Q4 2021 Brightsphere Investment Group Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the Bright Spear investment Group earnings conference call and webcast for the fourth quarter of 2021.
Speaker 1: Ladies and gentlemen, thank you for standing by. Welcome to the Brightsphere Investment Group Earnings Conference call and webcast for the fourth quarter of 2021.
During the call all participants will be in a listen only mode.
Speaker 1: During the call, all participants will be in a listen-only mode. After the presentation, we will conduct a question and answer session.
After the presentation, we will conduct a question and answer session.
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Speaker 1: Please note that this call is being recorded today, Thursday, February 3rd, 2022 at 11 a.m. Eastern Time.
Please note that this call is being recorded today Thursday February 3rd 2022 at 11, a M eastern time.
I would now like to turn the meeting over to you at least sugarman.
Speaker 1: I would now like to turn the meeting over to Ellie Sugarman, Head of Corporate Development and Investor Relations. Please go ahead, Ellie.
Corporate development and Investor Relations. Please go ahead aly.
Good morning, and welcome to <unk> conference call to discuss our results for the fourth quarter ended December 31, 2021 before we get started please note that we may make forward looking statements about our business and financial performance.
Speaker 2: Good morning and welcome to Bryce's conference call to discuss our results for the 4th quarter end of December 31st 2021. Before we get started, please note that we may make forward looking statements about our business and financial performance. Each forward looking statement is subject to risks and uncertainties that could cause actual results. Different materially from those projects.
Each forward looking statement is subject to risks and uncertainties that could cause actual results to differ materially from those projected additional information regarding these risks and uncertainties appears in our SEC filings, including the form 8-K filed today containing the earnings release, our 2000, Twenty's Form 10-K , and our Form 10-Q for each.
Speaker 2: Additional information regarding these risks and uncertainties appears in our SEC filings, including the Form 8K filed today containing the earnings release, our 2020 Form 10K, and our Form 10Q for each of the first, second, and third quarters of 2021. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update them as a result of new information or future events.
The first second and third quarters of 2021 any forward looking statements that we make on this call are based on assumptions as of today and we undertake no obligation to update them as a result of new information or future events.
Speaker 2: We may also reference certain non-GAF financial measures. Information about any non-GAF measures referenced, including a reconciliation of those measures to GAF measures, can be found on our website along with the slides that we will use as part of today's discussion. Finally, nothing here in shall be deemed to be an offer or solicitation to buy any investment product.
May also reference certain non-GAAP financial measures information about any non-GAAP measures referenced including a reconciliation of those measures to GAAP measures can be found on our website along with the slides that we will use as part of today's discussion.
Finally, nothing herein shall be deemed to be an offer or solicitation to buy any investment products.
Speaker 3: Stern Rana, our president and chief executive officer, will leave the call. And now, please turn the call over to Stern. Stern? Thank you, Sally. Good.
<unk> Rana, our president and Chief Executive Officer will lead the call and now I'm pleased to turn the call over to Sara Sara.
Thanks Ali.
Good morning, everyone. Thank you all for joining Us Tonight.
Well I'll start off but like five of the presentation deck as usual.
Speaker 3: Well, I'll start off with slide five of the presentation deck as usual.
Over the last few quarters, we completed the divestiture of <unk>.
Speaker 3: Over the last few quarters, we completed the divestiture of six of our seven affiliates.
However, seven affiliates.
Speaker 3: So the fourth quarter of 21 was the first quarter of the company operating as a pure play quite business rather than a multiple teeth business.
The fourth quarter of 'twenty, one was the first quarter of the company operating as a pure play Quant business.
Rather than a multi boutique business and.
Speaker 3: And we're pleased that we had a solid start in this new phase with strong financial results for the quarter.
And we're pleased that we had a solid start in the new PE with strong financial results for the quarter.
We reported Eni per share of 53 cents for.
Speaker 3: We reported E&I for share of 53 cents for 4Q21. Compare the 28 cents for 4Q20.
<unk> through 'twenty one.
Paired with <unk> 28 for <unk> 'twenty.
Speaker 3: and also 28 cents incidentally for 3Q21.
And also 28.
Lee <unk> 'twenty one.
Speaker 3: The increase was primarily driven by strong performance.
The increase was primarily driven by strong performance.
In the fourth quarter of 'twenty, one we also deployed large chunk of our excess capital.
Speaker 3: In the fourth quarter of 21, we also deployed a large chunk of our excess capital. We repurchased 1.1 billion of our shares, reducing our share count by 45%, and also paid down 125 million of retail notes, which will collect and regenerate significant earnings accretion and reduce leverage.
We repurchased $1 1 billion of our shares reducing our share count by 45% and also paid down $125 million of retail notes, which will collectively generate significant earnings accretion and reduce leverage.
Pro forma for the redemption of the retail notes, which happened in January after the quarter end.
Speaker 3: pro forma for the redemption of the retail notes, which happened in January after the quarter end. Our cash balance is $125 million.
Our cash balance is $125 million.
Speaker 3: and will continue deploying capital towards shared repurchases and to support organic growth.
