Invesco Ltd (IVZ) Q4 2025 Earnings Call Transcript

Invesco Ltd (NYSE: IVZ) Q4 2025 Earnings Call dated Jan. 27, 2026

Corporate Participants:

Greg Catron — Head of Investor Relations

Andrew R. Schlossberg — President and Chief Executive Officer

L. Allison Dukes — Senior Managing Director and Chief Financial Officer

Analysts:

William Katz — Analyst

Brennan Hawken — Analyst

Glenn Schorr — Analyst

Alexander Blostein — Analyst

Daniel Fannon — Analyst

Brian Bedell — Analyst

Benjamin Budish — Analyst

Presentation:

operator

Sam. Sa. It’s. Sa. Sam. It’s. Welcome to the InvestCoast fourth quarter earnings conference call. All participants will be in listen only mode until the question and answer session. At that time, to ask a question, press Star one. This call will last one 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, Vesco’s Head of Investor Relations.

Greg Catron — Head of Investor Relations

All right, thanks Shirley. And to all of you joining us today, in addition to the press release, we have provided a presentation that covers the topic of we plan to address. The press release and presentation are available on our website investco.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 as well as the appendix for the appropriate reconciliations to gaap. Finally, Invesco is not responsible for the accuracy of our earnings transcripts provided by third parties.

The only authorized webcasts are located on our website. Andrew Slasberg, President and CEO and Allison Dukes, Chief Financial Officer will present our results this morning. Then we’ll open up the call for questions. I’ll now turn the call over to Andrew.

Andrew R. Schlossberg — President and Chief Executive Officer

Okay, thanks Greg and good morning to everyone. I am pleased to be speaking with you today. 2025 marked a year of significant milestones for Invesco. We focus on our clients, transformed key aspects of our business, unlocked value across the organization and accelerated strategic priorities to position the firm for continued profitable growth in the evolving global asset management market.

Slide 3 of our presentation highlights several of our most impactful initiatives which are allowing us to streamline our business, drive profitability and margin expansion and strengthen our balance sheet. Significant among these accomplishments is the recapitalization of our balance sheet. We have now pulled forward a total of $1.5 billion in preferred stock that was otherwise non callable, enabling us to further deleverage, increase our balance sheet flexibility and free up earnings available to common shareholders. Allison is going to provide more details on the progress we have made recently with debt repayments, thus accelerating the earnings accretion of these transactions.

We have also made substantial progress in our efforts to narrow our organizational focus following our April 2025 announcement that we were moving to a hybrid alpha investment platform. We have onboarded several waves of assets and are now on pace to finish by the end of this year. The hybrid platform will drive simplification improve investment systems consolidation and future cost avoidance. Also in 2025 we took several strategic actions to focus and realign our resources across the company. In the fourth quarter we completed the sale of Intelliflow to Carlisle as well as the sale of a majority interest in our Indian asset management business to the Hinduja Group, establishing a local venture joint venture in India.

Our ongoing minority ownership structure in this JV will allow us to participate in the growth of the market and utilize the strength of our local partner while refocusing our resources accordingly. Earlier this month we also announced decision to transform our Canadian business through a strategic partnership with CI Global Asset Management. Through this transaction, CIGAM will acquire our entire Canadian mutual fund and ETF complex which is comprised of 100 funds totaling approximately $19 billion in AUM. Importantly, we will continue as an investment sub advisor for 63 of the funds totaling approximately $10 billion of the AUM.

We’re excited about the prospects of this ongoing relationship with CI. The Canadian market has become increasingly concentrated and more vertically integrated and we believe that CI is the right partner to address these market dynamics. As an ongoing investment sub advisor and strategic partner to CI, we will participate in the success of their growth, larger platform and strong presence in the Canadian market. Alison is going to detail the financial implications of these transactions later in the call, but I will note that these strategic actions are clear examples of how we are rethinking, refocusing and unlocking value in innovative ways across Invesco.

One of the key pillars of our strategy is to accelerate the growth of our $130 billion private markets platform. To that end, in 2025 we announced two strategic private markets partnerships targeting both the US wealth and the defined contribution markets. In the second quarter, we announced our partnership with Barings to launch two jointly managed credit strategies with 650 million in capital committed by MassMutual. We’re pleased with the progress of this partnership as we recently brought our first CO managed product to the US wealth management market. A second CO managed product is currently in development and expected to be launched later this year.

In December we also announced our second strategic partnership with LGT Capital Partners who is a leading private market specialist. We’re developing CO managed Total Return Growth oriented multi asset products that are targeting U.S. wealth and defined contribution investors. LGT Capital is also committing seed capital to support these new launches which will begin later this year. These two partnerships complement our investment strengths in real estate and alternative credit capabilities and the progress we have made with our existing evergreen funds in the market such as our rapidly growing Real Estate debt fund. These partnerships and new product offerings are indicative of our commitment in private markets and our objective to bring more innovative solutions and education to wealth management and retirement investors both in the United States and globally.

Finally, our 2025 transformative growth initiatives were capped off in late December with the modernization of our sizable QQQ etf. We received the necessary votes and completed the conversion of the fund on December 20. Bundt shareholders are now paying a lower fee and we are earning revenue on the more than 400 billion of AUM in the fund. I hold deep gratitude for our team. What we collectively accomplished this past year was remarkable in bringing so many of these large scale initiatives to fruition while also delivering exceptional operating performance and I feel all this bodes well for the future of Invesco.

So Turning now to Slide 4 for a snapshot of our financial progress in 2025, we performed extraordinarily well against our key performance drivers, leveraging Invesco’s unique position to deliver profitable growth in the highest opportunity regions, channels and asset classes. We grew net revenue 6% in 2025 with several encouraging signs for the future trajectory of our top line results. Our ETF and index investment capability produced record revenues and grew the top line by 22%. As we continue to scale this business. We also generated considerable revenue growth from our Asian and EMEA regions where combined revenue was up 13% for the year.

