Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Condensed Consolidated Financial Statements and related Notes thereto, which appear elsewhere in this Report. Except for the historical financial information, this Report may include statements that constitute “forward-looking statements” under the United States securities laws. Forward-looking statements include information concerning future results of our operations, expenses, earnings, liquidity, cash flow and capital expenditures, industry or market conditions, assets under management, geopolitical events and the COVID-19 pandemic and their respective potential impact on the company, acquisitions and divestitures, debt and our ability to obtain additional financing or make payments, regulatory developments, demand for and pricing of our products and other aspects of our business or general economic conditions. In addition, words such as “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates,” “projects,” “forecasts,” and future or conditional verbs such as “will,” “may,” “could,” “should,” and “would” as well as any other statement that necessarily depends on future events, are intended to identify forward-looking statements. None of this information should be considered in isolation from, or as a substitute for, historical financial statements.

Forward-looking statements are not guarantees, and they involve risks, uncertainties and assumptions. Although we make such statements based on assumptions that we believe to be reasonable, there can be no assurance that actual results will not differ materially from our expectations. We caution investors not to rely unduly on any forward-looking statements and urge you to carefully consider the risks described in this Report and our most recent Form 10-K and Forms 10-Q filed with the Securities and Exchange Commission (SEC).

You may obtain these reports from the SEC’s website at www.sec.gov. We expressly disclaim any obligation to update the information in any public disclosure if any forward-looking statement later turns out to be inaccurate.

References

In this Report, unless otherwise specified, the terms “we,” “our,” “us,” “company,” “firm,” “Invesco,” and “Invesco Ltd.” refer to Invesco Ltd., a company incorporated in Bermuda, and its subsidiaries.

Executive Overview

The following executive overview summarizes the significant trends affecting our results of operations and financial condition for the periods presented. This overview and the remainder of this Management’s Discussion and Analysis supplements and should be read in conjunction with the Condensed Consolidated Financial Statements of Invesco Ltd. and its subsidiaries and the notes thereto contained elsewhere in this Report.

Invesco Ltd. (Invesco or the company) is an independent investment management firm dedicated to delivering an investment experience that helps people get more out of life. Our comprehensive range of active, passive and alternative investment capabilities has been constructed over many years to help clients achieve their investment objectives. We draw on this comprehensive range of capabilities to provide customized solutions designed to deliver key outcomes aligned to client needs. One of Invesco's core strengths, and a key differentiator for the company within the industry, is our broad diversification across client domiciles, asset classes and distribution channels. Our geographic diversification recognizes growth opportunities in different parts of the world. This broad diversification mitigates the impact on Invesco of different market cycles and enables the company to take advantage of growth opportunities in various markets and channels.

The challenging industry backdrop continued in the third quarter, and investors continued to behave cautiously. Uncertainty associated with rising recession fears, higher inflation, interest rate hikes in most major economies and geopolitical tensions drove most global market indices lower. The table below summarizes returns based on price appreciation/(depreciation) of several major market indices for the three and nine months ended September 30, 2022 and 2021:


	Index expressed in currency	Three months ended September 30,					Nine months ended September 30,
Equity Index	2022			2021	2022				2021
S&P 500	U.S. Dollar	(5.3)	%		0.2	%	(24.8)	%		14.7	%
FTSE 100	British Pound	(3.8)	%		0.7	%	(6.7)	%		9.7	%
FTSE 100	U.S. Dollar	(12.1)	%		(1.8)	%	(23.2)	%		8.2	%
Nikkei 225	Japanese Yen	(1.7)	%		2.3	%	(9.9)	%		7.3	%
Nikkei 225	U.S. Dollar	(7.9)	%		2.0	%	(28.3)	%		(0.6)	%
MSCI Emerging Markets	U.S. Dollar	(12.5)	%		(8.8)	%	(28.9)	%		(3.0)	%
Bond Index
Barclays U.S. Aggregate Bond	U.S. Dollar	(4.8)	%		0.1	%	(14.6)	%		(1.6)	%

Despite the volatile markets, our diversified product lineup maintained net inflows in certain key capability areas, notably Active Fixed Income, Greater China, and the Institutional Channel. These areas, in addition to ETFs and private markets capabilities, have garnered net long-term inflows on a year-to-date basis.

We remain highly focused on our capital priorities, investing in our key growth areas, and efficiently allocating our resources. Consistent with our commitment to improve our leverage profile, we continue to manage our debt to lower levels. We ended the quarter with no balance on our credit facility and our cash and cash equivalents balance increased to over $1 billion. The progress we have made in our efforts to build financial flexibility has Invesco well-positioned to navigate near-term volatility and deliver long-term growth.

Presentation of Management’s Discussion and Analysis of Financial Condition and Results of Operations - Impact of Consolidated Investment Products

The company provides investment management services to, and has transactions with, various retail mutual funds and similar entities, private equity, real estate, fund-of-funds, collateralized loan obligation products (CLOs) and other investment entities sponsored by the company for the investment of client assets in the normal course of business. The company serves as the investment manager, making day-to-day investment decisions concerning the assets owned by these products. Investment products that are consolidated are referred to in this Form 10-Q (Report) as consolidated investment products (CIP). The company’s economic risk with respect to each investment in CIP is limited to its equity ownership and any uncollected management and performance fees. See also Note 13, "Consolidated Investment Products", for additional information regarding the impact of the consolidation of managed funds.

The majority of the company’s CIP balances are CLO-related. The collateral assets of the CLOs are held solely to satisfy the obligations of the CLOs. The company has no right to the benefits from, nor does it bear the risks associated with, the collateral assets held by the CLOs, beyond the company’s direct investments in, and management and performance fees generated from, the CLOs. If the company were to liquidate, the collateral assets would not be available to the general creditors of the company, and as a result, the company does not consider them to be company assets. Likewise, the investors in the CLOs have no recourse to the general credit of the company for the notes issued by the CLOs. The company therefore does not consider this debt to be a company liability.

The impact of CIP is so significant to the presentation of the company’s Condensed Consolidated Financial Statements that the company has elected to deconsolidate these products in its non-GAAP disclosures (among other adjustments). See Schedule of Non-GAAP Information for additional information regarding these adjustments. The following discussion therefore combines the results presented under U.S. generally accepted accounting principles (U.S. GAAP) with the company’s non-GAAP presentation. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains four distinct sections, which follow the Assets Under Management discussion:

Results of Operations (three and nine months ended September 30, 2022 compared to three and nine months ended September 30, 2021);
Schedule of Non-GAAP Information;
Balance Sheet Discussion; and
Liquidity and Capital Resources.

Wherever a non-GAAP measure is referenced, a disclosure will follow in the narrative or in the note referring the reader to the Schedule of Non-GAAP Information, where additional details regarding the use of the non-GAAP measure by the company are disclosed, along with reconciliations of the most directly comparable U.S. GAAP measures to the non-GAAP measures. To further enhance the readability of the Results of Operations section, separate tables for each of the revenue, expense and other income and expenses (non-operating income/expense) sections of the income statement introduce the narrative that follows, providing a section-by-section review of the company’s income statements for the periods presented.

Summary Operating Information

Summary operating information is presented in the table below:


$ in millions, other than per common share amounts, operating margins and AUM	Three months ended September 30,				Nine months ended September 30,
U.S. GAAP Financial Measures Summary	2022		2021		2022		2021
Operating revenues	1,445.7		1,750.0		4,605.5		5,131.1
Operating income	350.2		463.8		1,072.6		1,279.0
Operating margin	24.2	%	26.5	%	23.3	%	24.9	%
Net income attributable to Invesco Ltd.	177.4		330.1		496.1		966.2
Diluted EPS	0.39		0.71		1.08		2.08

Non-GAAP Financial Measures Summary(1)
Net revenues	1,110.6		1,333.5		3,536.9		3,887.4
Adjusted operating income	369.4		561.6		1,275.9		1,605.1
Adjusted operating margin	33.3	%	42.1	%	36.1	%	41.3	%
Adjusted net income attributable to Invesco Ltd.	155.8		358.6		595.4		1,039.9
Adjusted diluted EPS	0.34		0.77		1.29		2.23

Assets Under Management
Ending AUM (billions)	1,323.3		1,528.6		1,323.3		1,528.6
Average AUM (billions)	1,416.2		1,540.5		1,472.8		1,471.9

(1)Net revenues, Adjusted Operating Income (and by calculation, adjusted operating margin), and Adjusted Net Income (and by calculation, adjusted diluted EPS) are non-GAAP financial measures, based on methodologies other than US GAAP. See “Schedule of Non-GAAP Information” for a reconciliation of the most directly comparable US GAAP measures to the non-GAAP measures.

Investment Capabilities Performance Overview

Invesco’s first strategic priority is to achieve strong investment performance over the long-term for our clients. The table below presents the one-, three-, five-, and ten-year performance of our actively managed investment products measured by the percentage of AUM ahead of benchmark and AUM in the top half of peer group(1).


	Benchmark Comparison								Peer Group Comparison
	% of AUM In Top Half of Benchmark								% of AUM in Top Half of Peer Group
	1yr		3yr		5yr		10yr		1yr		3yr		5yr		10yr
Equities (2)
U.S. Core (4%)	42	%	30	%	16	%	16	%	21	%	16	%	15	%	—	%
U.S. Growth (6%)	19	%	46	%	46	%	46	%	32	%	43	%	43	%	37	%
U.S. Value (7%)	91	%	60	%	91	%	87	%	81	%	55	%	41	%	37	%
Sector (1%)	8	%	9	%	2	%	53	%	52	%	30	%	23	%	54	%
UK (1%)	56	%	37	%	39	%	43	%	98	%	29	%	37	%	37	%
Canadian (<1%)	100	%	100	%	66	%	58	%	87	%	79	%	—	%	—	%
Asian (3%)	60	%	78	%	85	%	91	%	53	%	38	%	63	%	87	%
Continental European (1%)	76	%	47	%	7	%	93	%	85	%	37	%	19	%	91	%
Global (5%)	19	%	14	%	—	%	79	%	14	%	5	%	1	%	22	%
Global Ex U.S. and Emerging Markets (8%)	12	%	20	%	30	%	99	%	10	%	1	%	10	%	12	%
Fixed Income (2)
Money Market (26%)	82	%	96	%	97	%	100	%	84	%	82	%	82	%	98	%
U.S. Fixed Income (12%)	27	%	78	%	79	%	97	%	19	%	54	%	85	%	92	%
Global Fixed Income (7%)	41	%	84	%	80	%	90	%	65	%	69	%	76	%	92	%
Stable Value (6%)	100	%	100	%	100	%	100	%	97	%	97	%	97	%	100	%
Other (2)
Alternatives (6%)	22	%	40	%	30	%	33	%	62	%	40	%	49	%	42	%
Balanced (7%)	47	%	94	%	61	%	62	%	57	%	59	%	82	%	94	%

(1) Excludes passive products, closed-end funds, private equity limited partnerships, non-discretionary funds, unit investment trusts, fund of funds with component funds managed by Invesco, stable value building block funds and CDOs. Certain funds and products were excluded from the analysis because of limited benchmark or peer group data. Had these been available, results may have been different. These results are preliminary and subject to revision.

Data as of September 30, 2022. AUM measured in the one, three, five and ten year quartile rankings represents 46%, 46%, 45% and 41% of total Invesco AUM, respectively, and AUM measured versus benchmark on a one, three, five and ten year basis represents 60%, 58%, 57% and 51% of total Invesco AUM. Peer group rankings are sourced from a widely-used third party ranking agency in each fund’s market (e.g., Morningstar, IA, Lipper, eVestment, Mercer, Galaxy, SITCA, Value Research) and asset-weighted in USD. Rankings are as of prior quarter-end for most institutional products and prior month-end for Australian retail funds due to their late release by third parties. Rankings are calculated against all funds in each peer group. Rankings for the primary share class of the most representative fund in each composite are applied to all products within each composite. Performance assumes the reinvestment of dividends. Past performance is not indicative of future results and may not reflect an investor’s experience.

(2) Numbers in parenthesis reflect AUM for each investment product (see Note above for exclusions) as a percentage of the total AUM for the five-year peer group ($598.3 billion).

Assets Under Management

The following presentation and discussion of AUM includes Passive and Active AUM. Passive AUM includes index-based ETFs, unit investment trusts (UITs), non-management fee earning AUM and other passive mandates. Active AUM is total AUM less Passive AUM.

Non-management fee earning AUM includes non-management fee earning ETFs, UIT and product leverage. The net flows in non-management fee earning AUM can be relatively short-term in nature and, due to the relatively low revenue yield, can have a significant impact on overall net revenue yield.

The AUM tables and the discussion below refer to certain AUM as long-term. Long-term inflows and the underlying reasons for the movements in this line item include investments from new clients and existing clients adding new accounts/funds or contributions/subscriptions into existing accounts/funds. Long-term outflows reflect client redemptions from accounts/funds and include the return of invested capital upon the maturity. We present net flows into money market funds separately because shareholders of those funds typically use them as short-term funding vehicles and the flows are particularly sensitive to short-term interest rate movements.

