Q2 2021 Virtus Investment Partners Inc Earnings Call
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Ladies and gentlemen, todays conference is scheduled to begin shortly please continue to standby and thank you for your patience.
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Good morning, My name is to Wanda and I will be your conference operator today.
I would like to welcome everyone to investing.
And it partners quarterly conference call.
The slide presentation for this call is available and the Investor Relations section of the purchased website Www Dot purchased.
Dot com.
This call is also being recorded and will be available for replay and the purchase website.
At this time all participants are in a listen only mode.
After the Speakers' remarks, there will be a question and answer period and instructions will follow at that time.
I will now turn.
The conference to your host Sean book, You May begin.
Thank you and good morning, everyone that'd be half of Virtus investment partners I would like to welcome you to the discussion of our operating and financial results for the second quarter of 2021.
Today are George Aylward, President and CEO of Virtus, and Mike and Ingersoll Chief Financial Officer following.
Prepared remarks, we will have a Q&A period.
Before we begin I direct your attention to the important disclosures on page 2 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 <unk>.
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.
These risks and uncertainties may cause actual results to differ materially from those discussed and the statements and.
In addition to results presented on a GAAP basis.
We use certain non-GAAP measures to evaluate our financial results.
Following that our non-GAAP financial measures are not substitutes for GAAP financial results and it <unk>.
And be ready in conjunction with the GAAP results reconcile.
Reconciliations of these non-GAAP financial measures.
GAAP measures are included in today's news release and financial supplement which are available on our website.
Now I would like to turn the call over to George George.
Thank you Sean good morning, everyone.
Start today with an overview of the results. We reported this morning and give an update on the West Chester capital management transaction before turning it over to Mike to provide more detail and the quarter.
And then before taking your questions I'll make some comments on our recent announcement of the agreement with Stone Harbor investment partners.
Turning to the performance for the quarter, we continued to deliver very strong results demonstrating the value of our business model and collection of distinctive investment managers.
Second quarter, we reported a significant increase in assets under management.
<unk> consecutive quarter of positive net flows.
And levels of operating profitability and margin.
Our highest level of earnings per share as adjusted.
And cash generation with EBITDA more than double prior year levels.
And consistent return of capital to shareholders and debt reduction.
Our track record of strong growth and profitability is the product of execution on our long term strategy and the actions we've taken to build a differentiated partnership with <unk>.
This offering diverse compelling products and strategies supported by effective distribution and experienced business resources.
Over the past year, we built on that foundation, adding scale and complementary investment capabilities to support continued organic growth, while maintaining a balance sheet that provides flexibility for continued return of capital.
Manager as well as to be strategically opportunistic with inorganic opportunities.
Over the past year, we finalized our partnership with Allianz, Gi, adding significant scale and complementary investment strategies and the U S retail market.
Executed and are completing our transaction with Westchester capital.
Ed and well regarded.
<unk> proven strategies that will meaningfully expand our alternative offerings and announcing an agreement to acquire so and harbor and emerging market debt capabilities and enhancing our non U S institutional opportunities.
Some advisory partners with Hei, he and the additions of boutique affiliates like and F. J Westchester capital and Stone Harbor is lost.
And <unk> of our multifaceted approach to inorganic growth and underscores a key element of our value proposition.
While our long term growth is not dependent on M&A. Our model is designed to allow us to partner with distinctive managers and support growth by offering their strategies through our broad distribution platform and then 2 additional product structures.
Our model is attractive to high quality managers and allows us to partners selectively with distinctive firms from particular investment capabilities.
So turning now to the results.
Total assets under management increased by nearly $10 billion to $178.6 billion at June 30 up 6% sequentially due to market performance and net.
Yesterday.
Over the past year AUM has increased by 65% also from market performance and positive flows as well as the addition of the G I assets.
Sales of $9.6 billion represented our second highest quarter of inflows and sales increased 21% on a year to date basis on growth and.
Flow separate accounts open end funds and Etfs.
For the quarter, we achieved $1.3 billion of positive net flows with contributions from retail separate accounts institutional and Etfs.
