Good morning and thank you all for joining us. As a reminder, this conference call and the related presentation may include forward-looking statements, which reflects management's expectation about future events and overall operating plans and performance. These forward-looking statements are made as of today and are not guaranteed. They involve risks, uncertainties and assumptions, and there can be no assurance that actual results will not differ materially from our expectations. For discussion of these risks and uncertainties, please see the risks described in our most recent Form 10-K and subsequent filings with the SEC. Invesco makes no obligation to update any forward-looking statements. We may also discuss non-GAAP financial measures during today's call. Reconciliations of these non-GAAP financial measures may be found at the end of our earnings presentation.

Welcome to Invesco's Third Quarter Results Conference Call. All participants will be in a listen-only mode until the question-and-answer session. [Operator Instructions] Today's conference is being recorded. If you any objections you may disconnect at this time. Now I would like to turn the call over to your speakers for today, Marty Flanagan, President and CEO of Invesco; Allison Dukes, Chief Financial Officer; and Greg McGreevey, Senior Managing Director of Investments. Mr. Flanagan, you may begin.

Thank you and thank you, everybody for joining us this morning. So over the past decade, we've undertaken several strategic initiatives and made meaningful investments and key capabilities that have position us well to deliver for our clients in competing what is now a highly dynamic and competitive industry. Looking forward, we continue to be very focused on executing our long-term strategy, which is intended to further strengthen our ability to meet client needs while returning the firm to sustainable organic growth. With the continued uncertainty in the economic environment we saw during this third quarter, driven by the global pandemic again, we remain very focused on our clients and ensuring that we're meeting their investment objectives, while also been really focused on running a very disciplined business in this uncertain time. These efforts combined with strong investment performance and high demand capabilities lead to long-term net inflows of $7.8 billion during the quarter across a broad variety of channels, geographies and asset classes. Retails outflows significantly improved during the quarter and our Solutions-enabled institutional pipeline remains robust, long-term flows into fixed income capabilities continued to be strong, and we saw net inflows in Asia Pacific and EMEA regions during the quarter, and net outflows in the Americas improved significantly. Net inflows in Asia Pacific during the quarter were $8 billion up significantly from the $2 billion we saw in the prior quarter. As we noted during the second quarter call, we've undertaken a strategic evaluation of our business, and this evaluation has several objectives, including enhancing client outcomes and improving organic growth, reducing complexity and streamlining our operating environment. We see opportunities to invest in areas of growth aligned with our strategic plan and supported by data and analytics and these include areas such as ETFs, China, Solutions, Alternatives…

Thank you, Marty. Good morning, everyone. Slide 5 summarizes our investment performance. We had 63% and 68% of actively managed funds in the top half appears on a 5-year on a 10-year basis, reflecting strength in fixed income, global equities, including emerging markets and Asian equities, all areas where we continue to see strong demand from clients globally. Moving to Slide 6, we ended the quarter with $1.218 in AUM. Of the $73 billion in AUM growth, approximately $53 billion as a function of increased market values over the quarter. Turning to Slide 7, our broad-based platform generated long-term net inflows in the third quarter of $7.8 billion, representing 3.3% in annualized organic growth. Notably, we generated positive net inflows and activate AUM of $1.8 billion and passive AUM of $6 billion. Our ETFs experienced net inflows of $12.4 billion, including $6.8 billion and long-term ETFs in $5.6 billion in QQQs representing the second largest net flows in the industry for Q3. The QQQ ETF delivers significant marketing benefits that drive brand awareness, and it increases Invesco's footprint, leadership and relevance in the ETF market. Including the success of the QQQs, our US listed ETFs have their best quarter in their 15-year history with those flows representing 10% of the overall industry flows in the quarter, which is 2 times our industry ETF market share. Long-term ETF flows in the US and EMEA were diverse across asset classes in the third quarter, including broad equity and commodities, fixed income, ESG oriented equity and sector equity. Positive ETF flows for contributors to the meaningful improvements in our retail net outflows, which narrowed to $300 million in the third quarter. On the institutional side, we had net inflows of $8.1 billion and I'll provide a little more color on those flows on…

Thank you, Allison. So operator, can we open up the questions, please. And Greg, myself and Allison will address them.

Certainly, Mr. Flanagan. [Operator Instructions] Our first question is from Dan Fannon with Jefferies. Your line is open, sir.

