Q1 2023 T. Rowe Price Group Inc. Earnings Call

Speaker 1: Have F.

Speaker 2: Good morning. My name is Shannon, and I will be your conference facilitator today. Welcome to T. Rowe Price's first quarter earnings conference call. All participants will be in listen-only mode until the question-and-answer period. I will give you instructions on how to ask questions at that time.

Speaker 2: As a reminder, this call is being recorded and will be available for replay on TRO's website shortly after the call concludes. I will now turn the call over to Linsley Carruth, TRO prices director of investor relations.

Speaker 3: Hello, and thank you for joining us today for our first quarterly earnings call. The press release and a new supplemental materials document can be found on our IR website at investors.teroprice.com and from the downloads link in the upper right of the webcast platform. This call will last 45 minutes.

Speaker 3: over 15 minutes, and then we'll open it up to your questions.

Speaker 3: We ask that you limit it to one question per participant. I'd like to remind you that during the course of this call, we may make a number of forward-looking statements and reference certain non-GAAP financial measures. Please refer to the forward-looking statement language and the reconciliation to GAAP and the supplemental materials, as well as in our press release and 10Q. Now I'll turn it over to Rob. AudiSoldier.com

Speaker 4: Thank you, Lindley, and welcome to everyone joining us today for our inaugural earnings call.

Speaker 4: I'd like to start by saying that in rapidly evolving market conditions like the ones we experience this quarter, what we deliver for our clients matters more than ever.

Speaker 4: Our clients have entrusted us with over $1.3 trillion of assets, and we are deeply focused on helping them meet their long-term financial objectives.

Speaker 4: I'm pleased by how our teams have responded in these times, staying close to our clients, sharing insights, and helping them navigate uncertainty.

Speaker 4: Our first quarter shows some encouraging signs.

Speaker 4: Markets posted gains, and our investment performance showed signs of improvement. However, the market environment remains uncertain, and our flows remain under pressure. In light of this uneven backdrop, we continue to carefully manage our financials to preserve our ability to invest in long-term initiatives to support growth.

Speaker 4: I remain confident in the long term fundamental value that a global active investment management firm like T-Royce can deliver no matter the environment.

Speaker 4: With that, I'll provide an overview of the market context and our investment performance.

Speaker 4: as well as an update on our strategic priorities.

Speaker 4: Stocks in the U.S. and most other major equity markets recorded solid gains in the first quarter. Although returns were trimmed by the banking turmoil in the U.S. and later Switzerland.

Speaker 4: Bonds also offer good returns as growth and interest rate expectations moderated.

Speaker 4: A flight to safety following the banking turmoil led to a sharp decrease in U.S. Treasury yields, especially in the two-year yield.

Speaker 4: The yield curse stayed inverted, however, which may be an indicator of a coming recession.

Speaker 4: Stock returns in the U.S. varied markedly. Term oil in the banking sector and signs of ebbing growth in inflation pressors led to lower treasury yields and boosted growth shares by increasingly implied value of future earnings. The NASDAQ Composite Index jumped nearly 17 percent.

Speaker 4: and technology shares within the S&P 500 index return nearly 22% including dividends during the first quarter.

Speaker 4: Conversely, declines in bank stocks and oil prices contributed to a modest overall decline in the small cap Russell 2000 value index.

Speaker 4: Monetary and fiscal tightening, healing supply chains, and easing energy prices help lower inflation in most major economies.

Speaker 4: to 5% over the quarter in the U.S. and from 9.2% to 6.9% in the Eurozone.

Speaker 4: with UK inflation being an outlier in both direction and magnitude.

Speaker 4: In this choppy market environment, we saw our investment performance improve for some of our equity and fixed income strategies that struggled last year.

Speaker 4: While it was reassuring to see performance rebound in a number of key strategies in the first quarter, we are keenly aware that one quarter does not make a trend, especially in such an unsettled macro environment. Periods of market transition in elevated uncertainty can work to the advantage of quality active managers.

Speaker 4: Near-term dislocations often create long-term opportunities as the market refocuses on fundamental drivers such as valuation and earnings quality.

Speaker 4: Our firm has navigated both sides of the investment performance cycle before.

Speaker 4: We persevere by adhering to our rigorous investment process and leveraging the insights generated by our global research platform.

