AllianceBernstein Holding LP (AB) 2025 Q4 法說會逐字稿

Thank you for standing by and welcome to the Alliance Bernstein fourth quarter 2025 earnings review. (Operator Instructions) As a reminder, this conference is being recorded and will be available for replay on our website shortly after the conclusion of this call.

I would now like to turn the conference over to the host for this call, Head of Investor Relations for AB, Mr. Ioanis Jorgali. Please go ahead.

Good morning everyone and welcome to our fourth quarter 2025 earnings preview. Today's conference call is being webcast and is accompanied by a slide presentation available in the investor relations section of our website at www.allianceBernstein.com.

Joining us today to discuss the company's quarterly results are Seth Bernstein, our Chief Executive Officer, and Tom Simeone, our Chief Financial Officer; Onur Erzan, our President, will join us for the question-and-answer session following our prepared remarks.

Some of the information we'll present today is forward-looking and subject to certain SEC rules and regulations regarding disclosure, so I would like to point out the safe harbor language on slide 2 of our presentation.

You can also find our safe harbor language in the MD&A of our 10-K which will be filed next week. We base our distribution to unit holders on our adjusted results which we provide in addition to and not as a substitute for our GAAP results.

Our standard GAAP reporting and reconciliation of GAAP to adjusted results are in our presentation, appendix, press release, and our 10-K.

Under regulation FT, management may only address questions of material nature from the investment community in a public forum, so please ask all such questions during this call.

Now I'll turn it over to Seth.

Good morning and thank you for joining us today. 2025 was a year of disciplined execution and strategic progress for AllianceBernstein. I'm very proud of the strides we've made as a firm and I'm deeply grateful to my colleagues for their dedication and impact. One individual who has played a pivotal role in our transformation is our newly appointed President, Onur Erzan.

With a proven leadership track record spanning our client group, private wealth, and more recently our private markets businesses, Owner has consistently demonstrated strategic vision, a tireless work ethic, and a deep commitment to our clients, our people, and our unit holders.

As CEO I will continue to set the firm's strategic direction and guide our leadership team. I look forward to partnering with owner, who will lead the transformation of our business, execute our strategic priorities, and drive profitable growth, working closely with Equitable to deliver innovative client-focused solutions.

Now let's dive into our key business highlights from the quarter and the year on slide 3.

First, our assets under management reached a record $867 billion at year end 2025, reflecting market appreciation, strong sales, and organic growth across ultra high net worth, insurance general accounts, tax exempt SMAs, and private markets. A notable positive is our Bernstein Private Wealth business, which has $156 billion assets under management and contributed roughly 37% of our firmwide revenues in 2025.

In addition, our private markets platform closed the year with $82 billion in AUM, up 18% year over year, driven by approximately $9 billion of deployments across all channels in 2025.

Finally, our SMA franchise reached $62 billion of AUM and grew 12% organically in 2025, led by our market leading MI capabilities. Our active ETF suite expanded to $14 billion across 24 strategies, delivering 65% organic growth in 2025, excluding conversions.

While we've seen strong inflows into targeted growth areas, firmwide active net flows were negative for both the quarter and the full year. We had $9.4 billion of total net active outflows in 2025, including $3.8 billion outflows in the fourth quarter.

Firm-wide active equity redemptions persisted as performance headwinds lingered, with $7.6 billion outflows in the fourth quarter and $22.5 billion throughout the year. Roughly half of these were driven by retail redemptions. Taxable fixed incomes saw $2 billion in outflows in the fourth quarter and $9.1 billion for the year as overseas retail demand declined amid geopolitical uncertainty and a weaker dollar.

Institutionally we had roughly $4 billion of taxable outflows related to equitable reinsurance transaction with RGA. On the other hand, our tax exempt franchise continues to deliver durable organic growth with $3.9 billion in inflows in the fourth quarter and $11.6 billion for the year.

