Q1 2025 P10 Inc Earnings Call
Lateef: Hello and welcome to the P10 First Quarter 2025 conference call. My name is Lateef and I will be coordinating your calls today.
Lateef: Currently, all participants are in a listen only mode. After the speaker presentation there will be a question and answer session.
Speaker Change: As a reminder, today's conference call is being recorded. I will now hand the call over to your host, Mark Hood, EVT and Chief Administrative Officer. Mark, please go ahead.
Speaker Change: Thank you, operator, and thank you all for joining us. On today's call, we will be joined by Luke Sarsfield Chairman and Chief Executive Officer, and Amanda Coussens, EVP and Chief Financial Officer.
Speaker Change: Additionally in the room with us today are Arjay Jensen, EVP, Head of Strategy, and M&A, and Sweden Jarrett, EVP, Global Head of Client Solutions.
Speaker Change: Before we begin, I'd like to remind everyone that this conference call, as well as the presentation slides, may constitute forward-looking statements with the meaning of the federal security laws, including the Private Security's litigation reform act of 1995.
Speaker Change: Forward-looking statements reflect management's current plans, estimates, and expectations, and are inherently uncertain.
Speaker Change: Actual results from future periods may differ materially from those expressed or implied by the forward-looking statements due to a number of risks and uncertainties that are described in greater detail in our earnings release and in our periodic reports filed from time to time with the SEC.
Speaker Change: The forward-looking statements included are made only as of the date hereof. We undertake no obligation to update or revise any forward-looking statements as a result of new information or future events, except us otherwise required by law.
Speaker Change: During the call, we will also discuss certain non-GET measures that we believe could be useful in evaluating the company's performance. A reconciliation of these measures to the most directly comparable GET measure is available in our earnings release and our filings of the FEC. I will now turn the call over to Luke.
Luke Sarsfield: Thank you, Mark. Good morning, everyone, and thank you for joining us for our first quarter 2025 earnings call.
Luke Sarsfield: E10 had an extremely strong start to the year. We raised and deployed over $1.4 billion in gross, new fee-paying AUM, marking a record fundraising quarter for the firm and generated revenue of $67.7 million, an FRE of $30.7 million.
Luke Sarsfield: We closed RCP Direct 5 with nearly $1 billion in commitments, our record for RCP and an impressive follow-up to December's $1.6 billion close of Bonacquart Capital Partners Fund 2.
Luke Sarsfield: During the first quarter, we had ten funds in the market and saw contributions from private equity, private credit and our venture capital strategies.
Luke Sarsfield: Over the course of the full calendar year, we expect more than 15 funds in the market at various times.
Luke Sarsfield: and not only did we have strong demand for our co-mingle funds, but we also closed several large SMAs, including one with a new global sovereign well-fun client. We continue to see non-coomingled vehicles as a secular growth opportunity as we expand our engagement with global clients.
Luke Sarsfield: A particular note, on April 4th, we closed the Qualitas Funds acquisition, meaningfully expanding our global LP base and establishing a strong European presence with investors and private banks in the process.
Luke Sarsfield: The acquisition adds 1,300 LPs to our platform, almost all high net worth investors. Importantly, the acquisition adds another $1 billion to our fee-paying assets undermanagement.
Luke Sarsfield: With strong momentum heading into the second quarter, I want to reiterate the guidance we provided on our February fourth quarter call.
Luke Sarsfield: We continue to expect at least $4 billion of organic growth fund raising in 2025 and double digit revenue growth, excluding direct and secondary catch-up fees and including revenue contribution from quality cost funds.
Luke Sarsfield: For 2025, we continue to expect core FRE margins, excluding M&A to be in the mid 40% range.
Luke Sarsfield: and with the quality transaction closed, we have another $1 billion in fee-paying assets under management coming online in the second quarter given the closing in early April , as I mentioned.
Luke Sarsfield: T10 delivered an impressive performance to start the year and were positioned to navigate the current operating environment through the continued execution of our strategic plan.
Luke Sarsfield: As a reminder, our strategic plan is focused on optimizing our organizational structure, driving increased organic growth, re-accelerating our M&A engine
Luke Sarsfield: generating operational efficiencies and enhancing our transparency as an enterprise. We maintain a conviction that we have the proper strategic roadmap and requisite experience across numerous economic cycles to navigate the months and quarters ahead despite the potential for near-term market volatility. [inaudible]
Luke Sarsfield: To that end, I want to highlight recent progress in advancing our strategic comparatives.