Retail separate accounts continued to deliver positive net flows with a double digit organic growth rate and positive flows across investment strategy.
Retail sales.
Institutional net flows were positive for the third consecutive quarter with continued traction and multiple affiliates and both new mandates and existing accounts.
Open end funds had modest net outflows largely due to the domestic equity.
Organic growth for the trailing 12 month period exceeded 7% with essentially.
<unk> product categories, and major asset classes, having generated positive flows.
In terms of the flows we're seeing so far in July.
And while it's still early in the quarter, we have not seen any fundamental change activity levels from the second quarter.
We continue to see some pressure on equity funds, though trends and other strategies, including fixed income remained favorable.
And <unk> profitability for the quarter again reached a new high reflecting the meaningful growth and assets under management and the leverage ability of the model.
Operating income as adjusted increased by 32% sequentially and more than doubled over the prior year and the related margin of 48, 9% increase from $41.6 and the prior quarter and by nearly 15 percentage.
Percentage points from the same period a year ago.
Earnings per share as adjusted for $9.7 up 34% sequentially due due to higher revenues and lower expenses.
Turning now to capital during the quarter, we repurchased or net settled approximately 41000 shares from 11.6 million.
And continue paying down debt.
Our balance sheet remains strong and we again ended the quarter and a net cash position and increased our working capital.
We continue to generate significant cash flow that has meaningfully increased providing flexibility to fund upcoming transaction related payments with existing resources, while continuing to.
And the growth of the business and return capital to shareholders.
Before I turn the call over to Mike for more detail and the results. Let me provide a brief update on our transaction with Westchester capital.
We remain on track with the approval process and anticipating closing the transaction near the end of the quarter.
Westchester continues to perform well.
And with assets under management at June 30, a $5 billion up 9% sequentially from the $4.6 billion and March 31.
The increase was largely driven by $361 million and positive flows representing double digit annualized organic growth.
We look forward to offering there and vet driven strategies, which have traditionally.
<unk> had low correlation to the equity markets through our strong retail distribution to an expanded set of retail investors, particularly given some of the recent volatility we've seen and the equity markets.
We expect the transaction to be immediately accretive to EPS as adjusted we have updated our accretion estimates are approximately 7% based upon second.
Current quarter EPS as adjusted is Westchester capital has more than kept pace with our very strong earnings growth.
With that I'll turn the call over to Mike Mike.
Thank you George good morning, everyone.
Starting with our results on slide 7 assets under management.
At June 30th.
<unk> and our management or $178.6 billion up 6% from $168.9 billion at March 31.
The sequential increase reflected $8.8 billion and market appreciation and $1.3 billion and positive net flows.
AUM remains diversified.
<unk> by product type with.
And with open end funds institutional and retail separate accounts, representing approximately 42%, 26% and 23% of AUM respectively.
In terms of asset classes equity assets were 64% of AUM.
With 3 quarters of that and.
<unk> equity relatively evenly split among large mid and small cap assets.
International and global were 21% of equity assets and.
And specialty was 6%.
Fixed income represented 20% of AUM at June 30.
And multi asset and.
And alternatives were 13% and 3% respectively.
In addition, we had $3.8 billion of other fee, earning assets at June 30, and.
And increase from $3.4 billion at March 31.
Turning to investment performance, we continue to generate strong relative.
Performance across our strategies at.
And at June 30, approximately 62% of rated fund assets at 4 or 5 stars.
And 96% were and 3.4 or 5 star funds.
We currently have 12 funds with AUM of $1 billion or more that are rated 4 or.
From stars representing a diverse set of strategies from 5 different managers.
In addition to strong fund performance as of June 30, and 92% of institutional assets and 100% of retail separate account assets were beating their benchmarks on a 3 year basis.
And 60.
Or 5% of institutional assets and 87% of retail separate account assets.
We are outperforming their benchmarks over 5 years.
Also 86% of institutional assets were exceeding the median performance of their peer groups on the same 5 year basis.
Turning to slide 8 asset flows.
Net inflows of $1.3 billion and the quarter represented a 3.2% annualized organic growth rate.
And this marked the fifth consecutive quarter of positive net flows.