Changes in AUM were as follows:


	For the three months ended September 30,
	2022			2021
$ in billions	Total AUM	Active	Passive	Total AUM	Active	Passive
June 30	1,390.4	957.9	432.5	1,525.0	1,066.0	459.0
Long-term inflows	68.7	44.5	24.2	91.7	60.3	31.4
Long-term outflows	(76.4)	(51.8)	(24.6)	(78.4)	(53.5)	(24.9)
Net long-term flows	(7.7)	(7.3)	(0.4)	13.3	6.8	6.5
Net flows in non-management fee earning AUM	1.9	—	1.9	5.5	—	5.5
Net flows in money market funds	10.0	10.0	—	2.6	2.6	—
Total net flows	4.2	2.7	1.5	21.4	9.4	12.0
Reinvested distributions	0.9	0.9	—	0.8	0.8	—
Market gains and losses	(55.1)	(32.0)	(23.1)	(14.6)	(13.1)	(1.5)


Foreign currency translation	(17.1)	(15.4)	(1.7)	(4.0)	(3.1)	(0.9)
September 30	1,323.3	914.1	409.2	1,528.6	1,060.0	468.6
Average AUM
Average long-term AUM	1,071.9	793.0	278.9	1,203.6	930.5	273.1
Average AUM	1,416.2	961.6	454.6	1,540.5	1,065.6	474.9
Average QQQ AUM	165.9	N/A	165.9	186.2	N/A	186.2


	For the three months ended September 30,
	2022	2021
Revenue yield (bps) (1)
U.S. GAAP Gross revenue yield	43.7	48.1
Net revenue yield ex performance fees ex QQQ	35.3	39.1
Active net revenue yield ex performance fees	40.6	44.3
Passive net revenue yield ex QQQ	17.8	19.7


	For the nine months ended September 30,
	2022			2021
$ in billions	Total AUM	Active	Passive	Total AUM	Active	Passive
December 31	1,610.9	1,082.5	528.4	1,349.9	979.3	370.6
Long-term inflows	256.4	155.0	101.4	326.3	197.7	128.6
Long-term outflows	(253.7)	(172.8)	(80.9)	(257.4)	(181.3)	(76.1)
Net long-term flows	2.7	(17.8)	20.5	68.9	16.4	52.5
Net flows in non-management fee earning AUM	(1.1)	—	(1.1)	8.1	—	8.1
Net flows in money market funds	26.3	26.3	—	29.7	29.7	—
Total net flows	27.9	8.5	19.4	106.7	46.1	60.6
Reinvested distributions	3.5	3.5	—	2.6	2.6	—
Market gains and losses	(278.3)	(143.6)	(134.7)	75.6	36.4	39.2


Foreign currency translation	(40.7)	(36.8)	(3.9)	(6.2)	(4.4)	(1.8)
September 30	1,323.3	914.1	409.2	1,528.6	1,060.0	468.6
Average AUM
Average long-term AUM	1,125.6	839.4	286.2	1,162.6	914.9	247.7
Average AUM	1,472.8	1,000.3	472.5	1,471.9	1,041.0	430.9
Average QQQ AUM	174.6	N/A	174.6	167.3	N/A	167.3


	For the nine months ended September 30,
	2022	2021
Revenue yield (bps) (1)
U.S. GAAP Gross revenue yield	44.6	49.2
Net revenue yield ex performance fees ex QQQ	36.0	39.4
Active net revenue yield ex performance fees	41.3	44.2
Passive net revenue yield ex QQQ	18.2	20.4

(1) U.S. GAAP gross revenue yield is not considered a meaningful effective fee rate measure. Gross revenue yield on AUM is equal to U.S. GAAP annualized total operating revenues divided by average AUM, excluding Invesco Great Wall (IGW) AUM. It is appropriate to exclude the average AUM of IGW as the revenues resulting from these AUM are not presented in our operating revenues. The average AUM for IGW in the three and nine months ended September 30, 2022 was $93.1 billion and $95.4 billion (three and nine months ended September 30, 2021: $85.5 billion and $81.1 billion). The U.S. GAAP gross revenue yield is not a good measure because the numerator of the U.S. GAAP gross revenue yield excludes the management fees earned from CIP; however, the denominator of the measure includes the AUM of these investment products. Net revenue yield metrics include the net revenues and average AUM of IGW and CIP. See “Schedule of Non-GAAP Information” for a reconciliation of operating revenues to net revenues.

Flows

There are numerous drivers of AUM inflows and outflows, including individual investor decisions to change investment preferences, fiduciaries and other gatekeepers making broad asset allocation decisions on behalf of their clients and reallocation of investments within portfolios. We are not a party to these asset allocation decisions, as the company does not generally have access to the underlying investor’s decision-making process, including their risk appetite or liquidity needs. Therefore, the company is not in a position to provide meaningful information regarding the drivers of inflows and outflows.

Market Returns

Market gains and losses include the net change in AUM resulting from changes in market values of the underlying securities from period to period. The table in the “Executive Overview” section of this Management’s Discussion and

Analysis summarizes returns based on price appreciation/(depreciation) of several major market indices for the three and nine months ended September 30, 2022 and 2021.

Foreign Exchange Rates

During the three and nine months ended September 30, 2022, we experienced a decrease in AUM of $17.1 billion and $40.7 billion respectively, due to changes in foreign exchange rates. During the three months and nine months ended September 30, 2021, AUM decreased by $4.0 billion and $6.2 billion, respectively, due to changes in foreign exchange rates.

Total AUM by Channel (1)

As of and for the Three Months Ended September 30, 2022 and 2021:


$ in billions	Total	Retail	Institutional
June 30, 2022	1,390.4	898.8	491.6
Long-term inflows	68.7	47.3	21.4
Long-term outflows	(76.4)	(58.9)	(17.5)
Net long-term flows	(7.7)	(11.6)	3.9
Net flows in non-management fee earning AUM	1.9	1.8	0.1
Net flows in money market funds	10.0	(1.0)	11.0
Total net flows	4.2	(10.8)	15.0
Reinvested distributions	0.9	0.8	0.1

Market gains and losses	(55.1)	(47.4)	(7.7)

Foreign currency translation	(17.1)	(7.4)	(9.7)
September 30, 2022	1,323.3	834.0	489.3

June 30, 2021	1,525.0	1,060.7	464.3
Long-term inflows	91.7	62.3	29.4
Long-term outflows	(78.4)	(60.5)	(17.9)
Net long-term flows	13.3	1.8	11.5
Net flows in non-management fee earning AUM	5.5	5.7	(0.2)
Net flows in money market funds	2.6	(0.4)	3.0
Total net flows	21.4	7.1	14.3
Reinvested distributions	0.8	0.8	—

Market gains and losses	(14.6)	(15.5)	0.9

Foreign currency translation	(4.0)	(1.5)	(2.5)
September 30, 2021	1,528.6	1,051.6	477.0

As of and for the Nine Months Ended September 30, 2022 and 2021:


$ in billions	Total	Retail	Institutional
December 31, 2021	1,610.9	1,106.5	504.4
Long-term inflows	256.4	190.8	65.6
Long-term outflows	(253.7)	(200.3)	(53.4)
Net long-term flows	2.7	(9.5)	12.2
Net flows in non-management fee earning AUM	(1.1)	2.4	(3.5)
Net flows in money market funds	26.3	1.5	24.8
Total net flows	27.9	(5.6)	33.5
Reinvested distributions	3.5	3.2	0.3

Market gains and losses	(278.3)	(254.3)	(24.0)

Foreign currency translation	(40.7)	(15.8)	(24.9)
September 30, 2022	1,323.3	834.0	489.3

December 31, 2020	1,349.9	947.1	402.8
Long-term inflows	326.3	232.0	94.3
Long-term outflows	(257.4)	(199.5)	(57.9)
Net long-term flows	68.9	32.5	36.4
Net flows in non-management fee earning AUM	8.1	7.5	0.6
Net flows in money market funds	29.7	3.6	26.1
Total net flows	106.7	43.6	63.1
Reinvested distributions	2.6	2.4	0.2

Market gains and losses	75.6	59.0	16.6

Foreign currency translation	(6.2)	(0.5)	(5.7)
September 30, 2021	1,528.6	1,051.6	477.0

See accompanying notes immediately following these AUM tables.

Active AUM by Channel (1)

As of and for the Three Months Ended September 30, 2022 and 2021:


$ in billions	Total	Retail	Institutional
June 30, 2022	957.9	509.0	448.9
Long-term inflows	44.5	23.6	20.9
Long-term outflows	(51.8)	(35.8)	(16.0)
Net long-term flows	(7.3)	(12.2)	4.9

Net flows in money market funds	10.0	(1.0)	11.0
Total net flows	2.7	(13.2)	15.9
Reinvested distributions	0.9	0.8	0.1

Market gains and losses	(32.0)	(27.1)	(4.9)

Foreign currency translation	(15.4)	(6.7)	(8.7)
September 30, 2022	914.1	462.8	451.3

June 30, 2021	1,066.0	649.3	416.7
Long-term inflows	60.3	35.5	24.8
Long-term outflows	(53.5)	(37.9)	(15.6)
Net long-term flows	6.8	(2.4)	9.2

Net flows in money market funds	2.6	(0.4)	3.0
Total net flows	9.4	(2.8)	12.2
Reinvested distributions	0.8	0.8	—

Market gains and losses	(13.1)	(13.8)	0.7

Foreign currency translation	(3.1)	(1.3)	(1.8)
September 30, 2021	1,060.0	632.2	427.8

As of and for the Nine Months Ended September 30, 2022 and 2021:


$ in billions	Total	Retail	Institutional
December 31, 2021	1,082.5	631.7	450.8
Long-term inflows	155.0	91.6	63.4
Long-term outflows	(172.8)	(123.0)	(49.8)
Net long-term flows	(17.8)	(31.4)	13.6

Net flows in money market funds	26.3	1.5	24.8
Total net flows	8.5	(29.9)	38.4
Reinvested distributions	3.5	3.2	0.3

Market gains and losses	(143.6)	(128.0)	(15.6)

Foreign currency translation	(36.8)	(14.2)	(22.6)
September 30, 2022	914.1	462.8	451.3

December 31, 2020	979.3	601.1	378.2
Long-term inflows	197.7	129.3	68.4
Long-term outflows	(181.3)	(127.8)	(53.5)
Net long-term flows	16.4	1.5	14.9

Net flows in money market funds	29.7	3.6	26.1
Total net flows	46.1	5.1	41.0
Reinvested distributions	2.6	2.4	0.2

Market gains and losses	36.4	23.7	12.7

Foreign currency translation	(4.4)	(0.1)	(4.3)
September 30, 2021	1,060.0	632.2	427.8

See accompanying notes immediately following these AUM tables.

Passive AUM by Channel (1)

As of and for the Three Months Ended September 30, 2022 and 2021:


$ in billions	Total	Retail	Institutional
June 30, 2022	432.5	389.8	42.7
Long-term inflows	24.2	23.7	0.5
Long-term outflows	(24.6)	(23.1)	(1.5)
Net long-term flows	(0.4)	0.6	(1.0)
Net flows in non-management fee earning AUM	1.9	1.8	0.1

Total net flows	1.5	2.4	(0.9)


Market gains and losses	(23.1)	(20.3)	(2.8)

Foreign currency translation	(1.7)	(0.7)	(1.0)
September 30, 2022	409.2	371.2	38.0

June 30, 2021	459.0	411.4	47.6
Long-term inflows	31.4	26.8	4.6
Long-term outflows	(24.9)	(22.6)	(2.3)
Net long-term flows	6.5	4.2	2.3
Net flows in non-management fee earning AUM	5.5	5.7	(0.2)

Total net flows	12.0	9.9	2.1


Market gains and losses	(1.5)	(1.7)	0.2

Foreign currency translation	(0.9)	(0.2)	(0.7)
September 30, 2021	468.6	419.4	49.2

As of and for the Nine Months Ended September 30, 2022 and 2021:


$ in billions	Total	Retail	Institutional
December 31, 2021	528.4	474.8	53.6
Long-term inflows	101.4	99.2	2.2
Long-term outflows	(80.9)	(77.3)	(3.6)
Net long-term flows	20.5	21.9	(1.4)
Net flows in non-management fee earning AUM	(1.1)	2.4	(3.5)

Total net flows	19.4	24.3	(4.9)


Market gains and losses	(134.7)	(126.3)	(8.4)

Foreign currency translation	(3.9)	(1.6)	(2.3)
September 30, 2022	409.2	371.2	38.0

December 31, 2020	370.6	346.0	24.6
Long-term inflows	128.6	102.7	25.9
Long-term outflows	(76.1)	(71.7)	(4.4)
Net long-term flows	52.5	31.0	21.5
Net flows in non-management fee earning AUM	8.1	7.5	0.6

Total net flows	60.6	38.5	22.1


Market gains and losses	39.2	35.3	3.9

Foreign currency translation	(1.8)	(0.4)	(1.4)
September 30, 2021	468.6	419.4	49.2

See accompanying notes immediately following these AUM tables.

