While other mutual fund firms are losing their heads (ok, firing them), Amvescap is trying hard to keep theirs.

"The most important asset that we have is our staff," explained Charles Brady, executive chairman of Amvescap, today in a conference call. "We are trying to manage the company to protect the assets that we have," he added.

Brady admitted that the decision to keep staff has pushed down the fund firm's margins in relation to its peers', but that has been a trade-off the firm has been willing to take.

"We have been able to retain respectable margins (28 percent), even though they are not as high as others'. If it becomes clear that we have to make more severe cuts, then we will do it. It is a balancing act between the shareholders and the staff," he explained.

"If you want to maintain margins, you have to cut people pretty quickly," he added. "We have been riding down [our margins] with the market."

While Amvescap eliminated 115 positions in its retail Invesco Funds group based in Denver at the end of June. Yet it has not wielded the axe as broadly as some other fund firms have.

Over the past twelve months the firm has seen its total headcount drop by about 900, or a little more than 10 percent of its staff. Most of those jobs were lost through attrition and some resulted after consolidating acquisitions.

Brady added that an upsurge in the price of stocks could easily restore the firm's margins. "A ten percent increase in revenues would lead to a 35 percent increase in profits," he told analysts. He added that simple events, such as a Fed rate cut, could quickly drive stock prices that much higher.

Amvescap is also preparing in case the market continues to slide, though. Robert McCullough, chief financial officer, explained that part of a charge taken during the quarter was to cover possible layoffs in the second half of the year if they prove necessary. The magnitude of that cut would likely be in-line with the earlier Invesco Funds layoff, he added.

"This [the declining headcount] has been an eighteen month trend," said McCullough, "I would expect to see the head count continue to decline."

Fund Flows Surprising

Pressed by analysts, McCullough admitted that he has been surprised by the relatively light fund outflows created by retail investors.

Amvescap reported outflows of just $7.5 billion during the first six months of the year. Meanwhile, market loss knocked $26.4 billion of the firm's books. Total assets under management on June 30 were $364 billion, off from $398 billion at the start of the year.

"I have been somewhat surprised that the flows have held up as well as they have. It is mostly the market that has taken us down," said McCullough.

McCullough added that the rate of outflows in July was not significantly different than in June. "Flows themselves have not picked up that much," he said, "It has been a pretty steady thing all year."

"Maybe they have increased a little bit, but most people are pretty sensible about these things, more so than the commentators," he elaborated." If you go onto the street many people talk about buying opportunities."  

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