Byproduct net flows are positive and retail separate accounts and.
Institutional and.
And Etfs, while modestly negative and open end funds.
And retail separate accounts net flows continued to be positive across all investment categories.
With an annualized organic growth rate of more than 15%.
Institutional net flows.
Those are positive for the third consecutive quarter.
Benefiting from new mandates at multiple affiliates.
And open end funds most investment categories generated organic growth with modest net outflows driven primarily by small cap and specialty equity.
Bye.
By asset class net flows are positive and equity multi asset and alternatives with fixed income essentially breakeven as positive flows and leveraged finance multi sector and hybrid were offset by investment grade outflows.
This marked the 10th consecutive quarter for net inflows.
And equity strategies.
Total sales for the quarter were $9.6 billion down sequentially from record prior quarter levels.
Byproduct fund sales of $4.7 billion compared with $5.9 billion and the first quarter as lower equity and fixed income fund sales.
Partially offset by increases and multi asset and alternatives.
Retail separate account sales of $2.3 billion were down sequentially from a quarterly high of $2.7 billion.
Institutional sales of $2.3 billion increased 22% sequentially.
Due to the funding of several large new mandates.
Turning to slide 9.
Investment management fees as adjusted of $183.2 million increased $19.3 million or 12% sequentially.
Reflecting the 12%.
We're part of our assets.
Yes.
Performance fees and the quarter were $1.8 million up from <unk> 6 million and the prior quarter.
The average fee rate of an AUM was 42.5 basis points.
Down 6 basis points sequentially.
The sequentially lower fee rate reflect.
<unk> the impact of the additional month of the <unk> assets.
Excluding performance fees, the average fee rate was $42.3 basis points and compared with 43 basis points in the first quarter.
Going forward from modeling purposes, we expect the average quarterly fee rate.
And to be and the range of 42 to 44 basis points.
All else being equal and subject to market variability.
Slide 10 shows the 5 quarter trend and employment expenses.
Total employment.
<unk> expenses as adjusted of $86.5 million decreased 4% sequentially, reflecting the impact of seasonal items and the first quarter.
Excluding those items employment expenses increased by $5.5 million or 7% due to higher profit based incentive compensation.
And.
And the full quarter impact of our new affiliate and FHA.
As a percentage of revenues employment expenses were 41, 1%.
A decline from 48, 3% due to the seasonal items and the first quarter.
Adjusting for the seasonal items employment expenses.
And as a percentage of revenues declined by 220 basis points from.
43, 3% and the first quarter.
Due to market driven revenue growth.
And the full quarter impact of a higher level of unaffiliated sub advised assets.
For the third quarter, we would anticipate.
<unk> and employment expenses as a percentage of revenues will approximate the second quarter level.
Subject to variability based on markets and sales.
Turning to slide 11.
Other operating expenses as adjusted were $19.9 million.
Dollars up on a sequential basis from $17.8 million due to <unk> $8 million of annual grants to the board of directors and growth of the business, including a full quarter with our new affiliate.
While it had a minor impact I would also note there was a modest resumption and travel activity and related expenses.
So still well below pre COVID-19 levels.
We anticipate third quarter other operating expenses as adjusted will be within the 19% to $21 million quarterly range. We previously provided.
Slide 12 illustrates the trend.
Earnings.
Operating income as adjusted of $102.9 million increased $24.9 million or 32% sequentially.
Due to the increase in revenues and lower operating expenses.
Notably operating income as adjusted increased over 150%.
From the second quarter of last year.
The operating margin as adjusted of 48, 9% increased by 730 basis points from 41, 6% and the prior quarter.
Normalizing the first quarter margin for $9.4 million of seasonal employment expenses.
The operating margin increased by 220 basis points.
Net income as adjusted of $9.7 per diluted share increased by $2.29.
Or 34% sequentially, primarily due to increased revenues from the higher average assets and.
Employment expenses.
Regarding GAAP results.
Net income per share of $7.86 increased 73% from $4.54 per share and the first quarter and included the following items a $1 <unk> reduction.
And low reflecting the increase and the fair value of the minority interest liability.
