Q3 2022 Federated Hermes Inc Earnings Call
Good morning, ladies and gentlemen, and welcome to the FHA.
Q3, 2022 analyst call and webcast at this time, all participants have been placed on a listen only mode and the floor will be opened for questions and comments. After the presentation. It is now my pleasure to turn the floor over to your host Mr. Ray Hanley, President Federated Investors management company right.
Sure.
Good morning, all leading today's call will be Christiani, who's CEO and president of Federated, Hermes and Tom Donahue, Chief Financial Officer, and joining us for the Q&A are soccer to Savi who's the CEO of Federated Hermes limited and Debbie Cunningham, our chief investment officer for money markets.
During today's call we may make forward looking statements and we want to note that Federated Hermes actual results may be materially different than the results implied by such statements. Please review the risk disclosures in our SEC filings.
Assurance can be given as to future results and Federated Hermes assumes no duty to update any of these forward looking statements Chris.
Thank you Ray good morning, all I will review Federated Hermes business performance, Tom will comment on our financial results.
While Q3 presented challenging market conditions across asset classes.
Our business mix enabled Federated Hermes to achieve positive net sales in equities fixed income private markets and long term assets. Overall, we also produced increases in revenue operating and net income compared to the prior quarter as growth in money market revenue.
Offset lower revenues from market based decreases in long term assets.
Looking first at equities assets declined due to the negative market and FX impact. However, Q3, net sales were $182 million compared to net redemptions in the prior quarter of six of $969 million and for Q3 of 'twenty.
One of $1 4 billion.
Equity net sales were driven by the strategic value dividend strategy.
The domestic strategy had third quarter net sales of nearly one 6 billion with both the fund and almost $600 million in the SMA at about 1 billion producing solid net results in sales.
We also saw third quarter positive net sales in <unk> equity fund strategies, including several international equity strategies like Asia, ex Japan International strategic value China equity.
International equity international growth and emerging markets equity the domestic MDT small cap core MDT large cap growth.
Also had solid net sales results.
Net redemptions were concentrated in growth strategies of about $555 million in Q3 down from $955 million in Q2.
Still reflecting difficult market strategy market strategy.
Environment for these strategies.
We continue to emphasize asset classes and strategies that have responded well in past inflationary periods, including dividend income international emerging markets and value strategies.
Now our equity performance.
At the end of the third quarter.
<unk> two peers was solid using morningstar data for the trailing three years at the end of the third quarter almost.
Yes.
60% of our equity funds were beating peers and 40% were in the top quartile of their category.
For the first three weeks of the fourth quarter combined equity fund and SMA have had net redemptions of $192 million.
We have 13 equity funds with positive net sales in the first three weeks of October including strategic value dividend Asia ex Japan inter.
International strategic value dividend and international equity.
Now, let's turn to fixed income.
The third quarter saw overall net sales of about one 1 billion.
Fixed income separate account net sales of $3 2 billion were partially offset by $2 1 billion of fund net redemptions.
Fixed income separate account net sales were driven by multi sector strategies. Most of the Q3 separate account net sales came from a large public entity.
Within funds our flagship core plus strategy total return Bond fund total return bond saw net sales of about $750 million benefiting from a long.
Term performance record.
That has led to expanded distribution opportunities.
Core plus and other multi sector fixed income SMA strategies added another 209 million of net sales.
Within fixed income fund net redemptions of about $1 4 billion occurred in the three ultrashort funds.
In addition high yield funds had about 462 million of net redemptions down from about $860 million in the second quarter.
Even so we had 12 fixed income funds with positive net sales in the third quarter, including Conservative municipal micro short Muni high yield advantage total return government bond and others.
Regarding performance.
Performance.
At the end of Q3 end using Morningstar data for the trailing three years, just over 60% of our fixed income funds were beating peers.
And 22% were in the top quartile of their category.
For the first three weeks of Q4 fixed income funds and SMA had net redemptions of about $693 million.
And this is mainly from ultrashort funds about $400 million in high yield almost $200 million.
During the same period, we had 14 fixed income funds with positive net sales led by Conservative municipal micro short total return Bond fund short term.
And ultra short government Bond fund.
And the alternative private markets category net sales of $17 million included real estate Pru bear MDT market neutral and this was partially offset by net redemptions in infrastructure private equity trade finance absolute return credit and unconstrained.
