Q4 2020 Virtus Investment Partners Inc Earnings Call

Ladies and gentlemen, todays conference is scheduled to begin shortly please continue to standby. Thank you for your patience.

[music].

Good morning, My name is joelle and I'll be a conference operator today.

I'd like to welcome everyone to the Virtus investment partners quarterly conference call.

Slide presentation for this call is available in the Investor Relations section of the Virtus website Www Dot greatest dotcom.

This call is also being recorded and will be available for replay on the Virtus website. At this time all participants are in a listen only mode. After the Speakers' remarks, Joe would be a question and answer period and instructions will follow at that time I will now turn the conference to your house Sean Rourke.

Okay.

Thank you Joelle and good morning, everyone on behalf of Virtus investment partners I would like to welcome you to the discussion of our operating and financial results for the fourth quarter of 2020.

Speakers today are George Aylward, President and CEO of Virtus, and Mike Hangers, All Chief Financial Officer.

Following their prepared remarks, we will have a Q&A period.

Before we begin I direct your attention to the important disclosures on page two of the slide presentation that accompanies this webcast.

Certain matters discussed on this call may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 and.

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 and discussed in our SEC filings.

These risks and uncertainties may cause actual results to differ materially from those discussed in the statements.

In addition to results presented on a GAAP basis, we use certain non-GAAP measures to evaluate our financial results are.

Our non-GAAP financial measures are not substitutes for GAAP financial results and should be read in conjunction with the GAAP results reconciliations.

Reconciliations of these non-GAAP financial measures to the applicable GAAP measures are included in today's news release and financial supplement which are available on our website.

Now I'd like to turn the call over to George George.

Thank you Sean good morning, everyone.

I'll start today by giving an overview of the results. We reported this morning as well as an update on the Allianz Gi partnership which has been finalized before turning it over to Mike to provide more detail on the quarter, then before taking questions I'll make some comments on our announcement yesterday of our agreement with Westchester capital management.

Turning to the results. We are pleased with the continued strong financial and operating performance of the business, which for the quarter included positive net flows representing an annualized organic growth rate of more than 9%, our second highest level of quarterly sales.

Our highest level of AUM revenues and earnings per share continued excellent investment performance and consistent return of capital to shareholders and debt reduction.

We were especially pleased with the trends over the course of 2020, which was a challenging year in many ways. Despite of that we reported record earnings generated positive net flows for the year with an organic growth from rate of nearly 5% and increased sales by more than 60 per cent.

We have reported positive organic growth in for the past five quarters with the favorable trends, reflecting the differentiated nature of our investment strategies strong investment performance and effective distribution.

In 2020, our free cash flow support continued return of capital to shareholders and debt reduction, including the 32 and a half million to repurchase stock representing 3.6, our beginning of period shares increasing the quarterly dividend by 22% and reducing debt by 28 per cent.

At December 31st our cash balance exceeded gross debt by $41 million.

Turning to a review of the results.

Long term assets under management at December 31st reached their highest level, increasing sequentially by nearly 16 billion or <unk> 14 per cent to $130 7 billion as a result of both market appreciation and positive net flows.

Total assets ended weighted $132 2 billion.

Sales momentum continue with $8 6 billion of inflows, representing our second best quarter of sales with significant increases in open end funds retail separate accounts and institutional.

For the quarter, we had $2 6 billion of positive net flows with sequential increases across product categories.

Open end net inflows were <unk> 7 billion, which included positive net flows in both equity and fixed income.

Retail separate accounts continued to deliver consistently positive net flows reaching another high 1.3 billion.

Institutional net flows from <unk> 6 billion, an improvement from the net outflows in the prior quarter, which included one large redemption.

For the year institutional generated 1.5 billion of positive net flows already gimmick growth rate of nearly 5% with contributions from existing mandates and new accounts across multiple affiliates, reflecting continued traction in distribution.

In terms of what we saw in January from flows there was a general continuation of the trends from last year, but we are seeing an increase in demand for our fixed income strategies and we were pleased that mutual fund gross sales in the month of January well higher than any month in 2020.

Our financial results for the quarter reflected positive market returns strong organic growth and ongoing expense discipline.

Operating income as adjusted of $61.9 million and the related margin of 43 per cent increase from $54 1 million or 39, 3%, respectively in the third quarter.

Our earnings per share as adjusted reached its highest level, increasing 15% sequentially to $5 from 15 cents, primarily due to higher revenues.