Speaker 4: The solid long-term pre-record of our target date franchise reflects these strengths.

Speaker 4: as does the performance of our value and core equity strategies last year. And I'm encouraged by the resilience of our U.S. equity research strategy.

Speaker 4: where more than 25 of our TRPA research analyst contribute to the portfolio in their focused area of expertise.

Speaker 4: As a fundamental research driven investment organization, our deep sector expertise and longstanding engagement with management teams is pivotal to understanding the long-term strategy and goals of the companies we invest in. We are proud that among more than 330 asset management firms nominated,

Speaker 4: We came in a very close second in institutional investors in inaugural 2023 ranking of America's top asset management firms.

Speaker 4: I am pleased that so many corporate voters recognized our differentiated research and corporate access model.

Speaker 4: Despite these bright spots, net flows continue to be under pressure. As we reported, net outflows for the first quarter were $16.1 billion. The primary driver was net outflows in our large cap growth equity strategies, reflecting both continued weak industry demand and the lagging impact of investment performance challenges in these strategies. While those net outflows were broad-based, net outflows were broad-based.

Speaker 4: They were particularly apparent in our United States to find contribution investment only and broker dealer channels.

Speaker 4: We continue to face headwinds with net flows to our large cap growth strategies.

Speaker 4: But we expect that they will abate with sustained investment performance and time. On the positive side, we recorded $7.5 billion of net inflows into the Target Day franchise and over $250 million in net flows in each of global multi-sector bonds.

Speaker 4: U.S. dividend growth, U.S. taxable cash management, U.S. all-cap opportunities, and U.S. short-term bond strategies during the quarter. We expect that we will return the firm to positive organic growth over time with a combination of more constructive markets, sustained improved performance in key strategies.

Speaker 4: traction with a broader range of vehicles and continued progress with our strategic initiatives.

Speaker 4: Although excellent investment performance is central to our long-term success, our industry has gotten more competitive.

Speaker 4: We are committed to investing in the areas where we have scaled businesses such as our leading retirement franchise.

Speaker 4: to building capabilities to support future growth.

Speaker 4: We see an opportunity to elevate our focus on areas where we have already invested resources over many years and where we believe we have the greatest opportunity for growth and long-term success.

Speaker 4: I would like to highlight some areas of focus and our progress against our strategic initiatives.

Speaker 4: We are bolstering our U.S. intermediary well channel, leveraging and extending the partnerships we have built.

Speaker 4: This quarter we were named a top-tier provider to another one of the largest intermediary firms in the industry. With this decision, we are now a top-tier partner with six of the 10 largest intermediary firms in this space. We are also broadening our range of products to ensure we deliver our investment strategies in the vehicle of choice. As more advisors look to do more with fewer investment management partners,

Speaker 4: We are well positioned to build on these deep partnerships.

Speaker 4: We were accelerating growth in international markets with a focus on unlocking growth and select countries where we have existing businesses that offer the greatest opportunity.

Speaker 4: During this quarter, I spent two weeks in Asia where we have 365 associates and clients representing $50 billion of assets under management.

Speaker 4: I had a chance to spend time with several of our clients and it reinforced for me the depth of relationships that we are building in the region and the opportunity that we have to do much more with them over time.

Speaker 4: In our direct retail business, we are enhancing our individual investor client experience through an improved digital experience and differentiated service offering.

Speaker 4: We recently completed the acquisition of Retiree Inc, a fintech firm that offers innovative retirement income planning software. This acquisition will complement and expand our retirement income capabilities across our audiences with planning tools for individuals and practitioner tools for financial professionals.

Speaker 4: We expect to use the technology in our retail direct, defying contribution, and wealth management channels.

Speaker 4: Finally, we are expanding our private markets and alternatives capabilities by leveraging our distribution channels and OHA's investment capabilities. As we previously shared, we acquired OHA to accelerate our expansion into alternative investments. Our first joint co-branded product, HERO Price OHA Select Private Credit Fund, or O Credit, is advancing. This business development company is a retail product developed to leverage OHA's private credit investment ex-

Speaker 3: Thank you, Robin. Hello, everyone. Today, I'll provide a summary of our financial results and key drivers, including assets under management and flows, revenue and operating expenses, and I'll conclude with a few comments on capital management before we take questions. Our adjusted earnings per share was $1.69 for Q1 2023 versus $1.