Total AUM by Asset Class (2)

As of and for the Three Months Ended September 30, 2022 and 2021:


$ in billions	Total		Equity		Fixed Income		Balanced		Money Market		Alternatives
June 30, 2022	1,390.4		644.8		309.1		72.9		164.0		199.6
Long-term inflows	68.7		25.0		30.4		3.2		—		10.1
Long-term outflows	(76.4)		(32.4)		(23.9)		(4.7)		—		(15.4)
Net long-term flows	(7.7)		(7.4)		6.5		(1.5)		—		(5.3)
Net flows in non-management fee earning AUM	1.9		1.8		0.1		—		—		—
Net flows in money market funds	10.0		—		0.3		—		9.7		—
Total net flows	4.2		(5.6)		6.9		(1.5)		9.7		(5.3)
Reinvested distributions	0.9		0.2		0.4		0.1		—		0.2
Market gains and losses	(55.1)		(36.1)		(7.0)		(5.2)		0.2		(7.0)


Foreign currency translation	(17.1)		(5.8)		(5.1)		(2.7)		(1.8)		(1.7)
September 30, 2022	1,323.3		597.5		304.3		63.6		172.1		185.8
Average AUM	1,416.2		669.5		311.4		69.9		168.8		196.6
% of total average AUM	100.0	%	47.3	%	22.0	%	4.9	%	11.9	%	13.9	%

June 30, 2021	1,525.0		795.5		317.6		88.5		135.7		187.7
Long-term inflows	91.7		41.8		27.3		9.5		—		13.1
Long-term outflows	(78.4)		(42.8)		(16.3)		(8.5)		—		(10.8)
Net long-term flows	13.3		(1.0)		11.0		1.0		—		2.3
Net flows in non-management fee earning AUM	5.5		5.8		(0.3)		—		—		—
Net flows in money market funds	2.6		—		—		—		2.6		—
Total net flows	21.4		4.8		10.7		1.0		2.6		2.3
Reinvested distributions	0.8		0.2		0.3		0.1		—		0.2
Market gains and losses	(14.6)		(12.1)		(1.0)		(3.7)		0.3		1.9


Foreign currency translation	(4.0)		(2.1)		(0.7)		(0.4)		(0.1)		(0.7)
September 30, 2021	1,528.6		786.3		326.9		85.5		138.5		191.4
Average AUM	1,540.5		805.8		322.6		85.7		135.2		191.2
% of total average AUM	100.0	%	52.3	%	20.9	%	5.6	%	8.8	%	12.4	%

As of and for the Nine Months Ended September 30, 2022 and 2021:


$ in billions	Total		Equity		Fixed Income		Balanced		Money Market		Alternatives
December 31, 2021	1,610.9		841.6		334.8		88.6		148.8		197.1
Long-term inflows	256.4		111.5		88.9		11.8		—		44.2
Long-term outflows	(253.7)		(121.0)		(72.8)		(16.4)		—		(43.5)
Net long-term flows	2.7		(9.5)		16.1		(4.6)		—		0.7
Net flows in non-management fee earning AUM	(1.1)		2.4		(3.5)		—		—		—
Net flows in money market funds	26.3		—		0.3		—		26.0		—
Total net flows	27.9		(7.1)		12.9		(4.6)		26.0		0.7
Reinvested distributions	3.5		1.4		1.1		0.3		—		0.7
Market gains and losses	(278.3)		(224.5)		(31.3)		(15.3)		1.2		(8.4)


Foreign currency translation	(40.7)		(13.9)		(13.2)		(5.4)		(3.9)		(4.3)
September 30, 2022	1,323.3		597.5		304.3		63.6		172.1		185.8
Average AUM	1,472.8		716.0		317.5		75.8		161.0		202.5
% of total average AUM	100.0	%	48.6	%	21.6	%	5.2	%	10.9	%	13.7	%

December 31, 2020	1,349.9		689.6		296.4		78.9		108.5		176.5
Long-term inflows	326.3		158.6		86.5		40.9		—		40.3
Long-term outflows	(257.4)		(134.8)		(54.3)		(34.4)		—		(33.9)
Net long-term flows	68.9		23.8		32.2		6.5		—		6.4
Net flows in non-management fee earning AUM	8.1		7.8		0.3		—		—		—
Net flows in money market funds	29.7		—		—		—		29.7		—
Total net flows	106.7		31.6		32.5		6.5		29.7		6.4
Reinvested distributions	2.6		0.6		1.1		0.3		—		0.6
Market gains and losses	75.6		67.3		(0.9)		(0.2)		0.1		9.3


Foreign currency translation	(6.2)		(2.8)		(2.2)		—		0.2		(1.4)
September 30, 2021	1,528.6		786.3		326.9		85.5		138.5		191.4
Average AUM	1,471.9		762.5		311.5		86.4		126.2		185.3
% of total average AUM	100.0	%	51.8	%	21.1	%	5.9	%	8.6	%	12.6	%

See accompanying notes immediately following these AUM tables.

Active AUM by Asset Class (2)

As of and for the Three Months Ended September 30, 2022 and 2021:


$ in billions	Total		Equity		Fixed Income		Balanced		Money Market		Alternatives
June 30, 2022	957.9		287.5		270.6		72.0		164.0		163.8
Long-term inflows	44.5		10.4		25.2		3.2		—		5.7
Long-term outflows	(51.8)		(16.9)		(21.5)		(4.7)		—		(8.7)
Net long-term flows	(7.3)		(6.5)		3.7		(1.5)		—		(3.0)

Net flows in money market funds	10.0		—		0.3		—		9.7		—
Total net flows	2.7		(6.5)		4.0		(1.5)		9.7		(3.0)
Reinvested distributions	0.9		0.2		0.4		0.1		—		0.2
Market gains and losses	(32.0)		(16.5)		(5.6)		(5.1)		0.2		(5.0)


Foreign currency translation	(15.4)		(4.7)		(4.7)		(2.7)		(1.8)		(1.5)
September 30, 2022	914.1		260.0		264.7		62.8		172.1		154.5
Average AUM	961.6		290.7		271.7		69.0		168.8		161.4
% of total average AUM	100.0	%	30.2	%	28.3	%	7.1	%	17.6	%	16.8	%

June 30, 2021	1,066.0		412.0		274.6		87.4		135.7		156.3
Long-term inflows	60.3		16.0		25.0		9.5		—		9.8
Long-term outflows	(53.5)		(23.0)		(14.0)		(8.5)		—		(8.0)
Net long-term flows	6.8		(7.0)		11.0		1.0		—		1.8

Net flows in money market funds	2.6		—		—		—		2.6		—
Total net flows	9.4		(7.0)		11.0		1.0		2.6		1.8
Reinvested distributions	0.8		0.2		0.3		0.1		—		0.2
Market gains and losses	(13.1)		(10.8)		(0.7)		(3.7)		0.3		1.8

Foreign currency translation	(3.1)		(1.5)		(0.5)		(0.4)		(0.1)		(0.6)
September 30, 2021	1,060.0		392.9		284.7		84.4		138.5		159.5
Average AUM	1,065.6		406.4		280.0		84.6		135.2		159.4
% of total average AUM	100.0	%	38.1	%	26.3	%	7.9	%	12.7	%	15.0	%

As of and for the Nine Months Ended September 30, 2022 and 2021:


$ in billions	Total		Equity		Fixed Income		Balanced		Money Market		Alternatives
December 31, 2021	1,082.5		389.6		293.1		87.4		148.8		163.6
Long-term inflows	155.0		43.2		73.5		11.8		—		26.5
Long-term outflows	(172.8)		(65.6)		(65.1)		(16.3)		—		(25.8)
Net long-term flows	(17.8)		(22.4)		8.4		(4.5)		—		0.7

Net flows in money market funds	26.3		—		0.3		—		26.0		—
Total net flows	8.5		(22.4)		8.7		(4.5)		26.0		0.7
Reinvested distributions	3.5		1.4		1.1		0.3		—		0.7
Market gains and losses	(143.6)		(97.2)		(25.9)		(15.0)		1.2		(6.7)


Foreign currency translation	(36.8)		(11.4)		(12.3)		(5.4)		(3.9)		(3.8)
September 30, 2022	914.1		260.0		264.7		62.8		172.1		154.5
Average AUM	1,000.3		320.8		277.7		75.0		161.0		165.8
% of total average AUM	100.0	%	32.1	%	27.8	%	7.4	%	16.1	%	16.6	%

December 31, 2020	979.3		383.2		259.4		77.9		108.5		150.3
Long-term inflows	197.7		55.9		74.8		40.8		—		26.2
Long-term outflows	(181.3)		(73.0)		(48.5)		(34.4)		—		(25.4)
Net long-term flows	16.4		(17.1)		26.3		6.4		—		0.8
Net flows in non-management fee earning AUM	—		—		(0.1)		0.1		—		—
Net flows in money market funds	29.7		—		—		—		29.7		—
Total net flows	46.1		(17.1)		26.2		6.5		29.7		0.8
Reinvested distributions	2.6		0.6		1.1		0.3		—		0.6
Market gains and losses	36.4		27.9		(0.2)		(0.3)		0.1		8.9

Foreign currency translation	(4.4)		(1.7)		(1.8)		—		0.2		(1.1)
September 30, 2021	1,060.0		392.9		284.7		84.4		138.5		159.5
Average AUM	1,041.0		403.1		270.9		85.3		126.2		155.5
% of total average AUM	100.0	%	38.7	%	26.0	%	8.3	%	12.1	%	14.9	%

See accompanying notes immediately following these AUM tables.

Passive AUM by Asset Class (2)

As of and for the Three Months Ended September 30, 2022 and 2021:


$ in billions	Total		Equity		Fixed Income		Balanced		Money Market		Alternatives
June 30, 2022	432.5		357.3		38.5		0.9		—		35.8
Long-term inflows	24.2		14.6		5.2		—		—		4.4
Long-term outflows	(24.6)		(15.5)		(2.4)		—		—		(6.7)
Net long-term flows	(0.4)		(0.9)		2.8		—		—		(2.3)
Net flows in non-management fee earning AUM	1.9		1.8		0.1		—		—		—

Total net flows	1.5		0.9		2.9		—		—		(2.3)

Market gains and losses	(23.1)		(19.6)		(1.4)		(0.1)		—		(2.0)


Foreign currency translation	(1.7)		(1.1)		(0.4)		—		—		(0.2)
September 30, 2022	409.2		337.5		39.6		0.8		—		31.3
Average AUM	454.6		378.8		39.7		0.9		—		35.2
% of total average AUM	100.0	%	83.3	%	8.7	%	0.3	%	—	%	7.7	%

June 30, 2021	459.0		383.5		43.0		1.1		—		31.4
Long-term inflows	31.4		25.8		2.3		—		—		3.3
Long-term outflows	(24.9)		(19.8)		(2.3)		—		—		(2.8)
Net long-term flows	6.5		6.0		—		—		—		0.5
Net flows in non-management fee earning AUM	5.5		5.8		(0.3)		—		—		—

Total net flows	12.0		11.8		(0.3)		—		—		0.5

Market gains and losses	(1.5)		(1.3)		(0.3)		—		—		0.1

Foreign currency translation	(0.9)		(0.6)		(0.2)		—		—		(0.1)
September 30, 2021	468.6		393.4		42.2		1.1		—		31.9
Average AUM	474.9		399.4		42.6		1.1		—		31.8
% of total average AUM	100.0	%	84.1	%	9.0	%	0.2	%	—	%	6.7	%

As of and for the Nine Months Ended September 30, 2022 and 2021:


$ in billions	Total		Equity		Fixed Income		Balanced		Money Market		Alternatives
December 31, 2021	528.4		452.0		41.7		1.2		—		33.5
Long-term inflows	101.4		68.3		15.4		—		—		17.7
Long-term outflows	(80.9)		(55.4)		(7.7)		(0.1)		—		(17.7)
Net long-term flows	20.5		12.9		7.7		(0.1)		—		—
Net flows in non-management fee earning AUM	(1.1)		2.4		(3.5)		—		—		—

Total net flows	19.4		15.3		4.2		(0.1)		—		—

Market gains and losses	(134.7)		(127.3)		(5.4)		(0.3)		—		(1.7)


Foreign currency translation	(3.9)		(2.5)		(0.9)		—		—		(0.5)
September 30, 2022	409.2		337.5		39.6		0.8		—		31.3
Average AUM	472.5		395.2		39.8		0.9		—		36.6
% of total average AUM	100.0	%	83.6	%	8.4	%	0.2	%	—	%	7.8	%

December 31, 2020	370.6		306.4		37.0		1.0		—		26.2
Long-term inflows	128.6		102.7		11.7		0.1		—		14.1
Long-term outflows	(76.1)		(61.8)		(5.8)		—		—		(8.5)
Net long-term flows	52.5		40.9		5.9		0.1		—		5.6
Net flows in non-management fee earning AUM	8.1		7.8		0.4		(0.1)		—		—

Total net flows	60.6		48.7		6.3		—		—		5.6

Market gains and losses	39.2		39.4		(0.7)		0.1		—		0.4

Foreign currency translation	(1.8)		(1.1)		(0.4)		—		—		(0.3)
September 30, 2021	468.6		393.4		42.2		1.1		—		31.9
Average AUM	430.9		359.4		40.6		1.1		—		29.8
% of total average AUM	100.0	%	83.4	%	9.4	%	0.3	%	—	%	6.9	%

See accompanying notes immediately following these AUM tables.