Turning now to capital approach to capital management remains consistent to invest in the growth of the business returning capital to shareholders and maintain appropriate levels of debt.

During the quarter, we reduced gross debt by 8% and we closed the year in a net cash position.

We also returned capital to shareholders through our common dividend, which we increased as well as with the repurchase of approximately 40000 shares.

Or half a percent of common shares outstanding.

Turning to Allianz G. I R. Agi as we announced yesterday, we have finalized our partnership which adds $29 3 billion of assets under management for pro forma AUM of $161 4 billion at December 31st as well as $3 6 billion of other fee, earning assets.

We're excited to welcome in F. J, a global value equity team to Virtus is a new affiliate and to begin a relationship with Allianz G I, representing their compelling strategies in the U S retail market.

The partnership at scale, Diversifies, our assets with complementary strategies, including multi asset and thematic equity and provides incremental growth opportunities.

We will largely be leveraging our existing strong retail infrastructure, but we are pleased relationship has provided us the opportunity to enhance our business intelligence digital marketing and distribution resources by adding select talented individuals' from agi.

Regarding the financial benefits, we continue to expect accretion to earnings per share as adjusted of more than 30% on an annualized basis 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 December 31st long term assets were 130.7 billion.

14% from 115 billion at September 30th.

The sequential increase reflected 13.4 billion of market appreciation and 2.6 billion of positive net flows.

All asset classes contributed to <unk> growth during the quarter.

Led by domestic and international equity, which increased 18% and.

And 17% respectively.

With fixed income up 2%.

And alternative assets higher by 9%.

Assets continued to be diversified by product type with open end funds institutional and retail separate accounts representing approximately 38%.

31% and 23% of long term AUM, respectively.

In terms of asset classes equity assets represented 73 per cent of long term AUM.

With 78% of that in domestic equity.

At 22% in international.

Fixed income assets as a percentage of total assets declined to 23% due to the rise in equity markets during the period.

Regarding the Allianz Gi partnership.

The assets under management totaled $29 3 billion at December 31st having increased $3 6 billion or 14% from September 30th due to market returns and positive net flows.

As mentioned the partnership includes an additional $3 6 billion of assets for which we do not serve as the investment advisor.

But do provide services for asset based fees.

The average fee rate on these assets is approximately 10 to 12 basis points and will be reported in other income and fees has adjusted.

With the addition of the complementary hei strategies, we've also taken the opportunity to refresh our AUM reporting.

Beginning in the first quarter, we will present, a new asset class category multi asset.

Which is comprised of strategies that include concentrations in at least two asset classes.

In addition liquidity strategies currently reported on a standalone basis will instead be included within the relevant product categories and in the investment grade fixed income asset class.

To further aid in transparency. We are also expanding the asset class subcategories, we provided in the financial supplement.

As an illustration as well as from modeling purposes. We've included a page later in the presentation.

With assets by product and by asset class pro forma for the Allianz Gi partnership.

With relevant fee rates on a combined basis.

Turning to investment performance, we continue to generate strong relative performance across our strategies.

As of December 31st approximately 83% of rated fund assets had four or five stars and 99% were in three four or five star funds.

We currently have nine funds with a U N 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 very strong fund performance, 93% of institutional assets at 100% of retail separate account assets were beating their benchmarks on a three year basis as of December 31st.

And 64 per cent of institutional assets.

And 85 per cent of retail separate account assets were outperforming their benchmarks over five years.

Also 89% of institutional assets were exceeding the median performance of their peer groups on the same five year basis.

I would also note that performance on the L. A S. G. I assets continues to be very strong and on a combined pro forma basis at December 31st.

83% of Morningstar rated a U M would be in four or five star funds the.

The same as we currently have.

And the number of funds with over 1 billion of a U M with four or five stars with.

<unk> increased to 12.

Turning to slide eight asset flows.

Net inflows of $2 6 billion in the quarter represented a 9.2% annualized organic growth rate.

For the full year net flows were positive 5.1 billion.

Our 4.7% organic growth.

In the fourth quarter net flow contributions are diverse by product with net inflows in retail separate accounts open end funds institutional and Etfs.

As well as by asset class with positive net flows in both equity and fixed income, notably this marked the eighth consecutive quarter for net inflows in equity.

Looking at open end funds net flows are positive points 7 billion.

Up from point 4 billion in the third quarter.

By asset class domestic equity open end fund net flows are positive point 9 billion for the quarter.

