Invesco to Phase Out a Quarter of Its Funds
Bucking a decades-long trend of expansion in the mutual fund industry, the Invesco funds group said Wednesday it will do away with up to a fourth of its 44 mutual funds.
Assets of the funds are relatively tiny: The 11 funds represent just $220 million of Denver-based Invesco’s $26 billion in fund assets under management.
Still, industry analysts were surprised by the move, and said it could accelerate consolidation by other fund giants.
“There hasn’t really been anything quite like this,” said David Masters, senior mutual fund analyst with Standard & Poor’s Micropal in New York, referring to the scope of Invesco’s move.
Invesco’s decision reflects the more difficult environment the fund industry now faces: At a time when the market is saturated with more than 10,000 funds and counting, individual investors aren’t putting anywhere near as much new money into funds as they did in 1996 and 1997.
Invesco plans to merge eight of its funds into other funds, while liquidating an additional three, pending a shareholder vote May 20.
Most of the 11 funds were launched earlier in the decade. While some are being merged to reduce duplicative efforts, Invesco spokeswoman Laura Parsons said others were simply failing to attract enough money to justify their existence.
“We realized that we got caught up in the euphoria of bringing out all these products” in recent years, Parsons said, adding that the company hopes its shorter, simplified menu of funds will be easier for investors to comprehend.
“Certainly, over time, every fund company is going to go through this process,” said Lou Harvey, president of Dalbar, a Boston-based research firm that tracks the financial services industry. “It costs money to keep [unpopular] funds open.”
“Others will definitely follow,” predicts Tom Tyson, a consultant with Financial Research Corp. in Boston.
The funds Invesco plans to liquidate are its Environmental Services (with $11.7 million in assets), Worldwide Capital Goods ($7.6 million) and Emerging Markets ($1.1 million).
Invesco also plans to merge its Small Company Value fund into its Small Company Growth fund. Other funds to be merged out of existence are Asian Growth, European Small Company, Intermediate Government Bond, International Growth, Multi-Asset Allocation, Short-Term Bond and Tax-Free Intermediate Bond.
Fund investors have or will be notified individually by Invesco.