Total AUM by Client Domicile (3)

As of and for the Three Months Ended September 30, 2022 and 2021:


$ in billions	Total	Americas	Asia Pacific	EMEA(4)
June 30, 2022	1,390.4	973.5	224.4	192.5
Long-term inflows	68.7	34.8	20.1	13.8
Long-term outflows	(76.4)	(44.7)	(15.0)	(16.7)
Net long-term flows	(7.7)	(9.9)	5.1	(2.9)
Net flows in non-management fee earning AUM	1.9	2.8	0.6	(1.5)
Net flows in money market funds	10.0	10.9	(0.4)	(0.5)
Total net flows	4.2	3.8	5.3	(4.9)
Reinvested distributions	0.9	0.8	—	0.1
Market gains and losses	(55.1)	(35.9)	(9.4)	(9.8)


Foreign currency translation	(17.1)	(1.4)	(10.0)	(5.7)
September 30, 2022	1,323.3	940.8	210.3	172.2

June 30, 2021	1,525.0	1,075.8	225.6	223.6
Long-term inflows	91.7	49.7	26.0	16.0
Long-term outflows	(78.4)	(44.9)	(16.7)	(16.8)
Net long-term flows	13.3	4.8	9.3	(0.8)
Net flows in non-management fee earning AUM	5.5	4.6	0.9	—
Net flows in money market funds	2.6	2.7	(0.2)	0.1
Total net flows	21.4	12.1	10.0	(0.7)
Reinvested distributions	0.8	0.7	—	0.1
Market gains and losses	(14.6)	(8.7)	(4.2)	(1.7)


Foreign currency translation	(4.0)	(0.7)	(1.1)	(2.2)
September 30, 2021	1,528.6	1,079.2	230.3	219.1

As of and for the Nine Months Ended September 30, 2022 and 2021:


$ in billions	Total	Americas	Asia Pacific	EMEA(4)
December 31, 2021	1,610.9	1,132.5	247.3	231.1
Long-term inflows	256.4	145.3	56.9	54.2
Long-term outflows	(253.7)	(151.2)	(46.1)	(56.4)
Net long-term flows	2.7	(5.9)	10.8	(2.2)
Net flows in non-management fee earning AUM	(1.1)	(1.9)	1.4	(0.6)
Net flows in money market funds	26.3	27.3	0.4	(1.4)
Total net flows	27.9	19.5	12.6	(4.2)
Reinvested distributions	3.5	3.3	—	0.2
Market gains and losses	(278.3)	(212.2)	(25.3)	(40.8)


Foreign currency translation	(40.7)	(2.3)	(24.3)	(14.1)
September 30, 2022	1,323.3	940.8	210.3	172.2

December 31, 2020	1,349.9	959.9	171.3	218.7
Long-term inflows	326.3	163.6	107.8	54.9
Long-term outflows	(257.4)	(143.8)	(53.5)	(60.1)
Net long-term flows	68.9	19.8	54.3	(5.2)
Net flows in non-management fee earning AUM	8.1	6.3	1.8	—
Net flows in money market funds	29.7	25.5	4.3	(0.1)
Total net flows	106.7	51.6	60.4	(5.3)
Reinvested distributions	2.6	2.3	0.1	0.2
Market gains and losses	75.6	65.5	2.3	7.8


Foreign currency translation	(6.2)	(0.1)	(3.8)	(2.3)
September 30, 2021	1,528.6	1,079.2	230.3	219.1

See accompanying notes immediately following these AUM tables.

Active AUM by Client Domicile (3)

As of and for the Three Months Ended September 30, 2022 and 2021:


$ in billions	Total	Americas	Asia Pacific	EMEA(4)
June 30, 2022	957.9	649.1	191.3	117.5
Long-term inflows	44.5	20.6	18.9	5.0
Long-term outflows	(51.8)	(31.1)	(13.3)	(7.4)
Net long-term flows	(7.3)	(10.5)	5.6	(2.4)

Net flows in money market funds	10.0	10.9	(0.4)	(0.5)
Total net flows	2.7	0.4	5.2	(2.9)
Reinvested distributions	0.9	0.8	—	0.1
Market gains and losses	(32.0)	(19.7)	(6.8)	(5.5)


Foreign currency translation	(15.4)	(1.3)	(8.8)	(5.3)
September 30, 2022	914.1	629.3	180.9	103.9

June 30, 2021	1,066.0	716.3	193.4	156.3
Long-term inflows	60.3	28.8	24.3	7.2
Long-term outflows	(53.5)	(27.8)	(15.2)	(10.5)
Net long-term flows	6.8	1.0	9.1	(3.3)

Net flows in money market funds	2.6	2.7	(0.2)	0.1
Total net flows	9.4	3.7	8.9	(3.2)
Reinvested distributions	0.8	0.7	—	0.1
Market gains and losses	(13.1)	(7.2)	(4.4)	(1.5)

Foreign currency translation	(3.1)	(0.7)	(0.4)	(2.0)
September 30, 2021	1,060.0	712.8	197.5	149.7

As of and for the Nine Months Ended September 30, 2022 and 2021:


$ in billions	Total	Americas	Asia Pacific	EMEA(4)
December 31, 2021	1,082.5	724.5	208.8	149.2
Long-term inflows	155.0	83.8	52.5	18.7
Long-term outflows	(172.8)	(102.9)	(41.2)	(28.7)
Net long-term flows	(17.8)	(19.1)	11.3	(10.0)
Net flows in non-management fee earning AUM	—	—	0.1	(0.1)
Net flows in money market funds	26.3	27.3	0.4	(1.4)
Total net flows	8.5	8.2	11.8	(11.5)
Reinvested distributions	3.5	3.3	—	0.2
Market gains and losses	(143.6)	(104.5)	(18.2)	(20.9)


Foreign currency translation	(36.8)	(2.2)	(21.5)	(13.1)
September 30, 2022	914.1	629.3	180.9	103.9

December 31, 2020	979.3	656.9	163.4	159.0
Long-term inflows	197.7	87.8	83.3	26.6
Long-term outflows	(181.3)	(92.7)	(50.2)	(38.4)
Net long-term flows	16.4	(4.9)	33.1	(11.8)
Net flows in non-management fee earning AUM	—	(0.1)	0.1	—
Net flows in money market funds	29.7	25.5	4.3	(0.1)
Total net flows	46.1	20.5	37.5	(11.9)
Reinvested distributions	2.6	2.3	0.1	0.2
Market gains and losses	36.4	33.2	(1.1)	4.3

Foreign currency translation	(4.4)	(0.1)	(2.4)	(1.9)
September 30, 2021	1060.0	712.8	197.5	149.7

See accompanying notes immediately following these AUM tables.

Passive AUM by Client Domicile (3)

As of and for the Three Months Ended September 30, 2022 and 2021:


$ in billions	Total	Americas	Asia Pacific	EMEA(4)
June 30, 2022	432.5	324.4	33.1	75.0
Long-term inflows	24.2	14.2	1.2	8.8
Long-term outflows	(24.6)	(13.6)	(1.7)	(9.3)
Net long-term flows	(0.4)	0.6	(0.5)	(0.5)
Net flows in non-management fee earning AUM	1.9	2.8	0.6	(1.5)

Total net flows	1.5	3.4	0.1	(2.0)

Market gains and losses	(23.1)	(16.2)	(2.6)	(4.3)


Foreign currency translation	(1.7)	(0.1)	(1.2)	(0.4)
September 30, 2022	409.2	311.5	29.4	68.3

June 30, 2021	459.0	359.5	32.2	67.3
Long-term inflows	31.4	20.9	1.7	8.8
Long-term outflows	(24.9)	(17.1)	(1.5)	(6.3)
Net long-term flows	6.5	3.8	0.2	2.5
Net flows in non-management fee earning AUM	5.5	4.6	0.9	—

Total net flows	12.0	8.4	1.1	2.5

Market gains and losses	(1.5)	(1.5)	0.2	(0.2)

Foreign currency translation	(0.9)	—	(0.7)	(0.2)
September 30, 2021	468.6	366.4	32.8	69.4

As of and for the Nine Months Ended September 30, 2022 and 2021:


$ in billions	Total	Americas	Asia Pacific	EMEA(4)
December 31, 2021	528.4	408.0	38.5	81.9
Long-term inflows	101.4	61.5	4.4	35.5
Long-term outflows	(80.9)	(48.3)	(4.9)	(27.7)
Net long-term flows	20.5	13.2	(0.5)	7.8
Net flows in non-management fee earning AUM	(1.1)	(1.9)	1.3	(0.5)

Total net flows	19.4	11.3	0.8	7.3

Market gains and losses	(134.7)	(107.7)	(7.1)	(19.9)


Foreign currency translation	(3.9)	(0.1)	(2.8)	(1.0)
September 30, 2022	409.2	311.5	29.4	68.3

December 31, 2020	370.6	303.0	7.9	59.7
Long-term inflows	128.6	75.8	24.5	28.3
Long-term outflows	(76.1)	(51.1)	(3.3)	(21.7)
Net long-term flows	52.5	24.7	21.2	6.6
Net flows in non-management fee earning AUM	8.1	6.4	1.7	—

Total net flows	60.6	31.1	22.9	6.6

Market gains and losses	39.2	32.3	3.4	3.5

Foreign currency translation	(1.8)	—	(1.4)	(0.4)
September 30, 2021	468.6	366.4	32.8	69.4

(1) The Channel AUM tables reflect AUM aggregated based on the company’s retail and institutional distribution teams which originated the AUM. This aggregation is a proxy for presenting AUM in the retail and institutional markets in which the company operates.

(2) The Asset classes AUM tables reflect AUM aggregated based on the common type of underlying investments.

(3) The Client domicile AUM tables reflect AUM aggregated based on the domicile of the underlying clients.

(4) In the third quarter of 2022, UK is now presented as part of EMEA. EMEA includes UK net long-term outflows of $1.3 billion and $5.4 billion for the three and nine months ended September 30, 2022, respectively. Ending AUM of UK as of September 30, 2022 was $39.5 billion .

Results of Operations for the three and nine months ended September 30, 2022 compared to the three and nine months ended September 30, 2021

The discussion below includes the use of non-GAAP financial measures. See “Schedule of Non-GAAP Information” for additional details and reconciliations of the most directly comparable U.S. GAAP measures to the non-GAAP measures.

Operating Revenues and Net Revenues

The main categories of revenues, and the dollar and percentage change between the periods, are as follows:


			Variance					Variance
	Three months ended September 30,		2022 vs 2021			Nine months ended September 30,		2022 vs 2021
$ in millions	2022	2021	$ Change	% Change		2022	2021	$ Change	% Change
Investment management fees	1,057.3	1,275.5	(218.2)	(17.1)	%	3,351.3	3,729.5	(378.2)	(10.1)	%
Service and distribution fees	340.2	409.1	(68.9)	(16.8)	%	1,073.0	1,191.2	(118.2)	(9.9)	%
Performance fees	3.0	4.8	(1.8)	(37.5)	%	13.2	22.0	(8.8)	(40.0)	%
Other	45.2	60.6	(15.4)	(25.4)	%	168.0	188.4	(20.4)	(10.8)	%
Total operating revenues	1,445.7	1,750.0	(304.3)	(17.4)	%	4,605.5	5,131.1	(525.6)	(10.2)	%

Revenue Adjustments:
Investment management fees	(185.5)	(216.3)	30.8	(14.2)	%	(584.5)	(632.3)	47.8	(7.6)	%
Service and distribution fees	(232.1)	(278.0)	45.9	(16.5)	%	(730.1)	(809.2)	79.1	(9.8)	%
Other	(33.7)	(52.1)	18.4	(35.3)	%	(124.3)	(167.3)	43.0	(25.7)	%
Total Revenue Adjustments (1)	(451.3)	(546.4)	95.1	(17.4)	%	(1,438.9)	(1,608.8)	169.9	(10.6)	%
Invesco Great Wall	104.6	118.7	(14.1)	(11.9)	%	334.8	333.6	1.2	0.4	%
CIP	11.6	11.2	0.4	3.6	%	35.5	31.5	4.0	12.7	%
Net revenues (2)	1,110.6	1,333.5	(222.9)	(16.7)	%	3,536.9	3,887.4	(350.5)	(9.0)	%

(1) Total revenue adjustments include passed through investment management, service and distribution and other revenues and equal the same amount as the third-party distribution, service and advisory expenses.

(2) Net revenues are operating revenues less revenue adjustments, plus net revenues from Invesco Great Wall, plus management and performance fees earned from CIP. See “Schedule of Non-GAAP Information” for additional important disclosures regarding the use of net revenues.

The impact of foreign exchange rate movements decreased operating revenues by $50.3 million during the three months ended September 30, 2022 when compared to the three months ended September 30, 2021.

The impact of foreign exchange rate movements decreased operating revenues by $108.3 million during the nine months ended September 30, 2022 when compared to the nine months ended September 30, 2021.

Our revenues are directly influenced by the level and composition of our AUM. Therefore, movements in global capital market levels, net business inflows (or outflows), changes in the mix of investment products between asset classes and geographies may materially affect our revenues from period to period. See the company’s disclosures regarding the changes in AUM during the three and nine months ended September 30, 2022 and September 30, 2021 in the “Assets Under Management” section above for additional information.

Passive AUM generally earn a lower effective fee rate than active asset classes, and therefore, changes in the mix of AUM have an impact on revenues and net revenue yield. In addition, as a significant proportion of our AUM is based outside of the U.S., changes in foreign exchange rates can result in a change to the mix of U.S. Dollar denominated AUM for AUM denominated in other currencies. As fee rates differ across geographic locations, changes to exchange rates have an impact on revenues and net revenue yields.

Average AUM was $1,416.2 billion in the three months ended September 30, 2022, as compared to $1,540.5 billion in the three months ended September 30, 2021. In addition to the impact of the decrease in AUM on our revenues, changes in the mix of the AUM between the periods also impacts our revenues. At the industry level, investors continue to shift towards passive products such as ETFs. As a result of the decline in AUM and the change in AUM mix, revenues and the resulting net revenue yield ex performance fees ex QQQ has declined from 39.1 basis points for the three months ended September 30, 2021 to 35.3 basis points for the quarter ended September 30, 2022.

Average AUM was $1,472.8 billion in the nine months ended September 30, 2022, as compared to $1,471.9 billion in the nine months ended September 30, 2021. The impact of the increase in AUM on our revenues was offset by changes in the mix of the AUM between the periods. At the industry level, investors continue to shift towards passive products such as ETFs. As a result of this change in AUM mix, revenues and the resulting net revenue yield ex performance fees ex QQQ has declined from 39.4 basis points for the nine months ended September 30, 2021 to 36.0 basis points for the nine months ended September 30, 2022.

