Q4 2020 Wisdom Tree Investments Inc Earnings Call

[music].

Ladies and gentlemen, and thank you for standing by and welcome to the Wisdom Tree Q4 earnings Conference call. At this time all participants are in a listen only mode. After the speaker presentation there'll be a question and answer session to ask a question.

During the session you will need to press star one on your telephone. Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to your speaker today, Jessica to Lou Wisdom tree head of corporate Communications. Please go ahead.

Good morning, before we begin I would like to reference our legal disclaimer available on todays presentation.

Presentation may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995, a number of factors could cause actual results to differ materially from the results discussed and forward looking statements, including but not limited to the risks set forth and this presentation and and the risk factors section of the waste.

And <unk> annual report on form 10-K for the year ended December 31st 2019, and quarterly reports on form 10-Q for the quarters ended March 31, 'twenty and 'twenty and June 30th 2020 with interest seems no duty and does not undertake to update any forward looking statements.

Now it is my pleasure to turn the call over to wisdom tree CFO Amit Muni.

Thank you, Jeff and good morning, everyone.

Quickly walk through the highlights for the fourth quarter, and then turn the call over to our President and Jarrett Lilien, who will provide a recap of 2020 and strategic plans for 2021 I'll provide an update on the expense guidance and then turn it to Jon on for his closing thoughts before we open the lines for Q&A.

So beginning on slide two.

And we ended the quarter with assets under management of 67, 4 billion up 11% from the third quarter from a combination of positive market movement and $900 million of net inflows.

During the quarter, we experienced a continuing trend of strong flows of $1 4 billion into our ex state on strategies.

We took a $900 million into our currency hedge gold and Swiss voltage gold products.

Also continuing the trend all year, where flows into our thematic funds.

We generated $600 million across our cloud computing battery technology and artificial intelligence funds.

Given its strong rally, we also took and $50 million into our Bitcoin fund, bringing it on now to $165 million.

The strong momentum we are experiencing exiting 2020 is continuing.

Flow has continued to remain strong taking and over $600 million and bringing our AUM to almost $70 billion.

Now turning to the financial results on slide three.

Revenues were $67 million for the quarter up 4% due to higher average day U N and a slight decrease and our fee capture due to mix change.

On a GAAP basis, we had a net loss of $13 5 million.

Excluding non operating items adjusted net income was $9 2 million or six cents per share.

This quarter, we took a noncash after tax charge of $22 million for our future gold commitment payments, primarily due to a change and a discount rate we used to record this liability.

Turning to margins on the next slide.

Our operating margin was 19, 2%, reflecting higher seasonal expenses.

Gross margins were 75, 6% from the quarter on the lower end of our guidance range as we incurred final costs related to past porting our funds into the EU due to Brexit and fund rebalancing fees and the U S.

On the next slide you can see the change and our expenses.

Our operating expenses were $54 million and the quarter call.

Compensation cost increased bringing our full year compensation to $74 7 million below the low end of the range. We gave at the beginning of the year.

We also incurred higher marketing and sales related spending, which generally picks up as compared to the summer months and the third quarter.

For the full year, our discretionary spending was 41 million also well below the guidance we gave at the beginning of the year.

I'd like to turn the call over to Jarrett Lilien.

Okay.

Thanks, Amit.

I'm very excited about and their business. We ended 2020 with strong growth and momentum and that momentum is continuing in 2021, and we are well positioned and have a strong 2021 growth Glenn.

In terms of growth and momentum last March we hit a pandemic low of 46 billion and globally AUM.

And from those loads globally, AUM rebounded, 46% in 2020, and a record 67 billion.

And with Shine through during this period was the balance on a global and mixed with U S equity at 27% gold at 26% International equity at 14% and emerging markets equity at 13% commodities at 13% and a growing seven.

Percentage share for fixed income and alternatives in 2020, this diversity dampen volatility for 2021.

And it positions us for further growth. We're also shined through last year was our underlying organic growth turning to slide seven the U S ended the year with six consecutive months of organic growth and an annualized pace to add $3 billion and new net flows in the U S alone.

