Virtus Investment Partners, Inc.

Good morning. My name is Tawanda and I will be your conference operator today. I would like to welcome everyone to the Virtus Investment Partners quarterly conference call. The slide presentation for this call is available in the investor relations section of the Virtus website, www.Virtus.com. This call is also being recorded and will be available for replay on the Virtus website. At this time, all participants are in a listen-only mode. After the speaker's remarks, there will be a question-and-answer period, and instructions will follow at that time. I will now turn the conference to your host, Sean Vork. You may begin.

Thank you, and good morning, everyone. On behalf of Virtus Investment Partners, I would like to welcome you to the discussion of our operating and financial results for the second quarter of 2021. Our speakers today are George Elward, President and CEO of Virtus, and Mike Engerthal, Chief Financial Officer. Following the prepared remarks, we will have a Q&A period. Before we begin, I direct your attention to the important disclosures on page two of the slide presentation that accompanies this webcast. Certain matters discussed on this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and as such, are subject to known and unknown risks and uncertainties, including but not limited to those factors set forth in today's news release and discussed in our SEC filings. These risks and uncertainties may cause actual results to differ materially from those discussed in the statements. In addition to results presented on a GAAP basis, we use certain non-GAAP measures to evaluate our financial results. Our non-GAAP financial measures are not substitutes for GAAP financial results and should be read in conjunction with the GAAP results. Reconciliations of these non-GAAP financial measures to the applicable GAAP measures are included in today's news release and financial supplement, which are available on our website. Now I would like to turn the call over to George. George?

Thank you, Sean. Good morning, everyone. I'll start today with an overview of the results we reported this morning and give an update on the Westchester Capital Management transaction before turning it over to Mike to provide more detail on the quarter. Then, before taking your questions, I'll make some comments on our recent announcement of the agreement with Stone Harbor Investment Partners. Turning to the performance for the quarter, we continue to deliver very strong results. demonstrating the value of our business model and collection of distinctive investment managers. For the second quarter, we reported a significant increase in assets under management, the fifth consecutive quarter of positive net flows, record levels of operating profitability and margin, our highest level of earnings per share is adjusted, strong cash generation with EBITDA more than double prior year levels, and consistent return of capital to shareholders and debt reductions. Our track record of strong growth and profitability is the product of execution on our long-term strategy and the actions we have taken to build a differentiated partnership of managers offering diverse, compelling products and strategies supported by effective distribution and experienced business resources. Over the past year, we have built on that foundation, adding scale and complementary investment capabilities to support continued organic growth while maintaining a balance sheet that provides flexibility for continued return of capital and as well as to be strategically opportunistic with inorganic opportunities. Over the past year, we finalized our partnership with Allianz GI, adding significant scale and complementary investment strategies in the U.S. retail market, executed and are completing our transaction with Westchester Capital, adding well-regarded event-driven strategies that will meaningfully expand our alternative offerings, and announced an agreement to acquire Stone Harbor. adding emerging market debt capabilities, and enhancing our non-U.S. institutional opportunities. The Subadvisory partnership with AGI and the additions of boutique affiliates like NFJ, Westchester Capital, and Stone Harbor is illustrative of our multifaceted approach to inorganic growth and underscores a key element of our value proposition. While our long-term growth is not dependent on M&A, our model is designed to allow us to partner with distinctive managers and support growth by offering their strategies through our broad distribution platform and into additional product structures. Our model is attractive to high-quality managers and allows us to partner selectively with distinctive firms for particular investment capabilities. So turning now to the results, total assets under management increased by nearly $10 billion to $178.6 billion at June 30th, up 6% sequentially due to market performance and net flows. Over the past year, AUM has increased by 65%, also from market performance and positive flows, as well as the addition of the AGI assets. Sales of $9.6 billion represented our second highest quarter of inflows, and sales increased 21% on a year-to-date basis on growth in retail separate accounts, open-end funds, and ETFs. For the quarter, we achieved $1.3 billion of positive net flows, with contributions from retail separate accounts, institutional, and ETFs. retail separate accounts continued to deliver positive net flows with a double-digit organic growth rate and positive flows across investment strategies. Institutional net flows were positive for the third consecutive quarter with continued traction at multiple affiliates in both new mandates and existing accounts. Open end funds had modest net outflows largely due to domestic equity. Organic growth for the trailing 12-month period exceeded 7%. with essentially all product categories and major asset classes having generated positive flows. In terms of the flows we're seeing so far in July, while it's still early in the quarter, we have not seen any fundamental change in activity levels from the second quarter. We continue to see some pressure on equity funds, though trends in other strategies, including fixed income, remain favorable. Our profitability for the quarter again reached a new high, reflecting the meaningful growth in assets under management and the leverageability of the model. Operating income as adjusted increased by 32% sequentially and more than doubled over the prior year, and the related margin of 48.9% increased from 41.6% in the prior quarter and by nearly 15 percentage points from the same period a year ago. Earnings per share as adjusted were $9.07, up 34% sequentially, due to higher revenues and lower expenses. Turning now to capital, during the quarter, we repurchased or net settled approximately 41,000 shares for $11.6 million and continued paying down debt. Our balance sheet remained strong when we again ended the quarter in a net cash position and increased our working capital. We continue to generate significant cash flow that has meaningfully increased providing flexibility to fund upcoming transaction-related payments with existing resources while continuing to invest in the growth of the business and return capital to shareholders. Before I turn the call over to Mike for more detail on the results, let me provide a brief update on our transaction with Westchester Capital. We remain on track with the approval process of anticipating closing the transaction near the end of the quarter. Westchester continues to perform well, with asset center management at June 30th of $5 billion, up 9% sequentially from the $4.6 billion at March 31st. The increase was largely driven by $361 million of positive flows, representing double-digit annualized organic growth. We look forward to offering their event-driven strategies, which have traditionally had low correlation to the equity markets, through our strong retail distribution to an expanded set of retail investors. particularly given some of the recent volatility we've seen in the equity markets. We expect the transaction to be immediately accretive to EPS as suggested. We have updated our accretion estimate to approximately 7% based upon second quarter EPS as suggested, as Westchester Capital has more than kept pace with our very strong earnings growth. With that, I'll turn the call over to Mike. Mike?

