Invesco Management Discusses Q3 2013 Results - Earnings Call Transcript

Oct.31.13 | About: Invesco Ltd. (IVZ)

Invesco (NYSE:IVZ)

Q3 2013 Earnings Call

October 31, 2013 9:00 am ET

Executives

Martin L. Flanagan - Chief Executive Officer, President and Executive Director

Loren M. Starr - Chief Financial Officer, Senior Vice President and Senior Managing Director

Analysts

William R. Katz - Citigroup Inc, Research Division

Brennan Hawken - UBS Investment Bank, Research Division

Michael Carrier - BofA Merrill Lynch, Research Division

Craig Siegenthaler - Crédit Suisse AG, Research Division

Michael S. Kim - Sandler O'Neill + Partners, L.P., Research Division

Daniel Thomas Fannon - Jefferies LLC, Research Division

Glenn Schorr - ISI Group Inc., Research Division

Matthew Kelley - Morgan Stanley, Research Division

Kenneth B. Worthington - JP Morgan Chase & Co, Research Division

Christopher Harris - Wells Fargo Securities, LLC, Research Division

Robert Lee - Keefe, Bruyette, & Woods, Inc., Research Division

Marc S. Irizarry - Goldman Sachs Group Inc., Research Division

Greggory Warren - Morningstar Inc., Research Division

Christopher Shutler - William Blair & Company L.L.C., Research Division

Unknown Executive

This presentation and comments made in the associated conference call today may include for looking statements. Forward-looking statements include information concerning future results of our operations, expenses, earnings, liquidity, cash flow and capital expenditures, industry or market conditions, AUM, acquisitions and divestitures, debt and our ability to obtain additional financing or make payments, regulatory developments, demand for and pricing of our products and other aspects of business or general economic conditions. In addition, words such as believes, expects, anticipates, intends, plans, estimates, projects, forecast and future or conditional verbs such as will, may, could, should and would, as well as other statement that necessarily depends on future events are intended to identify forward-looking statements.

Forward-looking statements are not guarantees, and they involve risks, uncertainties and assumptions. There can be no assurance that actual results will not differ materially from our expectations. We caution investors not to rely unduly on any forward-looking statements and urge you to carefully consider the risks described in our most recent Form 10-K and subsequent forms 10-Q filed with the SEC. You may obtain these reports from the SEC's website at www.sec.gov.

We expressly disclaim any obligation to update the information in any public disclosure if any forward-looking statement later turns out to be inaccurate.

Operator

Welcome to Invesco's Third Quarter Results Conference Call. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time.

Now I would like to turn the call over to the speakers for today, Mr. Martin L. Flanagan, President and CEO of Invesco; and Mr. Loren Starr, Chief Financial Officer. Mr. Flanagan, you may begin.

Martin L. Flanagan

Thank you very much, and thank you, everybody, for joining us. This is Marty Flanagan and I am with Loren Starr, who was just introduced. Today we'll provide a review of the business results for the third quarter, including a discussion regarding the United Kingdom. Loren will go into greater details in the financials, and as always our practice, we'll open up for Q&A.

So if you happen to be following the presentation, I'm on Page 3. And let me begin by highlighting the firm's operating results for the quarter. And they were very, very strong. First, it started with very good long-term investment performance. And it remained strong across all time periods during quarter. The strong investment performance, with the broad diversity of flows and continued focus on clients, contributed net inputs of $9.1 billion during the quarter. Adjusted operating income was up 34% compared to the third quarter of last year, and a continued focus on the disciplined approach to our business drove improvement in our operating margins to 40.2% from 34.5% in the same quarter a year ago. This is a 5.7% -- percentage point increase, so a very, very strong quarter.

Assets under management were $745 billion at the end of the quarter, up from $705 billion in the prior quarter. And you'll remember from the second quarter that assets under management in the financial results during the quarter reflect our decision to treat Atlantic Trust as a discontinued operation, given that this is a pending combination with CIBC. Operating income was $328 million versus $311 million in the prior quarter. Earnings per share were $0.55, up from $0.50 in the prior quarter.

The quarterly dividend remained at $0.225 per share. And we returned just over $100 million to shareholders during the quarter. And reflecting confidence and the continued strength of the business, the Invesco board authorized $1.5 billion of additional share repurchases.

And before Loren goes through the details of the financials, let me spend a few minutes first on the investment performance in the quarter. I'm on Page 6 now. Investment performance in the quarter was, again, amongst the strongest we've seen across the global organization. 82% of assets were ahead of peers on a 3- and 5-year basis, and 72% of assets were ahead of peers on a 1-year basis. And as you might expect with numbers like these, long-term performance of our investment teams -- for investment teams across the enterprise, were quite strong, with a number of capabilities achieving top desk [ph] outperformance.

Performance of our cross-border fund range remained strong during the quarter with 87% of its assets in top half of peers on a 3-year basis and 84% of assets on a 5-year basis.

Turning to flows. You'll see on Page 7 that gross long-term sales remained stronger during the quarter. In addition, redemptions tapered off, which led to an improvement in long-term net flows of $5 billion this quarter versus $1.4 billion in the prior quarter. These numbers also reflect the broad diversity of flows we saw across the global business during the quarter, which included strength in equities and alternatives.

Continued strong gross long-term sales and improvements in gross long-term redemptions led to net flows in our retail channel of $6.5 billion versus $4.9 billion in the prior quarter. The institutional channel saw continued demand in real estate bank loans and IBRA. During the quarter, there were -- there was a $2.5 billion note fee outflow related to a decrease in leverage in our mortgage REIT. The institutional pipeline of one but not funded mandates continues to look very strong.

Turning to Page 9. I would just like to put things in perspective. And before the showdown in Washington undermined consumer confidence and put a damper on growth, we saw solid strength in the U.S. economy during the third quarter. As a result of that, although clients continue to show interest in our Asset Allocation strategies, we saw a shift towards risk-based assets during the quarter, which resulted in a slowdown of IBRA sales. I wouldn't characterize this as a great rotation, but there surely was a mild rotation of investors feeling more confident enough to take on additional risk, and you'll see on Page 10.

Gross long-term sales for our retail business remained strong at $21.6 billion for the quarter, a 26% increase over the same quarter a year ago, which was also quite strong. The annualized redemption rate for Invesco remained favorable relative to the industry. And redemptions also eased during the quarter, which led to net sales of $3 billion.

Flows into the complex were led by strength in U.S. value equity, international, global equities and traditional ETFs and alternatives. Our U.S. business has become increasingly diversified as allocation and alternatives grew to 38% of sales in the quarter, versus 25% during the same period 2 years ago.

We saw 18 funds with net flows of greater than $100 million over the trailing 12-month period ended September 30, 2013, and this compares to 6 in the same period in 2011. So you can start to understand the broadening of the flows and the benefit that we keep talking about the broad diversity of investment capabilities where we can meet investor needs in different environments.

