Welcome to Invesco’s first quarter results conference call. All participants will be in a listen-only mode until the question and answer session. At that time, to ask a question, press star, one. Today’s conference is being recorded. If you have any objections, you may disconnect at this time. Now I’d like to turn over to the call to your speakers for today: Marty Flanagan, President and CEO of Invesco; Loren Starr, Chief Financial Officer; Colin Meadows, Senior Managing Director and Head of Global, Institutional and Private Markets; Andrew Schlossberg, Senior Managing Director and Head of Americas; and Greg McGreevey, Senior Managing Director, Investments. Mr. Flanagan, you may begin.

Thanks very much, and thanks everybody for joining. I’ll spend a few minutes just talking about the environment in the quarter. Loren will spend the bulk of the time talking about the results. Colin has joined and he’s going to talk about the institutional business, Andrew will talk about the Americas, Greg will also join us for questions, and I’m also especially pleased to introduce Allison Dukes, who joined Invesco as Deputy CFO and will be taking over as Senior Managing Director and CFO on August 1, when Loren Starr takes on the new role of Vice Chairman. I will note that we’re not in the same room and taking the call from different locations, as you can imagine in this environment, and you’re also welcome to follow along using the presentation that’s available on the website. First, I hope you, your families and colleagues remain safe and healthy during these unprecedented, challenging times. I’ll tell you we’ve been intensely focused on protecting our employees and their families while continuing to robustly engage with our clients and serving them in any way possible and just operating a disciplined business in this highly turbulent environment. We’ve been dealing with the effect of COVID from the time it first affected our business in China in February. Several weeks ago, we reached the point where literally 99% of our workforce was working from home. The operating outcomes have been outstanding, which is a testament to my colleagues and the strength of our global operating platform. Despite working in this remote environment, we’ve been highly engaged with our clients around the world, as I said, supporting them in any way necessary during this period. We’ve had thousands of digital and virtual interactions with our clients since the start of the crisis which have been…

Thanks Marty. Before I cover the topic of flows, expenses and capital management, I want to pause on the investment performance slide, which is Slide 5 of the deck that we have posted on our website. You’ll see our long-term investment performance does remain strong at the end of March. We reported 60% and 69% of our capabilities in the top half of peers for the five-year and 10-year time periods, and that’s up slightly from the end of 2019. Marty talked about our diversified global platform with exposure to the industry’s key growth areas. Our platform is aligned with these growth trends. It’s in these areas that we’re delivering strong investment performance, particularly in global, emerging markets and international equities, global fixed income, liquidity, and alternatives. Next, let’s move onto flows. As you can see on Slide 7, we had net inflows in our institutional channel and we continue to see positive net long-term flows in Asia Pacific. Positive net flows of $11.2 billion in our institutional business were driven by the partial funding of the previously disclosed Amalgamated Solutions win, and we also saw inflows into our stable value products as well as other active fixed income mandates. Additionally, we had just under a billion dollars in net long-term inflows into our China joint venture, driven by our balanced fund but also across equities and fixed income products. Colin is going to talk a little bit more about the institutional business a bit later. Our retail flows do remain challenged in the quarter. You’ll see $30.3 billion in net retail outflows driven by ETF net outflows of $6 billion, which did include $1 billion from previously disclosed ETF closures. We also saw outflows in OFI global equity funds, senior loan funds, U.K. equities, and high yield muni funds.…

Thank you Loren. I would like to echo my colleague’s hopes that all of you are staying healthy and safe in this challenging time. Our institutional business had a strong quarter as our clients by and large are taking a measured long term view in line with their investment objectives. We realized gross flows of $26.9 billion in the quarter with mandates funding in a variety of strategies, including custom solutions, stable value, investment-grade credit, and real estate. Redemptions stayed largely in line with prior quarters at $15.7 billion, largely as a result of rebalancing decisions. These results allowed us to realize long term net flows of $11.2 billion in the first quarter. We also saw significant net flows of $26.3 billion into liquidity products as clients look to ensure financial flexibility through the crisis. A growing share of these flows resulted from direct liquidity mandates, which will provide us with the opportunity to help our clients meet their diverse investment objectives as they eventually transition these assets into other strategies. Our won not funded pipeline remains very robust at $31.9 billion. Our focus on becoming trusted partners to our institutional clients has resulted in wins across a variety of strategies, including factors, solutions, alternatives, and fixed income. This result compares favorably to prior periods as it’s twice our won not funded pipeline on a year ago this quarter and is a 20% increase over our pipeline in the fourth quarter. We are especially encouraged that institutional clients have remained engaged through the crisis as $14 billion of that total are mandates that were won in the first quarter. As a result of the COVID-19 crisis and social distancing measures across the globe, we’ve transitioned to a completely digital engagement model, and institutional clients have responded. We’ve hosted 20 webinars and webcasts that have attracted over 2,000 clients globally. Our week Market Pulse webinars have been particularly impactful as we responded to client areas of interest, including investment implications of COVID-19, updates on global financial markets, government and regulatory interventions, and implications for key investment strategies and products. Institutional clients are increasingly looking beyond the crisis to understand what’s next for their portfolios and member plans. Clients have expressed interest in a diversity of strategies, including multi-asset, stressed credit, real assets, EM equity and liquidity. We’re also working closely with our Invesco solutions team to engage clients on changes to their investment priorities and portfolios and are introducing Invesco Vision, our portfolio analytics tool to these conversations to provide real time modeling of various scenarios. We believe that supporting our clients as partners through all environments will allow us to deepen these important relationships and ensure client success. Now I’ll turn it over to Andrew Schlossberg to discuss our Americas wealth management and global ETFs business. Over to you, Andrew.