And we will continue to deploy capital towards share repurchases and to support organic growth.
Now turning to the operating highlights for Acadian on slide seven.
Speaker 3: Now turning to the operating highlights for Acadian on slide 7.
Speaker 3: Acadian generated 87.6 million of adjusted EBITDA in 4Q21, compared to 40.4 million in 4Q20, and 49.1 million in 3Q21.
Acadian generated $87 6 million of adjusted EBITDA in <unk> 21, compared to $40 4 million and <unk> 29.
$49 1 million in Q2.
Speaker 3: The increase in EBITDA was mainly driven by strong performance.
The increase in EBITDA was mainly driven by strong performance fee.
Speaker 3: Acadium reported net outflows of 0.8 billion in 4Q21, compared to net outflows of 1.3 billion in 4Q20.
Acadian recorded net outflows of <unk> 8 billion <unk> 21, compared with net outflows of $1 3 billion in <unk> 'twenty.
On a revenue basis. The flows were breakeven for <unk> 21, compared to an annualized revenue impact of minus $6 1 million for <unk> of 2020.
Speaker 3: On a revenue basis, the flows were breakeven in 4Q21, compared to an annualized revenue impact of minus $6.1 million for 4 Q2 020.
Acadian investment performance continued to be excellent and got even stronger in <unk> 'twenty one with.
Speaker 3: Acadian's investment performance continued to be excellent and got even stronger in 4.21, with 82%, 86%, and 90% of strategies by revenue now beating their respective benchmarks over the prior three, five, and 10-year period.
With 82%, 86% and 90% of strategies by revenue now, beating their respective benchmarks over the prior three five and 10 year periods.
Now last quarter, we spent some time diving into Acadian platform a bit more.
Speaker 3: Now last quarter, we spent some time diving into a caden platform a bit more, as laid out on flight 8 to 12 in the step.
As laid out on slide eight through 12 in the deck.
At this time, let me take the opportunity to touch on the long term outlook for our Canadian business and.
Speaker 3: This time, let me take the opportunity to touch on the long-term outlook for Acadian's business and the drivers of growth.
And the drivers of growth.
Speaker 3: So on flight 13, we look at the key secular trends impacting our business.
So on slide 13, we look at the key secular trends impacting our business.
Firstly that continues to be at Lowe's that growth and alternative data available to investors.
Speaker 3: Firstly, the continues to be an explosive growth and alternative data available to investors.
Speaker 3: It includes companies related information, sector trends, macro data, ESG data, unique.
It includes companies related information sector trends macro data ESG data unit.
Processing at all efficiently and extracting useful takeaways from it is getting harder and harder for human analysts.
Speaker 3: processing it all efficiently and extracting useful takeaways from it is getting harder and harder for human animals.
Speaker 3: At the same time, the techniques and technology for making meaning of the data keep getting better and better, including machine learning and artificial intelligence approaches.
At the same time, the techniques and technology for making meaningful the data keep getting better and better and coating machine learning and artificial intelligence approaches.
Speaker 3: And also the scale of investment in technology, data and talent is becoming more and more important to truly make the most use of the signal available in the data.
And also the scale of investment in technology data and talent is becoming more and more important to truly make the most use of the available in the data.
Acadian is a pioneer in quant investing and has been investing heavily in its capabilities by 35 years building a unique combination of data technology and talent.
Speaker 3: Acadian is a pioneer in quant investing and has been investing heavily in its capabilities for 35 years building a unique combination of data technology and talent.
We're seeing a growing demand for uncorrelated strategy and for customized solutions declined objectives, such as ESG our diversification.
Speaker 3: We're seeing a growing demand for uncorrelated strategies and for customized solutions to client objectives, such as ESG or Deversification.
And these type of strategies are particularly suited for big data driven approaches.
Speaker 3: And these types of strategies are particularly suited for big data driven approaches.
Speaker 3: We believe that these long-term trends, position is really well to produce superior alpha for our client and needs the scrolling domain for data-driven strategies.
We believe that these long term trends.
That's really well to produce superior alpha for our clients and.
And meet the growing demand for data driven strategy.
Speaker 3: We are on the cutting edge of quant, and we can apply our edge in adjacent asset classes, such as alternative and new markets, such as China.
We are on the cutting edge of Quant and we can apply our edge in adjacent asset classes, such as alternative and new markets such as China.
Speaker 3: On slide 14, we'll review some specific initiatives that we have underway on these teams.
On Slide 14, we'll review some specific initiatives that we have underway on these themes.
First investors around the globe.
Speaker 3: First, investors around the globe are looking for yield.
Looking for yield, but with downside protection and robust diversification across market environments.
Speaker 3: but with downside protection and robust diversification across market environments.
Speaker 3: And of course, this trend continues to power the growth of private alternatives.
And of course this trend continues to power the growth of private alternatives.
Speaker 3: We have developed two very good solutions to satisfy the commute, which we are very excited.
We have developed two very good solutions to satisfy this debate, which we are very excited about.
Speaker 3: One systematic macro, which is applying our multi-factor model across asset classes, including equity, fixed income, currency, and commodities to generate absolute returns with very high diversification. We've been getting very good traction.