Thanks, good morning. I was hoping you could expand a bit on the areas of the cost cutting, you gave some buckets. But I think you also mentioned it is really not client-facing. So just want to see you know, what might be the disruption from some of these changes in cost cuts? And then also if you could just kind of size the areas in terms of percentages, maybe where that $200 million it's going to come from?

Sure. Thanks, Dan. I'll start and I might let Greg or Marty chime in on the client-facing impact. Of the $200 million that we've noted, about 50% to 60% of that I would expect to come through compensation expense. And of that, I'd say about 75% will occur in 2021 and the remainder of that would fall off in 2022. The other 40% to 50% would be split across occupancy, tech expense and G&A, and that occupancy expense I expect that's going to be kind of evenly split across '21 and '22. I think the G&A component will fully recognize in '21 and the tech expense will probably be pushed closer to 2022. On the compensation side, it is primarily realigning our workforce to lower cost locations, and reallocating and reorganizing across our business to make sure we're investing in our highest capability. There were some announcements that have already been made publicly. I'm happy to let Greg comment a little bit more on that, but that's largely behind us at this point. That help, Dan?

Yes, that does. But and so just then on the client-facing side, you know, we're just thinking about AUM at risk or anything you could put, we think about the investment professional components of what changes might happen?

Yeah, let me take, Dan. Really good question. So that strategic evaluation did include investment teams, as you would expect, the total assets impacted is a relatively small one, it's about $26 billion and even though that's a small amount, we really believe that the changes really improved the overall organization, improved our focus, prioritization. Maybe just a little bit in perspective from a high level, the changes were really designed on the investment side to accomplish a couple of examples. One is to enhance our investment teams and processes, so we can continue to drive performance. Two is to enhance and simplify our global equity offerings. We can talk more about that if you want to. Three was to reassign certain capabilities to stronger teams, which frankly better processes and performance. And then for the non-investment professionals that really is to reduce complexity and eliminate redundancy, and just in service levels where we needed to. So on the investment side, we talked to employees, we've had detailed conversations with clients, and by and large, those changes are completely behind us and the feedback internally and externally has been very well received, very thoughtful and I think everybody said it made a lot of sense from a strategic standpoint.

Great, thank you.

Great. Thanks, Dan.

Thank you for your question. Our next question is from Craig Siegenthaler with Credit Suisse. Your line is open, sir.

Good morning, Craig -

Hey. Good morning, everyone.

Good morning.

Good morning.

Question's actually for Marty. Marty, do you believe Invesco at $1.2 trillion of AUM now has enough scale to be successful and I was especially interested in your comments on the distribution side?

Yeah. So great question, so let me - you know, the answer is yes and let me step back to probably the core of the question. And, as we'd talked about for last few years, you know, there's clearly a very different dynamic going on in the industry and it's driven by something very simple. Clients around the world are choosing to work with fewer money managers. And that's whether it's the retail channel, the institutional channel and, again, every geography in the world. And so what they're looking for from clients is, clients are expecting more from money managers, so it's that broad range of capabilities that we have from passive all the way to alternatives, but beyond that, they want Solutions capability, they want thought leadership, they want the ability for us to build models for them help in any way. And so that has been you know a core focus for us as a firm, and you can see it in just the growth - gross inflows, the net inflows now of you know, that the impact there. So you have to be relevant to clients, you have to make a difference for clients and that's really important. So it's capabilities. It's also depth and breadth of capabilities of services. And also, I think what you have to do too is, yes, you want to have skills so you can drive efficiencies into the organization, which we've proven to do, you know, over any number of years and just conversation today you know proves that once again, but it's really so you can reinvest back in things like technology to create a better experience for your clients. And, again, ourselves and you know, I'd say the other larger firms have done very well doing that during the global pandemic, the client interactions have never been better. And you know, much of that was driven by historical technology investments, and again, not unique to us and but I think we've all been surprised that if you have skill and capability, you can really create a difference for your clients -

Thanks, Marty. And I actually just had one -

Yeah -

Marty, I had one follow-up -

Yes, please -

For Craig on the strategic expense initiatives. So -

Yes, please.

When you say that changes will enhance the global equity offering, does this mean emerging funds in the other funds, removing teams? Does this mean shrinking the number of investment professionals and also reducing the number of products?