Thank you, George. Good morning, everyone. Starting with our results on slide seven, assets under management. At June 30th, assets under management were $178.6 billion, up 6% from $168.9 billion at March 31st. The sequential increase reflected $8.8 billion of market appreciation and $1.3 billion of positive net flows. AUM remains diversified by product type, with open-end funds, institutional, and retail separate accounts representing approximately 42%, 26%, and 23% of AUM, respectively. In terms of asset classes, equity assets were 64% of AUM, with three-quarters of that in domestic equity relatively evenly split among large, mid, and small-cap assets. International and global were 21% of equity assets, and specialty was 6%. Fixed income represented 20% of AUM at June 30th, and multi-asset and alternatives were 13% and 3%, respectively. In addition, we had $3.8 billion of other fee-earning assets at June 30th, and increased from $3.4 billion at March 31st. Turning to investment performance, we continue to generate strong relative performance across our strategies. At June 30th, approximately 62% of rated fund assets had four or five stars, and 96% were in three, four, or five-star funds. We currently have 12 funds with AUM of $1 billion or more that are rated four or five stars, representing a diverse set of strategies from five different managers. In addition to strong fund performance, as of June 30th, 92% of institutional assets And 100 percent of retail separate account assets were beating their benchmarks on a three-year basis. And 67 percent of institutional assets and 87 percent of retail separate account assets were outperforming their benchmarks over five years. Also, 86 percent of institutional assets were exceeding the median performance of their peer groups on the same five-year basis. Turning to slide eight, asset flows. Net inflows of 1.3 billion in the quarter represented a 3.2 percent annualized organic growth rate, and this marked the fifth consecutive quarter of positive net flows. Byproduct, net flows are positive in retail separate accounts, institutional, and ETFs, while modestly negative in open-end funds. In retail separate accounts, net flows continued to be positive across all investment categories with an annualized organic growth rate of more than 15 percent. Institutional net flows are positive for the third consecutive quarter, benefiting from new mandates at multiple affiliates. In open-end funds, most investment categories generated organic growth with modest net outflows driven primarily by small cap and specialty equity. By asset class, net flows are positive in equity, multi-asset and alternatives with fixed income essentially break even as positive flows in leveraged finance, multi-sector and hybrid were offset by investment grade outflows. This marked the 10th consecutive quarter for net inflows in equity strategies. Total sales for the quarter were 9.6 billion down sequentially from record prior quarter levels. By product, fund sales of $4.7 billion compared with $5.9 billion in the first quarter as lower equity and fixed income fund sales were partially offset by increases in multi-asset and alternatives. Retail separate account sales of $2.3 billion were down sequentially from a quarterly high of $2.7 billion. Institutional sales of $2.3 billion increased 22% sequentially due to the funding of several large new mandates. Turning to slide 9, investment management fees as adjusted of $183.2 million increased $19.3 million, or 12% sequentially, reflecting the 12% growth in average assets. Performance fees in the quarter were 0.8 million, up from 0.6 million in the prior quarter. The average fee rate on AUM was 42.5 basis points, down 0.6 basis points sequentially. The sequentially lower fee rate reflected the impact of the additional month of the AGI assets. Excluding performance fees, the average fee rate was 42.3 basis points, and compared with 43 basis points in the first quarter. Going forward, for modeling purposes, we expect the average quarterly fee rate to be in the range of 42 to 44 basis points, all else being equal and subject to market variability. Slide 10 shows the five-quarter trend in employment Total employment expenses, as