One systematic macro which is applying our multifactor model across asset classes, including equity fixed income currency and commodities to generate absolute returns.
Very high diversification.
We've been getting very good traction from clients for this strategy.
Speaker 3: And two, equity alternative strategies, which is using alternative signals, alternative data, and differentiated portfolio construction techniques to produce uncorrelated returns. We are very happy with the investment.
So equity alternative strategies, which is using alternatives.
Alternative data and differentiated portfolio construction techniques to produce uncovered excess returns.
We are very happy with the investment results were getting here.
And then we're seeing continually increasing demand for ESG focused strategies, which have already exceeded a trillion in.
Speaker 3: And then we are seeing continually increasing demand for ESG-focused strategies, which have already exceeded a trillion dollars in the EU.
AUM.
Speaker 3: where the cadence focused on quantum technology, our advantage in ESG space is that we can quantify the ESG signals and more precisely customize flying portfolios for their ESG value.
With Acadian focused in Quant and technology, our advantage in ESG space is that we can quantify the ESG signals and more precisely customized client portfolios for the ESG values.
Speaker 3: We can implement dynamic programs related to client ESG goals, such as quantifying their carbon exposures and decarbonizing their portfolios and measuring the impact and risk and return of their portfolio.
We can implement dynamic program related declines ESG goals, but just quantifying the carbon exposures and decarbonising that portfolio and measuring the impact on risk and return of their portfolio.
So these sophisticated techniques are ways the periods include methods.
Speaker 3: So these sophisticated techniques are way superior than crude methods, such as excluding or divesting some names or just incorporating ESG considerations qualitatively without explicit measurement of ESG exposure.
Excluding our divested some names are just incorporating ESG considerations qualitatively without explicit measurement of ESG exposures.
Speaker 3: Doing the latter doesn't give you a T of the ESG goals. And clients may be unwittingly sacrificing return or taking on additional risks.
Doing the latter doesn't really achieved the ESG goals and clients, maybe unwittingly sacrificing return or taking on additional risk.
Speaker 3: Working, increasing demand and engagement compliance on ESG theme and expect this to continue for a long time.
We're seeing increasing demand and engagement from clients on the ESG theme and expect this to continue for a long time.
Speaker 3: And then as an example of applying our quant edge in new markets
And then as an example of applying our quant edge in new markets we.
Speaker 3: We've seen it as strategy for China market, which is performing pretty well.
We seeded a strategy for China market, which is performing pretty well.
Speaker 3: China market is large and liquid, but rich in opportunity and inefficiencies since it's retail driven.
China market is large and liquid rich in opportunity and inefficiencies since its retail driven.
So to summarize our growth strategy.
Speaker 3: We will continue investing in our quant capability to remain on the cutting edge, and we will leverage our quant edge to tap into several secular growth areas, such as ESG, absolute return, alternatives, and new markets such as China.
We will continue investing in our quant capability to remain on the cutting edge and we will leverage our quant edge to tap into several secular growth areas, such as ESG absolute return alternatives and new markets such as China.
Now, let me turn the call back to the operator, and we're happy to answer a question for this point.
Speaker 3: Now let me turn the call back to the operator and we're happy to answer questions at this point. Thank you.
Thank you.
Speaker 1: Thank you. At this time, those with questions should lift their phone receiver and press star followed by the number one on their telephone keypad. To cancel a question, please press the number sign. Please hold for a brief moment while we compile the Q&A roster.
Thank you at this time those questions lift their phone receiver and press star followed by the number one on your telephone keypad.
Cancel a question please press the number side.
Please hold for a brief moment, while we compile the Q&A roster.
Our first question is from Kenneth Lee with RBC capital markets. Your line is open.
Speaker 1: Our first question is from Kenneth Lee with RBC Capital Markets. Your line is...
Speaker 4: Hi, thanks for taking my question. I'm wondering if you could just talk a little bit more about how you think about capital allocation as it pertains to what's needed for organic growth and deep capital. Thanks.
Hi, Thanks for taking my question.
Wondering if you could just talk a little bit more about how you think about capital allocation as it pertains, what's needed for organic growth and seed capital. Thanks.
Hi, Ken Thanks.
Speaker 3: Yeah, you know, Bob, we said that we our business throws out a lot of cash.
Yes.
As we've said.
Our business throws out a lot of cash.
Speaker 3: and of course, a good problem to have. At the same time, we think our stock is undervalued and our long-term prospects are really great. So we will probably be using a lot of our cash generation toward repurchases. In terms of organic growth, as I said, our business, we've been investing in our capabilities.
And Thats of course, a good problem to have.
At the same time, where things are.
Our stock is undervalued and our long term prospects are a really great.
So we will probably be using a lot of our cash generation.
Toward repurchases in <unk>.
A organic growth as I said into our business, we've been investing in our capabilities.
For decades.
Speaker 3: And a lot of that investment is already baked into the P&L in terms of the talent that we have, the data that we pay for and have, the technology that we build and continue to invest in. All of that is, a lot of that is expensed into the P&L.