We feel good about the momentum in our business. We remain confident in our ability to deliver a high level of value for our clients, and we believe the firm is well positioned regardless of where the market takes us next. As always, we continue to look for opportunities that further strengthen our competitive advantage and our financial position over the long term.

And before I turn it over to Loren, I would like to go more in-depth into a discussion of our position in EMEA. So I'm on Page 12, if you are following the slides. First, as everybody on the call is aware, we announced earlier this month that after 25 years with the firm, Neil Woodford will be leaving Invesco Perpetual on April 29, next year. We appreciate very much Neil's significant contributions to our firm. He's leaving on very good terms with the company, and he has been an important part of creating this well-thought-out succession plan and is committed to helping transition the funds. We have planned for succession for many years and frankly, we've never been better positioned to manage this transition. We have a very experienced, highly tenured team that has built a world-class investment culture, strong investment performance of the team, their focus on clients and the tremendous breadth of capabilities have led to strong organic growth across our EMEA business.

So to put this in perspective, total assets under management for Invesco are $745 billion. We've seen $20 billion of net long-term flows into the business so far this year. And this represents an annualized organic growth rate of approximately 4%.

Assets under management for our EMEA business totaled nearly $165 billion. So far, through 2013, through the September quarter, net flows into EMEA, excluding equity income, are nearly $9 billion, representing annualized organic growth rate of 12%.

The U.K. equity income assets equaled roughly $48 billion at the end of the quarter, but we've seen net flows taper off over the past year, which resulted in a slightly negative organic growth. Given our assets have thoughtfully managed the transition, we're pleased to report that client reaction to departure -- to the departure of Neil has been calm, professional and highly supportive of Mark Barnett. The combined total of the 2 largest funds managed by Neil is $38 billion. For the 11 days between the announcement and today, redemptions from these funds above the historic redemption rate were less than $1.5 billion, or slightly more than 4% and let's put that into perspective just for the month of October.

For the month of October, total Invesco had net flows of $2.7 billion, which includes the redemptions that I was just speaking of. It's early days, but the redemption experience has been very much towards the positive end of the scenarios we modeled and planned for, and considerably less than what we've seen reported in the media. We find the results encouraging and we continue -- we will continue to do everything we can to deliver good outcomes for clients, retain the assets and grow our EMEA business.

As I mentioned, we believe we are very well positioned to manage through this transition. Invesco Perpetual as a deep, well-tenured team that has consistently delivered investment excellence for clients.

We've talked in the past about the investment team's phenomenal performance. In the third quarter, 98% of the assets across the business were above peers on a 5-year basis. And if you look at equally related investment performance, 87% were above peers over a 5-year period also. And 49 out of the 52 of Invesco Perpetual's managed funds achieved positive returns over the past 5 years, in spite of the financial crisis. The team has been named the Best Investment Group of the Year and of The Decade by numerous publications and organizations.

Mark Barnett, who will assume the leadership at the U.K. Equity Income funds, has a phenomenal track record. He will lead an exceptional team that has helped manage the funds over the years. We're focused now on introducing Mark to clients and sharing the very positive facts we have with clients, the media and others.

And to give you further perspective on Slide 15. It shows you the debt and breadth of our investment capabilities within Invesco Perpetual, as well as the experience and tenured team supporting those capabilities. The average industry experience for the entire team in Henley is 17 years. The average length of time with Invesco is more than 8 years. We continue to build on our highly experienced, capable and stable team to meet clients' needs. We added a multi-asset team in late 2012 that we launched its first product, Invesco Perpetual Global Target Return fund, in early September. The team takes an unconstrained, conviction-led approach to multi-asset investing, consistent with the approach taken by the Henley based funds across equities and fixed income and using Invesco Perpetual's highly experienced investment capabilities. We look at this as an important additional investment capability to the organization.

And as you'll see on Slide 16. Invesco real estate has a significant profile in EMEA, with more than $6 billion under management and 6 offices across the continent. Additionally, as the leadership for Invesco Quantitative Strategies is headquartered in Frankfurt, Germany, IQS oversees approximately $23 billion in assets under management and offers a full range of strategies. And as I mentioned earlier, investment performance for our cross-border fund range has been quite strong, with 84% of the assets ahead of peers on a 5-year basis, and you can see also, 87% of beating peers on a 3-year basis, so very strong.

Strong investment performance and efforts to bring the best of our investment capabilities to continental Europe have resulted in organic growth rate of 26% year-to-date for the cross-border fund range.

We have very strong facts to share with clients. Let's start with Mark Barnett's excellent track record and the 17 years of working alongside Neil. Mark has a truly exceptional performance record and we are extremely confident in his ability to succeed Neil as Head of the U.K. equities team. We also have a robust investment culture in Henley that is focused on delivering strong, long-term investment performance for our clients, a brand that is very well recognized.

We have a strong business in EMEA. Highly experience, talented investment teams, market leading capabilities and the resources of a global organization to support the success. We've planned for succession for many years. Our primary focus is to manage through the transition in the most thoughtful, disciplined way, with the goal of continuing to doing an excellent job for our clients and thereby ensuring long-term success.

I have every confidence in our investment team and the business to manage this succession in a very thoughtful, meaningful way, and we'll have great -- continue to have great outcomes for our clients and also for our shareholders.

So with that as background, I'd like to turn it over to Loren to go through the financials.

Loren M. Starr

Thanks very much, Marty. So quarter-over-quarter, our total AUM increased $39.9 billion or 5.7%. This was driven by positive market returns and FX of $30.8 billion and total net inflows of $9.1 billion, of which $5 billion were long term. Our average AUM for the quarter was $729.4 billion, that was up 1.3% versus the second quarter average. And our net revenue yield came in at 44.8 basis points. That's an increase of 0.9 basis points quarter-over-quarter, and this increase was a result of improved mix, one extra day for retail assets and the higher other revenues as compared to the second quarter.

Now let's turn to the operating results. Net revenues increased $26.1 million or 3.3% quarter-over-quarter, which included a positive FX impact of $4.9 million. And within the net revenue number, you'll see that investment management fees grew by $32.8 million or 3.6% to $938 million. This increase was in line with our higher average AUM and an improvement in the effect of fee rate during the quarter. FX increased investment management fees by $6.4 million.

Our service and distribution revenues were up $5 million or 2.3%, and that was roughly in line with the increase in average AUM. FX increased service and distribution revenues by $0.5 million. Our performance fees came in at $8.5 million, a decrease of $0.5 million from Q2. Performance fees in the third quarter were driven by a variety of products and regions, and FX had no significant impact on this line item.

Our other revenues in the third quarter came in at $33.1 million, and that was an increase of $4.2 million versus the prior quarter. And this increase was driven by higher real estate transaction fees. And FX increased other revenues by about $0.1 million.

Third-party distribution service advisory expense, which we net against gross revenues, increased by $15.4 million or 4.2%, and that was roughly in line with the increase in retail investment management fees. FX increase these expenses by $2.1 million.

