Q4 2019 Earnings Call
Ladies and gentlemen, thank you for standing by welcome to the brakes Fear investment Group earnings conference call and webcast for the fourth quarter and full year 2019 during the call all participants will be.
In listen only mode. After the presentation, we will conduct a question answer session to be attitude. The Q. Please press the star followed by one at anytime during the call.
If you need to reach an operator. Please press the star followed by zero. Please note that this call is being recorded today Thursday February six 2020.
At 11 am eastern time.
I'd now like to turn the meeting over to Brett Ferryman head of corporate Communications. Please go ahead Brett.
Good morning, and welcome to break spirits conference call to discuss our results for the fourth quarter and full year ended December 31st 2019.
Before we get started.
Please note that we may make forward looking statements about our future business and financial performance.
Each forward looking statement is subject to risks and uncertainties that could cause actual results to differ materially from those projected.
Additional information regarding these factors appears in our FCC filings, including the.
Form 8-K filed today containing our earnings release and in our 2018 form 10 K. any forward looking statements that we make on this call are based on assumptions as of today and we undertake no obligation to update them as a result of new information or future events. We will also reference certain non-GAAP.
Financial measures information about any non-GAAP measures referenced including a reconciliation of those measures to GAAP measures can be found on our website along with the slides that we will use as part of today's discussion finally, nothing here in Shelby deem to be an offer or solicitation to buy any investment products.
Well I'm young our president and Chief Executive Officer, and certain run up our Chief Financial Officer will lead to call and now I'm. Please to turn the call for too long.
Thanks, Brad.
Good morning, everyone. Thanks for joining US today, then be beginning on slide five off the presentation by walking through some of the.
Highlights for the fourth quarter and four year.
We reported yeah, and I per share of 50 cents for the fourth quarter.
Compared to 42 cents for the third quarter.
Yeah, hi per share grew 19% quarter over quarter.
And then by stronger.
Expected performance fees across several of our high performing quantitative strategies.
As well as ongoing share repurchases.
Net flows for the quarter were negative 25.1 bidding.
Is there to 22.8 bidding related.
To a previously alone.
Location shameful Vanguard's sub advisory strategies managed by borrow handy.
Excluding those reallocation they flows for the fourth quarter were negative 2.3, feeling a meaningful improvement compared.
So the prior quarter.
That's what do you have mentioned previously the overall revenue impact off though vanguard's reallocation, what's the limited.
Reflecting lower sub advisory fee rates and the reallocation also said counts has a limited.
The impact on earnings going forward.
As you will recall last quarter, we restructured our reporting to provide greater visibility into our business mix.
But shows broad participation in high growth segments healthy.
Industry.
As you can see in the charge on the right to starts off all revenue is generated from plans and solutions and alternatives.
Areas that have significant potential for continued growth and expansion.
Turning to slide six we continue to make progress across our long term growth strategy.
The quantum and the solutions segment.
Appeared in has experienced recent headwinds in the U.S. and emerging markets.
Similar to the audio.
Measures.
But it's pro Formas non U.S. developed markets is well above benchmark.
Over the three five and 10 year periods.
The firm's long term performance is excellent.
With your nearly 100% strategies.
Beating their benchmarks over the 10 year period.
Okay, Dan multi asset class strategy is off to a excellence spark.
In terms of both performance and the kind demand.
As the investor appetite for Heidi Pandered, an outcome oriented solutions.
Remains high.
In the alternatives segment.
We see strong interest in our differentiated strategies.
As he investors around towards continue to increase allocations to E liquids and encore related products.
<unk>.
Previously mentioned, we're currently engaged with a wide range of clients in this segment.
And expect fundraising momentum to butte throughout the year and into 2021.
Well these are widely colonized investments expertise.
She's in this segment, we see significant opportunities for Rapids capital deployment of new.
Cash flows.
In the liquid office segment, our affiliates continue to feel its long term track records outperformance.
The strong.
Investment returns over all greater than time periods in particular Barrow Hanley has strong performance across its diversified suite of offerings.
Including non U.S. value global value emerging markets and the multiple fixed income strategies.
Sorrows largecap value composite.
Continues to outperform over the critical three and five year period.
As well as.
The near term.
And has ample capacity for additional investments.
Carl has a healthy news.
Business pipeline and the management continues to Hans investments offerings.
The next elements of our strategy focuses on expanding capabilities in high demand.
Higher fee business.
As we mentioned last quarter.
Our most recent innovation is a exclusive partnership with Mercer to offer a total solutions investment capability to institutional investors worldwide.
