Q2 2020 Virtus Investment Partners Inc Earnings Call
Ladies and gentlemen, please standby your British conference call will be good momentarily once again, ladies and gentlemen, please stay alive.
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This website at Www Dot dot com.
It's also being recorded and will be available for replay on diverse website. At this time all participants are in listen only mode. After the speaker's remarks, there will be a question and answer period and instructions will follow with their Todd I'll now turn the conference over to your whole Sean work.
Thank you, Kevin and good morning, everyone I'd be happy Virtus investment partners over like the walking through the discussion operating and financial results for the second quarter of 2020.
Our speakers today or George Aylward, President and CEO of Vertis, Unlike Ingersoll Chief Financial Officer.
Following their prepared remarks, we'll have acuity period before we begin I direct your attention to the important disclosures on teams to slide presentation that accompanies the webcast certain matters discussed on this call may contain forward looking statements within the meaning of the private Securities Litigation Reform Act, because that's not inside and as such are subject to known and unknown risks and uncertainties, including.
But not limited to those factors set forth in today's news release discussed in our as you see filings.
The risks and uncertainties may cause actual results to differ materially for most discussed and statements.
In addition to results presented on a GAAP basis, we use certain non-GAAP measures to evaluate our financial results are non-GAAP financial measures measures are not substitutes for GAAP financial measures and should be read in conjunction with again.
Reconciliations of these non-GAAP financial measures.
GAAP measures are included in today's news release and financial supplement which are available on the website.
I'd like to turn the call the George George.
Thank you Sean good morning, everyone. Thanks for joining us on our second quarter earnings Conference call.
We're pleased to second quarter results, which included strong positive net flows are highest level sales continued excellent investment performance disciplined expense management and further reduction in do you continue to return to capital.
We're especially pleased with the strong organic growth, which exceeded 11% on an annualized basis. The composition of the growth in broad based with contributions across product categories investment strategies.
The favorable trends that we've experienced in sales and flows reflect the distinctive and differentiated nature of our investment strategies as well the quality of our retail and institutional distribution.
I would also highlight our announcement earlier this month that we've been in entered into an agreement for strategic partnership with Allianz Global investors, which we had approximately 24 billion in assets under management.
We would expect to be highly accretive transaction that will enhance our bond offerings distribution capabilities and growth opportunities.
So turning now to review as a result.
Long term assets under management at June Thirtyth recovered to near peak levels, increasing sequentially by nearly 18 billion or 20% 207.1 billion as a result of both market appreciation and positive net flows.
Let us which include liquidity strategies ended the period at 108.5 billion.
Sales momentum continued sequential increase of 30% to 9.1 billion, our highest level since becoming public with significant increases in open end funds retail separate accounts and institutional.
The quarter, we had 2.5 billion a positive net flows were strong momentum across products and asset classes.
Discontinue the favorable trend we've seen this year other than the disruption earlier in the year during the worst of the market dislocation.
Open in net flows were positive point 4 billion, primarily due to strong positive net flows in domestic equity.
We feel separate accounts have positive net flows a point 8 billion led by the intermediary sold channel, which has now generated 18 consecutive quarters of positive flows.
Institutional net flows were positive 1.5 billion with contributions from existing mandates and new accounts, reflecting the attractiveness of our investment strategies and continued traction from our investments in institutional distribution.
In terms, what we're seeing in July for the month to date the trends of the second quarters continued solid sales positive net flows in open end funds retail separate accounts and institutional.
Our financial results for the quarter reflected the impact of last quarter's equity market decline as lower beginning of period assets led to a sequential decline in average assets, which had an unfavorable effect on investment management fees for the quarter.
Largely offsetting the revenue decline was a significant decrease in expenses due to lower seasonal employment expenses as well as lower travel and entertainment.
Operating income as adjusted a 40.5 million and the related margin of 34.3% increased from 40.1, million% to 31.5% respectively in the first quarter.
Earnings per share as adjusted decline in minus 2% over the first quarter $3.24 largely due to lower revenues, mostly offset by significantly lower other operating expenses and the impact of the seasonal employment expenses in the first quarter.
To me now to capital.
We continued our balanced prudent approach to capital management during the quarter, we purchased approximately 75000 shares or about 1% of shares outstanding and continue the consistent paydown of our term loan ending the quarter with net that bank EBITDA <unk> 0.3 X.