Great, thank you Colin. I’ll refer to Page 12 for some of my comments; however, before discussing the flow results, I’d like to take a moment to describe how our Americas wealth management intermediary team is matching off with the marketplace. The strength of our newly formed distribution group, our consolidated and diverse product lines, and our total client experience strategy that were all put in place late last year, went full force in the first quarter and delivered with much success against multiple market environments of the past few months. Through the combination last year of Invesco and Oppenheimer, we’ve built a distribution engine that is pointed to the future. It’s comprised of top talent in the industry. We’re re-apportioned resources to key channels and clients, and we’re deploying both traditional and more digitally inclined coverage models and tools to the marketplace. Our go-to-market strategy in the North American wealth management platform and advisor market is anchored on a differentiated three-part client experience model which includes investment insights and thought leadership, portfolio risk and positioning through asset allocation and investment analytics capabilities, and business consulting for advisors to help them grow and manage their practice. While our distribution model was not designed to be 100% virtual in its client engagement, we’ve been operating in this format since early March and we’re deploying this distribution strategy now digitally, with really strong success. Feedback over the past six months has been positive. It confirms to us that the winners in this space will need to have scale going forward to maintain strong relationships, will need to have advanced technology for both client service and interaction, and a holistic client experience like the one I described. Just a few stats to give you a sense of the relevance we’ve had with clients…

Thanks Andrew, and before we get to Q&A, let me just close out this section by saying we had a good quarter in what was an incredibly challenging macro environment. The key points to take away from the conversation we just had, investment performance in key areas continues to be aligned against where marked demand is and a strong investment performance [indiscernible] as we look forward. Total outflows of negative $ billion, an extremely challenging quarter really reflects [indiscernible] diverse platform, including long term flow scenarios we consider strategic. Average assets under management remained flat to Q4, and since that time has gone up since March. Margins are 4% higher than the same period a year ago, reinforcing the power of the combination with Oppenheimer and the benefits of scale. Finally, we’re making prudent decisions around expenses and capital and liquidity, allowing us to build ample liquidity and financial flexibility to support our long term growth. With that, why don’t we open up to Q&A.

[Operator instructions] Our first question comes from Dan Fannon with Jefferies. Your line is open.

Thanks, good morning. I guess my first question is on the balance sheet, and the dividend also. Thinking about the actions today and understanding that you’re solidifying that for going forward, but wondering how this impacts the institutional business. Clients looking at your financial stability of the parent and thinking about large mandates, particularly in areas such as fixed income, as we remember from the financial crisis for others in the industry, this was an issue in terms of winning business or retaining it. Can you talk about how clients are engaging with you and asking--you know, bringing up parent liquidity and/or the balance sheet strength, and how that may or may not impact the business trends going forward?

Yes Dan, let me make a couple comments and then I’ll turn it over to Colin in particular. Look, the whole point is the balance sheet is strong. We’re taking proactive measures around the dividend in particular and then all the other actions that we talked about today as we focus on expenses in this uncertain environment, and freeing up capital from the seed capital. Again, our institutional business has never been stronger and it just continues to grow, so again these actions today, they’re just proactive. It’s just not been a topic for us at all, and what we do today will probably only strengthen that. Colin, anything you’d add to that?

No, I think you nailed it, Marty. Obviously institutional clients do care very much about the financial stability of the parent. It has not been a topic on clients’ minds up to now. I think they feel that Invesco is a very strong company and, to Marty’s point, I think we think that the actions that we’ve taken to date honestly reinforce that and would expect that our institutional clients would view it the same way.