And we are now and our seventh consecutive months of organic growth, our best performance and over five years and USA AUM is now back over $40 billion.

Europe ended 2020 with its second consecutive year of record organic growth and momentum continues we have five product suites that are all growing we have six times over a 1 billion and 240 overall from that or volatility tested and represent the best structures and in the market.

And rounding out Europe, our UCITS suite is now over $2 billion with dramatic, adding 400 million and January alone.

To date, we have seen global organic growth of $630 million assisted by more than 1 billion and market move and now have global <unk> and a new record just shy and $70 billion.

Turning to slide eight.

For 2021, and our products are extremely well positioned and we have a strong growth plan to keep the fire burning.

Consensus points to a low interest rate environment, a shift to value and strong prospects for installation and Theyre also continues to be strong interest and semantics and ESG, we could not be better positioned with our dividend strategies, and our leadership position and gold and commodities.

Our best and market Crypto ETP offering our cloud AI and battery and rethink global cyber security launch as well as our leading ESG offering this product diversity and positioning enhances both the quality of our flows as well as and our prospects for continued growth.

Turning to slide nine.

And drilling deeper on ESG and our plan is to be the leader in this space and we already ranked third in the U S by ESG assets behind ice shares and Invesco on.

Our multi factor and ex state owned suites, six funds and $5 billion and AUM and total each represent differentiated performance oriented investments strategies. This month, we further enhanced our ex state owned suite by adding additional environmental and social screens and.

Ensuring they will show up and more third party ESG classifications and be more visible for ESG oriented investors and Europe. The same broad ESG screen has been applied to our core and use it to equity funds.

To meet increasing local market demand for such considerations and traditional exposures.

And we need or means more than just product. It's a holistic package of thought leadership education company level initiatives and products and performance and we have been advancing all of these three years.

Turning to slide 10.

We are looking to accelerate our momentum through targeted investments both in today's growth and tomorrows and 2021, and we're targeting 20, new global launches with a focus on core tactical dramatic and ESG exposures.

We will also invest and marketing and sales to further drive client engagement in 2020, we were able to drive record client engagement and a remote working environment.

Quality client engagement, which includes providing the best products Advisory solutions and client service. This is what drives flows and this is where we are focused in addition, we continue to make progress with our model portfolio offering and expect a meaningful portion of our 2021 flows to <unk>.

Come to us through models as we've discussed before model flows tend to be stickier and have a greater lifetime value to the firm. We see these flows adding to the overall diversity and quality of our asset mix.

All the while we're investing and efficiency remote working has worked for US we've transformed our operating model and we are working as a global team better than ever before with a fresh perspective, we have found new efficiencies, adding scalability to our model and giving us scope to make further investments and <unk>.

Future growth.

Our vision is to continue with a remote first approach post pandemic, ensuring that these efficiencies are permanent and carried into future years.

Looking further into the future we are and the business of providing best in market exposures, we already have top ETP executions around the world.

The future aside from the previously mentioned launches, we will maintain our leadership position and crypto Etp's, while also establishing ourselves as a leader and digital assets. This last initiative holds the promise for wisdom tree to tap additional revenue streams further accelerating.

Organic growth and what we see as the next chapter and financial services. Let me now turn the call back to Amit to give color on how this impacts our 2021 expense guidance.

So turning to slide 11, with Jarret comments and his background I'd like to give you some guidance on how we're thinking about expenses and 21.

Compensation expense was $74 7 million for 2020, and we projected to be between 75 and $85 million for 2021, depending upon our results.

This range is consistent with our initial 2020 guidance.

We anticipate gross margin to be between 77, and 78% on an annual basis, given our current AUR index with some fluctuations intra quarter.

We anticipate third party distribution fees to decline to $6 million as we look to consolidate the platforms we work with.

We are leveraging efficiencies and savings we have learned during the pandemic and reinvesting it back into the business to support innovation and future growth.

We expect discretionary spending to be approximately $49 million and 2021.

As a reminder, our Gulf payment expense is based on us paying 9500 ounces of gold on an annual basis you.

