Q1 2023 StepStone Group Inc Earnings Call
[music].
Okay.
Welcome to the steps down fiscal first quarter 2023 earnings call.
At this time, all participants will be in a listen only mode.
Later, we will conduct a question and answer session.
I'd like to ask a question. Please press star one on your telephone keypad.
Now I'll turn the call over to your host Seth Weiss head of Investor Relations. Mr. Weissman, you may begin.
Thank you and good afternoon, everyone. Joining me on the call today are Scott Hart, Chief Executive Officer, Jason, Matt President and co Chief Operating Officer, Mike Mccabe head of strategy, and Johnny Randall Chief Financial Officer.
During our prepared remarks, we will be referring to a presentation, which is available on our investor relations website at shareholders that steps down good dot com.
Before we begin I'd like to remind everyone that this conference call as well as the presentation contains certain forward looking statements regarding the company's expected operating and financial performance for future periods.
Looking statements reflect management's current plans estimates and expectations and are inherently uncertain and are subject to various risks uncertainties and assumptions actual results for future periods may differ materially from those expressed or implied by these forward looking statements due to a number of risks or other factors that are described in the risk Dr.
Section of Stepson's, most recent 10-K.
These forward looking statements are made only as of today and except as required we undertake no obligation to update or revise any of them.
In addition, today's presentation contains references to non-GAAP financial measures reconciliations to the most directly comparable GAAP financial measures are included in our earnings release, our presentation and our filings with the SEC.
Turning to our financial results for the first quarter of fiscal 2023.
We reported a GAAP net loss of $21 $5 million for the quarter ended June 32022.
The GAAP net loss attributable to step Stone Group, Inc was $11.0 million, we generated fee related earnings of $36 $6 million.
Net income of $47 1 million and adjusted net income per share of <unk> 41.
The quarter reflected retroactive fees, resulting from the final closing of step stones private equity co investment fund that contributed $2 $4 million to revenue and $2 $2 million to fee related earnings and pre tax adjusted net income.
This compares to retroactive fees in the first quarter of fiscal 2022 that contributed zero point $9 million to revenue and <unk> $8 million to fee related earnings and pre tax adjusted net income.
Now like to turn the call over to Stepson's, Chief Executive Officer, Scott Hart.
Thank you Beth and good afternoon, everyone. We delivered another robust quarter of earnings fundraising and growth in fee, earning assets as we kicked off our 2023 fiscal year.
Our strong performance comes despite what was one of the most challenging periods for public equity and fixed income markets in the last two decades. These results exemplify the strength of step stones platform and the resilience of our business model.
As I think back to our September 2020, IPO Road show, which took place just six months into the pandemic. The resilience of our business model was a major focal point.
While there are notable differences between the current environment and the Covid driven market correction the stability of our model remains relevant and is largely driven by three factors.
Our exclusive focus on the private markets with a dedication to customize offerings.
To our diversification and three our visibility into future earnings and growth.
I'd like to touch on each of these topics.
First we are exclusively focused on the private markets, which have historically generated stronger performance and weather volatility better than their public equivalents.
As a result private market allocations have continued to grow over time, representing a larger percentage of your overall portfolio for experienced investors, while also attracting new Lps.
While we and our clients have benefited from the favorable market conditions in recent years the value of our services become especially apparent during times of stress.
Over the last several years, we operated in an environment in which investors were often rewarded simply for deploying capital into a rising market.
Going forward there'll be more differentiation and performance and we believe that disciplined portfolio and risk management data driven manager an investment selection and asset the cost effective private market strategies will be the determinant of success.
These are all areas that we work in partnership with our clients and where the step stone platform is well positioned to add value.
Second step in the diversification is a significant differentiator and gives us the flexibility to navigate through challenging market and capitalize on new opportunities as they arise.
Even in a shifting environment. There are few challenges that our clients face in their private markets portfolios that we cannot help them address as a result of the comprehensive toolbox, we have build over the last 15 years our.
Our platform spans across avenues for investment geography and client type.