But.
We continue marketing the fifth vintage of PEC PUC, our co invest private equity structure and the third vintage of the horizon private equity fund.
We began in Q4 with about $2 9 billion.
In net institutional mandates yet to fund into both funds and separate accounts.
About $2 6 billion of this net total is expected to come into private market strategies, including private equity a little over $1 billion direct lending about $1 billion and unconstrained credit $400 million.
Moving the money markets.
Assets increased in the third quarter compared to the second quarter.
Money market fund assets increased.
About 12 billion benefiting from higher yields and continued elevated liquidity levels in the financial system.
Any funds also benefited from higher yields relative to deposit alternatives.
We continue to believe.
That higher short term rates will benefit money market funds over time, particularly as compared to deposit rates.
Money market separate accounts were down by 10 billion, mainly from seasonal factors related to timing of tax payments.
Our money market mutual fund market share, including sub advised funds was about seven 4% at the end of the third quarter up from about seven 3% at the end of the second quarter.
Now looking at recent asset totals as of a few days ago.
Managed assets were approximately 626 billion.
Including $437 billion in money markets.
<unk> 7 billion in equities.
89 billion in fixed income.
$20 billion in alternatives private markets.
And $3 billion in multi asset.
Money market mutual fund assets were 304 billion.
These figures include approximately $3 5 billion in fixed income assets from the CW Henderson transaction, which closed on October the first Tom.
Thanks, Chris.
On the financials total revenue for Q3 increased $15 million or 4% from the prior quarter due mainly to lower money market fund minimum yield related waivers of nine $5 million higher average money market assets, increasing revenue by $6 6 million.
Lower money market competitive waivers and an additional day in the quarter.
And higher carried interest and performance fee.
These were all partially offset by lower average long term assets, which reduced revenue by $12 8 million.
Q3 carried interest was $3 $9 million and performance fees were 300000.
Q3 operating expense increase.
$10 7 million or 4% compared to Q2.
Driven by $9 million of higher distribution expense from lower money market fund minimum yield related waivers.
The decrease in compensation and related expense from the prior quarter reflected lower Q3, FX rates per pound Sterling based compensation of three one.
$1 million.
Partially offset by $1 5 million of higher incentive comp related to carried interest.
The Q3 increase in other in the other category of operating expense compared to Q2 was due mainly to one <unk>.
3 million of net mark to market losses related to FX, including the currency forward used to hedge certain pound exposure.
This expense was $4 9 million in Q3 compared to $3 6 million in Q2.
This Q3 expense was largely offset by an estimated $3 8 million in higher pre tax income related to the change in value of the pound and various revenue and expense line items.
Such that our estimate of the net income impact of Q3 changes in the value of the pound was a loss of about $1 1 million pretax or about a penny of EPS.
Investment losses after subtracting the impact attributable to noncontrolling interests reduced earnings per share for the quarter.
About <unk> <unk> due to the negative market impact on our investments.
At the end of Q3 <unk>.
Cash and investments were $481 million of which about $427 million was available to us.
Debt at the end of Q3 was $397 5 million.
During Q3, we repurchased 212000 shares of our stock for approximately $7 million.
Jenny that completes our our comments and we would like to open it up for the question and answer session. Please.
Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments. Please press star one on your phone at this time, we also while posing your question. Please pickup your handset you want to speak to provide optimum sound quantity. Please hold while we poll for questions.
Thank you. Your first question is coming from Patrick Davitt of Autonomous Research Patrick Your line is live.
Hey, good morning, everyone.
I think I think everyone's been a little surprised how anemic money fund flows have been in <unk> and I hear your comment on the tax your tax issue, but still it's still pretty bad here in October .
You're clearly outperforming a lot of your competitors, but the picture is still I think off from what we would've expected a couple of questions on that firstly could you frame any other dynamics that might be going on.
Given how high rates have gotten and secondly should we should we still expect the big four Q surge on the usual seasonality plus the higher rates.
Thank you Patrick there are some other dynamics and next week, what's the fed going to do 75, what are they going to do in December and what we've always said.
Several of these calls is that over time.
This helps.
<unk>.
The money fund business.
We often goes back to the story of 16 to 18.
When the fed was increasing rates, where our assets then increased about 15% in the industry about 11, and then in the next period once youre dealing with higher rates.