Fundamental equity revenue was flat to the prior year but up 4% from 2023. This is an encouraging data point as we consider the headwinds of client demand for fundamental equities and our work to stabilize this trend and focus on investment performance. On the expense side, we continue to be disciplined, maintaining a relatively flat expense base while continuing to redeploy resources and invest in our business. This revenue growth and well managed expenses translated into a significant operating leverage and a 230 basis point increase in our operating margin, 14% growth in our operating income and 19% improvement in earnings per share in 2025 as compared with the prior year.

Further, our clients continue to demonstrate that we have the right products in the right markets at the right time. We generated over $80 billion in net long term inflows in 2025 or 6% organic growth. Importantly, nearly 40 products each generated at least $1 billion in net inflows reflecting the diversity and breadth of our client offering. Considering the work we have done on the balance sheet, our leverage ratio over the past year has also significantly improved. We will continue to see progress here as we actively manage our balance sheet while continuing to return capital to shareholders.

Allison is going to outline our expectations in this regard for 2026. Finally, the advancements we have made on our strategic initiatives and our efforts to unlock value across the organization have yielded a significant increase in our total shareholder returns and resulted in Invesco having the highest TSR among our publicly listed peers. We’re pleased with the overall strong results in 2025 and we will continue to stay focused on our highly defined growth strategy with an emphasis on relentless execution, client centricity and teamwork across our firm. Let’s now pivot to Slide 5 focusing on fourth quarter flows we delivered another strong quarter of broad based net inflows resulting in an annualized long term organic growth rate of 5%.

Markets had strong momentum coming into the quarter, which continued as US and global capital markets remained resilient. Equities were robust through year end, fixed income rebounded with clearer rate cut expectations and we began to see broadening investor demand beyond technology stocks. Against that backdrop, we reached a record AUM of $2.2 trillion with strong net long term inflows of $19 billion in the fourth quarter. Even more encouraging was the breadth of this growth reflecting our diversified scaled global platform. We had solid positive flows across several dimensions, including many of our strategically important investment capabilities in both our active and passive strategies in equity and fixed income and across wealth management and institutional channels.

Specifically, we were pleased to see continued strong flow growth in EMEA and Asia Pacific regions which together account for nearly $700 billion of our long term AUM. We continue to scale our ETF and index capability which now stands at a record $630 billion in AUM ex the QQQ. We had nearly $12 billion of net inflows during the quarter or 8% annualized organic growth within our ETF range. We garnered net inflows across a diverse set of products in both equity and fixed income, despite a nearly $4 billion headwind from the bullet share redemption that happens annually in the fourth quarter.

We also continue to build out our active ETF suite with our most recent launches, we now have nearly 40 active ETFs across a range of asset classes. Bringing the depth of our active investment capabilities into the ETF wrapper has long been a part of our overall strategy and will continue to be as we innovate to meet evolving client demands with our QQ2 fund conversion on December 20th. Flows are now included in our long term view. However, for the fourth quarter that means we just had a fraction of the 13 billion in total QQ2 net flows counted into our overall long term flow number presented here.

The fund continues to attract strong demand reaching a record high of $407 billion in AUM at quarter end. Moving on to fundamental fixed income where we garnered 2.2 billion in net long term inflows. However, this only considers what is included in our fundamental fixed income strategies. If you look more broadly at the asset class across all of our investment capabilities, that net flow number jumps to nearly $12 billion of inflows in the quarter with the inclusion of related ETF and China based fixed income products. Fundamental fixed income flows were driven by continued strength and investment grade, with institutional interest particularly strong from EMEA and Asia Pacific.

We also saw ongoing demand for our leading stable value product in the US defined contribution market. Additionally, our SMA platform in the US continued to help drive flows, particularly in municipal bond strategies. Our entire SMA platform, which also includes a portion of equity assets, now stands at $35 billion in AUM. We have one of the fastest growing SMA offerings in the US wealth market, generating an annualized organic growth rate of 7% this quarter. Moving on to our China JV which now only reflects our domestic Invesco Great Wall business, here we produced another exceptionally strong quarter demonstrating that we are exceedingly well positioned for the shifting dynamics in this market.

We reached a record high AUM of $132 billion, delivering a robust $8.9 billion of net long term inflows, marking one of our best quarters to date and representing a 36% annualized organic growth rate. Flows in the China JV were led by fixed income plus demand from both retail and institutional clients. This product line has industry leading investment performance and is benefiting from increased client risk appetite as these funds provide an effective means of balancing fixed income with enhanced equity exposure. We’re also seeing interest in pure equity strategies via passive funds as demand for standalone active equity has been slower to regenerate.

We continue to innovate in our China JV to meet evolving client demand across active, passive and multi asset capabilities. We launched four new products in the JV this quarter, but it’s important to note that existing products remain the predominant driver of organic growth, an indication of the breadth of our platform. We expect to continue to benefit in the China JV as both the secular and now cyclical tailwinds develop, shifting to private markets where we posted $300 million of net inflows driven by direct real estate NCREF, which is our real estate debt strategy targeting the US wealth management channel continues to generate net inflows and be onboarded with new platforms and clients.

NCREF is now on three of the four major US wealth management platforms. Assets in this fund with leverage now total $4.7 billion after just over two years in the market in private credit, we had good activity during the quarter. We closed another USCLO, bringing our issuance total to $2.5 billion across the US and Europe in 2025. As these products continue to offer meaningful value versus corporate bonds in direct lending, we launched our first European Long Term Investment Fund or LTIF. This European upper Middle Market Income Fund was launched with the support from several anchor clients.