Speaker 3: higher effective tax rate in the quarter, drove the modest decline in adjusted EPS from Q4 2022.

Speaker 3: The change versus Q1 2022 reflects the decline in AUM and revenues from sharply lower markets and net outflows over the last 12 months. Looking at the drivers behind these results, we ended the quarter with 1.3 trillion in AUM and increased of 67 billion from December 31st, 2022. Improving markets in Q1 increased assets by $83 billion.

Speaker 3: mentioned out closing Q1 were concentrated.

Speaker 3: We posted 23.5 billion of outflows in global equities with a majority of the net amount attributable to our U.S. large cap growth equity strategies.

Speaker 3: On a channel view, outflows were largely focused in our US DCIO and broker-dealer channels and with a few institutional clients.

Speaker 3: We experienced net outflows across all regions with the percentage of AUM sourced from outside the US ending the quarter at 8.9%.

Speaker 3: There were a few notable areas of strength in the quarter, including 7.5 billion of net inflows into the target date franchise, 1.3 billion of net inflows into international fixed income strategies, and nearly 200 million of net inflows into alternatives. During Q1, we typically see some seasonality in target date flows.

Speaker 3: in part due to plan sponsor lineup activity around the turn of the year.

Speaker 3: We've provided an AUM inflows breakdown by institutional and retail client type, which replaces the vehicle views we have provided in the past.

Speaker 3: The assets and flows for global institutions and DC plans, including those we record keep and those we manage on an investment-only basis, are reflected in the institutional bar.

Speaker 3: Our effective fee rate of 42.7 basis points for the quarter was a slight uptick from Q4 2022. This reflects a bit of noise from a mixed shift during the quarter. Over time, we continue to see modest downward fee pressure in line with new vehicle adoption and overall industry pricing headwinds. Turning to revenues, our Q1 adjusted net revenues were $1.5 billion with $1.4 billion from investment advisory revenues. We saw a small increase in net investment advisory revenues from Q4 2022 on higher average assets versus the fourth quarter.

Speaker 3: Compared with Q1 2022, investment advisory revenues were down 16.3% reflecting the decline in average AUM.

Speaker 3: Capital allocation based income for the quarter was 16.9 million. And as a reminder, capital allocation based income includes the change in accrued carried interest from some of our alternative funds, along with acquisition related amortization. Additionally, accrued carried interest will fluctuate quarter to quarter based on the underlying portfolio company's specific performance, along with a market environment at the end of each quarterly period. This quarter was down from Q1 2022 due to a more challenging market environment than a year ago. It was also down from Q4 2022 as that period included additional accrued carried interest to cover required tax distributions.

Speaker 3: Typically, 50 to 60 percent of accrued carried interest is expected to be retained in operating income as the remainder is passed through to fund partners who are also employees and recognized as compensation expense.

Speaker 3: We've included additional details about accrued carried interest on page 11 of the supplemental materials. Now shifting to expenses, adjusted operating expenses were about a billion dollars, which is a decrease of 1.6 percent from Q1 2022 and down 4.7 percent from Q4 2022. The decline from Q4 2022 is largely driven by the declines in compensation, benefits, and related, along with the accrued carried interest related compensation. Compensation benefits and related costs, which excludes the carried interest related compensation,

Speaker 3: was $593 million for the quarter, which was in line with Q1 2022 and down about 31 million from Q4 2022.

Speaker 3: Lower compensation expenses in Q1 primarily reflect lower stock based compensation expense related to the firm's annual equity grant, as well as the absence of severance and other costs associated with the workforce reduction action recognized in Q4 2022, which more than offset the Q1 impact of annual increases. As a reminder, about a third of our adjusted operating expenses, excluding compensation related to carried interest.

Speaker 3: are driven by AUM and revenues.

Speaker 3: This is predominantly cash and stock based incentive compensation and distribution expenses.

Speaker 3: For the balance of the year, we maintain the prior guidance that we expect our adjusted operating expenses, excluding capital allocation based income, to grow in the range of 2 to 26% over the comparative full year 2022 amount of $4.1 billion.

Speaker 3: So we have started the year below the 2-6 percent range. The savings associated with the Workforce Reduction Action in late 2022 will be offset through the year as we re-reheir for new skill sets aligned to our strategic initiatives.