Moving on down. You'll see that adjusted operating expense at $488.3 million increased by $8.6 million or 1.8% relative to the second quarter, and FX increased the operating expense by $1.4 million.

Employee comp at $328.3 million increased by $5.6 million or 1.7%. This increase was due to higher variable compensation, which was slightly offset by a decline in sales commissions, seasonally lower payroll and retirement costs and a full quarter's worth of staff cost reductions from the outsourcing of our European transfer agency. FX increased compensation by $0.8 million.

Marketing expense decreased by $0.8 million or 3.3% to $23.5 million. FX increased these expenses by $0.1 million. Several new product introductions had been expected in the last half of this year, spread evenly between Q3 and Q4. And this is the basis for our original guidance for marketing expenses of $27 million per quarter in Q3 and Q4.

The planned launches are on track but now are expected to occur mostly in Q4, and as a result, we would expect marketing expenses to increase in Q4 by approximately $5 million to $6 million.

Property, office and technology expense was $72.7 million in the third quarter, which was up $4.3 million. The increase was driven by a full quarter's worth of expense associated with the outsourcing of our European transfer agency and by continued investment in technology systems.

Foreign exchange increased these expenses by $0.2 million. Consistent with our guidance in Q2, we expect this line item to level off at about $74 million in Q4.

G&A expenses came in at $63.8 million, down $0.5 million or 0.8%. FX increased G&A by $0.3 million. This line item is affected by new product introductions and accordingly, we would expect to see G&A increase by approximately $2 million or so in Q4.

Continuing on the page, down the page you'll see that our nonoperating income increased $10.6 million compared to the second quarter. The increase was due to unrealized gains on certain of our real estate and private equity partnership investments, as well as a realized gain on our investment in a CLO, which liquidated during the quarter.

The firm's effective tax rate on a pre-tax adjusted net income basis in Q3 was 26.6%. Going forward, we continue to guide the effective tax rate to be around 26.5% to 27.5%.

And that brings us to our EPS. Our adjusted EPS of $0.55, and as Marty mentioned, our adjusted net operating margin of 40.2%.

And with that, I'll turn it over to Marty.

Martin L. Flanagan

Thank you, Loren. So operator, we'd like to open up for questions, please.

Question-and-Answer Session

Operator

[Operator Instructions] The first question comes from Bill Katz with Citigroup.

William R. Katz - Citigroup Inc, Research Division

Marty, as you -- it looks like you got to your margin target a little earlier than expected. And maybe some unusual items along the way in the P&L, but really not so much from my perspective. As you look out into 2014, just given the flow dynamics that you're seeing between EMEA equities, alternatives, active, if you will, versus maybe some further attrition in the U.K. footprint. How do you see the margin dynamics playing out next year? So I guess, the root question is, is there still nice incremental margins from here?

Martin L. Flanagan

So using the framework that you laid out, so if the market continues that way, we are anticipating continued expansion in the margin. As we said in the past, we don't -- there's no reason that we don't continue to have margin expansion. And as you point out, the flows are broadening, the performance is very strong, but for a market pullback, something like that, we just don't see that we can continue on the path that we've been on.

Loren M. Starr

And Bill, this is Loren. And the only thing I would say, and Marty highlighted it on some of the slides. Some the fastest-growing parts of our business are cross-border, in EMEA, also in Asia-Pacific. And these have very high fee rates, similar to equity income fee rates. And incremental margins are excellent on those similar. So I'd say, it is certainly a reasonable expectation that our incremental margin guidance or whatever, outside of 60%, 65% is absolutely intact.

William R. Katz - Citigroup Inc, Research Division

Okay. That's very helpful. I guess, the new news is the $1.5 billion repurchase authorization. How should we think about deployment of that, particularly where the stock is trading right now? Would you expect the share count to ratably go down? Or it's still open-ended as I see from press release, but what are your thoughts in terms of usage of that?

Loren M. Starr

The $1.5 billion certainly gives us room to run around, so to speak, on the buyback. And we're watching our relative stock price compared to competitors closely. Certainly, the stock took a fair beating in the recent last quarter, and then we're paying attention to it. We were out of the market in Q3 because of the realization that we have obviously of Mr. Woodford leaving. And so we weren't in a position to buy back stock, but we are certainly now in a position to do so. And you certainly would expect to see us, at a minimum, be back in the market at -- in a strong way.

William R. Katz - Citigroup Inc, Research Division

And just the last question. Just in terms of very tactically, in your G&A as you look into the first quarter of next year, some o f these launches, if you will, is that G&A level -- should that trend down a little bit or is that sort of a new starting level to which you'd grow off of?

Loren M. Starr

I think it will trend down. So there's clearly -- these product introductions got bunched up in Q4 versus Q3, Q4 which is what we originally thought. So that extra $2 million would certainly move down.

Operator

The next question comes from Brennan Hawken with UBS.

Brennan Hawken - UBS Investment Bank, Research Division

So a couple of just quick questions. On Woodford, it certainly is good to hear that the outflows have been better than the press reports. But it'd just be helpful to hear about what you guys think, as far as the drawn out -- sort of 6-month time period, if he's going to stick around. Do you think that might mean that there's going to be a couple of waves of outflows? Or how do you think about that?

Martin L. Flanagan

Yes, it's a good question. So I'd answer it this way. As I've said a minute ago, this has been very thought-out, we think the best way to transition is to have -- through April next year, Neil will be very, very involved. And it allows Mark Barnett, who again, has been there 17 years, spectacular track record, adjust to -- work into that. And so we think, if you look at history, when do you have good transitions? You have very good transitions when the funds are performing well. You have a thoughtful succession plan with very, very capable individuals that have very good track records. And that's what's in place. And beyond, we talk about Neil, we talk about Mark, but it's very deep team that has been in place for a very long time. So we can't predict what the outflows are going to be, but what I can tell you from my experience, this is intact to be a very, very successful transition for clients.

Brennan Hawken - UBS Investment Bank, Research Division

Okay. And I guess, is the idea behind the 6-month period that it will give the team a chance, both Mark and Neil, to get around and get in front of clients and therefore make the transition easier? Since the announcement, obviously, there's been a lot of discussion around the thought process behind this transition because it seems rather unconventional to a lot of investors. So maybe if you could help us understand that, too?

Martin L. Flanagan

Yes. So that is exactly the case. As I've said, Mark has done -- he has been part of Neil's team, worked side-by-side with Neil, know each other very well. Exact same investment philosophy, as you would imagine on a team. If you look at their portfolios, they're not wholly different as you would imagine. So the knowledge of the stocks is very, very high. And what it really is doing is just allowing investors a chance to get to know Mark some more thoroughly. And that is what we are doing.

Loren M. Starr

And the other thing I'd just say is obviously, to the extent that people felt the transition was shorter, the impetus to make a decision and move obviously becomes greater. And so time is our friend here for sure. And as people get to know the team, and they're very impressive, it is certainly our hope that we will be able to retain significant assets in this process.