Private credit remains in a strong position despite a lower MA environment. Fundraising continues to be robust. However, deployment channel challenges persist due to fewer transactions in the current environment. With rate cuts pending this year, it’s anticipated that deal activity will pick up, particularly within direct lending. CLOs are expected to benefit from increased allocation to broader fixed income even as carry compresses. Furthermore, our real estate team remains well positioned in the institutional markets and with $7 billion of dry powder to capitalize on emerging opportunities. As we look ahead, we are excited for our prospects in private markets, driven by our organic growth opportunities and amplified by our partnerships with Barings and LGT Capital to further penetrate the wealth management and defined contribution markets.

Finally, in fundamental equities, we continued to see aggregate positive flows from our clients in EMEA and Asia Pacific specifically for global and regional products. Ongoing momentum in these markets is headlined by our Global Equity Income Fund managed out of the uk, which remains the top selling retail active fund in the Japanese market and is gaining increased interest. More broadly, this fund posted net inflows of $3 billion for the quarter, rapidly growing to 23 billion in AUM while generating a very favorable net revenue yield for Invesco. Despite these positive fundamental equity flow highlights, we did record 5.5 billion in net outflows overall in this segment.

Our results partially reflect the broader secular outflow trend in actively managed equities, particularly in the United States. This was compounded by the expected net outflows from a developing markets funds which totaled $1.5 billion for the quarter. This was partially driven by our strategic decision to reposition this fund with a new internal portfolio management team this past summer. The outflow rate in this fund has moderated from the recent high we experienced last quarter. I will also point out that on a gross sales basis we had our best fundamental equities flow quarter since the beginning of 2022, giving us optimism of future prospects.

Moving to slide six, which shows 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. Investment performance is key to winning and maintaining market share regardless of overall market demand. As such, achieving first quartile investment performance remains a top priority for Invesco. Overall, 44% of our active funds are performing in the top quartile of peers on a three year time horizon, with nearly half reaching that bar on a five year basis. Further, 70% of our active AUM is beating its respective benchmark also on a five year basis.

With that, I’m going to take a pause and I’m going to turn the call over to Allison to discuss this quarter’s financial results and I look forward to your questions.

L. Allison Dukes — Senior Managing Director and Chief Financial Officer

Thank you Andrew and good morning everyone. I’ll start with the fourth quarter financial results on slide 7. Strong markets and net asset inflows drove assets under management to $2.2 trillion at quarter end. This was $45 billion, or 2% higher than at the end of the third quarter and $324 billion, or 18% higher than the end of the fourth quarter of 2024 with the QQQ conversion in late December. Long Term AUM now includes the QQQ ETF Ending Long Term AUM increased significantly over prior periods due to the addition of the QQQ average. Long term AUM, which includes the 12 days that the Q was classified as long term, reached nearly $1.6 trillion, an increase of 8% over last quarter and 21% over the same quarter last year.

Growth in total assets under management during the quarter was driven largely by net long term inflows of $19 billion and market gains of $11 billion. Net revenues, adjusted operating income and adjusted operating margin all significantly improved from last quarter and the fourth quarter of 2024. While adjusted operating expenses continued to be well managed. This drove meaningful positive operating leverage on both a sequential quarter and year over year basis. On a sequential quarter basis, positive operating leverage was 340 basis points, delivering a 220 basis point operating margin improvement in the fourth quarter, improving to 36.4%. On a year over year basis, positive operating leverage was 440 basis points, delivering a 270 basis point improvement in the operating margin.

Adjusted diluted earnings per share was $0.62 for the fourth quarter. Our focus on strengthening the balance sheet continued during the quarter. We repurchased an additional $500 million of preferred stock in December, bringing the total amount repurchased to $1.5 billion in 2025 and reducing the outstanding preferred stock from $4 billion to $2.5 billion at year end. We also repaid the remaining $240 million of the three year term loan used to finance the preferred stock repurchase in May, meaning $500 million of the term loans used to finance the May repurchase are now repaid. The $1.5 billion of preferred stock repurchased in 2025 is expected to generate a 20 cent EPS benefit once the associated debt to fund the repurchases is repaid.

Given that we’ve repaid half a billion dollars of the $1 billion in term loans earlier than projected, coupled with the benefit of replacing the higher cost preferred stock with lower cost floating rate debt, We’ve now captured 11 cents of the EPS run rate benefit on a go forward basis. The magnitude of the potential reduction in the remaining $500 million term loans that matures in 2030 will depend on the level of cash flow we generate going forward. Additionally, as our focus on deleveraging continues, we recently redeemed a $500 million senior note that matured on January 15th.

Finally, we also continued common share repurchases, buying back $25 million or 1 million shares during the quarter. Moving to Slide 8 the decline in our net revenue yield continued at a slower pace than a year ago. Client demand continues to drive diversification of our portfolio with strong growth in ETFs and index and fundamental fixed income capabilities while demand for fundamental equity, particularly global equity, has been weaker. While the concentration of higher fee fundamental equity products has been reduced, our asset mix has shifted towards a higher degree of lower fee products, namely ETFs and index and fundamental fixed income capabilities.

The more balanced AUM profile better positions the firm to navigate various market cycles events and shifting client demand, but this has also resulted in a decline in the net revenue yield over time. To provide context for the net revenue yield Trend during the fourth quarter, our overall net revenue yield was 22.5 basis points. This is similar to the sequential quarter decline that we’ve experienced in the prior two quarters, and the magnitude of the last three quarterly declines is notably lower than prior quarters, a sign we’re closer to reaching a degree of stabilization in the yield.

