AllianceBernstein Holding LP (AB) 2009 Q4 法說會逐字稿

Thank you for standing by, and welcome to the AllianceBernstein fourth quarter 2009 earnings review. At this time, all participants are in a listen-only mode. After the formal remarks, there will be a question-and-answer session, and I'll give you instructions at that time. As a reminder, this conference is being recorded and will be replayed for one week. I would now like to turn this conference over to the host for this call, the Director of Investor Relations for AllianceBernstein, Mr. Philip Talamo. Please go ahead.

Thank you, Stephanie. Good afternoon, everyone, and welcome to our fourth quarter 2009 earnings review. As a reminder, this call is being webcast and is supported by a slide presentation that can be found in the Investor Relations section of our website at www.alliancebernstein.com/investor relations. Presenting our results today are our Chairman and Chief Executive Officer, Peter Kraus; our Chief Operating Officer, David Steyn; and our Chief Financial Officer, Bob Joseph.

I'd like to take this opportunity to note that some of the information we present today is forward-looking in nature, and is subject to certain SEC rules and regulations regarding disclosure. Our cautionary language regarding forward-looking statements can be found on page two of our presentation, as well as in the MD&A section of our 10-K, which we expect to file later today. In light of the SEC's regulation FD, management is limited to responding to inquiries from investors and analysts in a nonpublic forum. Therefore we encourage you to ask all questions of a material nature on this call. And now I'll hand the call over to Peter.

Thanks very much, Phil. As we've noted with all of you in our discussions during the course of the year, 2009 was really about three important things. One is restoring performance across our platform, and from that flows will follow. Two, enhancing the operating leverage and restoring the operating margins of the business, both the average margins and marginal margin contributions. And three, building and enhancing the research-oriented culture and earning the trust of our clients. We made good progress in all accounts. I am going to spend a little bit of time talking about performance, flows and then turn it over to David to go further into the details.

You will see on the first slide that we have arrayed the performance for the year, three years, five years, and 10 years, and the fourth quarter 2009 for the major value services. Each of the slides on performance are ranged similarly. The one-year performance was outstanding across the board for the US -- for the global value services, the international value services, and also positive for the US diversified service.

Turning to the next slide we look at growth. The US large cap growth broke even, but the GRG product and the international large cap growth both showed gains for the year. Importantly, the fourth quarter of 2009 for GRG and international large cap growth showed significant gains and real progress towards continued performance above the benchmark. On the blend side of the world, solid performance for one year and for the fourth quarter in all the major categories, emerging markets leading the parade. On the institutional fixed income business, outstanding performance in the year. Corporate Bonds, Strategic Core Plus and Global Plus all had absolutely excellent years, including the fourth quarter as well.

When we look at flows, we still see net outflows for the businesses. Although fixed income by the third quarter of 2009 was beginning to reflect some of the positive performance that we had during the year and has continued to show positive flows in that space. Value, although negative outflows did not have any significant deterioration between the third quarter and the fourth quarter and was slightly better, and growth pretty much the same picture as value. Looking at the net flows by distribution channel, we see basic improvement; however, the fourth quarter in the institutional space saw greater outflows in the third quarter. However, I'll let David explain some of the reasons for that, and it will become clear to you that the performance is basically consistent from the third quarter and the fourth quarter.

Thank you, Peter. I'm going to, in the next few minutes, drill down into the business conditions of our three main channels. And while each of them is at a different stage of recovery and is dealing with different challenges and experiencing a different environment, in my remarks, I hope it will become clear that there's some common denominators to what is going on across our business.

The first is the one which Peter has already alluded to. Improved performance across the board, driven by our three global research platforms: value, growth, fixed income. The second common factor, or common phenomenon, is a sort of a new sales focus, exploring the depths and breadth of our distribution footprint. The third one is a greater product innovation, or a greater focus on product innovation. But of two types: one, filling in the gaps in our product range. Areas where we don't have the appropriate services. That's the obvious one.

