Q4 2021 Pzena Investment Management Inc Earnings Call
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Speaker 1: Hello and welcome to today's Pazina Investment Management Reports results.
Hello, and welcome to today's Pacyna investment management reports results.
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Speaker 1: Hello and welcome to today's Pazina Investment Management Report's results for the fourth quarter of 2021 conference call. My name is Bailey and I will be the operator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star followed by one on your telephone keypad. I would now like to pass the conference over to our host, Jamsika Duran, Chief Financial Officer. Jessica, please go ahead.
Hello, and welcome to today's Casino investment management reports results for the fourth quarter of 2021 Conference call. My name is Bailey and I'll be the operator for today's call.
All lines will be muted during the presentation portion of the cool with an opportunity for questions and answers at the end. If you would like to ask a question. Please press star followed by one on your telephone keypad I would now like to pass the conference.
Two our host Jessica Doran Chief Financial Officer, Jessica. Please go ahead.
Thank you operator, good morning, and thank you for joining us on the casino investment management fourth quarter and full year 2021 earnings call I'm, Jessica Doran Chief Financial Officer with me today is our Chief Executive Officer, and co Chief investment Officer Rich Davina.
Speaker 2: Thank you, operator. Good morning and thank you for joining us on the Pizina Investment Management fourth quarter and full year 2021 earnings call. I'm Jessica Doran, Chief Financial Officer. With me today is our Chief Executive Officer and Co-Chief Investment Officer, Rich Pizina.
Our earnings press release contains the financial tables for the periods, we will be discussing.
Speaker 2: Our earnings press release contains the financial tables for the periods we will be discussing. If you do not have a copy, it can be obtained in the investor relations section on our website at www.pizzina.com. The copy plays of this call will be available for the next two weeks on our website.
If you do not have a copy it can be obtained in the Investor Relations section on our website at Www Dot casino Dot com replays of this call will be available for the next two weeks on our website.
Speaker 2: Before we start, we need to remind you that today's call may contain forward-looking statements and projections. We ask that you refer to our most recent filings with the SEC for important factors that could cause actual results to differ materially from today's comments.
Before we start we need to remind you that today's call may contain forward looking statements and projections. We ask that you refer to our most recent filings with the SEC for important factors that could cause actual results to differ materially from today's comments.
Speaker 2: Please note that we do not undertake to update such information to reflect the impact of circumstances or events going forward.
Please note that we do not undertake to update such information to reflect the impact of circumstances or events going forward.
Speaker 2: In addition, please be advised that due to prohibitions on selective disclosures, we do not, as a matter of policy, disclose material that is not public information on our conference calls.
In addition, please be advised that due to prohibitions on selective disclosures, we do not as a matter of policy disclose material that is not public information on our conference calls.
Speaker 2: Now let me turn the call over to Rich who will discuss our current view of the investing environment. Rich simpson, Young Business Energy Thomson whats the
Now, let me turn the call over to Brett who will discuss our current view of the investing environment.
Okay.
Thanks Jessica.
If a client asked me X 2000 that nine began just after the peak of the global financial crisis.
Speaker 3: If a client asked me as 2009 began, just after the peak of the global financial crisis, if
Speaker 3: what I thought our strategy would earn over the next 13 years. I would have and often did.
I thought our strategy would earn over the next 13 years I would have and often did express that I expected long term returns to be in the low double digits.
Speaker 3: that I expected long-term returns to be in the low double digits.
Speaker 3: And as we sit here today, 13 years later, our large cap, US large cap focused value strategy earned approximately 13 and a half percent per year growth.
And as we sit here today 13 years later, our large cap U S. Large cap focused value strategy earned approximately 13% per year growth.
Speaker 3: So it seems we could fairly state we achieved our expectation.
So it seems we can fairly state we achieved our expectations.
Speaker 3: And yet the post GFC era is known now as the anti-value period.
And yet the post <unk> era is no now as the anti value period.
Speaker 3: period where growth strategies outstripped value strategies by record levels and for a record period of time.
Period, where growth strategies outstripped value strategies by record levels and for a record period of time.
Many have questioned whether value investing even works anymore or whether this time is actually different.
Speaker 3: Many have questioned whether value investing even works anymore, or whether this time is actually different.
I've long been a fan of behavioral economist Daniel Kahneman in eight months Devorski.
Speaker 3: I've long been a fan of behavioral economists, Daniel Kahneman and Amos Diversity.
Speaker 3: In a 1974 paper, they described the human tendency to bias their decisions due to a force they called anchoring.
The 1974 paper they describe the human tendency to bias their decisions due to of course, they called anchoring.
Speaker 3: Kahneman and Tversky found that even arbitrary numbers could lead participants to make incorrect estimates.
Condominium devorski found but even arbitrary numbers could lead participants to make incorrect estimates.
Speaker 3: In one example, participants spun a wheel to select a number between 0 and 100.
And one example, participants spun a wheel to select a number between zero and 100.
Speaker 3: The volunteers were then asked to adjust that number up or down to indicate how many African countries were in the U.S.
Volunteers with announced to adjust that number up or down to indicate how many African countries.
Hi.
Those who spent a high number gave higher estimates while those who spent a low number gave lower Hudson.
Speaker 3: Those who spun a high number gave higher estimates, while those who spun a low number gave lower estimates.
Speaker 3: In each case, the participants were using that initial number from the wheel as their anchor point to base their decision. How does this?
In each case, the participants were using that initial number from the wheel as their anchor point to base their decision.
How does this tendency impact investors.
Speaker 3: investors are confronted with a myriad of investment choices to allocate their assets.
Investors are confronted with a myriad of investment choices to allocate their house.
Always aimed to achieve what they believe is their optimal outcome for the future.
Speaker 3: always aim to achieve what they believe is their optimal outcome for the future.
Speaker 3: And yet investors, just like the participants in the real spinning exercise, are prone to biased decision making due to anchor.
And yet investors just like the participants in the wheel spinning exercise.
Prone to bias decisionmaking due to anchoring.
While our strategies generated 13.5% returns, which is nearly 100 basis points ahead of the Russell 1000 value index. The Russell 1000 growth Index earned just under 19 and a half per cent per year for the same post Dfc period.
Speaker 3: While our strategies generated 13.5% returns, which is nearly 100 basis points ahead of the Russell 1000 value index, the Russell 1000 Growth Index earned just under 19.5% per year for the same post GFC period.
Speaker 3: put in terms of absolute dollars, an extra 600 basis points per year for 13 years, resulted in a growth index portfolio nearly double the size of a portfolio invested in our stock.
But in terms of absolute dollars, an extra 600 basis points per year for 13 years resulted in a growth index portfolio nearly doubled the size of our portfolio invested in our strategies.
Speaker 3: But the zistery, and as the saying goes, past performance does not guarantee future results. Of course, hi.
What does history and that's the saying goes past performance does not guarantee future results.
Of course.
I don't know what the future will bring.