The platform has generated organic growth for 13 consecutive years and long-term alpha for our clients. Alternatives and multi-asset strategies also remained the bright spot, posting $1.9 billion active net inflows in the fourth quarter and $10.6 billion for the full year, supported by strong private markets deployments.

Third, our scalable model and disciplined expense management continued to drive profitable growth. Our adjusted operating margin expanded to 33.7% for the year at the upper end of our 30% to 35% investor day target range.

With a streamlined expense base and robust operating leverage, we are delivering strong flow through to earnings. fourth, we've accelerated our collaboration with Equitable as we continue to expand our private markets capabilities and amplify the flywheel effect of this partnership.

I'm pleased to share that we're making investments to enhance our commercial real estate lending capabilities and expand the scale of our platform. As a result, we'll onboard more than $10 billion of new long duration assets from equitable by year end 2026. This represents a meaningful expansion of our origination and service and capabilities in commercial mortgages.

Beyond the financially accretive nature of this commitment, it underscores the broader strategic value of our partnership with Equitable. It's a clear example of how our alignment continues to unlock incremental growth well beyond the $10 billion plus of additional committed assets.

Leveraging our expertise in commercial real estate lending, the adjacent capabilities will build upon our existing footprint in core and core plus real estate credit and bring insurance tailored assets to over $20 billion. This enhances our scale and enables us to compete more effectively in the strategically important insurance channel.

As of year end, we managed over $59 billion on behalf of more than 90 third party insurance clients with general account assets growing 36% year over year. We see strong momentum in this business and expect to add $3 billion of new private asset mandates from strategic insurance partnerships in the first half of 2026.

Slide 4 provides a summary page with our key financial metrics. Tom will follow-up with more commentary on our results.

Turning to slide 5, I'll review our investment performance starting with fixed income. Fixed income markets delivered broad-based gains in the fourth quarter of 2025, despite softer labor market trends and limited macroeconomic data due to the government shutdown.

Short-term rates declined following the Fed's rates cuts, while long-end yields remained elevated, steepening the yield curve. The US 10-year Treasury ended the year near 4.2%, reflecting persistent long-term inflation and fiscal concerns. The Bloomberg US aggregate index returned 1.1% in the fourth quarter and 7.3% in 2025, while Bloomberg's global high yield index returned 2.4% in the fourth quarter and 10% in 2025.

Overall, our one year relative performance improved versus the prior quarter, supported by our higher quality exposure and global high yield, our longer duration positioning in American income, and continued outperformance across our municipal strategies, where nearly all our funds are rated four or five stars by Morningstar.

86% of our AUM outperformed over the one year and three year periods while 67% of our AUM outperformed over the five year periods. Demand for intermediate duration has strengthened and fixed income volatility has declined meaningfully, reducing two key headwinds to performance and enhancing the diversification value of the asset class.

As the curve steepens, investors are rotating out of cash, floating rate, and short duration instruments into intermediate duration products to capture higher yields. US retail tactile flows continue to show encouraging momentum with two consecutive years of organic growth and increasing adoption of our active ETF suite.

In 2025, we ranked among the top-15 fund managers in taxable flows in the United States, a meaningful step forward in the market where we've historically been under penetrated. Municipals remain well positioned for continued inflows, supported by attractive tax efficient returns and continued share gains of our market leading SMA platform.

Our systematic strategies are gaining traction in the investment grade bond market with strong institutional demand and consultant support in 2025, underpinned by our consistent track record of our performance.

Turning to equities, the S&P 500 returned 2.7% in the fourth quarter, closing near record highs and delivering a roughly 18% total return for 2025. This marks the index's third consecutive year of double-digit gains. For the first time in several years, international equities outperformed the US, supported by a weaker US dollar, more compelling relative valuations, and a rotation away from US mega cap technology leadership.

Our equity performance softened in 2025 with relative returns declining across the one year, three year, and five year periods. This was primarily driven by sustained underperformance in our largest US equity franchises, particularly growth, defensive and sustainable strategies amid a market environment dominated by speculative, momentum-driven names and narrow leadership.