Yeah, so it's a combination of some of those things, Craig. So, you know, we will, you know, the global equity capabilities that we have right now, especially that we've acquired from Oppenheimer was very strategic in terms of filling some gaps within our portfolio. But we had other capabilities on the global side that we're kind of nascent to that overall effort, if you will. So many things we're going to be doing is reassigning our Atlanta-based global core equity team to our Canadian global equity team. And then realigning that Canadian global equity team into our New York team, it's going to simplify not only our overall offerings and capabilities, but it's going to be able to streamline our messaging and our branding into the kind of marketplace, so those types of things that we're going to be doing under that umbrella simplifying our global equity offerings.

And can I just - I just want to be very clear and both Greg and Allison made this point, because changes have been made. And we're done with the changes, the clients contacts have been made. And we're virtually - we're moving forward now. So I just want to make sure that there's no mystery there.

Craig, that addressed your question.

Yeah, great.

Yeah, great job, Greg. Thank you.

Thank you for your question. Our next question is from Brian Bedell with Deutsche Bank. Your line is open, sir.

Great, thanks. Good morning, folks. Maybe Allison just started out with the expense, a question to, I think you said this, but just to confirm the expense base assumptions, the dollar amounts, exclude any impact of market appreciation that are based on September 30 data. So, if we, just playing with numbers, if we normalize market returns from say, the end of the year, you know you get around $400 million or so of additional revenue. So would it be fair to just put a comp to revenue number on the compensation line on that to think about how the expense base might grow in that market return dynamic in their fortune, and then just take a few hundred million off of that?

Yeah, it's a great question and obviously got a couple of ways you could think about it. So let me just try to bring a little bit of clarity to it. One, yes, all the expense guidance, the fourth quarter guidance and the $200 million target beyond that is all based on September 30th asset levels, market and FX. As you think about the $200 million reduction, and again, I expect 50% to 60% of that comes from compensations and that would be the components, that is, you know, as you reduce compensation, that is, that has the most variable component to it and that obviously fluctuates the most with any change and asset levels or market performance. The balance is really tied to discrete items across our occupancy, tech and G&A expense. And so it doesn't have quite the same dependency on market or asset level.

Okay, fair enough. Yep, thanks. And then on, maybe just to talk on the sales side, Marty, if you can or you, Marty or Allison. If you could just talk about some of the key drivers that you saw for improved flows in terms of the sustainability - and your confidence of the sustainability of that into 4Q, I don't know if you want to comment on October flows so far. But do you think that you can continue to generate positive flows both in the near-term and over the long-term? And maybe you can talk on a couple of initiatives that give you confidence on that?

Yeah, let me make a couple of comments. And I'll let Allison and Greg chime in. So, yes, the answer is yes, right. And you saw a market change in flows. And again, we continue to point to look at the gross number always that's really the health indicator always. And what you've seen over the last period of time, the institutional business continues to just be very strong. And again, we pointed, you know to the pipeline, again, it is strong. And if you look to you know Asia-Pac continues to be a very strong business, EMEA coming back on track and the Americas improving dramatically. So what's behind the ETFs generally continue to just be quite powerful, fixed income is an area of absolute strength right now. And it's not just performance, it's the quality of the team, it's the breath of the team. But it's also client demand. That's a really important you know element for our flows. And you saw a marked improvement in the US, the biggest headwind continues to be where we have great confidence in the long-term. You know, the global equity capabilities, you know, including emerging markets, you know, that is something of strength as we look forward. But the headwinds when clients don't want something. And, you know, you're going as if you use the US retail channel as a proxy, because it's you know so public information. The outflows in US equities are you know a strong headwind, the second largest category out is the global equity capabilities and those are the two areas we have some real strength and get some challenges in some of our capabilities there. But it's hard to overcome that. So what you're seeing is the rest of the policy, part of the organization overtaking that, and I think that's really important. Allison or Greg.

Yeah, the only thing I'd add is, look, if you look at our business on a managed perspective, we saw significant improvement in our flows and every broad investment category on a quarter-over-quarter basis. So sustainability, I think, assuming we have continued strong performance, I think is there. In fact, if you look at our flows in the third quarter, they were positive in every category, except retail equities and retail bank loans, where bank loans were essentially slightly negative for the quarter. So when you kind of look at the overall business, institutional and retail, fixed income, institutional equities, institutional alternative and institutional and retail balanced products, all contributed to, you know, the positive flow number. So we're encouraged by that trend. But we're probably more encouraged by the magnitude and improvement in every broad asset category that really is much more of a testament to the sustainability, we think of our flows moving forward.

