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Invesco Ltd  (NYSE:IVZ)
Q3 2018 Earnings Conference Call
Oct. 18, 2018, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Unidentified Speaker --

This presentation and comments made in the associated conference call today may include forward-looking statements. Forward-looking statements include information concerning future results of our operations, expenses, earnings, liquidity, cash flow and capital expenditures, industry or market conditions, AUM, geopolitical events and their potential impact on the company, acquisitions and divestitures, debt and our ability to obtain additional financing or make payments, regulatory developments, demand for and pricing of our products and other aspects of our business or general economic conditions.

In addition, words such as believes, expects, anticipates, intends, plans, estimates, projects, forecasts and future conditional verbs such as will, may, could, should and would, as well as any other statement that necessarily depends on future events are intended to identify forward-looking statements. Forward-looking statements are not guarantees and they involve risks, uncertainties and assumptions. There can be no assurance that actual results will not differ materially from our expectations.

We caution investors not to rely unduly on any forward-looking statements and urge you to carefully consider the risks described in our most recent Form 10-K and subsequent Forms 10-Q filed with the SEC. You may obtain these reports from the SEC's website at www.sec.gov. We expressly disclaim any obligation to update the information in any public disclosure if any forward-looking statement later turns out to be inaccurate.

Operator

And welcome to Invesco's Third Quarter Results Conference Call. All participants will be on a listen-only mode until the question-and-answer session. (Operator Instructions) Today's conference is being recorded, if you have any objections, please disconnect at this time.

And now I would like to turn the call over to your speaker for today, Marty Flanagan, President and CEO of Invesco; and Loren Starr, Chief Financial Officer. Mr. Flanagan, you may begin.

Martin L. Flanagan -- President & Chief Executive Officer

Thank you. And thank you everybody for joining us, and I appreciate that you changing your schedule so quickly. Some very, very good news, we're going to talk about the transaction between ourselves, Oppenheimer and MassMutual and also go over the third quarter results. And if you're so inclined, the presentation is on our website if you want to follow along. So, I realized there has been quite a bit of news in the market about this combination for a period of time, but before we get in to third quarter results, I really want to clarify some very important key points.

The combination will result in Invesco being the 13th largest global asset management in the world and the sixth largest manager in the US retail channel, both very important when you think of the importance of scale and client relevance as we look forward. The financial returns are extraordinarily compelling. For the partial year 2019, we're expecting 18% accretion in the full year 2020, 27% accretion. And post synergies, we anticipate an additional billion dollars of cash flow for the combined company so really quite extraordinary.

We're also very excited that MassMutual is going to be a long time strategic shareholder of 15% -- 15.5% equity stake in the $4 billion of perpetual preferred that Loren will get into the details in a few minutes. But what's really important, MassMutual is not selling, they are taking every dollar -- all the proceeds to put it back in the combined institution showing their commitment and the excitement for the opportunity in front of us. And the other point I want to make, we're going to initiate today a $1.2 billion stock buyback, which is also important part of the discussion that we'll be having today.

So with that, Loren, can you walk through the financials?

Loren Michael Starr -- Chief Financial Officer & Senior Managing Director

Thank you, very much, Marty. So on slide seven, you'll see a summary of the results for the third quarter that continued to demonstrate strong long-term investment performance with 63% and 67% of actively managed assets in the top half of peers over the three and five years. While year-to-date gross sales were up 16.7% versus prior year, market dynamics and some near-term performance challenges continue to impact redemptions, leading to total long-term net outflows of $11.2 billion for the quarter.

Adjusted net operating income was $358 million for the quarter, that was down from $377 million in the prior quarter and that was driven by lower net revenue yield, resulting from a change in AUM mix, the negative impact of foreign exchange and the impact of lower transaction fees within other revenues.

Additionally, on the expense side, we saw some elevated marketing and technology expenses this quarter. These items also impacted our adjusted operating margin, which decreased to 37% from 38.7% in the prior quarter. We returned $124 million to shareholders during the quarter through dividends and we've made good progress in paying down the balance on our credit revolver in early October and we expect to have our leverage ratios roughly in line with our pre-Guggenheim acquisition levels, by the end of the fourth quarter.

Moving on to slide eight, we highlight long-term investment performance for the quarter over the one, three and five years. As we've noted in past conversations, our investment processes and approach are focused on generating outperformance over a full market cycle. So we typically see fluctuations between quarters. The current market cycle is impacting the relative performance of a number of large value-based equity investment approaches, representing more than 10% of included AUM.

With some of the recent market volatility and more favorable market conditions, however, these teams have seen near term improvements, as you would expect. As an example, diversified dividend is now in the top decile on a quarter-to-date basis and also our UK equity portfolios and international growth portfolios are in the top quartile.

Let's turn to flows on slide eight (ph). As I noted, while gross sales remained robust for the quarter, up more than 17% on a year-to-date basis versus 2017, we did see net negative flows during third quarter as market dynamics weighed on redemptions and the net results. We saw pockets of strength within ETFs with nearly $1.5 billion of inflows in US ETFs and that included nearly a $0.5 billion of flows into our bullet share franchise, bringing the flows in these products since close to nearly $1 billion.

Commodity ETFs in Europe and certain commodity ETFs in US were weaker, in line with industry trends, which led to modestly negative passive ETF flows for the quarter. On the active side, the outflows were largest in the US and UK retail equity products, which continued to face some of the challenges as noted earlier.

Additionally, on the institutional side, we saw two sovereign wealth fund outflows, which totaled nearly $2.5 billion. We also saw $1 billion outflow from an Asian client in our bank loan strategies and there was a $1 billion real estate outflow, which we had mentioned on the previous quarter call, all of which contributed to the negative flow this quarter.

Despite these one-time outflows, I want to mention that our institutional pipeline is in fact at an all-time high in terms of both AUM and revenues with AUM in the pipeline, which is one but not funded up more than 35% versus the prior quarter and up over a 30% versus prior year and that should help elevate our flows in future periods.

And I also like to note that while you don't see it on these charts, we did see very strong flows into our Great Wall JV Money Market product with nearly $5 billion inflows for this quarter and that's a trend that we would expect to continue in Q4.

So with that, I'm going to turn it back to you Marty.

Martin L. Flanagan -- President & Chief Executive Officer

Thanks, Loren, and why don't we now turn to the transaction again, very excited about it. It's 100% consistent with our strategy and really is going to rapidly advance the strategy that we've been talking about with all of you.

But if you turn to page 11, I think importantly, really want to set a fact base OppenheimerFunds because it's clear, it's not understood, really the robustness of Oppenheimer and how it's consistent with the strategy that we've been talking to you about. The first thing we're really excited about obviously, it's a strength to the organization, it's incredible talents, a group of people. We're looking forward to working with them going forward and helping create something really quite special.

The organization has $250 billion in assets under management, 75% of the assets are hard to replicate differentiated active and alternative strategies. They have exceptional investment talent generating very good consistent long-term performance, 59% of assets are four star and five star-rated funds and the business is financially robust. Net annual revenues of $1.4 billion. The net revenue yield is 56 basis points and operating margin of 40%, all of which is accretive to Invesco.

On page 12, I want to make very, very clear. Our strategy is unchanged, we continue focus on strengthening our leadership in our core markets, while executing the high-growth areas and we believe, you must do both of these to be successful going forward. And one is not going to be satisfactory for success as you look to the future, if you do both of these very well, we feel very strongly that you generate in an elite set of capabilities for the benefit of both clients and shareholders.

What we truly believe is unique about Invesco is a combination of our leadership in core markets and our investments into these high growth areas. The combination with Oppenheimer and our relationship with MassMutual will meaningfully expand our leadership in the US wealth management industry, while also strengthening our ability to execute in several of these high growth areas. This transaction rapidly advances our growth strategy and is fully aligned with our clients' needs as we look to the future and that of the industry.