Perhaps the slightly more subtle one is what I call "the innovative expressions, or iterations of our existing alpha platforms" for packaging them up into new dynamic products. With that said, let me start with our private client business. Here the business momentum has continued to improve in Q4, manifested by the metrics of gross sales and net flows which you can see on the graphic at the bottom of the page. What you can't see is another metric we follow closely, and which is, in our experience, a very good indicator of future activity.

A key component of our engagement model with high net worth clients and high net worth products, is what we call well forecasting analysis. WFA. And WFA is where we analyze the needs of the client, their wealth, their philanthropy, their spending patterns, their expectations, their family, etc. A key part of our engagement model. From 2009 and particularly, in the second half of 2009, we saw the amount of WFA activity significantly, materially increasing. In fact into this year, January's WFA activity was a record for any January with this firm. Well Forecasting Analysis isn't just an indicator of engagement of clients and prospects. There's also a driver of new business. It is that process of working with a client in the prospects and his or her referral sources which leads to recommendations and asset allocation or rebalancing or selection of managers. So, at this point, the WFA activity is looking very positive.

So if the business momentum is continue, that is being matched with a ramping up of our footprint. To all intensive purposes, we managed the sales force of private prime business in 2009 to be flat. We ended the year at 292. We started the year at 299. We just managed it in the 290s. We've never in the past given targets for what our FA numbers will be. But, I think looking out over 2010, it's reasonable to assume a high single digit growth in financial advisers across the United States of America, reflecting the opportunity we see here. The next training class starts in March, and we're planning a further training class in the fall.

In my opening comments, I mentioned the greater product innovation across all three channels. And here, we list a couple of the things we are working on in private clients. A classic example of filling the gaps is the real estate initiative we have announced. An area which, in direct real estate, this firm has never had exposure in in the past. An example of what I called "innovation," the reiteration of our capabilities and the repackaging of our intellectual capital into new products and new services, is a very important initiative in private clients for dynamic asset allocation. An approach which is designed to manage risk, adjusting clients' asset allocation dynamically in response to forecast changes and market conditions. We're just in the process of rolling this out to our private clients. And the initial feedback has been very, very positive.

Let me turn to the very last bullet point here, which is rather oblique or opaque, to continue to advance client service excellence through operational efficiencies. This is an example of what Peter alluded to in his opening remarks about restoring operational and financial leverage to our business. What this actually means is a project underway, reengineering the way we service our private clients, taking operational functions out of our private client department and embedding it back into our state -- our operations department, both here in the United States of America and offshore in India. The purpose of this is twofold. One, it is to have a center of excellence and leverage that center of excellence in the way we service our clients. There's a second level rationale here. It's also to free up our (inaudible) so that they can do more value-added functions, client-facing functions. Well Forecasting Analysis is to give us leverage within the private client distribution side.

Let me turn to retail. In some senses, the picture in retail is similar. Business momentum has continued to move in the right direction, manifested both with gross sales and net flows. Over the past couple of quarters, the earnings reviews I've talked about the tale of two cities in retail. I've talked about us having essentially, two businesses, and they were experiencing two very different environments. With mutual fund activity improving, particularly in Asia and particularly in fixed income, following a strategic move into fixed income a couple of years ago. But, with our subadvisory business facing headwinds, our subadvisory business being a quasi-institutional business. At risk of extending the metaphor to breaking point, it is probably no longer a tale of two cities, but a tale of three cities.

Mutual fund activity worldwide continues to exhibit the patterns of behavior we've been talking about for the past two quarters. High growth in fixed income, high growth outside the United States of America, but an improving environment here in the United States. It is the subadvisory business which is bifurcated into two cities. The US subadvisory business continuing to face the headwinds I have been talking about over the last two quarters. Encouragingly, the non-US subadvisory business is beginning to look much more robust, with particularly improved environment in Europe and in Japan. In the same way as I indicated that the private client channel exhibited the fruits, or was exhibiting the fruits, of our move into new product innovation, exactly the same phenomenon is happening in our retail channel. Some of the same products, dynamic asset allocation, inflation protection strategies. Dynamic asset allocation all ready planned to be rolled out. Inflation strategies starting to be rolled out.