The future direction of asset mix shift will dictate the net revenue yield trajectory. The exit net revenue yield at the end of the fourth quarter was actually higher than the yield for the quarter at 22.7 basis points partly driven by the QQQ read classification in late December. Turning to Slide 9 net revenue of 1.3 billion in the fourth quarter was $102 million higher compared to the same quarter last year. Increase in net revenue was largely from investment management fees, mainly driven by higher average AUM and augmented by the QQQ reclassification in late December. Operating expenses continue to be well managed with an increase of $34 million versus the same quarter last year, mainly driven by higher employee compensation.

The $17 million increase in G and A was largely due to a $13 million insurance reimbursement recognized in the fourth quarter of 2024 on a sequential quarter basis. The increases in net revenues and operating expenses were driven by similar operating dynamics. The net result was a substantial increase of positive operating leverage on both a year over year and sequential quarter basis. The hybrid investment platform implementation costs were $13 million in the fourth quarter in line with our expectation and prior quarters. The incremental operating expense associated with AUM that has been moved onto the hybrid platform was $3 million in the fourth quarter.

We continue to implement the hybrid approach with expected completion by the end of 2026. Regarding the hybrid investment platform costs for 2026, we expect one time implementation quarterly costs to start in the 10 to $15 million range and trend more towards $15 million per quarter as implementation continues. With the push to have implementation completed by year end as we transition more AUM onto the platform throughout the year, the incremental expense related to AUM on the platform will build towards $10 million per quarter later this year. Expenses associated with the platform may fluctuate quarter to quarter due to timing.

Comparing 2026 to 2025, we expect incrementally higher costs related to the hybrid platform with the combined implementation costs and expenses associated with AUM on the System to be 25 to $30 million higher in 2026 versus 2025. We’ll provide further updates as the implementation progresses. Regarding our overall operating expense outlook level setting to fourth quarter AUM annualized operating expenses would be $3.2 billion which is a good base to start with for 2026. We still believe that our operating expense base is approximately 25% variable in relation to changes in net revenue and this still holds true with the QQQ now earning revenue.

There are other factors that will impact the 2026 operating expenses to consider while the transactions that were completed in the fourth quarter, namely the creation of the India JV and the sale of IntelliFlow have de minimis impact on operating income. There will be an impact from these transactions on net revenues and operating expenses in 2026. On a combined basis, the two entities contributed net revenue and operating expenses of approximately $100 million in 2025. Going forward, India’s operating results will no longer be reported as Invesco’s operating income including the associated revenues and expenses. Our 40% share of the JV’s net income will be reported in equity and earnings of unconsolidated affiliates.

As for Intelliflow, the results from operations no longer impact Invesco’s operating results. Andrew noted the benefits of transforming our Canadian business through a strategic partnership with CI Investments. This will have a nominal impact on our operating results after the expected closing towards the end of the second quarter. Beginning in the third quarter, operating income will be negatively impacted by 5 to $10 million per quarter initially comprised of a 15 to $20 million excuse me, comprised of a 15 to $20,000,000 reduction in net revenue per quarter and an operating expense reduction of 5 to 10 million dollars per quarter quarter.

We expect this will improve as the long term growth benefits of the strategic partnership are realized with net revenues growing while the operating expense benefit moves closer to $10 million per quarter in the future. As we’ve outlined, marketing associated with the QQQ will now be recognized in marketing operating expenses starting in 2026 and we expect marketing expenses related to the QQQ will be near the midpoint of the 60 to $100 million range we have previously disclosed. We’re also making incremental changes to our retirement eligibility criteria for our long term awards in 2026 that will result in a timing change on how we recognize retirement related expenses.

We expect the net impact of these changes will be an increase of approximately $10 million in compensation expense for the full year 2026 with compensation expense being approximately $30 million in the first quarter. Excuse me, with a compensation expense being approximately $30 million higher in the first quarter than fourth quarter of 2025 and then offset by lower compensation expense the remainder of the year netting to the total $10 million impact for the year. As a reminder, we typically see seasonally higher compensation expense in the first quarter due to payroll tax and other compensation related expense.

It resets that with other compensation related expense resets that total approximately $20 million. And as I noted earlier, hybrid platform expenses are expected to be 25 to $30 million higher in 2026. Effective tax rate for the quarter was 21% below our expectation due to the gain on Sale of India being tax free and other discrete items. For the first quarter, we estimate our non GAAP effective tax rate will move back to the 25 to 26% range excluding any discrete items. 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 considerable progress on building balance sheet strength and improving our leverage profile. In December, we repurchased an additional $500 million of preferred stock held by Massmutual, bringing the total preferred stock repurchased in 2025 to $1.5 billion which will ultimately create a 20 foot run rate EPS benefit and as I noted, we also repaid the remaining $240 million of the $500 million three year term loan used to fund the first repurchase of preferred stock last year, leaving only $500 million in the five year maturity term loan.

By repurchasing $1.5 billion of preferred stock, we have reduced the preferred dividend by $88.5 million annually and this will now become earnings available to common shareholders in the future. We also continued common share repurchases in the fourth quarter, buying back $25 million or 1 million shares during the quarter. We intend to continue a regular common share repurchase program going forward and expect common share repurchases to increase to $40 million in the first quarter. We will continually evaluate our capital return levels as we target a total payout ratio including common dividends and share buybacks to be near 60% for 2026.

The repurchase of the preferred stock and repayment of the three year term loan improved our leverage ratio from 2.8 times a year ago to 2.2 times for the fourth quarter. The leverage ratio excluding the preferred stock remained well below 1 at 0.73 times. We also redeemed the $500 million senior note that matured on January 15th. Going forward, we expect further progress in our leverage profile as we repay revolving credit and term loan debt through operating cash flows. To conclude the strength of our debt flows, performance and diversity of our business is evident once again this quarter and we delivered strong revenue growth.