Investment Management Fees

Investment management fees were $1,057.3 million for the three months ended September 30, 2022 as compared to $1,275.5 million for the three months ended September 30, 2021. The impact of foreign exchange rate movements decreased investment management fees by $42.6 million during the three months ended September 30, 2022 as compared to the three months ended September 30, 2021. After allowing for foreign exchange movements, investment management fees decreased by $175.6 million. See discussion above on how AUM changes impact our investment management fees.

Investment management fees were $3,351.3 million for the nine months ended September 30, 2022 as compared to $3,729.5 million for the nine months ended September 30, 2021. The impact of foreign exchange rate movements decreased investment management fees by $90.1 million during the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021. After allowing for foreign exchange movements, investment management fees decreased by $288.1 million. See discussion above on how AUM changes impact our investment management fees.

The discretionary money market fee waivers (see Item 1. Financial Statements - Note 7, "Revenue") also impact our investment management fees. During the three months ended September 30, 2022, waivers reduced management fees by $1.4 million, an improvement from waivers of $40.8 million in the quarter ended September 30, 2021. During the nine months ended September 30, 2022, waivers reduced management fees by $33.7 million, an improvement from waivers of $111.2 million from the nine months ended September 30, 2021.

Service and Distribution Fees

Service and distribution fees were $340.2 million for the three months ended September 30, 2022 as compared to $409.1 million for the three months ended September 30, 2021. The impact of foreign exchange rate movements decreased service and distribution fees by $7.0 million during the three months ended September 30, 2022 as compared to the three months ended September 30, 2021. After allowing for foreign exchange movements, service and distribution fees decreased by $61.9 million. The decrease results from lower AUM to which these fees apply.

Service and distribution fees were $1,073.0 million. for the nine months ended September 30, 2022 as compared to $1,191.2 million for the nine months ended September 30, 2021. The impact of foreign exchange rate movements decreased service and distribution fees by $15.6 million during the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021. After allowing for foreign exchange movements, service and distribution fees decreased by $102.6 million. The decrease results from lower AUM to which these fees apply.

Performance Fees

Of our $1,323.3 billion in AUM at September 30, 2022, approximately $59.3 billion could potentially earn performance fees, including carried interests and performance fees related to partnership investments and separate accounts. Performance fees during the three and nine months ended September 30, 2022 were primarily generated from real estate products.

Other Revenues

Other revenues were $45.2 million for the three months ended September 30, 2022 as compared to $60.6 million for the three months ended September 30, 2021. The decrease in other revenues for the three months ended September 30, 2022 as compared to the three months ended September 20, 2021 was primarily driven by lower front end fees of $17.1 million and lower real estate transaction fees of $2.8 million which were partially offset by a $4.6 million increase in other revenues.

Other revenues were $168.0 million for the nine months ended September 30, 2022 as compared to $188.4 million for the nine months ended September 30, 2021. The decrease in other revenues for the nine months ended September 30, 2022 as compared to the nine months ended September 20, 2021was primarily driven by lower front end fees of $41.8 million which were partially offset by increases of $14.0 million in real estate transaction fees and $9.0 million in other revenues.

Invesco Great Wall

The company’s most significant joint venture is our 49% investment in Invesco Great Wall Fund Management Company Limited (the “Invesco Great Wall” joint venture). Management reflects 100% of Invesco Great Wall’s activity in its net revenues and adjusted operating expenses because it is important to evaluate the contribution that Invesco Great Wall is making to the business. The company’s non-GAAP operating results reflect the economics of these holdings on a basis consistent with the underlying AUM and flows. Adjusted net income is reduced by the amount of earnings attributable to the 51% non-controlling interests. See “Schedule of Non-GAAP Information” for additional disclosures regarding the use of net revenues.

Net revenues from Invesco Great Wall were $104.6 million and average AUM was $93.1 billion for the three months ended September 30, 2022 (net revenues were $118.7 million and average AUM was $85.5 billion in the three months ended September 30, 2021). The impact of foreign exchange rate movements during the three months ended September 30, 2022 decreased net revenues by $5.9 million as compared to the three months ended September 30, 2021. After allowing for foreign exchange movements, net revenues from Invesco Great Wall were $110.5 million. The decrease in revenue is a result of a reduction in net revenue yield due to changes in the mix of AUM.

Net revenues from Invesco Great Wall were $334.8 million and average AUM was $95.4 billion for the nine months ended September 30, 2022 (net revenues were $333.6 million and average AUM was $81.1 billion in the nine months ended September 30, 2021). The impact of foreign exchange rate movements during the nine months ended September 30, 2022 decreased net revenues by $5.7 million as compared to the nine months ended September 30, 2021. After allowing for foreign exchange movements, net revenues from Invesco Great Wall were $340.5 million. The increase in revenue is a result of higher AUM, partially offset by a reduction in net revenue yield due to changes in the mix of AUM.

Management, performance and other fees earned from CIP

Management believes that the consolidation of investment products may impact a reader’s analysis of our underlying results of operations and could result in investor confusion or the production of information about the company by analysts or external credit rating agencies that is not reflective of the underlying results of operations and financial condition of the company. Accordingly, management believes that it is appropriate to adjust operating revenues for the impact of CIP in calculating net revenues. As management and performance fees earned by Invesco from the consolidated products are eliminated upon consolidation of the investment products, management believes that it is appropriate to add these operating revenues back in the calculation of net revenues. See “Schedule of Non-GAAP Information” for additional disclosures regarding the use of net revenues.

Management and performance fees earned from CIP were $11.6 million in the three months ended September 30, 2022 (three months ended September 30, 2021: $11.2 million).

Management and performance fees earned from CIP were $35.5 million in the nine months ended September 30, 2022 (nine months ended September 30, 2021: $31.5 million).

Operating Expenses

The main categories of operating expenses, and the dollar and percentage changes between periods, are as follows:


			Variance					Variance
	Three months ended September 30,		2022 vs 2021			Nine months ended September 30,		2022 vs 2021
$ in millions	2022	2021	$ Change	% Change		2022	2021	$ Change	% Change
Third-party distribution, service and advisory	451.3	546.4	(95.1)	(17.4)	%	1,438.9	1,608.8	(169.9)	(10.6)	%
Employee compensation	420.8	476.7	(55.9)	(11.7)	%	1,260.9	1,452.9	(192.0)	(13.2)	%
Marketing	27.6	20.3	7.3	36.0	%	83.1	60.6	22.5	37.1	%
Property, office and technology	133.2	134.2	(1.0)	(0.7)	%	400.2	390.7	9.5	2.4	%
General and administrative	48.7	105.0	(56.3)	(53.6)	%	270.6	304.9	(34.3)	(11.2)	%
Transaction, integration and restructuring	(0.6)	(12.0)	11.4	(95.0)	%	34.8	(13.3)	48.1	N/A
Amortization of intangibles	14.5	15.6	(1.1)	(7.1)	%	44.4	47.5	(3.1)	(6.5)	%
Total operating expenses	1,095.5	1,286.2	(190.7)	(14.8)	%	3,532.9	3,852.1	(319.2)	(8.3)	%

The table below sets forth these expense categories as a percentage of total operating expenses and operating revenues, which we believe provides useful information as to the relative significance of each type of expense.


$ in millions	Three months ended September 30, 2022	% of Total Operating Expenses		% of Operating Revenues		Three months ended September 30, 2021	% of Total Operating Expenses		% of Operating Revenues
Third-party distribution, service and advisory	451.3	41.2	%	31.2	%	546.4	42.5	%	31.2	%
Employee compensation	420.8	38.4	%	29.1	%	476.7	37.1	%	27.2	%
Marketing	27.6	2.5	%	1.9	%	20.3	1.6	%	1.2	%
Property, office and technology	133.2	12.2	%	9.2	%	134.2	10.4	%	7.7	%
General and administrative	48.7	4.4	%	3.4	%	105.0	8.2	%	6.0	%
Transaction, integration and restructuring	(0.6)	(0.1)	%	—	%	(12.0)	(0.9)	%	(0.7)	%
Amortization of intangibles	14.5	1.4	%	1.0	%	15.6	1.1	%	0.9	%
Total operating expenses	1,095.5	100.0	%	75.8	%	1,286.2	100.0	%	73.5	%


$ in millions	Nine months ended September 30, 2022	% of Total Operating Expenses		% of Operating Revenues		Nine months ended September 30, 2021	% of Total Operating Expenses		% of Operating Revenues
Third-party distribution, service and advisory	1,438.9	40.7	%	31.2	%	1,608.8	41.8	%	31.4	%
Employee compensation	1260.9	35.7	%	27.4	%	1,452.9	37.7	%	28.3	%
Marketing	83.1	2.4	%	1.8	%	60.6	1.6	%	1.2	%
Property, office and technology	400.2	11.3	%	8.7	%	390.7	10.1	%	7.6	%
General and administrative	270.6	7.7	%	5.9	%	304.9	7.9	%	5.9	%
Transaction, integration and restructuring	34.8	1.0	%	0.8	%	(13.3)	(0.3)	%	(0.3)	%
Amortization of intangibles	44.4	1.2	%	1.0	%	47.5	1.2	%	0.9	%
Total operating expenses	3,532.9	100.0	%	76.8	%	3,852.1	100.0	%	75.0	%

The impact of foreign exchange rate movements decreased total operating expenses by $46.9 million during the three months ended September 30, 2022 as compared to the three months ended September 30, 2021.

The impact of foreign exchange rate movements decreased total operating expenses by $100.3 million during the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021.

Third-Party Distribution, Service and Advisory

Third-party distribution, service and advisory expenses were $451.3 million for the three months ended September 30, 2022 as compared to $546.4 million for the three months ended September 30, 2021. The impact of foreign exchange rate movements decreased third-party costs by $14.7 million during the three months ended September 30, 2022 as compared to the three months ended September 30, 2021. After allowing for foreign exchange rate changes, the decrease in costs was $80.4 million. The decrease is primarily due to decreases of $41.9 million in service fees due to lower average AUM, $19.7 million in renewal commissions, and $13.2 million in transaction fees.

Third-party distribution, service and advisory expenses were $1,438.9 million for the nine months ended September 30, 2022 as compared to $1,608.8 million for the nine months ended September 30, 2021. The impact of foreign exchange rate movements decreased third-party costs by $32.9 million during the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021. After allowing for foreign exchange rate changes, the decrease in costs was $137.0 million. The decrease was primarily due to decreases of $69.6 million in service fees due to lower average AUM, $42.0 million in renewal commissions, $28.4 million in transaction fees, and $14.3 million in front end commissions partially offset by $18.0 million of higher administrative and other third party management fees.

Employee Compensation

Employee compensation expenses were $420.8 million for the three months ended September 30, 2022 as compared to $476.7 million for the three months ended September 30, 2021. The impact of foreign exchange rate movements decreased employee compensation by $18.7 million during the three months ended September 30, 2022 as compared to the three months ended September 30, 2021. After allowing for foreign exchange rate changes, there was a decrease in employee compensation of $37.2 million. This decrease was primarily driven by $39.5 million in lower variable compensation which is in line with lower revenues in 2022 compared to 2021.

Employee compensation expenses were $1,260.9 million for the nine months ended September 30, 2022 as compared to $1,452.9 million for the nine months ended September 30, 2021. The impact of foreign exchange rate movements decreased employee compensation by $38.6 million during the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021. After allowing for foreign exchange rate changes, there was a decrease in employee compensation of $153.4 million. This decrease was driven by decreases of $90.1 million related to the mark-to-market on the deferred compensation liability and $92.6 million of lower variable compensation which is in line with lower revenues in 2022 compared to 2021, which were partially offset by an increase in staff costs and benefits.

Headcount at September 30, 2022 was 8,621 (September 30, 2021: 8,507).

Marketing

Marketing expenses were $27.6 million for the three months ended September 30, 2022 as compared to $20.3 million for the three months ended September 30, 2021. The impact of foreign exchange rate movements decreased marketing expenses by $1.5 million during the three months ended September 30, 2022 as compared to the three months ended September 30, 2021. After allowing for foreign exchange rate changes, the increase in marketing expenses was $8.8 million. The increase was related to higher marketing travel costs as travel activity returned to more normalized levels with the easing of COVID-19-related travel restrictions.

Marketing expenses were $83.1 million for the nine months ended September 30, 2022 as compared to $60.6 million for the nine months ended September 30, 2021. The impact of foreign exchange rate movements decreased marketing expenses by $3.6 million during the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021. After allowing for foreign exchange rate changes, the increase in marketing expenses was $26.1 million. The increase was related to increased client events and marketing travel and entertainment costs as travel activity returned to more normalized levels with the easing of COVID-19-related travel restrictions.

Property, Office and Technology

Property, office and technology expenses were $133.2 million for the three months ended September 30, 2022 as compared to $134.2 million for the three months ended September 30, 2021. The impact of foreign exchange rate movements decreased property, office and technology expenses by $6.1 million during the three months ended September 30, 2022 as

compared to the three months ended September 30, 2021. After allowing for foreign exchange rate movements, the increase was $5.1 million. The increase was driven by an increase in software maintenance costs of $3.8 million and higher property expenses.

