State Officials Examine Amvescap Relationship

December 4, 2003 ( - Massachusetts and Connecticut are reviewing their financial relationships with Amvescap, after regulators brought civil fraud charges against its Invesco Funds business unit this week.

Neither state invests through Invesco Funds, but pension officials and the treasurers of both states are requesting information about how the charges may affect other investments they have with other business units of Amvescap, Dow Jones reported.

On Wednesday, Invesco Funds became the latest in a series of firms to be named in a widening probe of mutual-fund practices (See  Prosecutors: Invesco Engaged in Massive Market Timing Scheme ). Announced by New York Attorney General Eliot Spitzer in September, the probe is looking into late and rapid-fire trades by a group of favored investors (See  Spitzer Fund Abuse Probe Pumps Out More Subpoenas ).

Amvescap manages a real estate investment trust fund and another real estate fund for the state of Massachusetts, according to Karen Sharma, a spokeswoman for Massachusetts state Treasurer Timothy Cahill. However, information wasn’t immediately available concerning how much money or which Amvescap unit is involved.

Massachusetts was one of the first of nearly a dozen state pension funds to sever their relationship with Putnam Investments as a money manager in recent weeks, after charges were filed against the Boston firm in the mutual-fund probe.

Connecticut is reportedly monitoring its relationship with Invesco Global Asset Management, which manages $277 million in international equities for the state’s pension funds, according to Bernard Kavaler, a spokesman for state Treasurer Denise Nappier. Connecticut also contracts with Invesco Global Asset Management as a consultant on its $1.9-billion private equity portfolio, but the firm doesn’t manage funds as part of that relationship, Kavaler said.

Amvescap said Thursday that it has been in “constant communication with our clients as events have unfolded over the last three weeks.” The company reiterated that regulators’ actions are directed solely against Invesco Funds Group, its retail mutual-fund business in Denver.

Amvescap Setup

Public retirement systems weighing how to respond to charges against Invesco Funds face a different scenario than they did in acting on earlier charges against Putnam.

Some 11 state pension funds withdrew more than $6 billion from Putnam in the wake of fraud charges against it by Massachusetts regulators. States including Massachusetts, Rhode Island and Vermont in some cases fired the firm because Putnam managers named in the probe directly managed their portfolios.

However, Invesco is structured differently than Putnam, and that may ultimately help ease the potential of heavy public-pension withdrawals. Invesco Funds and Invesco’s institutional unit are both wholly owned by Amvescap, but they are separate businesses, structured as separate advisory companies – and it was the Invesco Funds mutual fund unit, not the institutional business, charged by state and federal regulators this week.