For the full year, they were 2.6 billion, representing a 15% organic growth rate.

Flows were positive across large mid mid and small cap.

Fixed income open end fund net flows turned positive this quarter at point 1 billion a continued improvement from prior quarters that included elevated bank loan redemptions and the first net flow.

Positive quarter for fixed income funds in three years.

International equity funds had net outflows of point 1 billion.

As positive net flows in developed market strategies were offset by net outflows in emerging markets.

Total sales for the quarter continued to be strong at $8 6 billion up 1 billion or 13% sequentially.

For the full year sales of $32 3 billion were up 60% over the prior year.

Led by growth in open end funds institutional.

At retail separate accounts.

For the quarter byproduct.

<unk> sales of 3.9 billion increased point 2 billion or 5% sequentially.

Due to growth in both equity and fixed income funds, particularly sales of large and small cap domestic equity strategies.

Credit sensitive fixed income.

Institutional sales of 2.3 billion were up 9% sequentially and represented the second highest quarterly level with broad based flows into both existing and new mandates across multiple affiliates.

Retail separate accounts sales of $2 2 billion were up 26% sequentially led by particularly strong growth of small and smid strategies.

Turning to slide nine.

Investment management fees as adjusted of $136 8 million increased $14.5 million or 12% sequentially.

The increase reflected 7% growth in average assets due to market appreciation and positive net flows as.

As well as $3 7 million of performance related fees up from $2 million in the prior quarter.

I would note that for the year, we had $6 8 million of performance related fees, an increase from $2 8 million in the prior year.

Okay.

The average fee rate on long term assets for the quarter was 48.8 basis points up 1.8 basis points sequentially.

With respect to open end funds the fee rate increased to 60.7 basis points from 59.5 in the third quarter.

<unk> 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 63 basis points, while the rate of redemptions.

Was 58 basis points.

For modeling purposes. The schedule. We've included on page 17 of the presentation.

Outlines fee rates byproduct on a pro forma basis.

Net of revenue related adjustments consistent with our disclosure in the financial supplement.

Slide 10 shows the five quarter trend in employment expenses total.

Total employment expenses as adjusted of 73.5 million increased 11% sequentially, largely reflecting higher profit based incentive compensation.

As a percentage of revenues employment expenses were 47.8% relatively unchanged from the third quarter.

Looking ahead for 'twenty and 'twenty, one we believe a reasonable quarterly range for employment expenses as adjusted would be 44% to 46% of revenues as adjusted.

Which is subject to variability based on markets and sales.

As always in the first quarter, we will be above this range due to the seasonally higher levels of payroll taxes and other benefits we incur.

Last year's first quarter employment expense ratio of approximately 52% of revenues as adjusted.

Is reasonable.

Turning to slide 11, other operating expenses as adjusted were $17 1 million up sequentially from $16 3 million largely due to modestly higher professional fees.

The fourth quarter level of other operating expenses continued to reflect the operating environment is travel and related expenses remained muted.

Going forward we.

We believe a reasonable quarterly range of other operating expenses as adjusted would be 19 to 21 million.

In the first quarter, we would expect to be at the lower end of that range.

Due to the current operating environment.

For modeling purposes keep in mind that the second quarter includes the annual equity grants to our board of directors.

Slide 12 illustrates the trend in earnings operating income as adjusted of $61 9 million increased $7 8 million or 14% sequentially due to the increase in revenues, partially offset by the higher employment expenses.

The operating.

Margin as adjusted of 43% increased by 100 basis points from 39, 3% in the prior quarter.

Non controlling interests as adjusted increased by $1 million sequentially to $3 4 million largely due to performance related fees at our majority owned affiliate.

The effective tax rate as adjusted for the quarter was 27% unchanged from the prior quarter.

And we believe that is a reasonable rate going forward all else being equal.

Net income as adjusted of $5.15 per diluted share increased by 66 cents or 15% sequentially, primarily due to higher revenues.

Regarding GAAP results.

Fourth quarter net income per share of $5 40.

Compared with $3 71 per share in the third quarter.

That included the following items $1.96 of realized and unrealized gains on investments at $1 56 reduction, reflecting the increase in the fair value of the minority interest liability.

Slide 13 shows the trend of our capital position and related liquidity metrics.

Working capital was 172 million at December 31st.

Up 8% sequentially as operating earnings more than offset debt repayments and return of capital.

Gross debt outstanding at December 31 was $206 million as we repaid $17 5 million during the quarter.