Already response, a mom potential clients.
Has been very.
Live and work hard so they engaged which investors across key global markets.
Seating has being a long term elements off our strategy and we have well established and the successful track records seeding new products such as borrow Hana is.
Emerging markets equities and leveraged loan capabilities.
That's why as a kid in single factor and the multi asset class strategies.
Finally, we continue to evaluate opportunities to further diversify our business by acquiring.
New investment capabilities.
While maintaining pricing discipline as part of our capital management strategy.
Focused on maximizing shareholder returns.
Third we remain focused increase in business from key.
Global markets.
We expanded our global distribution team in 29 chain to increase all coverage.
Target markets, such as Asia, Latin America, and the Middle East.
Our seasoned sales professionals I understand that.
It's all sophisticated institutional investors are rounds award and to the range of investments capabilities and solutions Reits fair can provide to help meets their objectives.
As a result, we have seen a significant increase in.
Our search activity participation over the course of the year.
Oh, so as previously discussed we remain focused on expanding our presence in China, although macro factors have impacted our pace.
The recent U.S.
Phase one trade agreement helped.
Get us back on track.
We are then slowed by the recent piling up virus outbreak.
Well monitoring the situation carefully.
And I'm hopeful.
That things were stabilized over the near to medium.
When they do we want to be well positioned to move forward on a number of initiatives.
Finally, we remain focused on driving shareholder value.
We're pleased to have returned meaningful value to our shareholders. So.
I'm going share repurchases throughout the year.
We repurchased 2.9 million shares in the fourth quarter, along for a total of 19.5 million shares into and get 19.
Driving.
Additional 15% creation.
Yeah, hi per share.
Looking ahead with a strong and to recurring free cash flow from our diversified revenue streams.
We remain focused on allocating capital to the high so return growth opportunities.
Thank you once again and.
Now I'll turn the call over to soaring to discuss our results in greater detail sorry.
Thanks, Ron turning to slide eight it's an overview of the company three dogma, that's highlight I work differentiated business.
Our content solutions segment.
Shown in the left column, which accounted for about 58% of our earnings in Q4 is well positioned to generate continuous long term growth because clients already pretend to be seeking highly sophisticated capability and customized solution.
You can deliver so this segment.
Our alternative segment in the middle column, which accounts for 12% of our earnings and will increase from there.
As expected to drive meaningful organic growth for us.
Typically has several of our private market strategies get into their next vintage fundraising cycle.
Our liquid <unk> segment.
Right column.
And for 30% of our earnings from White, Darren Cline, our diverse mix of fundamental long only strategy across a range of rapid pop his vision and cap ranges.
And you continue to develop and see you do French.
You did higher fees strategies in the segments.
Segment is an important part or a comprehensive product suite and nicely complements our overall does.
So in summary, the attractive business mix positions the company very well, we produce strong organic growth.
Over the long term.
On slide nine you show the results for the quarter from our Boston solutions segments.
Yeah, you on increased 6.7% from the third quarter 202 billion driven by market appreciation.
Revenue increased 11%.
And you know I increased 34% compared to a third quarter driven by higher average or you want.
At year end performance fee of approximately 9 million.
Long term investment performance in this segment remains strong with almost 100% on the strategies.
Plumbing over 10 year period.
The five year performance number decline from 90% to 58% as a large strategy was marginally below its benchmark by 14. This.
Now, let's turn to the alternative segments on the next slide like.
As we mentioned previously the segment I just want to be posted strong growth.
Generating more than 12, and a half billion of I do you smoke.
In the 2016 to 2018 fundraising.
You would expect to get back to growing our a you amendments to the segment starting in the back half.
This year as multiple strategies are nearing their next vendors fund raises and our track record continues to be very strong.
In the fourth quarter revenue in that segment increased by 2.4 million compared to a third quarter due to lower placement agent be.
Did you may recall.
Paul was an item that you talked on the last earnings call as something that was at a higher than normalized level.
In the third quarter.
Turning to our third time and seek what else segment on slide 11.
Thank you I'm in the segment reviews from 98 billion.
The 79 billion, primarily due to dropping by bank card account, which was partially offset by market appreciation.
As a result, this segment's revenue and he and I declined by 6.4 person and 8.8% perspective.
Also as a result.
Dropping morphea <unk> from bank our.
Our fee rate in the segment increased from 27 best 29 basis.
<unk> performance in the segment strong across the three five in Kenya.
Slide 12 shows a snapshot.