Brennan Hawken - UBS Investment Bank, Research Division

Cool. And then the last one on this, and sorry to have so many questions on this, it's just been a very big topic on the mind of investors here, as you can imagine. Can you help us understand what he's going to be doing, Neil, in his new venture? Is this sort of going a different of direction strategically, or is he going to be courting sort of very similar client base as to the current fund. Can you help us maybe understand that a little, too?

Martin L. Flanagan

To your third question, the answer is I don't know. I mean, as Neil said in the press release, he does intend to salvage new business after he departs on April 29. And there've been no discussions of what his plans are. So I really don't have any insight into that.

Operator

The next question comes from Michael Carrier, Bank of America Merrill Lynch.

Michael Carrier - BofA Merrill Lynch, Research Division

Just a question on the flows. On the institutional side, it looked a bit weaker than maybe what we expected, and part of it was just the pipeline. You mentioned, I think $2.5 billion, that was -- and I might get this wrong, but something on leverage on one of the products. So I just wanted to understand that, maybe it was with the liquidation of the CLO, but understand that. And then just when you look at the institutional pipeline and the outlook, where is the demand? Where are you seeing some of these outflows? I'm just trying to get better gauge on the outlook because it sounds like the pipeline is still pretty healthy.

Loren M. Starr

Michael, this is Loren. I'll take that question. So there was $2.5 billion associated with a reduction of leverage in our mortgage REIT, IDR, as you would know it by the ticker symbol. And that's -- there's no fee associated with the leverage. So it is one of these passive assets that is counted in our AUM and in our flows. But it really has no -- it has 0 impact on revenues. And so if you back out the $2.5 billion, we're in positive flows and active flows and institutional, and that is coming from real estate, bank loans, as well as our IBRA capability and I think commodities capability. So we're continuing to see in the pipeline consistent strength along largely those same asset classes. And so we feel that and obviously, the leverage was noise, but you back it out, we're on a good trend.

Michael Carrier - BofA Merrill Lynch, Research Division

Okay, all right. That's helpful. And then just on the expenses and the margin, the only area where it seems like it's been trending differently is just more on the distribution margin, if you want to look at it that way, just the revenues versus expenses. I think you hit on it. Like you just mentioned, just on the retail, it's driving some of those expenses higher. But I just want to get a sense of -- when I look at the revenue line, the expense line, even just the outlook for those 2. Just could seems like the expenses are trending a bit higher than the revenues.

Martin L. Flanagan

There is no trend of increasing distribution expenses. That does move in line with retail, AUM and there was an extra day there, so again you'll see a pickup in retail management fees, as well as those types of expenses. So that was in line and even although it looks a little bit off compared to the total management fee line item, again it's just sort of disconnect between retail and institutional. So there is no trend. We wouldn't sort of guide you that this is going to continue to increase. In fact, there'll be 1 day less in Q4. So you're not going to see -- actually no, it is a similar day. Forgive me, so it's a similar ratio of Q3, Q4 based on retail assuming that we maintain fee rates.

Michael Carrier - BofA Merrill Lynch, Research Division

Okay. And then, just last one. On the retail side, in terms of the flows in the quarter. It seems like it came in a lot stronger given what we saw on the industry on the muni side. And then also on the IBRA product, that is moderate. I just wanted to get any granularity because the strength that we've seen on the retail side just seems -- is just better than expected. So which products are working? What's the traction that you're seeing there? I mean, you hit a lot on the U.S. distribution front. But I just want any other color there.

Martin L. Flanagan

Yes, and that's the point that we have been making historically and we continue to make. IBRA is a very important capability here and will continue to be. But as we always said, as investor confidence comes back, they're going to go more risk assets. And we've said, we're prepared for it. And the point I was making was just that if you -- the depths of -- the broadening of the capabilities in the retail channel that is gaining traction is very broad. And as I pointed out, literally, 18 funds had net flows over $100 million, and that compares to 6 funds 2 years ago when you do that comparison. So we just continue to get stronger in that channel and we would expect that to continue.

Operator

The next question comes from Craig Siegenthaler of Crédit Suisse.

Craig Siegenthaler - Crédit Suisse AG, Research Division

I think there's a lot of focus here on the loss of potential AUM and revenues from Neil Woolford. But not as much focus on the other side of the equation, expenses. I know this is very difficult kind of to talk about, but is the best way for us to sort of estimate the offset here, sort of a comp ratio basis when we think about the offsetting expense here?

Martin L. Flanagan

Yes. I mean, I think if you think about incremental margins, it's the best way to think about it. The 65 -- 60% to 65% is the right way to think about what is the impact on expenses. It's going to be largely managed in aggregate for the firm as a whole. It's not one particular team. And so thinking of that on a team basis is not the right way to think about the impact overall. So that's how I would guide you, Craig.

Craig Siegenthaler - Crédit Suisse AG, Research Division

Got it, got it. And do you see your expectations really deviating here? It may even make sense to provide sort of comp guidance at some point next year. But just a follow-up question here. Is there any other kind of unique expense initiatives you sort of have in the plan, sort of like, the European transfer agent that you did this year?

Loren M. Starr

Craig, I mean, there are always things that we're looking at, I guess 2 off-hand that I know about. One is, I don't want to call it an expense initiative, it's more just the way we operate it. But it's our continued use of enterprise centers, which have been a real asset for Invesco. As you know, we have a 650-person group in Hyderabad, India. We just took on more space that would allow us to bring that up to close to 1,000 people. So we think that overtime, that scenario where we're going to continue to see leverage overall in terms of keeping effective and efficient operations. The other part I would mention, and we may have talked a little bit about it in the past, is just around our footprint in terms of properties. Again, if you had a clean sheet of paper where we have every single office, every single location that we have today, probably not. And ultimately, there is a need for us to continue to rationalize our location and our footprints to reflect the business today. And so that's something that you'll probably hear more from us in the near term, about how we plan to continue to manage that line item, which ultimately, if it's unmanaged, it continues to escalate. So it's certainly on our radar screen.

Craig Siegenthaler - Crédit Suisse AG, Research Division

And Loren, I saw you guys had about 50 more employees quarter-over-quarter, roughly. Was most of that India?

Loren M. Starr

No, it's fairly seasonal. There's a ramp up typically around transfer agency activities, and those numbers will go down too overtime. So I wouldn't read that as a sort of permanent headcount.

Operator

The next question comes from Michael Kim of Sandler O'Neill.

Michael S. Kim - Sandler O'Neill + Partners, L.P., Research Division

First, just based on management commentary that we've been hearing from some other firms and some of the data we've seen across the industry more recently. It does seem like retail investors are starting to move up the risk curve, so maybe more of a mild rotation, as you put it. So just wondering, assuming that, that sort of environment persists and investors are coming back into more traditional equity strategies, where you could see the biggest step-up in flows and then also how you might be thinking about the organic growth profile of the firm, particularly versus prior cycles?

