Q3 2019 Earnings Call
Thank you for standing by my name is Jamie and I'll be your conference operator today.
At this time, all participants are within only mode.
After the prepared remarks management will conduct a question answer session.
Conference participants will be given instructions at that time.
As a reminder, today's conference call is being recorded.
At this time ill turn the converts however, it's your Mackay with top board of director Investor Relations for Artisan partners asset management.
You may begin.
Thank you welcome to the artisan partners asset management estimates that eight an earnings call.
Today's call will include remarks, Eric <unk>, Chairman and CEO and <unk>.
Our latest result, and Investor presentation are available on the Investor Relations section.
Following his remarks.
In line.
Before we begin I'd like to remind you that made on today's call, including <unk> <unk>.
Question, maybe all the.
Which are subject to risks and uncertainties.
In the earnings release.
Yes.
They are not required to update or revise any of these days.
In addition, never remarks made today will include references to non-GAAP financial measures you can find reconciliations of those measures unless comparable GAAP measures internationally.
Now I'll turn the call over its Eric.
Okay.
Thank you everyone for joining the call or reading the transcript.
Hey, I want to discuss the topic a thoughtful growth.
After I finish Sanjay will review, our financial and business results.
Oh growth is one of the three pillars.
Business philosophy.
Dan remain a growth for.
It's important for talent.
Our clients and for owners.
Three crew develop and motivate exceptional talent.
Must provide resources space time and guidance for people to grow.
Professionally as investors and entrepreneurs.
Intellectually curious engaged people.
Personally as responsible members of diverse communities.
Financially at accountable citizens.
Phil attain all facets of growth.
Maximized the probability that weekend attract and retain exceptional people for entire Lincoln careers, which increases the probability of long duration clients and positive long term financial outcomes for owners.
Over the last 10 years.
We have grown the real assets of our business in a multitude of ways.
We have increased our investment franchises from five to nine diversifying our sources of alpha and future growth.
We have increased our strategies from 10 to 17, diversifying our a U M and creating a lined up that is relevant for a variety of asset allocations.
And we have built technology infrastructure and operations.
Support greater degrees of investment freedom, and the continued growth of our business.
We have focused on multi dimensional growth.
Strengthening and expanding our existing business, while also adding new teams strategies and capabilities.
It was investments in business growth.
Translated into financial growth.
Are you in has grown from 44.4 billion to 112.5 billion.
Our run rate revenues at more than doubled.
And throughout the past 10 years, we've maintained strong operating margins and distributed essentially 100% of our cash earnings.
[noise] well growth is important we constantly remind ourselves that growth is an outcome not a strategy.
Don't seek growth for the sake of growth, we don't try to engineer growth.
We focus on what we can influence.
We do well.
And what is consistent with who we are at a high value added investment firm.
Adams listed on slide two.
We can recruit and develop great talent and maintain an ideal environment for our people.
We can provide investment tools and flexibility to manage differentiated strategies and generate alpha.
We can communicate openly with clients and deliver on commitments.
We can manage capacity to prioritize investment returns.
You can design, new investment strategies for evolving asset allocations and distribute those strategies and inefficient leverage its way minimizing distractions for investment teams.
We can operate at financial model that is transparent and predictable.
And operate with integrity and we can remain patient.
We cannot control the macro environment market returns.
Yeah, and investor sentiment or the timing of client cash flows.
That's we can't control those items, we try to avoid being distracted by them.
Our patient approach results in a bumpy ride.
We could try to smooth things and engineer short term outcomes.
We could launch whatever the latest hot product is regardless of whether we have the right talent or edge.
We could under price Alpha and limited capacity to those short term flows.
We could massively spend on sales and attempt to change buyer preferences, which would disrupt our investment oriented culture.
That's simply not our approach.
Not sustainable that results in below upset can fatally disrupt the long term compound in process.
We want to persist and thrive front talent clients and owners for the very long term.
Which requires that we remain disciplined and patient.