Speaker 3: Based on the current market environment, we are trending to land at or below the midpoint of that range.

Speaker 3: Our Q1 non-gap tax rate of 30.3% was outside the annual range we gave in January as we increased evaluation allowances recognized on certain foreign-based deferred tax assets, including net operating losses.

Speaker 3: Currently, we estimate our non-GAP effective tax rate for the full year 2023 will be in the range of 26.5% to 29.5%.

Speaker 3: In a more cash constrained environment, we continue to prioritize the recurring dividend, which we increased for the 37th consecutive year since the firm's initial public offering in 1986.

Speaker 3: Our near term focus beyond the dividend is to balance the needs for seed capital and opportunistic buybacks over the long term to offset delusion from the equity incentive programs and to preserve cash for potential M&A. In Q1, we initiated Minimals stock buybacks. We expect to repurchase some during the remainder of the year, though not at the same level as 2021 and 2022 when we were offsetting the shares issued for the OHA purchase. We've also been modestly rebuilding our cash position since the purchase of OHA in late 2021 to maintain our strong balance sheet.

Speaker 3: We added roughly $233 million in cash reserve in 2022. We are more focused than ever on prioritizing investment in our strategic initiatives, maintaining efficient operations, and carefully managing our cash position. This financial discipline gives us the strength to navigate through market volatility and stay focused on the long term. With that, I'll ask the operator to open the line for Q&A.

Speaker 2: Thank you. To ask a question, you will need to press star 11 on your telephone and wait for your name to be announced.

Speaker 2: To withdraw your question, please press star 1-1 again. We ask that you please limit yourself to one question.

Speaker 2: Please stand by when we compile the Q&A roster.

Speaker 4: Our first question comes from the line of Daniel Fanon with Jeffries LLC. Your line is now open. Thanks, good morning and thanks for doing the call. With hoping you could give us a broader progress report on the OHA transaction, you talked about a product that's coming to market here. But more broadly, can you talk about their performance, what growth has been?

Speaker 5: stand alone because we know they were growing reasonably well before you bought them, but AUM hasn't really moved that much. So maybe just a little bit more context around that business today and but it's done since you've owned it. And maybe what you see is the opportunity over the next 12-24 months. Good morning, Dan.

Speaker 4: We've integrated the appropriate functions and worked really hard to identify distribution synergies, the ability to take their strategies to institutional clients and prospects around the globe, and also to take OHA capabilities into the well channel. I think the specific product that you're referring to is our T-Raprice OHA Credit BDC. We've made a lot of progress with regard to the institutional seed and expect to launch it late this year in the well channel. In terms of their performance, it's remained quite strong. Their absolute results have been impacted by the difficult overall...

Speaker 2: of a core if you're willing to stop it.

Speaker 6: Hello, thank you. Maybe a follow-on on OHA in broadened a little bit. I'm curious on how OHA and the T-Row price fixed income teams can work together, can learn from each other, and maybe any observations you might have.

Speaker 6: on trends in private first public credit markets and how you can design product so you can learn from each other from that.

Speaker 6: first public credit markets and how you can design product so you can learn from each other from that. Thanks, Rob.

Speaker 4: Yeah, Glenn, we purposefully kept the investment teams largely separate. The OHA had the 30-year track record of delivering great investment results for their clients in private credit and in distress in their liquid offerings.

Speaker 4: I do think there's some overlap in expertise, but we really wanted to minimize disruption in terms of the overall investment philosophy and process and in terms of the culture. We are exploring ways to leverage ideas across the two platforms and share perspectives, particularly at the end.

Speaker 4: driving distribution synergy. We see a very large opportunity long-term, again, to take OHA to institutions around the globe, but also to take them into the broker dealer and advisory channel. And that's a place where T. Reprice has very strong relationships at the home office.

Speaker 4: SupplySpoor 2 Reprise has very strong relationships and support in the field. Many of the wealth platforms have done business with OHA in the past in their more traditional structures and vehicles and we're really excited for the opportunity to use more evergreen vehicles to take their capabilities there. Again, we expect to show some progress in that regard later this year and think the operational development ofporeoso!

Speaker 4: the lagged, the decline in public markets. I think in general, particularly on the wealth platforms and number of advisors and clients are more, taking a more cautious approach. I think there's a lot on the sidelines and I think if you look at where spreads and absolute rates are now, the return and risk return profile of a well-managed private credit strategy

Speaker 2: Our next question comes from the line of Patrick Dovet with Autonomous Research. Your line is now open.