adjusted, of 86.5 million decreased 4% sequentially, reflecting the impact of seasonal items in the first quarter. Excluding those items, employment expenses increased by 5.5 million, or 7%, due to higher profit-based incentive compensation and the full quarter impact of our new affiliate, NFJ. As a percentage of revenues, employment expenses were 41.1%, a decline from 48.3% due to the seasonal items in the first quarter. Adjusting for the seasonal items, employment expenses as a percentage of revenues declined by 220 basis points from 43.3% in the first quarter due to market-driven revenue growth and the full quarter impact of a higher level of unaffiliated subadvised assets. For the third quarter, we would anticipate that employment expenses as a percentage of revenues will approximate the second quarter level, subject to variability based on markets and sales. Turning to slide 11, other operating expenses as adjusted were $19.9 million, up on a sequential basis from $17.8 million due to $0.8 million of annual grants to the Board of Directors and growth of the business, including a full quarter with our new affiliate. While it had a minor impact, I would also note there was a modest resumption in travel activity and related expenses, though still well below pre-COVID levels. We anticipate third quarter other operating expenses as adjusted will be within the $19 to $21 million quarterly range we previously provided. Slide 12 illustrates the trend in earnings. Operating income as adjusted of $102.9 million increased $24.9 million or 32% sequentially due to the increase in revenues and lower operating expenses. Notably, operating income as adjusted increased over 150% from the second quarter of last year. The operating margin as adjusted of 48.9% increased by 730 basis points from 41.6% in the prior quarter. Normalizing the first quarter margin for 9.4 million of seasonal employment expenses, the operating margin increased by 220 basis points. Net income as adjusted of $9.07 per diluted share increased by $2.29 or 34% sequentially, primarily due to increased revenues from the higher average assets and lower employment expenses. Regarding gap results, net income per share of $7.86 increased 73% from $4.54 per share in the first quarter and included the following items, a $1.20 reduction reflecting the increase in the fair value of the minority interest liability, 24 cents of acquisition and integration costs, and 58 cents of realized and unrealized gains on investments. Slide 13 shows the trend of our capital, liquidity, and select balance sheet items. Working capital was $229 million at June 30th. up 9% sequentially due to cash generated by the business in excess of debt repayment and return of capital to shareholders. At June 30th, gross debt to EBITDA was 0.6 times, down from 0.8 times at March 31st and from 1.1 times in the prior year as we have both reduced debt and significantly grown operating income. Gross debt outstanding at June 30th was $194 million, as we repaid $6 million during the quarter. Over the past year, we have reduced gross debt by $47 million, or 19%. We generated $112 million of EBITDA in the second quarter, up 29% sequentially and more than double the prior year level, as AUM growth from the market, positive net flows, and the addition of the AGI assets has meaningfully increased quarterly cash flow. We ended the quarter in a net cash position with cash exceeding gross debt by $82 million. During the second quarter, we repurchased 26,921 shares of common stock for $7.5 million and net settled an additional 14,439 shares for $4.1 million to satisfy employee tax obligations. Our balance sheet continues to provide flexibility to invest in the business and return capital to shareholders and positions us to fund upcoming transaction-related cash obligations from available resources over the next 12 months that include the $135 million closing payment and up to an additional $20 million revenue retention payment for Westchester Capital. Our closing payment for Stone Harbor our first revenue participation payment to AGI, and other obligations, including the purchase of affiliate non-controlling interests. With that, let me turn the call back over to George. George?