24 of acquisition and integration costs.
And 58 and realized and unrealized gains on investments.
13 shows the trend of our capital liquidity and select balance sheet items.
Working capital was $229 million at June 30, up 9% sequentially due to cash generated by the business in excess of debt repayment and return of capital to shareholders.
At June 30.
Slide gross debt to EBITDA was <unk> 6 times.
Down from <unk> 8 times at March 31.
And from 1.1 times and the prior year as we have both reduced debt and significantly grown operating income.
Gross debt outstanding at June 30 was 194.
$4 million as we repaid $6 million during the quarter.
Over the past year, we have reduced gross debt by $47 million or 19%.
We generated $112 million of EBITDA, and the second quarter up 29% sequentially and more than double the prior.
And as AUM growth from the market.
Positive net flows and the addition of the Agi assets has meaningfully increased quarterly cash flow.
We ended the quarter and a net cash position with cash exceeding gross debt by $82 million.
<unk> during the second quarter, we repurchased 26921 shares of common stock for $7.5 million and net settled an additional 14000 and 439 shares.
For $4.1 million to satisfy employee tax obligations.
Our balance sheet continues to provide flexibility.
And to invest and the business and return capital to shareholders.
And positions us to fund upcoming transaction related cash obligations from available resources.
Over the next 12 months that include the $135 million closing payment and up to an additional $20 million revenue retention payments.
For Westchester capital.
Our closing payment for stone Harbor.
Our first revenue participation payment to agi and other obligations, including the purchase of affiliate Noncontrolling interests.
With that let me turn the call back over to George George.
Thanks.
Yeah.
Before we take your questions I'd like to discuss our recently announced agreement to add stone harbor as and affiliated manager.
So and harbors a premier manager of emerging market debt and multi asset credit strategies with $15.3 billion and assets under management, primarily offered to global institutional clients, including some of.
Mike just the most sophisticated sovereign wealth funds pension plans foundations and endowments.
We are excited to add Sean Harper to our family of affiliated managers.
So and harbor will significantly enhance our fixed income capabilities complementing our offerings from new fleet, and Sykes with well regarded and emerging market debt strategies and have a proven track.
The low through mobile.
And credit cycles, it will broaden our base of clients and channels and geographies that have lots of growth prospects and expand our opportunities in those regions stone harbors distribution professionals and relationships and the non U S institutional market will significantly enhance our overseas resources and capabilities.
In addition, stone Harvey will provide us with a proprietary operating analytical platform that offers and to and investment and risk management technology and can be leveraged by other affiliates.
Sean Harper will operate as an individual boutique retaining autonomy over its investment process and maintaining its independent culture and brand identity.
Under the agreement, we will acquire 100% of stone harbor from the principles. The transaction structure includes an upfront payment as well as potential future earn out payments based upon the growth and the business.
We expect the transaction to be modestly accretive to earnings as adjusted upon closing, which we anticipate will take place near.
And we look forward to providing more details as we get closer to closing.
So with that we'll now take your questions to 1 or can you open up the line. Please.
Thank you.
Ladies and gentlemen to ask a question you will need to press Star then 1 on your telephone.
Towards George your question press the pound.
Year and again Thats 1.
And to ask questions.
Please standby, while we compile the Q&A roster.
Sure.
Our first question comes from the line of Scott from it and Lee with Piper Sandler your.
Your line is open.
Thanks, Good morning, guys Joe.
Just wanted to follow up on.
That last Stone Harbor point, you made George is there any more details that you guys plan on providing on sort of the price of the earn out on stone Stone Harbor.
Yes, I think what we say.
Is we've given the general transaction structure, which is an upfront payment and then potential earnings pay.
Payouts and the future.
And so.
And some way sort of think about structured.
Not too dissimilar with the drivers behind the Agi structure, which is really all about.
Believing in the future growth of our businesses together.
So that is the way the structure is and when we get closer you may see a little additional.
Decision, but thats the way you should be thinking about.
Okay, Great and then.
And on the fee rate.
It seems like the rate declined much less and we are expecting after agi's first quarter of inclusion can you talk about the driver of the resiliency there and then secondly, I appreciate the guidance on 42% to 44 basis.