You can project this expense by monitoring the average price of gold during the year.

Assuming gold prices remain flat at current levels. This expense will be approximately $17 million per the year.

Based on our current AUR mix and current rates.

Expect our effective tax rate to be between 19% and 20% for the year.

Also as a reminder, we could say $3 million to $4 million annually once our New York City office space and sublease, but we don't anticipate those savings and our current guidance.

As we think about uses of our capital it remains to accumulate cash to pay down our debt.

Return on capital to shareholders through dividends and Mei.

And adequate dry powder.

<unk> organic and inorganic opportunities.

As always we remain disciplined and focused on controlling expenses balance with investing into our business to help support and drive future growth.

Thank you and let me now turn the call over to Jonathan.

Thank you Amit.

Jarrett reviewed the solid progress and our European and U S platforms, and the focused investments, we are making and product and distribution to further accelerate our growth our.

Our business has more than navigate the global pandemic, we have emerged stronger.

Not only have we adapted to the remote working environment without missing a beat but we also gained new operating efficiencies and competitive strengths. We are in fact operating as a truly integrated global business.

The benefits of our European acquisition of ETF Securities did not and by simply digesting a large diversified asset base in 2018 as valuable as that is.

We have developed real synergies by leveraging complimentary IP investment capabilities, and best practices, and our product and distribution initiatives.

However, I believe many of the existing and emerging strength in our business are not fully appreciated.

They represent real value for wisdom tree shareholders today.

Let me double click on several of these strengths.

We have a leading bitcoin ETP approaching an inflection point.

I, often say the essence of the ETF structure is about simplifying and democratizing access to previously hard to reach exposures.

Point is just the latest example.

Our European listed Bitcoin ETP has gathered almost $200 million and assets and remains in our view, the most investor friendly bitcoin product and the world.

This should be appreciated as a valuable achievement from wisdom tree shareholders.

The product is now at a scale, where it is becoming increasingly viable for institutional investors.

And this could not have come at a better time because of the dramatic rise in the price of bitcoin and bullish investor sentiment has driven a significant increase and engagement for our European sales team.

Additionally, we believe we have an opportunity to leverage our European experience to offer a best in class.

James traded bitcoin exposures beyond Europe.

We have built a profitable and complimentary use its platform that is poised for further growth.

A major part of investing in our European infrastructure was to build out. Our then fledgling UCITS business. So that wisdom tree could participate in the growth of the more globally recognized UCITS framework.

Today, our UCITS ETF platform stands at $2 billion and growing the success, we are experiencing and usage is being driven by a suite of thematic funds like artificial intelligence and new battery solutions.

Meaning we are diversifying our equity business and new growth and technology exposures.

But we are not satisfied with regional strengths.

Our breakout success and dramatics was led by our cloud computing funds, which we launched in both markets with over $2 billion and a combined $600 million of that and use it. This.

This week, we launched a new cyber security strategy in both markets and have further plans to cross pollinate when appropriate.

Wisdom tree has become a truly diversified asset manager.

Of course, the benefit of a large gold commodities and tactical trading range of Etp's was part of our strategic rationale for Europe.

We continue to see the benefits of asset diversification and dampening volatility and real time.

Most recently goal was once again, a very constructive exposure amid the global sell off in March and April.

A quarter of wisdom Tree's assets are now in gold, making us the third largest gold manager globally.

We have the broadest and most diverse suite of gold products with the most assets in Europe.

We recently launched a low fee and sustainable gold ETP WG LD to help defend and grow our leadership position.

But we are not stopping there.

We expect later this year to have a regulated gold tokens in the market.

We are committed to competing for the future of gold, which we feel is digital and global.

Our aim is to turn digital gold into currency.

As an asset class gold has unique attributes, making it more than just and investment exposure gold has become an important part of the discussion around the <unk>.

And emerging digital currencies and payments.

Our digital assets initiatives reinforces and expands upon our core business strengths.

From day, one we have endeavored to offer smarter products and asset class exposures with an emphasis on transparency cost efficiency liquidity regulated investor protections and other investor friendly hallmarks.