I think the other thing, which is a really important point we’re trying to make, we’ve built scale in this organization. We came into 2020 with some of the highest EBITDA margins in the industry, so that puts you in a very different cash flow position than a number of your competitors. Again, that will all the other actions we’re taking, the company is very strong and, again, we’re just trying to be very prudent at this moment.

Understood. I guess as a follow-up, the $80 million a quarter in additional savings, it seems like some of that is kind of run rate with some of the business practices in place around no travel and other things, and also market related with AUM. If you could maybe talk about specific removal, permanent removal of cost versus temporary, and how--if this is headcount, if there are certain areas outside of just people staying home and markets being lower.

Yes, so let me start on that and then I’m going to turn it to Loren. [Indiscernible] we talked about really in the last quarter post-Oppenheimer, we already had turned our eyes to driving additional operating efficiency into the platform, and it is platform-type undertakings, so it is--that’s where we get the additional scale. That slowed down, quite frankly, in this first quarter as we turned our attention to making sure that all our employees are safe, that they were able to work from home, that we could interface with our clients and serve our clients, so the immediate actions to do just what you’re talking about. The things that you should do in a crisis is hit the brakes, stop [indiscernible], and where you can stop spending, stop spending, always with an eye to making sure that you’re serving your clients, and that’s what we’ve done. We’re now at a place where we’re back to looking at going forward and building this program that we started, and that’s where you’re going to take the longer, more permanent types of expenses [indiscernible] as an organization. So back to the point - we know how to do it, we’re not just talking about it. We’ve proven it time and time again, and last year with the Oppenheimer combination [indiscernible] it’s just not an idea. We know how to do it and we have a proven track record of doing it. Loren, anything to add?

The only thing I would add is--I mean, one of the things that no one’s presuming is that post this COVID situation, that everything is going to be back to normal, right, so I think we are learning things, as everyone is, around how we can operate perhaps differently, and that reflects a whole slew of some of the costs that are business as usual costs around travel. Honestly, we’ve gotten very good at using digital method for interacting with clients and how we use space and other things, so I do think there is a variety of things that are being looked at and that we will continue to explore with respect to what should the operating model look like going forward. Beyond that, I think right now we’ve definitely hit the brakes. We’ve done this before. This feels very much like the way we managed through the financial crisis, and you can look back to how that worked through. But we’ve been very diligent and good about stopping spend around areas that I think we can keep a handle on for some period. The bigger opportunity is, as Marty already alluded to, is around some of the structural opportunities around technology, operating platform, which we are well down the path of looking at.

Yes, and I do want to reiterate Loren’s comment, and I tried to highlight that. The way that we’re operating, and I’m sure many organizations, it is absolutely going to change how we operate going forward, just how we operate the business. But really, the client interactions, they have never been more robust, more frequent, more meaningful than this period that we’re in, and it’s good for our clients, it’s good for the organization, and it will just create a very different dynamic. The operating model and costs associated with it will definitely change going forward. Do we know what [indiscernible] right now? No, we don’t, because frankly our heads have been down taking care of our clients and taking care of the business, but it is going to be a changed world, and I’d say for the better, frankly.

Got it, thank you.

Thanks Dan.

Thank you. Our next question comes from Ken Worthington with JP Morgan. Your line is open.

Hi, good morning. You cut the dividend by half, but it still seems like you’re taking a defensive position here given market conditions and outflows. You talk about the preservation of capital in the press release, you talked about not buying back stock this year. That sort of seems like the cut may have been a half measure. [Indiscernible] cut the dividend further or outright eliminate it altogether, maybe why not consider dropping the preferred dividend for a number of quarters in order to strengthen the balance sheet, allow yourself to buy back stock, and really take advantage of the downturn in the market that we see?

Yes Ken, good question. Our decision to reduce our common dividend by 50% was done certainly with an understanding that the environment could weaken from here. It wasn’t necessarily our working assumption, but certainly we’re not thinking that we’re seeing a snap back going forward. But we don’t intend, and we certainly don’t intend to make another difficult decision like this again, and we do feel confident that this was the right action at the sufficient level to give us the flexibility that we desire to manage the balance sheet, even if the environment were to deteriorate from here, and we’ve stress tested this all which ways. I do think it’s important to note that while 2020 is emerging to be more challenging than we anticipated, we are still operating, as Marty mentioned, from a position of strength. This isn’t a reactive move driven by liquidity concerns at all. Instead, we are proactively addressing the opportunity that we have to improve our leverage profile and to maintain financial flexibility, which is going to be required to invest in client enhancing and growth capabilities going forward. We feel comfortable that this was absolutely enough, that what you were suggesting is not needed, and of course we looked at everything when we were setting this. It was not a decision taken casually, and there was a lot of stress testing involved.