Property, office and technology expenses were $400.2 million for the nine months ended September 30, 2022 as compared to $390.7 million for the nine months ended September 30, 2021. The impact of foreign exchange rate movements decreased property, office and technology expenses by $11.7 million during the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021. After allowing for foreign exchange rate movements, the increase was $21.2 million. The increase was driven by increases in software maintenance costs of $16.2 million, outsourced administration costs of $4.7 million, and depreciation expenses of $1.3 million.

General and Administrative

General and administrative expenses were $48.7 million for the three months ended September 30, 2022 as compared to $105.0 million for the three months ended September 30, 2021. The impact of foreign exchange rate movements decreased general and administrative expenses by $5.9 million during the three months ended September 30, 2022 as compared to the three months ended September 30, 2021. After allowing for foreign exchange rate movements, the decrease was $50.4 million. The decrease was primarily a result of insurance recoveries of $60 million received during the quarter relating to fund related losses incurred in prior periods. The decrease was partially offset by $3.6 million of increased travel costs as travel activity returned to more normalized levels with the easing of COVID-19-related travel restrictions, an increase of $6.6 million in professional service costs, and an increase of $2.7 million in other fund expenses.

General and administrative expenses were $270.6 million for the nine months ended September 30, 2022 as compared to $304.9 million for the nine months ended September 30, 2021. The impact of foreign exchange rate movements decreased general and administrative expenses by $13.5 million during the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021. After allowing for foreign exchange rate movements, the decrease was $20.8 million. The decrease was primarily a result of insurance recoveries of $60 million received during the year relating to fund related losses incurred in prior periods. The decrease was partially offset by a $22.1 million increase in professional services costs, and an increase of $10.2 million in travel and administrative expenses.

Transaction, Integration and Restructuring

Transaction and integration expense (excluding restructuring) was a benefit to expense of $15.0 million during the three months ended September 30, 2022 (three months ended September 30, 2021: a benefit of $37.6 million), primarily related to $15.0 million of ongoing insurance recoveries related to the previously disclosed OppenheimerFunds acquisition-related matter.

Restructuring costs were $14.4 million for the three months ended September 30, 2022 (three months ended September 30, 2021: $25.6 million). Restructuring costs related to the strategic evaluation were $5.4 million for the three months ended September 30, 2022 ( September 30, 2021: $17.9 million). See Note 10, "Restructuring", for additional details. The remaining restructuring costs are primarily composed of professional service costs related to other initiatives.

Transaction and integration expense (excluding restructuring) was a benefit to expense of $18.0 million during the nine months ended September 30, 2022 (nine months ended September 30, 2021: a benefit of $96.0 million), primarily related to $30.0 million of ongoing insurance recoveries related to the previously disclosed OppenheimerFunds acquisition-related matter. The benefit was partially offset by $8.6 million of compensation-related expenses and $3.1 million of professional fees.

Restructuring costs were $52.8 million for the nine months ended September 30, 2022 (nine months ended September 30, 2021: $82.7 million). Restructuring costs related to the strategic evaluation were $32.4 million for the nine months ended September 30, 2022 (nine months ended September 30, 2021: $68.0 million) and are primarily composed of non-cash property, office and technology costs and stock-based compensation (see Note 10, "Restructuring", for additional details). The remaining restructuring costs are primarily composed of professional service costs related to other initiatives.

Other Income and Expenses

The main categories of other income and expenses, and the dollar and percentage changes between periods, are as follows:


			Variance					Variance
	Three months ended September 30,		2022 vs 2021			Nine months ended September 30,		2022 vs 2021
$ in millions	2022	2021	$ Change	% Change		2022	2021	$ Change	% Change
Equity in earnings of unconsolidated affiliates	20.2	54.6	(34.4)	(63.0)	%	78.3	119.3	(41.0)	(34.4)	%
Interest and dividend income	3.3	1.9	1.4	73.7	%	6.6	3.6	3.0	83.3	%
Interest expense	(18.6)	(23.1)	4.5	(19.5)	%	(67.6)	(71.5)	3.9	(5.5)	%
Other gains/(losses), net	(34.6)	(12.1)	(22.5)	186.0	%	(170.1)	65.4	(235.5)	N/A
Other income/(expense) of CIP, net	(65.4)	200.2	(265.6)	N/A		(62.5)	416.9	(479.4)	N/A
Total other income and expenses	(95.1)	221.5	(316.6)	N/A		(215.3)	533.7	(749.0)	N/A

Equity in earnings of unconsolidated affiliates

The decrease for three months ended September 30, 2022 is primarily driven by a decrease of $25.0 million in our real estate and private equity investments.

The decrease for nine months ended September 30, 2022 is primarily driven by a decrease of $40.3 million in our private equity investments partially offset by an increase of $9.2 million in our real estate investments.

Other gains/(losses), net

Included in the loss for the three months ended September 30, 2022 were $29.7 million of losses on investments and instruments held for our deferred compensation plans and $4.2 million of net losses related to the mark-to-market on seed money investments. Included in the losses for the three months ended September 30, 2021 were $9.4 million of losses on investments and instruments held for our deferred compensation plans and $5.0 million of investment losses, partially offset by $1.7 million of net gains related to the mark-to-market on seed money investments.

Included in the loss for the nine months ended September 30, 2022, were $151.8 million of losses on investments and instruments held for our deferred compensation plans and $26.3 million of net losses related to the mark-to-market on seed money investments. Included in the gain for the nine months ended September 30, 2021 were $35.3 million of gains on investments and instruments held for our deferred compensation plans, $25.8 million of net gains related to the mark-to-market on seed money investments and $8.1 million of gains on acquisition-related contingent consideration liabilities, partially offset by $5.3 million of investment losses.

Other income/(expense) of CIP

In the three months ended September 30, 2022, interest and dividend income of CIP increased by $18.7 million to $97.9 million (three months ended September 30, 2021: $79.2 million). Interest expense of CIP increased by $15.9 million to $57.4 million (three months ended September 30, 2021: $41.5 million).

In the nine months ended September 30, 2022, interest and dividend income of CIP increased by $40.6 million to $255.0 million (nine months ended September 30, 2021: $214.4 million). Interest expense of CIP increased by $24.1 million to $144.9 million (nine months ended September 30, 2021: $120.8 million).

Included in other income/(expense) of CIP are the realized and unrealized gains and losses on the underlying investments and debt of CIP. In the three months ended September 30, 2022, the realized and unrealized gains/(losses) of CIP were net losses of $105.9 million as compared to net gains of $162.5 million in the three months ended September 30, 2021. In the nine months ended September 30, 2022, the realized and unrealized gains/(losses) of CIP were net losses of $172.6 million as compared to net gains of $323.3 million in the nine months ended September 30, 2021. The net losses during the three and nine months ended September 30, 2022 were attributable to market-driven losses on investments held by the consolidated funds.

Net impact of CIP and related noncontrolling interests in consolidated entities

The consolidation of investment products does not have an impact on net income attributable to Invesco Ltd. CIP are taxed at the investor level and not at the product level; therefore, there is no tax provision reflected in the net impact of CIP.

The adjustment to net income for the net income/(loss) attributable to noncontrolling interests in consolidated entities represent the CIP profit or loss attributable to third-party investors. The impact of any realized or unrealized gains or losses attributable to the interests of third-parties which is reflected in other income/(expense) of CIP is offset by this adjustment to arrive at net income attributable to Invesco, Ltd.

Additionally, CIP represent less than 1% of the company’s AUM. Therefore, the net gains or losses of CIP are not indicative of the performance of the company’s aggregate AUM.

Income Tax Expense

The company's subsidiaries operate in several taxing jurisdictions around the world, each with its own statutory income tax rate. As a result, the blended average statutory tax rate will vary from year to year depending on the mix of the profits and losses from each jurisdiction.

Our effective tax rate increased to 34.0% for the three months ended September 30, 2022 (three months ended September 30, 2021: 20.4%). The increase in the third quarter of 2022 was primarily due to the unfavorable impact that the losses attributable to interests in CIP has on the effective tax rate and the change in the mix of income across tax jurisdictions, which was partially offset by the favorable impact of the remeasurement of the deferred tax liability for certain intangibles due to a change in future state tax rates.

Our effective tax rate increased to 27.1% for the nine months ended September 30, 2022 (nine months ended September 30, 2021: 22.1%). The increase in the effective tax rate was primarily due to the unfavorable impact that the losses attributable to interests in CIP has on the effective tax rate.

Schedule of Non-GAAP Information

We utilize the following non-GAAP performance measures: net revenue (and by calculation, net revenue yield on AUM), adjusted operating income, adjusted operating margin, adjusted net income attributable to Invesco Ltd. and adjusted diluted earnings per common share (EPS). The company believes the adjusted measures provide valuable insight into the company’s ongoing operational performance and assist in comparisons to its competitors. These measures also assist the company’s management with the establishment of operational budgets and forecasts. The most directly comparable U.S. GAAP measures are operating revenues (and by calculation, gross revenue yield on AUM), operating income, operating margin, net income attributable to Invesco Ltd. and diluted EPS. Each of these measures is discussed more fully below.

The following are reconciliations of operating revenues, operating income (and by calculation, operating margin) and net income attributable to Invesco Ltd. (and by calculation, diluted EPS) on a U.S. GAAP basis to a non-GAAP basis of net revenues, adjusted operating income (and by calculation, adjusted operating margin) and adjusted net income attributable to Invesco Ltd. (and by calculation, adjusted diluted EPS). These non-GAAP measures should not be considered as substitutes for any U.S. GAAP measures and may not be comparable to other similarly titled measures of other companies. Additional reconciling items may be added in the future to these non-GAAP measures if deemed appropriate. The tax effects related to the reconciling items have been calculated based on the tax rate attributable to the jurisdiction to which the transaction relates. Notes to the reconciliations follow the tables.

Reconciliation of Operating revenues to Net revenues:


	Three months ended September 30,		Nine months ended September 30,
$ in millions	2022	2021	2022	2021
Operating revenues, U.S. GAAP basis	1,445.7	1,750.0	4,605.5	5,131.1
Revenue Adjustments (2)
Investment management fees	(185.5)	(216.3)	(584.5)	(632.3)
Service and distribution fees	(232.1)	(278.0)	(730.1)	(809.2)
Other	(33.7)	(52.1)	(124.3)	(167.3)
Total Revenue Adjustments	(451.3)	(546.4)	(1,438.9)	(1,608.8)
Invesco Great Wall (1)	104.6	118.7	334.8	333.6
CIP (3)	11.6	11.2	35.5	31.5
Net revenues	1,110.6	1,333.5	3,536.9	3,887.4

Reconciliation of Operating income to Adjusted operating income:


	Three months ended September 30,				Nine months ended September 30,
$ in millions	2022		2021		2022		2021
Operating income, U.S. GAAP basis	350.2		463.8		1,072.6		1,279.0
Invesco Great Wall (1)	61.8		70.4		197.7		198.9
CIP (3)	15.7		20.7		46.6		56.9
Transaction, integration and restructuring (4)	(0.6)		(12.0)		34.8		(13.3)
Amortization of intangible assets (5)	14.5		15.6		44.4		47.5
Compensation expense related to market valuation changes in deferred compensation plans (6)	(12.2)		3.1		(60.2)		36.1
General and administrative (7)	(60.0)		—		(60.0)		—
Adjusted operating income	369.4		561.6		1,275.9		1,605.1

Operating margin*	24.2	%	26.5	%	23.3	%	24.9	%
Adjusted operating margin**	33.3	%	42.1	%	36.1	%	41.3	%

Reconciliation of Net income attributable to Invesco Ltd. to Adjusted net income attributable to Invesco Ltd.:


	Three months ended September 30,		Nine months ended September 30,
$ in millions, except per common share data	2022	2021	2022	2021
Net income attributable to Invesco Ltd., U.S. GAAP basis	177.4	330.1	496.1	966.2

Transaction, integration and restructuring, net of tax (4)	(0.4)	(8.7)	26.8	(8.4)
Amortization of intangible assets and related tax benefits (5)	18.3	21.3	55.7	64.9
Deferred compensation plan market valuation changes and dividend income less compensation expense, net of tax (6)	13.0	9.4	69.3	(0.1)
Change in contingent consideration, net of tax	—	—	—	(6.2)
General and administrative, net of tax (7)	(45.7)	—	(45.7)	—
Impact of tax rate changes (8)	(6.8)	6.5	(6.8)	23.5
Adjusted net income attributable to Invesco Ltd.	155.8	358.6	595.4	1,039.9

Average common shares outstanding - diluted	459.5	466.0	460.0	465.6
Diluted EPS	$0.39	$0.71	$1.08	$2.08
Adjusted diluted EPS***	$0.34	$0.77	$1.29	$2.23

Operating margin is equal to operating income divided by operating revenues.

** Adjusted operating margin is equal to adjusted operating income divided by net revenues.

*** Adjusted diluted EPS is equal to adjusted net income attributable to Invesco Ltd. divided by the weighted average number of common and restricted common shares outstanding. There is no difference between the calculated earnings per common share amounts presented above and the calculated earnings per common share amounts under the two class method.

(1) Invesco Great Wall

The company reflects 100% of Invesco Great Wall in its net revenues and adjusted operating expenses. The company’s non-GAAP operating results reflect the economics of these holdings on a basis consistent with the underlying AUM and flows. Adjusted net income is reduced by the amount of earnings attributable to non-controlling interests.

(2) Revenue Adjustments

The company calculates net revenues by reducing operating revenues to exclude fees that are passed through to external parties who perform functions on behalf of, and distribute, the company’s managed funds. The net revenue presentation assists in identifying the revenue contribution generated by the company, removing distortions caused by the differing distribution channel fees and allowing for a fair comparison with U.S. peer investment managers and within Invesco’s own investment units. Additionally, management evaluates net revenue yield on AUM, which is equal to net revenues divided by average AUM during the reporting period, as an indicator of the basis point net revenues we receive for each dollar of AUM we manage.