And a lot of that investment is already baked into the P&L in terms of the talent that we have the data that we pay for it.
The technology that we have built.
And continue to invest at all of that is a lot of that is expense into the P&L. So.
Speaker 3: So the incremental need is really mostly leading new strategies for which we have an active program. So as data opportunities come, we will continue to see new strategies.
So the incremental need is really mostly seeding new strategies for which we have an active program.
So as opportunities come we will we will see continue to see new strategies.
Speaker 3: such as the text I described which we see it from time to time. But a bulk of
Adjusted the types I described which we ceded.
From time to time.
But the bulk of.
The cash generation.
Speaker 3: The cash generation really is available for repurchases. So currently our cash balance is about 125 million after having paid the retail notes.
Is available or.
For repurchases.
Currently our cash balance is about $125 million after having paid the retail nodes.
Speaker 3: So we have about that much capacity now for repurchases. And then we'll see how the year progresses in terms of additional cash flow generation.
So we have about that much capacity now.
For repurchases.
Then we will see how the as the year progresses in terms of additional cash flow generation.
Great. That's very helpful and just one follow up question.
Speaker 4: Great, that's very helpful. And just one follow up question. If I may, wonder if you could comment whether you've had any, you know, had any discussions around potential value enhancing transactions in the quarter and perhaps.
If I may I Wonder if you could comment on.
Whether you've had any.
You had any discussions around potential value enhancing transactions in the quarter and perhaps wonder.
Speaker 4: One of you can also frame the likelihood of seeing any kind of potential transaction over the near term. Thanks.
I Wonder if you could just also frame the likelihood of seeing any kind of potential transaction over the near term. Thanks.
Speaker 3: Yes, sure. As we've always said, our objective and our duty remains to maximize your older value. Now, having completed our deaf restitures, we are very well positioned.
Yeah sure you know as we've always said.
Our objective and our duty.
Remains to maximize shareholder value.
Now having completed our divestitures.
We are very well positioned with our unique business and we really believe in our long term growth prospects.
Speaker 3: with our unique business. And we really believe in our long-term growth prospects. And we are very...
We are very.
Speaker 3: optimistic about our future growth. And we generate a lot of cash flow and we can add value to buy back.
Optimistic about our future growth and we generate a lot of cash flow and we can add value through buybacks.
So so.
Very happy continuing on at the same time, if we have a serious proposal that is attractive for our shareholders.
Recognizes the value.
We're very open to it.
It's hard to really peg the timing or anything.
But.
Thing happens, that's that's great for shareholders and we of course have a fiduciary duty.
To make that happen.
Great. Thank you very much.
Our next question is from Robert Lee with <unk>. Your line is open.
Speaker 1: Our next question is from Robert Lee with KVW.
Speaker 5: Great, thanks good morning, CERN, hope all's well.
Great. Thanks, Good morning, CERN hope all is well.
Speaker 5: This is real quickly, because you may be updated on where you are with kind of
Just real quickly could you maybe update us on where you are with kind of.
Corporate overhead holding company expenses I noted.
Speaker 5: corporate overhead holding company expenses, I know him and talked about kind of driving some room to drive those down some more. And maybe it's part of that there. And Avenue here, we're kind of the public company, kind of get to collapse into a KD and I'm not sure, I mean, who knows if a KD imagine wants to run a public company, but
<unk> talked about kind of driving some room to drive those down some more and maybe as part of that is there.
Avenue here, where it kind of a public company kind of gets collapsed into Acadia and I'm not sure I mean, who knows of Acadia imagine wants to run a public company, but.
You've seen some of those into distant past in the industry, but is that something we should be thinking that.
Speaker 5: You know, you've seen some of those in the distant past in the industry, but is that something we should be thinking that ultimately if there is no transaction the public You know the public holding company essentially gets absorbed into the operating business
Ultimately.
If there is no transaction that public.
Public holding company essentially gets absorbed into the operating business.
Yes, Hi, Rob.
Speaker 3: Yeah, you know, that is anyway our plan, you know, that we're not necessarily counting on a transaction, but you know, we're always open to it and you know, given our capabilities are so unique and a business is so well position. That could very well happen. We're a scarce business. By the same time, of course, no, we are we're continuing on the path of continuing.
Our plan.
We're not necessarily counting on that transaction, but we're always open to it given our capabilities are so unique in our business is so well positioned that could very well happen.
We are a scale business, but at the same time of course now we are we're continuing on the path.
Continuing to.
Speaker 3: simplify our business, make things easier. So we are, you know, the PR and the process to more closely integrate.
Simplify our business to make make things easier.
So we are.
We are in a process to more closely integrate.
Speaker 3: our public company functions with the operating business. So in effect, it is what you're describing sort of collapsing is already underway. You know, and of course, we're doing a thoughtfully in terms of making sure that all the work streams are streamlines and it'll take a few quarters. And of course, as that continues on, there are efficiency that we mentioned that there will be realized from.
Our.
Public company functions with the operating business, so and in fact it is.
What you are describing sort of collapsing is already underway.