And from maintenance.
For the remainder of this year it seems like it should increase with with Westchester and stone point. After those close how do we think about the combined effects from those 2 deals on the rate for 2022.
Sure I mean, a couple of thoughts and then Mike will expand upon that so.
And so that fee rate is going to be impacted obviously.
The temporary timing of the agi transaction and their average rate versus ours.
Obviously that was a big driver of the changeover over the prior quarters. We continue to have a variety of different products sold at different rates and redeeming at different rates.
And then when.
You get to the Westchester and as well as ultimately the stone harbor each of them will have their separate impacts.
But there'll be commingled with the other activities that are going on and the business. Mike do you want to go and yes, I think thats right Sidney.
And a 42% to 44 range.
And thank will be impacted.
And total by the addition of either Westchester and Stone Harbor, so certainly each.
The product structure and line items will be impacted.
And it's Alan is.
West Coast predominantly open end funds and.
That will have an impact on net fee rate and stone harbor predominantly.
Institutional, but overall I think that 42 to 44 right.
<unk> holds pretty tight and we are pleased with the continued differential between our sales and redemptions on the fee rate, giving us confidence and that range on the open and side I think the sales were.
Imminently and at about 51, and a half and redemptions were.
Just under <unk>.
<unk>, so about a half a basis point differential and then on the institutional side, we didn't really get into it but.
Sales increased about 22% this quarter and sales came.
36 basis points, where the redemptions were at 27 basis points and included a low fee.
<unk>, so we feel pretty good about the outlook on the fee rate.
And the guidance that we provided.
Okay great.
And around.
And then similarly on the comp ratio and I know you guys have talked about third quarter being roughly in line with the second but.
And at a fair.
Is it fair to think about this as more of a longer term run rate.
Going forward or is there kind of more considerations.
Outside of the third.
Especially after kind of Westchester and stone point close to.
Yes, I mean, the factors that drive it and there's multiple factory right. So the revenue growth factor.
And particularly as equity markets move up.
That has a really big impact on that so you see that as being divided.
Quarter revenue revenue is being impacted by the market's just moving up and up or are they flat and then on the variable side of the comp and a high percentage of our compensation is variable and it will be based upon our profitability.
It's hard to particularly say like a given run rate because it will be highly influenced by those factors.
Divided by but I think Mike has given the indication and.
And I think to Georges point, certainly that ratio will be impacted by factors like the market and like sales levels, which have moved it around a bit and also the level of unaffiliated sub advised assets, which.
And have increased with the addition, and full quarter impact of the Agi assets this quarter.
And looking forward, we will have a westchester coming on and stone harbor coming on will provide additional insight.
On the on that ratio as those transactions.
And has come on we did talk about the accretion of each of those.
<unk> to give you a frame of reference of the impact on the bottom line and as we get closer if there is a impact on the ratio will update you certainly from the third quarter.
All else being equal we think the ratio that came in and the second quarter as appropriate.
Great.
Okay, and then if I could squeeze 1 more and just with the closing of the 2 pending deals expected in the coming months, and then kind of given your pristine balance sheet and and higher run rate on cash flows can you talk about the conversations you're having with with more potential targets and.
And particularly on the larger M&A opportunities that could be more transform.
And if and nature and whats the opportunity set look like today.
Yes, and I always start answering that question by saying our long term growth strategy is not dependent on M&A, but obviously, we've just announced what 3 or 4 and in a short period of time. So we've always had those conversations.
<unk> indicated in the comments.
We are to your point, we have a strong balance sheet, our cash flow as both Mike and I pointed out has significantly increased and expanded allowing us to continue to invest and the growth and the business as well as returning capital to pay down debt and to potentially fund other future.
And inorganic opportunities, we do continue to be involved in multiple conversations and look at those things that are available but for us it has to fit.
Our criteria that makes sense for us so we don't.
Need to buy things focused entirely on short term accretion and it really is going to be focused on.
What is <unk> and.