Slide three shows the current outcomes of our long term approach.
We have nine autonomous investment franchises, each with great leadership stable talent and outstanding investment performance.
The nine franchises manage a diverse set of high value added strategies for a range of asset allocation styles.
All nine franchises want to grow.
And we continue to invest in each of them.
Adding new talent.
Nobody knew technology and data.
Improving physical environments.
And developing new strategies.
The nine existing franchises right powerful platform for thoughtful growth.
True future investment performance.
Net flows and additional investment strategies.
[noise] existing business.
I was not are only source for future growth.
At any given time artists and as a firm as more than the some of its existing parts, we have a repeatable and proven process for adding new franchises and strategies.
Slide four summarizes our execution of that process in recent years.
2013, we have built three new investment franchises.
Watch six new strategies.
Recruited a new leader for and added degrees of freedom to our non U.S. small made growth strategy.
Evolved our global value team into two distinct investment franchises.
And invested in new people infrastructure and technology to support greater degrees of freedom and are increasingly global business.
We have taken advantage of disruption in the talent marketplace. We have provided at home for proven investors want an investment centric from that provide support independence and time to do things the right way.
We've also taken advantage of the disruption to style box allocation.
We have designed and launch global and third generation strategies that fit asset allocations evolving way evolving away from the traditional approach in both the institutional and wealth channels.
These investments have significantly increased the diversification of our from adding new independent Altisources, new asset classes, new capabilities and new sources of growth.
We are already seen significant early returns as shown on slide five.
[noise] today, we manage over 10 billion in a seven third generation strategies develop since 2013.
The strategies are growing through investment performance and new client demand.
Year to date, they have raised to combine 3.3 billion in net inflows.
They are experiencing demand at fee rates that reflects their high value added nature and relatively limited capacity.
And so far the early adopters have gotten good value for money.
Before publicly available third generation strategies with track records at more than a year have outperformed their indexes by an average of 156, 523, 838, and 1447 basis points annually since inception after.
Fees.
The third generation strategies are continuing and the tradition of our first and second generation strategies. Your today those strategies have generated collectively 2.8 billion and $1.3 billion of excess returns.
The first and second generation strategies remain incredibly important to our clients and our business.
In keeping with our multi dimensional holistic approach, we continue to spend the lions share of our time and energy reinvesting back into the first and second generation.
We have added an elevated talent increased degrees of freedom and thoughtfully managed capacity and business mix over time.
Those efforts have paid off in the form of continued strong investment performance.
Looking forward, we believe that a significant portion of the market will retain style box components, which will drive long term demand for our first generation strategies.
You can see that in the 6.2 billion of gross inflows into those strategies. So far this year.
Our second generation strategies.
Have multiple avenues for continued growth they fit well into institutional OCI O programs model delivery sub advisory and the non U.S. wealth channel.
These are relatively large capacity strategies that can be delivered to end clients and many formats.
And we expect a third generation strategies continue to draw demand from the U.S. wealth channel, where advisors want to complement core positions with differentiated alpha generating satellites overtime with longer track Records. We expect a third generation strategies will also increase their institutional.
Separate account and non U.S. businesses.
If we continue to generate excess returns we are confident in the long term growth prospects of all three generations.
Our diversified business can access growth with different types of clients in different geographies and through different vehicles.
[noise] clearly our approach to growth is focused on generating investment returns for clients.
Slide six shows an estimate of our excess returns over the last 11 years.
Over the entire period shown.
The excess returns total nearly 15 billion.
Generating excess returns lengthens the duration of our client relationships hurting us more time to compound client well and grow our AUM.
We have been doing this for 25 years across multiple teams strategies asset classes and time periods, we're focused on continuing to generate excess returns and growing our business alongside our clients capital.
We are not letting reset net outflows change anything fundamental about our long term approach. If we are performing for clients. We are accomplishing our mission.
We expect the ongoing disruption and client preferences, whether for asset classes vehicle types customization or E.S.G. will create plenty of opportunities connect our investment focus and expertise with clients long term needs.