This, combined with well managed expenses resulted in significant operating leverage and a sizable improvement in our operating margin. We also continue to make progress on building a stronger balance sheet. We’re committed to driving profitable growth, a high level of financial performance and enhancing the return of capital to our shareholders. And with that Shirley, we’ll open up the Operator Sorry, we’ll Open up the line for Q and A.

Questions and Answers:

operator

Thank you. [Operator Instructions]. Our first question comes from Bill Katz with TD Cowen. Your line is open, you may ask your question.

William Katz

Great. Thank you very much for taking the questions. Just maybe picking up where you left off, Allison, on the capital return, clearly the extra $500 million of pay down with the MassMutual was a bit earlier than most people expected. As you look ahead, can you talk a little bit about the priorities to bring down the remaining preferred and how you sort of think about capital deployment more broadly? And now that your balance sheet’s in a better spot, would you start to think about M and as a potential use of capital rather than continue to repair the balance sheet? Thank you.

L. Allison Dukes

Sure. Good morning, Bill. So, yes, as we think about our capital priorities from here and the prep, I mean, look, we’ve $1.5 billion repurchased in 2025. We were very pleased with that progress, $2.5 billion remaining. We did end the year with some balance on the revolver and of course then redeemed another $500 million note in January. So as we think about the balance sheet from here, we’ve definitely got continued opportunity to, as I noted, using operating cash flows to work that revolver down. And then we’ve got the five year term loan that matures in 2030. You know, I think with that we’re going to continue to make really good progress and we’re getting the balance sheet into a place where we’re quite pleased.

We do have the opportunity to continue discussions with MassMutual on repurchasing more of the preferred at some point. But we’ve got these near term maturities that we want to focus on as we continue to make good progress. And I think freeing up nearly $90 million in capital that’s now available to the common shareholder, we’re very pleased with. So with that in mind, and as we think about our capital priorities from here, you know, I’d start with one, the increase in our share buybacks on the common side to $40 million this quarter. As we seek to get our payout ratio up closer to 60% this year, we want to make sure we are balancing our capital priorities with capital to our common shareholders.

And then as we think about M and A, I mean, look, we’ve Always said our best opportunity is to continue to invest in ourselves and grow our own business. And I think you see the results of that over the last year with the organic flows that we had and the base fee growth that we demonstrated in 2025. We’ve got tremendous opportunity within our own business profile to grow organically and to do so in a really shareholder friendly manner. And we still see a lot of momentum behind that and we’re going to continue to invest behind our own capabilities.

And then we’re leveraging that with the partnerships that we discussed today as well. And it gives us again, a very capital efficient, shareholder friendly way to continue to grow our capabilities. So as we’ve always said, we’ll never say never to M and A. It’s just got to be the right fit. And we have a very well diversified and broad set of capabilities. And so where there might be opportunities to tuck other capabilities in, we’re always opportunistic there. But we’re very pleased with the opportunities that we’ve had to invest in ourselves and just balance our capital priorities.

Andrew R. Schlossberg

Yeah, the only. Hey Bill, the only thing I’d add picking up where Allison left off, the not just the private market partnerships that we, that we structured last year, but also the Canadian and Indian partnerships or JVs in the case of India that we set up. We feel really good about those as additional growth levers for the company.

William Katz

Great. Just one follow up. Thanks for all the extra detail on the expense outlook and I appreciate we’re seeing here in January of 2026. As you look into next year, can you talk a little bit about just the off ramp on the implementation costs? I presume that should trend towards zero and then how do we think about maybe the incremental spend on the platform costs? And I would presume that would be more related to the equity book. Any color there as we think about 27 would be helpful. Thank you.

L. Allison Dukes

Sure. So yes, you’re correct that you should expect the implementation cost to trail off and then go away over the course of 2027. And as we get deeper into 2026, we’ll give you further guidance on that. But it is reasonable to assume that those implementation costs do disappear over time and there will be additional savings as we decommission existing systems and continue to streamline processes. That is, you are correct, somewhat offset by the quantum of AUM as we continue to progress with moving AUM onto these hybrid platforms. We will be giving additional guidance to that as we get deeper into 26 and move into 27.

William Katz

Thank you.

operator

Thank you. Thank you. Our next question comes from Brennan Hawken with BMO Capital Markets. Your line is open, you may ask your question.

Brennan Hawken

Good morning. Thanks for taking my questions. Would love to start out with the net revenue yield. Allison, you spoke to the exit rate at 22.7. There were some moving pieces in the quarter for sure, not the least of which was the cues vote that came in late. So what’s the right way to think about all those moving pieces and the impact to net revenue yield on a go forward basis? I know it’s a hard one to try to predict, but maybe based upon what you know today, what would you say would be the further impact as we average in some of these factors that happen in the quarter? Thanks.

L. Allison Dukes

Sure. You’re absolutely correct. With the addition of the cews of revenue, it does create some differing dynamics I think. Namely it does create some level of stabilization in the net revenue yield. Just as you start to see, just given the size of the QQQ and as it converts into six basis points of net revenue yield, you will start to see that stabilize. I think the overall average and the mix there a bit more. It’s very difficult to forecast net revenue yield as you know, and it certainly has lots of quarterly dynamics including things like day count and the market impact.

All things being equal though, we do think we’re starting to see more and more stabilization and the cews will offer even a further level of stabilization. I think as you’re thinking about just how you model revenue overall and how you think about some of our revenue dynamics, I do think it’s important to look at third party plus distribution fees as a percentage of management fees, which we’ve talked about a lot in the past. And that relationship is certainly changing with the addition of the queues. And you’ve got 18 basis points of CEWS revenue that will run through management fees.