And additive capability or additive resources or additive market opportunities that will further facilitate continued organic growth coming from the rest of our business. So continuing to see a lot of opportunities out there we do have the ability to be <unk>.
And what is a good fit for us in terms of either a product capability or a business.
And I do agree and believe that they will continue to be more consolidation in the industry. We think we're well positioned as it relates to that.
And given them just the fundamental strength of the business.
In terms of the business fundamentals.
<unk> investment performance and flows and profitability as well as having a nice balance sheet and we'll continue to look at opportunities and other ways to build out towards the future creation of shareholder value.
Okay, great. Thanks for taking my questions.
Thank you.
And of.
Our next question comes from the line of Michael Cyprus with Morgan Stanley. Your line is open.
Great. Thanks, Good morning, George Michael Good morning. Good morning. The question I was just hoping you could talk a little bit about your vision for Virtus over the next 5 years and what what in your view does the Virtus.
<unk> of 2026 look like and and how different Mike outlook from the way Virtus looks today, whether it's you know a number of affiliates types of capabilities.
<unk> global footprint et cetera, and then as you kind of think about the path to getting there what sort of strategies and affiliates do you think we're going to have the biggest impact on the.
The growth of the firm.
Sure No great question, what I would say is the vision. The vision, we have for the future of the business is basically the vision, we've been executing on at least for 13 years and actually I would argue probably 2 years prior to that and that really is to have a.
And differentiated best in class.
Multi boutique model, where we have a collection of some of the best managers of individual capabilities and strategies and that we facilitate.
Their ability to focus on generating great performance.
By supporting them from the business perspective, and then simultaneously, making as many clients and channels open.
And to them. So that's always been the vision for the business over the last many years, we have been building out all aspects of that right. So over the last 12 and 13 years you've seen us.
And building out and further enhancing our retail distribution investing and institutional distribution non U S distribution.
Beneath are also working.
Working on all of our infrastructure and then through a whole series of transactions, you've seen us expanding the the Cape investment capabilities, where at this point and I was kind of argue we pretty much Phil.
Pretty wide spectrum of actively manage traditional asset classes and both.
Equity and fixed.
Both U S non U S.
Et cetera.
And then with Westchester, you're actually adding a little bit more into the alternative strategies. So so the same vision as saying the other pieces that we've commented on that are still areas for us is continuing to.
To grow our non U S footprint.
In terms of our client base. So stone harbor, 1 of the many things and what's attractive about stone Harbor is they do have a very nice.
Presence and client base outside of the U S. We continue to see that as a as a green pasture for some of our strategies.
So a lot of we didn't get into some of our specific mandates that we've been winning over the last few quarters. We've actually started seeing from resources that came actually as part of the original transaction and some other investments. We've made we've already started growing our own business on the non U S side continue to see that as something that is just a high level of.
The opportunity for our existing capabilities and.
And as it relates to other capabilities.
We continue to think there are other asset classes.
May have less correlation or have less liquidity that may be and important part of the building blocks for portfolios. So those could be areas that we continue.
And interesting.
Great. Thanks for that and maybe just building off of your your last point on Stone Harbor with the international presence and you could just expand a little bit more on how you would sort of go to market and and execute on that sort of international sales distribution strategy I imagine the distribution team has kept within.
And stone harbor, but how do you sort of work with that incentivize and so forth to drive existing products and new fleet Sykes and other affiliates through that distribution channel that's coming over from stone Harbor on the institutional side.
Globally, yeah, well be.
And that and then giving specific to the zone.
So and hardware piece of it but we have non U S resources that are supportive of multiple affiliates and the non U S market that is the opportunity for us to add to their existing resources and facilitate.
Our growth and those areas. So you should think of the the non U S opportunity.
<unk> as you know.
<unk> resources can support multiple affiliates not necessarily only 1 affiliate.
And our model is affiliate centric and net each affiliate should really be driving their institutional strategy and growth, but we support that by having resources available to help them either and channels that theyre not going to fully dedicated.
Kate on or in markets, where it makes no sense for each affiliate to have resources. So that is 1 of the things that we've seen and in our growth from our some of our shared resources have been some meaningful wins outside the U S market I would say with stone Harbor. We're looking for the same thing is to try to just take advantage.