We are confident that investment performance will create a sufficient combination of flows long duration client relationships and investment returns to generate growth outcome for all our constituents.
I'll now turn it over to CJ discussed our recent business and financial results.
Thanks, Eric our earnings release includes both GAAP and adjusted results.
Our call today I will focus my comments on adjusted results, which we utilized to evaluate our business and operations.
Financial results begin on slide seven.
We ended the quarter with the U.M. of 112.5 billion.
1% from last quarter and down 4% year over year.
Today, you EM was up 17%.
September 2019, coronary U.M. decline resulted from approximately 700 million of client cash outflows and market depreciation of approximately 600 million.
Our performance across most of our strategies positively impact today you ended the quarter.
Many of our strategies are growing and in particular, our third generation strategies have had strong organic growth in both the corner and year to date periods.
For all 10 of our strategies had aggregate net inflows of 1.1 billion during the quarter.
These net inflows were offset.
By 1.8 billion in aggregate net outflows in earlier generation strategies, principally our non U.S. growth all will value and U.S. midcap strategies.
As a reminder, next quarter flows will include the impact of artisans funds annual income and capital gains distributions.
Based on our current estimates we expect this year's distributions to resolve and approximately 450 million of net client cash outflows from investors, who choose not to reinvest their dividends.
Average anyway I'm in revenues are on slide eight in the quarter average anyone was up 3% to 113 billion.
[noise] revenues grew only 1% as the June quarter included $4 million performance fees.
Compared to the prior years quarter average or you I'm was down 3% and revenues were down 5% as the average fee rate was down slightly due to a decline in assets managed and higher fee pooled vehicles.
Average anyway I'm for the year to date period was 109.4 billion down 6% compared to the same period last year due to significantly lowering U M heading into 2019.
Revenues were 7% lower in the current year to date period, primarily due to lower average anyway.
Our average management fee excluding performance fees.
Operating expenses are presented on slide nine.
Operating expenses declined in the corner and year to date, largely due to the variable expense components and our piano model adjusting to the lower level of revenues and lower equity based compensation expense as higher valued grants fully amortized in the quarter.
Compared to the corner and year to date 2018 periods. Those decreases were partially offset by increases in occupancy expense related to investment team relocations and increases in salary and benefits costs related to additional full time employees and 2019.
Operating margin adjusted per share earnings are on slide 10.
Our operating margin increased to 37.2% this quarter from 35.3% and the June quarter, reflecting the impact of slightly higher revenues along with the decline in equity based compensation expense.
Prior to the same quarter, a year ago, the operating margin declined from 38.5% to 37.2% primarily due to lower average Jay you and revenues.
For the nine month period, the operating margin was 34.6% compared to 37.8% also as a result of lower average at U.M. and revenues and the expense items I explained earlier.
The adjusted effective tax rate increase in the quarter due to higher state income tax expense.
We expect a full year adjusted effective tax rate to be 24.1% in 2019.
And further increase in 2022 between 24.5% to 25%.
As a result of the change in our deferred income tax rate, our deferred tax assets and amounts payable under tax receivable agreements were also remeasured.
Deferred tax assets increased by 23 million with a corresponding decrease to the provision for income taxes.
Amounts payable under tax receivable agreements increased by 19.6 million.
Revaluation of deferred income taxes, and the related payables under tax receivable agreements did not impact our adjusted results.
Adjusted net income was 54.8 million 70 cents per adjusted share in the September 2019 quarter. This is up three cents compared to the June 2019 quarter and down nine cents compared to the September 2018 quarters.
Year to date, adjusted net income was 149.5 million or $1.92 cents per adjusted share.
Capital Management discussion begins on slide 11.
How many his board of directors declared a variable quarterly dividends 65 cents per share of class a common stock with respect to the September 2019 quarter.
This variable quarterly dividend represents approximately 80% of the cash generated in the September 2019 quarters.