Martin L. Flanagan

That's a good question, and I think we'd all love that day when that's a challenge for us. But again, what we've said in the past is, we've all anticipated at some point, people will take on risk assets and we couldn't be more well-positioned for something like that. And again, not just in the United States but as Loren is pointing out, kind of [ph] Europe that's a big thing for us. And quite frankly, in Asia it's a very good thing for us. And you started to see that in this quarter. So it would result in just stronger outcomes for us, that's for sure. But if you're asking, so what could the organic growth rate be? It's really hard to answer the question without knowing what the environment is. But I would just come back to the facts that we keep pointing to. Broad range investment capabilities, strongly performing set of investment capabilities, available through the Americas, through EMEA and through Asia-Pacific and I think that just sets us up very well for that environment.

Michael S. Kim - Sandler O'Neill + Partners, L.P., Research Division

Okay, fair enough. And then, just coming back to IBRA. Any color on the relative returns, particularly versus the other risk-parity strategies? And then also, can you just give us an update or some color on flow trends for the IBRA strategies and the institutional channel and outside of the U.S., just trying to get a sense of the prospects for the overall business assuming U.S. retail net flow trends remain sort of flattish here?

Martin L. Flanagan

So I don't have the most current data on the relative performance of IBRA versus peers, but it had been really quite strong. And I would imagine it would be very difficult that, that has fallen off really much at all during that period. So that's the important thing there. There is still continued interest in IBRA institutional and that is pretty broad. I think also that we've talked about in the past, we have a team that's very strong, there are natural extensions of the team's capabilities, those are things that we are looking -- we are spending more time with clients on. And also, as I've mentioned earlier, early days, but we have just started with the Invesco professional multi-asset team with the global target return fund and all of those things are going to be -- they're -- we just think they're permanent parts of the landscape going forward. We're strong in the area and we just intend to get stronger.

Operator

The next question comes from Dan Fannon of Jefferies.

Daniel Thomas Fannon - Jefferies LLC, Research Division

I guess, just a question on the $2.7 billion you mentioned in October, just wondering if there was anything lumpy in there with regards to institutional wins. And then also, we've been reading a fair amount in the press about what the intermediaries in the U.K. have done subsequent to the announcement. Just curious as to anymore color around feedback you've had from either consultants with a small component that is institutional and/or those intermediaries that have sold Neil's products in the past thus far.

Loren M. Starr

Dan, maybe I'll pick up the one, the first part, then Marty, I don't know if you want to address the second one. But ultimately, it's pretty diversified in terms of where the flows are coming from. It's across Asia Pac, retails that will be local equities, sort of Asian capabilities, EMEA is strong. Real estate is a good chunk of it as well, so I'd say that's about $800 million of it. Americas continues to do very well. So it's got within the traditional PowerShares, it's definitely factoring in there, up $550 million. So it's spread over lots of different capabilities, probably not too unsimilar to -- just similar to what we did in Q3.

Martin L. Flanagan

Yes. I just -- I don't know if I can add much more color to the feedback of the change that I've mentioned. The feedback so far from advisors and clients is, those that know Mark, have a lot of respect for Mark. They're very aware of his very, very strong track record. And so as I said, the engagement has been very professional, very thoughtful and back to the point we made earlier, the whole idea of having a long transition is it allows those that don't know Mark and the team very well, a real good chance to understand the depths and capabilities and track record that they have. And we think that is just an important part of the plan that has been put in place.

Daniel Thomas Fannon - Jefferies LLC, Research Division

Okay. And then just a follow up on -- does the timing of the Atlanta sale is that -- in the proceeds we should assume that those should be a directly applied to a buyback upon closing?

Loren M. Starr

Dan, yes, definitely, that is our intention, for sure.

Operator

The next question comes from Glenn Schorr of ISI.

Glenn Schorr - ISI Group Inc., Research Division

Curious on your comment earlier on the increasing investor confidence, many, many move into riskier assets and its impact on IBRA flows. Do you -- are you able to track what goes out and what you actually capture into your own equity funds. Obviously, equity and retail was strong performance, but can we assume that you're actively courting the third-party distributors and managing that transition, do you have any metrics that you can throw at that?

Martin L. Flanagan

Yes, so let me answer it this way. So it is -- the engagement with the advisor community is very broad-based and we try very hard to understand what their needs are and offer a range of capabilities to meet those needs. So it's not like the old days, 15, 20 years ago where you're sort of pushing this fund or that fund and the like. And so for a long time, we've been putting for a long time meeting last few [ph] years. The range of capabilities from IBRA through the equity capabilities and always has been the commentary that we've had with you and others and the clients is that you'll have different allocations during different times. And that's exactly what we're seeing, the numbers bear that out and that was the point I was trying to make, whether or not I did it very well. That as people get more confidence, so probably have lower allocations to IBRA right now, and increasing their allocations into things like value equity or international and that's exactly what's happening.

Glenn Schorr - ISI Group Inc., Research Division

Okay, good. And can we talk alternatives for a second? If you look at your performance slides, it's so strong across almost every product, that is one area where performance has lagged and you had some outflows. Anything you can talk to in terms of any visibility on the outflows, ebbing, what your plans are a little longer term in terms of broadening the product set there?

Loren M. Starr

So Glenn, this is Loren. So I mean, alternatives, we saw in this quarter, $1.4 billion of positive net inflows. So I think we -- we're actually seeing strength, it's in bank loans, it's in real estate. The -- what you're seeing on the performance side is misleading, so -- but it is consistent, we sense that. A lot of these capabilities don't have natural benchmarks. They're not available to peer groups, peer analysis that allows us to compare. So you're actually not seeing the true [indiscernible] relative performance of our direct real estate, for example. There is no comparable direct real estate benchmark that we can use, and that's $50 billion. So I obviously would guide you not to look closely at that. I think that particular one may be around some of our REIT capability, where there is a benchmark. But honestly, our REIT capability has been flowing strongly in this quarter and for the last several quarters. So it's certainly a conservatively positioned product relative to some of the competitors. I think that's exactly what clients have been looking for.

Martin L. Flanagan

Yes. And I think, Loren's speaking on this, but the one in particular, the real estate capability is just so, so strong. And again, it's this benchmark that leads you to thinking there's a problem there, and it's just quite the opposite. If you look at alternatives, generally it's about $87 billion right now within the organization. It is a growing part of our capabilities. And we're very, very focused on it, and I'd say over the next 6, 9, 12 months, you'll just continue to see greater extensions of our existing institutional capabilities into retail channels in different parts of the world. So we think we are uniquely positioned in the area.

Glenn Schorr - ISI Group Inc., Research Division

Very, very helpful. The last quickie was -- I'm sure it's a short period of time, so I'm the answer is retail, but I just figured I'd check on the outflows that you have seen in the U.K. products. I'm assuming it's all retail at this stage?

Loren M. Starr

Yes, I mean I think the U.K. is predominantly retailer-oriented in terms of the funds, there may be sort of pseudo-institutional relationships. But it's all relative to the retail products really.