Then I think you guys regularly disclose quarter to date net flows on these earnings conference calls. How do things look so far in 2Q for long term net sales?

Yes, I don’t think we typically have done that. We sort of stopped that practice a while back, Ken, so I think we’re going to continue to not do that, just because it’s still too short a time frame to really judge what is going on. I think obviously March was a horrible month. Things are better, clearly, in the way the market is evolving, but beyond that I don’t want to get into actual numbers.

Okay, great. Thank you very much.

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

Great, thanks. Good morning folks. Just a clarification, Loren, on a couple of the guidance points you made, just the absolute level of the fee ratio in 2Q, the down two basis points. Is that implying a little under 37 basis points - do I have that right, or is that a different number? And then the cost run rate, I think you said, if I’m not mistaken, 80, lower than the 755, so the second quarter quarterly adjusted expense run rate should be about 675. Do I have those correct?

Yes, so on the latter one, yes, 675 is what we’re suggesting as the average run rate for the remainder of ’20, and so yes, we’re saying that in terms of the net revenue yield less performance fees, that we’d be suggesting two basis points off of where we ended in Q4. That is the guidance that we’re providing.

I’m sorry, so where you ended in Q4? Can you--

I’m sorry, for Q4, not where we ended. For the Q4 net revenue yield.

I’m just trying to get the actual level of the revenue yield that you’re talking about for 2Q on an ex-performance fee basis.

All right, so the actual quarter was 38.7 for the quarter, so we’re talking about two basis points less, so 36.7.

Okay, so it is 36.7 - okay. Just wanted to make sure I had that. Then just on the--you know, it sounds like obviously the sales momentum is a good story here, both on the institutional and retail sides. Can you talk about which areas institutionally that you’re seeing that sales momentum and the timing of that $31 billion, $32 billion won but not funded pipeline in terms of actually getting funded? It sounds like the solutions mandates, I think there’s only a few billion left that’s included in that $31 billion pipeline, so maybe if you can just talk to the sales momentum on the institutional side in particular.

Colin, will you pick that up?

Sure, happy to. Momentum has been strong. As I mentioned before, the pipeline is--won not funded pipeline is growing. In fact, it’s actually grown each of the last five quarters consecutively, and so we feel that we’re being quite responsive to institutional client needs and that’s reflected in wins. In terms of when it will fund, what typically happens is that pipeline will largely be funded through the end of the year. It usually takes about two to three quarters for the pipeline at any given time to be funded. There’s obviously some things that will tail off beyond that, but that’s a good expectation. In terms of product, it really is going to be client dependent and depending on needs. We are seeing strong momentum, continuing momentum into our solutions and factors capabilities, continuing momentum into alternatives [indiscernible] real estate and real assets, continued momentum into various fixed income categories. In many ways, it reflects the portfolio dynamics of institutional clients globally.

Have you been able to create institutional products for the Oppenheimer funds yet or is that still a work in process, and what would be the timing of availability for those separate accounts?

It’s still a work in progress, but we are getting increased inquiry, particularly in the current environment. It’s not reflected enormously in the pipeline as we see it, but in the longer term pipeline that we have that’s beyond won not funded, so these would be things that were more on the qualified side, we’re starting to see early interest.

In particular, where we’ve seen it so far is on the retail side of the platform. It’s global equity, emerging markets equity, and institutionally that is exactly what’s happening now, so those are the conversations that there’s a lot of interest.

I think particularly in Europe and Asia.

I was going to say, yes, on the CCABs and Luxembourg sales product, are you getting traction there on the Oppenheimer side in terms of demand?

There’s still strong interest. It hasn’t grown dramatically. We are still talking about a couple of hundred million in terms of AUM, but the interest is still there. The product is still considered very attractive. Obviously in the current environment, things slowed down, and that number is with all the market impacts.

Great, thank you.

Greg--I don’t know if you want to add anything, Greg?

No, I think you captured it. I think the interest is in the areas that you mentioned, and we’re seeing that interest continue to pick up, so I think we’re pretty excited about the longer term opportunity or the intermediate term opportunity for a lot of the products, that demand is strong and our performance in those products is incredibly strong.

Great, thank you.

Thanks Brian.

