This presentation and comments made in the associated conference call today may include forward-looking statements. Forward-looking statements include information concerning future results of our operations, expenses, earnings, liquidity, cash flow and capital expenditures, industry or market conditions, AUM, 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. Forward-looking statements are not guarantees, and they involve risks, uncertainties and assumptions. 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 our most recent Form 10-K and subsequent Forms 10-Q filed with the 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.

Welcome to Invesco's First Quarter Results Conference Call. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time. Now I'd like to turn the call over to the speaker for today, Mr. Martin L. Flanagan, President and CEO of Invesco; and Mr. Loren Starr, Chief Financial Officer. Mr. Flanagan, you may begin.

Thank you very much. And thank you, everybody, for joining us. I'm joined with Loren Starr, and we'll be speaking through the presentation that's available on the website, if you wish to follow that way. As has been our practice, we'll review the business results for the first quarter. Loren will go into greater detail on the financial results, and then both of us will answer any questions that people might have. And so let me start by highlighting the operating results for the first quarter, and you'll find those on Slide 3. Long-term investment performance remained strong during the quarter. 81% and 80% of actively managed assets were ahead of peers over 3 and 5 years, respectively. Strong investment performance combined with comprehensive range of strategies and solutions we offer, to help clients achieve their desired investment outcomes contributed to long-term net inflows of $10.3 billion during the quarter. Adjusted operating income was up 3.1% compared to the first quarter of the prior year. Reflecting continued confidence in the fundamentals of our business, we're raising the quarterly dividend to $0.27 per share, up 8% over the prior period, and also, returning $185 million to shareholders during the quarter through dividends and in buybacks. Assets under management were at $798 billion during the first quarter, up from 200 -- $792 billion in the prior quarter. Operating income was $374 million in the quarter versus 700 -- $373 million in the prior quarter. Earnings per share were $0.63, the same as you saw in the prior quarter. Before I go into -- before Loren goes into company's detailed financials, let me take a minute and review investment performance. I'm now on to Slide 6. Our commitment to investment excellence and our work to build and maintain a strong investment culture helped…

Thank you very much, Marty. Quarter-over-quarter, total AUM increased $5.9 billion or 0.7%. So this was driven by market gains of $14.4 billion and long-term net inflows of $10.3 billion, which translates to an annualized organic growth rate of more than 6% on long-term assets. These gains were partially offset by negative foreign exchange of $9.5 billion and outflows from money market, and the QQQs of $6 billion and $2.6 billion, respectively. Assets also fell by $0.7 billion due to the ETNs that did not come over as part of the transaction with Deutsche Bank, that closed this quarter. Average AUM for the quarter was $795.4 billion and that was up 0.7% versus the fourth quarter. Our net revenue yield came in at 46.1 basis points, an increase of 0.2 basis points versus Q4. This was driven by higher performance fees in the quarter, which added 1.6 basis points. The increase was partially offset by a few items: 2 fewer days during the quarter; the negative impact from FX on product mix; and lower other revenues, which collectively reduced our net revenue yield by 1.4 basis points. Next, I'm going to turn to the operating results. Our net revenues increased $11.7 million or 1.3% quarter-over-quarter to $917.5 million, which included a negative FX impact of $20.9 million. Within the net revenue number, you'll see that investment management fees declined by $9.3 million or 0.9% to $1.02 billion. This was the result of 2 fewer days during the quarter and the impact of the strengthening dollar on our product mix. The decrease was partially offset by higher average AUM, and FX decreased investment management fees by $26.7 million. Service and distribution revenues declined by $4.3 million or 2%, also in line with day count. FX decreased service and distribution revenues by…

Thank you. We'll open up to questions please.

[Operator Instructions] And the first question comes from Brennan Hawken from UBS.

So if we normalize for day count and FX, what was the delta in the revenue yield x performance fees sequentially?