Operator

The next question comes from Patrick David of Autonomous Research.

Unknown Analyst

I've heard some speculation that because of the nuances around RDR, there could actually be a financial incentive for at phase not to move their money from Woodford's fund because they'd lose their trailing commission. Could you give us an idea of how much of the AUM has significant trailing commissions attached to it in Woodford's fund?

Loren M. Starr

Patrick, I think it's a great question, it's one that I think is a bit of a difficult one to answer on this call because I think the RDR rules and how those trailers work, it's more complicated than what you just said. I think -- I'd say, first off though, from a high-level, you're correct that, that is fundamentally the right way that it will work, so if someone moves out of the existing products, they will -- they'll lose their trails. So you can decide whether that's going to be a motivation or demotivation for that to occur. I mean, most financial advisors will be doing what's right for clients, as they should. And there's a lot of regulatory requirements for them to do that. So I don't know I want to read a whole lot into that rule as to where that's helpful and not, other than I think it's a good point and one that's probably -- we'll see to what extent it actually has an impact or not. But it will be a little hard for me to speculate whether it's really going have an impact.

Unknown Analyst

Okay, understood. And then more broadly, I think a key component to the growth of your margin would be the scaling of non-QQQ PowerShares. Could you kind of help us a little bit with a better framework around what the margin experiences is for a fund, given how many newer funds you have as it moves from, say, $500 million to $1 billion AUM to $2 billion, to $3 billion, to $5 billion. How powerful is that margin expansion?

Loren M. Starr

Yes, it's powerful. So I'd say it's a major help in terms of the incremental margins. It's been helping our margin expansion, as we've seen the traditional PowerShares grow. And so the fact that we have more size and scale in our existing set of products, as opposed to a lot of new smaller products, which is the case right now, is very, very helpful. So I would expect it to continue to contribute very positively to our margin expansion story as those products are continuing to grow. The other point is certainly a lot of the products that have been growing have been at a higher fee rate. So that has also been net helpful for us as opposed to on the lower end of the scale...

Matthew Kelley - Morgan Stanley, Research Division

I mean, would it be fair to say that a lot of those newer products are coming from something close to 0% in accelerating to something about what your current, firm line [ph] margin is?

Loren M. Starr

Yes, when you start out with a new product, I mean, typically it's not a big moneymaker right off the bat. Probably think of it more as break even, as you said. But yes, as it goes to $500 million or so, it becomes extremely powerful in terms of incremental margins and that whole business as a whole, which has improved significantly in terms of its overall margin characteristics just in last year.

Operator

The next question comes from Ken Worthington of JPMC.

Kenneth B. Worthington - JP Morgan Chase & Co, Research Division

To -- I guess, to beat a dead horse and maybe a follow-up on Craig's question. On Perpetual, how does what may or may not happen at Perpetual influence the setting of incentive awards on PCBOI? I think you and the Board set incentive awards each year and there's been a reasonable range over time, so might a change in profitability at Perpetual influence the setting of that ratio? And then Marty, how do you think about balancing the needs of employees versus demands of shareholders with regard to an incentive comp year?

Martin L. Flanagan

Right. I think the best way to answer your question is look at what we've done in the past. The facts and circumstances is what drives our actions, and we will continue to have that as the driving force. And we just -- are absolutely committed to be staying on the same path that we are and that's do great things for clients and great things for shareholders and again, I think the best way to -- I can't speculate of what's going to happen as I've been saying the whole time, but what I do know is look at what we've done in the past and we'll continue to do that and just be very thoughtful.

Loren M. Starr

Yes. Maybe, just to be more clear, I mean, Ken, under a reasonable set of scenarios and assuming -- because you mentioned you assumed some asset outflow, but it's over some period of time, it's more of a business-as-usual type of situation for us, right? So there's not a need to knee-jerk to something different, right, we can manage through it. And particularly as we're able to grow strongly in areas like cross-border in Asia and other parts of the firm, it is quite feasible that you'll continue to see -- just -- it's all going to be revenue growth, asset growth and you won't even see this, right? And then that really, obviously would be a great outcome for everybody.

Kenneth B. Worthington - JP Morgan Chase & Co, Research Division

Okay, great. And then, maybe just a follow-up on, I think, it was Patrick's question, in terms of RDR rules have gone to -- into effect for some of the channels but not for others. And I think in terms of platforms, the rules have not yet gone into effect there. So how big are the platforms for the U.K. business versus the other channels where RDR may have already gone into effect?

Loren M. Starr

So again, it's a very good question, a little specific -- sorry, I'm losing my voice here, but I would say platform business is a pretty big part of our business, so I don't want to minimize it. So it's probably in excess of, I don't know, 50% perhaps?

Operator

The next question comes from Chris Harris of Wells Fargo Securities.

Christopher Harris - Wells Fargo Securities, LLC, Research Division

You talked a little bit about new products driving some of the expense lift next quarter and just wondering if you guys can talk more broadly about the pace of new products, how it's compared today versus maybe the recent past and where you see the most opportunity to launch new products?

Martin L. Flanagan

Yes, we are probably again in sort of a unique phase on product development. Largely, as I've seen an earlier, these extensions of existing capabilities within the team really focus on the alternative area. We have strong capabilities there. We think broadly in most parts of the world, it is an important area and a growing area. So you're going to see, as Loren pointed out, through this quarter, through the first quarter of next year, probably some of those comprehensive product introductions that we've had in a very long time. And the question was asked earlier, the way we understand -- we have conviction on where the need is and where the growth is in this area. So that's where we're going and it does take -- the way that we think about is -- think that it's served 3 years before you see success broadly within any product capability. That's the typical timeframe that you would look to and every once in a while, you get something very successful before that timeframe like in IBRA and the like. But we'll be very thoughtful about it and we think we're positioning the firm very strongly to a growing opportunity.

Christopher Harris - Wells Fargo Securities, LLC, Research Division

Okay, excellent. Maybe a few follow-up questions then also on Perpetual. I'm kind of curious to get your thoughts, you mentioned this, but it didn't -- it doesn't really sound like the business was growing and data we looked at, even back in 2012, it didn't look like Woodford's business was growing. And the performance was kind of there. So just wondering why you guys think that is and then when you get the PM changes, what's going to be the strategy to actually get Perpetual in the growth mode again?