Thank you. Our next question comes from Bill Katz with Citigroup. Your line is open.

Okay, thank you very much for taking the questions. Appreciate some of the new disclosure in your supplement as well. First question, you had mentioned the targeted payout ratio of 40% to 60% for the dividend. Is that GAAP payout ratio or an adjusted payout ratio?

That’s based on adjusted, Bill.

Okay. Is that a forward 12-month type of dynamic?

That’s a forward 12-month type of dynamic - yes, absolutely.

Okay, then just turning to the fee rate for a moment, I appreciate some of the color from the conversation as well. Could you break down the net impact of volumes coming versus going out in both retail and fixed income, you know, setting market dynamics to the side because there seems to be a lot of different moving parts? Just trying to get a sense of how to think about the fee rate, other than your outside market moves.

There’s a lot of ins and outs. We had some dynamics where you had--you know, money market was a huge flowing in, that’s at a lower fee rate, typically 10-plus basis points but lower fee rate. You had the funding of a significant solutions win, which was also single digit fee rate. You had Qs coming in, which are sort of non-fee driving. It’s hard to parse all that through. That’s why I provided the guidance, just because it was really hard, I think for anybody to really understand the full impact, plus you obviously had the market which was obviously compressing some of the higher fee equity components within our mix. So again, it’s a complicated fee rate thing, and even hard for me to forecast which is why I typically don’t do it, but we wanted to give you that two basis points, which we think sort of puts you at least statically where you should be, based on March.

Okay. Just one final one - thanks for taking all three of them this morning. In terms of looking at your balance sheet, debt went up, cash went down. How do we think about a targeted leverage ratio, whether it be a function of market cap or enterprise value, or maybe more focused in terms of debt to EBITDA? What’s a reasonable target and when do you think you can get there?

It’s a good question. As I mentioned, we’re not committing at this point in terms of de-levering. We are very confident, though, that we have the ability to have the financial flexibility to do so. In terms of what that could mean, obviously taking our credit facility down from 508 to zero, eliminating the obligation that’s remaining on the forward purchase of $220 million by April, and then finally we have the $600 million that’s coming due in November of 2022. Under a very dire scenario going forward, we could cover those requirements handily through the existing liquidity without further borrowing. Our focus would be on having the flexibility to de-lever as we come up to those events, or maybe even sooner if we decide that’s the right thing to do. I think if you were to look at our debt to EBITDA ratio, we’re higher than we are comfortably wanting to be right now. I think we would rather see--if I’m just looking at debt to EBITDA, where debt is our long term debt, let’s not provide anything around the preferred at this point, sort of getting closer to 1.25 times to 1 time has been the long term target that we’ve had in the past, and we’re not that far away from that number, but there is opportunity for us to bring that down further going forward.

I think the main point that we’re trying to make today is just literally to create optionality, right, and it’s such an uncertain market and I don’t think any one of us has the answers as to what things will look like, but these steps again are very proactive. It just puts us in a much stronger position to [indiscernible] if markets start to recover, and that gives us the different options. That’s the main point.

Okay, thank you very much for taking all the questions this morning. Thank you.

Thanks Bill.

Thank you. Our next question comes from Michael Carrier with Bank of America. Your line is open.

Hi guys, this is actually Shaun Kelley [ph] on for Mike. With the pullback in the seed capital, can you give us an update on the outlook for launching new strategies and products?

Yes, maybe I’ll just touch on it, and then Marty or Greg or others can--. I mean, I think we have been very focused on launching products to the benefit of our clients around--particularly in the area of ETFs. We’ve been very fortunate to have the seed provided by our clients effectively, so we have not had to put seed in to launch those products. That is our preferred method of launching products generally. Now, we can’t do that with all products, some alternative products and others do require so co-investment. I think as Marty mentioned, we’ve actually seen partnership with MassMutual really opening up some doors, where they themselves have stepped in, in certain cases to provide seed and co-investment to some of these product launches, which has been really helpful because it offsets our need to use our own balance sheet. I don’t know, Marty, if there’s anything you’d like to add to that?

Why don’t I ask both Andrew and Colin to make a comment or two? Andrew, you want to start?

Yes, from a seeding perspective, the only thing I’d mention is the product line that we have across the ETF complex and the mutual fund complex, given all the work that we did over the course of the last year or two in consolidating acquisitions and right-sizing our product line, our seed capital needs in those areas are fairly limited at this point and, as Loren said, much of it coming from clients, where we do have launches on the drawing board for the ETF side.

Maybe Colin, you can [indiscernible].

