Q3 2021 Virtus Investment Partners Inc Earnings Call
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[music].
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Good morning, My name is retrained and I'll be your conference operator today I would like to welcome everyone to the Virtus investment partners quarterly conference call the.
A slide presentation for this call is being able in the Investor Relations section of the Virtus website Www Dot dot.
Dot com.
This call is also being recorded and will be available for replay under very test 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 instruction will follow at that time.
I will now turn the conference to your home.
Please go ahead.
Okay.
Thank you Richard 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 third quarter of 2021.
Speakers today are George Aylward, President and CEO of Virtus, and Mike Andresol 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.
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 in the statements.
In addition to results presented on a GAAP basis, we use certain non-GAAP measures to evaluate our financial results.
Our non-GAAP financial measures are not substitutes for GAAP financial results should be read in conjunction with the GAAP results.
<unk> of these non-GAAP financial measures 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 with an overview of the results. We reported this morning before turning it over to Mike to provide more detail.
We delivered very strong financial and operating results for the quarter and although we did have modestly negative net flows attributable to equity mutual funds, where we reported record levels of operating profitability and margin with operating income more than double the prior year period, our highest level of earnings per share as adjusted.
Strong investment performance.
Positive net flows in retail separate accounts, Etfs, and institutional and meaningfully higher return of capital through increases in both share repurchases and our dividend.
We also continue to take actions to enhance the companys strategic and financial positioning.
On October 1st we closed on our acquisition of Westchester Capital management further diversifying our investment offerings with $5 1 billion of differentiated non correlated event driven strategies.
We also remain on track with the approval process to complete our transaction with Stone Harbor investment partners near year end Stone Harbor is $15 billion in emerging markets that multi asset credit and other strategies are highly complementary to our existing fixed income products and well respected among clients and consultants.
In addition, we completed the refinancing of our credit arrangement, providing additional financial flexibility and extend the maturity profile and more attractive borrowing costs.
Turning to a review of the results.
Total assets under management were $177 3 billion down 1% from June 30th due to market performance and modest net outflows over the past year AUM.
<unk> has increased by 52% from the addition of the Agi asset market performance and positive net flows.
Sales of $7 6 billion declined sequentially from $9 6 billion, while redemptions were flat for the period.
The sales decline were primarily due to weakness in equity funds consistent with the shift in investor preferences during the period.
On a year to date basis sales have increased 13% on growth in retail separate accounts open end funds and Etfs.
Net outflows in the third quarter were $1 6 billion as that flows in mutual funds, including $8 $7 billion model, we balance offset organic growth in retail separate accounts Etfs and institutional.
Open end net flows which include the model change were negative due to international and domestic equity.
Retail separate accounts continued to deliver positive net flows with an 8% annualized organic growth rate and positive flows across investment strategies.
Institutional net flows were positive for the fourth consecutive quarter with continued traction in multiple affiliates.
Etfs generated positive net flows for the fifth consecutive quarter.
Organic growth for the trailing 12 month period exceeded 5% with essentially all asset classes generating positive flows.
In terms of the flows we're seeing so far in October many of the third quarter trends have continued including solid momentum in retail separate accounts and Etfs.
In institutional the pipeline is consistent with what we've seen over the past year.
Open end funds areas continue strength in fixed income multi asset and alternatives are being offset by international and domestic equities.
Westchester capital, which generated $2 1 billion of positive net flows in the third quarter prior to the close continues to grow organically in October.
Our profitability for the quarter again reached a new high operating income as adjusted increased by 7% sequentially and more than doubled over the prior year and the related margin of 56% increase from 48, 9% in the prior quarter and by 11 percentage points from the prior year.
Earnings per share as adjusted were $9 71 up 7% sequentially due to higher revenues and stable expenses.
Turning now to capital during the quarter, we increased return of capital to shareholders, reflecting the meaningful growth of free cash flow over the past year.
We repurchased approximately 65000 shares for $20 million up from $7 5 million in the prior quarter and.
And we increased our quarterly common dividend by eight 3% representing the fourth consecutive annual increase.
Our balance sheet remains strong and we ended the quarter in a net cash position as we continue to generate significant.