Speaker 3: I do, however, recognize the danger of becoming anchored in the last 13 years.
However, recognize the danger of becoming anchored in the last 13 years estimates to estimate last 13 years to estimate the most likely outcome for the next period.
Speaker 3: to estimate, last 13 years, to estimate the most likely outcome for the next period.
Speaker 3: I also know that the cheapest segment of stocks continues to sell on average for the same multiples of earnings that they have for the last 70 years.
I also know that the cheapest segment of stocks continues to sell on average for the same multiples of earnings that they have for the last 70 years, while the most expensive segment of dogs sells for the highest multiples ever recorded.
Speaker 3: while the most expensive segment of stocks sells for the highest multiples ever recorded.
Speaker 3: I know that the earnings yield on the cheapest stocks averages in the low teens, while expensive stocks offer earnings yields of 2%.
I know that the earnings yield on the cheapest dogs averages in the low teens, while expensive stocks off our earnings yields up 2%.
I know that even in a world of supply chain disruptions disruptive technologies love affair with crypto currency.
Speaker 3: I know that even in a world of supply chain disruptions, disruptive technologies, love affair with crypto currents.
Speaker 3: that buying a portfolio of good businesses, selling for low prices, give investors an outstanding opportunity to earn attractive long-term returns today, as it has consistently in the past.
Like buying a portfolio of good businesses selling for low prices give investors an outstanding opportunity to earn attractive long term returns today.
Has consistently in the past.
Before I turn the call back to Jessica Let me offer a few thoughts about our business.
Speaker 3: Before I turn the call back to Jessica, let me offer a few thoughts about our business.
Speaker 3: As 2021 came to a close, we marked our fifth consecutive year of positive net close. And it was the eighth.
2021 came to a close we marked our fifth consecutive year of positive net flows and it was the eighth out of the last 10 years and a war.
Speaker 3: in a world dominated by record outflows in active management and a challenged investing environment for a deep value strategy.
World dominated by record outflows in active management and a shelf in a challenged investing environment for a deep value strategy.
We're completely proud of this outcome.
Speaker 3: We attribute this record to the reason most of our clients express when they asked why they hired our firm.
We attribute this record took to the reason most of our clients express when they asked why they hired all fun.
Speaker 3: we do not deviate from our deep value strategy that we have successfully executed for over 26 years.
We do not deviate from our deep value strategy that we are successful at successfully executed for over 26 years.
Speaker 3: As of January 1st, we opened an office in Dublin to accommodate the market reality in a post-Brexit world.
As of January 1st we opened an office in Dublin to accommodate the market reality in a post Brexit world.
Speaker 3: Our presence in Dublin will serve as a regulatory gateway to Europe and will enable us to operate without barrier throughout the EU.
Our presence in Dublin will serve as a regulatory gateway to Europe .
Enable us to operate without barrier to go out to eat them.
Last but not least we added eight new partners, bringing our partnership to 63 members are new partners come from our HR research and marketing groups, continuing our tradition of adding partners from every functional area. We then offer.
Speaker 3: Last but not least, we added eight new partners bringing our partnership to 63 members.
Speaker 3: Our new partners come from our HR, research, and marketing groups, continuing our tradition of adding partners from every functional area within our.
Speaker 3: Partnership is a foundational element of our culture, and we believe that connecting our team to our clients' outcomes is a crucial element of our commitment to excellence on behalf of our clients.
Partnership is a pound don't foundational element of our culture, and we believe that connecting our team to our clients' outcomes is a crucial element of our commitment to excellence on behalf of our clients.
Speaker 3: I look forward to answering your questions, and now we'll turn the call back to Jessica.
I look forward to answering your questions and now ill turn the call back to Jessica.
Thank you rich.
We reported diluted earnings of 24 cents per share for the fourth quarter compared to 27 times last quarter and 22 cents per share for the fourth quarter of last year.
Speaker 2: We've reported deluded earnings of 24 cents per share for the fourth quarter compared to 27 cents last quarter and 22 cents per share for the fourth quarter of last year.
Speaker 2: Revenues were $51 million for the quarter and operating income was $26.5 million.
Revenues were $51 million for the quarter and operating income was $26 $5 million.
Our operating margin was 52% this quarter decreasing from 55% last quarter and increasing from 45, 7% in the fourth quarter of last year.
Speaker 2: Our operating margin was 52% this quarter, decreasing from 55% last quarter, and increasing from 45.7% in the fourth quarter last year.
Speaker 2: We reported deluded earnings of $1 per share for the full year of 2021, compared to deluded earnings of $0.52 per share for the full year of 2020.
We reported diluted earnings of one dollar per share for the full year of 2021 compared to diluted earnings of 52 cents per share for the full year of 2020.
Speaker 2: Revenues were $199.3 million for the year and operating income with $105.9 million.
Revenues were $199 3 million for the year and the operating income was $105 9 million.
Speaker 2: This compares to revenue of 138.6 million, an operating income of 55.3 million for the full year of 2020.
This compares to revenue of $138 6 million and operating income of $55 3 million for the full year of 2020.
Our operating margin was 53, 1% for the full year of 2021, increasing from the operating margin of 50 excuse me.
Speaker 2: Our operating margin was 53.1% for the full year of 2021, increasing from the operating margin of 59.9% for the full year of 2020.
39.9% for the full year of 2020.
Taking a closer look at these results assets under management ended the quarter at $52 $5 billion up three 3% from last quarter, which under that $58 billion.
Speaker 2: Taking a closer look at these results, assets under management ended the quarter at $52.5 billion, up 3.3% from last quarter, which ended at $50.8 billion, and up 21.2% from the fourth quarter of last year, which ended at $43.3 billion.
And up 21, 2% from the fourth quarter of last year, which ended at $43 3 billion.
Speaker 2: The increase in assets under management from last quarter was driven by market appreciation, including the impact of foreign exchange of $1.4 billion and that inflows of $0.3 billion. The increase in the fourth quarter of last year reflects $8.4 billion in market appreciation, including the impact of foreign exchange, and that inflows of $0.8 billion.
The increase in assets under management from last quarter was driven by market appreciation, including the impact of foreign exchange of $1 $4 billion and net inflows of $3 billion.
The increase in the fourth quarter of last year reflects $8 $4 billion and market appreciation, including the impact of foreign exchange and net inflows of $8 billion.
At December 31st 2021, our assets under management consisted of $19 $4 billion in separately managed accounts.
Speaker 2: At December 31, 2021, our assets under management consisted of $19.4 billion and separately managed account.
Speaker 2: $30.5 billion in sub-advised accounts, and $2.6 billion in ourrazina fund.
$35 billion in sub advised accounts and $2 $6 billion in Arkadina fun.
Speaker 2: Compared to last quarter, separately managed account assets increased, reflecting $0.3 billion in net inflows, and $0.3 billion in market appreciation and foreign exchange impact.
Compared to last quarter separately managed account assets increased reflecting $3 billion in net inflows and $3 billion in market appreciation and foreign exchange impact.