Subject to board approval, we currently expect to pay our quarterly dividend approximately 80% of the cash the company generates each quarter. After the ended the year our board will consider payment the special dividend.
Finally, our balance sheet summaries on the last slide.
Our balance sheet as position has remained relatively consistent in 2019.
Cash position is healthy and leverage remains modest.
That concludes my comments and we look forward to your questions I will now I'll turn the call back to the operator.
Ladies and gentlemen at this time, we'll be getting any question and answer session.
To ask a question. Please press star on that one using a touchtone telephone.
Using a speaker phone when you asked you placed pick up your handsets before pressing the keys [noise].
It's all your questions you May press star into [noise].
We do please ask that you limit yourselves to two questions to allow time for all crushers.
And at this time, we'll pause momentarily to assemble the roster.
Our first question today comes from Bill Katz from Citi. Please go ahead with your question.
Okay. Thank you very much and thank you for the added slides in slide deck very helpful. So I want to start there if I could maybe tying together some of the commentary in your prepared remarks, as well as maybe slides five and six.
On six I'm sort of intrigued by what do you think would sort of we comfortable the excess return and the flows and then within that on page. Five you had mentioned that you expect that the first generation.
Closed store it could get a little bit better I sort of wondering what would suggest that maybe the back book of the platform could start to see some better growth all else being equal.
Sure Bill.
For the questions the.
More mature strategies that tend to be and the style box categories have seen some outflows, which we've talked about.
Primarily in the mid cap space.
Some of those outflows says.
Ramped up a little bit in the international growth strategy, which had.
Difficult performance for one year and over the last two years that performance has ramped up.
That that performance is going to mitigate some of the outflows there that should give us a lift in that first generation group. So it gives us confidence there.
And we also see some sticking as to the style categorization and.
Equity allocations, we believe that.
Well most asset allocators will continue to diversify by philosophy, our process or a general term for that as style.
No I'm going to higher three managers that all do dividend discount modeling summary, I'll look for earnings growth. So we're going to look for.
A valuation approach so.
Now that those trends give us confidence that that's on the road to stabilization.
Okay. Just a follow up just a follow up question I never get back in Q.
So maybe fewer so CJ just as you think about you come out sort of scale. The business from here where are you on your spending cycle, maybe another way to ask about to the extent that asset just sort of continue to migrate up assuming no market dynamics aside for a moment.
I think about the spend began so maybe the incremental margin associated with that growth.
[noise] Bill I.
I would say that.
Absent any new teams or.
Where new initiatives, which are in on the Doc and right now we're looking at probably.
Mid single digit growth.
Gross you know sort of little bit more than inflationary you know, we'll spend a little bit more on when technology, but the occupancy costs that you saw creep up this year do some relocations will subside.
Stabilize.
And tax should.
Tech should level out all there would be up probably mid single digits.
So.
So I think you know incremental dollars we should see.
Some nice margin leverage.
Okay. Thank you.
Our next question comes from Robert Lee from KBW. Please go ahead with your question.
Great. Thanks, whose me thanks for taking my question.
Maybe a.
To this.
No I talked a little bit about immune in previous earnings.
Earnings calls the you know you've talked about how changing retail landscape.
Provide some opportunities for you and.
Yeah, maybe that's evident in the third generation success. The wealth management you may be you know up they are no update us on maybe what kind of investments or new opportunities, you're seeing there and maybe how you.
Started to try to take advantage of them.
Sure the.
The third generation strategies have a.
Currently a higher until towards the.
Intermediary or wealth management.
Segment, which is.
You know more skewed to that group and our first and second generation, which.
Yes.
Second generation has a bit higher allocation do some global allocation and obviously the first on style and the institutional space.
With regards to the intermediary and the wealth management.
We all are seen disruption in that space.
With regards to.
How these models are operating how.
The fees are being generated to support these models.
The vehicles that will be used or whether there is going to be a holdings base.
And how customization flows through.