Our chief financial metrics over the last five quarters, showing generally solid and stable over the though.
Yeah.
Slide 13 shows our net client cash costs and revenue impact our village flows broken up by segments.
The chart on the left hand side show that.
While the total net client cash flows no liquid I'll segment were not going to 24.9 billion driven by the Vanguard account.
Loading the vanguard reallocation.
The net flows in the segment are improving.
But do you think to minus 1.1 billion in the fourth quarter.
No on the table at the bottom right that our inflows for 39 to see.
While outflows were at 21 this.
This resulted in an increase in our overall average fee rate from 36 bed, So 38 cents.
On slide.
16, we show our operating expenses.
You will note an increase NGL <unk> expenses from 29.9 million.
32.8 million.
Which was driven by for us adjustment and yearend seasonality.
Turning to our balance sheet on slide 19.
We repurchased another $27 million shares in the fourth quarter and pay down our revolver by 35 million compared to the third quarter, which now stands at 140 million Undrawn.
Our net leverage ratio of or do you still 1.7 dot.
Compared to one point either.
Last quarter.
This shows the strong recurring cash flow from our it doesn't.
Allows us to deploy capital to recruit abusive while managing our leverage.
Now I'd like to turn the call back to the operator, and we're happy to answer any questions you may have.
[noise].
At this time those with questions should lift their phone receiver and press star followed by the number one on their telephone keypad to cancel a question. Please press the number saying please hold for a brief moment well, we compiled acuity roster.
Your first question comes from Craig Siegenthaler from Credit Suisse.
Please go ahead your line is open.
Thanks, Good morning, everyone.
Good morning.
Long now that the U.S. in China has phase one of the trade deal in place can you remind miss your long term objectives for China, especially when we.
We think about he <unk> resolution happening for the virus.
That's correct.
Yeah, China as.
As we communicated before China is very important for us it's very important for us in terms of Ah markets longer term.
ER since beginning of 29.
19, we have expanded our team their presence there.
Right, we engaged with a number of institutions or potential partners on the distribution side as well as.
Just outright clients.
<unk> efforts.
You know way it was put on hold.
You may.
When the U.S., China trait negotiation stopped.
And I point, where you kind of a pivot our efforts into Hong Kong, where engage waste number of far east seriousness there.
But again, we kind of hit another road block when the.
The protest happens in Hong Kong.
So now waste the phase one trade agreements in place.
We are engaged with those institutions that gain.
And.
We actually had a number of a meeting is lined up right. After.
Chinese new year that now because the Corona virus a those meetings are cans. So it's a I think probably would be another.
Quarter maximum two quarter.
So to speak just like the source that happens a 15 16 years ago and as its two quarter you event.
So we are fully prepared to two you know to have our team engaged off course right now for the health.
Consideration.
On a we don't have our team traveling there.
But we're well prepared today to get moving once the situation.
Freeze offs.
Thanks gone and up just as my follow up on landmark in the future do you think they'll be <unk>.
Running their fund raising out across many periods rather than sort of a concentrated.
Fundraising cycle any given year and it looks like the next big year, probably isn't tells him 20 she a.
Based on what you said, it's probably more gonna be like 2021.
Yeah, Hi, Craig this is the right.
In here.
Yeah, I guess, what we'd expect a in our alternative segment.
You know sort of the fund raising dog.
Going on in earnest really starting back half of this year and yet you would see more of the activity.
21, rather than 20.
And.
With our affiliates in the alternative segment.
The the timing really is more of a function of.
Capital deployment, we do see good opportunities.
Across our strategies in terms of capital deployment and and.
Entertaining sort of comes out of that and we would expect overtime the different strategies do.
Spread out a little bit more in terms of timing.
Your observation is right that no that most strategies a.
Deployment and the timing of additional raises.
So was.
But contemporaneous somebody with you over time, it's spread out.
Thank you saw in.
That's it for me.
Your next question comes from Robert Lee from KBW. Please go ahead. Your line is open.
Great Good morning.
Thanks for taking my questions I guess.
First one is I'm just curious on capital management, yeah with the steady buyback is.
Are there any kind of if we look ahead to 2020 and kind of assuming you keep up a similar pace or are you.
Or any kind of the <unk>.
The shoes, you run into given a you know paulson ownership I guess now there's ownership stakes can creeping up do you buy back so as you get towards that kind of 24.9, 25% level. If you keep.
Buying at this pace that create any kinda issues with the future buybacks.
Yeah, Hi, Rob this is.