Speaker 2: Sub-advised account access increased reflecting $1.1 billion in market appreciation for an exchange impact, and $1.1 billion in net inflow.
Sub advised account assets increased reflecting $1 $1 billion in market depreciation and foreign exchange impact and point $1 billion in net inflows.
And that's it then pacyna funds decreased slightly due to point $1 billion in net outflows.
Speaker 2: And assets in Pizina funds decrease slightly due to $1 billion in that outflow.
Speaker 2: average assets under management for the fourth quarter of 2021.
Average assets under management for the fourth quarter of 2021.
Speaker 2: We're $51.5 billion, a decrease of 1.7% from last quarter, and an increase of 36.6% for the fourth quarter of last year.
Were $51 $5 billion, a decrease of one 7% from last quarter and an increase of 36, 6% for the fourth quarter of last year.
Speaker 2: Revenues decreased 1.3% from last quarter and increased 27.9% from the fourth quarter of last year.
Revenues decreased one 3% from last quarter and increased 27, 9% from the fourth quarter of last year.
Speaker 2: He's varying this primarily reflective changes in average assets under management over the respective periods.
These variances primarily reflect the changes in average assets under management over the respective periods.
Our weighted average fee rate was $39 six basis points for the quarter compared to 39.4 basis points last quarter and $42 three basis points for the fourth quarter of last year.
Speaker 2: Our weighted average fee rate was 39.6 basis points for the quarter compared to 39.4 basis points last quarter and 42.3 basis points for the fourth quarter of last year.
Speaker 2: asset mix across our strategies and distribution channels, as well as performance-based fees, are generally the primary contributors to changes in our overall weighted average fee rate.
Asset mix across our strategies and distribution channels.
Well as performance based fees are generally in the primary contributors to changes in our overall weighted average fee rate.
Speaker 2: However, changes in asset levels may also impact our fee rates, as the majority of our separately managed accounts pay off management fees pursuant to a schedule in which the rate we earn on the AUM declines as the amount of AUM increases.
However changes in asset levels May also impact our fee rate as the majority of our separately managed account Paas management fees pursuant to a schedule in which the rate we earn on the AUR declines as the amount of AUM increases.
Our weighted average fee rate for separately managed accounts was 53 nine basis points for the quarter.
Speaker 2: Our weighted average fee rate for separately managed accounts
Compared to $53 four basis points last quarter, and 55.7 basis points for the fourth quarter of last year.
Speaker 2: The increase from last quarter primarily reflects the shift in assets to certain strategies that typically carry higher fee rates. While the decrease from the fourth quarter of 2020 primarily reflects an increase in assets due to market depreciation as the rates we earn in the majority of our fee schedules decline as the assets increase.
The increase from last quarter, primarily reflects the shift in assets to <unk>.
Certain strategies that typically carry higher fee rates, while the decrease from the fourth quarter of 2020, primarily reflects an increase in assets due to market depreciation at the rates we earn in the majority of our fee schedules decline as the assets increase.
Speaker 2: Our weighted average fee rate for sub-advised accounts was 27.4 basis points for the fourth quarter of 2021, compared to 27.6 basis points last quarter, and 27.2 basis points for the fourth quarter of 2020.
Our weighted average fee rate for sub advised accounts was 27.4 basis points for the fourth quarter of 2021 compared to 27.6 basis points last quarter, and 27.2 basis points for the fourth quarter of 2020.
Speaker 2: Certain accounts related to one client relationship have falcrum fear arrangement.
Certain accounts related to one client relationship have fulcrum fee arrangements.
Speaker 2: These fear arrangements require a reduction in the base C if the investment strategy underperforms its relevant benchmark or allows for a performance C if the strategy outperforms its benchmark.
These fee arrangements require a reduction in the base fee if the investment strategy underperforms its relevant benchmark or allow for a performance fee if the strategy outperforms its benchmark during.
Speaker 2: During the fourth quarter of 2021, we recognize the $0.9 million reduction in base fees related to these accounts.
During the fourth quarter of 2021, we recognize the point 9 million dollar reduction in base fees related to these accounts.
During both the third quarter of 2021 and fourth quarter of 2020, we recognized $1 million reduction in base fees related to these accounts.
Speaker 2: During both the third quarter of 2021 and fourth quarter of 2020, we recognize $1 million reductions in base fees related to these accounts.
Speaker 2: These fees are calculated quarterly and compare relative performance over a three-year measurement period.
These fees are calculated quarterly and compare relative performance over a three year measurement period.
Speaker 2: To the extent that three-year performance record of these accounts fluctuate relative to their relevant benchmark, the amount of bases recognized may vary.
To the extent the three year performance record of these accounts fluctuate relative to their relevant benchmark the amount of base fees recognized may vary.
Our weighted average fee rate for <unk> funds was 71.7 basis points for the quarter, increasing from 69 basis points last quarter and decreasing from 89.3 basis points for the fourth quarter of last year.
Speaker 2: Our weighted average fee rate for Pizina funds was 71.7 basis points for the quarter, increasing from 69 basis points last quarter, and decreasing from 89.3 basis points for the fourth quarter of last year.
Speaker 2: The increase from the third quarter of 2021 primarily reflects performance fees recognized in the fourth quarter of 2021, while the decrease in the fourth quarter of 2020 primarily reflects an increase in performance fees recognized in the fourth quarter of 2020.
The increase from the third quarter of 2021, primarily reflects performance fees recognized in the fourth quarter of 2021, while the decrease.
In the fourth quarter of 2020, primarily reflects an increase in performance fees recognized in the fourth quarter of 2020.
Speaker 2: Looking at operating expenses, our compensation and benefit expense was $20 million for the quarter, increasing from $18.9 million last quarter and from $18 million for the fourth quarter of last year.
Looking at operating expenses, our compensation and benefits expense was $20 million for the quarter.
Increasing from $18 $9 million last quarter and from $18 million for the fourth quarter of last year.
Speaker 2: The increase in compensation and benefits expense from the third quarter of 2021 is driven by an increase in compensation and in the market performance of strategies tied to the company's deferred compensation obligations.
The increase in compensation and benefits expense from the third quarter of 2021 is driven by an increase in compensation and in the market performance of strategy is tied to the company's deferred compensation obligations.
The increase in compensation and benefits expense from the fourth quarter of 2020 reflect an increase in employee headcount and compensation.
Speaker 2: The increase in compensation and banish its expense from the fourth quarter of 2020 reflects an increase in employee head count compensation.
G&A expenses were $4 $5 million for the fourth quarter of 2021 compared to $4 $3 million last quarter and $3 $7 million for the fourth quarter of last year the.
Speaker 2: DNA expenses were $4.5 million for the fourth quarter of 2021, compared to $4.3 million last quarter and $3.7 million for the fourth quarter of last year. The increase from last quarter and the fourth quarter of last year primarily reflects an increase in professional fees and travel and entertainment expense.