We believe this disruption has lowered the number of.
Strategies, our managers that operate in this platform and as the change occurs we believe that the intermediaries and wealth managers are going up at a higher weight on alpha delivery since they've already increase their passive way.
And given our performance in the strategies that fit into that asset allocation, we're quite optimistic that we can.
I work with a variety of Ah.
No different solutions vehicles are customization and the demand is gonna be towards strategies that we deliver.
Yeah, maybe as a follow up thanks, thanks for that.
I mean at some time oftentimes getting newer strategies on different platforms with different.
A child's but certainly different platforms can take time is different.
Wealth managers.
Through their due diligence process so.
They give you a third generation obviously credits are already been around three years or so, but if you think of thematic and may be developing world, which are maybe not quite there yet I mean is do you feel like there's a lot more opportunity in wealth management at.
Do you have like let's call. It a pipeline of new wealth managers, who are going through the process of vetting them that could.
Accelerate some of the man there.
Yes, Theres certainly the.
The asset allocation in.
Manager structure that goes on in various platforms are or certainly not as homogenous as they used to be.
So I'm not everybody is lining up just to do a mid cap growth our value.
Which occurred in the late Ninetys early two thousands and you have various disruption then people are looking for differentiated satellite managers and so certainly as we increase the that the number of differentiated strategies that gives us more opportunities to work with a variety of plan.
Forms that.
Operate with different asset allocation and manager structure.
I think that are.
Success, and bringing new teams and strategy into the market.
Our being recognized by the research analysts and in these platforms that.
Give us a leg up too.
To have earlier success I'm, given our repeatability of of strategies.
That we've delivered and the returns that have come with that so clearly is a competitive marketplace and we're hoping that our brands are proven success and the history of teams and strategies being launched.
Our recognized and that's what we consistently say about thoughtful growth.
As opposed to launching as many strategies Uzi can and hoping one works.
Great. Thanks for taking my question [noise].
Our next question comes from Dan Fannon from Jefferies and company. Please go ahead with your question.
Thanks.
Yes, a follow up also on just kind of the third generation strategies and I think you mentioned in your comments, Eric about overtime getting more SDMA and more institutional contribution. So can you talk about.
Thats more at you are kind of managing that capacity now and you know as.
You want to you open it I guess trying to think about the timing of when that might open up to.
On a broader mandates on the institutional side, if thats a PM decision. If that's affirmed decision or just kind of an evolution that just might have other factors associated with it.
Yes.
And that it's all three of those clearly the marketplace has to evolve with regard to the SMB business and.
Technology is certainly move into that direction.
There are.
Our growing number of providers that I think are advancing.
And technology and the efficiency of.
Getting lower minimum separate accounts into the wealth management space. That's there is a is a leverage to model that we could.
Tap, we and operate effectively with the REIT strategies and myself and the any investment team or an agreement that is there right.
Road forward.
Then we will triangulate on that and we do think all three are coming together.
We're not going to force it or try to jump the gun on it.
And I think Theres still some development in the marketplace that needs to happen as well as the adoption of.
Technology into.
The intermediary in wealth platforms.
I mean, we're going to see that with the active MTF as well.
But these.
New developments take time to work into the ecosystem.
Okay and then.
Just as a follow up with regards to kind of talent acquisition and kind of the environment today and maybe if you could just kind of characterize.
What you're the opportunity said that you see today versus other periods in terms of talent that's out there that you're potentially looking at.
Yes, we believe right now it's a it's a phenomenal time to to look at talent.
And we go back to.
Why artists and was launched and it was launched because.
There was talent at large organization that didnt want to be embedded into a house view or centralize research and you see that today and many of the hedge funds, where it's a structured environment. So philosophically are from a risk point of view.
That on the flip side a lot of these individuals did not want to start their own from and deal with running a business.
And I think we all agree that the regulatory environment the distribution environment.
And ill.
The ease of starting your own business as much harder today.