Our assets went up.
Another 22% in the industry increased about 14% so those two levels.
We think we will obtain when I don't know im going to let Debbie comment on other dynamics and let her take a guess about fourth quarter avalanches.
Thanks, Chris.
And Patrick a couple of different things first of all historically with cycles Christopher referenced the 16 to 18, but looking at even more historic cycles. There is generally about a six month lag to when.
Policy changes start to occur so that occurred in.
The fed began moving in March so we're at about just following that that six months lag. So our expectation would be that we start to see a little bit more of a pickup going forward number. Two is we were moving off of zero and zero again as is.
Despite the fact that if you have been in the market. The last 15 years. Most of your lifetime was spent at zero rates, that's not the norm, So I think cycles.
Coming off of zero react a little bit differently.
Thirdly, if you look at where there hasnt been a huge amount of growth since march within the industry.
And this was referenced several different times and media articles over the course of last week, it's been in retail prime now that category.
A six month basis is up too.
67%.
Hey, Josh.
Industry as our assets in that category are up even more than that in the high eighties and that's a reflection of those assets, having gone very very low in a zero rate environment and now starting to come back as a good I'll turn it adds to deposit products, which as Chris was mentioning.
<unk> are not near a response as for retail customers too.
Increasing rate environments contrast that to prime institutional which has sort of the baggage.
2014 reforms that were enacted in 2016 and Thats a floating NAV.
And that category is only up 13% and government funds, which are the lowest risk category are only up 1%. So I think it's.
It's a dynamic.
At this point of where the industry assets are and looking at then to some degree on an individual category by category basis. Once we get to a point, though I think where people are comfortable.
That the fed is not going to continue to double rates.
Every six months or so.
That's when you really start to see the growth factor in all products in the liquidity space start to kick in and we're just not there yet.
Okay. Thanks.
One quick follow up for soccer.
It looks like Hermes might've had a fairly sizeable announced realizations and <unk> that set to close this quarter, a big Greek resort group.
It's not clear how much Hermes zone, but it looks like the millwork is quite high. So do you have any visibility on how additive.
That deal could be to <unk> performance.
So zack.
Got it. Thank you. Thank you very much for the question.
I am afraid, we don't give you breakdown.
Deal by deal of what we do.
Close.
So we can discuss this more offline if you'd like.
Generally we did not give you a deal by deal breakdown because it's all of the other clients, but also in the deals that we do.
Patrick This is Tom.
On the timing.
<unk> doesn't know the team doesn't know and we don't know because you asked Q4 or other on any kind of.
Carried interest that we're getting.
We just don't we.
We don't know.
Okay. Thank you.
Thank you very much. Your next question is coming from Dan Fannon of Jefferies. Your line is life.
Thanks, Good morning wanted to follow up on the unfunded wins I think you mentioned they were all in private market. So could you talk about kind of the momentum.
Across that side of the business and whether this is just the timing where theyre coming in terms of the fourth quarter or prospectively thinking about momentum fund raising other things across the private side.
That would be helpful.
Okay, I will talk a little bit about this first I'm going to let sac or have have a swing at this one on the institutional business. We've been focused on solutions based type campaigns and.
But we're sort of unique types of capital allocation stimulus pools infrastructure pools opioid settlements and things like that.
And the emphasis has been on fixed income type mandates and so thats been the workflow of the institutional business.
And that reflects a U S domestic.
Thing, which we think is pretty good in addition on the domestic side.
The state pools have been a very successful business for us and we look forward to continuing to grow that as well I think we're up to about 137 or $140 billion or so.
State monies not just state pools, but in state monies and that remains a very very strong business on the private market side I'm going to let.
Sacher comment on those.
Thank you very much and here, we have the right deal.
All projects going on.
Equities, which has had.
An excellent track record.
Hudson is.
Continuing res tech.
Which is co investments private equity funds and then horizon.
Have commitments not the reason for that is there's a strong move for many institutional pension climbs towards investing in private assets for the long term. In addition to that direct lending strategy, which has had a very successful track records again has continued the strong raise of assets as we go through it.
We see increased amounts of that both in the UK and Europe .
But it is also another place where we see where.
Where we see demand. So this is part of the trend I think.
Particularly institutional clients see value.