Sure. From an institutional standpoint, I think we feel quite comfortable with the support that we’ve received over the years from a seed capital standpoint, so I can’t think of anything that’s been slowed down, nor would I anticipate anything going forward. I might reinforce Marty’s point and Loren’s point, MassMutual has been a fantastic partner to us in the support that they’ve shown for a number of our strategies, particularly in alternatives. They’ve been just tremendous, and we would expect that relationship to continue to blossom going forward.

Okay, thanks. Then just going back to flows, are you starting to see any improvement in Asia, since they’re a little bit further along with dealing with the pandemic?

Yes. There was [indiscernible] in the quarter, and it just continues to accelerate at a retail level. The institutional engagements with the important clients out of there also continues to be quite strong. Again, that’s continuing as we move into this quarter. Maybe Greg, do you want to add anything from your perspective, because there’s a lot of demand from the fixed income group too over there.

No, I think you’ve got it covered, Marty.

So did I get your question?

Yes, I think I’ll just mention, I think Asia continues to be a positive contributor to flows. They’ve continued to, even in the height of this, produced positive long term flows. There is nothing indicating that that’s slowing down. We’re still launching product, people still are interested in the products that are being launched, and it is broader than just China. I think Japan as well is beginning to show up as a potential contributor with opportunities around fixed income in particular. Next question?

Thank you. Our next question comes from Kenneth Lee with RBC Capital Markets. Your line is open.

Hi, good morning. Thanks for taking my question. Just in terms of the--I had a question, you mentioned there’s a lot of non-cash items within your net income. What’s your best view of ongoing free cash flow generation for the company, and how could this potentially evolve in the near term? Thanks.

Cash flow from operations is strong. We see somewhere between, and this is based on current March end levels, so again somewhere between--you know, in excess of $950 million to a billion of cash flow from operations going forward. Even in the stress scenario, that number holds in reasonably well, so that’s a huge contributor. Again, the non-cash elements, when you add those back to earnings, you get to those types of numbers. Hopefully that gives you a sense of how much cash generation we are providing just from the business.

Great, and just one follow-up, if I may, just in terms of the MassMutual. Wonder if you could provide a little more detail in terms of that approval of capital for, I think you mentioned it was real estate or alternative strategies. What are the potential time frames that we could see some initial products, and perhaps you could better frame the opportunity you’re expecting there. Thanks.

Colin, could you take that, please?

Sure, happy to. I think as we mentioned earlier, MassMutual has contributed $425 million to two of our real estate strategies. The first is a non-traded REIT strategy, really targeted at the retail market. We’ll figure out the timing of when we would launch that strategy as the markets start to settle down in real estate, so you can get some sense of value and valuation. That was a key capital investment, and then they’ve also contributed an anchor LP position in one of our Asia real estate funds as well.

Great, thank you very much.

Thank you.

Thank you.

Thank you. Our next question comes from Robert Lee with KBW. Your line is open.

Great, thank you. Thanks for taking all the questions. Sorry to go back to the balance sheet questions, but just to clarify, Loren, should we be thinking in terms of use of cash over this year, obviously some liquidity, but that’s to kind of chip away at the revolver over the course of the year and then it kind of reloads first quarter of next year? Is that the right way to think about it?

In general, yes. I mean, this is obviously extraordinary times, and I think you’ve certainly seen other companies draw fully on their credit facilities just to get cash. That’s not what we’ve done, but I’d say the normal sequence would be, yes, there’s a normal draw that happens on the credit facility in the first quarter, and then we generally pay that down. I’d say that would be the right way to think about it, and the cash flow that we generate would allow us to do that, for sure, would allow us to pay down the credit facility, would allow us to, as I mentioned, fully pay back the forward commitments and still generate excess cash.

Okay, great. Then maybe as a follow-up, and I appreciate the disclosure on the pipeline and quantifying it, but give us a sense of if we look at that mix, I know there’s a lot of factor-based strategies there, how would the fee mix compare to the overall? Your overall fee rate, is it in line, a little lower? How should we be thinking of that, with that in the mix?

Yes, let me make a comment. I don’t know if we have that information, but as you know also, Rob, I wouldn’t confuse fee rate levels with fee rate profitability. The factor business [indiscernible] has very high margins, even [indiscernible] quite frankly same thing with the [indiscernible] business. But Loren, do you have a sense of--?

Yes, I think the pipeline has a fee rate, because of the growth in solutions, that’s just a handful of basis points below the firm’s aggregate fee rate, so it has come down a little bit, but it is still roughly in line with the firm’s overall [indiscernible].