Better investments and financial experience.

While these are still early days for digital assets.

I am glad we made investments and kicked off our efforts in this space earlier than many.

In addition to the launch of the previously mentioned Bitcoin ETP and our minority investments and security wisdom tree is aggressively pursuing and is well positioned for success and this exciting new area.

In 2020, we set our strategy for these initiatives and we have been designing workflows and engaging productively with regulators as I said I expect 2021 will be the year wisdom tree brings regulated more regulated tokens to market.

For regulatory and competitive reasons I won't be disclosing more at this time, but in the coming months I am hopeful we will have additional filings and news to share at which point, we will comment further.

As Jerry indicated we ended 2020 with momentum, which we are carrying into the new year I expect our digital asset initiatives to only accelerate organic growth and diversify our revenue streams better positioning wisdom tree for the future.

Now I would like to open up the call for questions.

Thank you as a reminder to ask a question you will need to press star one on your telephone.

Question Crystal balance sheet.

Our first question comes from Craig Chic and Harter with Credit Suisse. You May proceed with your question.

Thanks, Good morning, everyone.

So we had a follow up on your digital asset initiatives.

First are your initiatives solely through your interest and see currency or are there. Other efforts that are coming from wisdom tree, excluding the crypto ETF and Europe and I also wanted to see if you could share a little more detail on what type of products. You may launch this year and in terms of is it more sort of compliance and back on.

Office in terms of block chain or are these kind of asset management type products.

Thank you Craig.

So are the breadth is we're fully committed to crypto currencies, we've spoken about the bitcoin.

We are on wisdom tree launching.

<unk> broken, which we referenced in the.

The first part of the <unk>.

Conversation.

Prior we disclosed that we are pursuing treasuries and the dollar I think those are.

The will follow.

That's the the products that we'll be launching in terms of.

Blockchain, we participate through our investments in secure and see where we currently hold a 20% stake.

I think that answers your question Craig.

Yes, and anything else that's good okay.

Okay. Good yeah, I actually had one more follow up.

So it's nice to see the early successes.

On your crypto ETP offered and Europe.

Can you just remind us about the prospects and also the constraints for launching a U S. ETF version.

Sure.

And what.

So for the U S. We obviously are in discussions with regulators to bring it here recently you've seen.

The FTC open up that market a little bit I think there is growing pressure on the SEC to allow investors to participate in.

Really better investor friendly structures, right now they're being forced into.

Really.

Sub standard products, but because thats all of its available.

And that's where the money is flowing there is no timeframe that I can give.

But we'd certainly have constructive.

Dialogues with regulators around the world, including the U S.

Thank you Jonathan.

Thanks, Greg.

Thank you. Our next question comes from Dan Fannon with Jefferies. You May proceed and your question.

Hey, Good morning. This is actually James Steele filling in for Dan and thanks for taking our question. So.

Just firstly and I'm looking at slide.

10 year of the presentation and your comment on an expectation for a model portfolios to provide meaningful flows and 2021.

And just curious if you would characterize the contribution from model portfolios and 2020 as meaningful and then if you could just kind of give some color as to.

Why does set us a lot better going into this year.

Jarrett would you mind answering that question.

Yes sure.

Yes, good question and I'd say for now.

2021, we expect the contribution to be more meaningful but it was also meaningful and 2020 and really this is a bit of the journey. This is something we've been building and positioning for for some time and <unk>.

And having a good model offering is many things you got to have the models.

You have to have.

Some key partnerships to like what we announced last quarter with our partnership with narrow and being on their platform.

And with other providers as well as we also disclosed last quarter with 55, and IP, which makes it easier for advisers to transmission and a tax efficient way into models.

And you also need good proprietary research, it's great to have.

And some high visibility people working with you.

Like Professor Siegel and then you've got to bring it all together as we've done on our website. So really it's a holistic approach. It takes a lot of work a lot of building.

And we've done that but at the same time, we've been building our pipeline and our pipeline is strong and Thats why we expect model flow has to be even a more meaningful driver.