Cash flow, providing opportunity to continue to invest in the growth of the business and relative to the shareholders with that I'll turn the call over to Mike Mike.
Thank you George good morning, everyone.
Starting with our results on slide seven assets under management.
Yeah.
At September 30th assets under management were $177 3 billion down modestly from $178 6 billion at June 30.
The sequential decrease reflected <unk> 5 billion of market decline and.
<unk> 6 billion of net outflows.
Our assets under management continued to generate strong relative performance across strategies at September 30th approximately 68% of rated fund assets had.
<unk> had four or five stars.
And 85% were in three four or five star funds.
We had 13 funds with AUM of $1 billion or more.
Our rated four or five stars.
Up from eight funds a year ago, representing a diverse set of strategies from five different managers.
In addition to strong fund performance as of September 30th 92% of institutional assets.
And 92% of retail separate account assets were beating their benchmarks on a three year basis.
And 66% of institutional assets.
And 81% of retail separate account assets.
Outperforming their benchmarks over five years.
Also 87% of institutional assets were exceeding the median performance of their peer groups on the same five year basis.
Turning to slide eight asset flows.
After five consecutive quarters of organic growth net outflows turned to modestly negative for the quarter at $6 billion.
Which included $1 7 billion model rebalance.
Net outflows were specific to open end funds as retail separate accounts.
Etfs and institutional all generated positive net flows in the quarter reviewing byproduct for open end funds.
Net outflows were $1 5 billion due to equity strategies with fixed income multi asset and alternatives each delivering positive flows in the quarter.
Within equities, both domestic and international generated net outflows, including the rebalance and international equity.
In retail separate accounts net flows were <unk> 8 billion and continued to be positive across nearly all investment categories with an annualized organic growth rate of more than 8%.
Okay.
Etfs had <unk> 1 billion of positive net flows the fifth consecutive quarter of organic growth.
Institutional net flows of <unk> 1 billion were positive for the fourth consecutive quarter again benefiting from new mandates at multiple affiliates.
By asset class for all products net outflows were primarily due to international equity, which turned negative in the third quarter, most notably in July and August.
Domestic equity global equity and multi asset each continued to generate positive net flows.
Total sales were $7 $6 billion down sequentially from $9 6 billion.
Byproduct fund sales of $3 6 billion compared with $4 7 billion in the second quarter, largely due to lower equity sales consistent with industry trends.
Retail separate account sales were down modestly to $2 billion and institutional sales of $1 8 billion decreased sequentially from $2 3 billion.
Which included the funding of several large new mandates.
Turning to slide nine investment management fees as adjusted of 190 million increased $6 8 million or 4% sequentially.
Collecting 4% growth in average assets.
Performance fees in the quarter of <unk> 6 million compared with <unk> 8 million in the prior quarter.
The average fee rate was 42 basis points down five basis points sequentially.
Excluding performance fees the average fee rate was 41 nine basis points.
And compared with $42 three in the second quarter.
The lower fee rate reflected a higher proportion of retail separate accounts and institutional assets.
Looking ahead, it would be reasonable to assume a fee rate in the range of 41 to 43 basis points.
For the fourth quarter, we would expect to be at the higher end of that range.
Then move to the middle of the range for 2022.
After closing on stone Harbor.
Slide 10 shows the five quarter trend in employment expenses total employment expenses as adjusted of $86 5 million were flat sequentially as higher profit based incentive.
It was offset by lower sales based compensation.
As a percentage of revenue as employment expenses were 39, 7% a decline from 41, 1%.
Due to market driven revenue growth.
We believe that a reasonable range for modeling going forward is 41% to 43% subs.
Subject to variability based on markets and sales.
For the fourth quarter.
We expect to be at the lower end of that range.
Moving to the middle of the range for 2022 upon closing.
Harbor transaction.
Turning to slide 11, other operating expenses as adjusted were $20 2 million up on a sequential basis from $19 9 million.
Which included $8 million of annual grants to the board of directors.
The sequential increase of $1 1 million normalized for the grants.
Reflected growth in the business as well as a continued modest increase in travel and related expenses.
As a percentage of revenues other operating expenses were nine 3% down.