The licensing and custodial fees of 12 basis points run through third party contra revenues. And so that relationship is really moving higher, probably closer to the 22 to 23% range per quarter in 2026, which is quite a bit higher than where it previously been, around 13 or 14%. So I think those are all important factors as you think about some of the dynamics that could change now.

Andrew R. Schlossberg

Brennan, it’s Andrew. The one thing I’d add is that beyond the revenue yield, if you look at things like ETFs, fixed income, our cash business, these are all very at scale and so thinking about the drive through to profitability is also pretty critical.

Brennan Hawken

Got It. Okay, thanks for that. And then sort of related. I know there’s a lot of moving pieces with the expenses. A little tricky to follow all those parts, but just focusing in maybe on one part to start out here, you’ve historically talked about a 38 to 42% comp ratio and it looked like you were starting to get back into that. But how should we think about the impact of the QS and all the other moving pieces potentially impacting the comp ratio outlook? I would think moving to the lower end or maybe even adjusting the historical frame of reference of the 38 to 42 might make sense.

But we’d love to hear your thoughts on that and how we should think about the comp ratio going forward.

L. Allison Dukes

Sure, good question. And there are a lot of moving pieces to the expense guide and we recognize that tried to be as clear as we could, but there are a lot of ins and outs as we continue to transform the business as it relates to the comp ratio. You know, the comp ratio that we point to is always a full year comp ratio. We really don’t manage it quarter to quarter. We’re always managing on a full year basis. And in 2025 the comp ratio ended at 42.7%. So again above our historical guide of 38 to 42%.

As I think about 2026, I think we will come back within that range. I think we’ll be at the high end of that range. But with the addition of the cews, it does help and it does start to stabilize the revenue base. The reason we got out of line with that guide in some recent years is really as we saw a real pullback in revenue. So that stabilization and growing revenue back to where we needed to be I think gives us the opportunity to pull the comp ratio back down. But it’ll be on the high end of that range as we think about long term.

Look, we want to continue to invest in our business. We are continuing to remix our expense base. We are hiring in areas of growth and that really I think the addition of the CEWS revenue gives us the opportunity to continue to make selective and strong investments in our hiring.

Brennan Hawken

Thanks for taking my questions.

L. Allison Dukes

Thanks, Brenna.

operator

Thank you. Next question. Thank you. This question comes from Glenn Schorr with Evercore ISI. Your line is open. You may ask your question.

Glenn Schorr

Hi, thanks very much. I guess a big picture question on your private market strategy thought process going forward. You did a couple of interesting, what I call capital light partnerships. Get you into other geographies, other asset classes. So is the big picture game plan to piece together a full cross asset classes offering and maybe through Capital Light JVs for now and then it’s if that’s the case. I’m very curious on how branding is going to work in the wealth channel as you piece that together. Thanks so much.

Andrew R. Schlossberg

Yeah, let me start. Thanks for the question. Yeah. The partnerships are meant to complete and build out the product capability set. The ones with bearings were focused on income and the partnerships with partnership of LGT a little more towards total return and growth. That leaves us with other opportunities that we could look at with other partnerships to fill that out. But we’re starting to get a pretty complete product lineup in particular trying to reach the wealth management markets in the US and around the world in the defined contribution market. In particular here in the US Those partnerships did come, as you said, with capital committed by our respective partners and that’s a really great way to get these strategies launched into those markets.

So I think the combination of them plus our real estate offerings, our existing real estate offerings and our existing alternative credit offerings do give us a pretty complete picture. We don’t want to over saturate our product line either. We want to stay focused. But we really like this partnership model and structure. They’re going to be co managed both by us and our partners, which is really critical. And they’re going to be singularly distributed by us in those markets. In the US as we announced, the branding will be pretty straightforward. It’ll be our brand coupled with theirs where it makes sense.

But given that we’re the exclusive distributor, we’re really trying to avoid and will avoid any kind of channel conflict whatsoever. That’s critical to us too.

Glenn Schorr

That was great, Andrew. Appreciate it. Thanks a lot.

Andrew R. Schlossberg

Thank you.

operator

Thank you. Our next question comes from Alex Blostein with Goldman Sachs. Your line is open. You may ask your question.

Alexander Blostein

Thank you. Good morning. Just maybe another cleanup on expenses before I have my follow up. More on the strategic side. But to Austin appreciate lots of moving pieces here. Maybe it would be helpful just to kind of level set where you guys expect the total dollar amount of expenses to be for 2026 assuming sort of flat markets. I heard you on the $3.2 billion jumping off point but that’s really just kind of annualizing Q4. There’s a bunch of things that’s going to come out. There’s a bunch of things that’s going to go in. So just to kind of level settle might be helpful to get your sense of where 26 expenses could shake out again ex beta.

L. Allison Dukes

I think given all these moving parts and trying to land that would be probably not wise at this stage. I do think it’s to look at some of the moving parts given there’s so much quarter to quarter fluctuation. I recognize it’s rather frustrating. I find it rather challenging myself. But I’ll say a couple of things. One, it’s the right jumping off point. I do think it’s important to remove the right revenues and the right expenses as we guided to. As it relates to the sale of India and the sale of Intelliflow. Of course we add back in 40% of India but that’s below the line.

Important to look at some of what we were guiding to beginning in the second half of the year beginning in the third quarter as it relates to Canada and the repositioning of that market there will be impacts to both revenue and expenses. And then of course there are some all the alpha and the hybrid platform expense guides those will fluctuate quarter to quarter. I do think the 25% sort of variable expense assumptions the right one on the comp to rev again kind of in that 38 to 42% range but you know probably closer to 40, 41% is where I would be thinking about that.