Luke Sarsfield: We have continued to optimize our organizational structure through board refreshment. On April 21st, we announced the appointments of Jennifer Glossman and Steven Bluet as independent directors.
Luke Sarsfield: Jennifer is an experienced financial services leader currently serving as the Chief Financial Officer of Powerburg Capital Partners
Luke Sarsfield: Even has previously served as the chief investment officer and head of private markets and manual life investment management and in several other senior leadership positions in the alternative space.
Speaker Change: We are thrilled to welcome these leaders in the private markets who will deepen our expertise and insights and partner with management to guide P10 through its next phase of growth.
Speaker Change: Turning to organic growth, our focus and efforts center on deepening and expanding our robust LP base through new investment vehicles and distribution channels.
Speaker Change: We're also institutionalizing specific processes across our platform so that our strategies are more integrated and our investors can benefit from the scale that D10 has to offer.
Speaker Change: Our focus is on attracting larger institutional investors such as insurance companies and pension funds who seek access to attractive strategies in our market segment.
We continue to advance our M&A efforts.
Speaker Change: On that, I want to touch on the completion of our acquisition of Qualitas funds in April . When we set out to reinvigorate inorganic growth, we identified specific criteria that we believed represented a compelling strategic fit for P10.
Speaker Change: We wanted to find firms that offer natural adjacencies with our existing strategies, expand our geographic footprint, and grow our asset class exposure.
Speaker Change: Qualitas is perfectly aligned with the investment criteria we sought to achieve.
Speaker Change: Kualitas is a leading European private equity fund to funds manager based in Madrid. The firm provides fund to funds, direct co-investing, and NAF financing opportunities in the European lower-middle market.
Speaker Change: Further, Qualitas has had a long-standing collaborative relationship with two other PTEM strategies, RCP advisors, and heart capital.
Speaker Change: Integration is underway and we're already finding ways to drive cross-platform collaboration .
Speaker Change: The firm's founding partners, Eric Halverson and Sergio Garcia and the entire Qualitas funds team have built a strong crack record that complements P10 and we look forward to building on this foundation as we continue to grow internationally together.
Speaker Change: In the vein of continuing to enhance our investor transparency, Amanda will describe a new metric that we believe will help investors better understand the breadth of our asset base and provide additional clarity on our state and federal cash tax rate.
Speaker Change: Before I close, I want to acknowledge the volatility we're observing in the macroeconomic environment while also highlighting P10's unique, defensible market position.
Speaker Change: In our view, Aidan represents a compelling opportunity for investors seeking access to resilient strategies and market segments that are typically more difficult to access.
Speaker Change: From our vantage point, we operate in the best segments of the private market ecosystem. On average, compared to the larger parts of the market, companies in the middle and lower market have much less leverage and lower entry multiples.
Speaker Change: Furthermore, firms in our part of the market rarely exit via IPO. Instead, we typically see strategic buyers and larger sponsors purchasing our businesses.
Speaker Change: This is an attractive market dynamic, especially when public IPOs are muted. The middle and lower middle market can allow larger sponsors to find attractive bolt-on acquisitions as larger firms wait for the IPO window to reopen.
Speaker Change: In short, Keytan has dealt the platformer's strategies in demand across attractive market segments that we believe are insulated from some of the volatility we have seen year to date.
Speaker Change: Furthermore, we can take advantage of current marked conditions by offering direct and secondary vehicles.
Speaker Change: For example, RCT is in the market with Secondary Fund Fives and later this year we expect to launch a Secondary End Direct Fund.
Speaker Change: The underlying strategies that compose P10 have navigated multiple decades of economic cycles and the teams that manage these strategies have long track records of success.
Speaker Change: Finally, I want to update you on our Capital Allocation Strategy and how we continue to deliver
Speaker Change: Returning capital to our shareholders remains a priority and we are pleased to share that since going public we've increased our quarterly distributions by 25% since inception. With today's announcement we are raising our quarterly dividend to 3.75 cents per share.
Speaker Change: In the first quarter, we were purchased approximately $15 million of stock or about 1.2 million shares, leaving $28.5 million available on the share repurchase program.
Speaker Change: Looking ahead, P10 has the right team and investment strategies to generate value for our shareholders and underlying LPs.
Speaker Change: We offer all weather exposure to access constrained elite investment opportunities. Almost all the funds we invest in are over subscribed and we will continue to drive fundraising success for a broad and diverse product set.
