INVESCO : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-K)

Management has elected to apply the FAST Act Modernization and Simplification of
Regulation S-K, which provides the option to limit the discussion to the two
most recent calendar years. The discussion and analysis disclosed herein apply
to material changes in the consolidated financial statements for 2020 and 2019.
For the comparison of 2019 and 2018, see the Management's Discussion and
Analysis of Financial Condition and Results of Operations in Part II, Item 7 of
the company's 2019 Annual Report on Form 10-K, filed with the Securities and
Exchange Commission on March 2, 2020. The following discussion and analysis of
the results of operations and financial condition of Invesco Ltd. and its
subsidiaries (collectively, the "company" or "Invesco") should be read in
conjunction with the "Forward-looking Statements" disclosure set forth in Part I
and the "Risk Factors" set forth in Item 1A of Part I of this Annual Report on
Form 10K, each of which describe our risks, uncertainties and other important
factors in more detail.

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Executive Overview

The following executive overview summarizes the significant trends affecting our
results of operations and financial condition for the periods presented. This
overview and the remainder of this management's discussion and analysis
supplements and should be read in conjunction with the Consolidated Financial
Statements of Invesco and the notes thereto contained elsewhere in this Annual
Report on Form 10-K.

Throughout 2020, global markets experienced record levels of volatility,
transitioning quickly from highs in the beginning of the year to extreme lows as
global markets first reacted to the COVID-19 pandemic. The pandemic had a severe
impact on the economy, increasing unemployment and decreasing consumer spending
throughout the global markets. However, beginning in April 2020, equity markets
in many major indices experienced near continual gains throughout the remainder
of 2020, more than reversing losses earlier in the year. The increasing equity
markets were driven by the softening of social containment measures and
reopening of businesses following shut-downs earlier in the year, accommodative
fiscal and monetary policies enacted by many central governments and the
authorization of multiple COVID-19 vaccines. Despite the increase in equity
markets, the economy contracted in many developed and developing countries in
2020.

The table below summarizes the year ended December 31 returns based on price
appreciation/(depreciation) of several major market indices for 2020 and 2019:

Year ended December 31,
Index expressed in
Equity Index currency 2020 2019
S&P 500 U.S. Dollar 16.3% 28.9%
FTSE 100 British Pound (14.3)% 12.1%
FTSE 100 U.S. Dollar (11.8)% 16.7%
Nikkei 225 Japanese Yen 16.0% 18.2%
Nikkei 225 U.S. Dollar 22.4% 19.9%
MSCI Emerging Markets U.S. Dollar 15.8% 15.4%
Bond Index
Barclays U.S. Aggregate Bond U.S. Dollar 7.5% 8.7%

The company's financial results are impacted by the fluctuations in exchange
rates against the U.S. Dollar. Our revenues are directly influenced by the level
and composition of our AUM. Therefore, movements in global capital market
levels, net new business inflows (or outflows) and changes in the mix of
investment products between asset classes and geographies may materially affect
our revenues from period to period. As fee rates differ across geographic
locations, changes to exchange rates have an impact on the net revenue yields.

Invesco benefits from our long-term efforts to ensure a diversified base of AUM.
One of Invesco's core strengths, and a key differentiator for the company within
the industry, is our broad diversification across client domiciles, asset
classes and distribution channels. Our geographic diversification recognizes
growth opportunities in different parts of the world. This broad diversification
mitigates the impact on Invesco of different market cycles and enables the
company to take advantage of growth opportunities in various markets and
channels.

Update on significant events and transactions

Over the past decade, we've been highly focused on investing ahead of shifts in
client demand, putting us in a strong position to take advantage of key industry
tailwinds in the future. During 2020, we continued to invest in capabilities
where we see client demand or future opportunities by hiring strong talent,
further upgrading our technology platform and launching new products. We believe
the ability to leverage the capabilities developed by our investment teams to
meet client demand across the globe is a significant differentiator for our
firm.