I think it’ll get you pretty close to where we need to be and we’ll continue to give you guidance throughout the year. But one thing I want to point to is everything we’re doing is with a focus towards operating margin expansion and we have every expectation we will continue to grow operating margin this year. Everything we are doing is with an eye towards creating that positive operating leverage and expanding operating margin. And I feel very confident we are on a good strong trajectory. Continue to expand operating margin this year on a full year basis. There will be some quarter to quarter fluctuations.

We said all along our objective is to get our operating margin into the mid-30s on a path back to the high 30s. And I think we will continue to make really good progress this year in our operating margin expansion objectives. Great.

Alexander Blostein

Now that’s super helpful. Thank you. And I appreciate all the moon pieces as well. Strategically just one for you guys as well. So incredible year really over the last 12 months or number of big steps you guys made as you look forward, do you still see parts of the business that are sort of subscale where you could do something similar where you exit them or GB them or kind of try to maneuver them to where sort of makes sense or this sort of future strategic moves are likely to be More of kind of growth related partnerships like we’ve seen you guys do with Barings and perhaps some of the others.

Andrew R. Schlossberg

Yeah, let me start. And Allison should chip in as well. Look, we made a lot. Thank you for your comments. We made a lot of moves this year. I think it also presents or describes a lot of the creativity that I think is in the company to look for alternative ways to grow, all different ways to grow. And I think we exhibited that. I would say from here a lot of that foundational work is, has been done and the execution now is I think more clear. And the resource alignment that we have towards these growth initiatives organically I think is more set things like expanding out our ETF business and our SMA business and our models business.

As personalization takes hold, we’re taking these private market partnerships and really starting to generate the organic growth in the retail markets in D.C. that we expect or the shift into fixed income as cash comes off the sidelines. The real growth that we’ve established in Asia and EMEA now that those are 40% of the long term AUM base. So just a few examples of we have a lot to build off of the foundational work that we did. If we see opportunities to align with others in partnerships or other JVs, we will. But we’ve really laid a lot of that foundation, I think, thus far.

L. Allison Dukes

I think that’s right. I mean there’s not a lot that’s obviously subscale, but there’s still a lot of opportunity, I think, for improvement in our performance overall. And that’s really our focus in 2026 around execution and continuing to drive a lot of these strategic initiatives all the way through. Some of these things are kind of announced but not yet executed and we’ve got a lot of work to do to bring these partnerships to life, to close the partnership with CI in the second quarter of this year and to really then drill even deeper into the opportunity we have to improve execution overall.

I think Andrew noted some of the strategic highlights that we see in our platform, but I don’t want to leave anybody with the impression we kind of got all the fun things behind us. We now we got a lot of big rocks done and we cleared a lot of ground for us to now focus on, I think even deeper into the firm this year and really refine our execution from here.

Alexander Blostein

Great. Awesome. Thank you so much for the book.

Andrew R. Schlossberg

Thank you.

operator

Thank you. And our next question comes from Dan Fannon with Jefferies. Your line is open, you may ask your question.

Daniel Fannon

Thanks. Good morning. So really strong close from the China JV in the quarter. Was hoping you could discuss the outlook as we think about 2026 and, and maybe the diversity of some of the. Products that are driving that growth?

Andrew R. Schlossberg

Yes. Hey, Dan. Yeah. The growth in the China JV really persisted throughout the entire year. I think we did, you know, north of 20 billion inflows and it was each quarter got successively better. A lot of that growth this year came in the balance strategies, they call it fixed income plus. Those strategies I think really demonstrated people starting in China to get a little more confident in both the fixed income markets, but in this case getting into the equity markets through these balanced funds. The stimulus and reforms that have happened in China continue to, I think, stimulate investors interest in the markets.

They’re pushing up consumption. There’s less emphasis on the property sector. There’s continued to be programs emphasizing market participation, long term retirement growth. And then the easing trade tensions with the US I think has helped interest grow domestically, but also by foreign investors in particular in Europe and Asia into those markets. So the growth’s been good, it’s been pretty focused in those areas I mentioned. And we’re seeing our passive ETF business also pick up, which is good to see.

Daniel Fannon

Right. And just as a follow up, Alison, one more just on expenses and the hybrid investment platform. Obviously those costs you said will roll off as we get into next year. But could you remind us, is this more about cost avoidance or we should actually see savings as we get into 2027.

L. Allison Dukes

Relative to 2026? Yes, we will see savings in 2027 cost avoidance if we take it all the way back to the beginning of this, you know, over multiple years. I mean, look, Invesco is an entirely different Invesco than we were five years ago when we started this. And the opportunity was always about simplifying the overall operating system and really trying to create future cost avoidance. So it’s hard to point to year over year savings going back to the beginning because our AUM is going to be almost double when we finish where we started. But the cost avoidance in the future, as we think about the opportunities to garner the benefits of scale and the size of our aum, I think we will be pleased in the long run.

But 27 relative to 26, yes, there will absolutely be savings, namely the implementation expenses that have been running in that 10 to 15 million dollars range per quarter. Those will taper off as effectively construction costs go away. And then as we move AUM fully onto the hybrid platform and have the opportunity to decommission systems on the other side, I think some of the operating expenses will improve in 27 relative to 26 as well. We’re focused entirely right now on completing implementation in 26. As we get closer to that, we will also begin getting more and more focused on how do we make sure we start to really drive the cost curve down in 27 and beyond.

Daniel Fannon

Great. Thank you.

Andrew R. Schlossberg

Thanks.

operator

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

Brian Bedell

Great, thanks. Good morning, folks. Thanks for taking my questions. Just one more on expenses, just to clarify. So, Allison, I think if I could tally the things that you mentioned that have, you know, discrete impacts to that 3.2 billion expense base in 26. I think I counted five different things, but they look like they mostly offset from things that, you know, I know the timing is going to evolve throughout the year. So you did start that part in your commentary about 3.2 billion being a good starting point. It sounds like with those specific impacts, 3.2 billion is also a good starting point for 2026.