Over the past year, we've reduced our debt by.
The 5%.
With that let me turn the call over to Mike to provide more detail on the results Mike.
Thank you George good morning, everyone.
Starting with our results on slide seven assets under management.
At June Thirtyth long term assets were 107.1 billion up 20% from 89.5 billion at March 31st.
The sequential increase reflected $15.2 billion of market appreciation in 2.5 billion a positive net flows.
Nearly all asset classes contributed to 11 growth during the quarter led by domestic equity which increased 33%.
Assets continued to be diversified by product type with open end funds.
Institutional and retail separate accounts, representing approximately 37%.
32%.
And 21% of long term me when respectively.
In terms of asset classes equity assets represented 69%, a long term AUM with 78% of that in domestic equity and 22% International.
Fixed income assets declined as a percentage of total to 27% primarily due to the sharp rise in equity markets during the period.
We continue to generate strong relative investment performance across our strategies as of June Thirtyth, approximately 84% a rated fund assets.
Had four or five stars.
98%.
We're in three four or five star funds.
We currently have nine funds are they win of 1 billion or more that are rated four or five stars representing a diverse set of strategies from five different managers.
In addition to this very strong fund performance, 94% of institutional assets were beating their benchmarks on a five year basis as at June Thirtyth.
And 82% of assets were exceeding the media performance of their peer groups on the same five year basis.
Turning to slide eight asset flows.
Positive net flows of 2.5 billion in the second quarter represented a strong 11% annualized organic growth rate.
For the trailing four quarters net flows were positive point 5 billion.
In the second quarter net flow contributions were diverse by product with the net flows and open end funds retail separate accounts and institutional as well as being positive across multiple asset classes.
And this marked the sixth consecutive quarter from positive equity net flows in aggregate.
Net flows for open end funds were positive point 4 billion for the quarter a marked improvement from net outflows in the prior quarter.
Looking at open end fund flows by asset class.
Domestic equity net flows are positive 1.2 billion up from breakeven last quarter.
Those are positive across all domestic equity strategies with particular strength in mid cap.
Where net flows increased by over 100% sequentially 2.6 billion.
Fixed income fund net outflows were point 3 billion.
A significant improvement for 1.4 billion of net outflows in the first quarter.
The second quarter net outflows were primarily in more credit sensitive strategies, while investment grade fixed income had positive net flows.
International equity funds had net outflows and point 6 billion as modest positive net flows and developed market strategies.
For more than offset by net outflows in emerging markets.
Which included a point Threebillion model reallocation.
Total sales for the quarter were very strong up 30% sequentially as 77% year over year to 9.1 billion, marking the second consecutive quarter that our sales have reached their highest level since becoming public.
And on a year to date basis sales have increased 52% over the prior year period.
Sales growth in the quarter was driven by open end funds retail separate accounts and institutional.
On sales of 4.4 billion increased point 5 billion or 13% sequentially with increases in both equity and fixed income.
Equity fund sales increased 18%.
Driven by a 45% increase in domestic equities, partially offset by a 24% decline in international.
Fixed income sales were up 6% with increases in investment grade strategies.
Retail separate account sales of 1.5 billion were up 40% sequentially with strong sales growth across asset classes and investment strategies, including a 107% increase in domestic large cap strategies.
Institutional sales of 3.1 billion increased by 1.6 billion from the first quarter due to flows into both existing and new mandates across multiple affiliates.
This included meaningful flows into an existing sub advisory mandate.
Turning to slide nine.
Investment management fees as adjusted of 104.6 million decreased 7.7 million or 7% sequentially.
The decline investment management fees for the quarter.
Despite strong a web growth reflected the impact of lower beginning a UN on average assets.
Which declined sequentially by 7%.
I would note at end of quarter, a win was sharply higher than the average for the quarter.
The average fee rate on long term assets for the quarter was 46.8 basis points.
Unchanged sequentially and up 0.5 basis points from the prior year period.
With respect to open end funds the fee rate increased to 58.4 basis points from 57.8.
In the first quarter, reflecting the significant market driven increase in equity assets.
And the ongoing positive fee rate differential between sales and redemptions.
This quarter the blended fee rate on fund sales was 58 basis points.
While the rate on redemptions was 54 basis points.