As previously disclosed, we are undertaking a strategic evaluation of our
business focusing on four key areas of our expense base: our organizational
model, our real estate footprint, management of third party spend, and
technology and operations efficiency. We plan to invest in key areas of growth
aligned with our strategic plan, including ETFs, Fixed Income, China, Solutions,
Alternatives and Global Equities, while creating permanent annual net operating
expense improvements of $200 million. A significant element of the savings will
be generated from realigning our workforce to support key areas of growth as
well as repositioning some of our workforce to lower cost locations. We expect
$150 million of the savings to be achieved by
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the end of 2021 with the remainder by the end of 2022. Remaining restructuring
costs related to the strategic evaluation are estimated to be in a range of $150
to $175 million over the next two years, with $119.0 million incurred in 2020.

In 2019, Invesco completed the acquisition of OppenheimerFunds (OFI), and the
integration of our two firms. Building on the combination with OFI, in 2020 we
further deepened our relationships with clients in the US, expanded the
capabilities we offered globally and further scaled our business for the benefit
of clients and shareholders. The firm is also highly focused on delivering the
additional capabilities achieved through the combination to institutional and
non-US markets.

Managing our business and meeting client needs through COVID-19

Invesco is committed to helping our employees, our clients and our communities
navigate the challenges presented by the impacts of COVID-19. The primary focus
of our efforts is to ensure the health and safety of our employees while
preserving our ability to serve clients and manage assets in a highly dynamic
market environment. As always, we are committed to helping our clients achieve
their investment objectives through disciplined long-term investing. To this
end, we continue to proactively engage with our clients virtually to help them
better navigate market volatility by providing thought leadership and other
value-added services. We believe our client centric approach will enable our
clients to emerge from this crisis stronger.

To ensure we continue to meet client needs in a primarily remote-working
environment, small select teams are working at alternate sites or operating in
split shifts to mitigate the risks associated with the virus. Some of our
offices in locations across the globe have begun staged re-openings. We will
continue to be responsive to the evolving threat of the virus and may re-close
if necessary. Decisions regarding openings and closings of our offices are
supported by information from local government and health officials, as well as
our own internal research regarding the needs of our employees and clients.

Our portfolio managers, research analysts and traders are successfully working
remotely or in secure locations with access to all systems necessary to do their
jobs and an ability to connect with their teams in managing client assets.
Additionally, our operational, control and support teams are primarily working
in a remote environment. In light of the remote working environment, we continue
to assess and enhance our business continuity plans as well as our internal
controls with appropriate adjustments made to address the environment. This
thoughtful, coordinated approach helps ensure our ability to continue to meet
client needs and to run our business.

Other External Factors Impacting Invesco

Invesco has a larger global presence in key markets than most of our peers. As
one of the leading investment managers in the UK and Europe, we were more
impacted by continuing uncertainties surrounding Brexit. Additionally, our
strong position in Asia-Pacific meant that Invesco was more affected than others
by market uncertainties over the trade issues between China and the U.S.

On December 24, 2020, the UK and the EU (European Union) announced a trade deal
after months of negotiations. The deal came into force effective December 31,
2020. While the deal announced largely covers goods, details related to the
financial services industry are not specifically outlined within the agreement.
The UK and the EU aim to agree by March 2021 to a memorandum of understanding
establishing a framework for regulatory cooperation on financial services. The
Brexit outcome at the end of 2020 was largely anticipated by the market.

Invesco is a global business and has been committed for many years to meeting
clients' needs across Europe in both EU and non-EU countries. Invesco has local
teams of experts focused on servicing local clients and fund ranges in different
countries to meet a variety of local, country and regional client needs. We
currently have a presence in 12 countries across Europe. Our staff will be able
to continue to reside and work across the relevant regions. The change in the
UK's status from an EU to a non-EU country will not change Invesco's focus or
commitment to serve its clients across Europe. We are fully prepared to continue
to operate and deliver for our clients with minimal disruption.