Flows and 2021.

Great. Thank you and then maybe just one for and on the expense guidance and I appreciate that it's obviously, a moving target, but just any help any color on the assumptions that you used to arrive at these this guidance, but help us just in terms of markets and a normalization of the.

Yeah.

Sure So I would say.

And the investments that we're making particularly around discretionary spending.

Really to make investments to help support areas, where we're seeing momentum and client demand. So I'd say, there's probably three main areas first is around products.

And particularly around the Etfs and our digital asset initiatives.

And second is around the client engagement parts, I would say and digital marketing our digital sales related efforts things around our advisor solutions program to help drive sales and then the last I would say is around our platform relationships.

And where we can help drive again more momentum and more growth and those are probably the main areas I would say that that we're making that investment.

Great. Thank you.

Thank you. Our next question comes from Robert Lee with <unk> and then proceed with your question.

Hi, Good morning, this is Jeff Drezner on for Rob Lee.

Thanks for taking my questions I had a question regarding ESG.

Just if you can just point us to some specific ESG products that you have and and also.

On the slides you mentioned that you're ranked number three app share Blackrock.

And Invesco I'm, just curious what's ranking.

That is by is that following a specific.

Accountability.

It or.

And if something like that or is it internal.

Jeremy do you might taking that first question.

Sure.

Have.

We had a two six funds that we consider ESG funds and.

We started in March last year, we have three multi factor ESG funds from U S International and emerging but even before we had launched those.

<unk> been investing and our family called ex state owned starting over six years ago, and we have three funds and that grouping as well on led by excess so we which is our broadly and fund CX SCE. The China version, and then India <unk>. So another three five and six funds and total and that ex day don't family started in 2010.

And with about $900 million and assets today. It sits around $4 9 billion and assets just under 5 billion and led by the broad.

Over 4 billion and and then China, just under 900 million. So we've seen a lot of flow interest its core.

With performance so.

The X date on family wasn't met and it's won awards for being the best in class ESG funds for focusing on performance focusing on the governance that companies are run and the interest of shareholders not just the government. It also had environmental tell us because many stayed on companies are in the energy and commodity sector. So it also seems very high ratings on.

On traditional.

And metrics environment metrics, and we've enhanced that Jerry talked about we have enhanced the ESG credentials with some further screens.

To solidify and make sure all on vector ESG investors are finding these funds appropriately, but we do think that family at those three X day on funds at 5 billion are the leaders and the market and they've done it with performance.

And can I add a couple of things on there too.

This is very much like models, where there's a lot that goes into it and there is many really years of planning and.

So it's not just product it starts with great product and it starts with importantly, great performance, but there's also this holistic package, where again there has to be thought leadership education, and then on top of that.

And you got and also walk the walk. So there are also corporate initiatives that are part of it and you have to be a good corporate citizen.

As we are we became a U N pri's signatory in 2019, we've done.

A bunch of diversity equity and inclusion work inside the firm so really it is a firm wide commitment.

And we've been advancing for many years, and it's culminating now and really a leading offering.

Say one more thing we plan to also and are sort of invest and growth strategy for 2021.

As Amit said part of that is product and in our product launch vision or additional ESG funds as well.

Great. Thank you for taking my questions.

Thank you. Our next question comes from Brennan Hawken with UBS you May proceed with your question.

Good morning, Thank you for taking my questions.

And I had a few on the outlook for expenses and 2021 here.

What is your embedded assumption for travel and entertainment normalization, that's embedded within the discretionary expense outlook.

And is there any kind of occupancy cost savings.

And that's embedded in there by going fully remote which even though you're seeing some expense growth clearly from investing maybe the magnitude of that investment is even greater.

And then it appears on the surface. So just wanted to try to get an understanding of some of that some of those dynamics. Thank you.

Sure Brennan so.

Last one on the occupancy.

No we have not assumed.

Any sort of occupancy cost reductions.

The Big one is our space and New York City, which is up for sublease.

Conservatively think maybe by the end of the year, we will be able to sublease, that's and none of those savings are embedded in the and the guidance yet.