As we look forward, the picture for the retail businesses is encouraging. A very strong pipeline encouraged -- been driven by improved performance, improved product suite, or broader product suite, and reengagement in the sub advisory channel in the non-US parts of the world.

So if private clients and retail are both being characterized by a continuation of the trend towards a better and healthy environment, institutions continues to face the challenges of 2009. Now Peter said I would reference the outflows which occurred in the fourth quarter. Fourth quarter outflows fell -- increased 56% sequentially. However, one part of that outflow was a cash flow of approximately $5 billion from a nonactively managed account. The revenue attached to which was de minimus.

So then moving to the institutional business environment. And here, I will circle back to what Peter said.This obviously is going to be a performance story. Peter talked about the improved 2009 performance against the index. Let me put that into a context against the competition. Of the 12 services Peter referenced, nine were in the top half against the competition. Four of those nine in the top quartile. And if we look to the index in a more broadly based basis, and the data is included in the appendix of the deck in front of you. Eight out of eight value services outperformed the index. Seven out of nine, growth services. Four of four, blends. Six out of six, fixed income.

It's appropriate for me to end that list with fixed income, because just as the retail channel made a strategic move to prioritize fixed income a couple of years ago, so did the institutional channel, which has borne fruit with a high level of interest in fixed income globally and globally. And what I mean by "globally and globally" is for clients globally, and for global fixed income. And certainly as we look at the pipeline right now, those are the some of the most interesting opportunities. Looking at client segments, we see a high level of interest and activity from sovereign funds and central banks. In that context, it was gratifying to see The Washington Press release announcing that of the nine [P-Pit managers] AllianceBernstein raised the most assets.

Let me turn from the buy side to the sell side. What we call here "Bernstein research highlights." (Inaudible) Year-over-year, revenue is down 8%. 2009 revenue year-over-year is down 8%, compared to a record 2008. The story behind this data is really much stronger. Our best estimate of global secondary commission pool, is that it is down more than 30%. So both our business in the United States of America and our business in Europe have enjoyed very significant market share gains. Driving the market share gains are two things. The first is our footprint. I talked about the private-client business footprint being the advisers we have dotted around the world or the United States.

The comparable footprints of the south side are the publishing analysts we have. Today we have publishing analysts, 29 in the United States, 20 in Europe, three in Asia. It's the largest number we've ever had. It is also the highest ranked publishing analyst force we have ever had. That is one metric which is driving market share gain. The second is the service sweeps we are able to offer our clients. Where recent investments and products, such as European electronic trading, equity derivatives, equity capital markets, have all borne fruit.

So if I look back at the south side business the past couple of years, the story has been one of the broadening out into Europe and the broadening out of the service suite of our capabilities. If I look forward to the next two years, it is the continuation of that process in Asia. I mentioned that we have three publishing analysts in Asia today; we expect to end the year with four. We expect to be have a critical mass of publishing analysts by the end of 2011. A critical mass of publishing analysts which will be matched by a critical mass of trading and sales capabilities.

The last comment I make on Bernstein research is that, to a very significant extent, and perhaps one we don't often comment on, it is a great brand enhancer for the group as a whole. Interestingly, in January of this year, in all media around the world, there were just under 2,900 references to our (inaudible) Bernstein. So, I commented on the channels and the sell side of our business. Let my close my comments by saying a little about the firm as a whole. Peter mentioned the three tasks which lay ahead of us in 2009. One which was to restore operating and financial leverage to the Company, for the benefit of unit orders and staff. One key, if not the key metric of this is head count. From the past couple of earnings calls, we've been showing you how head count has changed. From its peak, in the third quarter 2008, we are down 23%. From the beginning of 2009, we are down 13%.