Investment exposure to the London Interbank Offered Rate (LIBOR) based interest
rates could impact our client portfolios. The UK Financial Conduct Authority
(FCA), which regulates LIBOR, has made it clear that the publication of LIBOR is
not guaranteed beyond 2021. The ICE Benchmark Administration (IBA), which
administers LIBOR, recently consulted on the extension of five of the seven
total settings (overnight and one, three, six and twelve month) USD-LIBOR, with
a possible cessation extension date to June 30, 2023. As a result, firms must
transition away from LIBOR to alternative risk-free rates. Working groups and
regulators across various jurisdictions have put forth LIBOR transition plan
guidance, including recommendations related to the potential cessation extension
date of five of seven settings of US Dollar (USD) LIBOR. Invesco continues to
actively monitor and adjust the LIBOR transition strategy and timeline as
necessary, such as choosing to adhere to the recent International Swaps &
Derivatives Association (ISDA) protocol that provides a clear fallback rate for
legacy LIBOR-
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linked derivative contracts upon LIBOR cessation. The discontinuance of LIBOR
may adversely affect the amount of interest or other amounts payable or
receivable on certain portfolio investments. These changes may also impact the
market liquidity and market value of these portfolio investments. Invesco
finalized its global assessment of exposure in relation to funds holding LIBOR
based instruments and funds utilizing LIBOR as a benchmark and/or performance
target. Invesco is prioritizing the mitigation of risks associated with
financial instruments held and benchmarks/performance targets used that
reference existing LIBOR rates, as well as any impact on Invesco portfolios and
investment strategies. Invesco continues to monitor overall industry transition
progress and completes ongoing analysis of the suitability of alternative
risk-free rates.

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

The company provides investment management services to, and has transactions
with, various retail mutual funds and similar entities, private equity, real
estate, fund-of-funds, collateralized loan obligation products (CLOs), and other
investment entities sponsored by the company for the investment of client assets
in the normal course of business. The company serves as the investment manager,
making day-to-day investment decisions concerning the assets of the products.
The company is required to consolidate certain of these managed funds from
time-to-time, as discussed more fully in Item 8, Financial Statements and
Supplementary Data, Note 1, "Accounting Policies -- Basis of Accounting and
Consolidation." Investment products that are consolidated are referred to in
this Form 10-K (Report) as consolidated investments products (CIP). The
company's economic risk with respect to each investment in CIP is limited to its
equity ownership and any uncollected management and performance fees.

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

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

•Results of Operations (year ended December 31, 2020 compared to December 31,
2019);
•Schedule of Non-GAAP Information;
•Balance Sheet Discussion; and
•Liquidity and Capital Resources.

To assess the impact of CIP on the company's Results of Operations and Balance
Sheet Discussion, refer to Part II, Item 8, Financial Statements, Note
21, "Consolidated Investment Products." The impact on the company's results of
operations is illustrated by a column which shows the dollar-value change in the
consolidated figures, as caused by the consolidation of CIP. For example, the
impact of CIP on operating revenues for the year ended December 31, 2020 was a
reduction of $39.8 million. This indicates that their consolidation reduced
consolidated revenues by this amount, reflecting the elimination upon their
consolidation of the operating revenues earned by Invesco for managing these
investment products.

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

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Summary Operating Information

Summary operating information for 2020, 2019 and 2018 is presented in the table
below.
$ in millions, other than per common share amounts,
operating margins and AUM Year ended December 31,
U.S. GAAP Financial Measures Summary 2020 2019 2018
Operating revenues 6,145.6 6,117.4 5,314.1
Operating income 920.4 808.2 1,204.9
Operating margin 15.0 % 13.2 % 22.7 %
Net income attributable to Invesco Ltd. 524.8 564.7 882.8
Diluted EPS 1.13 1.28 2.14

Non-GAAP Financial Measures Summary
Net revenues (1) 4,501.0 4,415.1 3,818.1
Adjusted operating income (2) 1,664.5 1,655.8 1,391.7
Adjusted operating margin (2) 37.0 % 37.5 % 36.5 %
Adjusted net income attributable to Invesco Ltd. (3) 892.9 1,124.0 1,002.7
Adjusted diluted EPS (3) 1.93 2.55 2.43

Assets Under Management
Ending AUM (billions) 1,349.9 1,226.2 888.2
Average AUM (billions) 1,194.9 1,094.4 958.7

