Pzena Investment Management Inc Class A

Hello and welcome to the Pazina Investment Management Reports results for the third quarter of 2021. My name is Charlie and I will be coordinating your call today. If you would like to ask a question during the presentation, you may register to do so by pressing start followed by one on your telephone keypad. I will now hand you over to your host, Jessica Doran, to begin. Jessica, please go ahead.

Thank you, Operator. Good morning, and thank you for joining us on the Pazina Investment Management Third Quarter 2021 Earnings Call. I am Jessica Doran, Chief Financial Officer. With me today is our Chief Executive Officer and Co-Chief Investment Officer, Rich Pazina. Our earnings press release contains the financial tables for the periods we will be discussing. If you do not have a copy, it can be obtained in the Investor Relations section on our website at www.pazina.com. Replace of this call will be available for the next two weeks on our website. Before we start, we need to remind you that today's call may contain forward-looking statements and projections. We ask that you refer to our most recent filings with the SEC for important factors that could cause actual results to differ materially from today's comments. Please note that we do not undertake to update such information to reflect the impact of circumstances or events going forward. In addition, please be advised that due to prohibitions on selective disclosures, we do not, as a matter of policy, disclose material that is not public information on our conference calls. Now let me turn the call over to Rich, who will discuss our current view of the investing environment.

Thanks, Jessica. We human beings are irrational decision makers. It's not just my opinion. Decades of behavioral economics research and several Nobel Prizes have been handed out in support of this conclusion. We simply tend to make biased judgments, sometimes out of recent experience, sometimes out of a hard-wired predisposition towards loss aversion. The evidence is powerful. We humans are simply irrational economic actors. The truth is effectively the platform upon which value investing is built. Value investors capitalize on the realization that human biases impede rational decision-making, and the resulting mispriced assets are available for those willing to systematically override their biases and apply rational economic analysis for their decisions. Let's consider the choice of which asset class offers the most attractive future return profile today. Using our estimated normalized earning yield as our metric, the cheapest quintile of the 2,000 largest global stocks offers a yield of more than 13%. Compare that to the estimated normalized earnings yield of the full universe of global stocks at just over 6%. And treasury bonds and euro bonds each offering yields of just 2% or less. And yet current sentiment, investment literature, stock price momentum, all would have one belief that the better choice is to be found among assets with lower projected earnings yields. The rational actor would obviously prefer the double digit return opportunity embedded in the cheapest stocks. But let's consider one of the most common current arguments for avoiding the cheapest stocks today. Namely, I prefer quality. Or, okay, so let's look at the facts. The cheapest quintiles of both U.S. and non-U.S. stocks have 10-year average revenue growth rates of 6% and 8% and 10-year average returns on equity of 17% and 13% respectively. By any analytic frame, I think it's fair to say that this is a fertile hunting ground for quality businesses. Let's also consider the near-term projected earnings of the cheapest stocks. Wall Street analysts are projecting value stocks to grow their earnings at more than 20% compounded annual growth rate through 2023, a higher rate than projected by analysts for growth stocks. And we can buy these growing high-quality value stock businesses for prices at 60% or more discounted to their growth brethren. Our message and conclusion is clear. We think the value cycle is still in its early stages. There will no doubt still be bumps in the road ahead, as there always are, but to ignore the data is to fall prey to the irrational decision-maker's fate of suboptimal outcomes. You can count on us to always stay true to our value discipline and therefore offer a counterbalance to this all-too-human reality. Let me close with a few comments about our business. We closed the quarter with assets under management at nearly $51 billion. We had net outflows of a billion for this quarter, but this comes after positive net flows last quarter of 2.2 billion. As we have remarked over the years, our flows can be lumpy. I'd like to offer as evidence that the marketplace rewards our value discipline We still have positive net flows for the year. And if this holds, we will achieve our fifth consecutive calendar year and eight of the last 10 years with positive net flows. We're awaiting approval from the Irish regulatory officials to open our first European office in Dublin, which will offer us the ability to offer EU clients access to our strategies in whatever form they prefer. I look forward to answering your questions and now turn the call back over to Jessica.