In my last earnings call I said that year end, we should expect to number 4400 and change. This shows 4369. That doesn't mean we decided to go further than 4400 and change. At year end, there was some 50-odd positions which were in the process of being filled. I continue to stand by what I said three months ago. You should think in terms of a head count for this firm of 4400 and change. So with that, let me hand over to Bob to run through the financials.

Thanks, David. So as we reported today, and as shown on the next slide, net income attributable to AllianceBernstein unit holders for the fourth quarter of 2009 was $192 million, more than double the $92 million earned in the fourth quarter of 2008. Operating income increased by 180% driven by 35% increase in net revenues and a 14% -- offset by 14% increase in operating expenses. Our operating margin increased to 25.7% from 16.2% for the fourth quarter of 2008. A significant portion of this improvement is due to a large positive variance in the deferred compensation investment gains and losses, which I'll discuss later. The remainder is attributable to improved operating results. While we are on this slide, I'd like to point out that the operating partnerships effective tax rate declined to 6.8%, compared to 9.8% for last year's fourth quarter. As a higher proportion of our consolidated pretax earnings was generated from the operations of our US partnership. This mixed shift also explains the similar decline in the tax rate for the full year.

Fourth quarter 2009 diluted net income per unit and the distribution per unit for AllianceBernstein Holding, the publicly traded partnership, were both $0.62, each more than double that of the prior year quarter. Moving to the full year 2009, net revenues and operating expense for the operating partnership declined 17% and 11% respectively, compared to the full year of 2008, resulting in a 36% decline in operating income. Finally, full year per diluted net income per unit for both the operating partnership and AllianceBernstein Holding declined by 35%.

The next slide provides details of the $201 million, or 35% increase, in net revenues of the operating partnership. Base fees increased by $14 million, or 3%, due to higher retail (inaudible) revenue, which is partially offset by modest declines in our other buy-side distribution channels. In addition, we accrued $16 million performance fees this quarter with approximately 60% from hedge funds distributed in our private client channel and 40% from [long holding] institutions client accounts. Distribution revenues, which are based on average mutual fund assets under management, increased by $17 million, or 25%, year-over-year, roughly in line with the increase in retail AUM. However, this increase is largely offset by higher asset under management based distribution plan payments included in promotion and servicing expenses.

As David already discussed, Bernstein's research services revenues fell 8% from the prior year quarter to $109 million. Note that recent investments, as he mentioned, in equity derivatives and equity capital market services contributed approximately $6 million to current quarter revenues. The primary driver of the quarter-over-quarter increase in net revenues was $176 million positive variance in investment gains and losses. The majority of this variance was caused by $15 million in market gains in the current quarter on investments related to deferred compensation awards, compared to $132 million of losses in last year's fourth quarter. More on that later. Also contributing ,was a $23 million positive variance in investment losses in our consolidated venture capital fund, from a $25 million loss in the fourth quarter of 2008 to $2 million loss in the current quarter.

Moving along to operating expenses, promotion and servicing expenses increased by $15 million, or 14%, from the fourth quarter of 2008, due to higher distribution plan payments associated with higher average mutual fund assets under management. Other expenses in this category were essentially flat versus the prior year quarter. General and administrative expenses were also flat quarter over quarter, as lower technology and occupancy costs were offset by lower foreign exchange gains. Additionally, the current quarter benefited from a $9 million reimbursement for claims accrued in the second quarter of 2009. As noted last quarter, we currently estimate that the run rate for general and admin expenses is approximately $140 million per quarter.