One final point that I would like to make on page 14, is that from a context point of view, of the $87 trillion in asset under management in the industry, the US wealth management segment is the largest segment in the world with 23% of global assets under management. It's going to continue to grow but I think what's also very important I think it's all clear to all of us that it will grow and be important, but it will be concentrated in fewer investment managers hands in the years ahead. The notion of having client relevant to scale is an absolute necessity.

So turning to the combination itself, creating a $1.2 trillion global asset manager, the addition of OppenheimerFunds provides a number of benefits to the combined organization for our business. Our shareholders represent us as a strong strategic and cultural fit for both of our organizations and the power really comes from a combination of four different areas: scale and client relevance, differentiated investment capabilities, compelling financial returns and the strategic relationship with MassMutual.

If you take a look at client scale and relevance, as I mentioned, we'll be the 13th largest global investment manager in the world, providing the necessary scale to compete and invest on behalf of our clients and our shareholders. But importantly, the immediate impact of the combination will create a clear leader in US retail with Invesco becoming the sixth largest US investment manager with $680 billion of client assets. Another point of client relevance is looking at the relationships with the Top 10 US wealth management organizations in United States. Our relationships will be meaningfully more important as you can see with these key platforms. At the close, we will have five relationships with more than $30 billion in assets under management.

And while we turn to the investment capabilities themselves and the impact on the combined organization is incredibly compelling. Invesco's and Oppenheimer strengths are very complementary to one another. It broadens our comprehensive range of investment capabilities, which will not only benefit the US retail market, which is what we're looking at here but opportunities in the combined firm in the institutional market both in United States and outside of the United States and again, a number of these capabilities in the retail channels outside of the United States too.

Importantly 85% of the OppenheimerFunds are in high demand, alpha persistent asset classes, if you take a look, international equities, emerging markets, global equities and also very important income focus alternative areas, a high yield munis, bank loans, et cetera. So again the combined rankings post transaction are incredibly compelling.

If you take a look at the investment performance profiles of the two firms, they are also highly complementary as you would imagine from my prior comments. They're generally countercyclical. This is great news for our clients, it will help them through different market cycles and it is also a business benefit at the same time. So I truly believe and the organization believes this is incredibly powerful combination, that will immediately benefit our clients, our shareholders in both of the organizations and we could be more excited about it.

I'm going to turn it over to Loren and have him go into more depth of the financial results of the combination.

Loren Michael Starr -- Chief Financial Officer & Senior Managing Director

Thanks, Marty. So in addition to the very compelling strategic rationale for the combination that Marty just outlined, we expect the transaction to provide strong returns for our shareholders in line with our previously stated financial criteria for acquisition for those following along, I'm now on slide 20.

Excluding the impact of incremental intangible amortization and one-time integration charges. Our pro forma EPS accretion is approximately $0.38 or 18% in the year of closing and this assumes in second quarter close date and three quarters of accretion. In 2020 with the full benefit of the cost synergies in place and a full year of financial accretion, we expect to achieve $0.80 or 27% EPS accretion.

As a result of the combination and inclusive of the expected run rate synergies of $475 million, we expect to add nearly $1 billion in incremental EBITDA; and by 2020, we project to have an operating margin, well in excess of 45% and the combined annual EBITDA of more than $3 billion.

The purchase price will be satisfied with the combination of roughly 81.9 million common shares and $4 billion in non-cumulative perpetual preferred shares that has a 21 non-call period and a fixed rate coupon of 5.9%. Today's stock price based on where we are today that translates into a total consideration value of approximately $5.7 billion.

In addition, MassMutual will become a long-term shareholder and our largest shareholder at 15.5%. MassMutual intends to be a long-term strategic partner and at shareholder Invesco, in this regard they're entering into a two-year lock up on the common shares. In addition, MassMutual has indicated that they do not intend to sell their common shares after the lock-up period expires, the transaction is a tax-free reorganization for them and it's highly tax efficient for MassMutual. So any sale of shares in the future could trigger a sizable taxable event for them, again incentive for them to continue to hold the shares on a long-term basis.

So reflecting the financial strength of the combined business as well as the additional cash flow that will result from the combination as Marty mentioned, we are announcing a $1.2 billion common share buyback program, which is to be completed within the next two years. Importantly, this will be funded through operating cash and as such, we do not intend to take on any additional leverage to satisfy that.

So on to the next page. As noted, we expect to add nearly $1 billion in incremental EBITDA after synergies. In terms of the modeling, for your purposes we included some assumption of breakage in the acquired AUM of about 4 percentage points in 2019 and a modest level of organic growth in future years. Additionally, we've modeled modest fee reductions of approximately $45 million in future periods. We have a plan to capture by 2020 an approximate $475 million in cost synergies within the combined organization and that represents approximately 14% of our combined expense base.

We have a high degree of confidence that we can achieve our synergy target and this clearly is something we've demonstrated in the past through prior acquisitions. The savings will come from the scale benefits and the platform synergies and that will be focused primarily in the middle and back office areas and activities such like -- such as streamlining operational technology platform, leveraging preferred vendors and rate cards across the combined organization. And the transaction, which has been approved by the Board of Directors of both companies, is expected to close as I mentioned in the second quarter of 2019.

And with that, I'm going turn it back to you Marty.Thanks, Loren. I do want to come back to the history of our success in making these combinations work on page 22. A number of you have followed us for years and the track record has a proven track record and I have a high degree of confidence in the team, it's highly experienced. I believe we have a industry leading track record of success and delivering the benefits to clients and shareholders is as we've discussed and laid out here.

And if you just look at what's happened from PowerShares with $6 billion in assets under management originally in organic growth and two follow-on acquisitions, $230 billion in assets under management today and then a number two position in smart beta and number four position ETFs overall really quite compelling. The Morgan Stanley camp and track record by all accounts was also an incredible success for the organization and for our shareholders.

So when we look at our history, we have delivered each and every time and I have tremendous confidence in our ability to do that. With this combination between the two organizations, we will create an exceptional organization. We're going to have a better client experience by the time that we're done with this and it's going to generate excellent results for our shareholders. We're going to do this arm in arm with our new colleagues at Oppenheimer and I couldn't be more excited.

And to put this all in context, we believe this transaction is incredibly compelling, bringing scale and client relevance, differentiated investment capabilities, really compelling financial returns for our shareholders and important strategic partner MassMutual. It is going to be create a really special organization and we look forward to doing it with our colleagues at Oppenheimer.

So with that, why don't we open it up to Q&A.

Questions and Answers:

Operator

Thank you. (Operator Instructions) Our first question today is from Bill katz, please state your company name.

Bill katz -- Citigroup -- Analyst

Okay, thank you very much from Citigroup. So thank you very much for taking the question this morning. So I'd like to just sort of come back to the savings opportunity. For a moment, I think you highlighted $175 million and Loren, just gave a little bit more detail in your closing comments here. Can we break that down little bit more, couple of different ways. How much of it's coming from stand-alone Invesco platform and how much coming from the legacy Oppenheimer footprint?

And then can you break it down, may be by line item between invest in middle office but comp versus non-comp, just to get a sense of the savings, because I guess, really the question is you're running at about a 45% margin round numbers, they're running at 40% both are pretty good, I'm just surprised by the amount of redundancy that you've identified.

Martin L. Flanagan -- President & Chief Executive Officer

Yeah, thanks, Bill. So I appreciate the question, you should be surprised. So what has been presented right here something has been a conversation among the industry and the benefit of scale. And if you think of the Oppenheimer organization, incredible organization largely in the mutual fund industry, but the capabilities are beyond that, so that's another topic.