So maybe just, to normalize you mean eliminating it or taking out the -- because what we saw was FX, obviously, had a negative impact in the quarter. The impact was probably somewhere in the line of 0.3 basis points due to FX. That was offset by some benefit in terms of the mix, which was good in terms of flows, but overall -- the overall impact on the amount of non-U.S. higher fee product was reduced due to FX. So I'm not sure if I've fully explained what you're looking for but hopefully, I got some part of it.

Yes. So basically, it sounds like what you're saying is, if we exclude out FX and day count, we're probably looking at a flat to moderately improving revenue yield x performance fees, am I paraphrasing that right?

Yes. So I got -- so, yes, the day count impact was about 0.8 basis points. We talked about the FX mix being about 0.3 and then the other revenues was about the remainder. So that's the normalize in elements.

Okay, great. And then on the performance numbers. The 3- and 5-year performance numbers have been really, really steady. But the last 2 quarters, the 1-year performance numbers have deteriorated a bit. And can you help us maybe understand what's driving that and whether or not this is a concern to you guys at this point?

Yes. For us and probably everybody, the 1-year numbers tend to be the most volatile. Largely, the movement in energy had some impacts on the number of the larger portfolios. That said, when we look at dispersion, dispersion's actually very, very tight on that shorter term number. So it's nothing that we're worried about at the moment. So...

The next question comes from Michael Kim from Sandler O'Neill.

First, just at a high level. Obviously, you guys are one of the biggest and most diversified franchises out there, but are there any sort of manufacturing or distribution pockets that you might -- you think might make sense to fill? And then, how do you kind of think about the build-versus-buy decision, particularly in light of what seems to be the rising importance of scale across the industry?

Look, when we look at the organization today, just look at investment capability is pretty well covered as far as we're concerned, and then, when we look in it, what are the qualities of the team and what are the results that they're generating and they're all very, very strong. The probably largest, organic, if you want to call, build, that we've undertaken in the last 3 years has been in fixed income. And if you -- we have a talent that's here, right now, the numbers are very, very strong. And we mentioned that 3 years ago, when we started going down that path and my personal opinion, they're ahead of where they -- where you would imagine they would be, when you do something organically like that and again, I think we're in a very strong position there. So we don't really feel like we have gaps right now, and yes, we'll just continue to get better at what we have.

Okay, great. And then separately, just given kind of the pending money market fund, regulatory changes, and any updates on kind of your plans on how you might potentially transition that business? And then stepping back, any shift in how you might be thinking about the money market fund business just from a strategic standpoint?

Yes. Again, really talented group that we've had, been in the business a very, very long time. I think you probably have seen, with some of the new regulation and some of the people we have been focused, you have 60 days and in shorter duration. We've had a fund in that space for 30 years. So, yes, we're naturally, I'd say, positioned, strongly there. We're also seeing institutional clients, they still want in short-duration, cash management and it's going to be bear [ph] weathers and funds with separate accounts, it will continue to be there.

And I'll just say, we've had very productive dialogue with distributors of our traditional products in terms of other types of products that would be very interesting. So we feel that the business is going to be quite resilient despite the regulation changes.

The next question is from Dan Fannon from Jefferies.

I guess a little more color on April and the institutional backlog would be helpful. I guess anything different than -- kind of, you've been talking about whether there's products that are becoming increasingly a bigger component of the sales or vice versa on the slowdown?

Yes. It's -- yes, I'd say in -- from my perspective, that almost 10 years I've been here, I've never seen it more broad, more deep. We've had once before, where we've been in a situation where we've had all regions in net flows, but we've never been all regions, both retail and institutional. And even when that was happening, it was maybe more narrow in investment capabilities. So yes, we're seeing it, things like you have GTR, risk parity, international equities, real estate, fixed income, that -- all the quantitative capabilities. I mean, it just is really broad, very deep. So -- and usually, I'd say, for most organizations, that first quarter, historically is one of your stronger quarters for net flows for various reasons. Again, we can't predict the future, but April, it looks like our second quarter is very much on the same path as the first quarter, which would also just, again, suggest that things are looking really quite strong for the organization.

