The story line seems immediately recognizable. There is a no-load mutual fund company in Denver with great performance and record sales that is expanding its distribution at an opportune time.
The story's subject, however, is not the company whose name first comes to mind.
The Invesco Funds Group is in the midst of record sales growth thanks to a combination of high-performing funds, a growing wholesaling team and a fairly new CEO who has expanded the company's distribution beyond its traditional direct sales market. The combination has enabled Invesco - historically known for its sector funds - to come out of the shadow of its headline-grabbing cross-town rival, Janus.
Invesco has nearly doubled its assets under management in stock and fixed-income funds in 12 months, growing from approximately $20 billion as of Feb. 28, 1999 to $38 billion as of Feb. 29, according to Financial Research Corp. of Boston, a fund tracking and consulting firm. Market performance is key to Invesco's rising assets, but so are record sales. The firm was the third-best selling fund group in the industry for the first two months of this year, trailing only Janus and Putnam Investments of Boston, according to FRC.
Invesco's assets are small compared to Janus', the industry's fifth largest firm with assets under management in long-term funds of $210 billion as of Feb 29, according to FRC. Nevertheless, Invesco's performance and growth are remarkable.
"They've done a tremendous amount internally there," said Raymond Liberatore, associate director of research for FRC.
Changes in the fund lineup - Invesco merged or liquidated 11 funds last year - and broadened distribution through intermediaries have contributed to the firm's success, Liberatore said. Fund performance has helped too, he said.
Thirteen of the 23 Invesco funds that have a Morningstar rating carry either a four- or five-star designation, according to FRC. Five of the firm's funds have 12-month performance of more than 100 percent, according to FRC.
"Performance has been very strong," Liberatore said.
Sales have followed that performance. Invesco's five-star technology fund, for example, had year-to-date sales of approximately $1.5 billion through Feb. 29, according to FRC. That is the 12th best in the industry this year, FRC estimates. It also equals the sales of all of Invesco's long-term funds in 1998, according to FRC. Invesco's long-term fund sales totaled about $3 billion in 1999, according to FRC. Invesco's $2 billion in net sales in February was a monthly record for the group, beating the record it set in January of $1.4 billion in sales. Invesco now has approximately $50 billion in total assets under management, including funds and separate accounts, according to a firm spokesperson.
Conventional wisdom in the industry holds that hot money follows extraordinary fund performance. When performance turns, hot money leaves. But, Invesco has a strategy to maintain its popularity regardless of market conditions.
Mark Williamson, who joined Invesco as president and CEO in March, 1998, said Invesco's mix of traditional stock and fixed-income funds plus its nine retail open-end sector funds should mitigate the effect on sales when performance rotates from one investment sector to another. Invesco also has promoted its research capabilities and brand name rather than just performance, Williamson said.
"We try to sell the process rather than just the sizzle from last year's great numbers," Williamson said.
Invesco is now selling that process not just to direct investors, but to intermediaries. Invesco introduced class C shares for advisors in February which carry a maximum rule 12b-1 fee of one percent and a one percent fee on redemptions of fund shares held less than 13 months.
Invesco currently is in the midst of doubling its wholesaling force from 12 in February to roughly 24 by June 30. The firm also promoted two wholesalers to regional sales managers in February.
Invesco began increasing its wholesaling staff last year. In March 1999, the firm hired Ray Cunningham as national sales manager in an effort to increase the firm's distribution with financial advisors. Industry executives and observers credit Cunningham with expanding Invesco's distribution through intermediaries.
The growth in the wholesaling force is just one prong of Invesco's expansion. The firm grew from 574 employees as of Dec. 31, 1997 to 614 employees one year later. The firm had 814 employees as of March 31, a spokesperson said.
Increasing the wholesaling staff and distribution channels are crucial for a no-load company because a majority of fund investors rely on intermediaries for advice, Liberatore said. Invesco has built up a sales force to tap that market and now is introducing products that appeal to advisors, he said.
"They essentially created the sales infrastructure and then introduced the product," Liberatore said.
The investment products business increasingly is driven by investors' demands for advice, Williamson said. That has led to a growth in fee-based distribution industry-wide, he said.
Invesco has not abandoned its no-load roots, however. It continues to offer no-load funds directly to investors. In October, Invesco became the first fund company to allow shareholders to open accounts online.