Okay, great. That was all I had, and everyone stay safe and healthy. Thank you.

Thank you Rob, appreciate it.

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

Good morning, this Ryan Bailey on behalf of Alex. I actually had a question about the OFI MLP dynamic that was going on. I was wondering if of the $400 million accrual that you guys have taken, about how much of that you expect to recover, and then if you have any color on timing and whether the $400 million is the maximum we should be thinking about underwriting as an expense.

Yes, I think you saw in the quarter, we basically moved--I mean, we reflected the full--it was about 380--I think a little more than $380 million that was reflected through a purchase price adjustment. Marginally there was a small component that went through transaction integration. That’s been reflected. In terms of the expectation for recovery, I guess one, it’s going to take a while in terms of ultimately figuring out what the final number is, but we do believe that the number that we provided and we took through our balance sheet is the right number, obviously, but it is an estimate. Ultimately it needs to get confirmed as we go through the full detail of those client by client impacts, and that’s not going to get known for probably many quarters, so you’re probably talking more about a 2021 understanding of where that shows up. In terms of recovery, we have expectation that we’ll going to recover the substantial component or a majority of that number, if not all. It is still something where we have to work through insurance, the claims that we’re putting through as well as ultimately the normal indemnification that came as part of the transaction when we took the business over. So right now, at least in our thinking, there is nothing substantial or material that you need to think about in terms of net cash out as a result of this.

Got it, okay. Thank you. Then maybe just one more. Can you give us a reminder on any impact of fee waivers on the money market business as we roll through maybe another couple of months at lower yields on those products?

Yes, it’s an interesting dynamic. I’d say we’re fortunate in that the majority of our business is institutional money market business, which tends to be lower fee, so the topic of waiving is not nearly as relevant or impactful as it is if you had a large retail component. That said, I think as we move into 2020, there probably could be some amount of fee waiving that we’ll need to do in order to maintain a certain limited amount of yield on these products. I don’t think it’s going to be a material amount of money. It’s probably order of magnitude, and again these are sort of swags a little bit, so it could be a little more than $10 million on an annualized basis. But we are still looking at those numbers right now, but as I said, it’s not that material for us given our mix of business.

Got it, thank you very much.

You got it.

Thank you. Our next question comes from Brennan Hawken with UBS. Your line is open.

Good morning. Thanks for taking my questions. Most of them have been answered. I guess number one, could you remind us of or maybe update us about any regulatory or other calls on cash and liquidity at this point?

I’m not sure if--the only thing that we all know is the amount of cash that we have within our European subgroup, that’s nothing different than it’s been in the past. It’s sort of in the range of $700 million--not a range, that’s the number, but let’s call it $700 million, so that has not changed. That’s still roughly the number. Beyond that, there is nothing I’m aware of where we have any need from a regulatory perspective to provide cash or capital. If there’s something specific, Brennan, you’re getting at, please ask. I’m not sure if I’m answering your question.

No, you did. I just was curious whether or not that number had changed or whether or not there was anything that we didn’t know about. If you don’t know about it, then--

No, there is nothing else. It’s the same old thing.

Good enough, cool. Then thinking about the pay down plans, I appreciate the comments on how you guys view long term debt to EBITDA and that ratio. The increase or the draw down of the half billion for the revolver to fund the obligation that you guys have coming up, is the idea there that that’s going to be a priority, to pay that down first, or does the plan around the revolver fold into the overall plans around long term debt, or is that though of separately?

Well, we absolutely have the capacity to pay it down, so I think it’s a flexibility topic, as to would we rather pay down the revolver, would we rather keep cash? I don’t know if we’re at this point ready to commit to the timing of the pay down or when we would pay that down, but I would say that we are going to--in terms of a net debt perspective, it’s effectively paid down as we get into the end of 2020. You should think of it that way. How we actually manifest it, I think we’re still looking at.

Again to reiterate the point, we’re just creating flexibility right now. We think that is absolutely the most important thing to do until there’s greater clarity in this environment. The message to take away is we have the capacity to pull any one of those levers, and when we get greater clarity, we’re going to pull the lever that we think is most impactful to the organization.

That is clear and very sensible. Thank you. I was just hoping to squeeze in a follow-up here. The $80 million, I think it was Dan who asked about that initially. A lot of that seems to be based on--and I understand we’re not really on terra firma given everything that’s going on with COVID, on a few different levels. Are you guys going to update us as you continue to work through, thinking about how much of that would go from natural current environment changes to more structural expense declines, or should we--is there a certain portion of that that we can start to think about as a more structural decline in the expense base?