Great. That's helpful. I guess just on that in terms of the regions, everything looks positive, I guess, except Canada, which was right around breakeven. I mean, anything happening there that you -- that can change kind of the outlook for -- to be a little more robust or your seeing demand or product shifts there?

Yes, 2 things. So the ETF business there has actually been, really, a very important thing. It's almost following some version of -- and Dan, you've been following the company for a while so it's almost the ETFs were a reinforcement of our active management, and we're starting to see that happen there. There's also some very thoughtful product introductions that we've done in Canada, and I think that's also going to help in the retail channel. But also, the other area of focus is the institutional business. It is an area that we think we should be much more successful than what we had been, and that's an absolute focus for us in Canada and we expect that we'll be successful there.

I will point out that Canada was positive, even though it didn't show up. It rounded to 0, but they were positive this quarter.

The next question is from Patrick Davitt from Autonomous.

On regulatory front, we're hearing whispers and some chatter from some of your competitors that the FSOC and other bodies are really starting to kind of focus in on the liquidity issue. And the fact that a lot of products are being marketed as liquid products, but the underlying assets can become illiquid quite quickly. Are you hearing similar issues, and is there any more color you can give us on where you think that trend is going from a regulatory standpoint? And what, if anything they could do, that could alleve that issue, I guess?

Yes. It -- I wouldn't call it whispers, I'd say it's an open dialogue and I'd start by the regulators trying to get a better understanding at the FSOC level of how do money managers manage portfolios. And the idea of managing liquidity is not new, it's a fundamental core strength of the industry. It's what the industry has done forever. The difference is, it's sort of the broadening oversight of FSOC, actually educating the other set of regulators that have an interest there. That said, there's a lot underway from an industry point of view that where there can be improvements in potential liquidity, they're being addressed. There are some -- been some good developments in the bank loan area and there's further developments there. So again, I think it's a good dialogue, it's an important dialogue, but I think education is a big part of it. And as an industry, we'll just continue to -- where we can get better, we will.

Is there any sense that any regulatory changes or the outcome would be a significant negative for you from either a capital, I guess, some sort of capital issue or having some sort of reserves?

Yes. Again, I would classify that it's a topic, it's a dialogue right now. And you have to first -- if your question's assuming there's a problem and I say, yes, on the margin there's areas where you can improve, but that's no different than anything the industry does. So I'd say we're a long, long way away from any regulatory changes just because we're just too early in the process.

The next question is from Bill Katz from Citigroup.

It looks like Europe continues to be an area of significant growth for you. This is probably a bit of a naive question, given you're going to say it's still a relatively small AUM base. But 2-part question, one, can you talk about what the success is there, how broad is it? And then are you -- given the rapidity of growth, are you running into capacity issues yet?

Yes. No, I -- again, no. It's an area we've been discussing it for some period of time, and again, it's not an overnight development. I mean it was -- when we sort of put our focus on it 3 -- 3.5 years ago, it was broad-based, right? It was considering the product offering was robust and strong and it is very robust and strong, and excellent investment performance. It was also, on an execution side, where we cover in clients in a manner that we should and delivering, that's been a big change and that's helped also. Frankly, a redo of the servicing capability underneath and that's been in place too, so it was really broad. And that was, again, largely a -- in the U.K. has always been very, very strong. It was really getting the cross-border retail market on a continent into a very strong position, and that has happened and it continues to grow. So -- and we don't have any issues with capacity at the moment. And the other opportunity, again, for us, and you're starting to see it actually in our numbers is, we -- institutionally, we think we should be doing better than we have historically, and you're actually starting to see some of those results come through and I would still say, we're pretty early in what we expect over the next 1, 2, 3 years institutionally in EMEA.

And Bill, I will also just comment that, I think, in terms of country-wise, Italy has been a big driver of some of the flows and success, but Spain as well. And Spain is -- a lot of the dynamics that happened in Italy are now showing up in Spain. So Spain, Italy, Germany, Switzerland all are contributing nicely, but Italy right now, is probably outsized in terms of its contribution on a cross-border flow.