Slide 10 shows the five quarter trend in employment expenses.
Total employment expenses as adjusted a 59 million decreased 12% sequentially.
The decrease largely reflects the 7.7 million of seasonal employment expenses in the first quarter.
As well as lower profit based incentive compensation.
Partially offset by an increase in variable sales compensation.
Due to higher Commissionable sales.
As a percentage of revenues employment expenses were 49.9%, which reflected the impact of the higher retail sales as well as lower average at UN.
For the third quarter, we anticipate that employment expenses as a percentage of revenues will track toward the high end.
Or above the 46% to 48% range, we've previously discussed.
Assuming current market levels and a continuation of strong sales trends.
[noise] turning to slide 11.
Other operating expenses as adjusted or 17.4 million.
Down from 18.9 million in the prior quarter.
And included the annual equity grant to the board of directors of point 8 million.
Excluding the board grant other operating expenses, as adjusted or 16.6 million or 14.1% revenues.
The sequential decline in other operating expenses was primarily due to lower travel entertainment activities in the current environment.
Looking forward, we continue to expect that other operating expenses in the short term may remain below or at the low end of the previously stated 18 to 20 million dollar quarterly range.
Given limited visibility into a return to a more normalized operating environment.
Slide 12 illustrates the trend and earnings.
Operating income as adjusted of 40.5 million increased point Fourmillion, 41% sequentially due to the lower employment and other operating expenses.
Mostly offset by lower revenues.
The operating margin as adjusted or 34.3% compared to 31.5% than the prior quarter.
Interest and dividend income of 1.1 million declined from 3.4 million.
A decline reflected lower yields on cash and reduced distributions on our seed and see a low investments.
We believe this is an appropriate level for the third quarter.
The effective tax rate is adjusted for the quarter was 27% down from 29% in the prior quarter.
We believe 27% is reasonable all else being equal.
Net income as adjusted of $3.24 per diluted share decreased eight cents or 2% sequentially, primarily due to lower revenues and lower interest and dividend income.
Mostly offset by the decline in employment and other operating expenses.
Regarding GAAP results.
Second quarter net income per share of $1.43 cents compared with a net loss of 58 cents per share in the first quarter and included the following items.
Seven cents, a CLL refinancing expenses.
48 cents of increased liability to reflect the fair value of the minority interest.
And 22 cents of realized and unrealized losses on investments.
Slide 13 shows the trend of our capital position and related liquidity metrics.
Working capital at June Thirtyth of 156 million was essentially flat sequentially.
As debt repayments and return of capital to shareholders was offset by operating earnings.
Gross debt outstanding at June Thirtyth was 241 million.
As we repaid 17.5 million during the quarter.
Over the past year, we've reduced gross debt by 75 million or 24%.
The net debt to bank EBITDA ratio 0.3 times at June Thirtyth was down from 0.5 times at March 31st.
And 0.7 times, a year ago due to EBITDA growth.
Lower debt at a higher cash balance.
Gross debt to EBITDA was 1.1 times at quarter end.
Down from 1.5 times in the prior year.
Regarding return of capital to shareholders, we repurchased 74897 shares of common stock for 7.5 million.
Representing 1% at the beginning of quarter total outstanding shares.
Net settled.
21473 shares for 2 million.
With that let me turn the call back over to George George.
Thanks, Mike for we take your questions I would like to comment on the partnership with Allianz Global investors.
We're very excited about this relationship which is unique and you mean mutually beneficial partnership.
For us the partnership would increase our assets by approximately 22% it complimentary and attractive investment offerings enhance our distribution capabilities.
I'd be highly accretive to earnings without requiring any payments to close.
All the onto a gain access to our strong focus retail distribution.
And administrative capabilities to support growth and the partnership would allow them to focus more closely on their U.S. distribution efforts in institutional and other markets that are more closely aligned with their priorities.
Upon completion, which is subject to certain approvals and that we expect to occurred near the end of year.
We would add all the owns approximately 24 billion of assets based on June Thirtyth AUM.
Assuming responsibilities as the investment advisor distributor Ed or administrator.
Of their 16 billion of open end funds.
5 billion of closed end funds and 3 billion of retail separate accounts.
