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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Greetings, and welcome to the Federated Investors First Quarter 2019 Analyst Call and Webcast. [Operator Instructions] As a reminder this conference is being recorded.
It is now my pleasure to introduce your host, Mr. Ray Hanley, President of Federated Investors Management Company. Thank you, you may begin.
Good morning, and welcome. Leading our call today will be Chris Donahue, Federated's CEO and President; and Tom Donahue, Chief Financial Officer; and joining us for the Q&A are Saker Nusseibeh, the CEO of Hermes; and Debbie Cunningham, the Chief Investment Officer for our Money Market investment operations.
During today's call we may make forward-looking statements, and we want to note that Federated's actual results may be materially different than the results implied by such statements. Please review the risk disclosures in our SEC filings. No assurance can be given as to future results. Federated assumes no duty to update any of these forward-looking statements. Chris?
Thank you, and good morning. I will briefly review Federated's business performance and Tom will comment on our financial results. Looking first at equities. We closed the first quarter with $80.2 billion of assets, up from $72.5 billion at the end of 2018. Market-related gains offset net redemptions, which decreased from the prior quarter.
Equity mutual fund flows were positive by about $400 million and equity SMA net redemptions decreased to $228 million, which is down from $884 million in the fourth quarter.
Higher gross sales and lower redemptions in the Strategic Value Dividend strategy factored into the improvement in the equity fund and SMA results. Equity institutional accounts had about $970 million in net redemptions in Q1 with about $750 million due to BTPS making substantially all of their expected 2019 drawdowns from various Hermes accounts.
We had 16 equity funds with positive net sales in the first quarter led by Kaufmann Small Cap, Hermes Global Emerging Markets funds and several MDT funds.
Additional Hermes equity funds that achieved positive net sales in the first quarter included Global Emerging Markets SMID fund, Global Equity ESG fund and the impact opportunities fund.
Using Morningstar data for the trailing 3 years at the end of the year, about 1/3 of our equity funds were in the top quartile and about 2/3 were in the top half.
5 star equity funds at the end of the first quarter included MDT Small Cap Core, Mid Cap Growth and All Cap Core, the Kaufmann Small Cap and Hermes Global Emerging Markets. We had 11 4 star equity funds, including various MDT, Kaufmann and Hermes strategies. Looking at the Strategic Value Dividend strategy, its objective is to provide a high and growing dividend's income stream from high-quality companies.
The domestic funds, 12-month distribution yield of 3.77% ranked in the first percentile of its Morningstar category at the end of the first quarter.
Domestic Strategic Value Dividend strategy had combined mutual fund and SMA outflows of $450 million in Q1, down from $1.5 billion in Q4.
Looking at early Q2 2019 results, combined fund and SMA net redemptions for this strategy were about $57 million through the first 3 weeks of April. Overall, combined equity fund and SMA net sales for the first 3 weeks of April were positive at about $62 million.
Now turning to fixed income. Assets increased by about $1 billion in Q1 to $64 billion, due mainly to market-related gains of just about $2 billion, partially offset by nearly $1 billion of net redemptions. On the fund side, net inflows of about $275 million in total return bond and Trade Finance combined were offset by outflows of about $535 million in high-yield and multi-strategy credit also combined.
These outflows included about $200 million from the planned redemptions of BTPS seed investments in certain Hermes funds.
For fixed-income separate accounts, net outflow was due largely to the net redemption of about $375 million related to a large client's usage of cash.
Our fixed-income business has a variety of strategies that are performing well.
At quarter-end, using Morningstar data for 3 years, we had 8 funds, 25% in the top quartile, including Total Return Bond and Hermes multi-strategy credit, and 23 funds almost 75% in the top half.
Fixed-income fund and SMA net sales are positive early in Q2 at about $214 million.
In the alternatives category, assets at quarter-end were $17.9 billion, down from $18.3 billion at year-end. This decrease, however, was due to the success of various Hermes private market strategies that have been reflected as distributions of gains.
Now looking at money markets.
Total money market assets increased approximately $16 billion in Q1, with funds up about $6 billion and separate accounts up about $10 billion. We saw positive money market fund flows from a variety of institutional and intermediary clients in Q1, as money market strategies continue to offer yields well in excess of average deposit rates.
Prime money fund assets increased nearly $8 billion or 18% in Q1 from about $45 billion in Q4 to almost $53 billion here in Q1.
