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Consolidated Investment Products (CIP)
 9 Months Ended
Sep. 30, 2019
Consolidated Investment Products [Abstract]  
CONSOLIDATED INVESTMENT PRODUCTS (CIP) CONSOLIDATED INVESTMENT PRODUCTS (CIP)
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, 2019
 
December 31, 2018
Cash and cash equivalents of CIP
485.7

 
657.7

Accounts receivable and other assets of CIP
166.4

 
110.8

Investments of CIP
7,041.7

 
6,213.5

Less: Debt of CIP
(5,484.3
)
 
(5,226.0
)
Less: Other liabilities of CIP
(757.8
)
 
(387.6
)
Less: Retained earnings
9.2

 
7.9

Less: Accumulated other comprehensive income, net of tax
(9.1
)
 
(7.8
)
Less: Equity attributable to redeemable noncontrolling interests
(398.0
)
 
(396.2
)
Less: Equity attributable to nonredeemable noncontrolling interests
(387.5
)
 
(356.5
)
Invesco’s net interests in CIP
666.3

 
615.8


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, 2019 and 2018:
 
Three months ended September 30,
 
Nine months ended September 30,
$ in millions
2019
 
2018
 
2019
 
2018
Total operating revenues
(8.5
)
 
(4.7
)
 
(24.4
)
 
(18.8
)
Total operating expenses
9.4

 
5.1

 
17.6

 
14.5

Operating income
(17.9
)
 
(9.8
)
 
(42.0
)
 
(33.3
)
Equity in earnings of unconsolidated affiliates
(9.5
)
 
(3.4
)
 
(8.6
)
 
(9.8
)
Interest and dividend income
(0.7
)
 
—

 
(3.1
)
 
—

Other gains and losses, net
0.3

 
8.0

 
(28.7
)
 
16.3

Interest and dividend income of CIP
90.4

 
71.0

 
261.8

 
196.0

Interest expense of CIP
(58.0
)
 
(51.7
)
 
(170.8
)
 
(137.5
)
Other gains/(losses) of CIP, net
4.6

 
8.8

 
36.0

 
(2.3
)
Income before income taxes
9.2

 
22.9

 
44.6

 
29.4

Net income
9.2

 
22.9

 
44.6

 
29.4

Net (income)/loss attributable to noncontrolling interests in consolidated entities
(11.1
)
 
(11.6
)
 
(45.9
)
 
(19.7
)
Net income attributable to Invesco Ltd.
(1.9
)
 
11.3

 
(1.3
)
 
9.7


Non-consolidated VIEs
At September 30, 2019, 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 $194.1 million (December 31, 2018: $181.8 million).
Balance Sheet information - newly consolidated VIEs/VOEs
During the nine months ended September 30, 2019, there were three newly consolidated VIEs and five newly consolidated voting rights entities (VOEs) (September 30, 2018: there were twenty-two newly consolidated VIEs and eight 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, 2019
 
For the nine months ended September 30, 2018
$ in millions
VIEs
 
VOEs
 
VIEs
 
VOEs
Cash and cash equivalents of CIP
9.9

 
0.2

 
17.4

 
—

Accounts receivable and other assets of CIP
3.1

 
0.3

 
6.2

 
1.9

Investments of CIP
401.9

 
25.5

 
800.6

 
172.6

Total assets
414.9

 
26.0

 
824.2

 
174.5

 
 
 
 
 
 
 

Debt of CIP
188.8

 
—

 
555.2

 
—

Other liabilities of CIP
226.1

 
—

 
37.7

 
—

Total liabilities
414.9

 
—

 
592.9

 
—

Total equity
—

 
26.0

 
231.3

 
174.5

Total liabilities and equity
414.9

 
26.0

 
824.2

 
174.5


Balance Sheet information - deconsolidated VIEs/VOEs
During the nine months ended September 30, 2019, the company determined that it was no longer the primary beneficiary of six VIEs and no longer held the majority voting interest in nine VOEs (September 30, 2018: the company determined that it was no longer the primary beneficiary of five VIEs). 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, 2019 and 2018 from the deconsolidation of these investment products.
 