There is the opportunity, as I said earlier for institutional channel, non-US but what I'm really going with this is, you're looking at an organization where we have a mutual fund operation too, the scale benefits from operation are astonishing, right, it's really the systems conversions that come out of it, just all the benefits you get from scale. That's really the model that we're looking at.

And if you compare that to different combinations that you've seen in the marketplace, if it's two organizations in two different industries are two different segments or two different continents, you can't get scale benefits, displays right down the middle of something that will be a huge benefit to the organization. So where we are right now, this we have a high degree of confidence in these numbers it comes from all of our experience and what we know about the operating platforms, Oppenheimer was already heading down the path to make a number of changes themselves, you do have to look at it across the combined platforms.

Our next step is to, use our playbook and will team up area by area with each of our colleagues at Oppenheimer and work through the plan and execute over the next number of months and again we just feel very confident in the path forward. So the level of detail that you're asking for now, we're not in a position to share that, we have to create the plans with Oppenheimer and but do know, we know how to do this.

Bill katz -- Citigroup -- Analyst

Okay, thank you.

Operator

Thank you. Our next question is from Glenn Schorr, please state your company name.

Glenn Schorr -- Evercore ISI -- Analyst

Hi, thanks. Could we first talk about distribution. I get the scale and I get all the advantages you talked about the scale and the rankings in each of the channels and wealth management is important. But is there much unique overlap on distribution where you were strong, they weren't and vice versa and does MassMutual bring specific distribution?

Martin L. Flanagan -- President & Chief Executive Officer

Yeah. So -- the best way to look at the complementary nature of it is on page 17 where we list, the top 10 wealth managers and you'll note we're stronger and they're stronger and again it's a combination that is creating a much better set of outcomes. So that's at that level, so client relevance is kind of really come through with those wealth management platforms.

But I think, what I really want to point you to is that if you look at the investment capabilities between these organizations, they are very complementary. And if you look at really where going forward the impact is in high demand asset categories, right, international equities emerging markets, global et cetera and you can look for yourself.

And although we're presenting it from a mutual fund point of view for the two organizations, these are capabilities that are in demand in different channels beyond the US retail channel. And again, I think it's very important understand, I also do want to make a point, there are no revenue synergies contemplated at all in what you're seeing today, and so it's a very focused view on the existing business.

Is that getting to point?

Glenn Schorr -- Evercore ISI -- Analyst

It definitely does. I appreciate that it brings up the other interesting point of, you noted 85% of assets are in those categories where it passes sub 10%.

Martin L. Flanagan -- President & Chief Executive Officer

Yes.

Glenn Schorr -- Evercore ISI -- Analyst

And you mentioned that international EM and Global, do you have high confidence that -- that those aren't just next on the passive hit parade, because I'm pretty sure you, you have passive strategies that are trying to get ahead at that assets in those categories. So you know, I just want to make sure that we're not buying into just the next piece of secular decline.

Martin L. Flanagan -- President & Chief Executive Officer

Yeah, so it all depends on your core belief. Our core belief is that passive in a particular factor high-conviction active in alternatives is here to stay. And if you -- the notion that you're going to have passive across the different asset categories is correct, you're going to be generating alpha from the active capabilities. It's just not going to go away. And that is not a common belief I would say, right now, but if you look at the track records, they are compelling.

Glenn Schorr -- Evercore ISI -- Analyst

I had one less quicky on the spot mergers on slide 18, as much as there is not lots of overlap on the high demand strategies, there seem to be within each of those categories enough overlap. Have you worked through some of those decisions and within each of those asset classes.

Martin L. Flanagan -- President & Chief Executive Officer

No, look, we're all of two hours into the go forward and again we will work with our colleagues at Oppenheimer. And over the next month, create a plan and again we'll share with you, we don't have that level of detail.

Glenn Schorr -- Evercore ISI -- Analyst

Okay. Thanks, Marty.

Operator

Thank you. Our next question is from Robert Lee, and please state your company name.

Robert Lee -- KBW -- Analyst

Great, thank you. Robert Lee, KBW. Thanks guys, taking my question. Maybe I want to go back to the pace of expense synergies. If I remember correctly when you did the Van Kampen deal you able to pretty much get this -- get the synergies like day one after close and not that you're necessarily expecting this.

But can you give us some sense of kind of how you expect that to kind of layer in and then maybe as a follow-up with the breakage assumptions mean understanding mainly mutual funds and maybe a little less breakage, I think it had institutional. But just given the importance of platforms and centralize research, can you kind of help us get to how you tell you are confident that only $10 billion of breakage from Oppenheimer is kind of a good number or a conservative number?

Martin L. Flanagan -- President & Chief Executive Officer

So what we've assumed in terms of the modeling and we have a seasonal sense of confidence around is that most of the synergies we think would be sort of taken in the first year post close. I think we have somewhere between 75% to 85% assumption in terms of what could be achieve with the rest being fully achieved in 2020. I think, again it is something that we -- we feel like we have a good playbook in terms of how to execute this. So once again, it should not be very hard and complicated for us to go forward.

I think in terms of the breakage, the numbers that we used are actually quite similar to what we had thought as a percentage for Van Kampen. Again it's based on what we've done in terms of our studies of how these things work, we do think $10 billion is a reasonably good estimate. Obviously, there's some swing around that number. It doesn't make a huge difference. It is a few percentage points maybe accretion here and there. So, but we don't think there's going to be anything much dramatically offer those numbers.

Robert Lee -- KBW -- Analyst

Great. And if I can just have one quick follow-up. Just maybe going back, you guys have obviously been talking a lot less, couple of years as the investments you've been making in the platform, whether it's Jemstep and other things and certainly been excited about that and thinking about 2019 as being the point in time where may -- we start to see that, some of the fruits, that's start to come through. I mean, are you all concerned that thus given the size of this transaction, this becomes kind of a distraction over the next six, nine months or year as people kind of wonder about where they shake out in this, that may be that actually pushes the ability to realize some of those benefits out.

Martin L. Flanagan -- President & Chief Executive Officer

To your question, the answer is absolutely not. So again, we weren't doing this as we think, it was not going to advance the business and at the same time be able to advance a number of those growth efforts that we've been honored. Needlessly, as a management team, we've been through that and have -- with a high degree of confidence that, let's not do it.

Loren Michael Starr -- Chief Financial Officer & Senior Managing Director

Yeah, I would say, I mean, year-to-date, we've had about $13 billion of net flows into the areas that we've been focusing on growth, we've talked about a lot of them already. ETF, for example, some of the factor based capabilities, a lot of that's in our pipeline -- institutional pipeline. We actually seen an enormous sort of buildup in our Jemstep pipeline where we got, I think really very close to production and ongoing support as part of this process and some very large client names that will come through in short order.

And the area where we're seeing more sort of in contracting, we're winning probably in the majority. We're actually winning share in this space, I think, we've sort of generated four out of eleven kind of major banks. And so, we're feeling good about Jemstep into a digital advice and where that's going on.

So across the board, I'd say, our growth engines are moving forward in a very positive way. And Again I mentioned, China is an another example. So, obviously, we didn't have a lot of time to highlight it in this call, but I think, we're actually going to continue to provide visibility in terms of how our areas of growth are going to continue to allow us to sort of turn net flow trajectory to a positive number in 2019.

Robert Lee -- KBW -- Analyst

Great. Thanks for taking my questions guys.

Operator

Thank you. Our next question is from Ken Worthington. Please state your company name.

Ken Worthington -- JPMorgan -- Analyst

Hi, Ken Worthington from JPMorgan. So, the deal comes nine years essentially to the day after you announced Van Kampen. So I guess, we're going to have pay attention closely to what you're doing in October 20 -- 27 for the next one. So I guess, congratulations.