Speaker 5: Hey, good morning, everyone. Thanks. I appreciate the strong seasonal target date flows. But in that channel more broadly, any sign that last year's performance issues are driving plans or consultants to rethink having T-Rone the lineup. And secondly, remind us how active you can be in those discussions. Or do you just find out after they make the decision?

Speaker 4: Thank you. Yeah, I'll take the second part of the question first. You know, we're very engaged and you know, generally have the opportunity to share our outlook and give performance update. I think that's not the case in every instance. We reach plans in a number of ways.

Speaker 4: the opportunity to interact with the client or prospect. And in a number of instances, we work through aggregators or advisors. And, you know, there, we really are able to articulate our value proposition with those folks, and it's more indirect to the end client. When I think about the target-date business, first thing I would say is that in general,

Speaker 4: retirement investing and savings. If you look at our flows in Q1, as you mentioned, they were very strong. I think our pipeline remains very robust.

Speaker 4: Long-term performance is important and when you have an active offering, ultimately you're going to need to deliver it. I think if you look at our retirement date fund, it offers the strongest value proposition in the industry. We have a number of...

Speaker 4: the alpha rich diversifiers in our building block lineup from non-investment grade credit to emerging markets and small and mid cap equity areas where you can add a tremendous amount of value as an active manager. And I'm very confident that you continue to look at rolling three and five years.

Speaker 2: Our next question comes from the line of Brennan Hawking with UBS. Your line is now open.

Speaker 7: Good morning. Thanks for taking my questions. And thanks for hosting the earnings call. Really appreciate the increased transparency and chance to engage regularly. So on expenses, no change to the growth expectations. That's helpful.

Speaker 7: and helpful to get the color around with the profile of the quarter of the year will look like. You may be given a breakdown of how much this expense growth is tied to a poor inflation, maybe impact of the market sensitive expenses, and then how much of the growth you are allocating to continued investments.

Speaker 3: in the front. Thank you. Thanks, Brennan. So I'll start as a reminder we had in the commentary that about a third of our expenses are market driven in some way, either related to asset funder management or revenues. And so we typically look at the fluctuations during the quarter in markets to give a sense for what the range might be for those market driven expenses. So that

Speaker 3: that we had taken out of the expense base run rate coming out of the end of the year to be able to reinvest this year. So that's about the level that we're looking at for investments in new things. Again, most of these are not new areas that we're investing in. There are extensions of existing places where we're already active, either in a distribution sense or in a product construct. So...

Speaker 3: Again, not as many denovo investments, but further follow-on investments that we have in the business. If we think about the first part of your question about inflation, certainly that's something that we saw mid-year in the labor market context. We had announced that we had done an increase of 4% for 85% of our associates in salaries, and that impact has obviously rolled through into our expense.

Speaker 4: and U.S. wealth and in our focused markets around the world. But we also recognize that we need to drive efficiency and productivity in order to fund those investments going forward. And we're laser focused on doing that.

Thank you. Our next question comes from the line of Alexander Blostin with Goldman Sachs. Your line is open.

Good morning, thanks for taking the question as well. Robert, a little maybe big picture question about the firms or EPS and operating income growth algorithm over the next couple of years. So as you sort of think about your comments regarding organic growth and organic base, your growth be maybe challenged for some period of time.

expense growth is kind of like in this, you know, mid-single-digit range. So then obviously just kind of comes down to the market. But to GT areas we could flex expenses more where the sort of earnings growth algorithm can improve even if organic growth remains challenged for some time. ?????? more invested will be lost under the studies across the? for more research on warehouse development.

Alex, thanks for the question. The first thing I would say is that we see a path back to organic growth, but it is going to take some time. And in the interim, I do think we'll need to manage expenses in order to bridge that gap. So, as I said before, we do want to continue to invest in our strategic initiatives.

to get back to consistent organic growth, but we need to be very disciplined with regard to how we get there. In terms of the algorithm, the market does play a big part when you have a $1.3 trillion AUM install base and where kind of over half of that is in equities.

That said, flows can play a part in time. Access return and performance can play a part in time. Capital deployment can play a part in time. We have a number of areas that I think can drive a longer term growth, whether it's OHA or deep partnerships in the intermediary channel, whether it's continued growth in our focus markets.