Our diversification by asset class in strategy allows us to weather economic headwinds better than more concentrated managers.
For example, the inflation protection embedded in real estate and infrastructure.
On the liquidity offered by secondaries are in high demand in today's environment.
Our leading solutions in all three areas, which are significant drivers of LP capital inflows today.
Furthermore, we are consistently investing for our clients through cycles, which produces strong vintage diversification experienced Lps, who pulled back after the 2001 and in 2008 market dislocations are keenly aware of the value of investing through market troughs and understand that these are often the best performing vintage years.
Geographically, we have a very wide reach with nearly 70% of our last 12 months management and advisory fees and approximately 80% of our fundraising coming from outside North America.
The international market has ample room to grow as allocations are rising new pools of capital are coming online.
In addition to geography, our client roster spans a range of investor type and size from the individual investor to some of the largest pension and sovereign wealth funds in the world at.
At the core of our value proposition, we recognize that each client has unique needs and portfolio goals in the private markets.
While some of our clients are undoubtedly impacted by allocation limits and pressure from the denominator effect. We also have clients that are just starting to build a private marks portfolio or are actively increasing allocations are accelerating the pace of deployment.
Third we have extremely strong visibility into our future earnings.
The vast majority of our management fees are contractually tied to committed or invested capital and are therefore, not impacted by market fluctuations.
Over 80% of our management fees come from accounts that heavy remaining tenor of three or more years and over 50% come from accounts that have a remaining tenor of seven or more years.
Our clients tend to be very persistent even well beyond their contractual commitments.
Re up rate on SMA capital since inception is over 90% with an average increase in account size of over 30% on renewal.
Furthermore, we have over $17 billion of dry powder that will allow us to tactically capitalizing the more attractive pricing environment, and which will contribute to our fee, earning assets as we deploy capital over the coming years.
It's unemployed capital alone represent over 20% growth potential to our current fee earning assets.
While there may be fluctuations from quarter to quarter combined these factors provide tremendous earnings stability and contribute to long term earnings power of the business without even accounting for any new business development.
Moving on to our first quarter results on slide five we generated $47 million and adjusted net income for the quarter or <unk> 41 per share, which is the same as the prior fiscal years first quarter.
Looking over our trailing four quarters, we have generated $1 62 of adjusted net income per share, which is up 45% from a year ago.
Included in the quarter were $74 million of gross realized performance fees and $32 million of net realized performance fees, which represents our highest growth and third highest net realized performance fees on record.
Andy will speak to carrier dynamics in more detail.
We generated fee related earnings of $37 million up 58% from the prior year quarter as we produced strong organic growth and benefited from the Green Spring acquisition.
Accounting for the increase in our share count we grew fee related earnings per share by 39%.
The integration of Green spring is progressing well, we continue to be strong believers in the innovation economy and the power of technology.
Our ability to provide solutions across the venture lifecycle is evident through the successful recent closings of our micro fund, which has raised over $230 million to date, our BT direct fund, which has raised nearly $850 million and the final close of our <unk> Secondaries fund, which raised a total of $2 $6 billion and has a larger.
Venture Secondaries fund in the market today.
Shifting to assets under management, we produced another strong period of asset growth, finishing the quarter with approximately $137 billion AUM.
And nearly $79 billion of fee, earning assets exclude.
Excluding acquired assets, we've organically grown fee, earning AUM by over $14 billion in the last 12 months generating consistent and balanced growth across asset class and commercial structure.
I'll now turn the call over to Mike Mccabe to speak about our asset growth and fee related revenue growth in more detail.
Thanks, Scott turning to slide seven we generated $24 billion of gross AUM inflows in the last 12 months with $7 billion coming from our commingled funds and $17 billion in separately managed accounts.
Slide eight shows our fee, earning AUM by structure and asset class for the quarter, we grew fee, earning assets by over $3 billion.
We are well positioned to grow through market cycles, and this quarter's results and serves as a continued proof point of our business model.
While individual managers may experience fundraising pressures, a multi manager platform like ours diversified by geography asset class and strategy cast a much wider net.