So what are your thoughts in terms of cross-marketing or cross-selling with MassMutual over time. Maybe as a place to start, what percentage of Oppenheimer's AUM is actually sourced from MassMutual? And then what kind of incremental investment dollars might you expect from your new partner and what products -- Invesco products seem best positioned?

Martin L. Flanagan -- President & Chief Executive Officer

So, great question Ken. So, we've already had -- have to be conversation with the respective leadership between the two organizations and there are a number of areas where we think there are opportunities. By the way, we're just into it right now. So let me give you, as you know, they have 8,500 advisors in the United States and so that is something that's going to be an obvious focus area for us. MassMutual is also doing some very interesting things out in Asia, very complementary to what we're doing. So that's another area where we think there's some real opportunity for us. Those are two to name a few.

And with their knowledge and skills and insurance and risk, along with what we do in investment management, I'm sure we're going to find some very interesting things. The -- That's going to be quite a bit of focus area. I really can't get to disclose the level of what they've done together. Historically that's just not in our -- in the permit to do right now, but it is actually something that is, from our perspective, it's going to be quite powerful as we go forward.

Ken Worthington -- JPMorgan -- Analyst

Thanks, maybe a little one for Loren. And you guys mentioned AUM was about $250 billion market conditions, particularly outside the US have been poor so far this quarter. Do you have a -- may be more accurate AUM figure for us to kind of start out from or even as of date of the $250 billion.

Loren Michael Starr -- Chief Financial Officer & Senior Managing Director

I mean, it's moved around plus or minus. I mean, they've actually held pretty closely to the 250. I think probably still rounding roughly 250. So it has not been a lot of turmoil in terms of the AUM number. And flow trajectory, we have seen is -- has been on a very positive trajectory for their franchise still somewhat quite outflow, but in on a positive trajectory over the last two months. So, I think again, in terms of the numbers, I would still be thinking 250 is the right modelling number for you.

Ken Worthington -- JPMorgan -- Analyst

Thank you very much.

Operator

Thank you. Our next question is from Dan Fannon, ad please state your company name.

Dan Fannon -- Jefferies -- Analyst

Thanks, Dan Fannon, Jefferies. I guess, just building on that last comment, you talk about a little more detail about recent flow trends and we obviously saw your results this morning on a stand-alone basis, outflows were close to $11 billion. You just mentioned, I think, with the data we can see is Oppenheimer has generally been in a little bit more outflow, that's improving, but still been an outflow. So give us a little bit more around why you think flows on a -- to 220 basis will be positive given what we're seeing today from performance and in a kind of current industry trends.

Martin L. Flanagan -- President & Chief Executive Officer

Yeah, so let me step back again and again for all of us, we're long-term investors that in the quarter to quarter, which is probably not very constructive. So I'd put it in the context of, I'm very bullish on the industry, it's $87 trillion dollar industry, it's not going to go away. The organizations to get it right, are going to be very successful, we intend to be one of those organizations. So now let me bring it down here. We have been in net inflows for nine years, some headwinds and because of where we are in this market cycle for some of our value capabilities as we told you that will change and it is changing, we'll -- again, we'll continue to see the impact there.

But what we're doing is building the organization that to push through these more extreme market environments. Loren, talked about the institutional flows, Jemstep in 2019, the opportunities that we're talking about with Oppenheim here. But stay back, even put that off to the side. What we are seeing in the factor capabilities and our solutions capabilities are multi -- multi-asset capabilities, they are real, they are meaningful and we're expecting to be very successful as we go forward.

Loren Michael Starr -- Chief Financial Officer & Senior Managing Director

I think, I had mentioned Dan, there in the global and International and the capabilities that are hard to replicate that are persistent alpha, they've actually done very well in terms of flows. And it's really some of the other areas, some of the domestic kind of equity areas that has been in the industry trend where you've seen the biggest outflows.

So we do think, as we are able to leverage there -- the capabilities on a global basis, which are in demand that we're going to be able to bring the whole franchise positive flow. And again, we've talked about our own strategies around growth and how we think, we can bring sort of the core Invesco capabilities also to growth.

So that's why we 2019, definitely we got an outflow. It's not gonna happen overnight, but we do think by 2020 that's a reasonable estimate. Again modest but certainly, positive.

Dan Fannon -- Jefferies -- Analyst

Got it. And then just a couple of questions on the accretion assumptions that you're making, just to be clear, is that on -- based on consensus estimates. And then also is the buyback that you announced this morning included in that accretion and then also just kind of like what if -- and if also kind of what market assumptions are in that?

Loren Michael Starr -- Chief Financial Officer & Senior Managing Director

So, yes, effectively it's versus consensus. So that is the right assumption. In terms of the buyback, the $1.2 billion, there is about $400 million of incremental buyback that we have modeled in as a result of the transaction occurring, but the $800 million is pretty much consistent with consensus and so we're, that's now part of the accretion numbers. So I'd say there's about 1% accretion in 2019 due to that incremental 200 buyback and another sort of 2.5 in 2020.

Dan Fannon -- Jefferies -- Analyst

Thank you.

Operator

Thank you. Our next question is from Mike Cyprys and please state your company name. Mike Cyprys, your line is open, please check your mute feature. Sorry, Mike --

Martin L. Flanagan -- President & Chief Executive Officer

Mike, we cannot here you.

Operator

We are getting no response. We'll move to the next question. The next question is from Brennan Hawken and please state your company name.

Brennan Hawken -- UBS -- Analyst

Hey, good morning, guys. Thanks for taking the questions, from UBS. So just a quick one on the $45 million fee rate cut in your merger math. I think, that gets me to about 2 or so basis points, which would suggest about a 59% IAC for Oppenheimer. Can you -- number one is that generally, right. And number two, how much fee rate pressure has Oppenheimer experienced over the past year or two, either through their own fee cuts or the headwinds that we've seen from remixing across the industry?

Martin L. Flanagan -- President & Chief Executive Officer

Let me hit the second part and then Loren can pickup. Literally their effective fee rate has gone up over the last three years by, I think, it's about 3 basis points. So they've been doing quite well. And again there fees are very competitive, generate good -- just very good active managers.

Loren Michael Starr -- Chief Financial Officer & Senior Managing Director

So again the 45 as an estimate, really at this point, we don't have a goal plan in terms of how the funds come together and which funds are going to sort of win in terms of fee rates, but there's definitely some amount of breakage that will happen when we bring funds together. So the 45 is the number that I think is still needs to be ultimately vetted out and we'll obviously give updates as we get closer to a real plan around how the funds come together. But we think, it's a reasonably conservative number right now, little bit more than we -- than we actually hope will be the case. But it does have that impact in terms of basis point as you mentioned.

There is no assumption of further fee cuts going forward per se because of their price, their products are actually reasonably priced. And so, again, in terms of the alpha creation and the ones that are higher price and some of the alternative capabilities are all sort of reasonable on the core products, we believe that there is no significant pressure on having to cut fees on the active capability.

Brennan Hawken -- UBS -- Analyst

Okay, thanks for that color. And then, have you spoken with the rating agencies about the potential impact of issuing this expensive amount of preferred equity. And is there any reason why the preferreds wouldn't be viewed as the factor that -- given that they're non-callable and 20 year. And then finally, if we do you see a downgrade from a rating agency, what kind of impact do you expect that would have?

Loren Michael Starr -- Chief Financial Officer & Senior Managing Director

So again, I think, the agencies will lease their reports and ultimately after they go to committee on this and we hopefully will hear some of the answers today. So we're not going to sort of go ahead of them doing that. I mean, I think, we have our own views around the preferred and what it is.

Obviously, there is a perpetual coupon $236 million that is going to be part of this deal and 5.9% coupon, right now, as you said might feel expensive but we think over time it might not seem as expense, which you're implying, there is no commitments for us to have to repay the $4 billion. It's perpetual, there's a call option and here that's out 21 years really is part of the requirement to have qualifying equity as part of the tax-free reorg that's necessary for MassMutual.