Investment management fees are adjusted by renewal commissions and certain administrative fees. Service and distribution fees are primarily adjusted by distribution fees passed through to broker dealers for certain share classes and pass through fund-related costs. Other is primarily adjusted by transaction fees passed through to third parties.

(3) CIP

See Part I, Item 1, Financial Statements - Note 13, "Consolidated Investment Products", for a detailed analysis of the impact to the company’s Condensed Consolidated Financial Statements from the consolidation of CIP. The reconciling items increase net revenues to reflect the management and performance fees earned by Invesco on consolidated investment products, which are eliminated upon consolidation, and remove the underlying revenues and expenses of the consolidated products that have been included in the U.S. GAAP Condensed Consolidated Statements of Income.

The company believes that the consolidation of investment products may impact a reader’s analysis of our underlying results of operations and could result in investor confusion or the production of information about the company by analysts or external credit rating agencies that is not reflective of the underlying results of operations and financial condition of the company. Accordingly, management believes that it is appropriate to adjust operating revenues and operating income for the impact of CIP in calculating the respective net revenues and adjusted operating income.

(4) Transaction, integration and restructuring related adjustments

The company believes it is useful to investors and other users of our Condensed Consolidated Financial Statements to adjust for the transaction, integration and restructuring charges in arriving at adjusted operating income, adjusted operating margin and adjusted diluted EPS, as this will aid comparability of our results period to period, and aid comparability with peer companies that may not have similar acquisition and restructuring related charges. See “Results of Operations for the three and nine months ended September 30, 2022 and 2021 -- Transaction, Integration and Restructuring” for additional details.

(5) Amortization of intangible assets and related tax benefits

The company believes it is useful to investors and other users of our financial statements to remove amortization expense related to acquired assets net of the tax benefits realized on the tax amortization of goodwill and intangible assets in arriving at adjusted operating income, adjusted operating margin and adjusted diluted EPS, as this will aid comparability of our results period to period, and aid comparability with peer companies that may not have similar acquisition-related charges.

(6) Market movement on deferred compensation plan liabilities

Certain deferred compensation plan awards involve a return to the employee linked to the appreciation (depreciation) of specified investments. Invesco hedges economically the exposure to market movements for these investments.

Since these plans are hedged economically, management believes it is useful to reflect the offset ultimately achieved from hedging the market exposure in the calculation of adjusted operating income (and by calculation, adjusted operating margin) and adjusted net income attributable to Invesco Ltd. (and by calculation, adjusted diluted EPS) to produce results that will be more comparable period to period.

(7) General and administrative

Adjustment includes insurance recoveries related to fund-related losses incurred in previous periods that were not reflected in adjusted operating income and adjusted net income.

(8) Impact of tax rate changes

The company believes it is useful to investors and other users of our financial statements to remove the non-cash tax (benefits)/expenses related to the re-measurement of deferred tax assets and liabilities due to enactment of changes in corporate tax rates.

See below for a reconciliation of deferred compensation related items:


	Three months ended September 30,		Nine months ended September 30,
$ in millions	2022	2021	2022	2021
Market movement on deferred compensation plan liabilities:
Compensation expense related to market valuation changes in deferred compensation liability	(12.2)	3.1	(60.2)	36.1
Adjustments to operating income	(12.2)	3.1	(60.2)	36.1
Market valuation changes and dividend income from investments and instruments held to hedge the deferred compensation plans reflected in other income/(expense)	29.1	9.1	150.1	(36.2)
Taxation on the net impact of the above adjustments	(3.9)	(2.8)	(20.6)	—
Adjustments to net income attributable to Invesco Ltd.	13.0	9.4	69.3	(0.1)

Balance Sheet Discussion (1)

The following table represents a reconciliation of the balance sheet information presented on a U.S. GAAP basis to the balance sheet information excluding the impact of CIP and policyholder balances for the reasons outlined in footnote 1 to the table:


	As of September 30, 2022				As of December 31, 2021
Balance sheet information $ in millions	U.S. GAAP	Impact of CIP	Impact of Policyholders	As Adjusted	U.S. GAAP	Impact of CIP	Impact of Policyholders	As Adjusted
ASSETS
Cash and cash equivalents	1,023.6	—	—	1,023.6	1,896.4	—	—	1,896.4

Investments	906.7	(433.7)	—	1,340.4	926.3	(454.8)	—	1,381.1
Assets of CIP:
Investments and other assets of CIP	8,675.7	8,675.7	—	—	9,575.1	9,575.1	—	—
Cash and cash equivalents of CIP	202.4	202.4	—	—	250.7	250.7	—	—
Assets held for policyholders	754.3	—	754.3	—	1,893.6	—	1,893.6	—
Goodwill and intangible assets, net	15,551.8	—	—	15,551.8	16,110.5	—	—	16,110.5
Other assets (2)	2,157.4	(9.9)	—	2,167.3	2,033.0	(6.4)	—	2,039.4
Total assets	29,271.9	8,434.5	754.3	20,083.1	32,685.6	9,364.6	1,893.6	21,427.4
LIABILITIES
Liabilities of CIP:
Debt of CIP	6,548.7	6,548.7	—	—	7,336.1	7,336.1	—	—
Other liabilities of CIP	286.7	286.7	—	—	846.3	846.3	—	—
Policyholder payables	754.3	—	754.3	—	1,893.6	—	1,893.6	—

Debt	1,487.1	—	—	1,487.1	2,085.1	—	—	2,085.1
Other liabilities (3)	3,691.6	—	—	3,691.6	3,845.7	—	—	3,845.7
Total liabilities	12,768.4	6,835.4	754.3	5,178.7	16,006.8	8,182.4	1,893.6	5,930.8
EQUITY
Total equity attributable to Invesco Ltd.	14,903.7	(0.1)	—	14,903.8	15,495.8	(0.1)	—	15,495.9
Noncontrolling interests (4)	1,599.8	1,599.2	—	0.6	1,183.0	1,182.3	—	0.7
Total equity	16,503.5	1,599.1	—	14,904.4	16,678.8	1,182.2	—	15,496.6
Total liabilities and equity	29,271.9	8,434.5	754.3	20,083.1	32,685.6	9,364.6	1,893.6	21,427.4

(1) These tables include non-GAAP presentations. Assets of CIP are not available for use by Invesco. Additionally, there is no recourse to Invesco for CIP debt. Policyholder assets and liabilities are equal and offsetting and have no impact on Invesco’s shareholder’s equity.

(2) Amounts include restricted cash, accounts receivable, prepaid assets, unsettled fund receivables, property, equipment and software, right-of-use assets and other assets.

(3) Amounts include accrued compensation and benefits, unsettled fund payables, accounts payable and accrued expenses, lease liability and deferred tax liabilities.

(4) Amounts include redeemable noncontrolling interests in consolidated entities and equity attributable to nonredeemable noncontrolling interests in consolidated entities.

Cash and cash equivalents

Cash and cash equivalents decreased by $872.8 million from $1,896.4 million at December 31, 2021 to $1,023.6 million at September 30, 2022. See “Cash Flows Discussion” in the “Liquidity and Capital Resources” section within this Management’s Discussion and Analysis for additional discussion regarding the movements in cash flows during the period.

Investments

As disclosed in Note 3, Investments, balances comprise largely equity method investments in our Chinese joint venture, seed money and co-investments in affiliated funds, and investments related to the company’s deferred compensation plans. During the nine months ended September 30, 2022, net purchases of investments and distributions from equity method investees, as disclosed on our Statement of Cash Flows, were offset by negative market valuations in the period.

As of September 30, 2022, the company had $911.8 million in seed capital and co-investments (December 31, 2021: $856.7 million), including direct investments in consolidated investment products. Total seed capital and co-investments is presented as a helpful measure for investors and represents our net investment interest including our net interest in CIP, net of deferred compensation investments, joint ventures and other investments. The following table reconciles the investment balance to the total seed capital and co-investment balance.


	As of
$ in millions	September 30, 2022	December 31, 2021
Investments	906.7	926.3
Net interest in consolidated investment products (1)	433.7	454.8
Less: Investments related to deferred compensation plans, joint ventures, and other investments	(428.6)	(524.4)
Total seed capital and co-investments (2)	911.8	856.7

(1) Included in net interest in consolidated investment products as of September 30, 2022 is $198.8 million of seed capital and $234.9 million of co-investments (December 31, 2021: $195.3 million of seed capital and $259.5 million of co-investments).

(2) Included in the total seed and co-investment balance as of September 30, 2022 is $304.3 million of seed capital and $607.5 million of co-investments (December 31, 2021: $304.7 million of seed capital and $552.0 million of co-investments).

Assets held for policyholders and policyholder payables

One of our subsidiaries, Invesco Pensions Limited, is an insurance company that was established to facilitate retirement savings plans in the UK. The entity holds assets that are managed for its clients on its balance sheet with an equal and offsetting liability. The decrease in the balance of these accounts from $1,893.6 million at December 31, 2021 to $754.3 million at September 30, 2022 was the result of net business outflows of $903.6 million, negative market movements of $160.7 million, and negative foreign exchange rate movements of $75.0 million.

Liquidity and Capital Resources

Our capital structure, together with available cash balances, cash flows generated from operations, existing capacity under our credit facility and further capital market activities, if necessary, should provide us with sufficient resources to meet present and future cash needs, including operating, debt and other obligations as they come due and anticipated future capital requirements.

Capital Management

Our capital management priorities have evolved with the growth and success of our business and include, in no particular order of priority: reinvestment in the business, maintaining a strong balance sheet and returning capital to our investors through moderate growth of dividends and share repurchases.

Our capital management process is executed in a manner consistent with our desire to maintain strong, investment grade credit ratings. As of the date of our filing, Invesco held credit ratings of BBB+/Stable, A3/Stable and A/Stable from Standard & Poor’s Ratings Service (“S&P”), Moody’s Investor Services (“Moody’s”) and Fitch Ratings (“Fitch”), respectively. Our ability to continue to access the capital markets in a timely manner depends on several factors, including our credit ratings, the condition of the global economy, investors’ willingness to purchase our securities, interest rates, credit spreads and the valuation levels of equity markets.

In line with our capital management priorities, the company increased our quarterly common dividend by 10% to $0.1875 per common share beginning with the dividend paid in the second quarter.

On May 6, 2022 the company completed the early redemption of the $600 million, 3.125% Senior Notes due on November 30, 2022. As of September 30, 2022, the balance on the $1.5 billion capacity credit facility was zero.

Other items

Certain of our subsidiaries are required to maintain minimum levels of capital. Such requirements may change from time-to-time as additional guidance is released based on a variety of factors, including balance sheet composition, assessment of risk exposures and governance, and review from regulators. These and other similar provisions of applicable laws and regulations may have the effect of limiting withdrawals of capital, repayment of intercompany loans and payment of dividends by such entities. Our financial condition or liquidity could be adversely affected if certain of our subsidiaries are unable to distribute funds to us.

All of our regulated EU and UK subsidiaries are subject to consolidated capital requirements under applicable EU and UK requirements, and we maintain capital within this European sub-group to satisfy these regulations. We meet these requirements in part by holding cash and cash equivalents. This retained cash can be used for general business purposes in the European sub-group in the countries where it is located. Due to the capital restrictions, the ability to transfer cash between certain jurisdictions may be limited. In addition, transfers of cash between international jurisdictions may have adverse tax consequences. We are in compliance with all regulatory minimum net capital requirements. As of September 30, 2022, the company’s minimum regulatory capital requirement was $596.3 million (December 31, 2021: $724.9 million); the decrease was primarily driven by a reduction in net capital requirements in the UK as a result of lower expenses and AUM levels as well as the weakening of the Pound Sterling against the U.S. Dollar. The total amount of non-U.S. cash and cash equivalents was $737.2 million at September 30, 2022 (December 31, 2021: $1,088.3 million).

The consolidation of $8,878.1 million and $6,548.7 million of assets and debt of CIP as of September 30, 2022, respectively, did not impact the company’s liquidity and capital resources. See Part I, Item 1, Financial Statements - Note 13, "Consolidated Investment Products", for additional details.

Cash Flows Discussion

The ability to consistently generate cash flows from operations in excess of dividend payments, common share repurchases, capital expenditures and ongoing operating expenses is one of our company’s fundamental financial strengths. Operations continue to be financed from current earnings and borrowings.

The following table represents a reconciliation of the cash flow information presented on a U.S. GAAP basis to the cash flows information, excluding the impact of the cash flows of Consolidated Investment Products for the reasons outlined in footnote 1 to the table:


Cash flows information (1)	Nine months ended September 30, 2022			Nine months ended September 30, 2021
$ in millions	U.S. GAAP	Impact of CIP	Excluding CIP	U.S. GAAP	Impact of CIP	Excluding CIP
Cash, cash equivalents and restricted cash, beginning of the period (2)	2,147.1	250.7	1,896.4	1,839.3	301.7	1,537.6
Cash flows from operating activities (1)	239.7	(452.7)	692.4	1,081.8	(141.2)	1,223.0
Cash flows from investing activities	(238.0)	(53.6)	(184.4)	(588.1)	(519.2)	(68.9)
Cash flows from financing activities	(798.8)	468.0	(1,266.8)	14.2	904.1	(889.9)
Increase/(decrease) in cash and cash equivalents	(797.1)	(38.3)	(758.8)	507.9	243.7	264.2
Foreign exchange movement on cash and cash equivalents	(124.0)	(10.0)	(114.0)	(37.7)	(9.1)	(28.6)
Cash, cash equivalents and restricted cash, end of the period (2)	1,226.0	202.4	1,023.6	2,309.5	536.3	1,773.2

Cash and cash equivalents	1,023.6	—	1,023.6	1,773.2	—	1,773.2

Cash and cash equivalents of CIP	202.4	202.4	—	536.3	536.3	—
Total cash, cash and cash equivalents per condensed consolidated statement of cash flows	1,226.0	202.4	1,023.6	2,309.5	536.3	1,773.2

(1) These tables include non-GAAP presentations. Cash held by CIP is not available for use by Invesco. Additionally, there is no recourse to Invesco for CIP debt. The cash flows of CIP do not form part of the company’s cash flow management processes, nor do they form part of the company’s significant liquidity evaluations and decisions.