This was a balanced quarter for growth in fee, earning assets with approximately 60% of the growth coming from infrastructure real estate and private debt.
Demand for real assets continues to be extremely robust as the inflation protection embedded in the underlying investments driving strong capital formation and generating positive absolute investment performance.
This was our best period for growth in real estate since the fiscal second quarter of 2021, driven by a significant re up activity.
As Scott mentioned secondary investments are particularly compelling strategy in today's market.
As a leader in the secondary space, we can play both offense and defense for our clients as we help them navigate these challenging markets.
We have a multibillion arsenal of dry powder in our newly raised debenture Secondaries fund or private equity Secondaries fund and our real estate Secondaries fund and within separately managed accounts across all four asset classes that we will deploy as investors look to reposition their portfolios or seek liquidity.
The prospect for continued growth remained strong as investors look to the secondaries market as both a viable entry and exit point.
Moving to growth by commercial structure.
Commingled funds contributed about $800 million of net fee, earning assets driven by final closings at our <unk> co invest fund, which raised a total of $2 4 billion RBC Secondaries fund, which raised a total of $2 6 billion and our two credit funds, which raised a combined $1 9 billion.
Each of these funds surpassed their prior vintages and exceeded our targets highlighting the resilient and growing demand from our clients.
Looking at gross AUM additions total co mingled fund raising for the quarter was nearly $3 billion.
Our best quarter ever.
In addition to the previously mentioned closings, we had successful fund raises across our venture capital opportunities Fund and our PE Secondaries fund we.
We anticipate activating fees on these funds later this calendar year.
We also recently launched our first infrastructure Commingled fund, which will be focused on co investments.
We expect to execute our first closing on this fund near the end of this calendar year.
This commingled fund expand access to the infrastructure asset class to a wider group of investors.
With this new product, we now offer commingled funds across all four private market asset classes move.
Moving to separately managed accounts, we generated $2 $6 billion of fee, earning asset growth driven by re ups and deployments.
Looking over the last 12 months and excluding the impact from acquisitions, we have organically grown fee, earning assets by over $14 billion or 27%, which is generally consistent with the 30% organic CAGR since fiscal 2018.
We continue to see strong results from our evergreen products seen prime our private market fund four accredited investors.
As of July one we have grown <unk> prime to approximately $650 million of net asset value and have delivered a 78% total return since inception.
We continue to make progress across all distribution channels.
Our unemployed fee, earning capital stands at over $17 billion.
Slightly higher than last quarter.
We were able to maintain this level despite deploying nearly $3 billion from this balance as a robust fundraising replenish our dry powder slide nine shows the evolution of our management and advisory fees, where we are generating nearly $3 80 per share and revenues over the last 12 months, representing an annual growth rate of 25.
Percent since fiscal 2018, as a reminder, over 80% of these fees come from accounts that have remaining tenor of three or more years, we generated a blended management fee rate of 54 basis points, which is slightly higher than the prior year due to a mix shift towards coming of funds from the contribution of Green spring.
I'll now turn the call over to our CFO Jonny Randall.
Thank you Mike I'd like to turn your attention to slide 11 to speak to a few of our financial highlights.
For the quarter, we earned management and advisory fees of $117 million.
Strength in revenue was driven primarily by continued growth in fee, earning assets.
Profitability remains strong as our FRE margin expanded to 31% for the quarter up approximately 200 basis points year over year, but down slightly versus the prior quarter.
<unk> from retroactive fees in the quarter, which contributed 130 basis points to the FRE margin for comparison retroactive fees contributed 70 basis points to the FRE margin in the year ago quarter, and contributed 170 basis points last quarter.
Excluding the impact from retro fees, our margin was up over 100 basis points year over year and was essentially flat to the prior quarter shifting to expenses compensation was up versus the prior quarter as we continue to invest in our teams. We are also seeing sequential increases in travel and marketing driving increases in our G&A expense.