And I'd add one other thing. So we continue to see a lot of success coming out of the Solutions and the you know the factor capabilities and from the passive, and as you know, they are big mandates, but they are lumpy, right. So you could probably see some more lumpiness than historically we've seen in the past, but, you know, on balance, you know, that's a good thing you know from my perspective.

And do you see this continuing in October of this trend from the third quarter? You know it's all short in terms of the measure, but.

Yeah, that we're not going to do that, that's not our surface. We're definitely talking month-to-month so.

Yeah.

So.

That's fair, that's fair.

Were likely helpful, but I don't think it's been constructive so.

Okay. Yep, thank you.

Thank you for your question. Our next question is from Glenn Schorr with Evercore. Your line is open, sir.

Hi, thank you very much. I wonder if you could expand a little on your comments about the significant growing Solutions effort and the combined company. And I guess I want to talk about the construct on how you deliver you know what you think it takes to be great and how you measure that success, because, as you mentioned, with clients of all types, consolidating providers that seems to be the secret sauce that's going to help you deliver everything that you've built here. So curious if you could expand on that a little bit. Thanks.

Yeah, I'm going to make a couple of comments, and then have Greg. So the way that we've built our Solutions business, you know, obviously very talented group of people. But what it does is, it sits across all of our investment teams globally. So they don't compete with the investment teams, they literally use the content from the investment teams. And I think that's somewhat of a minority approach, you know, in the marketplace. But also, it's, the analytical tools that have been built by the team that really enable these conversations. And we've seen the conversations with very sophisticated institutions that have resources to do their own work, and they do, but they're wanting to get a different view from organizations that have these capabilities. And again, it just changes the depth of the relationship that we have with these organizations. And, and again, it's taken all spectrums from, you know, creating models through our self-indexing capabilities, you know, creating indexes for a client for them to use for their own purposes to, you know, the more, you know, well known, you know, Solutions outcomes that people want, which, across different asset classes, but Greg.

Maybe just to kind of add to Marty's comments. Look, our Solutions business really has two primary segments. One is an enabling - enablement capability, where we're going to help in with - in conjunction with distribution to determine client needs and the best individual capability to align to those needs. And so we need you know to be great and that is really strong client engagement skills and really strong analytics. And then the second is where we're going to provide customized outcomes tailored to specific client needs across a number of different asset classes. And so they're to be great, you need very strong asset allocation skills. And so what we've done over the last five years has really made probably one of the most significant investments in the company to build capabilities in those three areas. And I think what we're seeing off of that investment that really started four years ago is a significant improvement in both our assets under management, our assets under advisement, both in the institutional channel, which is up significantly, you saw that on the pipeline chart that Allison had talked about, where Solutions is enabling over half of that business. But we've also seen a significant level of engagement and portfolio reviews in the retail side. So we got a strong pipeline within Solutions, I think that in concert with more favorable market conditions in the third quarter is going to provide additional tailwind to the business. And so we're pretty excited about, you know, just the opportunities, both, you know, in the near-term and in the long-term.

Thanks for all that. Appreciate it.

Great, thank you.

Thank you for your question. Our next question is from Brennan Hawken with UBS. Your line is open, sir.

Good morning, thanks for taking the question. I was curious about how you view; I know that you've spoken in the past about the fact that you're in a fairly small footprint in retail SMA. And particularly given the fact that the US retail has been a bit of a headwind for you, you've got so much momentum in other parts of the business but that one has been a bit more slow to turn around retail SMAs has been sort of the bright spot in that channel. How do you think about potential investment there? You've also got a dominant provider that will no longer be independent in the future. And so there might be increased demand for another independent provider from some firms and some FAs. So how do you view that opportunity? Where are you as far as capabilities in that market? And is that worth your while when you start to think about investment dollars here?

Yeah, it's a great question. And I think the core of where you're going, which we've always agreed with the separate investment capabilities from delivering mechanisms, and you have to have you know different vehicles to deliver, because it's different parts of the world and different channels and you're highlighting a trend where SMAs have become important in segments of the wealth management channels. And the good news is when with Oppenheimer, they have had brought over a strong SMA capability largely aligned to fixed income. And as we've turned our attention to it, that's where we're starting to see flows. We'll continue to you know expand that you know the response to client demand, I think the other area that we've talked about all the time is the rise of non-transparent ETFs, we still have our application and we're excited that we're working with Fidelity, who's a very strong partner on bringing non-transparent capability into the market before the end of the year, we'll see where that goes. As I've said, I think that's longer dated, but I'm just really highlighting the need to, we have to respond to client needs with the vehicles also.