That's very helpful. And then, Loren, maybe just for yourself. I think you said you're running at the high end of your incremental margin. I just wanted to make sure I interpreted that correctly. From here you're at the high end or you were at the high end and, therefore, you're not going to sustain the high end?

No. For the full year, year-over-year, when you're looking at our incremental margins, we're going to -- if all things flatten or goes well, we'll be at the high end of that range in terms of delivering incremental margins.

'15 over '14 for you?

Yes.

The next question is from Luke Montgomery, Bernstein Research.

You've talked about the efforts to increase tractions at third-party distribution channels in the U.S. and I think you've been slightly frustrated by the progress there, given your strong performance. Retail flows were pretty robust this quarter, so maybe an update on how that's going, a little color on what's selling? And whether you feel increased brand recognition might suggest some sustainability there?

Yes. So let me start at the end. Brand recognition, the last founding, if you want to call it, sort of came out 8th. So that was, Luke, that's a tremendous improvement from 5 years ago where we weren't on the list. So I -- and I do think that is an important thing. We still have not closed the -- fully the perception and reality gap. That is something that we continue to do and it's -- from prior experience, it just takes longer than you think it should. But good progress. And if you look at the underlying fundamentals in addition to the breadth of capabilities and the performance, it's -- placement's on the other different platforms and that continues to just be stronger and stronger. And I will say the other element, too, is as a number of the distributors went through a number of changes, that they -- the distributors, as they have settled down and gotten organized, quite frankly, that's a good thing for us. And we think we'll see some greater impact in a couple of the principal distributors than we might have had 2 or 3 years ago because of that.

Okay, great. And then staying with retail distribution. I think we can agree the independents and RIA [ph] channels are growing in importance. It's a -- they're far more fragmented channels and so I think a lot more expensive to sell through. So any sense of how much of your retail flows have been going to those channels, and more broadly, how you're thinking tactically about selling into that channel without driving up cost too much?

Yes. Again, we -- as probably most everybody and we all do it in different versions, the same flavor, but it is a channel that is covered and we are focused on it. Yes, we do see it continuing to grow but quite frankly, the output of that channel vis-à-vis you have some of the main firehouses there -- it's just no comparison at the moment. That said, longer-term, it's something we'll continue to focus on and is, I think, you're sort of suggesting that it's probably a wise thing to do and we have been and we will continue to do it.

The next question is from Michael Carrier, Bank of America.

Marty, just on the alternative side, you mentioned that you feel like you have the products that you need. I just wanted to get a sense, when you see the demand in that product category, I know it's pretty diverse, but are you seeing more on the institutional side or you're seeing some uptake in some of the -- maybe the newer products on the retail side that's driving those flows?

Yes, I'll make a couple of comments and Loren can pitch in. So institutionally, I mean, it continues to -- what would be the more recent -- yes, real estate continues to be just very, very strong for us or World Bank loans continues to be very, very strong. The newer thing, well, risk parity continues to do very well institutionally, for us as an organization. And also adding to it now multi-sector credit is starting to get some real traction for us, and GTR's another one that has actually been very successful, and in total, GTR assets are about $5 billion, right? So -- and that's in what, a year, 1.5 years maybe, that's been in the market for us. So it's continued to be a focus, I'd say, for institutional investors. On the retail side, if you start with United States, a year ago, we introduced that very broad range of alternatives into the retail channel. Our expectation at the time was we'll look back 3 years from then to determine how successful it's been. It's just this is a long process, and back to Luke's comment a little bit, the distributors are very slow in adopting. So if you look at their commentary that they anticipate alternatives being -- pick a number, 15% to 20% of a client's portfolio, they -- what is available in their channels is -- can't meet that asset allocation capability. So I think that's sort of a headwind to that, but I do think, if you look at things like risk parity, GTR and some of those extensions that we've had, they are -- those are the types of things that are gaining a lot of interest in retail channels, and we've seen flows against it.