Previous strong track record and strong teams and processes.
Seem to attract.
Got it okay. Thank you and then for a follow up just wanted to talk about capital return.
Buybacks, obviously slowed versus the pace in the first half you announced.
Physicians GW Henderson, so in terms of the backdrop, where things sit today how are you.
Capitalized capital return and maybe characterize it also in the context of the M&A environment and kind of a bolt on deals you've been known to do overtime.
Sure Dan It's Tom.
In terms of buybacks look at look at our track record in terms of last year and the beginning of this.
Part of the year of buying.
Buying back 10 million shares and then you can actually look at the history when we have done deals.
Shares have our share buybacks have gone down.
But we still ever.
Every quarter and every day look at R. R.
Expectation for where we think the company is going and whether the price and our models.
So the future of shares is we're definitely we still have $5 million left in our.
Recently approved program and we will be active.
On the amount will depend how how we look through the quarter.
Ms of M&A.
We're pretty excited about the the CW Henderson deal.
Had a lot of people out there a lot of sales.
<unk> and <unk> going forward.
To grow that successfully get them their contingent payments through through the years and grow it.
And so we're focused on that right now in terms of M&A, our team that that goes out and looks for deals is still out looking.
But we're talking about the past deal right now which is the current deal.
The real thing is how can we grow that.
Okay. Thank you.
Thank you very much. Your next question is coming from Ken Worthington of JP Morgan Ken. Please ask your question.
Hi, good morning, Thanks for taking the questions.
Maybe first in terms of money market fund mix in recent months, we've seen money coming out of government obligations funds and going into prime obligation funds and it feels like this phenomenon of institutions, taking money out and retail putting money in assuming my interpretation is correct and this trend persists how should this impact Matt.
<unk> fee rates and distribution costs for money market funds. It feels like if we're seeing a little bit of a transition from institutional to retail that both should be going higher but would love to hear your comments.
Ken It's ray just from a from a fee standpoint.
The retail oriented funds will tend to have both higher revenue and higher related distribution expense.
But if you consider on a net revenue basis, it would be fairly comparable to two institutional so we should not see a.
A meaningful change there in our in our blended.
Blended if you will see right.
Okay. So even distribution channels are all sort of equivalent for money market funds in terms of the net rate that they're generating.
Yes, roughly.
Okay.
And then you are having great success in SMA and.
In equities and fixed income.
Can we talk about how.
SMA fees compare with fund fees. So if you take for example, the biggest equity product sheets high dividend, you've got a big fund presence, but you have a big maybe even bigger SMA presence there how did the fees compare how much lower are the SMA fees than the funds.
Fees or maybe they are more equivalent but help us understand that and is that phenomenon sort of consistent throughout SME versus funds.
Sure sure Ken.
<unk>.
Our comparable to other.
What may be considered institutional accounts, even though the end.
Users typically.
High net worth and application and a wrap type of account.
But in terms of fee level youre dealing with.
The sponsor of the SMA and so it's more analogous to an institutional account.
And then.
If you look across in the industry.
Typically.
Mutual fund fee rates would be as much as twice what the average institutional account.
<unk> rates would be so.
We were very cognizant of this when we went into the SMA business.
Pretty much at the beginning of it.
And.
We've had a lot of success.
We're close to $30 billion there of course, it's weighted towards strategic value dividend, but we've had some good.
Growth over the last couple of quarters and good placement on our core plus fixed income product in SMA world, that's starting to to pick up and as Tom mentioned, the Henderson acquisition gives us.
Some good performing strategies with.
<unk> differentiated from other things, we're doing in the Muni space with an outstanding team and.
A very good long term record so.
That we expect that business too.
Continued to diversify and continue to see strength on the fixed income side.
Great. Thank you.
Thank you very much. Your next question is coming from Brian Bedell of Deutsche Bank, Brian Your line is nice.
Great. Thanks, Good morning folks, maybe just one more on the money market side.
If you can comment in terms of the distribution channels, maybe what portion of your money fund assets are wood.
Within sweep program.
An option for us.
Sweep deposit investors too.
You take on invested cash and put that in a money fund and whether youre seeing that action actually happened and then back on the institutional side is it sort of.
How do we understand it where institutions are.
Can I invest directly in fixed income securities to get a better yield once that Recalibrates you would you expect that to come back and therefore.