Our money market mutual fund market share, including sub-advised funds at the end of the quarter, was up slightly, just below 8%.
Taking a look at our most recent available asset totals. Federated as of the 24th and really Hermes as of the 17th, managed assets were approximately $490 billion, including $321 billion in money markets; $82 billion in equities; $65 billion in fixed income; $18 billion in alternative; $4 billion in multi-asset.
Money market mutual fund assets were $215 billion. Federated and Hermes RFP and related activity levels continue to be solid and diversified with interest in MDT, Kaufmann and Global Emerging Markets for equities and multi-sector and short duration for fixed income.
Now we began the quarter with about $1.9 billion in net institutional mandates yet to fund, with about $800 million in fixed income and $1.1 billion in equities. We expect these wins to fund over 2019 with about $1.7 billion in 2 separate accounts and $200 million in 2 funds.
Turning to the international side. We announced this week, the launch of the next 2 Federated Hermes funds: the Federated Hermes global equity fund; and the Federated Hermes Global Small Cap Fund.
Each fund follows the investment strategy of a similar Hermes fund, which combined have grown to nearly $4 billion.
We continue to move forward in registering additional U.S. mutual funds to offer additional Hermes strategies to our customers.
We are also actively presenting Hermes strategies with our institutional clients and are working with Hermes to develop opportunities for them to offer Federated strategies to their clients.
We are continuing with plans for U.S. expansion in 2019 of the Hermes EOS, equity ownership services Business that features leading ESG stewardship and engagement services to institutional asset owners and pension funds.
Hermes EOS assets under administration reached $587 billion at the end of Q1, up from just under $500 billion at year-end.
Hermes managed assets at year-end were approximately $44.3 billion, up from $42.6 billion at year-end, with market gains offsetting net redemptions.
Third-party positive net sales of $263 million were offset by BTPS' net redemptions of about $1.3 billion. Hermes built on the successful Q4 launch of the Global Emerging Markets mid-strategy with more than $50 million of new net sales to bring that fund to over $100 million in assets.
Hermes continues to progress the development and growth of a world-class multi-asset credit platform, featuring the Hermes unconstrained credit fund and the Hermes European direct lending fund, both launched during 2018.
We also continue our business development in the Asia-Pac region with a focus on opportunities in Greater China, Korea, Japan and are actively working to establish strategic relationships with select financial institutions to add regional distribution of Federated's investment strategies. This effort complements Federated's European, U.K. and Canadian operations. Tom?
Thank you, Chris. Total revenue was down slightly from the prior quarter due mainly to fewer days, which reduced revenue by $7.6 million, and a $2.7 million decrease in performance fees, which were $3.1 million in Q1 compared to $5.8 million in Q4.
These decreases were partially offset by $10.8 million in higher revenue from higher average money market assets.
Revenue was up about $43 million compared to Q1 of last year due mainly to the consolidation of Hermes revenue of $48.3 million, and higher money market revenue of $16 million.
These revenue increases were partially offset by lower equity-related revenue of $12.4 million, and lower fixed income-related revenue of $3.3 million.
The increase in operating expense -- expenses from the prior quarter of $16.9 million was mainly due to higher incentive compensations and seasonally higher payroll taxes, seasonal bonus-restricted stock expense and to higher distribution expense from higher average money market asset -- money market fund assets.
The increase from Q1 2018 of approximately $52 million was due mainly to the consolidation of Hermes expense of $51.3 million, including the amortization of intangibles from the deal.
As we've said before, we expect the Hermes deal-related amortization to be about $11 million in 2019. At the end of Q1, cash and investments were $162 million, of which about $124 million was available to us.
Michelle, that concludes our prepared remarks, and we would like to open the call up for questions now.
[Operator Instructions] Our first question comes from the line of Ken Worthington with JP Morgan.
Maybe first, Federated's money market fund business lost market share pretty consistently in the decade that followed the financial crisis, and market share gains have actually been pronounced more recently. Can you talk about positioning of your fund to maybe what you attribute this transition from the more consistent market share losses to the more consistent market share gains that we've seen more recently?
Ken, this is Debbie. And I think there was a massive amount of consolidation that occurred in the money market space after reform took place in 2016. And I think that's to some degree is part of it. We continue to offer a very full slate of money market funds that includes every type of government money market funds. So that's the largest category.
It includes all types of both institutional, as well as retail prime funds, which have been, on a percentage growth basis, the largest growers over the course of the last 9 months. And a full slate of both federally tax exempt as well as state tax-exempt municipal products.