So again we -- we don't, I mean, personally, I don't view it as debt, it is -- got a lot of equity-like characteristics in terms of it being non-cumulative. And again, whatever you can sort of make your own approach or your own assessment. But certainly, you'll hear from all our ratings partners in terms of how they perceive this and you can assimilate that.

Brennan Hawken -- UBS -- Analyst

Thanks for the color.

Operator

Thank you. Our next question is from Mike Cyprys, please state your company name.

Mike Cyprys -- Morgan Stanley -- Analyst

Thanks, Mike Cyprys from Morgan Stanley. Just a question more broadly on M&A, so look across the industry mix results, M&A has been pretty kindly. So, I guess just what do you see, if you look across, what are others get wrong with M&A? What lessons do you take away with that? What do you think, you have to get right to make this a highly successful transaction on the execution side for Invesco?

Martin L. Flanagan -- President & Chief Executive Officer

Yeah, it's a good question. So, It's just my opinion. Yeah, I think, trouble happens when you look at a piece of paper and it looks good on a piece of paper and you actually lose track of what really matters. And these are fiduciary organizations with talented people and the value is really, understanding what the value is and how do you maintain that and how do you have that talent, how do you have that drive.

And so we are very focused on being very clear and jointly working through the execution with our partners. That's what we've done historically. And it might sound pretty basic, but that is, in my opinion, where things breakdown. And I -- but let me come back to this.

So Mike, we've talked about this in the past, there is this notion that there's going to be massive consolidation. The industry, maybe, maybe not, I do -- that the premises that there's what that taught is that there's excess number of money managers that might be doing a middling job and I think that is the case and that will get resolved one way or the other. But the notion that you -- you're going to see this massive consolidation with people that have not had experienced and that is going to be done well. I think is a misnomer.

And so, I look at this experience here, but the first experience I had was 1992 when Franklin bought Templeton when I was there. And so, I've been on both sides of these things and there is a way to do -- to do these and do this successfully. And I understand your sweeping comment but I'd point you to our track record and we know how to do this.

Mike Cyprys -- Morgan Stanley -- Analyst

And somewhat related to that, maybe you could talk a little about the risk around the large fund franchises that Oppenheimer has. How do you manage that? And I guess, particularly maybe you can talk about the incentive structures, retention structures, you're putting in place to retain key investment professionals and to what extent are they going to be integrated or not? What's the broader investment Invesco franchise?

Martin L. Flanagan -- President & Chief Executive Officer

Yeah. So important question. So MassMutual has put in retention program, which is great. But more importantly, people long stay at organizations for money, they stay at organizations because they want to be there because they thrive and in particular for investment managers, so they can actually express themselves through the craft.

And we actually run our investment teams in a very similar way that MassMutual does, they're separate, they're distinct, we want them dedicated, there are some process and philosophy, we reinforce that, we want to make sure that they have the tools they need to continue to generate alpha for their clients. That's what Oppenheimer has done in the past, that's what still going to happen going forward, that's not going to change.

And we had the opportunity to meet with some of the senior leaders. It's a great culture, they really love what they have and that's going to -- it's going to continue that way. And I think, that's really important and that's what matters. And again, this is where I come back to you. When does it fail? It fails when an organization combines and somebody thinks, they're going to institutionalize some process and is probably the worst thing you can do.

Mike Cyprys -- Morgan Stanley -- Analyst

Thank you.

Operator

Thank you. Our next question is from Michael Carrier, please state your company name.

Michael Carrier -- Bank of America Merrill Lynch -- Analyst

Mike Carrier, Bank of America Merrill Lynch. Thanks, guys. Maybe, first one, just on the core business, Martin, Loren, I think, you mentioned just the institutional pipeline is strong, maybe when we saw especially adding with in August, just some of the elevated outflows. Just maybe what you're seeing and what gives you maybe the confidence with that pipeline that we're not kind of seeing the same level of redemptions or maybe any color on what drove some of these redemptions in the quarter?

Martin L. Flanagan -- President & Chief Executive Officer

Well, again I think, I gave some color already, obviously a handful of individual accounts that decided to terminate. I think, the sovereign wealth is one that we've seen a few times, that was largest outflow and so it's not a performance related topic, if not something systemic if not, not a trend. It's really just a single client topic more than anything else, it could -- I will not say, it can happen again. But it's not, it's not something that is sweeping across all our institutional business, this is really localized to particular -- a particular client.

I think, we do feel very good about the pipeline because it's broad based, it's across equities, alternatives, balanced fixed income and so it is actually, again, I think, it is a function of maybe things have shifted in terms of where our client demand is going and we are actually hitting new sound areas of demand around factor, for example, some areas around alternatives that we hadn't seen in the past. So for us revenue yield is also extremely strong and so the revenue level was also at all-time high. And then when we look at, we do look at the pipeline of expected losses, that is not, I mean, it's flat and flat quarter-over-quarter, so does not escalating that.

So I mean, that's why we feel that we're just going through a rough patch here in terms of the institutional side. And it shouldn't be persistent going into 2019, certainly not anything we see with the information that we have today. So again redemptions do happen, they can happen, we could get surprised, but it just doesn't feel like a trend and is not based on performance. Again, when we look at the products that are selling, these are products that are in high, really performing well, real estate, bank loans and other products that have done -- done very well.

So then, the other side of the flow story, I think is one, we all know, which is just domestic equity retail, US has been in outflow some of the value oriented capabilities that we talked about has been under pressure. So that is something that, I think, in terms of the near-term, sort of turnaround that we've seen in October, in particular, just given the market is sort of a proof points to our clients that, what we said was going to happen, is happening and if anybody guess is to where the markets actually go, but the fact is we've said, that it would happen when markets begin to sort of turnaround and we begin to see momentum become less interesting that our products are going to outperform. If we do see -- see the world kind of moving into that direction, it should be really helpful for us, some of those redemptions going forward.

Michael Carrier -- Bank of America Merrill Lynch -- Analyst

Okay, that's helpful. And then maybe one more for Marty. Marty, when I look at the history for you guys and even the industry, it seems like you've done the M&A on sort of the growth side. And then you have also done some scale transactions. And this one is a little bit of both, but when you think about Invesco going forward, like -- in the areas that are very competitive, like the US mutual fund industry, this just create like enough scale, that you think over the next three, five years that you can combat any future fee pressures, outflows.

And then on the flip side, a lot of the investment that you guys have made over the past three years on the growth front and it seems like that you are -- you're still positioned in the higher growth differentiated areas. But just when you think about that combination, do you think going forward Invesco, it is well positioned, as you can get it to basically grow where you can and then, offset the headwinds through scale.

Martin L. Flanagan -- President & Chief Executive Officer

Absolutely, again, those are the points I was trying to drive up on, I mean, if you look at the US and retail Industry, we've become the 6th largest within that and we end up as one of the absolute leaders. And I think that's, but I also think what's important is just not the number, right. It is the capabilities that we're bringing there.

And so historically, if you think of the active management capabilities, the addition of Oppenheimer, it's dramatically expanding the capabilities that are in high demand there. You then add that with -- that early days of factor capabilities been picked up in that retail channel, early days of trying to get alternatives into that channel on the way that works for the channel, the solutions capabilities that are being taken up right now, the models that are being built by organizations, such as ourselves for that channel.

We are uniquely placed there and there are not many competitors that can do that. But the scale just puts us on another level there. So I think it's really important. And the other thing I do want to make really clear where you're going is, the information that you're seeing today that we're putting forward expresses the vast majority of Oppenheimer's investment capabilities happened to be in the mutual fund rapper. They have capabilities that are beyond, there is greater demand beyond mutual fund capabilities like I said, so it's the institutional opportunity, the non-US opportunity both institutional and retail. The opportunities are meaningful.