Okay, that's helpful. And then Loren, just quick one. Buybacks in the quarter just picked up. Just wanted to get a sense, is that seasonal because of grants or is it just, given where your cash level is, the net debt, are you having more flexibility?

It tends to be a little seasonal as we've discussed in the past, because we have some of the restricted stock grants granted March 1, and we certainly, do our best to eliminate the dilution associated with those grants as quickly as possible. So going into the second half, you may see the levels step down a bit.

The next question is from Ken Worthington from JPMC.

First, cross-border. Having huge success in Europe, can you talk about the sales of the SICAF products in Asia? You've got a lot of product. You have a fabulous track record in this product. Do you have the right product in distribution to meet investors tastes in Asia? And I know this is a hard benchmark, but like, is -- you're doing so well in Europe, how do you make Asia as good for Invesco in cross-border as it is in Europe?

Yes. Good questions. So let's see. Different ways I can answer that question. So yes, what we look at is sort of a core strength of ours and where we think the market's going is, really, Greater China investment capabilities. And performance is strong there for us and we're actually starting to see quite a bit of uptick in flows there. I think also, you saw probably the Hong Kong-Shanghai Connect launch, it raised almost $2 billion in 3 days. So I think it is part of the mechanisms opening up in the marketplace along with the asset classes that people are interested in. Also, it is again, for us, just be -- want to be more effective in the marketplace. We have a new retail leader out there and I think that's also going to help very much to make us more effective in the area, and I will also say you're seeing things. Japan for us is, it is day and night from 2 years ago and it is a very busy place for us, probably for some other managers too, and that's largely fixed income and it's really some broader equity capabilities too. So we're going to see, I think, results in Asia-Pacific this year that we've not seen for some period of time.

Great. Loren, in terms of performance fees, love the guidance. Can you help us understand which areas you have the greatest visibility on in terms of performance fees and what areas you have less?

They're all pretty murky. Yes, I think in terms of the real estate and private equity, which are 2 ones where we've seen a lot of built-up performance fees. It had a lot to do for real estate in terms of timing of certain sales of certain properties and now as we have visibility, we just didn't have a lot of sense of timing. And obviously, some of that materialized this quarter, we said -- we knew there was something out there and we didn't know when it was going to hit, and obviously, the bulk of it's hit this quarter. That doesn't mean there's not going to be more. There will be probably some more real estate performance fees we're going to see, but nothing of the magnitude that we just saw this year or we won't expect it to happen. But in terms of private capital, private equity, we've discussed this, because of our very strict accounting rules we can't recognize any carry until essentially there's no mathematical possibility of clawback. And that really means that it's going to be close to when the fund who has -- that has the carries, it's at a wind down -- wait until wind-down mode. So that's probably not going to happen this year. It's more like a 2016, possibly even 2017-type of event. But that's much harder for us to forecast. In terms of the visibility, that we do have good sense of visibility. U.K. trusts is pretty good. We've provided guidance there, it's -- and you've done a lot of work on that too, I know, Ken, where we can actually take a look at the performance and the trigger date and you can sort of get a sense of whether they're going to be there or not. We've generally seen sort of $10 million-ish numbers or higher in the first quarter. Bank loans, it's sort of hard. We do have some sense of it, in terms of the timing of when a bank loan is coming to advance, and when we also often see a performance fee and often connected with the launch of a new loan [ph]. And quants is also pretty decent because it also has certain trigger points on investment performance. So that's why the $5 million guidance, I'd say, is pretty good. We could be surprised by something else coming in that we didn't see. But generally, I think the $5 million a quarter is probably the right guidance.

Okay, great. Then lastly for Marty. There are number of new, nontransparent ETF structures that have been proposed and Invesco's partnering with one such provider. What are your thoughts on the opportunities of the new wrap or the new structure? What does that mean for the active management mutual fund industry if anything?