Over the past year, we have reduced gross debt by $80 million or 28%.

With our strong cash generation, we ended 2020 at a net cash position of $41 million per.

Biding for continued flexibility to invest in the business and return capital to shareholders.

Gross debt to EBITDA was 0.9 times at quarter end down from 1.4 times in the prior year.

Regarding return of capital to shareholders, we repurchased 40076 shares of common stock for $7 5 million, resulting at a 0.5% reduction in common shares outstanding.

With that let me turn the call back over to George George.

Thank you Mike before we take your questions I'd like to comment on our agreement with Westchester Capital management, a premier manager of event driven investment strategies with $4 3 billion in assets at December 31.

Westchester capitalized 30 year track record in merger arbitrage with category, leading investment performance delivering attractive returns across market environments. The firm as a pioneer in this space, having launched the first merger arbitrage fund and 1989.

We are excited to add Westchester capital to our family of affiliated managers, they're non correlated alternative strategies invest in publicly announced event opportunities such as mergers acquisitions takeover spin offs and other corporate rewards.

With the addition of Westchester capital, we would further diversify our investment strategies and nearly double our assets under management in alternative strategies.

Their funds, which are already available across top platforms will become available to a broader retail base through our robust distribution capabilities.

In addition, consistent with our overall product strategy with gesture capital.

Event, driven strategies could be leveraged into other product structures.

Like all our affiliated managers with Scotia capital will continue to operate as an individual boutique retaining autonomy over its investment process and maintaining its independent structure culture and brand identity.

The agreement, we would acquire 100 per cent of the equity interest from the principals and third party investors.

The transaction transaction structure includes an upfront payment as well as potential contingent in future earn out payments based upon the growth of the business.

The closing payment from the transaction is $135 million, which given our balance sheet and strong cash flow can be funded without additional financing. We did speak closing in the second half of this year pending customary fund shareholder approvals.

The structure of the transaction provides for a strong alignment of interest in the form of employment agreements and participation in non profit pool and the principles are reinvesting a significant portion of transaction proceeds into their investment strategies.

We expect the transaction to be immediately accretive to earnings as adjusted by approximately 6% based on run rate earnings on a pro forma basis for the Allianz Gi partnerships.

We look forward to providing more details as we get closer to closing.

The addition of Westchester capitals of boutique affiliates and the partnership with Hei is illustrative of our multifaceted approach to inorganic growth and underscores a key element of our value proposition.

Our long term growth is not dependent on M&A. However, our model allows us to partner with distinctive boutiques and support their growth, but offering their strategies through our broad distribution platform and into additional product structures. Our model also allows us to selectively partner with distinct affirms for particular investment capability will capabilities.

Both of these provide for further diversification of our strategies product lines and clients and gives us potential for greater opportunity to changing market cycles.

With Westchester capital, we added targeted private capability that leverages, our strength as a multi boutique and our value proposition that is attractive to boutique firms that can focus on managing their clients' assets, while getting the benefits of scale distribution and the resources of a larger organization with Allianz G. I, we significantly increased our <unk>.

Kale with compelling and complimentary products and a thoughtfully structured partnership that provides significant financial accretion.

We believe our multifaceted and flexible approach to inorganic growth combined with our ability to generate organic growth as we did in 2020 demonstrates that we are well positioned to execute on our long term growth strategy and create shareholder value with that we'll now take your questions Joelle could you. Please open the lines.

Thank you to ask a question you will need to press star one on your telephone Killik. Joe Your question press the pound key please standby, while we compile the Q&A roster.

Our first question comes from Jeremy Campbell with Barclays. Your line is now open.

Hey, thanks.

George and Mike just one quick clarification on the Agi accretion comment it's the at least 30% would be on this quarter's $5 15 quarterly EPS run rate correct.

Yes, so again, where its at at least 30 and it has taken into account the fourth quarter and our pro forma view of things going forward right Mike.

Yes.

That's correct. It's on this quarter's result.

Perfect and I guess, when we're talking to Agi, George maybe you can comment a little bit about the underlying flow trends there right now and now that the deal is closed how quickly you think the sales force can really kind of get this from their hands and potentially accelerate that flow trend.

Sure and you know on the page that we've included a couple of things I would sort of underscore.

Their products are really good and Mike spoke to some of the specific performance numbers. The other thing that I think it's important to really sort of understand is the complementary nature. So if you. If you look at what the they bring in terms of different strategies. There really are very additive to what we have in in categories of the multi asset.

