CONSOLIDATED INVESTMENT PRODUCTS (CIP)

9 Months Ended

Sep. 30, 2021

Consolidated Investment Products [Abstract]

The following table presents the balances related to CIP that are included on the Condensed Consolidated Balance Sheets as well as Invesco’s net interest in the CIP for each period presented. See the company’s most recently filed Form 10-K for additional disclosures on valuation methodology and fair value.


	As of
$ in millions	September 30, 2021	December 31, 2020
Cash and cash equivalents of CIP	536.3	301.7
Accounts receivable and other assets of CIP	273.7	175.5
Investments of CIP	8,924.2	7,910.0
Less: Debt of CIP	(7,224.5)	(6,714.1)
Less: Other liabilities of CIP	(864.9)	(588.6)
Less: Retained earnings	0.1	0.1

Less: Accumulated other comprehensive income, net of tax	—	—
Less: Equity attributable to redeemable noncontrolling interests	(542.6)	(211.8)
Less: Equity attributable to nonredeemable noncontrolling interests	(651.1)	(446.3)
Invesco’s net interests in CIP	451.2	426.5

The following table reflects the impact of consolidation of investment products into the Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2021 and 2020:


	Three months ended September 30,		Nine months ended September 30,
$ in millions	2021	2020	2021	2020
Total operating revenues	(11.2)	(10.4)	(31.4)	(29.8)
Total operating expenses	9.5	4.4	25.4	22.9
Operating income	(20.7)	(14.8)	(56.8)	(52.7)
Equity in earnings of unconsolidated affiliates	(25.0)	(26.0)	(86.5)	10.8
Interest and dividend income	—	—	—	(0.3)

Other gains and losses, net	1.8	(5.0)	(5.1)	8.4
Interest and dividend income of CIP	79.2	76.3	214.4	241.2
Interest expense of CIP	(41.5)	(41.8)	(120.8)	(151.2)
Other gains/(losses) of CIP, net	162.5	64.7	323.3	(61.4)
Income before income taxes	156.3	53.4	268.5	(5.2)
Income tax provision	—	—	—	—


Net income	156.3	53.4	268.5	(5.2)
Net (income)/loss attributable to noncontrolling interests in consolidated entities	(156.3)	(43.8)	(268.5)	14.6
Net income attributable to Invesco Ltd.	—	9.6	—	9.4

Non-consolidated VIEs

At September 30, 2021, the company’s carrying value and maximum risk of loss with respect to variable interest entities (VIEs) in which the company is not the primary beneficiary was $168.7 million (December 31, 2020: $152.0 million).

Balance Sheet information - newly consolidated VIEs/VOEs

During the nine months ended September 30, 2021, there were nine newly consolidated variable interest entities (VIEs) and three newly consolidated voting rights entities (VOEs) (September 30, 2020: there were four newly consolidated VIEs and no newly consolidated VOEs). The table below illustrates the summary balance sheet amounts related to these products before consolidation into the company. The balances below are reflective of the balances existing at the consolidation date after the initial funding of the investments by the company and unrelated third-party investors. The current period activity for the consolidated funds, including the initial funding and subsequent investment of initial cash balances into underlying investments of CIP, is reflected in the company’s Condensed Consolidated Financial Statements.


	For the nine months ended September 30, 2021		For the nine months ended September 30, 2020
$ in millions (1)	VIEs	VOEs	VIEs	VOEs
Cash and cash equivalents of CIP	38.5	—	9.1	—
Accounts receivable and other assets of CIP	6.3	1.0	1.2	—
Investments of CIP	492.3	131.4	114.2	—
Total assets	537.1	132.4	124.5	—

Debt of CIP	136.1	—	23.9	—
Other liabilities of CIP	206.6	1.0	89.7	—
Total liabilities	342.7	1.0	113.6	—
Total equity	194.4	131.4	10.9	—
Total liabilities and equity	537.1	132.4	124.5	—

__________

(1) Certain amounts have been reclassified between line items in this table to properly present balances and do not impact the financial statements or any other disclosures. The revision is not material to the previously issued financial statements.

Balance Sheet information - deconsolidated VIEs/VOEs

During the nine months ended September 30, 2021, the company determined that it was no longer the primary beneficiary of five VIEs and no longer held the majority voting interest in four VOEs (September 30, 2020: the company determined that it was no longer the primary beneficiary of seven VIEs and no longer held the majority voting interest in eleven VOEs). The amounts deconsolidated from the Condensed Consolidated Balance Sheets are illustrated in the table below. There was no net impact to the Condensed Consolidated Statements of Income for the nine months ended September 30, 2021 and 2020 from the deconsolidation of these investment products.