And again, you really have to put this in the context of everything that we've been talking about in executing against. Right, it is a combination of this high conviction active, passive factor particular for us, alternatives and I really feel really good about where we've gotten the organization over the last number of years, at last couple of years actually particular with this very rapid advancement of our strategy. And as I've said that in the past, it's the -- the world is not going back -- back to the future. It is changing, it is changing rapidly and our efforts have been get ahead of that curve in a meaningful way and we think we've done that.

Michael Carrier -- Bank of America Merrill Lynch -- Analyst

Okay, thanks a lot.

Operator

Thank you. Our next question is from Kenneth Lee, and please state your company name.

Kenneth Lee -- RBC Capital Markets -- Analyst

Hi, thanks for taking my question. Kenneth Lee, RBC Capital Markets. Just wanted to whether you guys have any updated thoughts on long-term organic growth targets, post-acquisition maybe post 2019 as well. Previously, there was sort of a 3% to 5% range, wondering if that's changing? Thanks.

Speaker C-Martin Flanagan

I think, we're -- still believe that 3% to 5% is feasible for us as a firm across market cycles. The -- this acquisition we think is going to help significantly improve our ability to grow and not just in the US in a more consistent way. But also, as Marty mentioned, taking some of the capabilities globally, is going to be a big opportunity for us.

So, I think, there's nothing that really changed. Obviously, the market itself that will have something to do with ultimately where we achieve and how we're going to achieve the growth. But the growth engines that we talked about are still ones that we feel strongly are sort of at a very high level higher than the industry average, particularly around digital advice, China, those things are double-digit kind of growth opportunities and factor based. We think, we can continue to really drive more -- more growth there. So I think, long answer to 3% to 5% still feels quite achievable for us.Okay, great. And just a follow-up on the earlier question about the strategic partnership with MassMutual. Just want to clarify is there some sort of agreement in place for Invesco to provide asset management services going forward or MassMutual's insurance and retirement products?

Martin L. Flanagan -- President & Chief Executive Officer

No. No, there is no agreement. I think, what's really important to understand is, MassMutual has put every dollar that proceeds back into the combined institution. There is a high degree, they are not getting out of the asset management business, they're staying in it and expressing it, through their equity holding and the preferred that Loren talked about. And as I said, we have had high level conversations, I feel very strongly that the appropriate way is to work together, will -- it will emerge and it will be beneficial to both organizations. So again just very confident in the relationship.

Kenneth Lee -- RBC Capital Markets -- Analyst

Got it. And just one last one. Just in the quarter within the EU Region, there were some outflows there. Just wondering whether what key factors drove some of those flows? Thanks.

Loren Michael Starr -- Chief Financial Officer & Senior Managing Director

Yes. So that was the Sovereign wealth outflows that I mentioned specifically, it was around some of our Asian equity capabilities managed out of our handling team.

Operator

Thank you. Our next question is from Chris Shutler and please state your Company name.

Chris Shutler -- William Blair -- Analyst

Hey, guys, good morning. Chris Shutler from William Blair. Within retail, how much of Oppenheimer's AUM is in the broker dealer channel relative to the ROA channel?

Martin L. Flanagan -- President & Chief Executive Officer

What I do know is, as Loren is looking for some numbers that we have it. But they have an incredible distribution capability, probably one of the better in the industry very highly regarded in the results also show that. They also have some very good success in the high network segment of the market, which we do not have. And again, so we look at the combination of things, we will be better off with the Oppenheimer talent and things that they've done.

Loren Michael Starr -- Chief Financial Officer & Senior Managing Director

Yeah. So again, I'm not sure if it's -- if I have enough transparency to really comments in detail around the various assets and channels, but it looks like ROE is something around $15 billion of their total number. So it's most seem to be mostly through the wealth management platform.

Martin L. Flanagan -- President & Chief Executive Officer

Wealth management platform.

Chris Shutler -- William Blair -- Analyst

15, fifteen?

Loren Michael Starr -- Chief Financial Officer & Senior Managing Director

15, fifteen.

Chris Shutler -- William Blair -- Analyst

Okay. Thanks, Loren. And then correct me, if I'm wrong. But it looks like, I think, about 85% of their Oppenheimer's AUM is in mutual fund wrapper. Can you give us some kind of breakout of what the other 15-ish percent of the assets look like, how much of it is institutional versus sub-advisory, what are flow trends within that piece of Oppenheimer?

Loren Michael Starr -- Chief Financial Officer & Senior Managing Director

So, I think, they have a small -- smaller institutional capability, so that's been an area that they've been trying to grow this is probably about $10 billion -- $12 billion, sub-advisory seems to be around $27 billion -- $25 billion. So those are the big other pieces that you might not see through the normal sort of channels that you've seen, they do have some -- the smaller other business, which again, I think, it's about $6 billion. So, it's mostly the mutual fund side and ETFs, right.

Martin L. Flanagan -- President & Chief Executive Officer

Yeah, $3 billion in ETFs. So let me come back to that. So what I do want to make very, very clear is the bulk of the business has been in mutual funds that is a vehicle, the capabilities within mutual funds are really very, very strong and we look there is going to be an opportunity for a number of those capabilities to be taken to the distribution channels we have outside of the United States. Retail, probably the most immediate followed by institutional both in the US and non-US. So again the high quality investment teams really offer up real opportunities as we look forward.

Chris Shutler -- William Blair -- Analyst

Last one guys, real quick. How much -- you may have stated this already, so I apologize if that's the case, but the -- how much of the AUM at Oppenheimer is in kind of an overlapping strategy with Invesco where there's two strategies that look pretty close?

Martin L. Flanagan -- President & Chief Executive Officer

Yeah, very little overlap, which is actually what is so attractive about the combination. So again, we look at the combination of the teams and the strategy is complementary and additive as we look forward.

Chris Shutler -- William Blair -- Analyst

Thank you.

Operator

Thank you. Our next question is from Alex Blostein, please state your company name.

Alex Blostein -- Goldman Sachs -- Analyst

Hey, good morning, thanks, Goldman Sachs. We'd like to go back to the cost synergy question just one more time, guys. And I'm sorry if I -- if I missed it. But if you think about the $475 million, it looks like it's 50% to 60% of Oppenheimer's cost base that's -- that's well above what we've seen with any other transaction in the asset management space of the size in recent history. So what makes this one different I guess, to get you guys to this level of synergies? That's I guess, part one.

And part two, when you guys talk about the 450 of integration costs that also feels pretty sizable, so maybe help us maybe break that out, kind of what that comprises off and how long do you think this integration costs will be in Invesco's run rate?

Martin L. Flanagan -- President & Chief Executive Officer

Yeah. So, the -- I want to clarify that point. So, you cannot look at it as a percentage of Oppenheimer's basis, it's not factual or correct. So what we said earlier was the opportunity becomes the dominance of their platform being in mutual funds and our mutual fund capability all been in the United States. The scale benefits that come out of systems integrations and the operations supporting the mutual fund business across both the platforms is material and real. And Oppenheimer already was heading down a path of simplification in the light, so this will just speed that up. So again, it is, that was very different than the other combinations that you've seen In the marketplace.

Loren Michael Starr -- Chief Financial Officer & Senior Managing Director

Yeah, and then the 450, so again there's all sorts of costs associated with completing a transaction and getting proxy solicitation so forth and so we have some estimates in here in terms of getting to one platform -- performed platform again get -- we have yet to get the one platform, so this cost around technology and integration to get there.