Yeah, the only thing I'd add to that, Marty a little bit is, look, we are spending time with our SMA business, we have the legacy of business and then one that we were able to acquire with the Oppenheimer acquisition, we recognize it's a bright spot in the retail market. So I think that all kind of Marty's points, our team and capabilities are strong in fixed income. We're spending time right now in technology to really in the areas of operations, tech's efficiency and the things that are going to be requirements to kind of support that business overall. So we understand the essence of your question and we're spending time to make sure that we address that bright spots into the market.

Excellent. Thanks for that color, Marty and Greg. You also made a few comments, it sounded like, although I might have misinterpreted that, you're looking to make some investments in some of the ETF product lineup trying to expand into a flight ESG. It sounded like there might be some further development of the way - QQQ related products. That I reading too much into that or is that the case? What kind of opportunity set do you think that that will actually result in for Invesco? And if you're going to expand on the Qs? Is that going to allow for Invesco to generate better economics on some of that innovation? How should we think about that?

Yeah so in the last couple of weeks we entered - produced sort of an expansion of the Q suite. NASDAQ was a fantastic partner. And it's really following, you know, the great success with the Qs. They're complementary in nature to the QQQ, and again, they are more typical structures with more typical economics, then, you know, what we have with, you know, the marketing allowance with the Qs. So we see client demand there. It's a natural extension of the Q Suite. And as Allison spoke to, showed some of the ETF related ESG capabilities, they've been in the market for a good number of years. So the track record does matter. And there are track records there and the assets are now just really beginning to grow as people are turning you know more seriously to ESG. We have you know other focus areas in ESG as, you know, everybody's turning their attention there. But again, we have a very strong capability internally there and you know product will follow that those capabilities as we look forward. So, that's the crack at your point.

Yeah, okay.

Yeah. Thank you, Marty.

Yep.

Thank you for your question. Our next question is from Ken Worthington with JPMorgan. Your line is open, sir.

Hi, good morning. Given consolidation is a theme for traditional asset managers these days and given where Invesco is, with the integration of Oppenheimer and its efficiency program, is Invesco interested in pursuing - further pursuing large scale M&A? And if so, would it be practical to pursue large scale M&A in the near-term if an opportunity presented itself, given the goals you've pointed out for the balance sheet?

Yeah. Ken it's a great question. So let me put it in the context of how we think about things. We have acquired over time, obviously, the principles have not changed. It needs to be additive to the organization, it has to have complementary investment capabilities, they need to be strategic, they need to be differentiated, has to be something clients want. And I would contrast that to some of the things I've read that the notion of you know, financial roll ups is going to be the order of the day, we don't believe in that. It's disruptive, it's risky and you know, clients are not supportive of it. So we will not, you know we will continue to be the area if it makes sense for us you know we will pay attention to it. And again, always, to your point, and it's got to be strategic and it also has to be financially sound. So our thoughts and beliefs have not changed there.

Yep. And if everything made sense, is Invesco in a position to pursue something near-term, like longer-term, you know, would make sense if you find the right fit after everything is digested, et cetera. But is Invesco in a position to do something, you know, now or in 2021, if that opportunity that fit all the criteria you mentioned presented itself?

Again, I can't address the hypothetical. What I can tell you right now is, we feel really good about the organization, we feel really good about what we've accomplished. You know, for us, like many other organizations, you know, COVID was not a welcome experience. It sort of knocked us off our plan for 2020 factually. We're now back on it, you can see it in these results. And we took very seriously during this period of time, you know, making sure that we had the resources against the right opportunities, and we believe we do right now. So again, I - we're - heads are down and we're executing to what we're doing and we feel really good about it.

And I'd underscore our commitment to our balance sheet objectives, we are committed to continuing to improve our financial flexibility, reducing our leverage profile and making sure we're in a very strong position to weather any uncertainty that comes our way and to continue to invest in our business and can invest in our capabilities for growth. And I'd tell you that our scale is what gives us the opportunity to announce the cost target that we announced today. And we're going to take advantage of that.