The increase from last quarter and the fourth quarter of last year, primarily reflects an increase in professional fees and travel and entertainment expense.
Speaker 2: Other income was $2 million for the quarter, reflecting the performance of our investments, and approximately 0.6 million in income related to our tax receivable agreement, and adjustment to our liability to selling and converting shareholders.
Other income was $2 million for the quarter, reflecting the performance of our investments and approximately <unk> 6 million and income related to our tax receivable agreement.
And an adjustment to our liability to selling and converting shareholders.
Speaker 2: Turning to taxes, the effective rate for our unincorporated and other business taxes with 4.3% this quarter, compared to negative 5.4% last quarter, and 2.9% in the fourth quarter of last year. The negative effective tax rate last quarter reflects the benefit associated with the reversal of uncertain tax position liabilities and interests due to the expiration of the statute of limitations.
Turning to taxes, the effective rate for our unincorporated and other business taxes was four 3% this quarter compared to negative five 4% last quarter and two 9% in the fourth quarter of last year.
The negative effective tax rate last quarter reflects the benefit associated with the reversal of uncertain tax position liabilities and interest due to the expiration of the statute of limitations.
Speaker 2: We expect the effective rate associated with the unincorporated and other business taxes of our operating company to be between 3 and 5% on an ongoing basis.
We expect the effective rate associated with the unincorporated and other business taxes of our operating company to be between three and 5% on an ongoing basis.
Our effective tax rate for our corporate income taxes ex D V T and other business taxes was 24, 6% this quarter.
Speaker 2: Our effective tax rate for our corporate income taxes, X, D, V, T, and other business taxes, was 24.6% this quarter, compared to 24.2% last quarter, and 24.5% for the fourth quarter of last year. We expect this rate to be between 24 and 26% on an ongoing basis.
Compared to 24, 2% last quarter and 24, 5% for the fourth quarter of last year. We expect this rate to be between 24 and 26% on an ongoing basis.
Speaker 2: The allocation to the non-public members of our operating company was 78% of the operating company's net income for the fourth quarter of 2021, compared to 77.8% last quarter and 77.3% for the fourth quarter of last year.
The allocation to the nonpublic members of our operating company was 78% of the operating Companys net income for the fourth quarter of 2021 compared to 77, 8% last quarter and 77, 3% for the fourth quarter of last year.
The variance in these percentages is a result of changes in our ownership interest in the operating company.
Speaker 2: The variance in these percentages is the result of changes in our ownership interest in the operating company.
During the quarter through our stock buyback program, we repurchased and retired approximately 301 6000 shares of class a common stock and class b units for $3 $1 million.
Speaker 2: During the quarters of our stock by-deck program, we repurchase and retire to approximately 301.6 thousand shares of class A common stock and class B units for $3.1 million.
Speaker 2: At December 31st, it was approximately $41.3 million remaining in the Repurchase Program.
At December 31, there was approximately $41 $3 million remaining in the repurchase program.
At quarter end, our financial position remains strong with $81 $1 million in cash and cash equivalents as well as $7 $3 million in short term investments.
Speaker 2: At quarter end, our financial position remains strong, with $81.1 million in cash and cash equivalent, as well as $7.3 million in short-term investments.
We declared a <unk> 53 per share year end dividend last night.
Speaker 2: We declared a 53 cent per share year end of an end last night. Thank you for joining us.
Thank you for joining us we'd now be happy to take any questions.
Speaker 1: Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If there are any reason you would like to remove that question, please press star followed by two.
Thank you if you would like to ask a question. Please press star followed by one on your telephone keypad. If for any reason you would like to remove that question. Please press star followed by two.
Yeah.
We will just hold here one second low questions get asked.
Okay. We do have our first question.
Speaker 1: OK, we do have our first question. Our first question comes from Wayne Akurambo from Monarch Partners. Wayne, please go ahead.
First question comes from comes from Wayne <unk> from Monarch partners.
Please go ahead.
Speaker 4: Yes, that's Archambeau, but that's okay. Good morning. Just on the buyback, would you ever consider a special dividend? I mean, your stock is not the most liquid stock in the market, and I just think the buyback just makes, it just exacerbates the illiquidity. Has a special dividend ever been considered for sitting on the cash that you have?
Yes, that's archambault, but that's okay.
Good morning.
On the buyback.
Would you ever consider a special dividend.
Your stock is not the most liquid stock in the market and.
I just think the buyback just makes it just exacerbates the illiquidity.
As a special dividend never been considered.
Youre sitting on the cash that you have.
Yeah.
Yeah.
Yeah.
Hi, This is Jessica.
Speaker 3: So the art vibe, oh, Rick, are you there? Sorry, I was on mute. I didn't realize.
So our.
Oh rich are you there.
Sorry, I was on mute I didn't realize it.
Oh, Okay all right.
Speaker 3: I can answer the question.
I can go I can answer the question.
Do you know.
Speaker 3: The way that we think about our dividend is that
The way that we think about our dividend is the.
The we pay out.
Speaker 5: that we pay out.
Al.
Speaker 5: the earnings at the end of the year. So it's almost always is a special dividend. In fact, in because we're not declaring a regular dividend, a cash balance that you see isn't really indicative of the excess cash that we have.
The earnings at the end of the year. So it's almost always is a special dividend and the fact.
Because we're not declaring a regular dividend the cash balance that you see is isn't really indicative of the excess cash that we have.
Speaker 5: And if you look at our cash balances by quarter, the March quarter is the lowest cash balance.
And if you look at our cash balances by quarter.
The March quarter is the lowest cash balance so effectively because our regular dividend as three cents per quarter and the final dividend is 53 sons, we're gonna deplete most about 81 million.
Speaker 3: So effectively because our regular dividend is 3 cents a quarter, and the final dividend is 53 cents, we're going to deplete most of that 80-
Speaker 5: That's on the balance sheet between the special dividend or the year end, we don't call it that we call it the year end dividend and paying bonuses which get paid after the end of the year. So if you actually looked, there's almost no ex...
That's on the balance sheet between the special dividend or the Euro we don't call. It that we call it a year end dividend.
I think bonuses, which get paid after the end of the year. So if you actually looked.
There's almost no excess cash so the question is could we divert.
Speaker 5: So the question is, could we divert the money we spend every year on stock repurchase, which I think is around a million dollars a year to a dividend? I suppose we could do it, but I don't think it moves the needle to the extent that you're thinking.
The money, we spend every year on stock repurchase, which I think is around $1 million a year.
To a dividend I suppose we could do it but I don't think it moves the needle to the extent that you're thinking.
Right right.
Speaker 4: Okay, and then secondly, Rich, while I get you on the phone here.
Okay, and then secondly, rich while I've got you on the phone here.
Speaker 4: ESG, sustainable funds, there's a new one coming out every day and it seems like it's the flavor of the month and it's the new shiny object in the marketplace and clearly
Yeah, you know.