_________

(1)Net revenues is a non-GAAP financial measure. Net revenues are operating
revenues plus the net revenues of our Great Wall joint venture; less
pass-through revenue adjustments to investment management fees, service and
distribution fees and other; plus management and performance fees earned from
CIP. See "Schedule of Non-GAAP Information" for the reconciliation of operating
revenues to net revenues.
(2)Adjusted operating income and adjusted operating margin are non-GAAP
financial measures. Adjusted operating margin is adjusted operating income
divided by net revenues. Adjusted operating income includes operating income
plus the net operating income of our joint venture investments, the operating
income impact of the consolidation of investment products, transaction,
integration and restructuring adjustments, compensation expense related to
market valuation changes in deferred compensation plans and other reconciling
items. See "Schedule of Non-GAAP Information," for the reconciliation of
operating income to adjusted operating income.
(3)Adjusted net income attributable to Invesco Ltd. and adjusted diluted EPS are
non-GAAP financial measures. Adjusted net income attributable to Invesco Ltd. is
net income attributable to Invesco Ltd. adjusted to exclude the net income of
CIP, transaction, integration and restructuring adjustments, the net income
impact of deferred compensation plans and other reconciling items. Adjustments
made to net income attributable to Invesco Ltd. are tax-affected in arriving at
adjusted net income attributable to Invesco Ltd. By calculation, adjusted
diluted EPS is adjusted net income attributable to Invesco Ltd. divided by the
weighted average number of common shares outstanding (for diluted EPS). See
"Schedule of Non-GAAP Information," for the reconciliation of net income
attributable to Invesco Ltd. to adjusted net income attributable to Invesco Ltd.
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Investment Capabilities Performance Overview

Invesco's first strategic objective is to achieve strong investment performance
over the long-term for our clients. As of December 31, 2020, 55%, 58%, 61%, and
70% of measured ranked actively managed assets performed in the top half of peer
groups on a one-, three-, five- and ten-year basis, respectively. The table
below presents the one-, three-, five- and ten-year performance of our measured
ranked actively managed investment products measured by the percentage of AUM
ahead of benchmark and AUM in the top half of peer group. (1)
                                                    Benchmark Comparison                                         Peer Group Comparison
                                                 % of AUM Ahead of Benchmark                              % of AUM In Top Half of Peer Group
                                         1yr            3yr          5yr          10yr                1yr           3yr          5yr          10yr
Equities (2)
U.S. Core (5%)                                16  %        12  %         8  %        12  %                28  %        28  %        24  %        17  %
U.S. Growth (7%)                              87  %        87  %        53  %        53  %                87  %        87  %        87  %        53  %
U.S. Value (7%)                               27  %        11  %         3  %         3  %                 4  %         0  %         0  %         0  %
Sector (2%)                                   99  %        97  %        76  %        96  %                62  %        59  %        79  %        60  %
UK (1%)                                       13  %        25  %        18  %        40  %                16  %         6  %         9  %        26  %
Canadian (<1%)                                 0  %         0  %         0  %        12  %                11  %         0  %         0  %        11  %
Asian (3%)                                    79  %        79  %        92  %        88  %                53  %        46  %        78  %        79  %
Continental European (2%)                     14  %         5  %         9  %        90  %                13  %         5  %         9  %        68  %
Global (7%)                                   71  %        71  %        72  %        87  %                78  %        29  %        32  %        47  %
Global Ex U.S. and Emerging
Markets (13%)                                 89  %        89  %        89  %        98  %                29  %        87  %        71  %        88  %

Fixed Income (2)
Money Market (15%)                            81  %        99  %       100  %       100  %                78  %        78  %        78  %        99  %
U.S. Fixed Income (11%)                       67  %        82  %        84  %        95  %                65  %        63  %        88  %        92  %
Global Fixed Income (6%)                      84  %        84  %        87  %        96  %                53  %        54  %        60  %        70  %
Stable Value (5%)                            100  %       100  %       100  %       100  %                97  %       100  %       100  %       100  %

Other (2)
Alternatives (8%)                             26  %        34  %        73  %        37  %                35  %        33  %        40  %        56  %
Balanced (8%)                                 79  %        75  %        53  %        60  %                55  %        52  %        54  %        91  %