Thanks, Mike. Before we take your questions, I'd like to discuss our recently announced agreement to add Stone Harbor as an affiliated manager. Stone Harbor is the premier manager of emerging market debt, and multi-asset credit strategies with $15.3 billion in assets under management, primarily offered to global institutional clients, including some of the largest and most sophisticated cyber wealth funds, pension plans, foundations, and endowments. We're excited to add Stone Harbor to our family of affiliated managers. Stone Harbor will significantly enhance our fixed income capabilities, complementing our offerings from New Fleet and Sykes with well-regarded emerging market debt strategies that have a proven track record through multiple It will broaden our base of clients and channels and geographies that have growth prospects and expand our opportunities in those regions. Stone Harbor's distribution professionals and relationships in the non-U.S. institutional market will significantly enhance our overseas resources and capabilities. In addition, Stone Harbor will provide us with a proprietary operating analytical platform that offers end-to-end investment and risk management technology and can be leveraged by other affiliates. Stone Harbor will operate as an individual boutique, retaining autonomy over its investment process and maintaining its independent culture and brand identity. Under the agreement, we would acquire 100% of Stone Harbor from the principals. The transaction structure includes an upfront payment, as well as potential future earn-out payments based upon the growth in the business. We expect the transaction to be modestly accretive to earnings as adjusted upon closing, which we anticipate will take place near year-end. We look forward to providing more details as we get closer to closing. So with that, we'll now take your questions. Tawana, can you open up the lines, please?