So as interest rates continue to climb, but as the differentials between those various sectors sort of ebb and flow, we continue to offer a very diversified group of products, which I think is not necessarily the case with many of our competitors at this point.
There are some additional factors, Ken, that -- what Debbie talked about is a commitment over decades that gets then reflected when you see the deposit numbers running up all during that time frame and then the yields on our funds being substantially higher than deposits today.
So then if you keep your commitment when it's raining dollars, you are a beneficiary. The other -- another factor is that it is important to keep the funds competitive and back in the old days, it was just keep the funds at 1 basis point or something above 0. And now we have been very good in both the investment performance and in how we manage the business to keep those yields on a very, very competitive basis.
Okay. And maybe just to press a little more. Prime would seem to be part of the share loss versus share gain, do you agree there? And then maybe looking at your distribution channels, is there a channel that seems to be maybe outperforming for you in the money market fund area that may -- that we may or we should attribute maybe more of the market share gains to versus the losses in the past?
Prime is a little different because prime required people to look through the new rules on the NAVs and things like that, and people are increasingly becoming more sanguine about going into these funds with 4 9s or 4 0s behind the decimal point.
And so that is the different overriding factor. The reason people are in money funds is because they want daily liquidity at par and they had to be absolutely certain that they would get that in the prime area.
And just to give you a couple of examples along those lines, and our prime products have grown both with regard to the retail distribution side and that the institutional distribution side.
Our largest retail prime product at its peak pre-reform was about $30 billion in assets, went down to $2 billion, now stands at $22 billion.
So it substantially has grown. And it has not come out of our government funds, it's come basically from our -- as Chris was saying, the retail deposit basis.
From an institutional perspective, our largest product historically hit close to $50 billion at its peak, went down to $800 million, yes, less than a $1 billion, $800 million post reform and today stands just under $20 billion.
So the strength and diversification of the growth in that prime product has been pretty substantial.
From a total distribution channel perspective, it spans the gamut. It's universities. It's broker-dealers. It's bank distributions. It's various types of large private offices. It's governmental entities, it's corporations. It spans the gamut. And that's the best kind of growth you can have because it continues to add to the diversification of the client base.
Okay. And then just on competition, I apologize if I missed this. Can you help us with an outlook here? The swing between 4Q and 1Q was substantial as I think most of us expected it to be. But how should we look at the rest of the year and how good is that 1Q number, compensation number as the run rate for the coming quarters?
Yes. Ken, great questions. If you remember last quarter, I kind of put up my hands and surrender on trying to predict this appropriate -- or the future. So I'm still surrendering on predicting the future. However, I will answer your questions. Because if you just -- we have to put a number in Q1 that we think is going to be the expense for the year. So this is our best estimate right now on it. And we're -- but we're also telling you there are some seasonal things in there, the payroll taxes, and as I mentioned, the bonus-restricted stock expense. We had about $0.5 million of under accrued from -- that's in Q1, that wasn't in Q4, obviously. And the 401(k ) is a little heavier weighted to Q1. So I wouldn't change the number except for the seasonal items.
Our next question comes from the line of Michael Carrier with Bank of America Merrill Lynch.
Give me a little more time with Hermes. Can you provide an update on where you're seeing some of the attractive distribution opportunities?
And then just on the pension redemptions and even the performance fees. Yes, I don't know if you guys can provide any more color on timing, meaning, are the pension outflows typically going to be in 1Q? Or was this more unusual this year? And then same thing for the performance fees. Are there any quarters that tend to generate more performance fees versus last?
Let's try to do these questions in reverse. I'll let Saker handle the question of BTPS and their redemptions. And then I will come back with the other opportunities, and Saker can add in other opportunity ideas as well. Saker?
Thank you. So as you know, we have a very strong relationship with BTPS, both as a minority and a large client of ours. And at the time of the deal, we had assumed that some of the growth assets, that mean the equity assets, would over time, redeem at a given and pre-agreed flight path. And the reason for that, it's mature, direct benefit DB fund. And as time passes by, they just put more and more of the money in matching assets.
Roughly speaking, we've got about $13 billion of their assets, with about $9 billion in private market assets and about $4 billion in global separate assets, and these are the ones that come down over time.
This year, it so happened that, pretty much the amount of redemption that we were expecting throughout this year happened in the first quarter. Is -- this normally depends on what the use of cash is. So you can't say that therefore, going forward, it will only happen in the first quarter and not on a quarterly basis. What we are more comfortable with is that this is the level that we agreed at the time of the deal and that continues to be on track.