(2) Restricted cash of $129.2 million as of December 31, 2020 is recorded in Other assets on the Condensed Consolidated Balance Sheets. There was no restricted cash at the end of the period for the nine months ended September 30, 2022 and 2021.

Operating Activities

Operating cash flows include the receipt of investment management and other fees generated from AUM, offset by operating expenses and changes in operating assets and liabilities. Although some receipts and payments are seasonal, particularly bonus payments which are paid during the first quarter, after allowing for the change in cash held by CIP and investment activities, our operating cash flows generally move in the same direction as our operating income.

During the nine months ended September 30, 2022, cash provided by operating activities was $239.7 million compared to $1,081.8 million provided by operating activities during the nine months ended September 30, 2021. Excluding the impact of CIP, cash provided by operations was $692.4 million during the nine months ended September 30, 2022 compared to $1,223.0 million of cash provided by operating activities during the nine months ended September 30, 2021. Cash inflows for 2022 included operating income of $1,072.6 million (nine months ended September 30, 2021: $1,279.0 million) as well as distributions of $82.6 million (nine months ended September 30, 2021: $55.4 million) driven by an Invesco Great Wall dividend of $65.5 million (nine months ended September 30, 2021: $38.8 million). Inflows were partially offset by net outflows from changes in payables and receivables due to timing of payments and receipts compared to lower net outflows for the nine months ended September 30, 2021. Also included in cash outflows were net investment purchases of $80.0 million, including seed money investments (nine months ended September 30, 2021: net investment redemptions of $81.5 million).

Investing Activities

Net cash used in investing activities totaled $238.0 million for the nine months ended September 30, 2022 (nine months ended September 30, 2021: net cash used of $588.1 million). Excluding the impact of CIP cash flows, net cash used in investing activities was $184.4 million for the nine months ended September 30, 2022 (nine months ended September 30, 2021: net cash used of $68.9 million).

Cash outflows for the nine months ended September 30, 2022, excluding the impact of CIP, included purchases of investments of $191.1 million (nine months ended September 30, 2021: $165.6 million purchases), partially offset by proceeds of $126.5 million from sales and returns of capital of investments (nine months ended September 30, 2021: $169.9 million proceeds).

During the nine months ended September 30, 2022, the company had capital expenditures of $119.8 million (nine months ended September 30, 2021: $73.2 million). Our capital expenditures related principally in each period to technology initiatives, including enhancements to platforms from which we maintain our portfolio management systems and client-facing systems including websites and client reporting tools, upgrades in computer hardware and software for employees, and improvements in the firm’s data solutions. Also, in each period, a portion of these costs related to leasehold improvements made to the various buildings and workspaces used in our offices. These projects have been funded with proceeds from our operating cash flows.

Financing Activities

Net cash used in financing activities totaled $798.8 million for the nine months ended September 30, 2022 (nine months ended September 30, 2021: net cash provided of $14.2 million). Excluding the impact of CIP, financing activities used net cash of $1,266.8 million in the nine months ended September 30, 2022 (nine months ended September 30, 2021: net cash used of $889.9 million).

Financing cash outflows during the nine months ended September 30, 2022 included the $600.0 million redemption of the senior notes due November 2022 (nine months ended September 30, 2021: none), purchases of common shares through the open market of $200.0 million (nine months ended September 30, 2021: none), $249.1 million of common dividend payments for the dividends declared in January, April and July (nine months ended September 30, 2021: common dividends paid of $228.9 million), $177.6 million of preferred dividend payments for dividends declared in January, April and July (nine months ended September 30, 2021: $177.6 million) and the payment of $40.1 million to meet employees’ withholding tax obligations on common share vestings (nine months ended September 30, 2021: $58.1 million). There was no net borrowing on the credit facility during the nine months ended September 30, 2022 (nine months ended September 30, 2021: no net borrowing). Financing cash outflows during the nine months ended September 30, 2021 also included the $309.4 million settlement of the forward contracts, $104.1 million of net collateral on the forward contracts returned to the counterparty, and a payment of $11.8 million of contingent consideration.

Dividends

When declared, Invesco pays dividends on a quarterly basis in arrears. Holders of our preferred shares are eligible to receive dividends at an annual rate of 5.9% of the liquidation preference of $1,000 per share, or $59 per share per annum. The preferred stock dividend is payable quarterly on a non-cumulative basis when, if and as declared by our board of directors. However, if we have not declared and paid or set aside for payment full quarterly dividends on the preferred stock for a particular dividend period, we may not declare or pay dividends on, or redeem, purchase or acquire, our common stock or other junior securities in the next succeeding dividend period. In addition, if we have not declared and paid or set aside for payment quarterly dividends on the preferred stock for six quarterly periods, whether or not consecutive, the number of directors of the company will be increased by two and the holders of the preferred shares shall have the right to elect such two additional members of the Board of Directors.

On October 25, 2022, the company announced a third quarter 2022 cash dividend of $0.1875 per share to holders of common shares, payable on December 2, 2022, to shareholders of record at the close of business on November 11, 2022 with an ex-dividend date of November 9, 2022.

On October 25, 2022, the company announced a preferred dividend of $14.75 per share to the holders of preferred shares, representing the period from September 1, 2022 through November 30, 2022.The preferred dividend is payable on December 1, 2022 to shareholders of record at close of business on November 15, 2022.

The declaration, payment and amount of any future dividends will be declared by our board of directors and will depend upon, among other factors, our earnings, financial condition and capital requirements at the time such declaration and payment are considered. The board has a policy of managing dividends in a prudent fashion, with due consideration given to profit levels, overall debt levels and historical dividend payouts.

Debt

The carrying value of our debt at September 30, 2022 was $1,487.1 million (December 31, 2021: $2,085.1 million) and was comprised of the following:


$ in millions	September 30, 2022	December 31, 2021
$1.5 billion floating rate credit facility expiring April 26, 2026	—	—
Unsecured Senior Notes:
$600 million 3.125% - due November 30, 2022	—	599.4
$600 million 4.000% - due January 30, 2024	598.6	597.8
$500 million 3.750% - due January 15, 2026	497.8	497.3
$400 million 5.375% - due November 30, 2043	390.7	390.6
Debt	1,487.1	2,085.1

For the nine months ended September 30, 2022, the company’s weighted average cost of debt was 4.10% (nine months ended September 30, 2021: 3.95%).

Financial covenants under the credit agreement include: (i) the quarterly maintenance of an Adjusted debt/EBITDA leverage ratio, as defined in the credit agreement, of not greater than 3.25:1.00, (ii) an interest coverage ratio (EBITDA, as defined in the credit agreement/interest payable for the four consecutive fiscal quarters ended before the date of determination) of not less than 4.00:1.00. As of September 30, 2022, we were in compliance with our financial covenants. At September 30, 2022, our leverage ratio was 0.67:1.00 (December 31, 2021: 0.79:1.00), and our interest coverage ratio was 21.18:1.00 (December 31, 2021: 25.21:1.00).

The September 30, 2022 coverage ratio calculations are as follows:


$ in millions	Total	Q3 2022	Q2 2022	Q1 2022	Q4 2021
Net income attributable to Invesco Ltd.	922.9	177.4	121.0	197.7	426.8
Dividends on preferred shares	236.8	59.2	59.2	59.2	59.2

Tax expense	363.3	86.8	63.0	82.8	130.7
Amortization/depreciation	197.1	47.9	49.3	49.5	50.4
Interest expense	90.8	18.6	25.8	23.2	23.2
Common share-based compensation expense	117.2	26.0	27.6	29.5	34.1
Unrealized (gains)/losses from investments, net (1)	125.0	24.6	68.8	26.4	5.2
OppenheimerFunds acquisition-related matter insurance recoveries (2)	(130.0)	(15.0)	(15.0)	—	(100.0)

EBITDA (3)	1,923.1	425.5	399.7	468.3	629.6
Adjusted debt (3)	$1,289.7
Leverage ratio (Adjusted debt/EBITDA - maximum 4.00:1.00)	0.67
Interest coverage (EBITDA/Interest expense - minimum 3.00:1.00)	21.18

(1) Adjustments for unrealized gains and losses from investments, as defined in our credit facility, may also include non-cash gains and losses on investments to the extent that they do not represent anticipated future cash receipts or expenditures.

(2) Unusual or otherwise non-recurring gains and losses, as defined in our credit facility, are adjusted for in the determination of EBITDA. The insurance recoveries related to the OppenheimerFunds acquisition-related matter are considered unusual and have been removed from the determination of EBITDA.

(3) EBITDA and Adjusted debt are non-GAAP financial measures that are used by management in connection with certain debt covenant calculations under our credit agreement. The calculation of EBITDA above (a reconciliation from net income attributable to Invesco Ltd.) is defined by our credit facility agreement, and therefore net income attributable to Invesco Ltd. is the most appropriate GAAP measure from which to reconcile to EBITDA. The calculation of Adjusted debt is defined in our credit facility and equals debt of $1,487.1 million plus $2.6 million in letters of credit less $200.0 million of excess unrestricted cash (cash and cash equivalents less the minimum regulatory capital requirement, not to exceed $200 million).

Credit and Liquidity Risk

Capital management involves the management of the company’s liquidity and cash flows. The company manages its capital by reviewing annual and projected cash flow forecasts and by monitoring credit, liquidity and market risks, such as interest rate and foreign currency risks (as discussed in Part I, Item 3, Quantitative and Qualitative Disclosures About Market Risk), through measurement and analysis. The company is primarily exposed to credit risk through its cash and cash equivalent deposits, which are held by external firms. The company invests its cash balances in its own institutional money market products, as well as with external high credit-quality financial institutions. These arrangements create exposure to concentrations of credit risk.

Credit Risk

Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to meet an obligation. All cash and cash equivalent balances are subject to credit risk, as they represent deposits made by the company with external banks and other institutions. As of September 30, 2022, our maximum exposure to credit risk related to our cash and cash equivalent balances is $1,023.6 million. See Part I, Item 1, Financial Statements - Note 2, "Fair Value of Assets and Liabilities", for information regarding cash and cash equivalents invested in affiliated money market funds.

The company does not utilize credit derivatives or similar instruments to mitigate the maximum exposure to credit risk. The company does not expect any counterparties to its financial instruments to fail to meet their obligations.

Liquidity Risk

Liquidity risk is the risk that the company will encounter difficulty in meeting obligations associated with its financial liabilities as they become due. The company is exposed to liquidity risk through its $1,487.1 million in total debt. The company actively manages liquidity risk by preparing cash flow forecasts for future periods, reviewing them regularly with senior management, maintaining a committed credit facility, scheduling significant gaps between major debt maturities and engaging external financing sources in regular dialogue.

Effects of Inflation

Inflation can impact our organization primarily in two ways. First, inflationary pressures can result in increases in our cost structure, especially to the extent that large expense components such as compensation are impacted. To the degree that these expense increases are not recoverable or cannot be counterbalanced through pricing increases due to the competitive environment, our profitability could be negatively impacted. Secondly, the value of the assets that we manage may be negatively impacted when inflationary expectations result in a rising interest rate environment. Declines in the value of AUM could lead to reduced revenues as management fees are generally calculated based upon the size of AUM.

Common Share Repurchases

The company did not purchase shares in the open market during the three months ended September 30, 2022. During the nine months ended September 30, 2022, the company repurchased 8.9 million shares in the open market at a cost of $200 million (three and nine months ended September 30, 2021: none). At September 30, 2022, approximately $532.2 million remains available under the share repurchase authorizations approved by the Board on July 22, 2016.

Separately an aggregate of 0.5 million and 2.2 million common shares were withheld on vesting events during the three and nine months ended September 30, 2022 to meet employees’ withholding tax obligations (three and nine months ended September 30, 2021: 0.4 million and 2.6 million shares). The fair value of these common shares withheld at the respective withholding dates was $5.7 million and $40.1 million during the three and nine months ended September 30, 2022 (three and nine months ended September 30, 2021: $10.5 million and $58.1 million).

Off Balance Sheet Commitments

See Part I, Item 1, Financial Statements - Note 12, “Commitments and Contingencies - Legal Contingencies”, for more information regarding undrawn capital commitments.

Critical Accounting Policies and Estimates

There have been no significant changes to the critical accounting policies disclosed in our most recent Form 10-K for the year ended December 31, 2021. Critical accounting policies are those that require management’s most difficult, subjective or complex judgments and would therefore be deemed the most critical to an understanding of our results of operations and financial condition.

Recent Accounting Standards

See Part I, Item 1, Financial Statements - Note 1, "Accounting Policies - Accounting Pronouncements Recently Adopted.”

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