____________
Note:
(1) Excludes passive products, closed-end funds, private equity limited
partnerships, non-discretionary funds, unit investment trusts, fund of funds
with component funds managed by Invesco, stable value building block funds and
CDOs. Certain funds and products were excluded from the analysis because of
limited benchmark or peer group data. Had these been available, results may have
been different. These results are preliminary and subject to revision. AUM
measured in the one, three, five and ten-year quartile rankings represents 53%,
52%, 51% and 47% of total Invesco AUM, respectively, and AUM measured versus
benchmark on a one, three, five and ten year basis represents 63%, 62%, 60% and
55% of total Invesco AUM as of 12/31/20. Peer group rankings are sourced from a
widely-used third party ranking agency in each fund's market (Lipper,
Morningstar, IA, Russell, Mercer, eVestment Alliance, SITCA, Value Research) and
asset-weighted in USD. Rankings are as of prior quarter-end for most
institutional products and prior month-end for Australian retail funds due to
their late release by third parties. Rankings are calculated against all funds
in each peer group. Rankings for the primary share class of the most
representative fund in each composite are applied to all products within each
composite. Performance assumes the reinvestment of dividends. Past performance
is not indicative of future results and may not reflect an investor's
experience.

(2) Numbers in parenthesis reflect percentage of 5-year total ranked AUM. As of
December 31, 2020, total ranked AUM is $711.0 billion (53% of total Invesco AUM)
for 1 year, $700.5 billion (52% of total Invesco AUM) for 3 years, $694.0
billion (51% of Invesco AUM) for 5 years, and $631.5 billion (47% of total
Invesco AUM) for 10 years.

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Assets Under Management

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

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

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

Changes in AUM were as follows:

                                                         2020                                                        2019                                                       2018
$ in billions                       Total AUM            Active            Passive             Total AUM             Active            Passive             Total AUM            Active            Passive
January 1                          1,226.2               929.2             297.0                 888.2               667.2             221.0                937.6               738.8             198.8
Long-term inflows                    310.9               204.3             106.6                 227.5               146.8              80.7                209.8               139.4              70.4
Long-term outflows                  (326.6)             (236.1)            (90.5)               (261.9)             (196.5)            (65.4)              (248.8)             (176.4)            (72.4)
Long-term net flows                  (15.7)              (31.8)             16.1                 (34.4)              (49.7)             15.3                (39.0)              (37.0)             (2.0)
Net flows in non-management fee
earning AUM                           (5.1)                  -              (5.1)                  9.2                (0.1)              9.3                  2.5                   -               2.5
Net flows in money market funds       14.3                14.3                 -                  (2.0)               (2.0)                -                  7.6                 7.6                 -
Total net flows                       (6.5)              (17.5)             11.0                 (27.2)              (51.8)             24.6                (28.9)              (29.4)              0.5
Reinvested distributions              16.9                16.9                 -                  17.9                17.9                 -                 11.4                11.4                 -
Market gains and losses              103.0                40.8              62.2                 120.4                73.5              46.9                (67.0)              (52.1)            (14.9)

Acquisitions (1)                         -                   -                 -                 224.4               219.9               4.5                 47.6                10.5              37.1
Foreign currency translation          10.3                 9.9               0.4                   2.5                 2.5                 -                (12.5)              (12.0)             (0.5)
December 31                        1,349.9               979.3             370.6               1,226.2               929.2             297.0                888.2               667.2             221.0
Average AUM
Average long-term AUM                952.0               784.6             167.4                 887.1               734.7             152.4                785.5               646.5             139.0
Average AUM                        1,194.9               893.0             301.9               1,094.4               830.1             264.3                958.7               726.6             232.1
Revenue yield
Gross revenue yield on AUM (2)        53.7                65.4              21.0                  57.8                69.1              23.9                 56.3                66.2              26.3
Gross revenue yield on AUM before
performance fees (2)                  53.1                64.6              21.0                  56.8                67.8              23.9                 55.7                65.4              26.3
Net revenue yield on AUM (3)          37.7                46.4              12.0                  40.3                48.6              14.6                 39.8                47.5              15.9
Net revenue yield on AUM before
performance fees (3)                  36.8                45.2              12.0                  39.4                47.2              14.6                 39.2                46.7              15.9