As we think about the near term trajectory of expenses, we expect further increases driven by higher compensation and occupancy costs as we grow our team we see a pathway for continued long term sustainable growth and we are investing to position ourselves accordingly.
Over the last few quarters, we have commented that we view a near term FRE margin of about 30% is reasonable with some variability quarter to quarter based on the timing of expenses and the cadence of large commingled fund closings and activation fees.
It might mean that we dipped below 30% in certain individual quarters, but we still expect that we will generate an FRE margin of about 30% for this full fiscal year.
We anticipate expanding our margins to the mid <unk> over the longer term as we balance profitability with sustainable growth.
Gross realized performance and incentive fees were $74 million for the quarter, which is our highest quarter ever we benefited from transactions that were announced in 2021 and we also benefited from some realization activity outside of private equity.
Factoring in compensation net realized performance fees were $32 million for the quarter capital markets have become more challenging in recent periods. So we anticipate some downward pressure on realizations over the next few quarters. As a reminder, we do not typically control the timing of exit moving to slide 12, we grew adjusted revenues per share by 20% year.
Over year, driven primarily by 29% growth in per share management and advisory fees speaking to longer term growth adjusted revenues per share has grown by 32% compounded annual growth rate since fiscal 2018.
Shifting to our profitability on slide 13, we grew fee related earnings per share by 39% year over year. The increase was driven by growth in management and advisory fees and by margin expansion looking over the longer term, we have a CAGR of 47% and fee related earnings per share since fiscal 2018.
Our eni per share was flat when compared to last year's first quarter as we saw strong growth in FRE per share net performance related earnings were relatively flat in dollar terms, but were down on a per share basis due to the issuance of shares to complete the green spring acquisition.
Looking at the longer term Eni per share has grown at a 42% CAGR driven by robust growth in both FRE and realized net performance fees.
Moving to the balance sheet on slide 14 grocery accrued carry finished the quarter at approximately $1 4 billion, which is $115 million lower than the previous quarter. The majority of the decline was driven by record gross realizations in the quarter. Our accrued carry balance has increased more than 27% over the last 12 months, despite a record period of realizations and pressure.
Or an underlying valuation as a reminder, our accrued carry balance is marked on a one quarter lag. So recent market pressure may impact next periods reported balance.
Our own investment portfolio ended the quarter at $108 million up 1% from the prior quarter and up 30% over the same quarter in the prior year, reflecting both market appreciation and net contributions.
New commitments to these programs were $82 million as of quarter end.
Our pool of performance fee eligible capital has grown to 58 billion and this capital is widely diversified across multiple vintage years and 160 programs as of June 30th.
64% of our unrealized carry was tied to programs with vintages of 2017 earlier, which means that these programs are largely out of their investment periods and are injured harvest mode.
61% of this unrealized carry and sourced from vehicles with deal by deal waterfalls, you realized carry maybe payroll at the time of investment exit.
This concludes our prepared remarks, I'll now turn it back over to the operator to open the line for any questions.
We would like to ask a question. Please press star one on your telephone keypad now you will be placed in the queue in order to receive once again, if you'd like to ask a question. Please press star.
Star one on your phone now.
And our first question comes from Michael Cyprus from Morgan Stanley . Please go ahead Michael.
Great. Thanks, so much for taking the question have you guys are doing well, maybe just start off on secondaries.
Mentioned in the prepared remarks, but there is an opportunity to help Lps in the marketplace reposition portfolio. So I guess my question is how would you characterize the level of activity that you see there today and the level of dialogue.
How do you see that relative to the opportunity set that you think may emerge and maybe you could talk a little bit about how you expect to see this playing out as you look forward over the next 12 months and other or maybe remind us. If there are certain parts of the secondaries market place, where you tend to play versus others in other places where you tend to maybe shy a little bit away from.
Sure. Thanks, Thanks, Mike for the question this is Scott.
So look as we started to hint at even last quarter, we do see the secondaries opportunity emerging as an important one from from both an.
An investment standpoint, but also as a portfolio construction tool for our of our clients and I think we really have seen that play out over the last couple of quarters. If you look at some of the market statistics for the first half of 2022.