The next slide provides some additional information on our compensation and benefits expense, including the $59 million, or 22%, increase in quarter -- from quarter over quarter. The $45 million, or 28%, decline in base compensation has two significant components. Base salaries declined $8 million, or 15%, due to the decrease in head count David mentioned earlier. In addition, related severance costs declined by $26 million from the prior year quarter to approximately $12 million. Base salaries have now stabilized at just over $100 million per quarter. Incentive compensation expense increased $116 million from the prior year's quarter. In the fourth quarter of 2009, our cash bonus accrual was $58 million, roughly in line with the accruals in each of the first three quarters of the year. However, you will recall that in the fourth quarter of 2008, our bonus accrual was essentially zero, due to lower than expected full-year profitability, resulted from severe second-half capital market declines. I'll discuss the $58 million increase in deferred compensation expense on the next slide. on this side let me note that the commission expense declined versus the fourth quarter of 2008. While we are on this side, let me note that commission expenses declined by 15% versus the fourth quarter of 2008, the result of lower sales and fee revenues.

Moving to the next slide, we show a slide that we have included in its package now for the last couple of quarters, which is basically a six-quarter net profit and loss trend for deferred compensation expense. Note that amortization expense for the fourth quarter of 2008, which includes the impact of accelerated amortization through the retirement of our former CEO was reduced significantly by the impact of current and prior quarter market to market losses on related investments. Conversely market-to-market investment gains in the current year quarter were modest, and only marginally impacted amortization expense for that period. Note also that the percentage of current quarter investment gains and losses amortized to expense immediately has remained at roughly 40%, although slightly higher in the fourth quarter of 2009, due to rounding.

The next slide shows comparative financial results for AllianceBernstein Holding, the publicly traded partnership for fourth quarter and full-year 2008 and 2009. We reported diluted net income per unit for the current quarter for Alliance Holding of $0.62, an increase of 130% from the prior year quarter. Fourth quarter distribution is also $0.62 per unit, an increase of 114%. That increase is higher than the 108% increase in net income at the operating partnership due to a decrease in the effective tax rate. Recall the taxes paid by the publicly traded partnership are generally based on its proportionate share of the operating partnerships key revenues. Income tax expense was the same for both quarters, since, as shown back on slide 15, fee revenues were only modestly higher in the fourth quarter of 2009 as compared to the prior year quarter. That concludes our financial review, and now we are ready to take your questions.

(Operator Instructions). Your first question comes from the line of William Katz with the Buckingham Research Group.

Good evening, everyone. Just a discussion on the expense outlook on a go-forward basis. Just sort of curious. It seems that, with David, your comments, the head count is stabilizing some initiatives in private client, etc. Should we be thinking just conceptually that margin improvement from this stage forward would be more a function of top line improvement? Or are there other things you can do? I'm wondering within that, maybe an update on the commercial real estate disposition.

Bill, you're quite right. Margin improvement, from this point forward, will be driven from the top line. The expense side was 2009's story; the top line will have to be the story going forward.

Okay. And then second question is, just in terms of the institutional pipeline. It's ticked up a little bit, but relatively nominal in the scheme of things. Where is the strength? And then secondarily, where are the weaknesses?

I think it is much of the picture we have described over past quarters. We're seeing interest coming out of the Middle East, interest coming out of Asian markets, UK continues to be somewhat depressed, and United States of America are a patchy story.

Okay. Thank you.

I'm sorry. I should clarify. That's for institutions.

Right.

Retail, every country (inaudible) is moving in the right direction.

Okay. Thank you.

Your next question comes from the line of Marc Irizarry with Goldman Sachs.

Great, thanks. Can we talk about institutional for a second ,in terms of where you are on the consultant's watch list. Are you still getting put on the watch list. Where does that stand?

It's a very difficult question to generalize. Because the consultants obviously are not homogeneous, either worldwide, even in one country. And so we have continued advocacy for some of our services with some consultants worldwide, with whom we've had very long and very deep relationships and who have been supporters of this firm for a decade. And there are other consultants who behave and react in the way, often, consultants are characterized by.