On your first part around sales team.

I'd say that compared to 19.

'twenty one is definitely a lot less we don't we currently expect right now this kind of current environment, where there is very limited travel various levels of lockdowns. So how we're reaching out to our clients is going to be as we're doing now which is more virtual.

So where we're really spending more of that is around the marketing side.

And on digital marketing digital sales, so sort of taking those savings and reinvesting it back into those areas, where we see more efficiency and a greater reach.

And to go out to clients.

Great. Okay, thanks for that clarity and.

And then.

The third party distribution expense ramping in 'twenty. One do you guys expect that thats driven by adding some new platforms or is there something else that's behind some of that growth expectation.

So it's a combo of two things I'd say, yes, it's definitely adding some more platforms offsetting some of that and some renegotiations that we've had with some fees as we.

Consolidated from the platforms that we work with.

But definitely a component of it is new platforms that we're developing relationships, particularly.

Around the European side of the business.

Got it thank you.

Yeah.

Thank you. Our next question comes from Michael Cyprus, with Morgan Stanley and preceding and question.

Hey, good morning, Thanks for taking the question and just wanted to circle back to on or to your comments on the gold token that you alluded to I was just hoping you could kind of explain to us what exactly that means having a like a regulated gold took it and the market and how one might be able to access that.

Customer and maybe you could if you were able to maybe talk about what hurdles you face and bring something like that to market and how you're overcoming that.

Well. Thank you as you said later this year and the second half of the year, we expect regulated gold token to be our first regulated token to come to market.

It'll be accessed through the blockchain ecosystem that is developing there are certain exchanges that exist currently.

For digital assets I think will be well received when we do launch.

There are some regulatory hurdles that we have to do.

Pass through but we're well along our way and see no.

Stumbling blocks that you can't share amount.

And so we're very excited about what will be coming out and I think the most exciting thing about what we're doing and the digital wrap of which more broadly feels to me like it can be the wrap of the future.

Is the enhanced functionality and.

User experience that we expect to come from this new technology.

Great. Thanks for that channel and maybe just as a follow up on the day.

Double and Triple Levered ETF products that you have and Europe I was just hoping you could talk a little bit about how you think about the growth of that category broadly levered ETF that is and what sort of growth rate would you think it should grow out over the next three five years as you kind of look forward and and what your view of the key drivers of the growth of that category.

Ari.

Jared do you want to start on that.

Sure.

We're one of the things we're doing with this short and leverage Sweden is as.

And is repositioning them, a little bit and internally, we are now referring to them as more as tactical funds, which is really really what they are and what we've done is.

Really through 2020 with all the volatility.

On those products, where battle tested and we now really feel we've got the strongest.

Volume proved bell.

First and market structures.

And we see the future as growth.

And as more people used tactical funds.

And as part of their strategies.

But again for US it was really first about cleaning up strengthening and having the best in market.

Volatility proved products and from here, we do think there is a growth opportunity as tactical funds get used more in 2021 and beyond.

This is Jonathan I'll add a little bit so we have a huge delta one business around our commodities and.

That's also in our tactical trading so we have a lot of interest we've pulled it all together and really a lot of this is through education. So that people use these products.

Well it has been growing.

Over the last few years.

And by almost.

Three for $500 million a year.

It's hard to predict future growth.

It is the kind of Uh huh.

And <unk> that could catch lightning in a bottle as certain trends.

You can get real.

Returns on certain of these exposures if you get the trends right.

So through education, and better marketing as Jared said, we're really pulled it together so I think it'll be faster growth on a going forward basis and I.

If I could sneak in and just another one here just on this topic and just curious what portion of client portfolios do you see these exposures.

Exposures, representing and and what's the sort of appetite of bringing these products in Europe to the U S and terms of tactical trading strategies, what sort of hurdles would you pace and how would you sort of compare and the opportunity set and the U S versus Europe.

So I'll take that.

First there is no opportunity to bring them into the U S.

The FCC has it allowed anyone else to do it and I'm not expecting them to change their stance on <unk>.

Europe is a smaller market and the United States.