So it's a generous number, but it's one that we think is conservative, but potentially you are going to be all used given the degree and the 475 is a big number as you mentioned. So we would expect to see that sort of in line with the timing around the synergies. So you can think of it, sort of occurring roughly in step with mostly in year one and then the rest, sort of getting finished up in year two, being a smaller piece.

Alex Blostein -- Goldman Sachs -- Analyst

Got it. And the 450 is mostly cash. I'm assuming rate cash expenses?

Loren Michael Starr -- Chief Financial Officer & Senior Managing Director

Yeah, those will be cash expenses, one time sort of cash expenses.

Alex Blostein -- Goldman Sachs -- Analyst

Got it. Sorry, last one, on the tax rate. So I'm assuming you guys will kind of proceed with the adjusted tax rate methodology in terms of how you report earnings. This probably creates a pretty sizable amortization shield, what should be sort of the -- the adjusted tax rate, we should be thinking about post the transaction and does that feed into your accretion math?

Loren Michael Starr -- Chief Financial Officer & Senior Managing Director

There is no -- there is no benefit here from a tax perspective for us. So there is no elements in the accretion related to tax benefit, the accounting around the intangible amortization is going to be small modest probably somewhere between $50 million to $70 million a year. But there is no tax benefit associated with that. So nothing. So the step up in tax rate is going to take our current rate of roughly 20.6% and probably add another 2 percentage points to it for the firm as a whole just because of the higher degree of US earnings that we're going to be generating.

Alex Blostein -- Goldman Sachs -- Analyst

Understood. Thanks very much.

Operator

Thank you. Our next question is from Jeremy Campbell, please state your company name.

Jeremy Campbell -- Barclays -- Analyst

Hey, it's Jeremy Campbell from Barclays. Most have been answered, just got one quick cleanup question here on the OpEx thing. Loren, I think you obviously mentioned that 75% to 85% is going to come in '19 with a few months of planning, how do you guys in the books here. Are we really looking at something where you can come out pretty hot and heavy out of the chute or is it going to kind of gradually build from 2Q through 4Q?

Loren Michael Starr -- Chief Financial Officer & Senior Managing Director

Yeah, I think again, little early for us to get into the details, we need to work with our colleagues at Oppenheimer to really understand how to execute this. Obviously, our intention is to go reasonably quickly. We don't think sort of long timeframe is helpful for anyone, but we need to be thoughtful in terms of doing this in a way we execute it. So I think, we'll be able to provide more color exactly around kind of how it gets sort of split by quarter as we get a little bit closer to close.

Jeremy Campbell -- Barclays -- Analyst

Got it. And then just one quick follow up on Alex's question there. Just want to be sure, a point of clarification that -- that outside it would be OpEx and to a very kind of small extent the buyback here, there is no other kind of elements to the accretion math that will be -- we might be missing there right?

Loren Michael Starr -- Chief Financial Officer & Senior Managing Director

Nothing else, no, as I mentioned, the only thing is $200 million of extra buyback in two years has been. And so to quantify that, that is -- that's about the only thing everything else should be straight from the numbers that -- that you're seeing.

Jeremy Campbell -- Barclays -- Analyst

Great, thanks.

Martin L. Flanagan -- President & Chief Executive Officer

Thank you.

Operator

Thank you. Our next question is from Brian Bedell and please state your company name.

Brian Bedell -- Deutsche Bank -- Analyst

Great, Deutsche Bank. Thanks very much for keeping the call going here. Two main questions, one on the cost synergies side and then one on the potential for revenue synergies. And maybe just starting on the cost side naturally I took a crack at trying to estimate the synergies after this is rumored in the press. 14% cost save on the total base is pretty high and implies some product rationalization around this. And so we took a crack at that and came up with around $150 billion of AUM on the mutual fund side between both organizations that -- that could potentially be merged and that was almost $200 million in cost saves the way we came up with it.

So just want to see, if that's -- if that's way off base. And then, if you can just talk about the process of timing of doing this fund mergers, for example, do you have fund board approvals yet or does that come after the deal closes. And then would you look to integrate funds fairly quickly, so that you're not put on gatekeeper watchlist?

Martin L. Flanagan -- President & Chief Executive Officer

Yeah. So with all due respect, that's not how we do it. And though there are no plans for fund mergers, our focus right now is to get to a combined operating platform that will be the 100% focus between now and closing. And the synergies that you're seeing are coming from what I've talked about this is the benefit of scale within an organization. And again, it happens because it's the operational benefits that you get through a merging operational capabilities within largely mutual fund capabilities within United States.

That's where that's coming from. And there's no contemplation, no plan for fund mergers in this work and that won't be until after we will turn our head to sort of what -- after the closing and see what makes sense there.

Brian Bedell -- Deutsche Bank -- Analyst

And so, if you do come up with fund mergers later down the road, will that be upside to the 475 thing?

Martin L. Flanagan -- President & Chief Executive Officer

Yes.

Brian Bedell -- Deutsche Bank -- Analyst

Okay, great. And then maybe on the distribution synergy side. So I appreciate your comment on the new product structure and obviously mutual funds has been a challenge product structure for a long time, but if you have the investment teams in there and Oppenheimer didn't really create a big product range in that area. How quickly do you think you can come up with institutional product structures to really crank up the net to net flow ability of the franchise and the $10 billion that you estimate, I assume that's a growth outflow number or is that net of potential of new products offsetting some of the mutual fund outflows?

Martin L. Flanagan -- President & Chief Executive Officer

Yeah, so let me hit on that. So again we're all of two hours into this, so we have some work to do, on being clear. But what we do know, spending time with the teams, they are high-quality teams, they are in high demand areas. We as an organization have a very robust institutional capability to get teams, what we call client ready for the institutional channel and we are very well equipped to introduce I'll call it, retail structures outside of the United States.

But it's just not the structure, is really the go-to-market strategy matching up against client demand, the Salesforces, the marketing capabilities, that's what is so robust about this. So again, once we spend time with one another, figure out what clients are looking for, we will get after pretty quickly.

Loren Michael Starr -- Chief Financial Officer & Senior Managing Director

And the 10 is a net -- is the outflow number, so it's not a -- just a redemption number, it's net flow.

Brian Bedell -- Deutsche Bank -- Analyst

Net number, OK. And then so you -- without the fund mergers, you really don't anticipate being put on watch with --

Loren Michael Starr -- Chief Financial Officer & Senior Managing Director

No.

Brian Bedell -- Deutsche Bank -- Analyst

From either gatekeepers that big distributor are concerned?

Loren Michael Starr -- Chief Financial Officer & Senior Managing Director

No.

Brian Bedell -- Deutsche Bank -- Analyst

Okay, great. Thank you.

Loren Michael Starr -- Chief Financial Officer & Senior Managing Director

Thank you.

Operator

Thank you. Our next question is from Patrick Davitt, and please state your company name.

Patrick Davitt -- Autonomous Research ` -- Analyst

Good morning. It's Autonomous Research. Well, I appreciate slide 17, that's helpful. I imagine, most of these probably want to be doing business with less managers, but is there a risk of hitting any exposure limits with being bigger with all of these guys?

Martin L. Flanagan -- President & Chief Executive Officer

I wish we had that problem, but no.

Patrick Davitt -- Autonomous Research ` -- Analyst

Okay. And then you mentioned the Great Wall flows, I imagine that's all money funds still, if not, that's great. But what is the kind of runway to getting more non-money fund kind of flows from that -- from that distributors?

Martin L. Flanagan -- President & Chief Executive Officer

Yeah. So a couple of points. So -- let me, we can be more excited about that. Actually, so and if you look at our joint venture partnership there, it is very digitally based economy within the retail world and through and financial, we are the first and only Western joint venture partner that's in there and it starts with money funds and by the way it's 10 basis points. So that's 10 basis points, 10s of billions of dollars, isn't so bad. But the natural follow on, is Including the further investment capabilities in that platform and we anticipate that happening in the future here. I don't have the specific dates of it though, but it's a good start for us.

