Acadian Asset Management Inc.

Ladies and gentlemen, thank you for standing by. Welcome to BrightSphere Investment Group earnings conference call and webcast for the fourth quarter 2022. During the call, all participants will be in a listen only mode. After the presentation, we will conduct a question and answer session. To be added to the queue, please press star followed by the number one on your telephone keypad. If you have If you need to reach out to an operator, please press star followed by zero. Note this call is being recorded today, Thursday, February 2nd, 2023 at 11 a.m. Eastern Time. I would now like to turn the call over to Eli Sugarman, Head of Strategy and Corporate Development. Please go ahead.

Good morning and welcome to BrightSphere's conference call to discuss our results for the fourth quarter ended December 31st, 2022. Before we get started, please note that we may make forward-looking statements about our business and financial performance. Each forward-looking statement is subject to risks and uncertainties that could cause actual results to differ materially from those projected. Additional information regarding these risks and uncertainties appears in our SEC filings, including the Form 8-K filed today containing the earnings release, our 2021 Form 10-K and our Form 10-Q for each of the first, second, and third quarters of 2022. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update them as a result of new information or future events. We may also reference certain non-GAAP financial measures. Information about any non-GAAP measures reflected, including a reconciliation of those measures to GAAP measures, can be found on our website along with the slides that we will use as part of today's discussion. Finally, nothing herein shall be deemed to be an offer or solicitation to buy any investment products. Surin Rana, our President and Chief Executive Officer, will lead the call. And now I'm pleased to turn the call over to Surin. Surin?

Thanks, Ali. Good morning, everyone. Thank you for joining us today. As usual, I'll start off with the financial highlights on slide five of the deck. For Q4 22, we reported our highest ever quarterly E&I per share of 67 cents, 26.4% higher than 53 cents that we reported for Q4 of 2021. Our sizable share buybacks in Q4 of 21 and Q1 of 22 more than offset the drop in our earnings from the significant equity market decline in 2022 and the resulting impact on our AUM. We are pleased that throughout this volatile market environment, our investment performance has continued to be strong. As of December 31, 22, 88%, 87%, 87%, and 90% of our strategies by revenue beat their benchmarks over the prior 1, 3, 5, and 10-year periods respectively. We also reported second straight quarter of positive net client cash flows with $1.3 billion of net inflows as we saw robust sales across a few different strategies. Our sales pipeline remains healthy with ongoing searches across a range of strategies. Turning to capital management, we had a cash balance of $108 million as of December 31-22, after funding $15 million of seed capital for Acadian's equity alternative platform and fully paying off Acadian's seasonal credit facility. Acadian generally draws on this facility in the first quarter for 1Q seasonal needs, and they fully pay it off over the course of the year. As our business continues to generate strong free cash flows, we expect to continue deploying capital to support our organic growth and to buy back shares whenever opportunities come up. Turning to some highlights for Acadian on slide seven. Acadian generated $50.9 million of adjusted EBITDA in the fourth quarter of 22 compared to $87.6 million in the fourth quarter of 21. The drop in EBITDA compared to 4Q of 21 was mainly driven by the approximately 20 percent decline in AUM over the last 12 months due to equity market decline globally and lower performance fees than last year. Turning to slide 11 for a minute as a reminder overview of what Acadian's capabilities are. The top two rows, equity and managed volatility, have historically been Acadian's core capabilities, and that's where most of our AUM resides currently. The bottom four rows represent the growth initiatives underway. These are all large and growing markets where Acadian's systematic approach is particularly suited to serve this demand. As a quick update on these initiatives, we continue to build out Acadian's efforts in systematic credit with the core investment team now mostly in place. And we continue to add to the investment model and data and technology infrastructure. We expect to start investing in the strategy in the second half of 23 with seed capital. We kick-started Acadian's equity alternative platform in Q4 with 15 million of seed capital and have now started to build a track record here. We continue to make further progress on systematic macro with ongoing traction with clients and additional buy ratings from consultants. And we continue to see more investment mandates focused on responsible investing. All these initiatives tap into secular growth markets, and over time, we expect them to help generate sustained organic growth for Acadians. To conclude with our long-term strategy on slide 15, we will continue to invest in our core capabilities and leverage our unique quant platform to expand into new areas. We will continue using our free cash flow to support organic growth and for share repurchases whenever opportunities are available. And we remain focused on maximizing shareholder value. Now, let me turn the call back to the operator Happy to answer questions at this point.