Speaker Change: With that, I'll hand the call over to Amanda to provide a deeper look at our financials and provide some additional insights.
Amanda Coussens: Thank you, Luke. At the end of the quarter, fee-paying assets and their management with $26.3 billion, a 10% increase on a year-over-year basis.
Amanda Coussens: In the first quarter, a record $1.43 billion of fundraising and capital deployment was offset by $790 million and step down the next operations.
Amanda Coussens: Revenue in the first quarter was 67.7 million, a 2% increase over the first quarter of 2024. The average fee rate in the first quarter was 102 basis points in total or 99 basis points when excluding the impact of secondary and direct catch of beer.
Amanda Coussens: We continue to expect the core fee rate to share to average 103 basis points.
Amanda Coussens: The lower fee rate this quarter is primarily attributable to the seasonality of our tax credit business, which tends to drive a higher core fee rate in the back half of the year than in the first half of the year, in line with our historical fee rate dynamic.
Amanda Coussens: Additionally, stepdowns and explorations in the quarter were a slight drag on core fee rates.
Amanda Coussens: In the first quarter, we had ten commingled funds in the market and saw broad participation across our investment platform.
Our private equity strategies raised and deployed $1.2 billion. $1.2 billion.
Amanda Coussens: Our Venture Capital Solution raised and deployed 82 million, and our private credit strategies added 162 million to speed-paying assets under management.
Amanda Coussens: The performance of P-10 strategies reflects our diverse global investor base, comprised of family offices and wealth managers, public pensions and sovereign wealth funds, endowments and foundations
Amanda Coussens: and our season deal team to continue to execute on best-in-class investment and generate durable alpha.
Amanda Coussens: Total catch up fees in the quarter were $2.8 million with direct and secondary catch up fees totaling $2.2 million. The timing of fun closing strikes catch up fees and in the first quarter they were primarily attributable to the final closing of RCP Direct 5.
Amanda Coussens: With many of our Cumangled Funds, plated to be early in their fundraising lives during 2025, we expect to see catch up these expand in 2026 and 2027.
Amanda Coussens: Operating expenses in the first quarter for 56.4 million, an increase of approximately 4% over a year ago. Professional fees from the quality of funds, transaction primarily drew the increase.
Amanda Coussens: Gapnet income in the first quarter was $4.7 million, a decrease compared to Gapnet income of $5.2 million for the prior year quarter
Amanda Coussens: For the first quarter, adjusted in income or A&I was 23.5 million, representing a decrease of 8% from the first quarter of 2024. The reduction in A&I is primarily attributable to increased interest expense driven by higher interest rates.
Amanda Coussens: for the quarter fully-deleted ANI-EPS with 20 cents, marking a decrease of 5% year-over-year.
Amanda Coussens: FRR in the quarter was 67.6 million, representing 4% year-over-year growth, and FRE was 30.7 million holding flat year-over-year. In addition, our FRE margin was 45% in the first quarter.
Amanda Coussens: As Luke mentioned, we are pleased to increase our dividend by 7% [inaudible]
Amanda Coussens: Today, we declared a quarterly cash dividend of $3.75 per share. .
Amanda Coussens: Payable on June 20th, 2025, the stockholders of record as of the close of business on May 30th, 2025.
Amanda Coussens: In the first quarter, we repurchased $1,215,106 shares at an average price of $12.31, leaving $28.5 million available on the Share Repurchase Program.
Amanda Coussens: Cash and Cash Equivalent at the end of the first quarter were approximately 74 million. The elevated ending cash balance reflects the 42.5 million cash consideration for the quality of the fund's transaction, which closed on April 4, 2025.
Amanda Coussens: At the end of the quarter, we had an outstanding debt balance of $362 million, $325 million on the return loan and $37 million remaining on the revolver.
Amanda Coussens: Following the end of the first quarter, we paid $7 million on the revolver. As of today, we have $145 million available at our credit facilities.
Amanda Coussens: And finally, some of you may recall that last year we discussed introducing new KPIs as part of our strategic priority to provide investors with additional financial disclosure that is more closely aligned with our industry peers.
Amanda Coussens: In 2024, we introduced F-R-R, F-R-E and F-R-E Margin. Today, I would like to introduce a new KPI, A-Fifth and Remanagement, or AUM, and provide additional clarity regarding our expected tax rate.