And of course, what we were doing that thoughtfully and in terms of making sure that all the work streams are streamlined.
And it will take a few quarters and of course as that.
As that continues on.
There are efficiencies that we mentioned that that will be realized.
Some of the simplification.
Speaker 5: Okay, and I assume that's embedded in whatever savings will be there embedded in your guidance on offenses.
Okay, and I assume thats embedded or whatever savings will be there embedded in your guidance on expenses.
With the performance fees I guess does the magnitude of I'm sorry. It took me by surprise I would expect.
Speaker 5: You know, with the performance fees, I guess this the magnitude of, and sorry, to me by surprise, I would expect the, you know, based on estimates out there, you know, if you weren't expecting any of that magnitude, so you give us a little color. It was there like one or two products that drove that or, you know, was that just really be playing this as just a one off? That was this big because I didn't, I know there was some performance fees from a cadian, but I just didn't think there was a potential for that kind of magnitude.
Just on the estimates out there people arent expecting anything of that magnitude. So you give us a little color was there like one or two products that drove that or was that just really be thinking that this is just a one off there was this big because I didn't I know there was some performance fees from Acadian, but I just didn't think there was a potential for that kind of magnitude.
Speaker 3: We've got a strong performance this year and we're very happy with that and came on the back of impressive investment performance as we've been reporting.
Right, Yeah, we got a strong performance fee. This year, we're very happy with that.
It came on the backup impressive investment performance right as we've been reporting.
Speaker 3: You know, our investment performance has been great and in full kill it improved even more. You know, with at least more than 80% of strategies meeting across all time horizons and some of 90% of strategies.
Our investment performance has been great and <unk> improved even more.
We now.
With at least more than 80% of strategy as being across all time horizons.
90% of strategies.
Speaker 3: and some time horizons. So performance fee will largely depend on how the investment performance staff stops.
Some time horizons.
The performance fee will largely depend on how the investment performance stacks up.
Speaker 3: at the end of 22. As we've said, performance fee is generally a 4Q event for us. We have smaller amounts in earlier quarters, but it really gets fully determined in 4Q. So for 22...
At the end of 'twenty two as we have said performance fee is generally.
Our <unk> event for us.
We have smaller amounts in earlier quarters, but it really gets fully determined in fourth Q.
So for 'twenty two.
Probably be lower than 'twenty one.
Speaker 3: but we're hoping for another good performance year and the environment is good. So we'll see where it comes out. It's hard to, hard to peg. But it can't come a wider variety of clients and strategies again, but it just really...
But we're hoping for another good performance a year from now the environment is good.
So, we'll see where it comes out it's hard to hard to peg, but it's not true.
From a wide variety of clients and strategies.
But it just really depends on performance.
Speaker 5: Is there any way of kind of sizing of the $117 billion there's?
Is there any way of kind of sizing of the 117 billion theirs.
Speaker 5: 20 billion of assets that are performance fee eligible or 10 or 50 just trying to get some sense of that potential You know asset-based supporting
$20 billion of assets that are performance fee eligible or 10 or 50, just trying to get some sense of the potential.
Asset based supporting it.
I would say, yes, that's about right.
Speaker 3: I see. Yeah, that's, you know, that's about right. And you know, we try to keep it, you know, less than a quarter or so, but 20, 25% one could say.
Try to keep it.
Less than a quarter, so about 2025% one could say.
Uh huh.
Okay, Great and one last really just kind of a modeling question what.
Speaker 5: Okay, great. And one last really just kind of a modeling question. What, you know, post the tender and everything, what is the, you know, year end kind of actual share count? At that point, I just want to make sure I'm level setting it correctly for, you know,
Post the tender and everything what is the you know year end kind of actual share count at that point, just want to make sure I'm level setting it correctly for.
They will go going forward.
Yeah.
Yes, I guess it will be in the 10-K, but.
Speaker 3: Yeah, I guess not. It will be in the 10K, but it's around, you'll get the exact number in the 10K, but it's around 46 million basic share count at the end of the year.
But it's around there.
You'll get you'll get the exact number in the 10-K, but.
$346 million basic share count.
At the end of the at the end of the year.
Just as a starting point.
Speaker 3: Just never starting points. And of course, we do we purchase this before the 20 million to work. No, maybe we can produce that by four five million.
As we do repurchases if you put the.
From a $20 million towards not maybe we can reduce that by $5 million.
Right Okay.
Speaker 5: Right. Great. Thanks for taking my questions.
Okay.
Great. Thanks for taking my questions.
Thank you.
Our next question is from Michael Cyprus with Morgan Stanley . Your line is open.
Speaker 1: Our next question is from Michael Cypress with Morgan Stanley .
Oh, Hey, thanks for taking the question I was just hoping you could maybe share a little color on how the quant strategies are holding up from a performance standpoint, so far in 2022, just given the volatility in the marketplace. What are you seeing there and then related to that what are you seeing.
Speaker 6: Oh, hey, thanks for taking the question. Just hoping you could maybe share a little color on how the quant strategies are holding up from a performance standpoint so far in 2022, just given the volatility in the marketplace. What are you seeing there? And then related to that, what are you seeing from clients just in terms of demand for these sort of strategies and what is likely here a choppier?