Down both sequentially and from the prior year period, reflecting the leverage ability of the business.
Looking forward, we expect other operating expenses in a range of $22 million to $27 million.
With the fourth quarter at the low end of that range.
Slide 12 illustrates the trend in earnings.
Operating income as adjusted of $110 1 million increased $7 2 million or 7% sequentially due to higher revenues and essentially flat operating expenses.
Notably operating income as adjusted more than doubled from the same period last year due to growth in the business.
Including the addition of the Allianz Gi assets.
The operating margin as adjusted of 56% increased by 170 basis points from 48, 9% in the second quarter.
And it was up 11, three percentage points from 39, 3% in the prior year quarter.
Net income as adjusted of $9 71 per diluted share increased by 64.
Or 7% sequentially.
Due to higher revenues from the increase in average assets under management.
Regarding GAAP results.
Net income per share of $7 36 decreased 6% from $7 86 per share in the second quarter and included the following items.
A $1.36 reduction, reflecting the increase in the fair value of the minority interest liability.
2007 of realized and unrealized losses on investments.
And 21 of acquisition and integration costs.
Slide 13 shows the trend of our capital liquidity and select balance sheet items.
On September 28, we completed the refinancing of our credit agreement with a new $275 million term loan maturing in 2028 and.
And $175 million of revolving credit capacity through 2026.
In addition to increasing the company's financial flexibility and extending the maturity profile.
The refinanced the credit agreement reduces borrowing costs by approximately 65 basis points at current rates.
Working capital was 345 million at September 30 up 51% sequentially due to the net proceeds from the debt refinancing as well as cash generated by the business in excess of return of capital to shareholders.
At September 30, gross debt to EBITDA was <unk>, seven times, which compared with <unk> six times at June 30.
And was down from one times at September 32020 due.
Due to significant growth in operating income over that period.
We generated 170 $17 million of EBITDA in the third quarter.
Up 5% sequentially and 92% above the prior year level as AUM growth from the addition of the Agi assets.
Market appreciation and positive net flows has meaningfully increased quarterly cash flow.
We ended the quarter in a net cash position with cash exceeding gross debt by $162 million.
Then after the quarter, we made a closing payment of $135 million for the acquisition of Westchester capital.
Additional upcoming obligations include a revenue retention payment for Westchester capital that will be paid near year end.
The closing payment for stone Harbor, and the first Allianz Gi revenue participation payments.
During the third quarter, we repurchased 64494 shares of common stock for $20 million.
The prior quarter level of $7 5 million.
We also raised our quarterly common dividend by 83% to $1 50 per share representing the fourth consecutive annual increase.
We continue to take a balanced approach to capital management and were pleased to return meaningfully more capital to shareholders in the third quarter, reflecting the significant growth in free cash flow over the past year.
With that let me turn the call back over to George George Thanks, Mike We will now take your questions. Richard would you open up the lines. Please.
Sure. Thank you as a reminder to ask a question you will need to press star one on your telephone.
If you wish to withdraw your question press the pound key again to ask a question that is part one.
We now have our first question from the line of Michael <unk> from Morgan Stanley. Please ask your question.
Great. Thanks. Good morning, Thanks for taking the question I just wanted to circle back to the model rebalancing the $700 million figure that you had referenced I think in international equities. Just curious if there's any additional color you can share with us around.
That rebalancing any thoughts on any potential risk as we kind of go forward from here and maybe you could just remind us on how much of your AUM sits in our models today and maybe you could also talk a little bit about your broader strategy and initiatives around model portfolios.
Sure and when we use the term model portfolios. We are generally referring to those things that are sort of home office.
Established and decided as opposed to just.
Sure wholesale product so as we sort of indicated in our comments. So the outflows included a model we balance it was the <unk> seven.
Again it was in the equity area, we don't have a lot of of assets in that strategy still left in models.
But periodically what you see over over periods of time Youll see people.
Home office is that they're making decisions to increase allocations to things or decrease allocations.
Things or making different decisions about what types of strategies. They want to use. So generally you will get some lumpiness as it relates to some of the model flows as opposed to the pure wholesale flows. So we did it sort of experienced that in the third quarter again, I think as you've sort of seen in some public commentary about.