ESG sustainability bonds.
There's a new one coming out every day and it seems like it's the flavor of the month.
It's the new shiny object in the marketplace and clearly.
Speaker 4: It's a bit of a tidal wave in terms of the acid gathering a little last couple of years.
It's a bit of a tidal wave in terms of the asset.
Gathering over the last couple of years.
Speaker 4: And I know you've done extensive work on this knowing you from years ago, like the things at Bernstein. Is there a style bias and a structure bias in this idea where...
And I know you've done extensive work on this knowing you from years ago and good things at Bernstein.
Did you do it.
Is there a.
Style by us in our sector bias.
And this idea where my.
Speaker 4: You know, my observation is, you know, as you think about if rates are rising and growth continues to be out of favor, I mean, I operate in a small value world and the small growth disparity is pretty significant relative to small value. That as if growth continues to underperform value over the next number of years because of a rising rate environment.
And as you know as you think about if rates are rising.
And our growth continues to be out of favor I mean I operate in the small value world.
The small growth disparity is pretty significant relative to small value.
But as if growth.
Growth continues to underperform.
Al you are over the next number of years because of a rising rate environment.
Speaker 4: What does that imply for these sustainable funds that tend to have a growth bias?
What does that imply for the sustainability funds they tend to have a a growth bias.
Speaker 5: You're absolutely right. ESG is critical from the standpoint of being able to
Yeah.
You're absolutely right.
The U S G.
She is critical from the standpoint.
Being able to.
Speaker 5: to invest money in a way that matches your client demands.
To invest money in a way that.
Matches your clients' demands.
But.
It it is more difficult to two.
Match and.
ESG strategy with a value strategy because.
There's a high correlation with what people want out of ESG and growth like they want investment in new technologies to address some of the world's issues, particularly when you're talking about the environmental side zero carbon world. So.
Speaker 5: So I think you're totally right, right? When new, when technology and growth-related strategies are winning, it's easy to marry that with ESG and make it, and, and, and, and, and,
You're totally right.
When.
When new when technology and growth related strategies or winning its easy to marry that with ESG.
And make it.
And when on both fronts.
Speaker 5: It's much more difficult when those technologies are actually overvalued and having their values correct. We can't, as a true deep value investor that's committed to our philosophy, we can't invest in those companies, nor would we want to, because the valuations just don't make sense. As they correct, I think, as you point out, clear-style bias.
It's much more difficult when those technologies are actual leap over valued I'm, having their values correct right. We have a good weekend as a true deep value investor that's committed to this too.
Our philosophy, we can't invest in those companies nor would we want to because the valuations just don't make sense. So as they correct we.
I think.
As you pointed out clear style by us having said that.
Speaker 5: You can really marry ESG with value. And we've written extensively about it and put it and listed some of those, we've published some of those papers on our websites that talk about how do you invest, for example, in energy while still being conscious of
You can really Mary E G with value and and we've written extensively about it and putting it listed some of those we've reaped publish some of those papers on our websites.
Right.
Talk about how do you how do you invest for example in energy, while still being conscious of.
Speaker 5: sustainability of these businesses. I don't know that this is the appropriate form to get into that, but I think I take your observation as being accurate.
Hum.
The sustainability of these businesses I don't I don't know that this is the appropriate forum to get into that but I think I'd take your observation as being accurate.
Okay very good obviously it from your friends. Thank you yeah nice to talk to them.
Speaker 4: Okay, very good. I'll see you here from your branch. Thank you. Yeah, nice to talk to you.
Speaker 1: Thank you, Wayne. Our next question comes from Sam Sheldon of Punch and Associates. Sam, please go ahead.
Thank you Wayne.
Our next question comes from Sam Sheldon of punching Associates. Some please go ahead.
Good morning, Rich and Jessica Thanks for taking my questions. Maybe you could talk about any sentiment changes you and the team are noticing from prospects towards deep value recently and has there been any noticeable changes in our RFP activity from say a year ago.
Speaker 6: Maybe you could talk about any sentiment changes you in the team are noticing from prospects towards deep value.
Speaker 6: Has there been any noticeable changes in RFP activity from, say, a year ago?
Yeah.
Speaker 5: You know, I think the way that I would answer that question is to say that the sentiment changes have been happening over the course of the last
You know that's that's the I think.
The way that I would answer that question is to say that the sentiment changes have been have been happening.
Over the course of the last.
Speaker 5: nine months, maybe even a little more than that, in the things that you would have called
Nine months.
Maybe even a little more than that.
Hum.
In the things that you would hope.
Called.
Speaker 3: you know, pre-RFP activity, meaning attendance at meetings, interest, filling up rooms when you want to talk about the value cycle. It's now starting to pick up.
Pre RFP activity, meaning.
<unk> had meetings interest filling up rooms, when you want to talk about the value cycle. It's now starting to pick up and so we've had kind of a consistent pipeline.
Speaker 5: And so we've had kind of a consistent pipeline.
Speaker 5: throughout the last four or five years. And I would say...
Throughout the last four or five years.
Hum them I would say.
Speaker 5: The trend is positive and it's still early. Believe it or not, it's still early. But the returns profile for value in 2021 had a pause in the middle of it.
The trend is positive and it's still early believe it or not it's still early.
Hum.
Well the returns profile for value.
2021 had a pause in the middle of it.
Speaker 5: which I think put a pause in that trend, which is now...
Which part, which I think put a pause in the end.
And that trend.
Which is now.
Speaker 5: picking up and re-accelerating. So I would say it's starting, but not achieving.
Picking up and Reaccelerate ing, So I would say, it's it's a starting what not a tidal wave.
Speaker 6: Okay, okay. And does the recent market volatility that we've seen recently, does that help or hurt the speed of these searches? And maybe you could just touch on how your existing clients are reacting to the...
Okay, Okay and does the recent market volatility that we've seen recently does that help or hurt the speed of these searches and maybe you could just touch on how your existing clients are reacting to the current environment and volatility as well.
Speaker 5: Um, you know, we, we tend to be, um, a.
No.
We tend to be.
Hey.
I guess, what I would call more of a satellite manager than a core manager so meaning.
Speaker 5: I guess what I would call more of a satellite manager than a core manager. So, meaning that the people who are investing with us.
The people who are investing with us.
Speaker 3: have made a decision to put a portion of their portfolio in value and they've generally done it on a fairly sophisticated basis.
Have made a decision to put a portion of their portfolio and value when they've generally done it fairly sophisticated basis.
Speaker 5: So I don't really see anything. In fact, I think what we see is that they are...
So I don't really see anything in fact, I think what we see is that the.
They are.
Behaving the way, we would expect them to behave and they're not really focused on where we're outperforming now will lead the growth.
Speaker 5: behaving the way we would expect them to behave, and they're not really focused on us. We're outperforming now the growth.
Speaker 5: investments and that out performance.
Investments.
And that outperformance.
Speaker 5: leads to the most sophisticated of these.
