term q g
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Aging US population driving need for income solutions
3
What the industry has been expecting
What’s actually happening today
A wave of baby boomers retiring soon
been expecting…
Baby boomers are hitting retirement age NOW
happening today…
Money moving from DB to DC plans
Inc easing inte est in
The real money in motion is from DC plans to IRAs
Ad iso s p efe to b ild Increasing interest in retirement income products
Advisors prefer to build their own retirement income portfolios
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Baby boomers have started to turn 653
Estimated Number of Individuals in US Age 65+(millions)
52.2
69.4
60
70
80
20 025.6
31.735.3
40.1
30
40
50
3.1 4.0 4.9 6.6 9.012.3
16.620.0
0
10
20
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030E E
MMM-PPT-1 10/1239
Source: U.S. Bureau of the Census (middle series projections)
10,000 baby 0,000 babyboomers will file for Social file for Social Security b fit benefits every day y yfor the next 20 years 20 years.
Source: “Annual Performance Plan for FY 2012,” Social Security AdministrationSource: “Annual Performance Plan for FY 2012,” Social Security Administration
Social Securityt t f d trust fund exhausted by 2033.
Sources: Social Security Online Actuarial Publications, “Status of the Social Security and Medicare Programs, A Summary of the 2012 Annual Reports,” Social Security and Medicare Boards of Trustees
IRA assets growing at the fastest rate3
Retirement Market Assets by Segment (%)
40
45
50
30
35
40
20
25
2000 2002 2004 2006 2008 2010 2012E 2014E 2016E2000 2002 2004 2006 2008 2010 2012E 2014E 2016E
DB DC IRA
MMM-PPT-1 10/1242
Sources: Department of Labor, ICI, U.S. Census Bureau, Federal Reserve, PBGC, EBRI, Cerulli Associates
Advisors prefer to build retirement income portfolios
3
What Advisors “Always Use” for Retirement Income
Annuitization12%
Retirement Income Funds6%
Bond mutual funds41%
Dividend-paying equity mutual funds31%
MMM-PPT-1 10/1243
Source: Cerulli Associates. Advisor Portfolio Construction Dynamics. 2011.
Aging US population driving need for income solutions
3
How to stay ahead of the trend
Provide advice to DC plan participants for IRA rollover capture
Deliver strategies to meet today’s investor income needs
Id tif di ifi d f i i t d ’ k t Identify diversified sources of income in today’s market
Ensure that income strategies take into account tomorrow’s outcomes
Invest in equities for the long term
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Increased market complexity accelerating need for advice
4
Key Trends
Markets are becoming more complex
Consumers live in a customized world
Di ti d i i i idl Discretionary advice is growing rapidly
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Increasing complexity for investors4
Then Now
More time
Limited information
Limited time
Unlimited data
Domestic markets
Stocks and bonds
Global markets
Broad array of investment solutions
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Customization is expected4
Then Now
Generic
Buy an album
Personalized
Build your own playlist
Select a shoe style “Choose your outsole, cushioning, colors — even weather protection”
Solutions Products SolutionsProducts
MMM-PPT-1 10/1247
Increased market complexity accelerating need for advice
4
How to stay ahead of the trend
Build relationships by delivering value
Provide a clear framework to turn data into actionable informationactionable information
Offer easy, tailored solutions that holistically meet investor needs
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Our discussion today
The world is changing around us
Staying ahead of trends in the US
Thriving in the new world order
MMM-PPT-1 10/1249
Thriving in the new world order
Focused on distinct client needs
Ability to capitalize on global opportunities
Broadly diversified
Abilit t ff ti l d li t il d l ti Ability to effectively deliver tailored solutions
Being indispensable to clients
MMM-PPT-1 10/1250
Thriving in the new world order
Martin L. FlanaganPresident and CEOInvesco Ltd.
All information as of All information as of Sept. 30, 2012, unless Sept. 30, 2012, unless otherwise noted. Please refer to the Appendix for important otherwise noted. Please refer to the Appendix for important information.information.