It helped accelerate some fluids.
Money Fund SMA.
Brian on the sweep front, it's hard to identify a lot of our clients do with us on an omnibus basis, and so we don't always have visibility to the to the end.
I would.
Peg it at.
Somewhere in the neighborhood of 10% to 15% of our money fund AUM, but again, it's difficult to get a precise figure that the other thing I would add Brian is that the.
The suite clients changed completely into the government products. After the last set of reforms because of the institutional.
Prime floating NAV for JJ.
For them.
Grabbing and platform standpoint so.
Essentially our government products phenomenon now.
As far as institutional gross goes and when that happens generally speaking it is lagging on a historical basis.
But even more so when youre talking about coming off of zero at cadence and the expectation is that when you are nearing a peak or getting to a point, where you think there is a terminal rate in sight.
Fed funds target standpoint.
That's when institutions really begin to move in earnest and quite honestly.
Betty to declining rate environment is really what produces inflows into institutional money market funds on an outsized basis.
As long as you are not declining into a zero rate environment again, so I think we're far away from that sort of to either one of those things happening either we're number one that the fed reaching a terminal rate and then a very near term or number two when.
When they do trending back anything that to near zero. So.
I think the institutional growth.
Is beginning to happen it will continue to happen, but it will increase in rns more than likely in 2023 versus 22.
Totally makes sense and then maybe just on fixed income and all.
Also through strategic value in here.
What are what is your sales force in terms of what they're hearing from financial advisors about.
The timing of when retail investors may shift back into bond funds, obviously, they want to avoid the NAV hits from rising rates.
But is that also an argument whereby once we are close to terminal rates you would expect a reacceleration.
The reacceleration in retail bond funds and then our strategic value that yield obviously is fairly looks like it's fairly close to short term rates right. Now that gives you equity optionality are you seeing or do you expect more interest in that as we move into 2023.
Well the answer on when do the clients expect the warm to turn its not yet and they don't have a time on it in fact, that's one of the principal question of asking us where asking anybody and if anybody knows.
They're going to make a fortunate right now the word we get from our financial advisors is it on the whole, they're bearish and defensive and.
As you suspect money funds or.
Front and center and Youre seeing some moves in government ultrashort, which I mentioned in micro shorts.
Now when you talk about total return bond that's still has strong legs and there is some amount of tax loss harvesting thats going to go on and other funds and and so that will be.
Playing some musical chairs out in the marketplace.
Would be interesting.
And because of exactly what you said with the dividend rates on the strategic value dividend fund our rush.
Roughly comparable to some other rates.
There are some fas are getting more comfortable with.
With that and you see that in some of the flow numbers.
But understand that on the other side you still have upticks in the Pru Bear fund which is.
Basically a short fund and I'd say overall.
There are people are telling us is that there are.
<unk>, having some of the toughest conversations with clients.
For a while and it's very very challenging and Thats why we try to offer things like products that are sensitive to the inflation, which you've talked about before.
And our portfolio construction activities.
There you can actually get a hold of the portfolio and show the FAA and the underlying client exactly what risks are being run and make adjustments.
Even to include things like.
The MDT market neutral fund.
To change the dynamic in some of those portfolios and so even though I'm, telling you that the <unk> or the bearish or defensive in and all of that there are many things that can be done to advance the ball.
That's great that's great color. Thank you.
Thank you very much. Your next question is coming from Mike Brown of K B W. Mike Your line is live.
Great. Thanks for taking my questions.
Yes.
If we.
Let's start on the ESG topic, Thats, obviously been facing greater political scrutiny. These days and I know, it's integral to the investment process.
Federated Hermes so.
What are you seeing in terms of.
The pressure of a buyback from.
Pushback from investors on either side of the island and how have you been navigating this.
<unk>.
This is kind of a greater scrutiny on ESG.
Okay.
What we see as the repeating the sounding joy of the beauty of an integrated ESG analysis.
Our investment managers managing money in the best interest of the shareholders and we're going to repeat this.
As long as we can because we are investment advisors.
I mentioned, the 137 billion in state money that we had if you look at the top 10 states on that list fiber red and five are blue.
So what is going to be Federated Hermes answer. The answer is we are not going to politicize or get into the jumbo lie of the politics of ESG. We are going to use those factors in order to improve performance work on investment management.