National and domestic in the third quarter. So I mean, that's sort of looking at it that way is that the assets that were in that model for a very long period of time.
We've got a reasonable fourth be rebalanced, but we don't have a lot left in.
Those strategies in models.
And then the other thing.
You sort of indicated in our comments.
In total we're really in open end mutual funds.
Were in equity primarily international equity and was mostly really in the month of July and August.
So of the $1 five ish billion of outflows in open end funds only <unk> one of it was in the month of September. So it was really kind of very focused in on that none of us know what the market is going to look like in the rest of the fourth quarter.
But really that July and August improved significantly in September and we're kind of seeing the same kind of run rate so far in the month of October.
Great. Thanks, and then just a follow up question, maybe just on the Westchester deal that had.
Clothes, just an update on how the integration is progressing and how are you thinking about the opportunity to accelerate growth at that property, whether it's around new product introductions and also some distribution synergies going on both sides in terms of distribution relationships in Westchester that can help accelerate growth of your existing products had virtus and vice versa.
To help them grow faster in Westchester as well.
We're very excited to have closed on that transaction is a great firm great strategy great legacy.
Good culture, and they've done an incredible job.
As a smaller boutique they've raised assets really just due to the strength and the quality of their investment process and while they certainly have.
<unk> support in terms of their own marketing and distribution.
We really are going to bring another element to the table for them to allow a product that I would describe is speaking for itself.
Have a lot more voices, telling that story. So I think we look forward to not only sort of amplifying their availability throughout the retail channel I think theres a lot of other opportunities to leverage their strategy, possibly in other product structure. So we.
We closed on October one I think the integration winning so far has gone incredibly well a lot of thought and planning was put into that so we're really now focused on the next step which is how do we maximize their opportunity set and how do we grow them and as I noted in the comments they were positive even pre close and we.
To see organic growth since the close even though it's only been a couple of weeks.
Great and if I could just maybe sneak another one in here just a question on SMA, where you've had a lot of strength and traction on flows I was just hoping you maybe could give us a sense of just what that underlying product looks like that youre selling into the SMA is from a strategy standpoint, what are some of the bigger one.
And what would be the opportunity to bring other products into the SMA wrapper as you kind of look out over the next year or two products, maybe including strategies from stone Harbor, Westchester Agi et cetera, how are you thinking about broadening out the product set within the SMA robber.
Yes, so we really do believe that the retail separate account structure.
<unk> is a great structure for investors, we have been in retail separate accounts actually since our probably our initial.
Creation back in the mid nineties, where we've always been in the retail separate business.
A lot of the growth that we have seen over the last few years has been in more of the equity product.
Either in the quality equity growth equity small cap equity smid cap mid cap.
But we absolutely do have other of our managers and capabilities on the value side, even on the fixed income side available in retail separate accounts. So a lot of a lot of the growth and the continued strength and that has been driven more on the equity side, but we have a large number of other strategies and we continue to see that as an area.
Of growth for us and an area, where we have a lot of experience in <unk>.
Selling that product.
Great. Thank you.
Okay. Thank you.
Yes.
Richard can we take the next question please.
Our next question is from the line of <unk> <unk> from Piper Sandler. Please ask your question.
Hey, Thanks, Good morning, guys just sticking with the.
The SMA business, just noticed the fee rates kind of crept down over the last couple of years. Just wondering if you could talk about the drivers of that trend and how we should think about that kind of moving forward from here.
Sure I mean I think.
Like a lot of active investment strategies, there's always a little bit of pressure on fees most of the strategies that I sort of.
Recited in answer to the previous question are more capacity constrained. So the generally higher fees and as you sort of look at that business is really kind of two components. This is kind of like manager traded or model provided to the intermediary. So we do both.
But if you actually sort of look through the industry trends you've seen much more of a growth in the clinical with the core model only as opposed to the manager traded so we have seen some more of the model one lease coming on as well.
I think that fee rate.
He is going to be moving more by asset levels of market, Mike, Yes, I think thats right. I mean, it's been at 44 45 basis point range over the last.
Four or five quarters.