So right here.
Yeah, I know I guess about support for capital deployment in general.
We as we've said we do look at now all the potential accretive.
Uses for our capital.
And and that goes into a organic growth investments like seed capital.
I'll be purchases is one of 'em you know de leveraging dissolved also.
I would use and then we continue to look for Oh, good acquisition and targets as well.
So so we would say yeah, we have enough.
Operating cash flow to.
To do all of those to pursue all of those opportunities and as you saw in this quarter. We we reap would be did some repurchase says and we also reduced our leverage.
So so we would say that no we have.
Enough of headroom right now.
In terms of.
Accessing the repurchase opportunity.
And if you're approaching a level that you I'll point until I'm aware of our largest shareholder.
As a the threshold of exceeding the 25%.
Leveled out there are draw of several dog.
Alternative dog that no that'd be about Dasgupta, what then that would allow us to continue repurchases.
Sure there would be an opportunity.
Great and the maybe.
Follow up on kind of new business trends and I apologize. If this is something you you mentioned I.
How did jump off the call for a moment, but.
Maybe a long if there's any type of color you could give on kind of RFP or pipeline activity.
I mean, if you look at your RFP activity is wave kind of.
Quantifying that it's I know, it's up 10, 20% year over year or something or any kind of granularity on RFP activity in the pipeline would be it'd be great.
I don't think were ready to.
Divide a numerical number about all I'm, saying is that.
Our our Tam self came up very busy Ah that gets a lot of meetings.
Since you mentioned are about RFP for example, I even four hour.
Or the total solution capability of.
His mercer.
Somewhere early discussion already got involved into the RFP stage already.
But as you know you know our business.
It's really hard to predict.
Or the timing when those are.
Mandate would it be away and found dates so.
Oh, what's a conversion ratio for RFP to the final Wayne.
By at least that lets say the early indication are quite encouraging.
And then maybe the partial follow up the Craig's question you know just fun really on kind of your distribution is initiatives then you.
Initiatives and maybe outside of China, I know you've spent some.
You know put some effort there could you update us on kind of do you feel like that some of the investments other investments you've made are complete and now it's about kind of execution or is there's still more kind of build out you feel you may need to do.
Yeah as a as we.
Okay.
Before we added a senior distribution team members in North America, They middle East and Asia.
And we're getting a quite a lot of Ah Ah meetings search activities for example in North America right now.
ER and some in the middle East.
And the Asia pituitary, China right now it's Pos.
But we still have a lot of ongoing conversations through you know a.
The conference calls and email us, but in terms of for the fiscal meetings.
Being rescheduled to it later date.
Originally paid are.
In many meetings scheduled right after Chinese new year.
But now it does has to be I have to be cancelled.
Okay, great. Thank for taking my question.
Your next question comes from Patrick Davitt from Autonomous. Please go ahead. Your line is open.
Hi, good morning.
On the other side of that last question I guess are there any large redemption to call out.
Coming.
Yeah, Hi, Patrick.
Correct.
Yeah, I guess and obviously you'd noted dog eat dog.
The vanguard and a redemption oh in the fourth quarter, we don't have anything no.
George and lumpy like that or anything else on do you know institutional business.
And its its difficult to predict so where we are as of right now in this quarter. So far so good we haven't seen anything but you don't.
It's it's not necessarily predictable, but no nothing to report as of.
Now.
Great in that vein could you remind us how much of the outflow in the first three quarters of 2019, and then for the full year 2018 came from the Vanguard assets that are now out.
As we kind of trying to like reset what the run rate could be without that headwind.
Yeah.
I think would we would be may have shared in the past is Ah we had about.
A billion plus.
A quarter of of outflow from that pocket.
So that so that's sort of a high level number it could it moves around it.
It's going around but no.
If you want to dawn, Oh, hi levels run rate that conduct could be that's probably a good number.
Okay. Thank you.
Your next question comes from Kenneth Lee from RBC Capital markets. Please go ahead. Your line is open.
Hi, Thanks for taking my.
A question just wanted to get your latest thoughts on the potential outlook for Ah for M&A, how would you characterize the current level activity. There and are you still focused on looking at potentially individual investment teams versus firms. Thanks.
Hi, Ken.
It's a sovereign yeah on on M&A or we are.
Actively.
Looking at targets.
And boat platforms, as well as as well as teens.
And we're looking in areas that are on the product side dog or high growth.
On the alternative solutions or on the distribution side that are providing those channels, where we where we arent.