Marc, let me just add to David's comments. One of the things consultants were quite focused on was voluntary turnover. We've seen in the last year plus that voluntary turnover actually declined from levels of 2007 and 2008. In fact ,the levels in 2009 were 30% lower than 2008. And we've had quite a bit of stability, and that's investment professionals by the way, we've had quite a bit of stability in the investing teams. And so I think that's a big positive momentum shift for the consultants as they continue to look at 2009 outperformance, the historical outperformance of the company, and the stability of the investment teams. That isn't to say that, because we have said this before, we'll never have another investment person leave. Of course, that's going to happen. We have a big organization. If your look at it on a percentage basis, and even if you apply that to the levels of seniority up and down the organization, we actually are trending in a substantially better direction than we were in 2007 and 2008.

And Marc, if I can just come back to my earlier answer, I'm thinking of a particular consultant illustrated difficulty of generalizing one consultant I know well put us on the watch list for equities and then put us on the buy list for fixed income. It's very, very hard for us to say where we are are all consultants. We continue to have a very deep dialogue with all consultants.

Okay, great. And I know January [AUM] is out, so maybe you can talk a little bit about the flow trends that we're seeing on the month of January, particularly on the institutional side.

I think it's no different story to what I said earlier about Q4 and Q3. No change in pattern. And Peter sort of alluded to and then I went into slightly greater detail, if you actually look at the redemption picture, stripping out that one $5 billion cash flow, Q4 and Q3 level-pegged each other.

Great. Thanks.

Your next question comes from the line of Cynthia Mayer with Bank of America Merrill Lynch.

Hi. Good afternoon. Just to follow-up on the flows, given the really strong fixed income performance in the last year and the strong flows industrywide, if you can give any color on why you think the fixed income flows haven't picked up more. It looks like they've been positive the last two quarters but not accelerating. And also when you look inside the pipeline you have, is it concentrated in any particular area?

I think, Cynthia, we were a bit victims of our own success. In the 2004, 2005, 2006, 2007 time period when the equity allocations to this firm were growing quite rapidly, and fixed income was a solid contributor to performance, both the client relations personnel, and the clients themselves thought of us and thought about equities. And so when 2009 occurred, or 2008's difficult performance, 2009 really positive performance, there needed to be an educational process, both with client basing personnel and clients themselves, and for that matter, consultants, really starting to think deeply about "Where is AllianceBernstein in the spectrum of fixed income managers?" Now, this is a as you know, longer game. We think we have got a substantial amount of momentum in the fixed income world. And yes, it would have been nice if we had had the visibility today in 2007. We would have had more flow in 2009 and in late 2008 because the world clearly shifted in that direction. There's plenty of fixed income market out there. We are essentially a $200 billion shop. There's plenty of market share for us to grab. And I think that flows have slowed down. They are still net positive in the fixed income space, and investors are still comfortable in lower-risk portfolios than higher-risk portfolios.

Okay. Great. And I think in the last call you gave guidance on base salaries. And I'm wondering if that guidance still holds. And on the incentive comp, how should we think about that if markets improve and the top line grows, how variable is that with advisory revenues.

I will let Bob comment on the salaries. On incentive compensation, we will pay our people pretty much in line with the way revenues grow. That's a total comment. Obviously the allocation of compensation to individuals is different than that. We are looking to pay our people who we think are the best the best.

And in my earlier remarks, Cynthia, I mentioned that we're stabilized now at a run rate of just over $100 million per quarter for base salaries.

Great. Thanks a lot.

(Operator Instructions). Your next question comes from the line of Robert Lee with KBW.

Thanks. Good afternoon. I'm just curious. I think Peter, in the past, I think maybe it was you, but that characterized in the institutional channel the outflow. The most recent clients have been the first to leave in many cases. Is it possible to update us on the characterization? Is that still the case? Is it still the people who are newer to the organization who are leaving, or are you starting to see more longer-term clients on the equity side of the business also redeem?

Robert, I know that that question has been asked in the past. And I think we assiduously avoided being specific about that because I actually don't think that we do a detailed study of it. We don't really have a precise answer. I think there's no doubt that the assets grew rapidly in the latter part of 2005, 2006, and 2007. And clearly, those clients had weaker experience with us than clients that were with us for longer periods of time. And so, that certainly could have a bigger impact on how people think about retaining us as an adviser -- as a manager over time. Having said that, I think that probably doesn't give you the story on what's actually going on with institutional redemption.

