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AIM, INVESCO Closer to Convergence


Sister companies AIM Investments of Houston and INVESCO Funds Group of Denver, both investment management units of AMVESCAP, the U.K. holding company, are growing closer every day.

The companies, which had slowly evolved into two competing fund groups both vying for the attention of financial intermediaries, now share an executive, have melded their once-separate distribution units, and will now marry about 20% of their funds across the two firms, clearly crossing brand lines.

The firms recently announced that 20 of their funds - 14 from the $21 billion INVESCO group lineup and six from the $124 billion AIM complex - would be merged in November, pending shareholder approval. The mergers will largely remove any overlap between the two fund groups, although two of the mergers are for similar INVESCO funds.

The combinations are seen as a convergence along party lines of sorts. AIM funds that are specialized or sector funds will be merged into similar INVESCO sector funds, and those INVESCO funds sporting broader mandates will join the AIM funds lineup.

All told, the restructuring is expected to displace six employees in Denver, which include portfolio managers as well as investment analysts, said AIM spokesman Ivy McLemore, who serves on the firm's integration team.

Prior to this announcement, AIM had been on a consolidation tear of its own since last September, squeezing seven of its own funds into four other funds.

Single Distribution

The fund mergers come hot on the heels of the two companies' joint announcement in late March that they would unify the U.S. retail distribution units into one division led by AIM Distributors that would sell funds from both product lines. INVESCO, which had earlier sold its funds without sales charges directly to investors, had converted to a load structure in April of 2002 and began selling its funds in financial intermediary channels.

But fund management and distribution are not the only cross-border changes the firms have seen. In January, as part of AMVESCAP's holistic restructuring of its two brands, Mark Williamson, formerly CEO of INVESCO, shifted firms to become the CEO of AIM.

In addition, plans are under way right now to mesh INVESCO's Web site into AIM's. As of July 1, www.invescofunds.com will begin migrating its capabilities over to www.aiminvestments.com.

The further convergence of AIM and INVESCO, while slow moving, has fueled speculation that INVESCO's days are numbered.

"I think ultimately there will be further consolidation at AIM/INVESCO," said Burt Greenwald, president of consulting firm B.J. Greenwald & Associates of Philadelphia. "When they distributed through separate channels, you could rationalize totally distinct operations. Now I think they will continue to consolidate funds, and ultimately I would expect AIM to be the dominant brand," he added. The AIM/INVESCO partnering could continue to linger a while with INVESCO keeping a much lower profile. Future consolidation into AIM's array of funds might be accelerated if INVESCO's funds' performance "fails to capture luster," Greenwald added.

The game plan isn't to eventually merge the AIM and INVESCO funds into a single fund group, said spokespersons at both AIM and AMVESCAP.

Rather, the goal is to allow each to retain its own distinct brand, while allowing for the strongest distribution model to emphasize the importance of both brands, said AIM's McLemore. The goal is to have INVESCO emerge as the niche, sector fund expert, while the AIM brand would represent longer-term, all-cap and various, non-sector-specific investment prowess, McLemore added.

Of course, the recent convergence between the two groups completely reverses AMVESCAP's stance of just 18 months ago. In December 2001, AMVESCAP dug in its heels, assuring that the firms would remain distinct, brands that would not be merged, and product lines wouldn't be trimmed (MFMN 12/10/01). But the landscape has definitely changed since then, admitted Doug Kidd, managing director of communications for AMVESCAP. The new initiatives mean that AIM and INVESCO no longer sport competing distribution groups. "But they are no closer to merging than before," he added. The realization was that AMVESCAP has two fund groups where cost savings could be realized, he added. "We are under pressure to deliver our products to clients and achieve cost savings, but [plan to] maintain two established brands," Kidd said. AMVESCAP has publicly vowed to trim $150 million in expenses by year-end 2003.

"Everybody is looking to [cut] expenses," said Ralph Verni, a consultant in Sudbury, Mass., and former president and CEO of State Street Research & Management. "But if the market doesn't change, INVESCO, which isn't a household name, could disappear altogether."

One vs. Many Brands

This certainly isn't the fist time fund company acquisitions have sparked discussions as to whether to maintain or merge individual mutual fund units. Deutsche Bank's purchase of Scudder/Kemper, FleetBank's acquisition of Liberty Funds and all of its acquired investment subsidiaries, and ING's purchase of Aetna, Pilgrim and others, each resulted in significant consolidation into one cohesive and singularly branded management firm.

Like AIM and INVESCO, others have chosen a separate but equal business model, such as the one adopted by Franklin Templeton of San Mateo, Calif., which maintains three distinct mutual fund brands.

"Our message can be complex because Franklin Templeton Investments includes three separate fund groups - Franklin, Templeton and Mutual Series - each with its own history and investment philosophy," said Dan O'Lear, EVP, sales for Franklin. "Our challenge is to make sure people see how these pieces fit together. We want to make sure people see us as one entity, but at the same time, understand the specialized investment styles we offer under our distinctly individual brands," O'Lear commented.

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