Yes, Ken, we've talked about it before. I mean, yes my -- first is, my personal opinion, it's interesting but I don't think it's a game changer by any stretch of the imagination. I think if you look at the ETF structure what it provides, the fundamental elements are well-known and enjoyed by market participants, right? So it's to deal with liquidity, it's some of the tax benefits that come along with it and really, the ability to see the portfolios as opposed to you have the open-ended mutual fund, where it is really a longer-term vehicle for sure and, I think, for active management, it's a better vehicle. So it may take hold, but I bet if we're sitting here in 5 or 10 years it's -- it will probably be there, I don't see it being an important part of the marketplace as it's currently being discussed or designed. But again, we'll pay attention and we'll -- we don’t want to be -- my feeling could be exactly wrong. So we're going to make sure that we're there.

The next question is from Robert Lee from KBW.

Just on the ETF business, I mean, you've have had a lot of success in Europe with the traditional businesses and I know it's been the focus on trying to grow ETFs there, but it seems like that's one part of your business where maybe you've had less traction than hoped. So can you maybe update us, just given the potential growth prospects of ETFs in the U.K. and the continent, kind of how maybe you're looking to reenergize that part of your business and what are you thinking about the opportunities there?

Very good point, you're correct. So we -- on the continents where we started the ETFs business, a number of years ago, we got very little traction, and it was just frankly a very different market. I would say, we're ahead of the curve, we thought there would be retail takeup similar to the United States, it just really wasn't the case. It was much more of an institutional tool. And as you know, it went through quite a large change from basically derivatives space ETFs more to physical and that is really coming to an end. We still think there's quite an opportunity there. We have just, more recently, in the last 12 months, sort of stepped back to sort of how to go forward, and there was a recent launch of an ETF on the continent. We also look at the U.K. as more of an institutional opportunity for us, in the shorter-term, and that is an area where we've, in the last 6 months, been starting to put some effort.

I mean, as part of that, kind of like where -- I think you've done in the U.S. where your retail distributors also, I guess, market the PowerShares product. So is it part of this combining distribution efforts?

No. That is on the continent. That is the case. There's still a open strategic question for us with RDR, what is the best way to use ETFs in the retail channel in the U.K.? And we're still working on that. So in the meantime, we're actually using our U.S.-listed ETFs in the U.K. into certain of the institutional market there.

Okay. Great. And the second question is just really kind of a, I guess I'll call it, a big picture industry question. But it's interesting your take on it, I mean, you talked about this morning how the marketplace kind of misunderstands the active versus index performance dynamic over time, and some of your peers have made similar comments today and in the past. So I'm just kind of curious, what besides some white papers? I mean, is there anything as a industry or maybe individually as a company? You feel you can do the -- kind of get that message out? Because it feels like it certainly gets way overshadowed by the press and whatnot. So I'm just kind of just curious what kind of things you could do as an industry to actually get that point across?

Well, that's a great question, and that's why we're reacting as other people are. I mean, it is -- we feel we have an obligation to educate the marketplace about what are the facts. And I would say, the reality is the active managers really did not do a good job of it. In a level we just thought that, well, everybody knows this of course, and it just wasn't true. And then you end up in a situation where go from this last market cycle which, not over yet from '09 on. You've had -- with an unprecedented market because of bouncing off the bottom, all the kiwi[ph] . So if passive was ever going to be attractive, this is the market and it's -- it probably wouldn't have happened since 1929. And so it was too easy to come to an answer that active is dead, when in fact, if you look at -- and the way you have to look at it, right, you have to look at market cycles, peak-to-peak, trough-to-trough. And the other thing that's totally misunderstood, too, is not just relative outperformance but risk mitigation and drawdown and those other -- so that in the work that we did, it just shows active management is a very, very important thing. And so, I also think we're going into a market where active management results are going to be more profoundly understood. So -- but we owe it to our clients to get the facts out in the marketplace.

I mean, along those lines, I'm just curious, I mean, if there's been some inkling that maybe in the institutional world that argument resonates or is resonating maybe somewhat more. But any sense as you think about the retail world that -- you getting some traction with those kind of...?