Depending on which stats you're looking at deal volume was up anywhere from 10% to 20% and unlike the last couple of years. The key driver of that was LP secondary as opposed to GP led secondaries, which as we've all talked about has been a key driver of growth over the last several years I would say we saw a similar to.
<unk> in our own deal flow in the first half of the year volume in both in both the LP secondary in the GP led secondary market was up pretty significantly in terms of what we saw but obviously just given the the quality or perhaps the uncertainty that exists ahead of June 30 evaluations coming out you can.
Imagine that we were very selective and as a result had an even lower completion rate than what we would've seen over the last several years I think that sort of characterize the type of environment that we're in here.
There is this uncertainty that exist until we have further visibility into June 30th valuations and I think at that point is when we expect to see.
Activity pick up to an even greater extent in terms of where we play as Mike mentioned during the prepared remarks, we're active across all four of the asset classes. Today, we think thats a differentiator if you think back to some of our prior commentary our real estate team was really some of the pioneers in the real estate secondaries market.
We pursued infrastructure secondaries through separate accounts and as we've talked quite a bit about both this quarter and last quarter.
Have now the largest venture secondaries fund in the market and have just had held the first close on our next private equity secondaries market, but our activity.
It crosses both the GP led and the MLP part of the secondary market in both areas. We think that the steps down platform brings with it pretty significant advantages from both a sourcing as well as a due diligence and information standpoint.
Great. Thanks, So maybe just a follow up question.
More broadly growing concerns.
Around sticking inflation potential recession geopolitical risk all of that still remains here our RASK I just curious when you think about.
The broader private markets, what sort of top of your wall of worry what tail risks do you see out there and ultimately what sort of deployment opportunities could that lead to or where do you think you might become most excited.
Yeah look I mean, I think as <unk>.
You listed a number of the different concerns that are out there I mean, it's probably hard to pick exactly one but I do certainly think that the.
The recession risk continues to be high on everyone's mind, if I if I used for an example.
As we started to see rates rise our private debt team in particular, we're doing quite a bit of stress testing and scenario planning across portfolios to understand the impact for example of rising rates on credit quality on interest coverage on ratings et cetera.
And found that look the rise in rates on its own would have somewhat limited impact, but it has the potential risk for recession and certainly those.
Tend to be scenarios, where you could then see a decline in earnings and cash flow generation and that certainly were.
You start to see more of an impact on portfolios. If we step back and think about our portfolio is today at the operating performance has continued to be quite strong maybe.
<unk> topline growth, partially offset by inflation and margin pressure, but still resulting in growth in earnings and cash flow. It's really been more of a valuation reset that we've experienced but if you were to experience.
A recession, obviously different sectors will respond in different ways I think that's where some of the concern lies.
From a deployment standpoint again. This is the point that we made during the prepared remarks, many of our most experienced investors understand that.
With that kind of correction comes new investment opportunities and when you have the chance to.
By companies at trough earnings and trough multiples and benefit from both growth from the bottom as well as potential multiple expansion, that's where we've seen some of the best returns historically in the private markets.
Great. Thank you.
Our next question comes from Ken Worthington from Jpmorgan. Please go ahead Ken.
Hi, good afternoon.
So you guys were.
Busy again fundraising on the SMA front.
So it's been a very good second half of the year.
What is the sentiment like for your Lps, given the macro environment and other factors and ultimately what I'm looking for is how do we think about combining your view of sentiment versus your pipeline in terms of what it means for the fund raising outlook for step stone in the second half of the year.
Year for SMA like how.
Again first half was very very strong.
How should we think about this sort of coming together in the second half of the calendar year.
Sure.
I'll start Ken This is Scott again, and maybe others will jump in.
But look you can imagine youll recall during our last earnings call just over two months ago, I think we struck a pretty cautious tone or we think are realistic tone on the fund raising environment and sentiment.
Look with the benefit of two additional months and many many conversations with clients and prospects.
But we would say a couple of things.