From a client just in terms of demand for these sort of strategies in what is likely here choppy or tape.
Speaker 3: Yeah, I might. Yeah, I guess it's only a month into it. So of course, it's too soon to tell, but thematically, we like this environment. Of course, it is a better environment for performance. Could give me some more normal environment.
Yeah, Hi, Mike, Yes, it's only a month into it so of course, it's too soon to tell.
But thematic Lee.
We like this environment of course, it is a better environment for.
Performance.
It gives me some more normal environment.
Speaker 3: in the sense that the market's more discerning about rewarding different investment factors.
The market's more discerning about rewarding different investment factors.
Speaker 3: rather than what we had for a few years, buying growth factor at any price. So in that sense, we would hope that it's a constructive market to reward good investment process.
Rather than what we had for a few years right buying growth factor at any price.
So in that sense, we would help that.
It's a constructive.
Market to reward.
Good investment process.
Speaker 3: And in terms of client demand, we will see how the market develops and what kind of strategies come in book. We do have a...
And in terms of.
Yes client demand.
We will see.
How the market develops and what kind of strategies.
Come in book, we do have a variety of strategies.
Speaker 3: And as we've said, our low-vol strategies, for example, this is kind of the environment where they are performing again.
As we've said our low vol strategies for example.
Kind of the environment, where they are performing again.
Speaker 3: We always, our low-volved strategies were always outperforming its beta and they were always ahead of the low-volved indices. But in this environment, we are also outperforming the core indices like S&P and MSCI. So that's good to see. But again, it's just a little too soon to tell where we'll see how the marketplace is up.
We are always our low vol strategies, we're always outperforming.
It's data and they were always ahead of the low vol indices, but in this environment. We are also outperforming.
Our indices like S&P and MSCI.
So that's so that's good to see.
But again, it's just a little too soon to tell there.
We'll see how the market plays out.
Great and maybe just circling back to the performance fees in our hearing your earlier commentary, suggesting 22 likely there'll be lower performance fees than that.
Speaker 6: and maybe just circling back to the performance fees.
Speaker 6: you know, hearing your earlier commentary, suggesting 22 likely to be lower on performance fees than 21. But would you have any historical periods you might be able to share with us and just what the performance fees were in 2020, 2019, neither for the fourth quarter or full year, understandably?
In 'twenty, one, but would you have any historical periods, you might be able to share with us and just what the performance fees were in 2000 22019, either for the fourth quarter or full year understandably.
With all the other affiliates you had some moving pieces and some claw backs I think with with Barrow. So just any help there and what change would you say in 'twenty one relative to the performance fee that you guys have put up in prior years just in terms of the business was there just outsized performance over a 12.
Speaker 6: with all the other affiliates, he had some moving pieces and some clawbacks, I think with Barrow. So just any help there. And what change would you say?
Speaker 6: and 21 relative to the performances that you guys have put up in prior years just in terms of the business. Was there just outsized performance over a 12 month period? Was it looking back over a multi-year time frame where these new strategies? Is anything that's different? Because the magnitude of performance fees here that we've seen is not something we've seen at all in bright fear or Oman's history that we can.
Month period, it wasn't looking back over a multi year timeframe, where these new strategies as anything that's different because of the magnitude of performance fees here that we see that's not something that you've seen it all and bright sphere or AUM Ams history that we can tell.
Yes, it certainly it bounces around depending on performance and onshore not been on some of that is linked to one year performance of some of that is linked to other periods, two or three or five year periods.
Speaker 3: Yeah, it certainly bounces around, you know, depending on performance. And, you know, I'm sure enough, you know, some of that is linked to one year performance. And some of that is linked to other periods, you know, two or three or five year periods. And so, you know, on the longer-dated periods, I guess, my-
And so.
On the longer data carriers divestment.
Speaker 3: If you get that kind of a period, then it's high. But it certainly has bounced around in the history. There have been times when the dollar number was similar, on a smaller AOM base, when sort of just the combination of things come together and a lot of strategy that would be foaming. And there are times when only a few strategies are performing. So it's really a good no. The simple thing is that...
If you get that kind of a period.
Then.
It's high but it certainly has bounced around in the history.
There have been times when the number was the dollar number was similar.
Now on a smaller base.
When sort of just a combination of things coming together and a lot of strategies outperforming and there are times when only a few strategies outperforming.
So it's really it gets no.
The simple thing is that we have.
Not really.
Speaker 3: across the board, great investment performance. So when that comes, when that happens, then you get a strong performance.
Across the board Great investment performance.
So when that comes when that happens then you then you get a strong performance.
And I guess, just given that strong performance backdrop that you're articulating do you think this is enough at this point to reverse the flow outflow trajectory that we're seeing and to drive inflows or what do you think needs to happen to really drive and inflect towards a more sustainable flow trajectory.
Speaker 6: And I guess just given that strong performance backdrop that you're articulating, do you think this is enough at this point to reverse the flow, outflow trajectory that we're seeing and to drive inflows? Or what do you think needs to happen to really drive and inflect towards a more sustainable flow trajectory?