Thank you. Ladies and gentlemen, to ask the question, you will need to press star then 1 on your telephone. To withdraw your question, press the pound key. Again, that's star 1 to ask questions. Please stand by while we compile the Q&A roster. Our first question comes from the line of Summit Moody with Piper Sandler. Your line is open.

Thanks. Good morning, guys. Just wanted to follow up on that last Stone Harbor point you made, George. Is there any more details that you guys plan on providing on sort of the price of the earn out on Stone Harbor?

Yeah, I think what we'd say is we've given the general transaction structure, which is an upfront payment and then potential earnings payouts in the future. So I would, in some ways, sort of think about structured, not too dissimilar with the drivers behind the EGI structure, which is really all about believing in the future growth of our businesses together. So that is the way the structure is. When we get closer, you may see a little additional information, but that's the way you should be thinking about.

Okay, great. And then on the fee rate, You know, it seems like the rate declined, you know, much less than we were expecting after, you know, AGI's first quarter of inclusion. Can you talk about the driver of the resiliency there? And then secondly, you know, appreciate the guidance on 42 to 44 basis points for the remainder of this year. It seems like it should increase with Westchester and Stone Point after those close. Now, how do we think about the combined effects from those two deals on the rate for 2022?

Sure. I mean, a couple thoughts, and then Mike will expand upon that. So that fee rate is going to be impacted. Obviously, the temporal timing of the AGI transaction and their average rate versus ours, obviously that was a big driver of the change over the prior quarters. We continue to have a variety of different products sold at different rates and redeeming at different rates. And then when you get to the Westchester as well as ultimately the Stone Harbor, each of them will have their separate impacts. but they'll be commingled with the other activities that are going on in the business. Mike, do you want to go into it?

Yeah, I think that's right. To me, the 42 to 44 range I don't think will be impacted in total by the addition of either Westchester or Stone Harbor. So certainly each of the product structure line items will be impacted on its own as Westchester is predominantly open-end funds and that'll have an impact on that fee rate and Stone Harbor predominantly institutional. But overall, I think that 42 to 44 rate holds pretty tight. And, you know, we are pleased with the continued differential between our sales and redemptions on the fee rate, you know, giving us confidence in that range. You know, on the open end side, I think the sales were at about 51.5 and redemptions were... just under 50, so about a half a basis point differential. And then on the institutional side, we didn't really get into it, but the sales increased about 22% this quarter and sales came in around 36 basis points where the redemptions were at 27 basis points and included a low fee redemption. So we feel pretty good about the outlook on the fee rate and in the guidance that we provided.

Okay, great. And then similarly on the comp ratio, I know you guys have talked about third quarter being roughly in line with the second, but, you know, is it fair to think about this as more of a longer-term run rate going forward, or is there kind of more considerations, you know, outside of the third quarter, especially after kind of Westchester and Stone Point close, too?

Yeah, I mean, the factors that drive it, there's multiple factors, right? So the revenue growth factor, particularly as equity markets move up, that has a really big impact on that. So since it's being divided by revenue, revenue is being impacted by, you know, are the markets just moving up and up or are they flat? And then on the variable side of the comp, and a high percentage of our compensation is variable, and it will be based upon our profitability. So it's hard to particularly say like a given run rate because it will be highly influenced by those factors. But I think Mike has given the indication in the near term.

Yeah, and I think, you know, to George's point, certainly that ratio will be impacted by factors like the market and like sales levels, which have moved it around a bit, and also the level of unaffiliated subadvised assets, which – have increased with the addition and full quarter impact of the AGI assets this quarter. And looking forward, we'll have Westchester coming on and Stone Harbor coming on. We'll provide additional insight on that ratio as those transactions come on. We did talk about the accretion of each of those transactions to give you a frame of reference of the impact on the bottom line. And as we get closer, if there's an impact on the ratio, we'll update you. But certainly for the third quarter, you know, all else being equal, we think the ratio that came in in the second quarter is appropriate.

Okay. And then if I could squeeze one more in, just, you know, with the closing of the two pending deals expected in the coming months and kind of given your pristine balance sheet and higher run rate on cash flows, can you talk about the conversations you're having with more potential targets and particularly on the larger M&A opportunities that could be more transformative in nature? What's the opportunity set look like today?

Yeah, I always start answering that question by saying our long-term growth strategy is not dependent on M&A, but obviously we've just announced, what, three or four in a short period of time. So we've always had those conversations. As I indicated in the comments, we are, to your point, we have a strong balance sheet Our cash flow, as both Mike and I pointed out, has significantly increased and expanded, allowing us to continue to invest in the growth in the business as well as return capital, pay down debt, and to potentially fund other future inorganic opportunities. We do continue to be involved in multiple conversations and look at those things that are available, but for us, it has to fit, you know, a criteria that makes sense for us. So, you know, we don't, you know, need to buy things focused entirely on short-term accretion. It really is going to be focused on what is an additive capability or additive resources or additive market opportunities that will further facilitate continued organic growth coming from the rest of our business. So you're going to see a lot of opportunities out there. We do have the ability to be selective in what is a good fit for us in terms of either a product capability or a business. I do agree and believe that there'll continue to be more consolidation in the industry. We think we are well positioned as it relates to that, given just the fundamental strength of the business in terms of the business fundamentals of investment performance and flows and profitability, as well as having a nice balance sheet. And we'll continue to look at opportunities and other ways to build out towards the future creation of shareholder value.