But I think it's realistic to say during this period of time where our flows are under pressure and our organic growth is negative, that we will have to be more focused on expenses and that would not be just a less robust overall EPS growth algorithm. And that's just the arithmetic of it.

Thank you. Our next question comes from the line of Kenneth Worthington with JP Morgan, your life's open.

Hi, good morning and thanks for taking the question. Investors domiciled outside the US was 9% in the quarter. This has historically been a faster growing part of the business that got to I think 9.9% at the end of 2021 after the OHEA deal closed. I think you have allocated significant resources to this build out outside the US. I guess first, are you getting the results commensurate with the resources allocated? And second, can you talk about the outlook for returning the non-US business growth to its better than enterprise growth period again? Thanks. Thanks, Ken, and appreciate the question.

So as we look at the business outside the US, obviously it's not a single market. Those are a number of individual markets and we've been investing across a series of focused markets outside the US. I would say over the long term, we continue to see growth out in those markets as an important leg of area for potential growth, particularly in core markets in Japan.

think about the intersection between the comments we made on the large cap equity business and the flow there. We have exposure to those asset classes and all those markets as well. So in the short term, you can see the impact of the same trends that we saw across the broader part of the business, but over the long term, we expect that that's an opportunity for growth for us.

specifically about the results that we're seeing for what we've invested there. I think we've been very pleased with the places where we've made core investments. Rob mentioned during his comments, the client meetings that he had had while he was in Asia, and we think there are some really good opportunities for us over the long term. Yeah, I would say our pipeline in Japan and Australia in particular is encouraging, Ken. But again, this is a business where...

There are some sizeable mandates and I don't think you can necessarily read quarter in and quarter out. You can make a trend. I do expect that this business will grow more quickly than the rest of the business, probably more so APAC than EMEA, but overall, I think.

we're reasonably confident that if you look at it, you'll kind of want a two or three year planning horizon that the growth rates will be meaningfully higher than the overall book. Thank you. Our next question comes from the line of Bill Katz with Credit Suisse. Your line is now open. Thank you very much, and thank you for hosting the call and the added disclosure.

about the urgency to drive better growth versus M&A. You mentioned a focus on sort of rebuilding cash. You have a very strong balance sheet to begin with. How much cash is necessary? And then how you think about incremental M&A to maybe catalyze overall organic growth. Thank you. Thanks for the question, Bill. The first thing I would say is in terms of share, there's a meaningful element of...

and give category. But you're right. We have had meaningful outflows in parts of our equity franchise and those parts of our equity franchise are of substantial part of the business. So kind of ultimately, I think if you look at that in aggregate, it has led to share loss over the more recent time horizon.

We want to manage this business with a very long-term lens. I think that we do want to have more exposure to parts of the business, whether it is product or vehicle or asset class or geography, that have more tailwinds of growth. And we think we can do that organically, but, you know, we also will continue to look very seriously at acquisition opportunities. But, you know, I think we have a very high bar for acquisition. They need to, you know, have minimal disruption to our ability to deliver on our existing commitments to clients and our culture.

They have to be strategic fit, they have to make financial sense. Most deals in this industry, the weight of the evidence would suggest that they haven't been compelling. So again, I think we will continue to look. And I think OHA and retiree were both examples of the sorts of things that can be meaningfully additive.

OHA, obviously much greater in scale and scope. But nonetheless, I mean, we think that M&A is a tool that can help us evolve our business mix and help us build more growth into the business in time.

greater in scale and scope. But nonetheless, I mean, we think that M&A is a tool that can help us evolve our business mix and you know, kind of help us build more growth into the business in time. Thank you.

Our next question comes from the line of Michael Cypress with Morgan Stanley . Your line is now open. Great, thank you. You mentioned that you're looking to broaden out the range of products and vehicles. I was hoping you could elaborate on that where you see whitespace from a product standpoint and vehicle standpoint. And maybe you could talk a little bit about how you're building out the SMA platform.

and also active ETFs and some of the actions that you could take there to accelerate growth. Sure, I'll start with ETFs. We have been in market for a couple of years. We just crossed a billion dollars in AUM and our ETFs and I would say that momentum is building. Our first offerings in the equity space were semi-transparent which was new and I'd say it took a little bit.

beginning to build momentum.

opportunity that those will bring in mid-March, we filed registration statements with the SEC for five new active equity ETFs, a value ETF, a growth ETF, an international ETF, small and mid-cap ETF, and capital appreciation equity ETF.