Vintage of of resources and footprint and to the extent that we can make that.
Additive for other parts of the business that will absolutely be part of the plan.
Great and just a follow up question on the SMA side of your business you've been having a lot of success there pretty consistently.
I was just hoping you could maybe elaborate on your perspective on how sustainable do you think those flows are coming from from estimates and maybe if you could talk a little bit about which channels. In particular are you seeing greatest strength is that with the wires or is that more <unk> and any sort of color on the product sets as well.
There are.
Around the SMA side, and the strength Youre seeing.
Yeah.
I would say at a high level Nonetheless, Mike.
And to some of it as well.
The SME, we're big believers and SMA as we started talking about it and emphasizing SMA many years ago.
We're very pleased with the continued <unk>.
<unk> in terms of growth both on the sales side as well as and net flow side for the SMA as we continue to think that that is a very important component in the retail market.
And we do see the opportunities not only in the wire house channels, but and our case, we do have a high net worth business.
Success at 1 of our at Kayne Anderson Rudnick, which is also a great area of nice stable ASP.
Assets. So we continue to focus on the area of focus on additional products that will fit very well into the SMA vehicle.
In addition to our open end funds, but we.
And you see that and area of growth yes.
I think just expanding on that I think we've we've seen growth in <unk>.
Investment strategies on the equity side, certainly and different market capitalizations, and both on core growth and value.
And.
We believe that that is an important area of growth across that and.
And in some fixed income.
Opportunity as well as growth equity across several of our affiliates and multiple different product structures.
Great and just maybe if I could sneak in another question just on the institutional.
Maybe you can just give us a little bit of update on the institutional pipeline.
That is looking like today relative to where it has and the past couple of quarters and if you could touch upon some of the traction and activity that youre seeing there and also on the CLO structured products business I know and the path that had been a regular source of inflows obviously, the pandemic I think had impacted that but now.
And with the market recovering, particularly for CLO managers, we've seen that with some others in the space just curious what opportunities might there be for you guys to bring another product to market. Maybe later this year.
Yes, so on the on the institutional.
We're really pleased with the evolution of the institutional business so that has.
Side thing we have been.
Focused on and building out over the past few years and and we've evolved from <unk>.
Sporadic periods of inflows at 1 or 2 affiliates to more consistent ones at multiple affiliates.
You alluded to and our prepared remarks, we continue to see good levels of activity.
And some multiple affiliates with new mandates.
Added to that now that some of those mandates are actually meaningful non U S mandates. So it continues to.
Expand in terms of what that opportunity set is I still think we have much greater opportunities ahead of us, but the trajectory has been very good.
Good and.
And we're pleased with the level of activity. It is by nature, a lumpy business, so you're going to have ins and outs, and particularly and market cycles, where you start having rebalancing and stuff like that we see that as an opportunity.
So 1 of the reasons for our model is if there are rotations.
We're on both sides of the rotation.
And as a growth and value.
We actually have opportunities.
And in those so we feel pretty good about that Mike if you want to add to that and and Clo's, yes no.
You touched on that where we're seeing opportunity with some of our value managers, where perhaps we haven't seen those opportunities at 12 months to 24 months ago.
And Theres traction there.
From the CLO perspective, we continue to.
And.
Look at that market I think we haven't talked about and open and warehouse. So there's nothing imminent.
That product structure, but the fixed income team certainly.
Hi.
And regular issuers and that market when opportunities arise and they do stay close to the market and.
We believe that it's a good use to sponsor and support our managers will certainly and dean.
And that and appropriate use of capital and update us as appropriate but as of now there is nothing imminent.
And the.
Warehouse space, but we do stay close to that market.
Okay.
Great. Thank you.
Thank you.
Thank you.
Yeah.
Our net Sean any further questions and the Q.
This concludes our question and answer.
Imminent and I would now like to turn the call back over to George for closing remark.
Great. Thank you and I and I do want to thank everyone as always for joining us and certainly encourage you to reach out and calls we have any other further additional questions. Thank you very much.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation.
You may now disconnect.
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