Some of the sustainability products, there's just a really new edition of very attractive products in the in the update that might provided you can also get an indication that they've continued to grow the assets from both performance as well as continued sales before the changeover to us.

So again these are great products compelling strategies, well marketed well supported and we're excited now that we've been working on the integration with their team, which is great team by the way being prepared to hit the ground running so.

You know I've listened in on multiple video calls as our wholesalers and our national accounts and other individuals are preparing to bring these things to market and as I sort of indicated as well we have had a great opportunity to bring in some additional talented individuals along.

Along with the assets under management. So we're really excited about the opportunity I think the market will tell US you know what what the opportunity will be but I think we've done everything from possibly due to be ready to take advantage of these great products.

And then just looking at your your mosaic as a firm now.

Adding agi and they're adding.

From some interesting kind of non correlated asset classes with the Westchester deal today.

As you kind of look at your product offering and how youre keeping your sales force that kind of hit hit the market over the next year or two is there anything else that you see that would be an element of white space that would need to be shaded in to kind of further complement your suite of products.

Yeah.

Oh, I would underscore where we're going with with Westchester capital right because in previous responses to that question you know I'll generally speak to we feel very good about our coverage of the traditional <unk>.

Asset classes and strategies I think the EG I partnership than fully expanded that to include multi asset hybrids convert convertibles sustainability products and what we've also said is that we thought they were great opportunities for less correlated strategies.

So we were always of the view that the strategy. We were attractive I think some of the recent market volatility underscores the need to have a portion of your portfolio in the less correlated strategies and I think that's one of the places where Westchester capitals approach to investing fits incredibly well. So we're very happy to add that.

Matt to the extension of our products into less correlated strategies continue to see that as an opportunity continue to think that there are other opportunities for us to grow our asset base outside of the U S.

Great. Thanks, a lot guys.

Thank you.

Our next question comes from Amit <unk> with Piper Sandler Your line is now open.

Thanks, Good morning, guys.

Just had a couple of big picture questions, starting with the kind of organic growth outlook for the year now.

Now that we've got a little bit more clarity with the kind of a new administration coming in and kind of a wider vaccine coming maybe midyear. How do you view this environment. How do you what do we kind of revert back to that trend of late 2019 or is there some room for more opportunity you know west with Agi in Westchester here to get continued strong.

Growth from here.

Across the strategy offerings can you maybe touch on some of those different strategies sure sure no. It's great question and you know one of the things we sort of.

Acknowledged to ourselves is since we can't predict the future you know, we sort of diversify to be successful in all environments. So the primary underpinning of our overall strategy has been to have a broad array of distinctive managers that could represent all the building blocks of a well diversified portfolio.

May be in and out of favor in different periods of time.

So that has generally been our approach that as the investor needs and wants and demand changes that we would then have something that would be attractive in those markets. So one of the comments I made earlier.

We're very happy to start seeing.

<unk> over to a rotation into more of our fixed income strategies, which we have great fixed income strategies. The nature of those strategies were less attractive last year than they should've been so we were really happy to sort of see that changeover. So I really do feel well positioned because whether whether the equity markets stay volatile weather theres.

Some kind of a drawdown draw.

I feel we have multiple strategies that could be attractive in each of those environments, which is has we sort of built that out and now with the addition of a non correlated strategy. So again, we've tried to make sure that where we don't live by feast and famine of any one market cycle or any individual strategy that is really the fundamental purpose.

So the diversification of our strategy and why we partner with very different unique differentiated managers for different capabilities.

Great. Thank you and then just one more high level question on technology and kind of how you guys think about leveraging that at firm can you maybe touch on how you look at it.

Both on a firm wide basis on an affiliate level basis, and how do you think you can best be used going forward, maybe through areas that youre not largely in today like model portfolio, folios or or or enhancing the distribution platform.

Sure and EM for technology I'll assume you were also referring to data right. So we sort of.

For US you know one of the good things. Good thing Bad thing was we didn't have a lot of RK technology that was hard to change so we.

We've been able to sort of kind of build out what we think is right for us as a business. We've been growing obviously with a lot of the transactions that we've done. So we will continue to be very focused on a lot of opportunities that we have we you know we have good a good technology, we continue to have opportunities to expand it I think the day decided is really.

Has anything you know we pulled in a lot of data we have a long history of data, particularly on the distribution side, where we have been keeping track of our relationships and information that we've learned over the years. So we continue to see that as a great opportunity to leverage that even further and now you're in the whole digital element.