For the nine months ended September 30, 2019
 
For the nine months ended September 30, 2018
$ in millions
VIEs
 
VOEs
 
VIEs
Cash and cash equivalents of CIP
7.6

 
(0.2
)
 
104.9

Accounts receivable and other assets of CIP
22.3

 
0.3

 
26.2

Investments of CIP
626.1

 
37.0

 
912.4

Total assets
656.0

 
37.1

 
1,043.5

 
 
 
 
 
 
Debt of CIP
526.2

 
—

 
938.3

Other liabilities of CIP
22.2

 
—

 
9.0

Total liabilities
548.4

 
—

 
947.3

Total equity
107.6

 
37.1

 
96.2

Total liabilities and equity
656.0

 
37.1

 
1,043.5


The following tables present the fair value hierarchy levels of certain CIP balances which are measured at fair value as of September 30, 2019 and December 31, 2018:
 
As of September 30, 2019
$ 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
5,801.7

 
—

 
5,801.7

 
—

 
—

Bonds
706.6

 
3.7

 
702.9

 
—

 
—

Equity securities
271.4

 
194.9

 
76.5

 
—

 
—

Equity and fixed income mutual funds
21.4

 
21.4

 
—

 
—

 
—

Investments in other private equity funds
208.6

 
—

 
—

 
—

 
208.6

Real estate investments
32.0

 
—

 
—

 
32.0

 
—

Total assets at fair value
7,041.7

 
220.0

 
6,581.1

 
32.0

 
208.6

 
As of December 31, 2018
$ 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
5,117.0

 
—

 
5,117.0

 
—

 
—

Bonds
636.0

 
—

 
636.0

 
—

 
—

Equity securities
241.2

 
208.1

 
33.1

 
—

 
—

Equity and fixed income mutual funds
18.8

 
18.8

 
—

 
—

 
—

Investments in other private equity funds
188.7

 
—

 
—

 
—

 
188.7

Real estate investments
11.8

 
—

 
—

 
11.8

 
—

Total assets at fair value
6,213.5

 
226.9

 
5,786.1

 
11.8

 
188.7


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, 2019
 
Nine months ended September 30, 2019
$ in millions
Level 3 Assets
 
Level 3 Assets
Beginning balance
14.5

 
11.8

Purchases
17.2

 
17.2

Gains and losses included in the Condensed Consolidated Statements of Income (1)
0.3

 
3.0

Ending balance
32.0

 
32.0

 
Three months ended September 30, 2018
 
Nine months ended September 30, 2018
$ in millions
Level 3 Assets
 
Level 3 Assets
Beginning balance
52.0

 
76.2

Purchases
—

 
13.0

Sales
(39.3
)
 
(84.8
)
Gains and losses included in the Condensed Consolidated Statements of Income (1)
(0.6
)
 
7.7

Ending balance
12.1

 
12.1

____________
(1)
Included in gains/(losses) of CIP, net in the Condensed Consolidated Statements of Income for the nine months ended September 30, 2019 are $3.0 million in net unrealized gains attributable to investments still held at September 30, 2019 by CIP (for the three and nine months ended September 30, 2018: $0.5 million and $0.8 million in net unrealized losses are attributable to investments still held at September 30, 2018 by CIP).
The collateral assets held by consolidated CLOs are primarily invested in senior secured bank loans, bonds, and equity securities. Bank loan investments of $5,758.2 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 2019 and 2028, pay interest at LIBOR plus a spread of up to 12.5%, and typically range in S&P credit rating categories from BBB down to unrated. 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, 2019, the unpaid principal balance exceeds the fair value of the senior secured bank loans and bonds by approximately $120.5 million (December 31, 2018: the unpaid principal balance exceeded the fair value of the senior secured bank loans and bonds by approximately $134.3 million). Approximately less than 0.28% of the collateral assets were in default as of September 30, 2019 and 2018. CLO investments are valued based on price quotations provided by third-party pricing sources. These third-party sources aggregate indicative price quotations daily to provide the company with a price for the CLO investments. The company has developed internal controls to review the reasonableness and completeness of these price quotations on a daily basis. If necessary, price quotations are challenged through a third-party pricing challenge process.
Notes issued by consolidated CLOs mature at various dates between 2026 and 2032 and have a weighted average maturity of 10.78 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 0.55% for the more senior tranches to 7.92% 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.
Quantitative Information about Level 3 Fair Value Measurements
At September 30, 2019, there were $32.0 million of investments held by consolidated real estate funds that were valued using recent private market transactions.
At December 31, 2018, there were $11.8 million of investments held by consolidated real estate funds that were valued using recent private market transactions.

The table below summarizes as of September 30, 2019 and December 31, 2018, 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.
 
 
September 30, 2019
 
December 31, 2018
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)
 
$208.6
 
$89.4
 
6.6 years
 

$188.7

 

$101.9

 
6.1 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.