I think I'd go back to our success of bringing talent on and as we've brought on our Thematics team and entered into the equity long short as we broadened out our credit and to a.
A long short or alternative oriented strategy.
And the success, we've had overseas we've become a very interesting home for proven talent and.
The number of opportunities for that talent.
As abundant but.
The best talent out there I think we're getting a good look at.
Great. Thank you.
Our next question guys are my carrier from Bank of America. Please go ahead with your question.
Hi, guys. This is actually Sean count on for Mike.
We just had a couple questions on flows so first over the last couple of quarters. Non U.S. climb flows have been better than U.S. flows, but it looks like that trend reverse this quarter. So we're just wondering what you think may have driven that.
[noise] Hi, Sean it's Eric the primary driver we've seen.
And our global value on global opportunities a bit of rebalancing. They are both fairly mature strategies. When you look at the total assets under management.
And we had a bit of rebalancing in some of those.
And some of those relationships.
Given the size and the success of those two strategies.
And the minimal net flows those were offset.
Okay and then there was also a slowdown in cell for global equity products quarter over quarter. So we just wanted to know if that was driven by lower sales and the non U.S. small mid growth strategy, which were relatively strong last quarter and if so what you think drove that.
Now that the primary was the.
Global strategies, but the non U.S. small mid.
Growth strategy.
Has remained fairly strong we.
See quite a bit of interest.
And that strategy the performance.
As a outpaced the benchmark and has outpaced most if not all of its of the relevant peers.
[noise]. Our next question comes from Alex Blostein from Goldman Sachs. Please go ahead with your question.
Good morning, This is Brian daily on for Alex I.
I wanted to piggyback off the last question Oh, the prior question on talent acquisition.
And if we go back to slide four.
Clearly has a differentiated skill set and identifying talent.
Thank you both scale U.M. and generate alpha and I. Appreciate that you brought in a P.M. recently, but if we look back the Las team that you brought in within 17, but you've mentioned that as a phenomenal times be looking at talents. I guess my question is why haven't we seen you guys, bringing more teams recently.
Well one over 25 years Weve have nine teams so.
That's the standard in the bar that we have is quite high.
And the fit into our organization, we take quite a time to ensure a strong fit so that we have the outcome that we've created on page three which is the performance page.
My comments on they phenomenal.
Timing right now are phenomenal point in the market is that we see an uptick in the number of talent and we're starting to that numerous opportunities.
But we don't think that there's an abundance of.
Perfect fit for our model and for where we want to attack.
In the distribution cycles so.
The opportunity set is growing and we think that is.
Plus for looking at another group to bring in our team to bring in.
Got it and maybe maybe one turning to the fee rate it looks like on the institutional side of the separate account side. The fear it it's trended down over the last couple of quarters I know historically you've been.
You are very protective on maintaining that fee rate because you just have to get paid for alpha.
I think changing your strategy there or is it a mix shift dynamic that's going on that's leading to the lower fee rate.
And primarily you're saying the the mix shift that's that's bringing down the fee.
Yes, I will say that the last couple of years.
We've seen fees come down for clients because I'm, obviously clients are using a lot more passive.
Clients are also looking for the most appropriate vehicle or separate account and thats brought down their fees.
And we've seen many of our competitors in the marketplace drive down feed the manage a one dimensional mindset towards growth, which is fine feet and find flows at all costs and.
Over the last couple of years, this disruption and noise in the marketplace.
As has changed I think the overall fee structure.
I think fees will come down slightly but are.
Strategy would that be patient and see how the market is changing and what does it mean for high value added managers.
Now with that I do think that you'll see a separate account fees come down slightly but.
Our next question comes from Chris Shutler from William Blair. Please go ahead with your question.
Hey, guys good morning.
With regards to how we're conducting research and embedding that into each teams philosophy and process.
I think that will be an active dialogue, we've always been opened to those type of discussions.
Yes.
And I. Thank you will see an uptick there will be meaningful.
Probably not in the next year.
But it could.