But we are one of the true leaders second or third and in some of the cases, depending on exposure by exposure we're number one.

And I think that.

It's a small overall a small allocation for investors.

And though certain investors tactical traders.

It could be a large.

That is not the norm so for tactical aggressive active traders theyre very very popular and he can play a larger world and your portfolio again education for US is the way we differentiate ourselves.

And.

We're really bullish on it and.

And sort of averaging 95 to 100 basis points on it it's really a.

Attractive economics for the firm.

Great. Thanks, so much.

Thank you. Our next question comes from Ryan Bell with Goldman Sachs. You May proceed and your question.

Good morning, and just wanted to come back to ESG for a second it.

It sounds like the vast majority of your AUM and is sort of.

Emerging market focus within ESG and I was just wondering how youre thinking about.

<unk> market strategies, and whether that will contribute a larger portion to ESG aon and fewer overtime.

Jeremy will you start.

Yeah, and I focus on the X data on just.

To start but that also is in a way that the full package and.

And we don't know and Jarrett Refered to.

For the European and how we added some of the screens that we recently added to the X and they don't tell the entire European product set and those those funds cover sort of global markets from U S European product really.

On a baseline all Europe products, and UCITS form more or less have that type of factor into it. So it's really the whole family.

And.

And when they also have we talk about some of the what I call Mega trend or thematic type exposure and Europe, we have a fund called battery solutions.

And it's been really one of our most successful Washington is up to 400 million or so and sort.

Sure that less than one year of Covid in the market and so it representing broader sort of megatrend and funds and that also is going after sort of the environment and sort of a unique way of being another ESG oriented solution is something we could look at bringing to the U S. At some point.

And but generally we are we are working on that full initiative and we do expect more than just emerging markets for sure.

Thank you Jeremy Jarrett is there anything you'd like to add or are we good.

The only thing I'd.

Throw on top is.

One of the things and the U S.

This is a global concept.

In terms of U S investors and it is really growing now faster, but we're behind where Europe is.

So one of the tasks that we've undertaken as well and the U S is education, we did some extensive proprietary market research and really the gap between the and Investor and the financial adviser and one of the things that is I think paying dividends for us is helping close that gap.

Between advisors and their clients and helping really connect the dots.

But again this is part of a holistic package.

A big movement, and we believe we're really well positioned to be part of the growth here.

Thanks Chuck.

And that's very helpful color. Thank you and maybe if I can just follow on with one additional question.

So it seems like from your.

On the table that you put on.

SG and AUM exposure.

Invesco and Ishares.

You guys have thought, but there's still a pretty healthy GAAP.

Is there a way you are thinking about trying to bridge that gap and catch ups been putting more on ESG and center model portfolios, which I think generally clients with life, but any sort of strategic thoughts there. Thank you.

Jeremy you want to begin.

And for sure you heard us talk a lot about model initiatives and model growth initiatives and.

We are very actively working on ESG oriented model solutions and we do as Jerry said, we expect model to be a more meaningful contributor to flows and we would expect the same with ESG models.

And.

And I'd say and the other thing here, we've been we've been.

It might be a surprise to some to see how much we have and ESG assets today, we've been relatively quiet about it is again, we've been pursuing and advancing this holistic approach and we now have it all together and.

And we're looking to sort of amplify the message. So I think youll be also hearing more and.

On about ESG from Us and I think thats going to help us close the gap a bit.

And let me just say it terms of models Dx data on has tremendous momentum accelerating momentum.

And it's very appropriate for that to be included and third party models and that might be a way for us to narrow the gap with invesco and <unk>.

Ishares. Thank you for your question and.

That's very helpful color. Thank you.

Thank you and your next question comes from Keith also with Northcoast Research you May proceed and your question.

Good morning, John maybe I heard this from ramp I think I heard you say that you guys are pursuing a low cost ETF for Golar and maybe go a token.

And I guess my question and happy to be around is there a risk of cannibalizing your existing gold Etfs and they go out of our lower cost product.

So.

We have a.

Very.