Okay, great. Thanks for taking my questions.

No, thank you.

Thank you. Our next question comes from the line of Michael Sippers with Morgan Stanley. Your line is open.

Great, thanks. Good morning, George, Michael. Good morning. Thanks for taking the question. I was just hoping you could talk a little bit about your vision for Virtus over the next five years. What, in your view, does the Virtus of 2026 look like, and how different might that look from the way Virtus looks today, whether it's number of affiliates, types of capabilities, global footprint, et cetera? And then as you kind of think about the path to getting there, what sort of strategies and affiliates do you think are going to have the biggest impact on the growth of the firm?

Sure. No, great question. What I would say is, you know, the vision we have for the future of the business is basically a vision we've been executing on at least for 13 years, and actually I would argue probably two years prior to that. And that really is to have, you know, a differentiated best-in-class multi-boutique model where we have a collection of some of the best managers of individual capabilities and strategies and that we facilitate the their ability to focus on generating great performance by supporting them from the business perspective and then simultaneously making as many clients and channels open to them. So that's always been the vision for the business over the last many years. We have been building out all aspects of that, right? So over the last 12 or 13 years, you've seen us building out and further enhancing our retail distribution, investing in institutional distribution, non-U.S. distribution, Beneath it all, also working on all of our infrastructure. And then through a whole series of transactions, you've seen us expanding the investment capabilities, where at this point I would kind of argue we pretty much fill a pretty wide spectrum of actively managed traditional asset classes in both equity and fixed, both U.S., non-U.S., etc., and then with Westchester, you're actually adding a little bit more into the alternative strategies. So the same vision is saying the other pieces that we've commented on that are still areas for us is continuing to grow our non-U.S. footprint in terms of our client base. So Stone Harbor, one of the many things that was attractive about Stone Harbor is they do have a very nice, presence and client base outside of the U.S. We continue to see that as a green pasture for some of our strategies, though a lot of we didn't get into some of our specific mandates that we've been winning over the last few quarters. We've actually started seeing from resources that came actually as part of the Ridgeworth transaction and some other investments we've made We've already started growing our own business on the non-U.S. side. Continue to see that as something that is just a high level of opportunity for our existing capabilities. And as it relates to other capabilities, you know, continue to think that there are other asset classes that may have less correlation or have less liquidity that may be an important part of the building block for portfolios. So those could be areas that we continue to find interesting.

Great. Thanks for that. Maybe just building off your last point on Stone Harbor with the international presence, maybe you could just expand a little bit more on how you would sort of go to market and execute on that sort of international sales distribution strategy. I imagine the distribution team is kept within Stone Harbor, but how do you sort of work with that, incentivize that? and so forth to drive existing products and new fleet sites and other affiliates through that distribution channel that's coming over from Stone Harbor on the institutional side globally?

Yeah, well, to be clear, and not getting specific to the Stone Harbor piece of it, but we have non-U.S. resources that are supportive of multiple affiliates, and the non-U.S. market, that is the opportunity for us to add to their existing resources and and facilitate their growth in those areas. So you should think of the non-U.S. opportunity as resources can support multiple affiliates, not necessarily only one affiliate. Our model is affiliate-centric in that each affiliate should really be driving their institutional strategy and growth, but we support that by having resources available to help them either in channels that they're not going to fully dedicate on or in markets where it makes no sense. for each affiliate to have resources. So that is one of the things that we've seen in our growth from some of our shared resources have been some meaningful wins outside the U.S. market. I would say with Stone Harbor, we're looking for the same thing, is to try to just take advantage of resources and footprint and to the extent that we can make that additive for other parts of the business, that will absolutely be part of the plan.