All the owns would continue to manage the majority of the assets approximately 16 billion as a select subadvisor well their value equity team, which manages approximately 8 billion would join us as a new affiliate similar to our other boutique managers.
In addition to adding significant scale the partnership would further diversify our investment strategies, adding multi asset thematic equity and alternative strategies that are differentiated from our current offerings and provide the potential for greater opportunity for clients through changing market cycles.
Investment performance on these assets has been outstanding of the open end fund the whim, 80% is in the 10 largest rated funds seven of which are rated four or five stars by Morningstar.
On a pro forma basis, we would have a total of 41, four and five star funds for presenting over 82%.
Of our funding you win.
We will also enhance our growth opportunities by expanding our offerings of funds and retail separate accounts through our broad national distribution in warehouses, and independent brokers, making us a more meaningful distribution partner and leveraging allianz investment capabilities to evaluate new products for you as retail investors.
Regarding the financial impact the agreement structured with an alignment of economic interest overtime that will not require any payment at close.
Based on June Thirtyth assets under management, we would expect relationship would be immediately accretive to earnings per share as adjusted and well in excess of 20%.
We will be providing additional financial details and updates as we get closer to the closing of the partnership so with that will not take your questions. Kevin would you open up the line. Please.
Ladies and gentlemen, you have a question or comment at this time. Please press the star than the one key on your touched on telephone. If your question that's been answered your customers all from the Q. Please press the balance sheet.
First question comes from Jeremy Campbell Barclays.
Hey, thanks.
Well George the.
Polyones partnership is really kind of interesting and innovative.
Wondering if you can give us some high level back on how Buddy deal came about and maybe if you view this little bit more of a one off unique situation or if there's potential further demand from other us Mandarin looking to partner on retail distribution.
Sure I mean, the way it would sort of characterize that going into specific details is this is a partnership not a transaction. This is about growth and alignment of interests.
This is it going forward transaction. So this is not a deal where we're a party is looking to do a transaction and get a check. This is about two companies working together to create growth and profitability and partner on that going forward. So I think in that way. It is a very.
Very aligned structure I think one that fits the relative nature will reach of US we're trying to achieve so we think it is very very good wave approaching it isn't unusual but I think it sort of reflective of what were each sort of looking for in terms of growth in future. I think also expresses can't speak probably.
But I would say expressing their confidence in themselves and their managers and their ability to generate good performance and their confidence that we can help grow those assets. So so clearly the structure of the deal is much more aligned for them to have the the opportunity continue to participate in that so I think that is something actually gives us more confidence right. So I think.
It really is a good so good structure. It's a good alignment of interest I think it's good for everyone involved.
Both polyones vertis, our shareholders their shareholders and just as importantly, all the punch shareholders that are involved here.
Is this a one off or or would that be others. Like this is unusual. So every circumstances a little different I would not expect you to think that every every deal you will see going forward, we structured like discuss each one has a different need or are different fit in terms of what they're looking to achieve and in some instances there are transaction.
That really did particularly if there is a third party seller that does require a.
An upfront capital structure as opposed to capital light or backend capital type of structure, but if you do here of any other opportunities of other people interested in doing the fuel you have my contact information and I encourage you to give that information to them available 24 seven.
[laughter], Great and then like maybe one for you.
Thanks for the the little bit people had occurred on the deal accretion expectations here can you give us a little bit color on the expected incremental margin like kind of funneled into that that ballpark you forecast I mean, I'd imagine that excluding the value team there really isn't much in the way of incremental expenses to the distribution side on the partnership while piece of the equation.
Yes, and I think the major inputs into the level that we referred to being well in excess of 20%.
Our obviously the fee rate on the 24 billion of assets under management, CMV and average fee rate sort in the range of 35 to 40 basis points.
And that incremental margins, we talked historically of 50% to 60% of incremental margins in that varies depending on the nature of the assets under management and here in the structure as George alluded to we can largely leverage the existing infrastructure that we have in place.
From Bofa and administrative and distribution standpoint.
So.
We sort of be in that range of incremental margin and.
Certainly as we alluded to the prepared remarks, we'll update you on as we get closer to two to the close.
On some of those specifics.
Great. Thanks, a lot guys appreciated.
Thank you.
Our next question comes from my carrier with Bank of America.
Good morning, Thanks for taking the questions.
Maybe just one more on the on the partnership.