	For the nine months ended September 30, 2021		For the nine months ended September 30, 2020
$ in millions (1)	VIEs	VOEs	VIEs	VOEs
Cash and cash equivalents of CIP	6.1	0.1	0.4	0.2
Accounts receivable and other assets of CIP	1.8	0.1	2.8	1.1
Investments of CIP	284.4	27.6	216.9	134.1
Total assets	292.3	27.8	220.1	135.4

Debt of CIP	258.3	—	—	—
Other liabilities of CIP	17.3	—	2.0	—
Total liabilities	275.6	—	2.0	—
Total equity	16.7	27.8	218.1	135.4
Total liabilities and equity	292.3	27.8	220.1	135.4

__________

The following tables present the fair value hierarchy levels of certain CIP balances which are measured at fair value as of September 30, 2021 and December 31, 2020:


	As of September 30, 2021
$ in millions	Fair Value Measurements	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Investments Measured at NAV as a practical expedient
Assets:

Bank loans	7,239.3	—	7,239.3	—	—
Bonds	667.3	10.1	657.2	—	—
Equity securities	367.1	149.2	217.9	—	—


Equity and fixed income mutual funds	268.9	0.2	268.7	—	—

Investments in other private equity funds	381.6	—	8.1	—	373.5




Total assets at fair value	8,924.2	159.5	8,391.2	—	373.5


	As of December 31, 2020
$ in millions	Fair Value Measurements	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Investments Measured at NAV as a practical expedient
Assets:

Bank loans	6,864.5	—	6,864.5	—	—
Bonds	539.0	0.6	538.4	—	—
Equity securities	137.2	61.3	75.9	—	—


Equity and fixed income mutual funds	103.0	91.2	11.8	—	—

Investments in other private equity funds	266.3	—	8.1	—	258.2




Total assets at fair value	7,910.0	153.1	7,498.7	—	258.2

The following tables show a reconciliation of the beginning and ending fair value measurements for level 3 assets using significant unobservable inputs:


	Three months ended September 30, 2020	Nine months ended September 30, 2020
$ in millions	Level 3 Asset	Level 3 Assets
Beginning balance	—	78.6






Deconsolidation of CIP	—	(89.4)
Gains and losses included in the Condensed Consolidated Statements of Income	—	10.8


Ending balance	—	—

The collateral assets held by consolidated CLOs are primarily invested in senior secured bank loans, bonds and equity securities. Bank loan investments of $7,225.4 million, which comprise the majority of consolidated CLO portfolio collateral, are senior secured corporate loans from a variety of industries, including but not limited to the aerospace and defense, broadcasting, technology, utilities, household products, healthcare, oil and gas and finance industries. Bank loan investments mature at various dates between 2022 and 2029, pay interest at LIBOR plus a spread of up to 12.0% and typically range in S&P credit rating categories from BBB down to unrated. Approximately less than 0.62% of the collateral assets were in default as of September 30, 2021 and 2020. Interest income on bank loans and bonds is recognized based on the unpaid principal balance and stated interest rate of these investments on an accrual basis. At September 30, 2021, the unpaid principal balance exceeds the fair value of the senior secured bank loans and bonds by approximately $84.0 million (December 31, 2020: the unpaid principal balance exceeded the fair value of the senior secured bank loans and bonds by approximately $208.6 million). These investments are accounted for on a one-month lag based on the availability of fund financial information, which means the third quarter fair value reflects a valuation as of August 31, 2021. CLO investments are valued based on price quotations provided by third-party pricing sources. These third-party sources aggregate indicative price quotations to provide the company with a price for the CLO investments.

Notes issued by consolidated CLOs mature at various dates between 2030 and 2034 and have a weighted average maturity of 10.72 years. The notes are issued in various tranches with different risk profiles. The interest rates are generally variable rates based on LIBOR plus a pre-defined spread, which varies from 0.40% for the more senior tranches to 8.51% for the more subordinated tranches. The investors in this debt are not affiliated with the company and have no recourse to the general credit of the company for this debt.

The table below summarizes as of September 30, 2021 and December 31, 2020, the nature of investments that are valued using the NAV as a practical expedient and any related liquidation restrictions or other factors which may impact the ultimate value realized. These investments are valued on a three-month lag based on the availability of fund financial information.

September 30, 2021

December 31, 2020

in millions, except term data

Fair Value

Total Unfunded Commitments

Weighted Average Remaining Term (2)

Fair Value

Total Unfunded Commitments

Weighted Average Remaining Term (2)

Private equity funds (1)

$373.5

$53.5

7.1 years

$258.2

$110.1

6.7 years

____________

(1) These investments are not subject to redemption; however, for certain funds, the investors may sell or transfer their interest, which may require approval by the general partner of the underlying funds.

(2) These investments are expected to be returned through distributions because of liquidations of the funds’ underlying assets over the weighted average periods indicated.