Amanda Coussens: Starting with AUM, it amounted to over 38 billion across the platform as of March 31, 2025, excluding Call of Tuss Fund, which was officially integrated into our platform after quarter-end.
Amanda Coussens: Proforma for the Quality Cost Transaction are AUM amounts to nearly 40 billion.
Amanda Coussens: Historically, we have focused on fee-paying AUM and will continue to do so, as this measure correlates directly to P10's economics. However, we believe adding AUM will show the breadth and scale of our business as a leading multi-autic class private market solution provider.
Amanda Coussens: Our AUM is calculated similarly to our peers and is the sum of nav, drawn and undrawn debt, uncalled capital commitment, and capital commitment made to the platform since the nav record date.
Amanda Coussens: Concerning our tax rate, we have continued to benefit from a low-cash tax rate due to our tax assets. As we shared at our investor-day presentation last year, we anticipate fully utilizing the animal portion of our tax assets sometime in 2026.
Amanda Coussens: Once the NOL is fully utilized, we will become a federal taxpayer. However, we will continue to benefit from significant tax amortization deductions related to goodwill and entangibles from prior acquisition.
Amanda Coussens: We expect our cash tax rate in 2025 to be in the low single digits.
Amanda Coussens: which is driven by her state taxes and is in line with our historical rate.
Amanda Coussens: Since we expect our NOL to be fully utilized in 2026, it will be a hybrid year and we anticipate that combines federal and state cash tax rate to be in the high single digits, the low double digits range as we become a federal taxpayer.
Amanda Coussens: Looking ahead to 2027 and beyond, we anticipate that our combined federal and state cash tax rate to be in the mid-teens similar to our peers once our NOL is fully utilized and we pay both federal and state taxes.
Amanda Coussens: As I mentioned, our tax rate benefits from tax amortization related to goodwill and intangibles, but excludes any impact from future M&A.
Amanda Coussens: Thank you for your time today. I'll now powder call over to the operator to begin the Q and A session. Thank you for your time today.
Speaker Change: Thank you as a reminder to ask a question you will need to press star 11 on your telephone to remove yourself from the queue you may press star 11 again. Please stand by while we compile the Q&A roster.
Thank you. Thank you. Thank you.
Speaker Change: Our first question comes from the line of Chris Kotowski of Oppenheimer & Company. Please go ahead, Chris.
Whitehead was in the first quarter. All right.
Speaker Change: Yes, thank you, Chris, for the question. The April 10th date was the announcement date, not the
Thank you. Thank you.
Speaker Change: You know, I think there are a few people in your position who have the luxury of having, you know, 5000 LPs to
Speaker Change: to try to cross market, and I'm wondering if you can share kind of the early results of that and how you're approaching it, it just seems like it would be a big daunting task and kind of what are the steps along the way to...
to cross-marketing.
Speaker Change: Hey, Chris. Thanks. It's Luke and Sarita's here and I'm going to let her answer it. I'm just going to observe that I think she's done a tremendous job over the course of the last kind of seven, eight months she's been here coming in really assessing what we have, reconciling the data and coming up with a great plan on the forward. And so I'm going to turn it over to her to give you a little bit more of a false answer to your question. And I'm going to give you a little bit more of a false answer to your question.
Sarita Jharat: Yes, thank you, Chris, for the question. So, as Luke mentioned, since I've joined, I've been very focused on climb cultivation, re-categorizing a lot of our data and looking across the data analytics that we have, we have a very impressive proprietary data analytics database. And so, what we've been looking to do is optimize the data that we have, see if there are any overlapping synergies, and more importantly, where we can capitalize on these synergies, and continue to optimize some of the...
Sarita Jharat: with L.K. Relationships further. Now that Kualitas has officially joined the P-10 family, I will be working very closely with the Kualitas funds team to ensure that the data integration happens seamlessly, you know, a very easy transition overall, and then working with them to basically incorporate them as part of our internal data management processes.
Okay, all righty, that's it from me. Thank you.
Speaker Change: Thank you. Our next question comes from the line of Ken Worthington of J.P. Morgan. Your question, please, Ken.
Speaker Change: Hi, this is Alex Bernstein on from Ken. Thanks so much for taking our questions. Firstly, maybe to focus a bit on the model in terms of step-downs and expressions. Looks like it was a bit of a larger number. I know in the prior call, you guided something like 5% to 7%.
Speaker Change: of at that point, existing C-paying AUM, which implies something like 1.5 billion on the year. And you noted the majority that would be in the first half.
