Invesco’s Martin Flanagan: Atlanta’s $787 billion man
Atlanta-based Invesco Ltd. is one of the world’s top money managers, with $787 billion under management as of March 2014.
On June 3, Atlanta Business Chronicle sat down with CEO Martin L. Flanagan to talk about markets, investing and why the company’s home is Atlanta.
Q: How would you explain to a high school class what your company does? Our role is to provide investment capabilities to financial advisers that meet the needs of individuals, endowments and foundations investment plans. All of us at some point know that we should save for a rainy day and retirement. What we do is try to help people invest the money they save.
Q: Next year will be your 10th at the company, and many credit you with returning the firm to profitability. How has the company grown since you joined? The financial success of the company is an outgrowth of doing a good job for our clients. If you look at the investment performance of the organization today it could not be stronger. Today, north of 80 percent of all the investment capabilities that we have are beating the peers and that is really strong. It is one of the strongest in the industry. When you do a good job for clients they will entrust you with more money to manage on their behalf and when you do that you can grow. And we have seen our assets under management grow from about $406 billion and today it’s around $787 billion. That really is a result of doing a good job for clients.
Q: Where is the U.S. market headed? I think you have to look longer term. Today, if you look at the U.S. market, they are fairly valued and are selling at about 16 times earnings, and that is about in line with historical averages. That would suggest that it isn’t overvalued or undervalued. It lends itself to what we would describe as a stock picker’s market. If you are investing in the long term you will do fine investing in the market. Understand that there are market cycles and we have yet to have a natural pullback in the U.S. equity markets. I would anticipate in the next 12 months we will have that pullback. We had a little bit of one in the first quarter that was about 5 percent but we got all of it back and more. Again, it will be driven by companies continuing to grow and invest. We are in that positive cycle right now, so again I anticipate three years from now you will see positive returns from where we are but I am sure within that period we will have a natural pullback somewhere between 10 to 15 percent.
Q: A few years back the Atlanta City Council unanimously passed Mayor Reed’s pension reform. What are your thoughts on pension reform? The pension reform the mayor and City Council put in place was one of many things they put in place to create financial soundness for the city. I was not involved in that. But it was ultimately the right thing to do, but very difficult for both the city and the plan participants. I think the next opportunity is an opportunity for the plans to become very focused on generating the best returns they can over the long term. There is always room for improvement …
Q: Do you plan on bringing any more jobs or departments to Atlanta? Right now, we have about 350 people in Atlanta and as we grow as an organization, I’m sure we will continue to hire people here in Atlanta. It’s a fantastic place to have headquarters. It’s a great place to be a money manager for many different reasons. There is a wide range of universities and they are very strong. We are a global company so having the ability to travel through the Atlanta airport is a real asset. Additionally, one of the most important developments that is underway is the [deepening of the] Port of Savannah and it seems to be just about achieved. I think that will create an engine of growth for the state of Georgia and the city of Atlanta that will be as important as the building of the airport here. We are going to see increased trade from around the world here. It is a transportation hub already and this is going to add a tremendous amount of economic growth. You have to give a lot of credit to the mayor and governor and their efforts to work with Washington to get that accomplished. It’s a really important thing for the state and our city.
Q: Why does Invesco maintain its headquarters in Atlanta? It is a tremendous place to have a headquarters. When you think of an organization like ours, what is the most important thing, and it’s having high-quality individuals. Again, around Atlanta you have Georgia Tech, Emory, Georgia State, University of Georgia and Kennesaw State, and we hire a lot of people from all of them. You fundamentally have a talent pool here. Secondly, you can attract talent from around the world. It’s a very livable place. People love to live in Atlanta. It’s dynamic. It has a great art community, a great business community, cost of living is a fraction of some of the major cities around the world. And also again, the transportation ability to get around the country and the world is really strong here. It’s a very attractive place. I think you have to give a lot of credit to Mayor Reed and what he has done for the city. He has put financial stability in place and at the same time he has driven down crime rates, he’s increased the number of parks, he has just done a tremendous job for the city.
Q: What are the biggest challenges individual investors face today? I think the most challenging thing is to ensure they have a financial plan in place. They need one that they are comfortable with and need to understand what they are trying to accomplish in the long term and the risk they are willing to take. That is step one. It is really critical for an individual to understand their time horizon, understand the returns they are seeking, understand the risks they are willing to take and understand their liquidity needs. That is fundamentally the first point you have to have in place and then when you have that, you can build a portfolio that is focused on your desired outcome. Right now, there is such a range of opportunities and vehicles that individuals can invest in that it places them very well to be successful over the long term.
Q: What are the biggest challenges institutional investors face today? It depends on the type of plan. Institutional investors are largely very highly sophisticated, they have a broad range of consultants and access to financial advisers so they are really in a position that they can invest quite strongly on behalf of the plan sponsors, certainly individuals. There are some historical defined benefit plans, which you will see around the country that are underfunded, meaning that they might have 50, 60, 70 percent of the obligation that they need for the plan participants and that puts an awful lot of pressure on the plan sponsor.
Q: What is the biggest mistake you have made as an individual investor? Too many. It was me thinking I had a great stock idea. That is a sure way to lose money, but what I learned from that is that you want to have a long-term time horizon and you want to have a diversified portfolio.
Q: Who manages your personal investment portfolio? I use the investment capabilities of Invesco.
“If you are investing in the long term you will do fine … Understand that there are market cycles and we have yet to have a natural pullback in the U.S. equity markets. I would anticipate in the next 12 months we will have that pullback.”
Phil W. Hudson is a finance, banking and general assignment reporter. Staff Writer- Atlanta Business Chronicle
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