Leads to the to the most sophisticated of these.
Speaker 3: rebalancing away from us when we outperform just like they rebalance towards us when we underperform and but but that
Rebalancing away from us when we outperform just like they rebalanced towards us one week.
Before them.
But but that.
Process today is.
Is.
Speaker 5: It's going on like it always goes on and it's modest.
It's going on like it always goes on and it's modest so I.
Speaker 5: I think the best way to answer your question is, it's pretty steady with our clients. There's no, there's certainly no alarm.
I think the best way to answer your question is its pretty steady with our clients. There's no. There's certainly no alarm.
Speaker 5: about what they have with us. That's for sure. Whether they're alarmed about the market and worrying about should they do something different. I'm sure that's the case. And I'm sure that's why some of the discussions with us have picked up to just to talk about value. But generally they're not sharing their fears of market over valuation or market volatility.
About what they have with us that's for sure whether they're alarmed about the market and worrying about should they do something different.
I'm sure that's the case and I'm sure. That's why some of the discussions with US are picked up to just to talk about value, but generally they're not sharing their fears.
Market overvaluation of market volatility.
Speaker 5: with us. They're treating us as we should be, which is kind of the role that we are properly filling the role that they've had us in and their portfolio. And the whole question is whether they should up that from historically low levels, which obviously we think they should and encourage at every moment.
With us, they're they're treating us as.
We should be which is kind of.
The role that we are properly filling the role that they've had us in in their portfolio and the whole question is whether they should upset from historically low levels, which obviously, we think they should and encourage at every <unk>.
Mint.
That we possibly can so.
Speaker 5: So I still would go back to the, I know what you're getting at. I mean, we're waiting for this value cycle to unleash more asset flow to us. And all I can say is we're seeing early stages of that.
I still would go back to the I know, what you're getting at I mean, we're waiting for this value cycle to unleash more assets flow to us and I. All I can say is we're where we're seeing early stages of that.
Okay.
Sounds good.
We saw news a few weeks back about potential interest.
Speaker 6: We saw news a few weeks back about potential interests by Pizina and building out a new credit business.
And building out a new credit business and making it higher for distressed debt manager, maybe you could talk about that initiative and how it fits into the strategy of casino.
Speaker 6: making it higher for a distressed debt manager. Maybe you could talk about that initiative and help it's into the strategy.
Yeah.
Speaker 5: Sure, we've always had.
Sure.
We've always had.
Speaker 5: in the back of our minds, this idea that
In the back of our minds.
But.
Speaker 5: The extensive research that we do on companies and industries would be valuable to a high yield world. And we always noticed from our own...
The extensive research that we do on companies and industries would be value valuable tool in a high yield world and we always noticed.
No.
From our own.
Observations of the companies that we own that when things get stressed and value opportunities often pick up on the high yield side to up to two by depressed bonds.
Speaker 5: observations of the companies that we own, that when things get stressed in value, opportunities often pick up on the high yield side to buy depressed bonds. It's a very similar investment philosophy to be a
It's a very similar investment philosophy to be Ah Ah Ah Ah Ah.
Speaker 5: a research oriented, distressed, and I'm not even used to go all the way to distraft, high yield investor compared to investing in value acquities. But anyway, so this has always been on the back of our mind about
Research oriented distressed.
You go all the way to distressed high yield investor compared to investing in value equities.
But anyway. So this has always been on the back of more and more in our mind about.
Speaker 5: maybe 18 months ago, we started thinking more.
Yeah, maybe 18 months ago, we started thinking more.
Speaker 5: seriously and strongly about how we would go about.
Seriously and strongly about how we would go about this and we looked around to see what what firms there were on them in the market and what people. There were that were available and we decided that really making an acquisition here.
Speaker 5: And we looked around to see what firms there were in the market and what people there were that were available. And we decided that really that making an acquisition here was not...
Was not.
Speaker 5: The sensible way to do this could give him the valuations that exist in the asset, in that segment of the asset management business and the concentration in bigger firms. And so we just decided to keep our ears open for high quality talent that we thought
The sensible way to do this given the valuations that exist in the us and in that segment of the asset management business and the.
The concentration and bigger firms and so we just decided to keep our ears open for high quality talent that we thought.
Speaker 5: could help us build this from inside. And Mark Herron, who we hired on January 1st, fit that bill. Our plan, I'm going to say we don't have a.
Could help us build this from inside.
Mark Herron, who we hired on January 1st fit that Bill.
Our plan I'm going to say, we don't have.
Uh huh.
Highly detailed business plan, we are using this year to get ourselves established into setup incubation of our own bonds and get operationally set up but with a with kind of a minimal investment at this point in time.
Speaker 5: highly detailed business plan, we're using this year to get ourselves established and to set up incubation of our own funds and get operationally set up, but with kind of a minimal investment at this point in time. And over the course of the year, we'll develop a plan, but I do think that
Over the course of the year will develop a plan, but I do think that the fault.
Speaker 5: following our decision and the feedback that we've received.
Following our decision in the feedback that we've received.
Speaker 5: that we reinforced the decision that
We we reinforced the decision that having having an extensive research team helping.
Speaker 5: having an extensive research team helping...
Speaker 5: on the credit side is a pretty powerful combination that could have legs for us. But, you know, it's so premature and I think to expect that we would get any asset flows from this.
On the credit side.
It is a pretty powerful combination that could have.
Legs for us, but you know, it's so premature I think to expect that we would get any asset flows from this in the near term is unlikely we have a long period of incubation and getting setup and staffing up even deciding to staff up before that happens.
Speaker 5: in the near term is unlikely. We have a long period of incubation and getting set up and staffing up, even deciding to staff up before that happens.
Okay, Yeah that that sounds interesting have you put a head count number on how many people would be required. It sounds like you can sort of leverage existing research, but just curious to hear how big.
Speaker 6: Okay, yeah, that sounds interesting. Have you put a Hague Count number on how many people would be required? It sounds like you can...
Speaker 5: I'm curious to hear how big it is in the future. I mean, for this year, for this year, it's one.
Really I mean for two for this year for this year, it's one.
Speaker 5: So we're not planning on adding anybody, but
So we're not planning on adding anybody but.
Okay.
Speaker 5: Will that change over the course of this year and into next? Maybe, as we figure out what we want to do. But I don't think we're going to make a big headcount commitment. We're going to make a gradual headcount commitment as we get more information. So I can't even give you a number. But it's not going to be more than a handful of people in the long run, or in the medium run.
Will that change in over the course of this year and into next maybe as we figure out what we want to do but I don't think we're going to make a big a big head count commitment, we're gonna make a gradual head count commitment.
As we.
As we get more information so I can't even give you a number but it's not it's not going to be.
More than a handful of people in the long run or in the medium run I should say.
Okay understood. My last question here rich picking back up on the illiquidity of the shares that the previous caller brought up can you just talk about any consideration to convert b shares to a shares.