And in terms of your question on the opportunities we see, we have very good success with our initial road shows to American clients back at the end of last year. And that sets the stage for launching the half a dozen or so funds that are either in registration or actually out on the field that I talked about in my remarks. And that we made a press release earlier this week on.
And what this involves is, we think that all of those funds -- each of those funds have a great opportunity for retail presence.
On the institutional side, both as a follow-up to the roadshow and responding to various RFPs, the institutional sales are going well, but you're not going to see anything immediately, that's a little longer sales cycle. And we are quite optimistic about what we can do there. And it's across the board on several of Hermes mandates.
Down the road, we would see opportunities for us to bring the alternatives infrastructure and real estate ideas to the U.S. but that's a down-the-road deal. The other thing that we would talk about here would be the EOS, the equity ownership services, which we plan to start and develop here in the United States under Hermes auspices to continue the engagement success that they've had and to offer this service to asset owners in the United States. Another picture of the opportunities has to be, what I've come to term, a reverse transformational merger where we are most anxious to move from doing the way we've done business, which is analyzing governance and social factors, environmental factors, to becoming what would be labeled as aware of these 2 becoming integrated.
And the way that happens is to allow the data from Hermes on both their investment analysis side and on the EOS side to flow through to the investment platforms of our investment professionals.
And that's another great opportunity that we see and how a lot of our clients and our funds can benefit from an entire operation that is integrated and using those factors to improve performance.
And Mike, it's Ray. Just to reiterate some of the points that Saker made and that we made another points during the call, the redemptions of BTPS had in Q1 included some seed money and distributions from private markets.
Obviously, distributions from private markets will be ongoing when and as they come. The seed money substantially has been drawn out. So that would not repeat. And as Saker mentioned, we're really talking about the roughly $4 billion in equity separate accounts being on a multiyear redemption pattern.
And Mike, your last question on timing of performance fees. So certainly, there were Q1 numbers and Q4 numbers, and I can't really tie that down. Saker, you want to talk about your expectation of performance fees? How about it?.
So I'm afraid I can't tie it down either. It depends on -- I mean, we get performance fees from a variety of private markets all the way through from property to private equity and it depends on when the assets are sold and when the hurdles are met. And so it cannot be predicted. There is, generally speaking, an amount that we'd expect on a yearly basis but again, the distribution depends on how it comes through.
So I'm afraid I can't be much help there. I will go back on the previous question though. And I know that in previous discussions that you've had with Federated, we've always talked about AUM. In Hermes, we tend to talk about revenue. Because of course, as we move our asset base around, it is logical to think that essentially, our net revenues can increase.
And that is quite substantial. So when we look at our flows coming through, one of the things that we look for is particularly in third-party flows is how much net new revenue have we added on an annualized basis to the year, and that is some of the measure of future success, if you like.
So a redemption of assets is not always negative because in the long term, it might allow you to have higher fees.
Right. Okay. That's helpful color. And Tom, just real quick on the comp. Just for clarification. I know you don't want to, like, predict it at this point, but do you have just the amount that was just the seasonal items that would just be helpful, so we can try to figure out the run rate.
Yes. The payroll tax and 401(k) items are about $3.3 million. The bonus-restricted stock expense was about $1.4 million.
Our next question comes from the line of Bill Katz with Citi.
Just coming back to the pipeline of new mandates won but not yet funded. So it seems like it's heavily skewed towards the more separate account institutional side. Could you give us a sense of how the fee rates on those product wins compared to legacy business?
Bill, I -- it's Ray. I would expect them to be comparable, but I don't have a summary of that to refer to. That's something we could take a look at and follow up on.
Okay, and just my follow-up question then, it would be just on capital management. It does look like repurchase slowed for the second quarter in a row or relatively low compared to maybe prior run rate. I know there's been a lot going on in terms of funding the Hermes platform and debt.
Can you still give us a sense of as you look ahead, how you sort of see the free cash flow usage priorities?
Yes. Right, there is a lot going on. Chris mentioned a couple of products that we seeded, and we expect more seeding in the future. And we're -- we did use up pretty significant amount of cash in the Hermes deal, and so we've been building that back up. We, of course, continue our dividend and yes, we were light on repurchases this quarter. We run our models on repurchases and the price is going up, and we make our decisions daily on what we're going to do there. And also if you remember our history, when we've done deals and had M&A going on, before and after, we have not purchased as many shares in the past. So would that continue in the future? Probably.