Speaker Change: with the number that we saw in this quarter being a bit higher than, say, the rent rate even if you focus on the first half.
Speaker Change: I just wanted to check if that guidance changes at all, for the full number for the year, and sort of maybe which were the funds that drove the building higher and key one.
Thank you.
Speaker Change: Thank you, Alex, for the question. We are not changing our guidance on step-downs and aspirations of your time.
Speaker Change: I'd appreciate your point around seasonality, especially with some of the repatriated businesses.
I know we have seen Theory 8's ex-cash-of-fees.
Speaker Change: that were lower than the one we saw this quarter and the first quarter does tend to be...
Speaker Change: So just to reiterate, we do continue to expect the Corsi race this year to average.
Speaker Change: Particularly with our tax credit business, which tends to drive a higher court fee rate in the back half of the year than in the first half of the year, in line with our historical fee rate dynamic. Additionally, step down the next operations in the quarter where a slight drag on the court fee rate.
Speaker Change: We are not currently staying pressure within our community funds, be pressure [inaudible]
Speaker Change: We also mentioned an investor day that as we grow our estimate business, we expect potentially lower fee rates with higher margins on this revenue base, which may impact fee rates when a larger estimate rate than a given quarter.
Speaker Change: That makes sense and congrats on the SMA results you noted. Finally, going bigger picture, talking about taxes and M&A and the potential interlay. Just wanted to see if you could point any potential tax benefits.
from Qualitas, and then maybe tying those two points together.
Speaker Change: As we look ahead in the current environment, when there's volatility in the market, one would expect that consolidation is more probable.
Speaker Change: So now that you've established a foothold in Europe , which seems very opportune given lots of headlines we're seeing from Bloomberg and others around excitement about that area, wanted to see what are the next adjacencies or geographies you might be looking tackle. Appreciate it. Thank you.
Speaker Change: Thank you. I'll take the first question in regards to impact on taxes. So, with quality toss in particular, I'll say that certain acquisitions are structured in a way due to regulatory purposes as a stock purchase rather than an asset purchase.
Speaker Change: which is the case with quality. So this particular acquisition will not change our tax favoritization, and I'll turn it over to Luke to answer your second question.
Luke Sarsfield: Yes, thanks. So, to your point, I think we are really seeing, you know, and I know there's been a lot of press written in the wider world about, you know, the impact capital market activity to slow down at M&A.
Luke Sarsfield: I guess I'm happy to report that we're not seeing that at all.
Luke Sarsfield: We continue to see a very vibrant, very robust M&A market, we continue to see [inaudible]
Luke Sarsfield: A lot of potential opportunities coming to market, obviously it's really important to us as we've always talked about, it's got to be on strategy strategy.
Luke Sarsfield: It's got to be the right cultural fit. It's got to make sense from our shareholders' perspective, and it's got to generate a compelling return.
Luke Sarsfield: as we fit it with our platform. So we're going to maintain our discipline and our focus.
Luke Sarsfield: but I will tell you, we are seeing, you know, probably even an increase in potential M&A opportunities. And you're right, now having done quality tasks and really having, you know, a meaningful presence in Europe gives us a real foothold to look at more opportunities. We always talked about how, you know, we would make one move on the chess board moves, not two moves on the chess board. And now that we're in Europe , I think that opens up, you know, a lot of opportunities in Europe .
Luke Sarsfield: and then just back to your question about areas of strategic focus.
Luke Sarsfield: That really hasn't changed since what we laid out at an investor day and what we've talked about on previous calls. It's all around finding things that we think will be added to our current platform. International continues to be something like that and I just referenced that. Obviously opportunities within the broad based realm of private credit continue to be very attractive for us and we continue to look at those.
Luke Sarsfield: and then things within, kind of that real asset ecosystem, in addition obviously to bolt-ons within our existing strategies and so those are all the things that we have then, we continue to evaluate and we think we're going to see and continue to see a very robust opportunity set but obviously we're focused on doing things in the right and disciplined way.
Proudly for solving answers, thanks so much.
Thank you. Our next question.
Moderator: comes from the line of Stephanie Ma, of Morgan Stanley , please go ahead, Stephanie.
Stephanie Ma: Hey, good morning. I'm seeing your slide deck. You have 20% skewed to Endowment and Foundations. Just cheers for your hearing from that LP base given recent headlines around large endowment and friction with the new administration. How do you see this impacting your growth outlook and perhaps could there be an opportunity on the other side to provide liquidity solutions just wanted to get your perspective? Thanks.