But no, but we continue to be very disciplined on on the strategic fit.
As well as or the deep financial accretion.
So why the we why do we have a pipeline that we it'd be process. Its it's hard to predict job when something might come to the finish line that that is satisfactory to us.
Oh, no under strategic fed accretion.
And as well as be more accretive.
Compared to the other capital use as well we are looking at the on the investment teams again, its that's obviously a little bit simpler they're getting the question is a cultural right cultural fit and the right alignment of structure and in.
We are in conversation, but conversations with multiple teams.
Oh, yeah in other words, where a heightened focus on the strategic.
Value a were not interesting you simply just spring yet another I faded.
Understood. Thanks, and just one follow up.
If I may when I look at B 2020, operating expense ratio guidance I I think if at 43% of the management fee revenues.
Just wonder what's driving that to increase year over year versus last year I'm. Just wondering if there's any key factors there.
Thanks.
Hi, Ken on the operating expense saw on the dollar level as a as we've said dog.
We are very disciplined on on cost and we'll continue to be to be so so we won't expect a a material increase in the in the absolute.
Level of Opex, but the ratio that you see is.
Our guard conservatism on the.
On the denominator, which is the management fee and as you've noted.
You have little bit lower fee from a removal of the large account.
There is for example in January the markets down.
So it's a ratio so it's a function of the numerator and denominator. We we don't expect any material change on the on the dollar level of expenses.
Understood very helpful. Thanks again.
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Your next question comes from John Dunn from Evercore.
Please go ahead your line is open.
Thank you just maybe a little bit more on the Mercer relationship because it seems like it could be eventually be good source of growth maybe just.
How do you think about the sales cycle, there and maybe just the size of Mandy average size mandates that.
Come through and you mentioned the global effort, so maybe just geographically where you're seeing some traction.
Yeah, I think its a very unique.
Offering bratcher and Mercer bringing into the.
You know, there's a investors globally.
And to the solution were primarily or have a basic offerings.
But was some percentage potential to allocate to us or party managers says you know.
Nurseries.
Experts in terms of fall.
Raging managers and no so make asset allocation portfolio construction or decisions.
And since the underlying portfolio. This could be you know you're booking.
Yeah.
A number of strategies.
We would expect the size of the mandates or would be quite meaningful because otherwise it does not really makes sense and to the institutions were.
Talking too.
In general there are also I've.
Very large institutions selmo loss funds insurance companies et cetera et cetera.
Its really hard as you know in this business to pin dying Saturday the cell cycle or the time.
But I would say at least the early reaction.
Has been very.
So if a sense and tend to move a lot faster than a normal.
You know self cycle I was saying.
Got you and then just.
Could you talk about you're still it's a about <unk> potentially any expense synergies like an under the covers to offset maybe some of it.
Good investments you're making.
Yeah, Hi, John Dog I guess at this point, we don't expect a further expense synergies we are.
Focusing on no growth investments.
At this point.
But it.
Said earlier, we wouldn't expect a material increase.
In our expenses.
Because whatever pockets of opportunities we are finding on the cost side, we are reinvesting that and probably then some.
On on the R&D expense side too.
To grow our capabilities.
Great. Thank you.
Your next question comes from Chris Harris from Wells Fargo. Please go ahead. Your line is open.
Great. Thanks.
So.
Yeah $12 billion to $13 billion I believe of net.
It was from the last fundraising cycle and all.
Is there any reason why are you guys couldn't do at least that much and a nice next cycle and 2021 and 2022.
I think actually that's probably a good number to think all I mean, nobody knows what were happen when you.
Yeah actually in the marketplace and raising money O win by the time Yukos about I think that would be a good number to think of as a reference.
Okay, very good and I just want to clarify the situation in China, just so I'm understanding correctly.
Yeah, we got through the phase one trade deal and so that.
You know opened up the opportunity for you'd have meetings in China.
You know assuming we get passed this current virus thing and you're able to take those meetings again.
And and you actually does means are constructive can can you actually.
Get a mandate wins so essentially.
Findings from China based on just the phase one trade deal or do we need to get you know beyond potentially phase two in phase three for there to be potential mandate wins that happened from that region.
Of course, it's a it's evolving process a one benefit from the phase one agreement is that.
Basically the from like a like US a floor and asset managers now can apply for 100% owns a mutual fund of license.
In the past as you know there's a limit.
In terms of for how much the ownership for.
Sure and asset managers.
Can't have started was 33% and moved to 49, 900%. So that's one thing we were we plan to to do is to get our license because that's a that's very important and and also in terms.