Great. And just a follow-up question on the SMA side of your business. You've been having a lot of success there pretty consistently. I was just hoping you could maybe elaborate on your perspective on how sustainable do you think those flows are coming from SMAs. Maybe if you could talk a little bit about which channels in particular are you seeing greatest strength. Is that with the wires or is that more RIAs? and any sort of color on the product sets as well there around the SMA side and the strengths you're seeing.

Yeah, you know, I would say the high level, and then I'll ask Mike to get into some of it as well. You know, the SMA, we're big believers in SMAs. We started talking about and emphasizing SMAs many years ago. We're very pleased with the continued success in terms of growth, both on the sales side as well as the net flow side. For the SMAs, we continue to think that that is a very important component in the retail market, and we do see the opportunities not only in the wire house channels, but in our case, we do have a high net worth business at Kane Anderson Rudnick, which is also a great area of nice, stable business. assets. So we continue to focus on the area, focus on additional products that will fit very well into the SMA vehicle in addition to our open-end funds, but we continue to see that an area of growth.

Yeah, and I think just expanding on that, I think we've seen growth in all investment strategies on the equity side, certainly in different market capitalizations and both on core growth and value. And, you know, we believe that that is an important area of growth across that and even some fixed income opportunity as well as growth equity across several of our affiliates and multiple different product structures.

Great. And just maybe if I could sneak in another question just on the institutional side, maybe you can just give us a little bit of update on the institutional pipeline and you know, how that is looking like today relative to where it has in the past couple of quarters. And if you could touch upon some of the traction and activity that you're seeing there. And also on the CLO structured products business, I know in the past that had been a regular source of inflows. Obviously, the pandemic, I think, had impacted that. But now with the market recovering, particularly for CLO managers, we've seen that with some others in the space. Just curious what opportunities that might there be for you guys to bring another product to market maybe later this year.

Yeah, so on the institutional, we're really pleased with the evolution of the institutional business. So that has been something we have been, you know, focused on and building out over the past few years. And we've evolved from, you know, sporadic periods of inflows at one or two affiliates to more consistent ones at multiple affiliates, as we alluded to in our prepared remarks. You know, we continue to see good levels of activity at multiple affiliates with new mandates. You know, I've added to that now that some of those mandates are actually meaningful non-U.S. mandates. So it continues to expand in terms of what that opportunity says. I still think we have much greater opportunities ahead of us, but the trajectory has been very good. and we're pleased with the level of activity. It is by nature a lumpy business, so you're going to have ins and outs, and particularly in market cycles where you start having rebalancings and stuff like that. We see that as an opportunity. So, you know, one of the reasons for our model is if there are rotations, if we're on both sides of the rotation, say growth and value, we actually have opportunities in those. So we feel pretty good about that. Mike, do you want to add to that and then the CLOs?

Yeah, no, I think you touched on that where we're seeing opportunity with some of our value managers where perhaps we hadn't seen those opportunities 12 to 24 months ago. So there's traction there. From the CLO perspective, we continue to look at that market. I think we haven't talked about an open warehouse, so there's nothing imminent in that. that product structure, but the fixed income team certainly have been regular issuers in that market when opportunities arise, and they do stay close to the market. And if we believe that it's a good use to sponsor and support our managers, we'll certainly deem that an appropriate good use of capital and update you as appropriate. But as of now, there is nothing imminent in the warehouse phase, but we do stay close to that market. Great. Thank you.

Thank you.

Thank you. I'm not sure on any further questions in the queue. This concludes the question and answer session. I would now like to turn the call back over to George for closing remarks.

Great. No, thank you. And I do want to thank everyone, as always, for joining us and certainly encourage you to reach out or call us if you have any other further additional questions. Thank you very much.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.