Patrick Davitt -- Autonomous Research ` -- Analyst

Thanks.

Operator

Thank you. Our next question is from Chris Harris. And please state your company name.

Chris Harris -- Wells Fargo -- Analyst

Good morning. Wells Fargo. Can you guys talk to us a little bit about how this transaction came about and maybe share your perspective on why MassMutual selling?

Martin L. Flanagan -- President & Chief Executive Officer

Yeah, let's see. The transaction came about simply from conversation of where do we just think the world is going, we were very like-minded and where we thought it was going and that all the things that we've talked about today are real and are meaningful. And when you have an alignment like that, you tend to continue to focus on what can you do together. But I do want to clarify a point MassMutual is not selling and they're making that very, very clear.

And they are taking, they're holding the -- $81 million common equity shares and $4 billion of preferred over the long term. They are a mutual company as they talk about having a long-term view, it's extraordinary. And every single dollar that would be proceed is going back into this combined institution. And I think, it's really important for people to hear and understand. They're committed to the combined firm and they have a high degree of confidence in what we're going to do together going forward.

Chris Harris -- Wells Fargo -- Analyst

Okay, understood. And kind of unrelated question. Some of the larger OppenheimerFunds, we looked at that have had really extraordinary performance, they do have a large over overweighting in the tech sector. And so I guess, I'm wondering is there a way you guys can mitigate the risks or how do you mitigate the risks of acquiring that, after what's been very good run for stocks not the receptor.

Martin L. Flanagan -- President & Chief Executive Officer

Yeah, so you are really hitting on a question that comes up in a different way. The -- no different than Invesco, the investment teams manage money consistent with our investment philosophy and that's one, two, three in the list, that's what we wanted to do and they are going to continue to do that. And they generate -- as you say, very good performance over market cycles and what's in the portfolio, sort of a full description of the above -- of the portfolio managers that's like an change in Oppenheimer, is never changed at Invesco.

The way that it gets, if you want to call mitigated is through having complementary strategies and that's what we're trying to point out earlier. And so when you look at the line ups side by side, if you want to call it, that's how mitigating, the different styles when sales are in favor and out of favor as an organization. It gives clients choice, but it's also good for having a more stable business.

Operator

And we do have time for one final question. And our last question today is from Greggory Warren and please state your company name.

Greggory Warren -- Morningstar -- Analyst

Good morning. This is Greg Warren from Morningstar. Just a quick question, I want to just step back to kind of the breakage forecast you guys put out there. I understand that you're basing and how much you saw with Van Kampen, but in all honesty, that was 10 years ago and that was a completely different market environment.

So what gives you the belief that with the disruption like this with you guys picking up OppenheimerFunds, that you're only going to see $10 billion in outflows out of the gate. I would assume you see something slightly higher than that. And I guess, a follow on to that is how much of MassMutual is actually invested in OppenheimerFunds. How much business are you guys getting from them?

Loren Michael Starr -- Chief Financial Officer & Senior Managing Director

I think, with the Van Kampen transaction, we use the estimate of $10 billion, it was nothing close to that, it was much less. So that $10 billion was weighed conservative back then. And we think, it's probably still conservative, but we are using it. And again when we think about it, it's really -- because there is no real break as we're not foreseeing teams to sort of come together, do anything different with -- within the process. So it may be that -- that 10 is just not going to happen.

So it's there, just as a point of conservatism in the modeling and I don't think, there's anything explicitly that we expect to sort of trigger the outflows as a result of this transaction, but we've got -- we really needed it when we're thinking about just the uncertainties. So that's why the 10 is there, it's not based on factor data, it's more kind of conservatism. I think -- what was your second question, Greg, I'm sorry.

Greggory Warren -- Morningstar -- Analyst

Yeah. Just wondering how much is MassMutual actually have because usually in those situations where the life insure or an insurer owns part of an asset management from, is it plenty of our cross business between them. So I was just wondering how much in MassMutual actually have invested in OppenheimerFunds at this point.

Martin L. Flanagan -- President & Chief Executive Officer

Yeah, no, it is not a large number and again I --

Greggory Warren -- Morningstar -- Analyst

Okay.

Martin L. Flanagan -- President & Chief Executive Officer

I'm not trying to, I just don't feel liberty that -- that I can have that conversation. So it's not a large number, the intense going forward though is one of the first parts that we collectively want to look at is making available more robustly the investment capabilities to here in the United States of 8,500 advisors.

Greggory Warren -- Morningstar -- Analyst

Okay.

Loren Michael Starr -- Chief Financial Officer & Senior Managing Director

Right. And in terms of a general accounts, there's really no relationship between what Oppenheimer is doing and the management of MassMutual general account.

Greggory Warren -- Morningstar -- Analyst

Okay. And then Loren, just real quick, I don't know if I caught it or not during the course of the call, but you've got $1.2 billion in share repurchase sort of authorized now. Did you give a indication of how soon you might start buying back stock or how much of that may be a quarterly run rate you're looking at?

Loren Michael Starr -- Chief Financial Officer & Senior Managing Director

So, we can start and we have our intention of beginning after -- obviously, this release gets its due process in terms of two days. So think about starting next week. And also we're going to be obviously, interested given the fact that the stock, we feel incredibly undervalued, particularly in light of this transaction. But we're also been sensitive to the fact that we haven't yet completed the deal. And lot of the buyback -- and the extra buyback is really on the backs of this deal ultimately, bringing more cash flow.

So with that said, we are absolutely intent on sort of starting in a very serious way, the 1.2 was not laid out by quarter. At this point in time, we will be in the market almost nearly.

Greggory Warren -- Morningstar -- Analyst

So, would it be comfortable to say, you could easily finance, a third of that right out of the gate?

Loren Michael Starr -- Chief Financial Officer & Senior Managing Director

No question.

Greggory Warren -- Morningstar -- Analyst

Okay, perfect. Thank you.

Martin L. Flanagan -- President & Chief Executive Officer

Thanks, everybody. Operator, I think, that's it.

Operator

I would now turn out the call back to the speakers for closing remarks.

Martin L. Flanagan -- President & Chief Executive Officer

Good. Again, just want to thank everybody for the change in the schedules and really appreciate engagement the questions and as you can tell, we are very excited about the opportunity in the future here. So thank you, very much. And we will continue to communicate progress on this combination, but also as Loren pointed out, many good things are going on in our core business and will bring it to speed on those in future calls. So have a good rest of the day. Thank you.

Operator

Thank you. This does conclude today's conference. You may disconnect at this time.

Duration: 79 minutes

Call participants:

Unidentified Speaker --

Martin L. Flanagan -- President & Chief Executive Officer

Loren Michael Starr -- Chief Financial Officer & Senior Managing Director

Bill katz -- Citigroup -- Analyst

Glenn Schorr -- Evercore ISI -- Analyst

Robert Lee -- KBW -- Analyst

Ken Worthington -- JPMorgan -- Analyst

Dan Fannon -- Jefferies -- Analyst

Brennan Hawken -- UBS -- Analyst

Mike Cyprys -- Morgan Stanley -- Analyst

Michael Carrier -- Bank of America Merrill Lynch -- Analyst

Kenneth Lee -- RBC Capital Markets -- Analyst

Chris Shutler -- William Blair -- Analyst

Alex Blostein -- Goldman Sachs -- Analyst

Jeremy Campbell -- Barclays -- Analyst

Brian Bedell -- Deutsche Bank -- Analyst

Patrick Davitt -- Autonomous Research ` -- Analyst

Chris Harris -- Wells Fargo -- Analyst

Greggory Warren -- Morningstar -- Analyst

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