Martin L. Flanagan

Well, I think you talking about 1 asset class and 1 category. And the equity income category is a very important one and we're very, very strong in it because of the history. It has not been a growing part of the sector of the overall industry. In fact, it's -- if you look back from '06 until -- through this past year, if you looked at that sector's -- the gross sales have dropped in half basically within the sector. That said, it's very, very important, but again, what we're trying to point to is we want to be as strong as we've ever been and we think we absolutely are with the team that we have. But no different than anywhere else in the world, you have to understand what clients' needs are and expand those capabilities and address them and the point that we were making, if you look at the depth and breadth and investment management team at Invesco Perpetual across a broad range of capabilities, they're very experienced with very, very good performance. And quite frankly, during this past quarter, the global team has had some really good, not just results, but actually flows coming into the area. So we're expecting broadening of the flows across Invesco Perpetual with -- where investor needs are and desires are against the capabilities we have. In addition, we also thought that introducing a multi-asset team with -- into Henley was very, very important because a core capability in the global total return fund is that they literally use the existing investment teams in Henley. So if you think of the asset classes that they manage with the absolutely outstanding performance and you put that in sort of the knowledge in the history of the multi-asset team, we think we are positioned ourselves very, very strongly within the United Kingdom alone, to say nothing of Continental Europe and that's why we brought that out. It is into the cross-border capability, which we think -- we're early days of where our success is there. And there are a number of those capabilities in Henley that we'll be using in different parts of the world. Whether it be the global equity capabilities and they are already, the Asian capabilities, or the multi-asset capabilities, so we're very, very excited about the prospect.

Operator

The next question comes from Robert Lee of KBW.

Robert Lee - Keefe, Bruyette, & Woods, Inc., Research Division

And I apologize upfront for going back to the topic of the day, but I'm just curious, Marty, I guess in the announcement, it's kind of hinted that, at least I took it this way, that maybe Neil thought there certain things he wanted to do in the fund business that maybe couldn't do at Perpetual or at least within the existing fund company structure. I don't know if you have any sense of where that difference kind of came up or what that may be, and then as a follow-up to that, while you've certainly prepared for this and have a transition in place and have prepared for the transition personnel-wise for a while, is this episode causing you to go back and kind of look at other teams around the world or other team managers and maybe think, rethink or approach, start to approach differently how you have them under lock and key, so to speak, or any other place just thinking maybe to make some changes?

Martin L. Flanagan

Yes. I appreciate the question. And I really can't -- obviously, Neil and I and others have had very broad range of conversations. I would be totally speculating on what his interest is with his new business. And again, he is very dedicated to being focused through April 29 of next year on the business at hand and that's really -- I wish I could give you more insights, I can't. Secondly, the idea -- let me answer it this way, it's an organization where we want -- when is this organization successful? When people are proud to be there, when they're excited about coming to work, when they're doing good things for clients, they enjoy the camaraderie of being with one another, and what we call the total employee value proposition. Now no question you have to get compensation right, I understand that, everybody does, we think we do. That said, it's got to be the total environment that is exciting, so the idea of even thinking that -- locking people down and the like, we just don't -- we don't want to be an organization like that. The reason why people stay is when they're proud and they can do very, very good things, and I think that's the organization that we are and we'll just continue to do that. And we do a number of things and I'll just, for example, every 3 months we do employee surveys. We've been doing them since I've come here. The employees certainly [indiscernible] obviously against history, against global financial organizations, what they call global high performers. This last one, the employee engagement was higher than the global high performers, has been for the last 3 times we've done it. The employee engagement's off the charts, we are at or higher at every single measure over the global high performers, and that's what's creating the excitement at the organization. And those are the things that matter, you have to look at it holistically, and that's what we do. But I'm glad you asked the question, it's a fair question, but that's how we look at it.

Robert Lee - Keefe, Bruyette, & Woods, Inc., Research Division

I appreciate the color. I have a easy one for Loren. I save the easy ones for Loren.

Loren M. Starr

Thank you.

Robert Lee - Keefe, Bruyette, & Woods, Inc., Research Division

I apologize if you've mentioned this earlier in the call, but could you give any guidance about what you're thinking for performance fees next quarter?

Loren M. Starr

Yes, we haven't given guidance on performance fees because it is hard. Obviously, the one thing that we can say is that you're not going to see the traditional performance fee coming from Atlantic Trust because that's now in discontinued ops. So performance fees have been good generally because performance has been excellent. And so I think, again if you look at our run rate, I mean you can probably discount it at a little bit because I'm not sure if you can -- I mean, I can't forecast it perfectly. But there's some level, $5 million-ish that probably is a reasonable amount to put in one's model for Q4.

Operator

The next question comes from Matt Kelley of Morgan Stanley.

Matthew Kelley - Morgan Stanley, Research Division

I wanted to ask first, Loren, actually one for you, kind of easy as well, but on the distribution margin. We talked last quarter about some institutional mandates funding could help that. And I'm just wondering where we stand now with retail sales remaining high. Should we expect the current quarter to be kind of a run rate for the distribution margin or is there anything that could bring that down or actually take it up?

Loren M. Starr

I think the ratio -- I mean, again, we don't break out retail management fees from our institutional management fees. But I would say that, since we're talking about the same day count going from Q3 to Q4, they won't be this disconnect of the retail management fees being up more than institutional management fees inherently because retail management fees are based on day count and going from Q2 to Q3, there was that extra day. So that really was the big driver of the difference. So again, you just have to pay attention to the day count. But the ratio should be about the same assuming everything else is flat.

Matthew Kelley - Morgan Stanley, Research Division

Got it. Okay. And then, one for either of you guys. In terms of -- I've heard a lot about active managers potentially looking to launch actively managed ETFs recently and I know -- I think T. Rowe [ph] had put out a comment letter to the SEC about the transparency and disclosure required. I'm wondering if -- where you guys stand on that, given the PowerShares, that's kind of a unique, differentiated products set. Where do you kind of see that evolving? And if active funds are launched into the market more frequently, is that something you're going to look to participate in?

Martin L. Flanagan

Yes, so we've had the ability to do active ETFs for a number of years. We're one of the very few firms that had the license in place to do it. And we launched an aristocratic, [ph] but calling it to react [ph] to ETFs. It must be almost 5 years ago, now. You don't hear much about it because it's not been very successful. And so I know there's raging debate on how successful it will be and won't be. I still question the success and growth in active equity ETFs. I think it's more likely to be successful with fixed-income products. Quite frankly. And you can see some evolution where -- some movement on use of indexes and those firms that can create their own indexes and the like. So there will be some evolutions, but I -- is it the great next thing? I would be skeptical at the moment. Not to say, it won't evolve over time.

Loren M. Starr

I think most of our active equity managers would not want their portfolios disclosed daily. And so there is work that's been done to see if you can create an active ETFs without disclosing daily sort of holdings. So that's just an evolution of that. If it turns out that the rules change in some way, it's something we could certainly pursue. But right now, it's a little too conceptual to be interesting.

Matthew Kelley - Morgan Stanley, Research Division

Okay. And then one last one for me, just another product kind of question here. You had an announcement out recently on liquid alternative launches. And I'm just wondering, what areas within the liquid alts, because it's a very kind of broad description that the industry tends to use, but what areas do you think will be the strongest sellers there? And do you feel like you have everything you need here or there could be more product launches from here for you?