It could occur and two to three years out pending.
The behavior of of institutional clients.
Okay. Thank you.
Our next question comes from Kenneth Lee from RBC capital markets. Please yeah with your question.
Hi, Thanks for taking my question wondering if you could just expand further upon you on your efforts to further reinvest in the first and second generation strategies.
We've obviously seen some team changes I was wondering if there's any other effort that you'd like to highlight.
No we've been very transparent about.
Our evolution there of bringing talent in a evolving teams where appropriate bringing more degrees of freedom into those strategies so that.
We provide an opportunity to outperform.
So.
As we.
I will work with each team and eight strategy, we've been very open and transparent so.
No nothing new to bring up there.
Gotcha, and just one follow up if I may on a broader level I'm presuming the firm's solid track record and generally excess returns is resonating well with clients in the current environment, but just wondering if there's any other factors and just wondering gender. If you could just gives a little bit more color as to what's resonating with climb.
Right now thanks.
[noise], our conversations with clients.
In a focus on increasing their passive and increasing.
Opportunities potentially the work in a outsource manner or no CIO that they may work with a consulting or a provider in a different way are they in there right vehicles.
And.
No.
Okay.
Although the vendor discussions.
I am dominated in the industry and is.
Ill gotten many of our clients and investors to just shore up there their plans.
And they'll be a read refocusing back on.
The stable.
And trustworthy and consistent value added managers.
That's not going away. So there has there been other conversations over the last year or two.
And that happens from time to time, and that's why we consistently say those as a lumpy right and if you force that conversation.
Youre going to have to bend on other areas, which is probably not.
Needed.
In the long term.
Got you very helpful. Thank you very much.
Our next question is a follow up from Bill Katz from Citi. Please go ahead with your follow up.
Okay. Thanks, very much I just couple of them number one you talk or Eric about where you stand today in terms of within your total asset pool, that's in the high net worth channel.
Okay.
Total asset pools, probably right around 30.
Percent.
We would deem and the intermediaries phase.
And then within that is there any exposure you so talk a little bit about sort of shifting nature. The estimate platform I don't know sautoy institutional or retail, but there's certainly been a lot of discussion about the implication is coming off of or would you be yes is doing on their own sort of platform and whether or not that's knock on effect for some of their competitors suite.
Look that little bit what do you have on the retail intermediary side in terms of SNA.
And if pricing change towards the play through how that might.
Filter down to what am I knew freight them.
Yes.
Certainly we don't have any asset may business and these retail platforms.
Historically.
And as the technology the impact on your trading desk and the probability of errors.
And implementing the the old technology, an old arrangements we.
Have.
Stayed away from so as that develops and we have the REIT strategies, we're very open to get into that discussion.
The newer strategies that tend to be Andy.
Third generation.
Tend to have a high degree of freedom.
They operate well and pooled vehicles.
They might be a bit difficult to move into a SDMA.
Platform, However, our second generation strategies.
Are you know of interests.
Especially the larger global equity global value global opportunities and looking at.
Global intermediaries that could be a nice fit.
But to answer your question, we don't have any exposure right now to the SDMA inside of a.
Intermediary platform.
Okay, and just just one last one thanks for patients and all the questions.
You'd mentioned some conversations with clients on terms that move performance fees. So is that more of a flex the product Allah what the fidelity is doing outside United States and what a alliance trying to do in United States, a number one or is it just more traditional two and 23 mile and then second point that is on.
If you could say, it's one institutional side and then the retail side you sort of talk about your views on how you see it potentially developing on the retail channels.
Sure. The we have not incorporated a performance based fee in a.
Publicly traded vehicle such as a mutual fund or you said I'm. So we have not incorporated that into our our publicly traded vehicles.
With regards to my comments on performance based fees, it's been around our traditional strategies.
On the institutional separate account business and.
Those those fees.
Tend to fold chroma rounds.
Our current separate account fees level.
With regards to your comment on the 220, we do not.
Have a.