Speaker 6: My last question here, Rich, picking back up on the liquidity of the shares that the previous caller brought up. Can you just talk about any consideration to convert B shares to H?
Yeah.
Speaker 5: You know, there's not a lot of consideration to convert B-shares to A-shares because unfortunately for the B-share holders, it's a taxable event.
You know there's there there there's not a lot of consideration to convert these shares to a shares because unfortunately for the b share holders. It's a taxable event to convert b shares to a shares. So you can't just convert them you have to pay taxes, when you convert them that wood.
Speaker 5: to convert B shares to A shares. So you can't just convert them. You have to pay taxes when you convert them. That would.
Speaker 5: Mandate us selling shares.
Mandate us selling shares so for us it would be do we want to do a secondary to expand to extend the liquidity of the company and it's always in our mind. The problem is we don't have very many be shareholders, who have any interest in selling at the current valley.
Speaker 5: For us, it would be, do we want to do a secondary to extend the liquidity of the company? And it's always in our mind.
Speaker 5: The problem is we don't have very many B-share holders who have any interest in selling at the current valuation. So it's a bit of a catch-22.
<unk> so it's a it's a bit of a catch 22.
Okay. Thank you for taking my questions.
Sure.
Speaker 1: Thank you Sam. As a reminder, if you would like to ask a question that is start followed by one on your telephone keypad. Our next question comes from Tom Brownel from Rock Point Advisors. Tom, please go ahead. Go ahead. Singer Faroe Simplert,
Thank you Sam as a reminder, if you would like to ask a question that is star followed by one on your telephone keypad.
Our next question comes from Tom Brown from Rock point Advisors. Tom. Please go ahead.
Great. Thank you operator, and good morning, rich good morning, Jessica.
Speaker 7: Thanks for taking the question. I guess the next meeting I'll start.
Thanks for taking the question I guess actually maybe I'll start.
On the distressed debt side, just really quickly did you I don't think I heard you say that God have you committed.
Speaker 7: on the distress set side just really quickly. Did you, I don't think I heard you say the thought, have you committed a dollar amount? And did you do that as of 1-1-22 or is that still down the road? And if so, can you give us an idea how much money you're gonna see that that...
A dollar amount.
You do that as a 120 tours, that's still down the road and if so can you give us an idea of how much money youre going up.
Key to that strategy was.
We didn't we haven't seen any money yet in the strategy.
Speaker 5: We didn't, we haven't see it at any money yet in the strategy.
Hum.
Speaker 5: We're still trying to figure out seeding and sources of seeding. Some of it will come from the firm and some of it may come from the partners in the firm. So it's not massive, but I don't have a number for you now. And it won't all be likely, won't all be from the firm.
We're still trying to figure out seeding and sources of ceding some of it will come from the firm and some of it may come from the partners and the firm so it's not a it's.
It's not massive I don't have a number for you now and it won't all be likely won't all be from the firms capital.
Got it helpful and I guess I ask in part because I was wondering whether you were seeing opportunities.
Speaker 7: I guess I ask in part because I was wondering whether you were seeing opportunities currently in the district.
Currently in the distressed space.
But it sounds to me like this is more of a long term business plan there are.
Speaker 7: But it sounds to me like this is more of a long term business plan. There are, as you say, a lot of synergies between that work and your current work. And so it's more of a...
So there are a lot of synergies between that work in your current work and so it's more about.
Speaker 7: You're taking a longer-term view of building out potentially a tangential business with a lot of synergies to what you currently do.
You're taking a longer term view building out potentially a tangential business with a lot of synergies to what you currently do.
Got it right we didn't have any any thoughts on opportunistic investing is the reason to just do it now this is exactly as you described.
Speaker 5: Correct. We didn't have any thoughts of opportunistic investing as the reason to just do it now. This is exactly as you described.
Yep got it got it well.
Speaker 7: Yep, got it, got it. Well, particularly when it says point about the value searches, it occurred to me how, and we talked about this, it seems every quarter, but how long do you think value and in your experience, you know, through the decades, how long does value have to outperform?
Picking up on <unk> point about the value searches that occurred to me.
And we've talked about this it seems every quarter, but how long do you think value and in your experience through the decades, how long does the value has to outperform.
Speaker 7: before it just really starts picking up in especially on the separate account side in value searches.
Before interest really starts picking up in especially on the separate account side in value searches.
Speaker 5: Yeah, I mean, I'll look to ever if you look at the average length of the value cycles over the past.
Yeah, I mean, I'll look the average if you look at the average length of the value cycles over the past.
You know you can go back 100 years its around six years, something like that the average length of time that value outperforms. When you look at these cycles where and.
Speaker 5: you know, you can go back a hundred years. It's around six years, something like that. The average length of time that value outperforms when you look at these cycles, where
Speaker 5: And so I'm guessing that the answer is something like 18 months to two years before the flood gates hit and they actually
So I'm guessing that the answer is something like.
18 months to two years before the flood gates, it and they actually.
Tend to to really.
Speaker 5: tend to really build slowly.
Build.
Slowly and and.
Speaker 5: Unfortunately, you get the biggest flows towards the end of the values.
Unfortunately, you get the biggest flows towards the end of the value cycle.
Speaker 5: So if you look at our last real cycle, which was post-internet double, we got the first kind of moveers about a year into the value recovery and we peaked in flows around four years.
So if you if you look at arc, our last real cycle, which was post internet bubble.
We got.
We got the first kind of movers about a year.
Into the value recovery.
And the and we peaked inflows around four years and so I don't know if that will be the same this time, but it gives you a little bit of appeal.
Speaker 7: So I don't know if that will be the same this time, but it gives you a little bit of feel. Yep, yep, takes a while.
Yep Yep, it takes awhile doesn't it.
Yeah No question.
Yeah.
Thanks for the thanks for the color on that.
Speaker 7: Thanks for the caller on that. The last question I would have would be on the...
Last question I would have would be on the PS.
Speaker 7: And I wonder if you could talk a little, just peel the onion a little bit on the fee, it looks from our vantage point, like we're seeing a pretty fair amount of fee compression, right, in 4Q21, 4Q22, 4Q23, 4Q24, 4Q25.
And I Wonder if you could talk a little bit just peel the onion, a little bit on the fee compression it looks from our vantage point like we're seeing a pretty fair amount of fee compression right in.
For Q 'twenty one for 'twenty.
And in total fees collapsed like 270 basis points, if I had my numbers right and in the fourth quarter.
Speaker 7: in total fees collapsed by 270 basis points of land-led numbers right and in the fourth quarter to the fourth quarter prior year. On the separate account side, it looked like they dropped that on our native basis points. And Jessica's commented some of it that was mostly, if not entirely due.
So the fourth quarter prior year.
But account side it looks like they dropped out of 180 basis points and Jessica his comments it sounded like that was mostly if not entirely due to.
Speaker 7: to points of counting breakpoints and not as opposed to a drop in your base fee rate due to competitive pressure.