Absolutely. So the -- our retail, kind of, they are desperate for the facts. And again, the paper we just put out, it is -- the interest level is enormous within the adviser community, because they really need the facts to talk to their clients. It's been too easy to read USA Today and then say, "Buy a passive index" and that's what they're responding to with no facts or I should say, yes, limited facts. So I think getting the facts out there and important -- in our view is, we take a very balanced view because we have our active business and our passive business and we think high conviction active and frankly, high conviction passive, which we describe as smart data, that's how you get better outcomes for clients. So we're not wedded to a single answer because we only have one capability. We have a broad range of capabilities and we just want to meet client's needs. And I think that's -- that, I think, resonates with the adviser community too. And again, just helping them construct a portfolio as to meet investor outcome is -- that's what we do.

The next question is from Eric Berg, RBC Capital Markets.

Marty, I have a 2-part question that actually follows on from the question that was just asked. Are you essentially saying that putting aside the admittedly important issues of risk and drawdowns, I'm certainly not disposing those mentions as not important, they're very important. But are you essentially saying that if one looks at a full-market cycle, that it is simply not the case, that active managers have underperformed typically on passive strategies?

Not all. So, again, you can get the white papers. So basically, what we did is -- and I -- if I could just try do this succinctly so it doesn't go on too long. We looked at peak-to-peak, trough-to-trough market cycles for the past 5 cycles, and through all U.S. major funds, 17 different asset classes holistically. And 60%, I think it was 61% of all managers outperformed the passive index, and that was with active share of 60%, which is not much. It only took out something like 10% of the funds. And our point is not that active manage -- yes, that active share is the predictor of results. All we were starting with was take out 5 indexes and what was the result? And that's before you try to pick a good manager. And again, so you can read the paper and draw your own conclusions, but I think it's really quite compelling.

I appreciate that. I will read it. I have one follow-up. One dimension to this active passive that has not been discussed at least today, is the whole tax issue and the idea that it is supposedly the case. I haven't -- or really documented this myself that there are too many active managers who are not tax mindful. What does Invesco have to say about that part of the discussion?

So that is, I'd say, one of the benefits of an active manager that they can actually -- part of what they think about is managing the tax elements of the holdings that they have. So I would put that in another positive category of active managers. I can't speak for all the active managers. I would say the vast majority of asset managers pay deep, deep attention to that and have tax teams that help them work through those types of topics, as do we. And I think the other reality is -- so that's important, but the vast majority of all investments are likely in some type of a retail -- excuse me, in a retirement vehicle, so it might minimize the benefit of it for many people. But it is an important topic.

The next question is from Chris Harris, Wells Fargo.

So you guys are performing at such a high level right now in so many different areas. Just wondering, if you can share your thoughts about maybe your strategic priorities over the next few years? And really, kind of wondering, what areas are you guys really focused on, perhaps, trying to grow further or if there are areas that are maybe underrepresented or perhaps not in your suite at all that you're really taking a hard look at it and making some additional investments there?

Yes. It's a good question. I don't know that if there's any earth shattering news, we're going to really very much stay on the path that we're on. And as I've said during this call and Loren has, too, it is really the first focus of broad, deep investment capability to perform well. And again, we'll focus on getting better there, and where we can be more thoughtful on product capabilities we will. We're doubling down in a number of areas that we've been on. We think we can do a better job having our investment capabilities available around the world, more effectively. That is an area of focus for us. We also think that the broader acceptance of alternatives around the world for the organization is an area of focus for us. And probably, the third leg is the institutional business. We think collectively, we're at different phases in different parts around the world. We think that is a real opportunity for us as an organization also.

The next question is from Douglas Sipkin from Susquehanna.

I apologize if this has been hit on already, but just wanted to get a sense, obviously, with the great growth out of Europe. I'm assuming, but I'm not certain, is that net revenue yield fee accretive, given that that's growing so much faster than everything else right now?