Stephanie Ma: Great, so I'll give you the answer to the first question, the answer to the second question around the opportunity to provide liquidity solutions is absolutely yes.
Stephanie Ma: We have many areas of our business that we're really excited about but one is kind of our broader ability to provide liquidity solutions, you know, whether it be in our GT stakes business, whether it be in our NAV lending business and obviously as we talked about in your heard from Amanda.
Stephanie Ma: We have both of our secondary funds, both on the private equity side and the venture side, I'm going to be in the market this year and we think to your point given some of the news and potentially the noise and again not knowing if any of it is certainly true. But we do think that there are going to be really created opportunities in that space of the market and obviously we're going to be positioned with ample capital to really capitalize on those opportunities as we see them. And so we do think there are going to be meaningful opportunities there.
Stephanie Ma: I would say to your point on endowments and foundations, you know we have seen I would tell you little to no impact to date in that part of our LP base
Stephanie Ma: In fairness, except for some very narrow and what I would call idiosyncratic pockets, we've seen little impacts of the volatility in any parts of our LP base to date.
Stephanie Ma: Obviously continue to monitor that, but I think we show really good about the outlook and really good about the forward. I would know, as we talk about kind of our E&F footprint, our E&F footprint probably skews a little bit smaller than the E&F footprint that we've seen the headlines on around some of the larger institutions. And so within our neck of the woods or the companies and the sort of endowments and foundations that we target it. [inaudible]
Stephanie Ma: We've seen them kind of in what I would say business as usual mode and we're obviously engaged closely with them and we expect to continue to have them as a large loyal part of our LP base in the quarters and years to come.
Speaker Change: That's very helpful. Thank you. And maybe just to follow up, I think I heard you have more 15 funds or so active in the market through this year. So do you mind just double clicking into that? Which ones do you think is the least of the largest contributors that underpins the $4 billion or more target for the year? Which ones are you most excited about with perhaps the greatest opportunity to scale?
Speaker Change: Yeah, well, I'll say a few things. The first is we're excited about a lot of them because we really think that this is given to dislocations in the market. We think this is an attractive time to be deploying capital. And so we're excited about that opportunity to generalize.
Nath Landing, Areas Light, Michael C.
Secondaries, areas like GP Stakes. [inaudible]
Speaker Change: and so I think we're going to have a number of funds in the market through the year, as we mentioned, we think 15, kind of, and that obviously includes some of the offerings from Qualitas.
Speaker Change: But, you know, as I mentioned, I think we'll be in the market with our RCP.
Speaker Change: Secondaries or SOF, as we call it, five fund, you know, we're actually in the market right now. We'll be in the market later this year with a few offerings from Trubridge, as was mentioned, you know, we're in the market with a number of funds from Qualitas. And I think it's useful to note that we think Qualitas is another very attractive opportunity. We're seeing a lot of interest and engagement from European LPs and we expect that to persist. Thank you very much.
Speaker Change: and then obviously I mentioned Nav Lending and we're going to be back in the market with our heart fund five later this year and so we think all of those are really attractive opportunities that we're focused on.
Speaker Change: Okay, I made just last one for me on your last point. Would call it this now, you have a more expanded geographic footprint. It's curious if you observe differences in sentiment or preference between US-based or European investors, or in inclination now, maybe from LPs to add more non-US exposure versus history.
Speaker Change: Yeah, look, I think it's probably too soon to call back. I would say, you know, remember this.
Speaker Change: Whatever the dislocation was happened just over a month ago.
Speaker Change: and so I think, you know, I wouldn't say that we've seen much in the way of radical change in LP behavior to date.
Speaker Change: Obviously, I think that's an open question as to what will happen over time [inaudible]
Speaker Change: But I think one of the hallmarks that we've always had has been our ability to really meet the clients where they are to offer them a broad spectrum of product offerings.
Stephanie Ma: I could certainly see a world's definitely to your question where you see you know more traditional US LPs who have been you know engaged with us very focused on you know the opportunity set we afford them in the middle and lower middle market who now say look I'd like to diversify some of that US exposure and get some global exposure from that.
Stephanie Ma: And so I do think, you know, having now executed and closed on the Qualitas funds transaction, it's a really potential timely opportunity for the British.