And Ken let me come back to the more, just want to step back, you know, just our basic belief. So the word consolidation is thrown around a lot in the industry. And, you know, what we said in the past and what I do believe is the stronger get stronger, there's no question about that just because of the dynamic, we talked about of what you know clients are looking for from organizations. But consolidation doesn't mean that, you know, organizations are going to be buying everything, I just think I think there are many firms that no one will buy, the consolidation will happen, you know, organically, you know, clients, leaving some money managers for others, where they're better served. So I think that's how we think about it. And again, anything we'll do will be very you know very thoughtful and consistent with the principles we've laid out. But that is not our focus at the moment.

Awesome, thank you so much.

Yeah, thank you.

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

Great, thanks for the question. I was hoping you guys could expand a little bit on the $32 billion pipeline you highlighted on institutional side. So, maybe a little more color on the revenues or the fee rates associated with that and any notable redemptions that you're also aware of again on the lumpier side of things?

Sure. Thanks, Alex you know, the pipeline, it actually looks very strong, obviously, as compared to prior quarters pretty balanced, I would say across regions and asset classes as you could see. In terms of the fee rate, it's perhaps maybe modestly higher than the pipeline at the end of the second quarter, I'd call it very modest, continues to be consistent. And it's really a strong mix of equity capabilities and fixed income that mostly drive the fee rate just a little bit higher. And we're continuing to see growth from the United States as well, which is a really strong indication, the highest we've seen from them in a number of quarters so. Overall, I'd say it's a good healthy pipeline. In terms of redemptions, nothing notable, nothing unusual. And I think we continue to be very focused on redemptions, if anything, it's really as our clients just continue to look at mix within their own mandate. I would note in terms of the institutional flows in the third quarter, about two-thirds of those were from the pipeline itself, about another third or so was from client activity. So the institutional flows we're seeing are not just coming from the pipeline, they come from augmentation of existing relationships and I think that really underscores just the strength of the franchise overall.

Got you. And then my second question just around the China JV. I was hoping maybe taken a taking a step back, if you guys could talk a little bit about what sort of the total AUM base and the operating income contribution to Invesco from that relationship today. And so if you could break it out kind of revenues, expenses that would be helpful. And as you think it about scaling this over time, what are sort of the products that are resonating most? How can you sort of grow this could be more meaningful contributor to the organization?

Let me just talk you know, conceptually at a high level about China for us. If you just look at what's happening as opposed to generated product kind of for us, they're at all-time highs and largely driven by the JV. And it's just its depth and breadth of capabilities and it just continues to get stronger. We anticipate that going forward, again, institutionally, we continue to have great experience there. And it's a broad base of through launches in China and existing products going forward. So again, we just are in a very strong position there and we anticipate it'll just be a material contributor you know as we move forward.

Any numbers around that?

So we have - I'd give you a couple of numbers, we have about $66 billion in kind of Mainland China overall, that footprint is across a variety of different kind of asset categories. If you look at the $8 billion of kind of flows from an asset category standpoint, they were quite diversified in positive and just about every area within Asia Pacific balanced products the largest driver of overall flows in Asia Pacific in the third quarter, you know, just related only to balanced products, I think the thing you have to think about there is a lot of diversification, given the broad, the base nature of needs within China and I think it's a broad based set of investment capabilities with very strong performance that relate to that.

Great, thank you.

Thank you.

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

Hey, good morning. Thanks for taking the question. Just coming back to the expense base the $200 million of net savings, I understand that net of investments, I was just hoping you could talk about how much exactly embedded in there for investments back in the business. Maybe you could talk about how you're approaching that? How you're sizing that? What gives you confidence about the right mount? And what would you say are the top three areas that you're investing in?

So let me just talk again. So we're not going to get into specifics. You know, I think, as we've all said, the work that we did was very comprehensive and very broad. So there was a lot of movement, you know, realignment of resources and against seriously we care about. And it was just talking about China is going to continue to be a contributor. So we're making sure that we have all the resources there that we need. ETFs continues to be a driver and, you know, we continue to see that, you know, as a very important priority for us. The factors continue, we have a subset of that continues to be very important. Solutions all the years that we've talked about. So again, most of the assets under management now we think are - that we have are these portable right resources, and they're in high demand areas as we go forward.

And Michael, the way I just add to that is, we're focused on creating positive operating leverage, and sustaining that operating leverage. And so looking at these cost targets, it gives us the opportunity to realign our investments or permanently alter or take out some expenses, so that we have the flexibility and the capacity to continue to invest in all those capabilities, Marty spoke of.