Yes, absolutely it is. This -- the fee rate in Europe tends to be, on a net basis, 80 and above. So it's certainly at the higher end of our product offerings.

Great, that's helpful. And then secondly, obviously, PowerShares has been a great story this year. I mean, can you guys update us on maybe on your sort of product development plans? Have you been raising the budget there to sort of launch new ETFs, given what you've seen a big move into smart beta in '15?

I would say it's a continuation of what we've done. I think we try to be thoughtful about our product introductions, and we'll continue to do that as opposed to put things in the market and hope they work. So I'd say it'd be more deliberate development as opposed to many, many things.

Yes. I would say some of the things that we've just recently done like our Equal Weight Russell product was just a very big flower this quarter, BuyBack Achievers continues to do well, S&P 500 High Dividends, certainly, the ones that are already out, but some of them have been pretty new. High Beta, actually, was a pretty good winner this quarter too. So it's -- I think the products that have been launched are now beginning to take root and there's probably more opportunity to seeing growth in our existing product set than necessarily going out and trying to fill other holes.

The next question is from Chris Shutler, William Blair.

Most of the questions have been answered already, but just one quick one on performance, which remains really strong across the franchise. U.S. seems like the kind of the one area that continues to have some challenges, particularly in the core and growth areas. So Marty, I just wanted to get your thoughts there and any changes you think are necessary?

Yes, thank you. No, I -- so if you look at core, relative underperformance. Again, very good team, very -- they're sticking to discipline. Yes, we -- yes, this is -- yes, it's what we've seen happen in prior market cycles and they've tended to build up cash in these periods of time and they have done that. But again, I have confidence that they're very strong. The growth team actually has put up some very strong numbers, actually. So I -- the leadership there in the last 3 years, I think -- Julie has brought in the large-cap growth. They've done a really good job. So I -- we feel comfortable in both areas.

The next question is from Brian Bedell from Deutsche Bank.

I joined the call late, I'm sorry if this -- if you've covered this already, but Marty, maybe if you could just comment a little bit on -- I know it's early but a little bit on the Department of Labor fiduciary proposals? If you're hearing anything from your wholesalers as they talk to the distribution channels, both on the warehouse and RIA [ph] side? And also, your view on the defined contribution channel, whether you think that will have any impact and across your product set, if you think there's certain product areas like multi-asset and PowerShares that might do especially well if more strict rules are proposed on the fiduciary side?

Yes. Brian, that last part of your question, I couldn't hear. I don't know if Marty, you could.

On the defined contribution side? On the product side? Yes, I'm sorry. On the product side, there's any products such as, say, multi-asset or products in the PowerShares complex would -- do you think might benefit from more stringent fiduciary standards?

So let me -- a few comments, right? Also right now, I'd say the fundamental idea is a good idea. You can't argue with the principles that are in place. I think that is thoughtful. I would also say, by the way, I do think the financial advisers have been very thoughtful and very minded about their clients. That said, raising the bar is always a good thing. I think the DOL is very focused on making sure that there's not unintended consequences by what they are putting forward where some smaller plans and smaller accounts are disadvantaged, where they can't get advice anymore. So that, I think, is one of the topics that they're focused on right now. With regard to us as an organization, we provide the investment capabilities. So it's more of an issue for the financial intermediaries and how do we weigh into that it's really, if you have strong investment performance, broad range of capability, your probably still in a pretty good place, and if you have competitive fees, you're probably still in a good place, which we are. And it's just how we interface with the intermediaries using -- on their models and different types of things. It's what we do already so I would put the whole element without knowing what the details are. Good idea to continue to raise the bar. As a firm, I think we're positioned well for what we could see coming down the path and whether that's in the DC channel or the retail channel. Okay. Thank you very much on behalf of Loren and myself. Thank you for your time and questions, and I look forward to speaking to everybody soon. Have a good rest of the day.

Thank you. And this does conclude today's conference. All parties may disconnect.