Yes.
We don't have like in August when we talked about 21 benign, we're targeting <unk> and <unk>.
Speaker 3: We don't have like, now I guess not, when we talked about 21 and I were talking 1, 2 and 2, 2, that clients were moving out of low ball because...
Clients, who are moving out of no Bob.
Cause.
Speaker 3: just to hide data, just seem to pay off really well for clients. And now that situation has changed. And anyway, we have outflows from mobile then. So we don't have any pressures.
Just the high data.
<unk>.
Pay off really well for clients right now the situation has changed.
And anyway, we had outflows from low model then.
So we don't have any pressures.
Speaker 3: you know like secular pressures like that on the flows per se. But then in 4Q we had a
Like secular pressures like that on the flows.
Let's say.
But then in.
In <unk>, we had.
Speaker 3: We had a client who decided to install their business.
We had a client who decided to in source their business.
Speaker 3: So without that, the flow would have been positive for the forefoot quarter. So there are ideas and critics, lumpy things like that that can happen in institutional business.
So without that.
<unk> would have been positive for the fourth quarter.
So there are idiosyncratic lumpy or things like that that can happen in institutional business.
Speaker 3: But away from that, there isn't any pressure as much. We are getting good sales. But to a question of in terms of getting consistently positive lows and growing lows.
But away from that and that there isn't any pressure as such we get we are getting good sales, but to your question of in terms of getting consistently positive flows and growing flows.
Speaker 3: That would probably happen more from our...
That would probably.
It happened more from art.
Speaker 3: the new strategies that were seeded and that were expected about. Because on our mature strategies, we get good sales. We can also get some, you know, client's to rebalance. And, you know, maybe it's like Breakeel and our modestly positive on average.
The new strategies that were seeded and that we're excited about because I'm a mature strategies. We get good sales. We can also get some clients to rebalance.
And you know, maybe a slight breakeven or modestly positive on average, but the real growth for us.
Speaker 3: but the real growth would probably come from, as I outlined earlier, in terms of the new strategies that are tapping into secular trends. So our multi-asset class strategy that's really getting good traction. We're really well-positioned to provide an ESG solution.
Probably come from as I outlined earlier.
In terms of our.
The new strategies that are that are tapping into.
Secular trends are.
Our multi asset class strategy, Thats really getting good traction.
Really well positioned to provide an ESG ESG solutions.
Speaker 3: to clients, so that we're very excited about our equity alternatives products where we have built up really good performance in markets like China. So those are things that can generate flows on a consistent basis because those are secular growth themes.
So clients so that we're very excited about.
Our equity alternatives products, where we have built up really good performance in markets like China.
Those are the things that can generate.
Flows on a consistent basis.
Because there are those are secular.
Growth themes.
R R.
Speaker 3: most of our business is very strong, but probably modestly positive, as opposed to consistent growth quarter after quarter. For that, we're going to tap into these new.
Our.
Most of our business is very very strong.
But probably modestly.
Positive as opposed to consistent growth quarter after quarter.
We've got we're going to tap into these new claims.
Great. Thanks, so much.
Our next question is from John Dunn with Evercore. Your line is open.
Speaker 1: Our next question is from John Dunn with Evercore. Your line is open.
Speaker 7: Just looking at the newer strategies, is there any difference for the way those gets distributed? And maybe can you talk about demand for them, the institutional channel versus maybe the law management channel?
Right.
Looking at the newer strategies.
Is there any is there any difference there.
Does it get distributed and maybe can you talk about demand for them in the institutional channel versus maybe the wealth management channel.
Yeah.
Yes.
Yes, currently hi, John you're currently all our distribution is institutional.
Speaker 3: Yeah, currently, Johnny, currently all our distribution is institutional. And we certainly do see distribution as an avenue for growth and whenever you find good resources, we want to have them in terms of opening new channels or opening new markets. But it's all institutional, currently. We haven't started.
We certainly do see distribution as.
As an avenue for growth and whenever you find good resources, we want to happen.
Now in terms of opening new channels are opening new markets.
Markets, but it's all institutional.
Currently.
We haven't started out.
Speaker 3: a retail distribution, whether well-tored, when the wire house is.
Our retail distribution.
The router.
No warehouses.
Speaker 3: So, but the new product are essentially the same distribution. Essentially it's more clients, it's clients where we deeply understand what they need and an often in consultation with them. We can provide a customized approach and then it becomes...
Yes.
But the new products are essentially the same distribution essentially it's more clients as clients, where we deeply understand what they need.
And often in consultation with them we can.
Provide a customized approach and then becomes.
Speaker 3: a larger strategy in the making sort of distributed more broadly. But in terms of retail, we don't have currently half plans to invest into retail. If it happens, they would probably be the context of our partnership with the retail organization that could bring a lot of synergies.
Our largest strategy did not make it sort of distribute it.
More broadly.
But in terms of retail we don't currently have plans to.
Invest.
Invest into retail if it happens it would probably be in the context of our.