One we would reiterate the comment that we've made which is that even as you do come up against the denominator effect. It seems that for every conversation, we're having about the denominator effect, we seem to be having another one about launching a new private markets program or accelerating deployment into a private market program that certainly gives us.
Some level of confidence.
The other thing I would say that even for those.
Clients or prospects that are dealing with the dominator effect issues. After they mentioned as Dominic denominator effect. The next words out of their mouth tend to be but we remember what happened after the dot com bubble or dfc, when we pulled back and missed out on some great opportunities and we're not going to make that same.
Mistake again, and so what you see is you have seen lp's react in a few different ways at some have actually increased their allocations to the private market as asset class.
As we just talked about in response to Mike's question have looked to the secondaries market and others have.
May be reduced but it's certainly not stopped making new commitments and theres a couple of different ways. You can do that you can make smaller commitments at the same number of managers or maybe you are a bit more selective and you invest with a select group of managers as we think about where our separate accounts lie right there in areas.
<unk> secondaries like co investments and oftentimes.
What we find with clients who've really partnered with US to launch. These programs is the last thing that you want to do is now find yourself out of the market. After you spent this time and effort establishing this program and so it's part of the reason that we shared some of the rehab statistics across our separate accounts, which is a key key driver of that separate account fund raising.
Activity for us.
So if I can paraphrase and give you my impression and back to you. It seems like you were definitely cautious last quarter.
But you seem to be less cautious given the two months in the dialogue, you're having right now is that a fair interpretation.
My sort of off the reservation.
No not at the rate we continue to be cautious I think part of what got loss may be in some of the messaging. Historically was the fact that we think we've got a platform that is well suited even for the current environment and again I think it was behind some of the key messages and some of our prepared remarks here around the stability of the business the strength of the.
The rehab center continued growth with existing existing clients.
Okay, great. Thank you very much.
Our next question comes from Alex <unk> from Goldman Sachs. Please go ahead Alex.
Hey, everybody good afternoon as well thanks for the question. So I was hoping to go back to some of the points you made around the secondary business again, something we've been talking about for a while.
Maybe just put a little bit more meat around the bones on what that actually means for its tough stones, P&L and kind of how it all comes together so the $17 billion of sort of dry powder or sort of shadow AUM that will turn on fees once deployed can.
Can you help us frame how much of that is the secondaries business.
Outside of the co mingled funds, because I guess those will turn on fees.
Once the investment period begins so it feels like the deployment pace in secondaries will be accelerated here. So I'm, just trying to better understand how that impacts the revenue base.
Yes. Thanks, Alex This is Scott again so.
But we've never disclosed the exact breakdown either by asset class or a strategy of the $17 billion of unemployed fee, earning capital I would say that it's probably more heavily weighted towards co investments than secondaries.
More of the secondaries programs do tend to pay on committed capital. So the main part of that $17 billion that will convert into fee, earning AUM is the first closing on the private equity Secondaries fund once it's once it's activated.
Got it Okay, and you guys plan to activate it in the back half of the year I think I heard the prepared remarks Q4 rate is that is that still the case.
That's our current plan yes.
Okay.
And then separately just honing in on Green spring for a second.
We obviously you have some questions in that last quarter, we have seen another quarter.
More challenging marks in and some of the growth of year kind of venture based investments how did the marks look across Green Springs portfolio.
Now that we're halfway through the year.
To what extent do you think that could impact capital fundraising efforts for that business.
Yes, I mean look one as a reminder, as we talked about last quarter I would say that.
Again, we did not acquire some of the legacy Greensburg spring carried interest so in terms of how those valuations impact.
The realized carry will have limited impact there, but I think to your point. The question is how does that impact track record future fund raising et cetera.
Rather than get into the Green stream portfolio, specifically I would say across the portfolios that we manage and if we look at how venture marks came in as of March 31, and again still limited visibility on where June 30, It comes out.
Look I'd say, we generally saw sort of mid single digit type declines across venture more broadly, but even if you.