Okay, and just on the uplift, $134 million on that slide with normalized business conditions. I guess just how do you think about the drivers there? How does that break down? And how would you describe what normalized is relative to say, pre-COVID? So for example, is it like 80% on say, TNE versus pre-COVID? How should we be thinking about that?

Yeah, sure. Good question. So, you know, again, there are a couple of ways to think about this. So the $134 million, it's a rather specific number, I know, but you know, I'd tell you about $25 million or so is really - is purely a function of seasonality in compensation expense. So it has nothing to do with COVID, it's just third quarter would not be the right quarter to really create a run rate there. The remainder of $100 million or so plus, is very COVID induced. And, you know, it's hard to figure out for any of us how much of that comes back and the way in which it comes back and the timeframe in which it comes back. I couldn't tell you if we're running it, you know, 80% or 20%. I mean, I can tell you, we're not traveling. And I can tell you that most of our offices either remain closed or at somewhat of a 20% or so capacity. And so if you just think about the expenses that would be tied around that, we're not having in-person engagements with clients, you know, consistent with what you would expect everywhere. So I mean, in some respects, you could assume it's, you know, we're at 5% of what it used to be, we don't expect we'll stay there forever, we just don't know when it would come back. We do believe it comes back, we do believe there is an environment someday, where we're largely back in the office where we are traveling to see clients again, that we are in-person together again, and we do think it's reasonable to expect some of that to come back over time. I just don't know when. And then the point I made earlier that $200 million is largely independent of that it's really tied to discrete line items that have all been identified, and really has nothing to do with a COVID environment.

Great, thank you.

Thank you for your question. Our next question is from Mike Carrier with Bank of America. Your line is open.

Good morning, and thanks for taking the question. First the turn inflows is great, I realized that the quarter fee rate was impacted by some of the rise in the non-AUM, but excluding that I think it still take down spikes on every markets. If you could provide some color on the theory on that institutional Solution inflows, more versus the overall fee rate, you know versus the prior pipeline disengage due to the trend line that we have?

I would say the fee rate for the institutional pipeline and the components that is driven by Solutions, it's very consistent. So I would just think of it very consistent to what we've experienced than certainly in the third quarter, and probably, you know, a couple of quarters prior to that.

Okay, and then, Allison just given the efficiency niches and where your guidance adjusted margin is right now at 37% just roughly in line when you exit the sector, when you're looking at these efficiency initiatives, is it a way to improve the margin further, like free up money to invest in the business longer-term, offsetting the structural headwinds in the industry, I'm just trying to get a sense because each firm has very you know has a different strategic, you know, kind of initiatives or outlooks in the industry. And then, if we do get a 5% rise in the markets, if you can just, you know, let us know how you think about the variable component of POS, and how that could impact the core expense you know level?

So I would say, the way we're thinking about it is, we want to be able to create positive operating leverage, it's hard to create positive operating leverage quarter after quarter after quarter. But that's, you know, longer-term over the medium-term, that's what we're trying to do so that we actually have the capacity to reinvest. And we can't underscore enough our commitment to reinvesting in our business and reinvesting in those growth capabilities, because we really believe that's what drives the longer-term flow dynamics and value of the firm. And so as we think about operating leverage, you know, and we think about the fact that the fee environment is one that is there is downward pressure, it is not the same downward pressure quarter-after-quarter. But in general, at a macro level, the pressure is more down than anything. And so as we seek to maintain the fee level, as we continue to see just the growth in our ETF business and the QQQ Suite, we are looking at really creating profitability across the broad platform and thinking of these expense levers as a way for us to create capacity to continue to reinvest to drive the top line. And that's where we think we get the operating leverage. In terms of the variability. I mean, I just point to the fact that our expense base in general is about a third variable, two-thirds fixed. And so as you think about a rise in markets, that's a reasonable data point to you.

Got it, thanks.

Thank you for your question. [Operator Instructions] As reminder, before we take our next question, we have about five minutes left in today's conference call. Our next question will come from Bill Katz with Citigroup. Your line is open, sir.

Okay, thanks. Just one clarification and lot of my question have been asked. On the $26 billion of AUM that had been sort of identified with some team changes. Is that money sort of sticky at this point in time? Or do you think that there could be some subject to run off? And what might be the associated revenues with that?