That level will be dependent on.
Market dynamics.
So I think the current level is an appropriate one as we think about looking forward.
Okay, great. Thanks, and then on the institutional pipeline can you just update you kind of won but not yet funded mandates pipeline and kind of what youre seeing today, where that demand has been concentrated in just a little bit color around that.
Sure I mean, I think in our in our comments, we sort of said the pipeline is generally looking consistent with what we've seen generally spoken about multiple affiliates in multiple strategies, Mike Koehler.
Yes, I think thats right and we talked about it over the entire looking at it over the last year, where we've been positive flows.
In that period of time, any given quarter can be a bit lumpy, but I think as we look out we see.
None.
<unk> not yet funded sort of exceeding what we know on on redemptions, but.
That could.
Be impacted in any given quarter and the strength that we talk about comes from multiple of our affiliates.
The traction that we're seeing is from multiple.
Affiliates, we continue win mandates and be considered for more mandates across affiliates and across strategies. So that gives us.
The optimism that some of the traction we've seen over the last year year and a half can continue but again.
Is a lumpy business in any given quarter can can shift a bit but generally speaking we're about <unk>.
Pleased with that pipeline dynamic right now, yes, the other element and it showed itself last quarter is some of the non U S growth rate. So that we've been focused on trying to grow our client base outside of the U S and several of our affiliates.
We've been very fortunate to be able to be bringing in some of the non U S. Mandates. We continue to see that as an area of growth I think last quarter. When we commented about one of the many things we find attractive about stone Harbor is that will also we think the additive to us in terms of our ability to make our offerings available.
Two non U S clients, where I think we have a much bigger opportunity set because we havent traditionally had all of our managers being represented in the offshore in those market. So very excited about that and see that essentially as a whole is a good growth area.
Great. Thanks, and then I noticed you guys decided not to pay down any debt in the quarter focused capital more towards repurchases and kind of presumably the westchester closing so given.
Given the float and lower debt levels could you give us an update on how youre thinking about capital priorities going forward I know you guys wanted to remain balanced but.
And then kind of along those lines on the M&A front now that you have two of the three deals closed this year.
Brian look like today, how <unk>.
<unk> got on with potential maybe future targets in the market. How are you guys thinking about inorganic growth from here.
Okay to meet this is this is Mike I'll start and.
Address some of the capital components of your question, then turn it over to George.
Touch on.
The M&A conversation.
From a capital standpoint, we were pleased this this quarter at the end of the quarter on September 28 to be in a position to refinance our term loan extend the maturities of bring the borrowing costs down given current LIBOR rates.
<unk> increased the flexibility position us well for the closing payment.
For Westchester and the upcoming obligations.
And I guess in that period.
That we are refinancing we would anticipate paying down debt.
We will continue.
Continue our balanced approach, which we were pleased to pick up the.
Share repurchases this quarter.
Up to $20 million from $7 5 million and increased the dividend so.
Really address returning meaningful levels of capital to shareholders.
We are pleased to also have that.
Our balance sheet and financial flexibility to invest in the business and continue to grow the business. So I don't think I'd read into any.
Longer term shift in our balanced approach to capital management more of a timing in terms of this is the period we refinanced.
Extended the maturity, where the revolver was coming due.
In.
Less than 12 months, so we reset that to be maturing in 2026th the term loan was coming due in less than three years. So we reset that for 2028.
So yes.
None of that impacts the balanced approach that we would expect to continue.
To implement just more in terms of timing with executing that refinancing.
So as George Hill, Yeah, and on the M&A question. So as we always say, we think it's really important that our long term growth strategy and value creation strategy is not dependent on M&A. So we focus on that organic growth and that increase of distribution of existing products and creation of new products.
That being said as you noted we literally have just done three transactions in a 12 month period.
So we are structurally very focused on that activity, we continue to be very active.
Active in that area, we see lots of things.
Again, I think as we've commented before.
For us it would have to be very <unk>.
Strategic fit in either in terms of the product diversification or other strategic elements.
So again I continue to think the activity out in the M&A market.
<unk> continues to be quite robust and that's just not for our sector I think it's for a lot of sectors.
