Operator: Our next question comes from Ken Worthington with JPMorgan. Your line is open.
Ken Worthington : Hi, good morning. Thanks for taking the question. First, Marty, it’s been a pleasure working with you all these years. First Franklin then Invesco. So best of luck on the next step in your career. On China and Asia, as mentioned a number of times, money coming out of fixed income, where is that money going to? Is it largely cash? Or is it some of it going into equities given the rally we’ve seen there? And is there a better opportunity to capture that money as it transitions from one asset class to another? And in terms of maybe what’s going on in Asia outside of China, I think we sort of danced around this a couple of times. But to what extent are higher rates impacting the demand for some of Invesco’s more popular yield-focused products like bank loans to real estate and CLOs?
I think like you said you raised three CLOs that seems to be contrary to what we’re seeing elsewhere. So you’re having success there and then bank loan seems more standard with outflows. So how does this all sort of circle around the demand for Asia for these higher-yielding products?
Marty Flanagan : Yeah. Let me make a couple of comments and thanks for your comments, and by the way, 18 years goes very fast as you all know, and that’s just here. So let me — Allison will hit on this. So what we’ve seen in China and say, in the retail market right now, I mean, you are definitely seeing the beginning of investor confidence strengthened, and so we are seeing moving more towards balance products and equity products there, which is not in the case for some period of time. And again, as I said, Andrew and I were just there. You just can sense the confidence growing in the marketplace. So we anticipate that to continue to grow. When you — the institutional clients, there are like — all of them are very, very sophisticated they don’t move their portfolios that much.
I understand the point, I’d say they’re probably more reflective at the moment of where do they want to see the market settle out for their investments. So we don’t know if there’s any real great insights there. What we are seeing in Japan, for example, there is interest in active fixed income, which has really not been experience for us recently, it’s been more passive, and also growth in some global equity capabilities, again, which is not what we’ve seen for a number of years. I talk about Australia, so I won’t go there but Andrew what would you add?
Andrew Schlossberg: Yeah. The one thing I’d say in the long run, Ken, to the question on China, the single biggest opportunity is the retirement market development in China. And so the notion of looking at more traditional asset allocations and a long-term asset allocations, we think is going to begin to find its way into that marketplace. Also, the digital sort of distribution and the way that digital is the primary way that retail investors invest, there is a higher turn. But that also means that they’re able to kind of look at the trends and we’re starting to see some of the equity movement even early on there. So that’s all I’d add for now.
Ken Worthington : Great, thanks very much.
Marty Flanagan : Thanks Ken.
Operator: Thank you. Our next question comes from Michael Cyprys with Morgan Stanley. Your line is open.
Michael Cyprys : Great, thank you. Good morning. So just a question on the Greater China business. Just curious how you think about the stickiness and duration of AUM in your Greater China business versus other regions of the world. I think if we look overall, your retail business has about 3.5-year duration or so for your retail customers. Just curious how different that is in China? How do you see that evolving over time? And then how does the cost of gathering new flows in China compared to, say, the U.S. business?
Marty Flanagan : Yeah. Again, I’ll make a couple of comments and Andrew can chime in. So — but we’re very bullish. I mean, it is a single largest opportunity in asset management. Just if you look at a global flows into the industry, China is going to make up third of those flows over the next three to five years. And that’s just for all the reasons that we know the size of the population, the absolute focus on developing a retirement system and so very different than most markets. You’re not in over in dollars, there’s new money coming in. So if you’re strongly placed, you’re going to grow and we are strongly placed. Also very differently that ever started it on so much the money probably half the flows are coming through a digital wealth platforms right now.
It’s actually astonishing just — and financial, for example, they have 800 million clients and so you don’t need a lot of money to make a big impact. So I’d say we’re just early days in what you’re going to see happening. So the cost structure, I think it’s also very important to know, it’s a very, very competitive market. It’s probably most might be the most competitive market in the world. So it’s not easy to be successful there, and it’s not inexpensive to operate there. But Allison can speak in more details. It’s very profitable, and we have scale and it’s reflected in the margins that we have. But —
Allison Dukes: Yeah. I would say, look, it’s accretive to the firm margins. It’s a well-scaled business, even though we think we’ve got a lot of room to continue to grow it, but it is accretive to the firm margins overall. And while it is a competitive marketplace, as Marty noted, we’re the 12th largest asset manager in China and the — we’re the largest foreign asset manager. The 11 ahead of us are all Chinese owned. And so we are very well positioned. We are a very competitive player. We have an opportunity to really not only grow as the market grows there, but also take market share as we’ve been able to do in the last few years. So in terms of the cost of gathering, I think it’s a very well-managed accretive business overall.
Andrew Schlossberg: Yeah. And the only thing I’d add just — and it was reminded actually being on the region recently, as Marty mentioned, I mean it’s we’re very well regarded in the market. And our reputation has been built over 20 years. In fact, we’re celebrating our 20th anniversary this year of IGW, of Invesco Great Wall, and being in that market for a long period of time, not only build the scale that we have today that Allison was mentioning, but also just the reputation with all parts of the ecosystem there. And so we think it’s a real differentiator, just the longevity of our JV.
Michael Cyprys : Great. Thank you.
Operator: Thank you. Our next question comes from Patrick Davitt with Autonomous Research. Your line is open.
Patrick Davitt : Hi, good morning, everyone. I think this was the first quarter of meaningful UK inflows in many years. Could you flesh that out a bit more? Is there something unique or lumpy that happened? Or are you starting to sense a real positive shift is finally emerging there? Thank you.
Marty Flanagan : Look, I’ll make a comment, Andrew, and EMEA for a number of years. So he was lucky enough to be there during the Brexit. So perspective. A lot of changes happen and a lot of good work. I feel really good about what’s happening in the UK, and around the continent. I was in institutional retail, and there’s been a lot of focus there. There was a big institutional mandate that funded this quarter, but I’d say the underlying fundamentals are strong. And we anticipate — also noted, all things being equal, we anticipate to be a net inflow here for the year, but Andrew you want to add.
Andrew Schlossberg: Yeah. I mean, it’s all — we’ve always had a high-quality sort of active focus in the marketplace in the UK, in particular, our legacy on the equity side and the performance is getting — has gotten stronger in those asset classes and as some demands come back, we’re capturing it. So I’d say it’s largely on the back of good investment performance.
Allison Dukes: Yeah. On the yields of that investment performance, we’re seeing retail redemption improve overall. And so obviously, the UK is working through their rate environment and their economic environment, much like we are — we think we’re really well positioned to capture additional flows, though, as rates stabilize and as sentiment at some point, improved over there as well.
Patrick Davitt: Thank you.
Operator: Thank you. Our last question comes from Alex Blostein with Goldman Sachs. Your line is open.