And maybe partnering that with with just your capital position you guys are going to asses on paying down debt Garrett.
Comfortable position on your net debt level.
With this partnership I know you mentioned Noah page, but how will that maybe impact your debt level or that your net debt position.
Over the next I don't know if it's three to five years in terms of payments.
Then you given that.
When you think about capital priority you are you still in a pretty good condition that you have flexibility.
Well look at other opportunity yet they they arise.
Sure. So on the first part, especially when you think I understand the correctly. So again the way this will be structured as a participation in effectively net revenues earned.
It will always.
Are we.
Hey will be a subset of what we received so if you're if you're sort of trying to understand is are going to be any kind of a.
Mismatch of that or like outstanding debt that reduces our available capital.
Theoretically no right because it will always there will always be a net cash contribution.
As long as there is assets as long as we continue to sell those so I think again in terms of the the impact it has on our capital structure.
We view this incredibly favorable right because it does not really create any lafayette obligation or an obligation mismatch between the receipt of cash it. So in many ways I think that is a great is great structure pressed to have and on your second part, yes, we've been very thoughtful around our capital we were very pleased.
As we went through the dislocations in the first quarter that because we have been thoughtful and cautious with our capital and not being too over levered that we're able to not only navigate through that period.
And maintain things like our dividend as well as our stock repurchases as well as our consistent paydown of debt. We also were opportunistically equal to reduce even a little bit more debt and to have gone through quarter like that and have working capital sort to be flat quarter over quarter.
Mike indicated our working capital sort of unchanged.
We view that is a testament to.
The focal approach we take to the balance sheet. So I think we do have.
A good balance sheet got us through this environment, which was what does intend to do we do see opportunities going forward to continue to look for ways to grow the business, our our primary focus and even going back to the on the ons will be.
How do we create sustainable growth in the creation of long term value.
As the years and ultimately having that flexibility in our capital we view as a positive.
Right.
And it just on the flow straight.
So you understand you guys have good performance some product from demand.
And industry trends, you've had some kind of rebalancing reallocation that it looks like you guys had bennett from.
But it still seems like a pretty significant.
Pick up so just trying to understand anything lumpy there.
And then one of the area that it seems like has been a little bit more active unit from an industry standpoint is on the closed end fund side and just more curious obviously, no more components, but little bit from marketing.
But over the next 12 months, if you see opportunities in that area as well.
Sure and on the flows in where we are happy we're happy with our ability to to continue to generate on relative basis. Good flows obviously second quarter, 11% organic growth rate, we're very very pleased with that but actually the more important in more interesting underlying statistic is really that other than that period of dislocation.
In that mid March two very beginning of April we've actually consistently been positive flows, which we think is very well.
Very good sign a lot of it really is we have some great managers and across the board from as he became.
The Duff I mean, all of them have really done a great job.
Include the others as well because you really can't do any of that unless you really have.
Good performance predictable performance.
Differentiated strategy defray the capabilities, so thats really the foundational element that there.
Upon which you need to build I do think we have been effective very effective on the distribution side.
Retail world gotten a little more challenging right. So the relation relationship based wholesaling of the past is currently on hold.
But thats why relationships are really important right because if you're in a work from home.
Environment and you can no longer knock on doors is really important that your distribution fourth force has the established relationships, where they can get those zoom calls or the other contact. So we think we've been able to effectively navigate through the use of technology and the leveraging of strong trusting relationship to build or.
A year is with our Salesforce, which generally as above average the years of experience. So we think we've been able to put those those together to effectively on a relative basis I think have good very good sales hitting two record quarters in a row.
As well as on the Netflow side and what the future holds things will continue to evolve I think everyone's getting used to navigating in this environment and I think going forward.
There will be a hybrid model of this.
But again I think in some ways is we'll end up being a really good learning experience, particularly in the retail channel, where I think both on the intermediary side as well as on the on the fund side. The wholesaler side I think everyone has learned a lot about how to be even more effective and how to be able to share information and thoughtfulness.
In a way that will hopefully ultimately benefit our mutual clients, which are the ones, who entrust their money into either the funds the separate accounts for institutional account.
Hi, Thanks, a lot.
Yes.
Our next question comes from Michael Cyprys of Morgan Stanley.
Hey, George Hey, Michael Good morning.
Congratulations on the GE transaction.