Yes, as Loren said, our action is very similar to what we did during the financial crisis. The first thing you do is you protect the organization and the employees, so you protect [indiscernible] as you protect shareholders. That’s exactly what we did, and [indiscernible] effectively stop spending, [indiscernible] stop spending and it creates really some security and some flexibility. That’s what we’re doing right now [indiscernible] which you’re going to hear from all of our peers, I expect. We happen to be in another position where coming out of Oppenheimer, we said we’re moving to what we call Day 2, to look at greater, more permanent operational opportunities to create ongoing efficiencies in the organization. We were heading down the path, we had to hit the brakes to take care--to get on top of this, the COVID challenge. We’re now turning our heads back to that, and as we get greater clarity and confidence of when we come out of that, we will absolutely share with everybody. But again, I just want to come back to we know how to do it, we have a track record of doing it, and we had already started down that path, and we’ll just pick it up as things start to settle.

Yes, but we’ll definitely give you clarity as we get through this, no question, Brennan.

Yes, okay. Thanks for taking all the questions, really appreciate it.

Absolutely.

Thank you. Our last question comes from Michael Cyprys with Morgan Stanley. Your line is open.

Hi, this is actually Stephanie filling in for Mike. I wanted to get your updated views on ESG, maybe. Do you think the environment today lends itself to increased demand for industry products further in the industry broadly speaking, and then maybe within Invesco, do you see an uptick in demand, and any sort of opportunities you see from here on the ESG front? Thank you.

Yes, why don’t I make a comment first and then Andrew can speak to it, and Colin and Greg are in the middle of it, [indiscernible] happen. I think there’s no question, and again I think it depends on what--where you sit. ESG is just an absolute necessity for any investment organization to be deeply engaged in. Beyond what your opinion, it’s absolutely a business necessity in Europe. If you are not very strong, you are incredibly disadvantaged. It is gaining legs here in the United States and also Asia. But what I will you as an organization, we are deeply engaged in ensuring we have ESG capabilities embedded in our investment capabilities and various offerings. Andrew, do you want to start with some of the--maybe talk about the [indiscernible].

Sure, I’ll make a couple comments, and others may want to as well. I think the environment, and we’re positioned for it, is probably going to create more demand around ESG and just more momentum. I’d go beyond product - I know your question focused a bit on that. We certainly think there will be ESG-focused product and we’ve been building that, or have built that and will continue to look at it. I think the bigger area that we’re focused on, and Greg might want to comment on it, is how we’re embedding ESG into fundamental strategies as a factor of the way that they’re looking--that we’re looking at active investments. I think that’s a growing expectation of all of our investors--I’m sorry, our clients around the world. I think that’s an area of focus for us too. Then lastly, I think more and more, as people are putting together asset allocations in portfolios, at the retail level it’s going to continue to be a factor that drives those aspects too. I think we’re seeing it on all fronts. Maybe while people are triaging in various environments right now, you may see a short slowdown, but in the medium or long run, I don’t see any of that abating.

The only thing I’d add to that is I think that the focus--that we’re seeing this from a lot of different participants overall, and there’s just a tremendous focus that emanated in Europe, so I think we’re seeing that in a lot of discussions that we’re having with clients in Asia and clients in North America overall, so that’s coming in the form of demand and we’ve got a number of products that have kind of hit that demand, that stem from things that were doing in our alternative business to things that we’re doing in fixed income and other areas. We have a wonderfully strong capability, we think, in ESG, and so we’re trying to match up that capability to the point that Andrew made, in embedding those into our investment teams and making sure that we’re kind of proactively, really not just touching the surface on ESG but really embedding that in the things that we can do from an investment standpoint to make decisions that are going to support ESG mandates overall. We’ve got a strong capability, we’ve got increased demand, we’ve got a lot of products that we’ve already put into the marketplace, and we think that while it may be stalled for a couple of weeks in light of what’s gone on in the environment, once we get through this, which we will, that demand, we think will come back online and we’re well prepared to be able to handle that, we think.

Colin, anything you want to add on that?

No, I’d just reinforce the points that were made. It’s a core skill, and I think as Andrew mentioned, the ESG book is a product but, equally important and maybe more importantly as a factor that can be applied across portfolios, is of critical importance. In fact, our ESG capabilities have been core to a number of our wins, particularly in the solutions space where that ability was critical from a client standpoint. We feel quite good about our capabilities.

So that was the last question, and again I appreciate everybody just spending time with us and engaging, and we’ll be chatting soon. Thank you.

This does conclude today’s conference. Please disconnect at this time.