But again, we will only do things that make a lot of sense for us in terms of moving us forward on our growth plans.
Alright, great. Thanks, and then just last one here on the CLO front is there any kind of open warehouses or anything to kind of look out over the next few quarters that you guys are kind of keeping your eye on.
Yes.
That way.
Yes.
Obviously, we've been active.
At our leveraged finance teams in the CLO market.
Both in existing transactions to be in a position to refinance or reset those given the current.
Outlook in the market, we were able to recently extend one of our CLO.
Through a refinancing.
And our team do stay close to the market, it's a product structure and a capability that.
We think is compelling.
And.
We'll stay close to it I think at this time there is nothing specific to report but.
We believe the market characteristics, there are compelling and we'll stay close to it.
We think it is.
Good Houston.
Shareholder capital, we would consider it.
Alright, great. Thanks for taking my questions.
<unk>.
We have a follow up question from Michael Cyprus with Morgan Stanley. Please ask your question.
For taking the follow up just wanted to dig in on a few other points, maybe just starting with just the CLO is you've seen a number of firms across the industry raise new CLO and do some restructurings and it sounds like you guys are doing some on the restructuring side.
<unk>, but just curious whats holding virtus back from participating in new CLO, where we're seeing others across the industry raise a significant amount of capital.
Yes, I think there are two elements to it we've got approximately 11.
Structured products and there are about $4 billion of assets under management in that product category.
And we look at both sides of it one is resetting our refinancing the existing book and we completed one of those actually post the quarter end.
Earlier in October, which extends the maturity and the reinvestment period at site and the team there does stay close to the market I think our last.
New issuance was a little over a year ago and the cadence has been anywhere from 12 to 18 months. So I'd expect we'd stay close to that and again, it's an area that.
We have the capabilities and.
We are certainly.
Willing and demonstrated in the past to support our teams, yes, we think the capital.
As appropriate and the opportunity is meaningful.
Great and then just coming back to capital management theme, we saw that the large dividend increase back in August just hoping you could maybe clarify elaborate a bit more on how you were thinking about what is the right dividend payout ratio for Virtus today, how do you think about that longer term clearly you have the cash flow.
To support a higher dividend payout ratio and so I guess what holds you back.
Yes, well I think you've seen a progression for us on that right. So.
We've had four annual consecutive increases in our dividend.
Had been reflective of underlying growth in the business.
So the substantive change year over year, obviously, the one we recently announced being the most significant really just reflective of.
On EBITDA and cash flow generation that has significantly grown and in some instances almost doubled depending on what periods. You look at so we do think we do think the dividend is important part of our return of capital strategy and the dependability and the reliability of that and expectations of growth in that going forward, but we will.
So balance that with the stock repurchases.
And as you saw in this quarter.
We saw an opportunity to look at how our stock is trading.
We will use them over that free cash flow to buy in the market. So we have done.
That frequently over years, and we will continue to use that as a tool combined with that and we sort of look at the payout ratio relative to peers and again, we think we manage that with growing the business because.
Asked a question about CLO, which takes investments of capital you didn't ask no. One asked about closed end funds. She closed end funds is another good thing. So there is a lot of other areas investing in growth in the business. So we want to balance all of those things because we think in combination of balancing them over a longer period of time as the better is the best way to create value for shareholders.
<unk>.
Great. Thanks, and since you mentioned closed end funds.
I do need to ask just because we are seeing others across the industry, taking on the P&L the issuance costs for closed end funds reopening that marketplace. It's been successful.
Is that something you guys are considering how do you think about that making sense for Virtus and if you were to enter reenter that marketplace with new issuance would you be putting through the issuance costs through the P&L as we've seen with some others.
Well.
I'll speak to the opportunity set and them Mike addressed the accounting side of it but no. We we're a big fan of closed end funds currently have about $11 billion ish of closed end funds across multiple affiliates. We think it is a great structure.
For retail investors and non retail investors in fact as you noted, though it has been gotten has gotten very busy out there a lot of the underwriters are very busy putting out closed end funds. We have several managers with attractive strategies, we've actually developed and actually probably have a filing out there on a farm that we've offered so we're very excited about.
That product structure and Eric.