Like the price flexes based on revenue it sounds like radio or maybe just revenue. So I was hoping you could maybe unpack how to think about what portion is there sort of like a floor minimum amount that would be paid and how we should be thinking about the sort of break points in the degree of flexibility there or but that can do.
Engine payment flex and so revenues are down 10% in terms of what's being acquired here does that contingent payment.
Next pro rata, so kind of a lower 10% payments. That's that's made I suppose on a subsequent basis are there any catch ups on on prior payments that are made how should we be thinking about how that works.
Sure and.
Yes, we're going to give more and more details and more.
Updates on specifics as early as we go through the year prior to close but I would really think about this is participation.
Just a tour rate structure right so for dollars coming into percentage of those dollars will.
BD amounts that you would consider from accounting perspective to be consideration of sometime so we'll always be a total alignment. So no dollar comes in no dollar goes out there is no minimal. So there is no floor. This is a true alignment of interests participation in effectively the net revenue type of Ernie.
Things.
So again, there won't be that mismatch in that sort of was inartfully trying to answer before on the on the prior question as it related to capital because it's always going to be a portion of whatever comes in so there will be.
Things to think about in terms of watermarks or or catch up payments. If that's what you're asking now it is his participation in the province, we jointly generate through the growth of the assets through their managing those assets in us distributing those assets are really do think it's a it's a good alignment of interest.
And we'll give more details in terms of the the timing of payments, but it it will be just infrequently once a year after the anniversary of the closing so we'll have more thoughtfulness and detailed to give you as we get closer to the closing.
Great and then just on the accretion I think you had said well index.
I'm, sorry, you broke up there.
Kevin.
The line open for Michael.
Hello can you guys hear me.
Mike We lost you there sorry about that so you might have to repeat the entire question.
I thought you guys can hear me now so just on the accretion you guys had said well in excess of 20%, but imagine that that does not reflect the contingent payment that would be made so I just want to try and get an understanding of thought if one were to think about the magnitude of that contingent payment.
How much what that sort of accretion then come down to a few were to sort of deduct for that would that be more like at the high single digits or low teens area, just trying to get a framing on the magnitude of that contingency on the payment side. It over what timeframe would that be made over I was thinking about eight years, but I was hearing maybe five for some others. So just how should we be thinking about that.
Yes, so in terms, so that well in excess of 20 accretion so again using June thirtyth assets.
And then as we sort of think about it in terms of how it will fit into our our net income in our earnings per share that we generate and report.
And again as Mike indicated we don't technically need a lot of resources, because we're leveraging a lot of our own infrastructure, but this is really about growth. So some of the flex in that number of how much in excess of 20 will be will be related to what we think are the opportunities for us to too.
Invest in maximizing growth opportunities. So we're very excited about the economics of that and I'll, let Mike into some detailed but again there is no contingent payment right. They will participate in in a percentage of of earnings that are generated over a period of time. So again, we'll always be.
Positive number Mike, Yes, I guess just thinking through.
The contingent payments that would show up as a financing activity really it's a liquidity activity rather than what we've been referring to in terms of the EPS accretion of as well in excess of 20%. So that will show up as a financing activity on liquidity measure.
So we would address that in terms of the accretion through the PM now.
That we've been talking about and again.
When this gets recorded from an accounting purposes, you'll see a present value of any of these payments we recorded as a liability on the balance sheet.
At the time of clothes and again there are many inputs that go into that which again will provide as we get closer to close.
In terms of like free cash flow accretion it will be free cash flow accretive again. If your question was is going to be into 20 plus level the answer to that no.
We go forward, you'll get more information.
In terms, including periods of time Def LTV.
Right, that's what I was getting out what the free cash flow accretion is that more like high single digits or more low teens so anyway.
Moving to give more yes, when we give more information that you'll be able to triangulate in on that but it will be attractive number but will not be day, well in excess of 20.
Okay. Thank you.
Our next question comes from Sumit Modi will Piper.
Thanks, Good morning, guys just.
Noticed the fee rate on separate accounts remain pretty elevated in the quarter. After after that I should increase first topic for Mike just wanted to get an idea of what's driving that.
As if we should.
Think about that rate permitting elevated for the rest here.
Yes, and again, we talked about some of the inputs that have impacted the fee rate.