<unk> and that's how we deal with it so when you say we get pressure.
Youre going to get pressure everywhere everyday on everything you do.
Get over it and get on with it.
My Dear friend Sacher, who was at the beginning of this.
And basically the.
And Pierre I wrote their documents in his office.
Near a 100 years ago I'm going to let him comment on this subject.
Thank you Chris.
We started down this journey back in 1983, that's before I even joined yet.
The objective has always been to improve performance and we would argue that ESG factors puts into effect improve the performance of companies that improved both with the long term performance of shares.
They should not be as key from the perspective of this size of the problem is partly to do with the model that people have between SSRI associated responsible investment, which has a place and by the way we run some domestic bonds will people, whose sole lynch and mainstream ESG.
Through our internal numbers.
This is intended evidenced some extended absence, some truths that we believe in engaging with companies, while holding version divestiture engaging with companies, while holding that shows will add performance over the long term.
We find the companies that can improve some of the taxes will add value over the long term. So we use ESG as effective and as a way of understanding companies' fundamental analysts on both sides of the pond with a fundamental understanding of the companies and we integrate the fundamentally understand the companies in our stock selection.
The politics going on.
Both side.
Is interesting, but it's not investment so I leave it to the politicians and we stick to our knitting, which is acting as a fiduciary managers looking out to the <unk>.
<unk> of our clients and trying to create wealth sustainably over the long term.
Thank you Chris.
Okay.
Thank you, Chris and Jack I appreciate the thoughts there.
The a lot of my questions have been asked about the money fund business, maybe just one more there.
What's the latest on the regulatory front and as it pertains to the money fund business and can you remind us how much of your business is at risk from swing pricing.
Yes, it would be about $8 billion, we haven't come off of that number and answer. The last question answer to the first question various things occurred at the SEC and otherwise.
Put the actual implementation of the rule off at least a quarter now we don't know when theyre going to come up with it.
Thought it would be.
Already but because of some glitches in their systems on the comments situation there to extend.
And so there are proceeding and the other thing, which we mentioned in our Q is the <unk> is doing a little study on money funds to see what impact.
Has been had that was requested by certain Congress.
Our representatives.
In Congress and I don't know, what Thats going to report, but thats.
Supposedly coming out here in the fourth quarter.
And perhaps that will help inform.
We are needless to say using this additional comment period so.
Pointed out other things.
On.
As we've said before that that really swing pricing on money funds is a great disease to impose on.
On the money funds and Theres, no basis data or history for doing that and.
It just doesn't seem right now of course, the FCC announced theyre going to do put out something on swing pricing on bond funds.
And so that has been done in Europe , and I don't know, what theyre going to propose or what the deal will be on that there's another whole round.
But it just makes no sense on.
On the money funds at all and we've also been talking to them about.
What happens.
When as and if you get to negative rates negative rates are you kidding.
We're not talking about negative rates, but they are a little rule that says you got to do some things, which we don't think.
The intermediaries are their clients will do.
On that score. So we've had very recent discussions with them on reverse distribution method so called.
In order to enable funds to deal with it long term, if you do get negative rates, which nobody foresees.
It's hard for us to figure out why you would.
Injure current funds that are functioning well.
By that concept when you have plenty of time to study. It. So we don't know when the regs are coming out we know it's been delayed and we know there's been a lot of commentary much like ours.
<unk> unified by the industry.
And many others against doing what theyre proposing but we'll see.
Okay, great. Thanks for the update Chris.
Thank you very much. Your next question is coming from Kenneth Lee of RBC capital markets. Kenneth Your line is live.
Apologies just one second I think that the.
Okay.
Hi, good morning, Thanks for taking my question.
In terms of the just given the current market environment I'm wondering if you could just share with us your thoughts around how operating expenses could trend more specifically.
Questionary items.
Could trend thanks.
You broke up a little bit there I think you are asking about where are we trending expenses.
So.
Comp.
Comp and related.
We went through what happened and you can see in the press release, but we would expect that to go up both the incentive and the base.
We are facing.
Same inflationary situation than everybody else's.
You go down to distribution.
Were right and we collect more money fund assets that distribution line will go up and we will be very happy about that going up.
On the systems and communications Tech well theres going to be more tech spending it seems like there is always more tech spending.