Break that down by individual sub sector, you saw a pretty wide range of activity. Early stage was was less impacted at late stage, which is more tied to the public markets and public market valuations was probably down more like high single digits in growth equity was somewhere in between and so again recall, we've got a very.
Diversified portfolio and venture ranging from early stage to late stage in growth equity and everything in between and ranging across primaries secondaries and direct investments portfolio.
<unk> holding up well from a to your question around fund raising activity continue to see quite a bit of strength. There we talked in the prepared remarks about not only the secondaries fund, but the direct fund the micro fund.
And are now and are now in market with sort of the flagship global.
Venture multi strategy fund as well so a lot of good activity, taking place across the venture and growth portfolio. Okay.
Great. Thanks very much.
Our next question comes from Adam Beatty from UBS. Please go ahead Adam.
Hi, good afternoon, and thank you.
Wanted to ask about the resilience of flows Scott you talked about.
The strength of new clients continuing to to initiate or expand private market programs and also about some werent experience of lp's around attractive vintages that maybe in times of disruption one thing that.
I Didnt hear you mentioned forgive me if you did.
Was the geographic footprint of step stone it seems to me that with some of the U S. Maybe public pension.
<unk> in particular being more constrained that youre more global presence might've helped with resilience of flows is that the case and if you could give some details around that I'd. Appreciate it. Thank you.
Yeah, So Adam.
We did make a brief mention of the international mix during our prepared remarks mentioned that really over the last 12 month period and this is consistent with the last few years something like 80% of the <unk>.
AUM inflows have come from outside of the U S closer to 20% from from from the U S or North America.
Look I would step back and say and I do think that is a source of strength for us I would say I am not sure I always totally agree with the narrative that has emerged around you've just being U S. Public pension funds that are impacting I would say that for a couple of reasons one of which is we've had some good performance here in the U S and over the last couple of quarters is.
Well, including.
U S public pension fund clients of ours that have re upped their expanded relationships. So again I often find it somewhat difficult to generalize.
On these topics and I think the same is true I mean outside of the U S.
Investors some investors that are impacted by the denominator effect as well, but look we do think that will be a continued source of strength for us.
About some of the legacy Green spring funds have probably been more heavily weighted towards the U S. Historically and so certainly one of the opportunities here is for us to introduce our global client base to our expanded venturing growth capability.
Thank you, yes, it's a good perspective, a street now my thinking a little bit.
And then.
Just moving on I wanted to ask about the realized carry.
Acknowledging that steps from there we can really control that.
Jon has comments sounded like this.
At this point from what you can see a slowdown is ahead. So I guess the question is.
How quickly could a rebound in conditions whatever that maybe its doom dealmaking activity or what have you where valuations, but how quickly could that kind of turnaround that outlook.
Would it take a quarter or two or could it be longer than that.
Yes look I think it probably does take a quarter or two because if you. Even just think about the time lag between transactions being signed and then being completed that does tend to take a couple of quarters and as Johnny mentioned during the prepared remarks part of the reason that we saw continued strength this quarter was just.
The pipeline of exit that had been signed up in late 2021, and ultimately closed during this last quarter here. So I think it does take some time I wouldn't yes, I mean.
Look I don't necessarily expect that realizations rebound immediately to 2021 activity levels and part of the reason I say that as you've heard me say on past calls.
Really we were operating environment last year when all exit routes were opened Ipos strategic M&A certainly financial buyers.
About the current environment clearly the IPO window is largely closed I'd say strategic M&A has slowed and really if we look over the last couple of quarters. It had been almost entirely sales to other private equity firms or <unk>.
<unk> led secondaries that have driven our exit activity. Good news there is there's a tremendous amount of dry powder. So I expect some of that to continue.
But perhaps not at elevated 2021 levels.
Got it makes sense. Thank you Scott.
And at this time under appears to be no further questions I'd like to turn the call back to Scott for closing remarks.
Well, great as always we appreciate the time and the interest and the steps down story and we'll look forward to keeping you updated in future quarters. Thank you.
This concludes today's conference call. Thank you for attending.
The host has ended this call goodbye.