(1) The acquisition of OppenheimerFunds business on May 24, 2019 added $224.4
billion in AUM at that date. The acquisition of Guggenheim Investments' ETF
business on April 6, 2018 added $38.1 billion in AUM at that date. As of July 1,
2018, we began including 100% of Invesco Great Wall, which added $9.5 billion in
AUM during the third quarter of 2018.
(2) Gross revenue yield on AUM is equal to annualized total operating revenues
divided by average AUM, excluding Invesco Great Wall AUM. Prior to the third
quarter 2018, management reflected its interests in Invesco Great Wall on a
proportional consolidation basis, which was consistent with the presentation of
our share of the AUM from these investments. Given the company's influence on
Invesco Great Wall, a change in regulation allowing increased foreign ownership
and reaching oral agreement in principle to obtain majority stake of the joint
venture, the company began reporting 100% of the flows and AUM for Invesco Great
Wall beginning in the third quarter of 2018. Average AUM in 2020 for our JVs in
China was $50.0 billion (2019: $35.6 billion, 2018: $16.2 billion). It is
appropriate to exclude the average AUM of our JVs for purposes of computing
gross revenue yield on AUM, because the revenues resulting from
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these AUM are not presented in our operating revenues. Under U.S. GAAP, our
share of the net income of the JVs is recorded as equity in earnings of
unconsolidated affiliates on our Consolidated Statements of Income.
Additionally, the numerator of the gross revenue yield measure, operating
revenues, excludes the management fees earned from CIP and our JVs in China;
however, the denominator of the measure includes the AUM of these investment
products. Therefore, the gross revenue yield measure is not considered
representative of the company's true effective fee rate from AUM.
(3)  Net revenue yield on AUM is equal to annualized net revenues divided by
average AUM. See "Schedule of Non-GAAP Information" for a reconciliation of
operating revenues to net revenues.

Flows

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

Market Returns

Market gains and losses include the net change in AUM resulting from changes in
market values of the underlying securities from period to period. As discussed
in the "Executive Overview" section of this Management's Discussion and
Analysis, during 2020, global equity markets saw significant volatility due to
the COVID-19 pandemic beginning in March 2020 and continuing through 2020. The
resulting decline in AUM adversely impacted our revenues during the first half
of the year, but market recovery increased our average AUM and revenues during
the second half of the year. However, market dynamics have also changed the AUM
product mix, which has an effect on our revenue yield, as discussed further
below.

Foreign Exchange Rates

During the year ended December 31, 2020, we experienced increases in AUM of
$10.3 billion due to changes in foreign exchange rates (December 31, 2019: AUM
increased by $2.5 billion).

Acquisitions

There were no acquisitions during the year ended December 31, 2020. For the year
ended December 31, 2019, we completed the acquisition of OppenheimerFunds on
May 24, 2019, which added $224.4 billion in AUM during the year.

Revenue Yield

As a significant proportion of our AUM is based outside of the U.S., changes in
foreign exchange rates result in a change to the mix of U.S. Dollar denominated
AUM with AUM denominated in other currencies. As fee rates differ across
geographic locations, changes to exchange rates have an impact on the net
revenue yields. Changes in our AUM mix also significantly impact our net revenue
yield. Passive AUM generally earn a lower effective fee rate than active asset
classes, and changes in the mix of products therefore have an impact on our net
revenue yield. At the industry level, investors continue to shift towards
passive products and away from active, and Invesco is able to participate in
this trend due to the breadth, strength and diversified nature of our business.

In the year ended December 31, 2020, the net revenue yield was 37.7 basis points
compared to 40.3 basis points in the year ended December 31, 2019, a decrease of
2.6 basis points.