Our partnership with with a retail organization that could bring a lot of synergies.
So we don't plan to build retail, but now we plan to continue growing more and more into institutional.
Speaker 3: So we don't plan to build retail, but now we plan to continue growing more and more into institutions.
Got it and then maybe just you mentioned.
Speaker 7: out it. And then maybe just you mentioned the client redemption this quarter. Could you maybe size that for us? And then also do you guys see anything kind of Trumpy coming down the pipe in the next couple of quarters?
Client redemption this quarter could you maybe size that for US and then also do you agree.
Guys see anything kind of chunky coming down the pike.
The next couple of quarters.
Okay.
Speaker 3: No, we don't see anything chunky because by definition these things are an idiosyncratic product. And yeah, that was, you know, I guess a billion and a half.
No we don't see anything.
Hunky because by definition these things are.
The ADSL product.
Yeah that was.
I guess 1 billion half.
Speaker 3: roughly. And so, without that, the flows would have been positive. But that could happen any quarter.
Roughly.
So as I said without that the flows would have been.
Positive, but that could happen any quarter.
Got it thanks Darren.
Thank you.
The next question is from Michael Cyprus with Morgan Stanley . Your line is open.
Speaker 1: The next question is from Michael Cypress with Morgan Stanley .
Speaker 6: Thanks for taking the follow up. Just as we think about share buyback potential, can you just remind us how much cash do you like to run with just to run the business and how much you think about investing back into the business to drive growth organically and maybe just kind of update us on some of those seeding initiatives. You certainly had mentioned some of the new products that you've invested in in prior years, but as you kind of look out over the next couple of years, there's how are you thinking about that on a go for it.
Thanks for taking the follow up just as we think about share buyback potential can you just remind us how much cash do you like to run with.
Just to run the business and how much you think about investing back into the business to drive growth organically and may be just kind of update us on some of those ceding initiatives certainly had mentioned some of the new products that you've invested in in prior years, but as you kind of look out over the next couple of years. How are you think.
About that on a go forward.
Yes, I guess, we know we typically.
The cash is always coming in so we know we typically have.
Speaker 3: And the cash is always coming in so we typically have.
Speaker 3: more than 20 million on hand, you know, you have one time when you're using up a lot of cat.
More than $20 million.
Handing out the amount of times when we are using up a lot of cash.
Speaker 3: And in terms of seeding, as I said, a lot of our investment in the data and technology and talent, that's already in the P&L, so just seeding. And we have many seeds already in the works. So it's probably, you know, probably, you know,
And in terms of seating has decided to go a lot of our.
Investment in the data and technology and talent that's already in the P&L, So Jeff Cds.
And we have many things already.
Yes.
In the works.
That's probably.
Probably $10 million to $20 million.
Speaker 3: A year that will be very good for incrementally unseating.
A year that we could put incrementally on seating.
Speaker 3: and in rest we'll probably think about bye-bye.
And Russ will probably.
Think about buybacks.
Speaker 3: So, you know, as I said, maybe 120, 125 million, what we would want to.
So.
As I said, maybe 120 <unk> hundred $25 million.
We would want to.
Set aside.
Speaker 3: for buybacks in the near term and then we see how our cash balance progresses.
For buybacks in the near term and then we see how our.
<unk>.
Cash balance progresses.
Speaker 6: Great, just lastly, if I could just coming back to the expense commentary, I hope you recall there were some plans to drive the corporate overhead costs from like a 20 million run rate to a 10 million key just remind us the timing of that. You know, some of the actions you guys are taking is 10 million still the right end state. Is there potential for that to go even lower?
Great and just lastly, if I could just coming back to the expense commentary. If you recall there were some plans to drive the corporate overhead costs from like $20 million run rate to a $10 million can you just remind us.
The timing of that some of the actions you guys are taking is 10 million still the right end status or potential for that to go even lower.
Yes, I guess I know that's.
Speaker 3: Yeah, I guess you know, that's sort of, you know, a good high level number. As I mentioned earlier, that process is underway in terms of just integrating our processes. So closely, so it was really just essentially.
Sort of a good high level number.
As I mentioned earlier.
That process is underway.
In terms of just integrating our processes.
Mostly though so it's really just.
Essentially one integrated business.
Speaker 3: as opposed to a hold-go and an upcode. And we were being thoughtful about it in terms of making sure there's nothing slip-go-the-cracks. So they'll progress over the next few quarters.
As opposed to a holdco and an outcome.
And.
And we.
Being thoughtful about it in terms of making sure.
There is no nothing slipped through the cracks.
They'll they'll progress over the next few quarters.
Great. Thanks for taking my questions.
This concludes our question and answer session I would like to turn the conference call back over to Suren Rana for any closing remarks.
Speaker 1: Our question and answer session, let's turn the conference call back over to Seren Rana for your closing remarks.
Great. Thank you thank.
Speaker 3: Okay, thank you. Thank you everyone for joining us today. Appreciate that and we're looking forward to engaging with you in the coming quarters.
Thank you everyone for joining us today.
I appreciate that and we look forward to engaging with you.
Quarters.
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