Where we have the ability to even bring in more data so.

So from the firm wide perspective.

We think there's great opportunities to leverage we think that that in some ways helps level, the playing field against larger competitors right. Because if you have as good or better data or way to utilize that and you know I'd like to thank debt. The success, we've had in retail distribution sort of Testament.

Not only a testament I think to the quality of our wholesalers, but the leadership the strategy as well as the underlying targeting of opportunities, which is really important and then on the other side for the affiliates you know one of the benefits of our model is is making available to affiliates.

Information data or technology that they might not otherwise have so we always do look for those opportunities, where we can bring value to them to help support them in what they find important and helpful. In terms of managing their clients' assets.

Great. Thanks George.

Thank you.

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

Our next question comes from Guy three Ram Krishnan with Bank of America. Your line is now open.

Hi, This is <unk> on behalf of Mike.

Hello, My question Hi.

The question was.

Let's just in investment management.

In terms of your rationale behind the structure of the deal in terms of Michael.

Equity.

Different from the last.

Sure.

Net.

And more broadly.

Mike.

I'd like to leave from equity on the table to have.

Interest aligned over a long period of time.

Wondering how you think about that.

<unk>.

Great.

Yes.

Sure. So from what I would say is every transaction is a little different and you know part of our model is we're flexible in how we partner, we don't want alumina or opportunity set by being pigeonholed into any kind of specific type of a structure.

I do think the structure that we have here is very well aligned.

Because it is not you know.

The element of equity ownership at the affiliate level or not isn't really the only way to have alignment I mean, our structures.

Uncapped earnings opportunities in the province to generate so no matter what in our model even if the equity ownership is more than majority is 100%. There is a significant income participation.

In that so I think this deal is structured very well, it's right for this manager and the objectives that they're looking to achieve it has the right alignment of interest between the leadership and the next generations as well as us. So we'll continue to to sort of be flexible in how we approach again. This is a good example of I think Westchester is.

<unk> is the best in the space that they occupy and for US it's more important to partner with the firm that we think is the right firm for the asset class of the strategy as opposed to any kind of specific structure.

Got it thank you.

Mhm.

Thank you. This concludes our question and answer session I would now like to turn the conference back over to Mr. Edward.

Well it looks like we have a follow up question on the queue.

And my follow up question comes from Jeremy Campbell with Barclays. Your line is now open.

Alright, thanks for the follow up just wanted to get your guys sense of what.

Demand looks like inside your CLO business I mean, everything we look at them a market wide. It's heating up actively so wasn't sure. If you guys had anything in warehouse or if there was anything in the pipe what we should be aware of.

Yeah, Mike do you want to respond to that.

Sure.

Jeremy No we don't have anything in it in the warehouse currently obviously are our teams stay close to the market and evaluate opportunities.

And certainly have seen the market strength that over the last couple of months and.

If there is anything that emerges from.

From the teams on that front, we'll we'll certainly make you all aware of it but nothing to report at this point.

And then is it fair to characterize I guess, you know George you mentioned that debt fixed income inflows from the first time, an alarm diamond we know a lot of that prior headwind was.

From the bank loan strategy, and I think thats, starting to percolate, a little bit more in this kind of rate regime, where were starting to grind higher a little bit what are you guys seeing on the ground and in that type of strategy.

Yeah, No I think you're absolutely right as we speak to the fixed income remember we have multiple strategies in fixed income. The one that you highlighted it really the loans have clearly been out of favor, but over the last few quarters, we've seen an improvement and increasing interest in that space, which again is when I sort of referring to in January as well as with some of our other.

Our strategies are multi sector short term bond fund, which is phenomenal product.

Very happy to see more interest in those types of products again.

Back to you know expectations of interest rates and how these things feel so we've seen that and we've seen some high yield. So it was sort of nice to see.

A continuation of some of the strength that we've seen in some of our equity products. But then also seeing a little bit of a rotation more into some of the other maybe more credit sensitive type of fixed incomes. So I think that is an interesting development and again it'll be interesting to see how that plays out through the rest of the year.

Great. Thanks, a lot guys.

Okay. Thank you.

Thank you. This concludes our question and answer session I would now like to turn the conference back over to Mr. Outward.

Okay, well I just want to thank everyone for joining us today, certainly encourage you to call us if you have any other questions have a nice day. Thank you.

That concludes today's call. Thank you for participating you may now disconnect.

[music].