Yeah, we think that it's quite sticky, Bill, we've had conversations as I mentioned before, both with the teams and our clients. And I think, you know, like I mentioned, the feedback was quite positive for the changes that we made both why we did them and strategically the rationale behind them. So you know we just don't expect there to be a significant amount of runoff related to those assets under advisement and then what we're trying to do is, use those things to strengthen the areas where we really think there is strong demand in the marketplace or move assets to stronger teams with better processes and performance overall. So clients, you know, should see that is doing a good thing kind of overall not you know, look it's tough to go through those things, but that was the right things to do strategically for the business.

Okay. And then just one quick follow-up. Marty, you mentioned in your prepared commentary that you are looking to take share within the ETFs. I was just sort of wondering, you know, where that share might come from? Is that within the passive bucket broadly or is that relative to active, some of the existing players I'm trying to get a sense of you know how that share would transpire?

Yeah, and those can be a combination, right. I think here we talked earlier about the QQQ Suite, it's a strong spot for us, you know, when you look at that will be an area with a very strong factor capability. And that's sort of fundamental to our ETF Suite. And so we'll continue that area. I also mentioned relatively small about $5 billion in ESG related ETFs right now, you know, it is an area of you know, as market demand is moving there, having those longer track records are, you know, are important when, so we look at that as an area of growth also, so that you should think broadly about it. And, again, I still think it's longer dated, but you know, paying attention to what happens with non-transparent ETFs is something to have, you know, as we look out into the future, and again, you know we'll start to get some sense of it as we launch sort of non-transparent along with Fidelity by the end of the year. So pretty broadly, Bill.

Okay, thank you very much, Greg and Marty [ph].

Appreciate it.

Thank you for your question. We have a question from Robert Lee with KBW. Your line is open, sir.

Great, thanks and thanks for your patience. But both questions. Firstly, thanks to the end product disclosure, appreciate it. Most of my questions been asked. But Marty, you touched on and I apologize if I missed it earlier. But, on ESG you were elaborating a bit more on how you're thinking but more broadly, is really the strategy mainly focused on ETF business where you'll have more ESG specific strategies, and then how are you really looking to incorporate into the broader you know active business as you can see the investment process, are you dissipating rolling on a broader suite of kind of thematic strategies, just trying to get a sense of that?

Yeah, let me make a couple of comments and Greg can chime in. So it's multi-tiered. So principal activity right now is, you know, embedding ESG across all of our strategies throughout the world. We're well into it, you know, some will take longer, but that's, you know it is just a reality and that's well underway. And again, I think different parts of the world are at different stages, if you aren't embedding ESG in your investment capabilities, you know, in Europe, you know, you're just not competitive and we anticipate that, you know, across the world. And then just looking at our product suites that's not ETFs alone, it continues to be you know, we'll look at active capabilities. I'd say we're probably a leader in the fixed income area with ESG been embedded in that process. And then, the other thing, we have ESG capability and, you know, thought leadership there is an area - that is an area of strength for us, and, again, taken you know very seriously. Greg, would you add?

Yeah, the thing about, you know, look, I think, we're well positioned, Robert for a lot of ESG perspective, the market is to Marty's point moving very quickly, we need to move quickly, we're prepared to do that, if you're going to think about our right now, we have roughly about $30 billion of ESG mandates by the narrowest of market definition, that's across 90,000 [ph] mandates varies by strategy and geography and client side. So you know, we view ESG strategically as something that we'll continue to grow in importance in every region will be a significant growth area for the firm, we have a desire to be a top tier global ESG manager and to Marty's point we're kind of prepared to have ESG systematically integrated across our entire platform, which is, you know, a big kind of undertaking and then we'll support that with the array of sustainability and impact products overall. So strong performance, I guess, is really key in all areas, it's critical to ESG moving forward, and that's why our model is very investment-led, you asked about how we manage this with investment-led, and we make sure our teams incorporate ESG requirements and each team's specific processes. And then we support that by a globally a key team and that provides expertise and a comprehensive set of tools. So a lot of work and I think it gives you a look and understanding and the seriousness of how we're taking ESG and how confident we do and this opportunity is going to be moving forward.

So we believe we answered the question.

Yes, it does. Thanks so much. Thank you.

Good, thanks Robert. And so we'll wrap up the call again. You know, thank you very much for all the questions, very thoughtful. Again, we feel good about the quarter and we feel good about the undertakings that we described today. They're all meant to make us a better and stronger firm. And we'll continue to be very focused on that as we move forward and for the ongoing conversation. So thank you very much and have a good rest of the day.

This does conclude today's conference call. We thank you all for participating. You may now disconnect and have a great rest of your day.