Westwood Holdings Group Inc

Good day and thank you for standing by. Welcome to the first quarter 2024 Westwood Holdings Group earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that this conference is being recorded. I would like to hand the call over to your speaker today, Jill Meyer, SVP, Director of Fiduciary Services. Please go ahead.

thank you and welcome to our first quarter 2024 earnings conference call the following discussion will include forward-looking statements that are subject to known and unknown risks uncertainties and other factors which may cause actual results to be materially different from those contemplated by the forward-looking statements additional information concerning the factors that could cause such a difference is included in our press release issued earlier today as well as in our form 10Q for the quarter ended March 31st, 2024, that will be filed with the Securities and Exchange Commission. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. You are cautioned not to place undue reliance on forward-looking statements. In addition, in accordance with SEC rules concerning non-GAAP financial measures, The reconciliation of our economic earnings and economic earnings per share to the most comparable gap measures is included at the end of our press release issued earlier today. On the call today, we have Brian Casey, our Chief Executive Officer, and Terry Forbes, our Chief Financial Officer. I will now turn the call over to Brian Casey.

Good afternoon, and thanks for listening to our first quarter earnings call. First, I'll start with some highlights for the quarter. AUM and AUA reached just over $17.1 billion, the highest we've seen in six years. We achieved positive new flows in our institutional channel. We launched our managed investment solutions, and feedback on the team and their capabilities has been very positive. Lastly, our first active ETF was launched on April the 9th. It's called the Westwood Salient Enhanced Midstream Income Fund. and it trades on the New York Stock Exchange under the ticker symbol MDST. It seeks to deliver current income and capital appreciation by investing in midstream energy companies by combining a high-conviction, actively managed, midstream energy-focused equity portfolio with an options overlay to produce enhanced income distributions for investors. Based on current dividend yields and option premium income, The fund targets a double-digit yield for investors, and we've priced it competitively with an all-in expense ratio of 80 basis points. Trading in ETFs is off to a good start with volumes exceeding expectations and tight trading spreads. It's available via Fidelity, Schwab, Vanguard, and on other platforms. Our intermediary sales team held lots of meetings over the past month to introduce our ETF to the RIA community, and the team has seen an encouraging level of interest. Several large RIAs are in the process of conducting due diligence to enable the ETF to be added to their approved list of investments. Due to our efforts, coupled with the attractive features of the fund, we expect trading volume and assets to grow in the weeks and months ahead. As part of this process, we've built a very solid infrastructure to support future ETF offerings, and the next one, enhanced energy income, will begin trading any day. Looking back over the quarter, equities carried their year-end momentum into the new year, but debt markets experienced mixed performance. Investors remain keenly focused on the trajectory of interest rates following one of the most aggressive monetary tightening cycles in history. Fixed income yields are at attractive levels, and an end or easing in the Fed's rate hikes would cause bonds to rally. On the equity side, large and mega cap stocks, especially those involved with artificial intelligence, or AI, led performance across the board. Company participation began to widen late last year, and this trend has continued into 2024, setting the stage for an improved investment environment for our strategies. Equity markets will also benefit from an end to the Fed's rate hikes, and with equity evaluations elevated relative to history, multiple expansion is less likely, and high beta names may lose their luster as earnings growth again propels returns. Businesses with underappreciated earning potential, our sweet spot, should be rewarded. Within our equity strategies, our U.S. value strategies with relevant track records are all outperforming their benchmarks over the 3-, 5-, and 10-year periods and also outperforming their benchmarks since inception. Among our peers, SmidCap and SmallCap continue to pose strong Morningstar rankings, top third for SmallCap and top 10% for SmidCap over trailing three-year periods.