FINANCE23○ Interviews are edited for clarity and length. Listen to Bloomberg Businessweek With
Carol Massar and Tim Stenovec, weekdays from 2 p.m. to 5 p.m. ET on Bloomberg Radio.○ Has run the Atlanta-based fund company since 2005 ○ Previously
served as co-CEO of Franklin Resources Inc. ○ During Flanagan’s
tenure, Invesco has acquired the PowerShares and Guggenheim ETF
businesses and the OppenheimerFunds and Van Kampen fund familiesInvesco Ltd. runs more than $1.3 trillion,
including the giant QQQ exchange-traded
fund tracking the Nasdaq 100. The CEO
still sees a growth opportunity in China—
and a big risk in Bitcoin. —Carol MassarWhat will be the lasting impact of the
pandemic on your business?Who’d have imagined having
99% of your workforce
working from home? But
how we interact with
clients is forever changed.
We’ll see clients in person
going forward, but digital
engagements have really
changed the game.Do you think there will be consolidation
in the fund business this year?I do. Clients are working with
fewer money managers. It’s
happening around the world.Do you have to be bigger to go after the
likes of BlackRock and Vanguard?I look at it a different way.
Clients want everything from
passive portfolios to active
alternatives. And they want
analytical tools and support.
You have to have scale to do
that—the ability to invest in
things like technology.One place Invesco has focused is
China. How is your business there
going? Are you nervous about how
the new U.S. administration will
approach China?We manage $76 billion in
China for Chinese clients,
whether through a joint ven-
ture or directly. The growth’s
been unbelievable. In the
last half of the year they had
something like $17 billion in
net inflows. I think it’s really
important for two world pow-
ers to be on the same page.
It’s good for each country.Does it feel like a new day for
that relationship?Early days, but it sure does.What are the new things that the financial
community needs to be paying attention
to now? How about Bitcoin?It’s very interesting, but you’re
going to see central banks in
the [digital currency] game,
too, at some point. I think
that puts the value of Bitcoin
at risk.What about SPACs, the blank-check
companies that raise money to take
another company public?Anytime something grows
that fast and it’s so wonderful,
it’s probably good to question
how long it’s going to last.^BW Talks Martin Flanagan
THE BOTTOM LINE For years, progressive Democrats have been
arguing for a small tax on financial transactions to fund their goals,
FLANAGAN: INVESCO LTD. *BASED ON A TAX OF 0.1% OF PURCHASE VALUE AND A JANUARY 2022 START DATE. DATA: STAFF OF THE JOINT COMMITTEE ON TAXATION, CONGRESSIONAL BUDGET OFFICEbut they’ve run into arguments that it would hurt retirement savers.
returns of Griffin’s Citadel businesses—a hedge fund
and a market-making trading firm—that would be
dinged each time they make a trade. Investment funds
and firms that trade the most, such as high-frequency
traders, could face the highest costs.
The idea isn’t new. The U.S. had a stock transac-
tions tax from 1914 to 1965. Today a small fee on stock
transactions helps fund oversight by the Securities
and Exchange Commission. A group of nonprofits in
the U.K. in 2010 organized to support what it dubbed
a “Robin Hood tax,” with the idea that it would take
from the rich to help the less fortunate. It caught on
in the U.S., with Democratic lawmakers proposing
their own bills. Their efforts stalled once Republicans
regained control of the House in 2010.
Wall Street lobbyists and Republican lawmakers
opposing the idea often point out that some European
countries that imposed transaction taxes later
withdrew them. The tax mostly failed to raise the
amounts proponents promised; it also drove secu-
rities trading and jobs to other countries. Efforts to
adopt a European Union-wide levy also foundered,
though some EU member countries are again float-
ing the tax as a way to raise funds to bolster econ-
omies hit by the pandemic.
The transaction tax proposal took the stage
again during the 2020 Democratic presidential pri-
maries. As a candidate, Sanders, who now leads
the Senate Budget Committee, proposed a levy on
all trades as a way to finance tuition-free college.
Michael Bloomberg, founder and majority owner of
Bloomberg LP, which owns Bloomberg Businessweek,
also offered a version during his primary effort.
At the time, lobbyists circulated research by mutual
fund giant Vanguard Group that claimed a measure
similar to DeFazio’s would reduce investor returns
by more than 1 percentage point per year. Vanguard
came under fire for its assumptions, such as basing
its calculation on the high trading rate of an actively
managed small-cap stock fund. The company later
released estimates for more typical types of mutual
funds and said in many cases the tax would hurt
returns by less than 0.3 percentage point.
One Wall Street advocacy group, the Partnership to
Protect Our Retirement Future, planted paid consul-
tants at candidates’ town hall meetings to frame the
tax as an affront to retirees, the public-relations firm
that formed the group told Reuters. North Carolina
Representative Patrick McHenry, the lead Republican
on the House Financial Services Committee, in October
introduced his own bill: It would prohibit states from
imposing their own taxes on transactions. —Joe Light