Our next question comes from the line of Dan Fannon with Jefferies.
Just curious about the outlook for the growth in the alternatives kind of private market business, is that something where we should see larger kind of fundraising cycles? Or would this be more piecemeal in terms of how that's going to grow?
Saker, I'll let you address that from the European side because that is overwhelmingly a U.K., European effort at this point. And as I mentioned in my remarks, bringing it to the U.S. is a longer-term deal. Saker?
Yes. Thank you. So again, I'm afraid the answer is, none. And it depends which part of the private markets we're talking about. So if you're talking about something like our private equity, and typically speaking, that follows the cycle of raising assets for funds, which are then close them, put to work, and that goes into a multiyear cycle and that tends to work very well and we've had very strong success there. When it comes to property, it tends to be much more project-by-project-related where we have a group of clients that we go to and that is, generally speaking, is much more substantial commitment for a much longer period of time. And that tends to be much more lumpy just by the nature of the investment within the projects, and here we're talking about long-term development projects as opposed to simply managing assets over a 5-year horizon. So we're talking about the much longer time horizon than that. So in general, we go at funding on a normalized basis, on a continuing basis but by definition, some of it particularly the very large property once can be lumpy, but the others are not. I hope that sort of helps answer your question.
Sure. But just a follow-up then. So when was the last private equity fund you raised? And when do you think you might be coming to market again with another one?
So we've just closed the last one we've raised very successfully. And we have just launched the next one or we will be launching the next one as we speak, as we go forward.
Okay. And then just a follow-up on compensation maybe with Hermes versus legacy -- versus Federated, and thinking about the businesses, we talked about revenue versus asset growth. I guess, there's certainly different compensation plans within the 2 entities versus how we might have thought about Federated historically versus now thinking about Hermes combined. Is it still -- are there different incentives in people paid off revenues versus profitability versus kind of various targets? Just curious about -- as we think of the performance fees and different metrics we have today, then looking at legacy Federated, and how the overall compensation pool might differ now?
So one has to be careful here because we are, of course, part of the same group and therefore follow the same theory, if you like. However, English law is different. And specifically within English law, you're not allowed to link compensation to sales, as an example. You can link it to percent of revenue if you want to read on, but you can. But you cannot incentivize people on sales.
In general, the way that we do it at Hermes is we link it to the overall profitability of the entirety of the firm and that's the profitability of the entirety of the firm, and we link it also to our revenue growth and to our long-term performance, and it's discretionary, which is a standard within the U.K. both the PORT itself is discretionary and allocation of the PORT is discretionary. You would expect us because we are such an alpha house in our equity stake. And we're -- so high equity shares, meaning we're very differentiated from the benchmark to put a large part of that discussion for the fund managers depending on long-term risk-adjusted returns after fees, which we do. So that will give you an idea of how we could -- just looking at public record, it will give you an idea of how the compensation is going. By long term, I mean 5 years, and for our business development and for our operational platforms, you would expect us to link it to the growth of our business.
I hope, again, that is -- gives you a color of how we do it. We also put a lot of emphasis on behaviors, particularly within Hermes. I mean, we are a very specific firm and behaviors rank very highly for us because we think it leads to looking after the clients, first and foremost, more than other firms who compete with us here in the U.K. market. We think it leads a better of cooperation between the teams, and we think it leads better cooperation between the business development and their teams on operations. So behaviors are a large part of also the compensation requirement. But it's all discretionary.
And if you're interested in the contrast, which I gathered from your question, you were. Remember, a couple of things at the beginning. The reason is transaction occurred successfully was because of a cultural connection, successful connection between Federated and Hermes.
And that however you do it, the way Saker just described it or the way I'm going to describe, we do a lot of our compensation here. It is based on performance. Performance in the marketplace. Performance in the office, et cetera. One of the strengths of how we did this deal was to allow Hermes to flourish the way they had been flourishing before.
So that we are not imposing Federated's method or the American method of compensation on to their business.
On the other hand, if you talk to the Head of HR here and the Head of HR over there, you'll find a very, very, very similar approach to all of these different things.
Now just to reflect what we said on here before about how we do the compensation, the investment professionals are compensated primarily on the 3-year rolling performance of their mandates and the salespeople are compensated on the basis of sales and net sales depending on, which department and which area they are working on. And the executives are compensated on the basis of the overall performance of the entire enterprise. Now that will shortcut a lot of different things but those -- you've picked up the basics in these last few minutes.