NASA dialogues with underwriters, but unfortunately, they are also in active dialogue with a lot of other people. So we continue to think Thats, a great opportunity and several of our managers have very attractive strategies, Mike on me and I think just Michael you kind of hit on it the way the accounting works, although in certain instances the.
Closed end fund structures can be seven to 10 years or in certain cases, they can be indefinite life.
Just the accounting requires the charge for restructuring costs to be absorbed in the period that they are issued so far.
Follow that accounting, but the way we look at it it's usually a very compelling use of the capital required to set up one of the vehicles. So.
We will call it out to ensure that.
The investment community is well aware of what that.
Expense and investment went to create which we think is a very good use of shareholder capital.
Great. Thanks, and just one last one if I if I can just coming back to M&A. It sounds like the bar maybe is going higher for you guys. At this point just what could make sense as you kind of look out over the next year or two what sort of gaps or white space remain that could be filled in through M&A. It sounds like it needs to move.
Forward on your growth plans, but maybe you could just elaborate on what that could be.
Yeah, and I don't know whether it was just higher but it may have moved to the right or the left into right. Because we have evolved as a company. So what was <unk>.
Of highest value to us $5 72 to three years ago.
May not be the same thing as it is today.
I think but consistent with what we've always said is we continue to think that.
Adding differentiated.
Investment strategies and firms is a value to us we have a very good coverage on the traditional active management side I think there's great opportunities and more of the non traditional in the less liquid less.
Less correlated strategies so westchester.
We will increase our exposure to non correlated strategies, we continue to think Thats an area for us.
And then just other product structures and I've commented.
Earlier about we continue to think that diversifying our business outside of the U S. In terms of our client base continues to be attractive to us. So we look at all those things are again, so it could be something that's specific to a product capabilities specific to a product capability that is not a daily liquid.
Strategy as.
As well as opportunities non U S.
Anything thats going to help us move our business forward and continue to generate organic growth.
Great. Thanks, so much for taking my questions.
Okay. Thank you. Thank you.
This.
So that's our question and answer session I would now like to turn the conference back over to Mr. <unk>. Please go ahead.
Now I want to thank everyone today for joining us and obviously its certainly encourage you to give US call center to know if you have any other further questions and enjoy the rest of your day.
That concludes today's call. Thank you for participating you may now disconnect.
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Yeah.
Yes.
<unk>.
Yes.
Okay.
Yes.
Okay.
Okay.
Okay.
Okay.
Okay.
Yes.
Okay.
Okay.
Sure.
Yeah.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
Yes.
<unk>.
Okay.
Yes.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
Yes.
Yes.
Yes.
Yes.
Yes.
Okay.
Right.
Yes.
Okay.
[music].
Yes.
Yes.
Okay.
Yes.
Okay.
Okay.
Yes.
Okay.
Yes.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
<unk>.
Yes.
Okay.
Sure.
Yes.
Okay.
Yes.
Sure.
Great.
Yes.
Okay.
Okay.
Yes.
Okay.
Okay.
Yes.
Yes.
<unk>.
Okay.
Okay.
Okay.
Okay.
Okay.
Yes.
Okay.
Yes.
Yes.
Yes.
Okay.
Okay.
Thanks.
Okay.
Yeah.
Okay.
Yes.
Okay.
Yes.
Okay.
Yes.
Okay.
Okay.
Sure.
Okay.
Yeah.
Okay.
Okay.
Yes.
Okay.
Okay.
Okay.
Yes.
Okay.
Sure.
Okay.
Yes.
Okay.
Yes.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
<unk>.
Yes.
Thanks.
Okay.
Okay.
Okay.
Yes.
Okay.
Okay.
Okay.
Yes.
Sure.
Okay.
Okay.
Yes.
Okay.
Okay.
Okay.
Okay.
Yes.
Okay.
Okay.
Okay.
Yes.
Yes.
Yes.
Yes.
Okay.
Yes.
Yes.
Okay.
Yes.
Okay.
Sure.
Yes.
Okay.
Yes.
Okay.
Okay.
Okay.
Thank you.
Yes.
Okay.
Okay.
Okay.
Yes.
Yeah.