So for the meetings like discussions we have has so far there including some potential.
Partnerships, a joint ventures, a those a conversation has been going on for four miles.
Bad I think we saw that phase one agreement.
But in place a weekend or really try to push those saw a conversation to the finish line.
Okay great.
Your next question comes from Michael Sypris from Morgan Stanley.
Your line is open. Please go ahead.
Great Hey, good morning, Thanks for taking the question just wanted to come back certain to your point on the the seating I'm just curious to kind of get an update on how you're kinda picky about the seeding strategy.
I think you see you mentioned, where it wasn't in the book and the deck in terms of the size, but just curious how that compares versus a year ago and it kind of the gross adds versus the recycling.
And how you see that playing out in any sort of views on what strategies makes sense.
As you looking out over the next a year or two in terms of seating next.
Yeah, Hi, Michael as we've said you know are all see portfolio currently is a bit about 960 million.
Do you ever give or take.
[music].
That's been transitioning a little bit more from exclusively.
Oh long only strategies to a mix of long only solution and and illiquid alternative strategies. So we probably see.
That trend continue well.
As we are seeing opportunities.
That are more solutions oriented dog coding for example need the totaled solutions product. So products like that then I noted we continue our job growth on the alternatives side, well, we'll we'll see.
Thanks, moving in that direction.
There's a good amount of velocity, there that as had strategies either.
Prove themselves out and I can get third party clients or or or sometimes we do have failed. The current events as well let me move it moved some of those moved.
The capital to something something else.
So to answer your question.
And then just in terms of funding. It is it just halsall recycling or are you looking to grow the size of the seat book as you move forward from here.
Yeah, we are open to the growing dog he.
No that that size that off though we would be comfortable growing it from under 60 million to 200 million.
I'm a little bit off of it also depends on the timing.
Of opportunities, we we work collaboratively.
With our affiliates too.
To see dog. The next best ideas that will that would that would drive growth.
Sold and so I.
I think over time, but with no we've been growing from hundred 62.
About 200.
Okay, Great and just to follow the question on the quantum solutions segment I know.
You mentioned some recent headwinds on investing performance I, just curious what sort of actions are being taken to address that and what if any sort of expectations. Do you guys have in terms as any potential impact on flows is it reasonable to assume that that segment.
It could be a little bit more challenging from a flow standpoint, as we look forward or how.
The next couple of quarters.
Yeah, what we see on the performance Ah there it gets into last you're in a half or so.
Notably up multiple factors have underperformed a you know just because fuel growth stocks have had an.
Outsized influence on encore benchmarks.
No client understand that that that's not a sustainable trend and like a more holistic approach what I.
Considers all the multitude of factors and that our quantum solutions segment focuses on.
Similarly that ours.
Large strategies like call it low volatility.
Prodigy that would tend to underperform in the short term in a rising market. So those strategies are delivering low volatility.
But also giving up some upside and I would say.
Clients understand that too.
So while the near term like a one year number may may look off yeah. I mean that is what Oh I would say Muslim majority of clients signed up for a that's why we have said that our clients being that we are primarily institutional our.
It's tend to focus on the longer term.
Track Records and ER and we have a strong performance I'm on the longer term somewhat early emerging markets for example.
Tend to be volatile and or any one year period.
Could be quite often but no the longer term performance there.
Yeah isn't it.
It is strong and ER and the and the model clearly works. So to your question, whether there are any changes to our models.
We have high conviction that no.
No that the that'd be philosophy approach.
<unk>.
Model and technology.
I've worked very well.
Over a long over a three with food through time over and over longer periods.
Great. Thank you.
Your next question comes from Michael Carrier from Bank of America Merrill Lynch. Please go ahead.
Your line is open.
Great. Thanks, just have a one question you provided the expense guidance is helpful. But can you provide maybe a little bit more color on where you're making investments on to try and drive growth ahead I'm either on the products you know with the affiliates are on the distribution front ex China.
Yes, certainly or so I guess, so clearly we are investing I'm on the where the growth of where the growth has and hence.
Increases needed for for example in our alternatives segment, we are increasing the expenses there naturally as.
The as we are growing our a U.M. and on capital.
We'll need to be deployed we are investing on the distribution side and continue to to do so has as we as we access new markets or as we get into channels, where we were not and.
We are we are adding people and we expect to do more of that this year.
But.
Please our question and answer session I'd like to turn the conference call back over to long young.
Thank you all for joining us today.
Okay.
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