Martin L. Flanagan

Yes. I just have be careful of where we in various registrations. You can look at the registrations, I'm not trying to dodge the questions, but I'll take it back to a higher level. As I said earlier, if you look at our investment teams, they've been managing a number of alternative capabilities for a very long time. And we think there are a number of capabilities that make sense to be in a mutual fund wrapper [ph] and those people are referring [ph] to more liquid alternatives. And we think we're going to be very well-positioned in that category. And again, it's not a great secret and it's just more of the registration process than...

Loren M. Starr

Probably more to come on this in the future. And this is the best way to describe. But certainly, everything you've said is correct in terms of our interest in the opportunity.

Martin L. Flanagan

Yes.

Operator

The next question comes from Marc Irizarry of Goldman Sachs.

Marc S. Irizarry - Goldman Sachs Group Inc., Research Division

Loren, can you just give a little more color on the incremental margin targets or guidance that you put out there? What sort of organic growth expectations are sort of embedded in that or and market -- and/or market expectations? And then also you -- how should we think about performance fees and/or transaction fees when it comes to that incremental margin?

Loren M. Starr

Okay. Good question. So when we are thinking about incremental margins, obviously we don't manage to an incremental margin, it's more of a result of what has been flowing and what's happened with markets. And I think we've said on -- generally, when we're seeing strong market supports, FX, whatever those types of elements that are boosting our asset base, the incremental margins are at the high end of the range. So you're probably at 65% or even higher. If it's done through new product introductions and sort of organic growth, as we talked about, there's some cost associated with that. You're probably at the lower end of the range, which could be more of the 60%, even 55% to 60% range depending on what type of product it is. So again, it's a little hard to say exactly what the right guidance is. But I'd say based on everything we're seeing, we're -- let's say, market is flat, but you're seeing growth in excellent products in terms of their characteristics and margins, ETFs, cross-border, Asia, you're probably in that 65% range, right? And you probably could do that on organic growth without 60% to 65%. And then in terms of your -- I'm sorry, your second part, which is performance fees and transaction fees. Again I find it really difficult to predict these, so I do apologize. I'd like to be more clear, if I could. But again, our performance as you've seen, is pretty, pretty good. And so there is an opportunity to generate good performance fees. How much will come? The biggest providers in the past have been in the U.K. Performance is excellent there still. So that still is an opportunity possibly in Q1. But I don't want to give out a number as to what's the right number because it obviously can shift quite a bit, depending on what is happening in the marketplace. And in terms of transaction fees, also little hard to do -- to predict, but we've been seeing good growth in Europe, in Asia, in real estate and a lot of the funds that operate there do have transaction fees. So again, if we can continue to see that type of activity, I'd say the path that we're on, on the other revenues side is constructive, right? We think it's probably at similar levels, maybe a little bit lower, just to be conservative.

Marc S. Irizarry - Goldman Sachs Group Inc., Research Division

Okay. And then, just getting back to Perpetual for a second. I think you've said that's probably about 50% or so, with the assets sort of platform-driven. Where are we in the cycle of you being put on watch, if you will, or on hold for many of those platforms. I mean, is this something that you expect over the coming quarters to be revisited or sort of did all of that sort of happen up front?

Martin L. Flanagan

Yes. Marc, I guess maybe it's obviously very fluid situation right now. And so getting into minute detail as to the number of platforms or who was saying what to whom, it's really not something I think we're wanting to go into at this point in time. I guess the good news, if there is good news generally about this, is the reaction has been one of conservatism and not to sort of knee-jerk to leave the fund and that we believe is absolutely a favorable result and gives us time to get people comfortable with clearly a big transition, which we can't underestimate and everyone you're seeing leave is obviously wanting to meet the new team. And so they're going to sort of say stay put, but let's meet the new team. So we're in that process right now.

Operator

Our next question comes from Greggory Warren of Morningstar.

Greggory Warren - Morningstar Inc., Research Division

Just -- again, not to beat a dead horse here. On the Invesco Perpetual thing, there's a lot of numbers floating around on AUM levels and stuff. And I know you guys touched on it a little bit this morning, noting that Neil had $38 billion in the 2 funds. What is his overall responsibility on Invesco Perpetual from a numbers perspective? And then I guess the other thing is you were just talk about being conservative and cautious, and we really appreciate that sort of attitude when you did the Invesco deal. Do you expect to be giving us some sort of update 4Q earnings on sort of where you're feeling the outflows might be or is it just something that's going to be trickling out over time?

Loren M. Starr

Greg, I'll answer and then Marty, if you want to take the other part. It's about $50 billion is the total size of assets with Neil directly named. So pretty close, I mean the 2 large funds are the predominant pieces as you might imagine. So that's the amount.

Martin L. Flanagan

The information will continue to be available, as it has in the past. And so people will be able to come to their own conclusions, and obviously each quarter if there's something material or additional that make sense to discuss, we're happy to discuss it and we will bring it up, if necessary. [indiscernible]

Greggory Warren - Morningstar Inc., Research Division

Okay, good. Just switching gears then. I noticed on the fixed-income side, you guys had a bit more of an outflow issue that I was expecting, given the shift in the Fixed Income markets mid- to late-September there. Was there anything responsible as more of an institutional issue during the third quarter, and I guess the question is, how are you feeling about flows this quarter and as we get through next year, given that rates are likely to go up and nobody knows when.

Loren M. Starr

So Greg, that fixed-income outflow is actually similar to the -- what we were talking about on the institutional side, which is this leverage related to this one product, the mortgage REIT. So that was $2.5 billion of outflow in fixed income, with no fee associated with it. So again, I would caution people not to read too much into that. And ultimately, fixed income continues to do very well on the active side, as we've seen positive flows in third quarter and we're continuing to see good flow in Fixed Income capability into October. So we do think active Fixed Income still has got legs and certainly we have great capabilities in that space.

Operator

Our next question comes from Chris Shutler of William Blair.

Christopher Shutler - William Blair & Company L.L.C., Research Division

I was hoping to get a little bit more color, not on Perpetual, but actually on the bank loan market. So I know that's been a strong area of flows for Invesco over the last several quarters, and so just curious what you're seeing in terms of supply in that market right now because I know there are conflicting views out there as to what extent supply maybe getting constrained and what that might mean for flows down the road?

Martin L. Flanagan

Yes. You're right, it's a very strong team here and they continue to do very, very well and there continues to be -- lots of client interest quite broadly in different parts of the world actually. So I wish I had more specific information. I have not had any feedback that were running into sort of capacity constraints.

Loren M. Starr

We've heard this question a few times, and so I think the topic is an interesting one. We're still not the dominant player in that market. And then so maybe others who have been seeing sort of order of magnitude differences in flows have had a greater -- more difficulty in terms of finding how to invest in our market. Our team I think is feeling very comfortable that given the flow pattern, that they have enough opportunities.

Operator

At this time, there are no further questions.

Martin L. Flanagan

Good. Again, Loren and I would like to thank everybody for engaging in the questions, very robust. We appreciate it very, very much, and we look forward to talking to everybody in the near future. Take care.

Operator

Thank you for participating in today's conference. You may disconnect at this time.

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