Two clients accounts, hitting breakpoints and not as opposed to a drop in your base fee rate due to competitive pressures.
Speaker 7: Could you comment on that? Is it going to have that right? Sure.
Could you comment on that is do I have that right sure.
Speaker 5: I would say the biggest impact is MIPS. So if you actually look at what's going on, we've had gigantic flows in our sub-advisory channels.
I would say the biggest impact is mix. So if you if you actually look at what's going on we've had gigantic flows in our sub advisory channel.
Speaker 5: which is the lowest fee strategies because we have to share the fees with the advisor. And of course we get access to much, much bigger pools of money. So that is the primary reason why our fees. So if you look at our overall fees, they've been...
Which is the lowest fee strategy is because we have to share the piece with the advice.
And of course, we get we get access to a much much bigger pools of money. So that's that is the primary reason why our fees. So if you look at our overall fees.
They've been inching down.
Speaker 5: I don't have the numbers right in front of me, but we're just under 40 basis points now. We've been going down something like a basis point a year.
I don't have the numbers right in front of me, but we're just under 40 basis points now we've been going down something like a basis point a year.
Speaker 5: So, you have to be careful with a couple of things. There's performance fees in there that distort the number.
And <unk>.
Outbreaks theirs. So you have to be careful with a couple of things there is performance fees in there that.
That distort the numbers, especially in this anti value period because with.
Speaker 5: especially in this anti-value period because with
Speaker 5: with our Vanguard relationship. We have spoken, spoken.
With our Vanguard relationship we have spoke fulcrum fees, which is effectively you can call. It a negative performance fee, we earn below our base fee. So we've been earning those negative themes for the last two two and a half years and those should go.
Speaker 3: which is effectively, you can call it a negative performance fee. We earn below our base fee. So we've been earning those negative fees for the last two, two and a half years. And those should go away, especially if values continues to, the negative should switch to a positive.
Away, especially if values continues to to the negative should switch to a positive if values should continue to hum.
Speaker 5: values should continue to outperform. So I think mostly what you're seeing is mixed shift.
Outperform so I think mostly what you're seeing is mix shift there.
There is some breakpoints in.
Speaker 5: And there's definitely fee pressure, but mostly we've seen fee pressure not causing us to have to lower our fee schedules, but causing...
And there there's definitely fee pressure, but mostly we've seen three pressure mob, causing us to have to lower our fee schedules, but causing all.
Speaker 5: are clients and prospects to themselves shift into lower fee versions of our strategies. And those are, so it's break points, shifting to lower fee versions, meaning more diversified versions, basically, and mixed shifts that's accounted for. I don't want to say there's no fee pressure, there's definitely fee pressure. But
Our clients and prospects to themselves shift into lower feed versions of our strategies and those are but so its breakpoints shifting to lower fee versions, meaning more diversified versions basically.
And mix shift that's accounted for I don't want to say, there's no fee pressure, there's definitely fee pressure, but but we've done a pretty good job of keeping our schedules intact.
Speaker 5: We've done a pretty good job of keeping these schedules into it.
Got it thanks final follow up would be do you.
Speaker 7: Got it. Thanks. Final follow up would be to, you know, ballpark one basis point per year glide path.
Ballpark, one basis point per year glide path.
Would you expect that.
Speaker 5: to continue is that a way to think about sort of what I don't care about. I think.
To continue that.
Way to think about sort of why I joined me in forever.
I think.
Yeah, I mean look I.
It is.
Speaker 3: It really depends on the mix. Unfortunately, it's hard to give you an answer. If we had the kind of flows in sub-advisory that we have had the last few years, which we would be thrilled with, by the way, you know, if you look at some of the clothes we've had in sub-advisory, it's been the biggest source of our...
It really depends on the mix. Unfortunately, I can't it's hard to give you an answer if it if we had the kind of flows in sub advisory that we have had the last few years, which we would be thrilled with by the way.
You know if you look at some of the clothes, we tied in sub advisory that's been the biggest source of ore.
Speaker 5: positive net flow has been more than 100% of our positive net flows have been from some advisory channels. So those partnerships that we've set up
Positive net flows it's been more than 100% of our positive net flows have been from sub advisory channel. So those partnerships that we've set up.
Speaker 5: are working well because you set them up and then you have continuous positive flows. So if that was caused by that, we would be fine with it.
Or are.
Our working well because you set them up and then you have continuous positive flows so.
If that was caused by that we would be fine with it but I wouldn't say so I don't know how to answer your question I do think we'll have a bit of a reversal from the performance fee question and won't have and hopefully access.
Speaker 5: But I would say, so I don't know how to answer your question. I do think we'll have a bit of a reversal from the performance fee question, and we'll have, and hopefully, access to
To.
Speaker 5: to more separate account business, but I will also tell you that as we've gotten bigger, we've qualified.
Two more separate account business, but but but I would also tell you.
But we.
As we've gotten bigger we.
We've qualified.
To be in bigger searches.
So art work when you get to when you get 100 million dollar account.
Speaker 5: So, when you get up 100 million dollar account,
Speaker 5: in the fee structure is so different than when you get a $500 million coin in. And we're getting more of the last.
In the fee structure is so different than when you get a 500 million dollar account and and and and we're getting more of the latter.
Speaker 5: So they'll be at the lower end of our fee schedule and break.
So that'll be at the lower end of our fee schedule and breakpoints.
Speaker 5: So you can call about a bad thing. We actually are very happy with it. We think it's margin-occurative. The average size of your account is probably the biggest determinant of your operating margin. And there's a lot of cost in getting a lot of small accounts. You could have higher fees if you did, higher basis point fees.
So you can call that a bad thing we actually are very happy with it. It's we think it's margin accretive.
The average size of your account.
Is probably the biggest determinant of your operating margin.
And.
There's a lot of cost and getting a lot of small accounts you could have higher fees. If you did I or basis point fees, but I think getting higher revenues is a lot more challenging so mostly that's the dynamic you're watching so do I think I think yes, there's going to be gradual erosion with us.
Speaker 5: But I think getting higher revenues is a lot more challenging. So mostly that's the dynamic you're watching. So do I think? I think yes, there's going to be gradual erosion. We don't model one basis point a year, but we don't really know. Got it.
We don't model one basis point, a year, but we don't really know.
Got it. Thank you very much I appreciate the color.
Sure sure.
Thank you Wayne.
Speaker 1: There are currently no more questions registered at the moment, so I will pass back to the management team for their closing remarks.
There are currently no more questions registered at the moment, So I will pass back to the management team for their closing remarks.
Speaker 2: Thank you, operator, and thank you everyone for joining us on today's call. We look forward to speaking with you again.
Thank you operator, and thank you everyone for joining us on today's call. We look forward to speaking with you again.
That concludes today's conference call you May now hung up the line.
Speaker 8: The.
Uh huh.
[music].
Okay.
Yeah.
Yes.
[music].
Right.
Yeah.
Yes.
[music].