Maybe if I add color and illustrate the difficulty of answering that question. Let's take a market like the United Kingdom, which was certainly one of our fastest growing programs and has seen significant redemptions on the institutional side. It's very hard to say, is that because it was the most recent clients who joined, or the is it because of the role of the consultants, or is it because the UK more than any other market anywhere in the world is closing down its defined benefit schemes and therefore moving to liability-driven investment solutions and fixed income? Or is it a bit of all of those things? That's our difficulty of answering that question.

And just to add more, how much of that is also plans taking lower risks, having nothing to do with performance. We all know that the risk trade is going in the opposite direction. That of course, will change at some point, and it will inert to our benefit. And it refers back to the point that Cynthia made of, "Well, you could have benefited from that if the fixed income, brand awareness, was more pervasive." But, that's something we're building.

Okay. And thanks. And maybe just a quick modeling follow-up question. As you've shifted deferred comp more towards restricted stock and away from reinvesting in mutual funds or other Alliance products. From a share count perspective, it's been creeping up. Should we expect that it's going to continue to creep up at the rate it's been. Should we expect you're maybe going to use some cash flow to repurchase units and keep it relatively stable? Just curious what the general goal would be there.

Good question. We've certainly considered that. And we will in the matter of course, use some of our financial resources to repurchase shares over time. And don't forget that for each share issued to an employee, that one-half of those shares is basically retained for taxes. And effective, since the government doesn't take shares in replace for withholding taxes, we have to pay them cash like everybody else. We're actually retiring that half share.

Great. Thank you.

(Operator Instructions). Your next question comes from the line of William Katz with the Buckingham Research Group.

A couple of follow-ups. Just curious of your thoughts, Peter, particularly on M&A. One of your larger competitors made a bit bet on passive. And one of the smaller franchises make a reasonable sizeable bet on private equity in the last couple days. I'm just curious if you can talk a little bit about how you see yourself in the industry. Is what you have good enough? Are you contemplating any way to externally expand the platform.

Bill, thanks for asking that question. I love answering that M&A question. I continue to believe, and we continue to believe, that there may be opportunities for us in the M&A market. But they are going to be places where we either don't have a service or where we have a substantial consolidation opportunity. And that size is generally a inhibitor to do a deal because, culturally, it's very hard to merge large organizations. That isn't to say others won't try it or do it, or be successful at it. But, I think we have a very strong and integrated culture, and to acquire something that would effectively require us to merge into that culture is challenging. So look for us to be opportunistic where we think we can be, because that can happen for sure. But it's going to be characterized by places where we're not or financially attractive transactions that add scale.

Okay. That's helpful. And just a couple of technical follow-ups. In the fixed income this quarter, how much of that was related to the P-PIP initiative? And then I asked earlier, but you didn't get to answer it. On the commercial real estate opportunity around the world. Where do you stand in terms of potentially downsizing some of that, which might add a little opportunity on G&A?

You did ask that question, and no we didn't answer it because we had moved on to something else. That is the commercial real estate. So P-PIP, I think was $1,000,000,064, if I remember the number properly. And I think that was raised in between the third quarter and the fourth quarter. So I don't know exactly where it splits out. So that's answer to question number one. Answer to question number two, is yes, we have some space. We continually reviewed those opportunities. And we will continue to do that. And we will make economically rational decisions.

If I can add onto P-PIP. We've had three closing of P-PIP and all three were in the fourth quarter.

the fourth quarter?

All three were fourth quarter. One October and two in December.

Thanks so much for taking all my questions.

At this time, there are no further questions in queue.

Great. Thank you Stephanie and assistance everyone for attending the call. If you have any further questions, feel free to call the investors relations team at any time. Enjoy the rest of your evening.

Thank you. This concludes today's conference call. You may now disconnect.