Obviously we’re going to be layering in, you know, variable expenses and investment in the business on top of the. But I just wanted to make sure. I just wanted to Clarify if that 3.2 is the right number to start with given the isolated impacts that you mentioned for the different businesses, including the triple Q marketing budget.

L. Allison Dukes

It’s the right number to start with, but you just highlighted a great one. Yes. With the triple Q marketing budget getting fully layered in in 2026, which was not present in 2025 or in the fourth quarter of that run rate that we start with. So it is absolutely the right number to start with. And then as you think about the puts and takes, I think it’ll get you to something a bit higher than 3.2 billion, but also with revenue that’s quite a bit higher than 2025 as well.

Brian Bedell

Yep. Okay, great. And then more strategically, can you talk about traction? Maybe Andrew, talk about traction in the defined contribution channel. What are you hearing from different potential plan sponsors in terms of their warming up to adding private markets to 401ks? And how do you view that positioning? I know it’s a great long term opportunity, but are you seeing actual traction building here this coming year?

Andrew R. Schlossberg

Yeah, I mean, we’ve seen a lot of discussions, a little bit of traction in the United States, but where we’re actually seeing more traction is in the United Kingdom and in places across Europe where there’s also retirement reform going on and more private markets participation and things like defined contribution plan. So we do think this is a long term trend private markets into dc. We also would point out it’s not just a US trend. And I think owing to the fact how diverse our portfolio is and how strong we are outside of the US too that we view this as kind of a multi layered proposition.

We certainly have the product offering to start to fill that out for institutions and plan sponsors, but we’re also going to be with the addition of the LGT partnership focusing on that with them as well. And they have a very strong reputation in the institutional markets.

Brian Bedell

Great. Thank you.

Greg Catron

Operator. We have time for one more question.

operator

Thank you. Question comes from Ben Budish with Barclays. Your line is open, you may ask your question.

Benjamin Budish

Hi, good morning and thanks for fitting me in here. Maybe just a couple more housekeeping questions on Canada and some of the moving parts from this quarter. So Alison, you mentioned that we should see an operating income drag starting in the third quarter, but you expect it to ease over time. Any more color in terms of what assets or what sort of asset groups we should see that come out of any other sort of geography impacts we should be aware of. And then just what’s your thoughts on the timeline for when you expect that to start to grind more closer, to break even or positive?

L. Allison Dukes

Thank you. So again we don’t expect to close that transaction until late in the second quarter. So we believe this will start to impact results in the third quarter. From a revenue perspective. You would see revenue on a quarterly basis decline by 15 to $20 million net on a net basis for the sale of those mutual funds net of the sub advisory revenue that we expect to garner on an expense basis. We expect expenses to kind of start in the kind of 5 to $10 million range in terms of 5 to $10 million lower beginning in the third quarter but trending higher towards that $10 million range over call it 2 to kind of 4 quarters as we get into 2027.

So that net operating income impact of 5 to $10 million starting on the high side of $10 million lower quarter kind of trending lower as we get into 2027. When you think about those expenses and the 5 to 10 million dollars of expenses, the majority half the more of that is going to be on the compensation side. So that will actually take a little bit of time to work down as we continue to really reposition our overall workforce in Canada related to this transaction. But there’s also some impact to property and office as we will have some reduction in locations in Canada and some impact to GNA as well.

So it’s split between those three categories with the majority in compensation.

Andrew R. Schlossberg

Yeah, I mean, when you look at the strategy behind what we did in Canada and partnering with CI, we’ll be managing, as I mentioned, the sub advised portion of the assets for all the global strategies, all the non Canadian strategies with all of our existing teams and as those as demand and flows grow through CI, that’ll give us a good opportunity to continue to grow revenue through our existing investment teams. We’ll no longer manage the Canadian portion of those funds. That’ll stay with CI.

L. Allison Dukes

So while there is some short term operating income impact, we absolutely believe this is the long term, right strategic move for Canada and that as we get into the LATTER Half of 27 and beyond that this will absolutely have been the right move. We really do feel strongly that this partnership positions this business for better growth than we were going to be able to deliver on our own. And in doing so, we’re going to take the opportunity to really look at our expense base and see where we can go even further as we get into 2027 related to all of our operations in Canada.

That gives us that opportunity to turn this into, I think, a long term, really positive move for the firm.

Benjamin Budish

Understood. If I could just double check, are there any cash flow implications, any proceeds from the sale or has that not been disclosed?

L. Allison Dukes

It’s pretty negligible relative to the cost that we will incur with some of the repositioning that we’re referring to. So it will. It will be immaterial.

Benjamin Budish

Understood. Thank you so much.

L. Allison Dukes

Thank you.

Andrew R. Schlossberg

Okay, so just in closing here, we really want to stress that we’re unlocking value across the organization for the benefit of our clients and for our shareholders. And as you can see, we made significant progress in 2025. This includes looking at how we fundamentally operate and evaluating every opportunity as we strive to improve client outcomes, generate operating leverage and profitability, continue to build a strong balance sheet, enhance our ability to return capital to shareholders. We have resilient operating performance across many key value drivers. And our global platform has a significant and unique Asia Pacific presence.

And a strong performing EMEA business, coupled with our scale and breadth of products positions us really well to perform through shifting market dynamics. We continue to demonstrate that we have durable performance and reason to be optimistic about the future. I want to thank everybody for joining the call today and please do reach out to our investor relations team for any additional questions. And we really appreciate your interest in Invesco and We look forward to speaking with all of you again soon.

operator

[Operating Closing Remarks].