Our next question comes from the line of Kenneth Lee with RBC Capital Markets.
Just a follow-up on the alternatives and private market AUM. Is there a way you could quantify the distribution of gains? And perhaps give us a sense of what the flows were like, excluding the distribution of gains?
So if you ask me, can I give you how much we've raised in third party, I will come back to that -- I will certainly get it to you because we publish the data. And we can get back to you, absolutely.
Okay. Great. And then perhaps just one on the Institutional Prime Money Market fund. Sounds like there's good growth there and in terms of the clients getting more warmed up to the product. Just wondering how much of that could be due to more corporate customers beginning either operational changes to be more accepting of the floating NAVs, just wondering what that change could be driven by?
Sure. I'll take that one, Kenneth. And ultimately, back in 2016, when customers chose to go in the mass into government products, I'd say 3/4 of them didn't have to.
From an operational perspective, maybe they were a little wary about their operations being able to process and accept a 4-digit NAV. Maybe they were a little bit concerned about what these gates and fees phenomenon might provide for them or put up as some sort of a hurdle for them.
And ultimately, I think many just didn't want to be sort of the test guinea pigs, if you will, for what was an uncertainty on a product change basis for the packaging of the product. They understood the investment ideas, but they didn't understand the packaging changes.
And that to me is the types of customers that today have reviewed, over the course of last 2.5 years, what has happened from an NAV movement standpoint are comfortable with their own systems at this point and it seem that now it's coming even close to putting a fee or gate on any of these products. And so it's, again, new cash coming into the market. They're still putting a lot into the government sector but they're taking a portion of that and voting with your feet, if you will, into the prime product. The other difference I think that is the case now versus maybe back in 2016 is that there is a yield differential.
As Chris mentioned, for the longest time when we were in the 0 rate environment it was a maintenance of 0 or 1 basis points that was kind of sustaining the market. And to the extent that we now are in a yield curve environment where there is 20, 25 basis points differential between government and prime, that also put factors into the equation.
Our next question comes from the line of Mac Sykes with Gabelli & Company.
So just to ask 2 questions separate. Would it be fair to assume the money fund progress in 1Q was actually better just given some of the seasonality? If you could comment on that.
And then secondly, are you looking at the nontransparent ETF structures as a potential vehicle for the future?
On the money funds, you have good insight there. Because frankly, if you talk to our sales people on that, they would have been happy to just hold serve during the first quarter. And the monies were actually up so we would steward the normal amount of tax withdrawals and tax planning that goes on and still had enough pull. So compared to what we normally see historically, yes, it was better. Do you have additional color on that, okay. What was your second question on the transparent...
Nontransparent.
Nontransparent ETF. So -- okay. So the SEC let 1 operation out of the cage. There are several others that are still being worked on there and our comments on this particular business is that when as and if, we believe that the nontransparent ETF is a viable thing then we start to look at it for just as any other package of our underlying mandate. And we said on this call many times that we look at this business a lot but we remain as you know, and that's why you're asking the question active, alpha hunters, high active share, as Saker likes to say. And so the index portion of that doesn't interest us a lot.
Now in terms of which products may be able to do this the earliest we've talked before about perhaps there'd be some MDT mandates or others. But this is at the brainstorming stage here and don't forget, there are several other methodologies in line at the SEC, which many of the practitioners believe will be coming out soon. And there were those who were surprised that 1 group got out ahead of the others but we'll see what happens.
Our next question is a follow-up from Bill Katz with Citi.
I just want to clarify the 2 sizeable mandates you called out just in terms of sort of the full year impact, BTPS coming out of Hermes. And then on the fixed income side $375 million or so, as suggested was due to some opening exogenous items. Are those both in the separately managed account buckets. I'm just trying to verify that. And then in relative to the flow you gave quarter-to-date, could you bifurcate that between mutual funds and separately managed accounts?
Bill, on the first part, yes. As we are all in separate accounts. On the quarter-to-date flows, there will be weighted towards mutual funds. Just looking at the numbers, the SMA are slightly positive quarter-to-date, and so literally by a couple of million dollars and the rest would have been in funds.
We have reached the end of our question-and-answer session. I would like to turn the call back over to management for any closing remarks.
That would conclude our call and we thank you for joining us today.
Thank you. This conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.