<unk>.
And we have a lot of things going on to too.
Make us a.
Global company, and Thats kind of going to be a theme here in the future and that will require more technology spend which we will be doing and we expect it will help our performance.
Professional fees and an office stuff I don't have really any comments there advertising.
Ill tick up there we have a lot of good products and in the future we expect to be focusing on our good products and if we come out with new products, we would expect to focus on those.
So I wouldn't be surprised to see increases there.
On travel and related.
Still pandemic.
Low pandemic costs and our.
And the history quarters, and so kind of year over year, you're definitely going to get an increase as our teams get out there and have our excellent products.
Well.
And other that's where we've talked about the FX stuff. So.
Who knows what's going to happen there.
Great.
That's all I have thank you very much.
Thanks, Ken.
Your next question is coming from John Dunn of Evercore, John Your line is live.
Good morning, maybe an extension of the ESG question an update on.
<unk> business, where you think it could translate into inflows and maybe the evolution of the conversations with U S institutional clients.
Let me just make a few comments on iOS and then I'm going to let its founding father talk.
To us iOS is a grand source of data.
That has been accumulated over the long term that is an edge against the rest of the marketplace. Because it helps you look through the front of your car, where youre going in not just the rearview mirror, which everybody always already has.
Plus because it's a long term engagement you get good judgments good people, who are subject matter experts, making.
Real determinations about which way things go in terms of its growth.
The impact its accuracy and I'll, let him speak on that.
Thank you very much Chris just to build on.
The introduction of that Chris made so.
We've been doing this for quite a few years almost 18 years.
Currently for slightly longer from before that.
And the basis of it is engaged clients now we think there are two advantages that we can get out of the deals the first what exactly as Chris pointed out to us.
Especially Lasalle global.
Global companies over a 10 year horizon and the insights that we get from doing this <unk> been sort of portfolio management.
He is a valuable source of fundamental understanding which helps us.
To formulate our investment decisions.
That's the value that we do is for our clients and Neil.
Typically these are institutional clients, who have index exposures, we hope so.
Sure.
Fox, which by definition the comp that's from because they are an index actually continued to increase the return.
Now we saw.
The spike in interest you guys back when there was a change in the law in the Nordics.
Great stewardship.
Essentially we see that in advanced markets like Australia, we continue to see.
Thats attractive for us and we continue to build our business there and generally speaking we continue to grow our business.
Around the world.
Slow sell it takes a long time to get people to come on board because it's a partnership.
Like other models.
Yields engages it doesn't engage on behalf of Chi feels engages on behalf of its clients because we involve eaton have reclined.
Engagement decisions that we make.
So it's.
We believe.
Business that will continue to grow by definition and we believe it's a business, which is very valuable both for the shareholders and also for us as investors.
Thank you.
Okay got you and then maybe just a quick one on.
Can you remind us of kind of the gaps in your strategy and distribution sides and maybe.
Kick in on the temperature and willingness to join you guys.
Well in terms of gaps.
With the CW Henderson, we filled one that we have articulated for several years.
<unk>.
Our Muni SMA.
Advisor, which is a great record great people and as Ray pointed out in.
It gets us pretty close to $30 billion in SMA assets, which is a pretty good size in there. So.
We're not exactly focused on any particular gaps right now.
But yes.
Just to follow on that the business in the.
London Office.
On private equity infrastructure real estate and direct lending.
Have been mostly.
Okay.
The real estate U K focused.
I think we've talked about it here.
We'd like to figure out how to do that in the U S and whether that.
Requires a acquisition to really get going.
There's some thought that that's what's required.
Just like the Henderson deal took us a long time just like the.
The acquisition of the London Office took us a long time I would expect that we're going to stick.
Victor discipline falls find somebody that fit with our culture.
How we think and we wont proceed until those criteria are fulfilled, but thats something that we.
<unk>.
I think we have good strength in the London team, who actually have U S offices.
And how.
<unk> opportunity for us.
Sounds good thanks very much.
Thank you very much there appear to be no further questions in the queue.
Back over to the management for any closing remarks.
Well, thank you for joining us today that concludes our call.
Sure.
Thank you ladies and gentlemen, this does conclude today's conference call. You may disconnect. Your phone lines at this time and have a wonderful day. Thank you for your participation.