And, you know, feel very good based on feedback that we've gotten from investors, advisors, and, you know, kind of users of ETFs that these will, could really allow us to meet the clearly strong demand in the ETF category, and ultimately we'll also allow us to be in market with ETF models using our asset allocation capabilities. So, if you tape the essentially part this hotel window for your start with an alternative accommodation on your community, and onto Multitorts, I'd recommend a detailed email, and subscribe for more smart and secure information about the retail organization. You should give this morning a link to Where I suppose to get air withc. QL botWachery over $14. And you can find a link to where you can get air withc. QL botWachery over $14.

We'll be quite active and you'll kind of really feel like we've got an approach that will allow us to continue to build momentum and have a bigger impact in ETFs. In terms of SMA, last week or in late April , seeded four new muni SMAs, which will be available later in Q2, that'll bring us to 20 strategies offered as SMAs.

We have placement with all of the top 10 SMA distributors and kind of continuously hear feedback from the wealth platforms that they want to do more with fewer high quality investment management firms and that they want strategies available across vehicle ranges. So mutual funds, ETFs.

SMAs, Model Account Delivery, et cetera. I also would add globally, we'd continued to scale vehicles that will allow us to penetrate the intermediary market in those focus markets that Jen mentioned earlier. And then finally, the BDC is a new vehicle and a new product for us. So I think we're investing to be top of mind and very relevant with our intermediary partners globally. Again.

the marketing and sales resources behind it to make sure that we can hold those vehicles all the way through to the end clients.

Thank you. Our next question comes from the line of Sineon O'Shea with Wells Fargo Security. She wants to open. Hi everyone, good morning. Another for O'Kill. Can you give us a sense of employee retention as the firm integrates into T-Row? And is O'Kredit intended to expand into direct lending as many...

That's a big part of the reason why we kept the investment platform separate, again, to minimize disruption and to allow them to sustain their momentum. They've got great talent. And there's generally in our business, some small amount of turnover, particularly among more junior success.

Thank you. Our last question comes from the line of Craig Segan-Thaller with Bank of America. Your line is now open. Hey, good morning, everyone. Rob, my question is a long-term one in the 4-NK business. From a timing standpoint, where do you think we are in the unbundling theme where 4-NK plan sponsors have been separating record keepers from asset manager? And I know this doesn't impact your bigger DCO business, but we want to get perspective on it, the bulk of these migrations are now behind us. Craig, I think it's difficult to say. This is a trend that's been unfolding for-

of asset management and record keeping is probably fairly far along. I also would say I think there will always be a place for a well-done bundled record keeping offering in parts of the market, particularly in what we characterize as the core market, so below the large enterprise level.

where I think you can really deliver a very compelling value proposition and if you were to look at our plan count if you were to look at our flows. The core RPS market is a market that we are investing in. We are investing in our coverage and territories and one that we think will be a growth driver for us over the course of the next several years. So while the um bundling trend I think is particularly important at the very large enterprise level.

keeping where we sell directly to the plan sponsor record keeping through aggregators and advisors. You know over 60% of our AUM is retirement related and we've got a multi-pronged strategy to penetrate that opportunity. I think we've got a great value proposition with as I mentioned before a range of retirement date funds so this is a business that I'm pretty enthusiastic about and I would spend a lot of time thinking about

the disaggregation of record keeping and asset management at the very large plan level. And that's something that we've lived with for a decade or more.

And if anything, that's benefited us over time because as we've been able to bring our target date to plans, we don't record keep because obviously we're not among the largest record keepers in the business as that consolidation has happened. So if anything, this trend has helped us to build the target date franchise over time.

Okay, I think that was the last question. In closing, I just thank you all for joining us today and for your interest in T-Roll price.

As we shared, I think Q1 showed promising signs in the market backdrop and also some improved investment performance as well as pronged target date and net blows. And while the market revire remains uncertain, I'm very pleased with how our associates and our teams are responding.

And we remain deeply committed and focused on helping our clients meet their long-term financial objectives. So again, thank you. Thank you. That concludes today's call. You may now disconnect.