Stephanie Ma: We also mentioned in the call some of the work that's going on collectively and one of the things that you know is really interesting I think is some of the work that's going on in our European that Claude Cross is doing in Europe along with the team from Hark around that lending and we think that that can be a real opportunity and a real opportunity to continue to build some sort of you know broader global product and so
Stephanie Ma: One of the things that I think always been a hallmark of ours is really trying to meet the clients where they are and we think by broadening out the product suite, the toolbox, the offering set, we're able to do that and so to your point I could see a world where it happens that some US traditional LP allocators want to get more exposure to Europe and now we're in a position to meet them where they are there. [inaudible]
Great, thanks for taking all my questions.
Thank you [inaudible]
Speaker Change: Our next question comes from the line of Ben Rubin, of UPS, please go ahead, Ben Ben, Ben, Ben, Ben, Ben, Ben, Ben
All right, great. Thanks for taking my questions.
Speaker Change: You referenced several large SMA closings and in your prepared remarks, you mentioned closing on a global sovereign wealth fund which is certainly encouraging given your strategic focus there. So it's just hoping you could help frame the contribution from SMAs on this quarter's fundraising numbers and maybe if it was more significant than past quarters. Lastly, if you could just speak to how your SMA pipeline looks today and maybe how those client conversations are trending that would be great. Thank you.
Speaker Change: Yeah, so a couple observations. So, look, as I said, we closed on a large global sovereign wealth fund.
Speaker Change: We obviously need to be careful for a lot of reasons. One is what we want to disclose but the other is client confidentiality and so I'm going to be a little careful around saying too much you know other than to say I think we had a strong contribution from you know kind of the SMA pipeline in this quarter. [inaudible]
Speaker Change: I would say, as we talked about, one of the many ways we're focused on and the work that Sarita is doing to...
Speaker Change: Expand our LP base is to partner with more large kind of allocators. They may be sovereign wealth funds, they may be corporate and public pensions, they may be insurance companies.
Speaker Change: and I think is, you know, you work with those larger clients, they often want more customized, more bespoke solutions. And the really good news is given the breadth of our offering, given the breadth of our capabilities, given our insights in the middle and lower market, I think we're uniquely positioned to provide that for them.
Speaker Change: The other dynamic that I really think is going on here, that's an important one, is I think that there is an increasing focus from a lot of allocators to get access to the middle and lower middle market.
Speaker Change: I think historically, obviously, they've focused their efforts in the upper parts of the market, but I think they really see kind of the return attributes that we see in this middle and lower middle market, they really see the differentiation. And I think increasingly they realize they need a partner to do it because I think. [inaudible]
Speaker Change: You know, contrary to places of the market where, you know, it's it's very open. There's a lot of data. There's a lot of insight. There's a lot of analytics. It's very public. What's going on? This is a very opaque part of the market. This is a part of the market where you really need experts to help you navigate the journey. [inaudible]
Speaker Change: and that's what we can do. And so those are the kind of dialogues that we're having. I hope to have more to report on them over the quarters and years to come. But I think we're really, really excited about this opportunity, frankly, to put our capabilities to use...
Speaker Change: in customized and bespoke ways on behalf of larger clients. We think it's a big opportunity for us on the floor with that.
Speaker Change: That's great. Thanks for the color. Question here for Amanda. You mentioned you still expect Core FRE margins in the mid 40% this year, and that Qualitas will put some downward pressure on that. So at 45% in the first quarter, how should we think about the expense uplift in 2Q as Qualitas comes online? Thank you.
Speaker Change: Do you still expect core organic FRE margin.
Speaker Change: Just to be in the mid <unk> as we continue to make key investments this year.
Speaker Change: That is including quality of life.
Speaker Change: As mentioned at our Investor Day, we expect our core organic FRE margins to expand from the mid <unk> in the near to intermediate term generic 50% long term.
Speaker Change: And we are not changing that guidance.
Speaker Change: Okay, great. Thanks for taking my questions.
Speaker Change: Thank you I would now like to turn the conference back to Luke <unk> for closing remarks, Sir.
Speaker Change: Thanks, Latif as I mentioned coming off of record fundraising in the first quarter <unk> is attractively and defensively positioned to navigate the current market environment. We believe we have the right team and the right investment strategies to generate value for our shareholders and for our underlying Lps, we very much look forward to connecting with you in the weeks ahead.
Speaker Change: And offering an overview of the second quarter later this summer thank you and good morning.
Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.
Speaker Change: Yeah.
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