Broad <unk> suite of funds as we said we have the most assets we have a number of.

And we really have to both the products and the market, we tried to differentiate where we can.

So our original low fee fund, which is a 15 basis point Swiss Baltic Gold Inc.

Is.

At 15 basis points as low as anything in Europe. We most recently this past quarter lifted London bolted low fee gold at <unk>.

15 basis points also Wgla I think both of those.

Position us well to participate in.

Future flow.

Those were very <unk>.

Interested and also maintaining the.

And the balance with strong economics are so.

So it's really a balance for us.

And the cannibalization.

Index.

Sponsor launches that are not so.

And we might as well participate in the drive for lower B.

Goal. So it is not really a concern that we're going to cannibalize ourselves more.

Look the gold already exist in the market.

And then if I could if I could add to that and just a short thing gold when we looked at 2020.

And also other commodities, but it really dampen the volatility and our flows.

In 2021.

And with inflation and the forecast, it's really got a different look too and it positions us for growth as we expect growth and the asset class and then as Jonathan said, our bold offering is well positioned we have a suite of a lot of different products, serving different clients at different price points, but with 26% of our global assets and.

And gold what's good for gold is also good for us. So we're excited about gold and 2021.

And as we said earlier, we're playing for the future of gold, which we think will be token cocainize gold, where it can really be more than just.

And investment, but it could be used in.

And as a paint for payments transactions and other things.

Great. Thanks, and if I could just change gears onto your cost guidance there discretionary costs.

Brokerage, 20% in 'twenty, one on kind of your guidance I guess as you kind of think about like the payoff period do you think you'll be good enough for that to be offset by increase in revenue. This year or is this really a multi year investment youre looking at.

Yes.

So Keith I would say it depends.

And where we're making these investments where we're seeing momentum and client demand and so what we're trying to do is accelerate that.

So we do expect some some portion or immediate pay off on some of those investments as we hopefully see accelerated growth, where we're seeing and that momentum.

And and others are for the long term as Jonathan mentioned right. The investments, we're making to provide a holistic approach around models around ESG and we think these are longer term long term trend. So it's really a combo of both I'd say long term as well as a pay off on the short term.

Got it and then.

I can squeeze one on and that's one on the comp and benefits your guidance. There what are you assuming for I guess for inflows for your guidance there.

So we don't give guidance on flows.

We published our flows every day every week on our website and so you can track it that way.

I would just say at a very high level. When you think about top the biggest drivers.

Flows revenue earnings.

On a year like today, where this year and 2020, where.

We had relatively flat net inflows for the year you can see we came in on the lower end of the guidance range. So that just kind of gives you.

Some data points of how that could move.

Got it thank you.

Thank you. Our next question comes from Mike Carrier with Bank of America. You May proceed with your question.

Hi, guys. This is Shaun calnan on for Mike Just one question on capital return priorities and the slides and says your number one priority and the Paydown of debt. So can you guys give us a timeline of the potential pay down and then we didn't see any share repurchases and there. So does that mean they are off the table and 2021.

Sure. So when we think about our capital as we've laid out.

And it's pay down our debt that comes due in three years.

We can't prepay. It so we have to wait for that so our goal is to accumulate our cash to pay that down.

And do have the return of capital with through our dividend.

And then we want to make sure we have dry powder. So that we can make the right investments and the business to support the growth and other opportunities that may come around.

We did do a large buyback earlier in 2020, when we did the convert.

So I don't want to say buybacks or other ever off the table, but I would say given the capital priorities I would think.

Accumulating cash paying.

Paying dividends and keeping some dry powder on the main priorities right now.

Okay. Thanks.

Okay.

Thank you and I'm not showing any further questions. At this time I would now like to turn the call back over to Jonathan Steinberg for any further remarks.

So we're very excited about 2021.

We have tremendous momentum quarter January almost $800 million of flows being led by ESG informatics, and we're really bullish on how market sentiment is aligning with our strengths and so we hope 2021 will really be a breakout year for us and we look forward.

And to talking to you next quarter. Thank you for your interest have a great day.

Thank you ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.

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