Being the equity markets.
And the and the flows and on separate accounts, we seen strength.
Predominantly in domestic equity there so.
I view this quarter is as good a fee rate as any from a modeling perspective.
All else being equal with.
The equity market levels, where they're at.
Okay, all right and just one what other on interest and dividend income just wanted to get a feel for kind of how to think about that wants the remainder of the year kind of in relation to the CLL book.
Last quarter, you talked about the kind of one to 1.5 billion range, but kind of what the improvement of closed during the March I mean, it's fair to assume rebounded lows that that a portion kind of what improve.
Interest and dividend income or is there is there like a portion of the CLL book, that's kind of exposed troubled sectors, maybe combined with the deferred sub fees that could keep that more subdued for the year.
Yes, I think in the prepared remarks, we suggested that the current level was appropriate for the third quarter. So I would continue to use that from a modeling perspective and.
We're very close to the CLL market will continue to monitor.
Monitor that an update you as appropriate but in the immediate term I think this current quarters as appropriate.
Got it okay. Thanks.
Our next question as a follow up question for Michael Cypress with Morgan Stanley.
Hey, Thanks for taking my follow up just wanted to dig in a little bit more on the institutional strains that we saw in the quarter I was hoping you could help frame.
Maybe how much of the sales were coming from existing clients that are already in the sort of strategies versus existing clients that maybe now your cross selling other products to versus new clients that are coming in the door that are new to the from entirely and just any sort of color on how that has been evolving and maybe.
<unk>.
Any sort of approaches and color you could share around sort of the cross sell products.
Sure well I'll I'll hit the person that Mike will give us some additional thoughts on it. So what was nice about it was nice abroad right. So it included multiple affiliates multiple strategies and included both new mandates as well as meaningful inputs into existing mandates. So that's sort of a nice for us in terms of our evolution of institutional business.
Which has has gone from a limited number of affiliates to multiple affiliates and then the sporadic nature has gotten more and more consistent so thats sort of think about it over the last I don't know 812, 15 quarters, it's sort of been a nice cumulative.
Building, a more consistency more broadness and I think the second quarter had a nice illustration weather.
Between the managers as well as types of strategies I don't know what the next quarter will look like but it's good to see it and the way we look at our pipeline.
It's sort of feels like we're getting to a much more mature place. It's still lumpy business model, we do there'll be quarters, where there'll be begins in big accounts, but I'll, let Mike give some thoughts and perspective on the specific question, yes, and we.
In the prepared remarks, we did indicate that there were meaningful flows into an existing sub advisory mandate and certainly that was.
Good to see and.
Sta, certainly has broad relationships and has contributed through.
An important relationship with one of our distribution partners that contributed nicely in the quarter and then as George alluded to we had new mandates.
At both does contain.
One of which was a a new mandate into it.
A strategy, where the client had.
A separate.
Very good experience with added funded a different strategy and.
We also had a new mandate.
That came about so we're seeing traction it's broad based.
And new mandates as well as well as existing accounts so.
As you know that business can be can be lumpy, but.
We're pleased with the traction over the last several quarters and it was as we alluded to in the prepared remarks.
We've seen thus far in July.
Gives us optimism as well.
Great and any additional color you're able to share on the retail estimate intermediary sold strength that we're seeing sounds like that's continuing into July here, just maybe how many platforms would you say that that's sort of coming from.
And how diversified across strategies and any color you could share around that the channel there would be helpful.
Sure, It's Mike and we Havent 17 consecutive quarters of positive flows on the retail separate accounts and.
Again it is broad based we've we've had success through several of our affiliates.
Kane.
Sta and and sites on the fixed income side so.
Predominantly the growth and overtime as has been in the domestic equity offerings are smid.
Offerings have been very strong and it is broad based on a number of the major distribution platforms, where again, it's indicative of the strength of the investment performance.
Thats been across the cross and those offerings. So.
It is at multiple distribution partners and again has been consistent overtime.
Great. Thank you.
Yes.
This concludes the question answer session I will watch from a conference back over to Mr. Albert.
Great now I want to thank everyone. Today, I hope everyone is seeing safe and healthy and look forward to talk to you in the future in the meantime give any questions. Please reach out thank you very much.
That concludes today's call. Thank you for participating and beyond I'll just come back to have wonderful day.