In 2019, yields improved after the second quarter acquisition of
OppenheimerFunds, which contributed AUM of $224.4 billion comprised of $219.9
billion of active and $4.5 billion of passive AUM, increasing the proportion of
active AUM and positively impacting net revenue yield. However, AUM mix in 2020
was impacted by flows into lower fee products, from the market impact of the
COVID-19 pandemic and from the growth in our QQQ fund, all of which increased
the proportion of lower-fee AUM, which has lowered net revenue yield in 2020. As
passive products generally have lower fees than active products, the AUM shift
towards passive has contributed to the declining net revenue yield. Passive AUM
includes our QQQ ETF, for which we do not receive a management fee but which
delivers significant marketing and brand value and increases Invesco's
footprint, leadership and relevance in the ETF market. At December 31, 2020,
passive AUM were $370.6 billion, representing 27.5% of total AUM at that date;
whereas at December 31, 2019, passive AUM were $297.0 billion, representing
24.2% of our total AUM at that date.
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Also contributing to the overall decline, the net revenue yield specific to
passive AUM has declined, particularly from the impact of the growth of the QQQ
fund. At December 31, 2020, the QQQ fund represented $152.5 billion, or 41.1% of
passive AUM. At December 31, 2019, the QQQ fund represented $86.9 billion, or
29.3% of passive AUM. In the year ended December 31, 2020, the net revenue yield
on passive AUM was 12.0 basis points compared to 14.6 basis points in the year
ended December 31, 2019, a decrease of 2.6 basis points.

Market volatility in 2020 also contributed to investors moving into lower risk
assets, such as money market and stable
value funds, which are active funds with lower fees. We saw outflows from equity
products and alternatives and inflows into fixed income and other relatively
lower fee products. These changes have decreased the net revenue yield on active
AUM. At December 31, 2020, active AUM were $979.3 billion, representing 72.5% of
total AUM at that date; whereas at December 31, 2019, active AUM were $929.2
billion, representing 75.8% of our total AUM at that date. In the year ended
December 31, 2020, the net revenue yield on active AUM was 46.4 basis points
compared to 48.6 basis points in the year ended December 31, 2019, a decrease of
2.2 basis points.

The changes described above have adversely impacted our revenue and resulting
revenue yields, and we expect they will continue to pressure revenues and yields
in the near term.

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Changes in our AUM by channel, asset class, and client domicile, and average AUM
by asset class, are presented below:

Total AUM by Channel (1)
$ in billions                                      Total          Retail         Institutional
December 31, 2019                                1,226.2          878.2             348.0
Long-term inflows                                  310.9          221.6              89.3
Long-term outflows                                (326.6)        (267.6)            (59.0)
Long-term net flows                                (15.7)         (46.0)             30.3
Net flows in non-management fee earning AUM         (5.1)           7.2

(12.3)

Net flows in money market funds                     14.3            2.0              12.3
Total net flows                                     (6.5)         (36.8)             30.3
Reinvested distributions                            16.9           16.3               0.6
Market gains and losses                            103.0           85.4              17.6

Foreign currency translation                        10.3            4.0               6.3
December 31, 2020                                1,349.9          947.1             402.8

December 31, 2018                                  888.2          566.7             321.5
Long-term inflows                                  227.5          175.2              52.3
Long-term outflows                                (261.9)        (210.4)            (51.5)
Long-term net flows                                (34.4)         (35.2)              0.8
Net flows in non-management fee earning AUM          9.2            4.9

4.3

Net flows in money market funds                     (2.0)           4.2              (6.2)
Total net flows                                    (27.2)         (26.1)             (1.1)
Reinvested distributions                            17.9           17.6               0.3
Market gains and losses                            120.4          102.4              18.0

Acquisitions (4)                                   224.4          215.8               8.6
Foreign currency translation                         2.5            1.8               0.7
December 31, 2019                                1,226.2          878.2             348.0

December 31, 2017                                  937.6          607.6             330.0
Long-term inflows                                  209.8          158.8              51.0
Long-term outflows                                (248.8)        (194.1)            (54.7)
Long-term net flows                                (39.0)         (35.3)             (3.7)
Net flows in non-management fee earning AUM          2.5            2.7

(0.2)

Net flows in money market funds                      7.6            9.0              (1.4)
Total net flows                                    (28.9)         (23.6)             (5.3)
Reinvested distributions                            11.4           11.4                 -

Market gains and losses                            (67.0)         (62.4)             (4.6)
Acquisitions (4)                                    47.6           42.6               5.0
Foreign currency translation                       (12.5)          (8.9)             (3.6)
December 31, 2018                                  888.2          566.7             321.5


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