21% of our AUM outperformed over one year, 37% over three years, and 51% over five years, with the most pronounced performance pressure in US large cap growth oriented services where benchmark concentrations remain acute.

Outside of these areas, many value core and thematic strategies delivered strong, absolute and relative results. Portfolios of exposure to cyclical sectors such as industrials and financials benefited from improving earnings breadth, especially in non-US markets. Emerging markets, China and international value and core strategies were notable standouts.

The highly concentrated nature of US equity market leadership and stretched valuations created a challenging backdrop for active managers. In response, we're sharpening execution against our investment philosophies, leveraging decision analytics to identify areas for improvement, implement targeted changes and measure outcomes with greater discipline.

Our equity platform is intentionally diversified across styles and regions, avoiding overexposure to any single market regime. Thematic and cyclically oriented value strategies provide balance and upside participation in risk on environments, complementing more defensively positioned portfolios.

As market breath began to improve entering 2026, platform performance has started to rebound. A growing share of growth, value, core, and thematic strategies are now delivering stronger relative results while defensive strategies have lagged in a more risk supportive conditions.

Looking ahead, we believe the continued earnings breadth and stable economic growth could favor international and value strategies. Additionally, portfolios with lower tracking error may offer clients more consistent participation in narrow leadership environments, helping to diversify performance streams and reduce reliance on a concentrated set of products.

Turning to slide 6, I'll discuss our retail highlights.

Retail flows softened in 2025, ending a two-year streak of organic gains. The channel saw $3.5 billion in net outflows in the fourth quarter and $9.1 billion for the full year, driven by active equity redemptions and softness and taxable fixed income, partially offset by continuing strength in municipals.

Active equities experienced outflows throughout the quarter and the year, primarily led by US growth oriented services. Fixed income allocations favored tax exempt strategies while taxable flows reversed to modest outflows driven primarily by APAC as the US dollar weakened. A retail community platform delivered 23% organic growth in 2025, surpassing $56 billion in third-party retail AUM across SMAs, ETFs, and mutual funds.

Despite overseas headwinds, US retail momentum remained durable. Taxable fixed income boasted a second consecutive year of organic growth, supported by expanding adoption of our ETF suite alongside continued market share gains and tax exempt, extending a 13-year history of organic growth.

In effect, we believe the bond reallocation trend has significant runway, and we're well positioned to help clients capture fixed incomes and enduring value just as we've consistently demonstrated in the early waves in 2024.

Moving to slide 7, I'll cover our institutional channel.

Institutional outflows moderated year over year, narrowing to $1.9 billion in the fourth quarter and$ 4.6 billion in 2025. Private alternatives remained the key growth engine supported by strong inflows across existing adjacent and newly launched strategies. Channel deployments into private markets totaled approximately $2 billion in the fourth quarter and nearly $8 billion for the year.

Taxable fixed income outflows were modest in the fourth quarter while outflows for the year were largely driven by equitable RGA's reinsurance transactions, offsetting inflows into our growing systematic platform. Active equities experienced roughly $2 billion in outflows in the fourth quarter and $7 billion for the year, primarily from our concentrated growth and global core strategies.

Our institutional pipeline expanded to nearly $20 billion bolstered by the addition of more than the above mentioned $10 billion in commercial mortgage loans. As previously noted, we expect to add approximately $3 billion of mandates from strategic Insurance partnerships over the coming quarters.

Next on slide 8, I will cover private wealth.

Bernstein Private Wealth delivered its second consecutive quarter of organic growth and fifth straight year of positive net flows supported by record-level advisory productivity. Net new client assets grew 7% in the fourth quarter and 6% for the full year 2025, with annual organic growth of nearly 2% for both periods. Growth was broad-based across asset classes driven by client reallocations into fixed income, rising adoption of alternatives, and sustained demand for tax efficient index equity solutions.

As noted earlier, private wealth represents approximately 18% of firmwide average AUM but contributes roughly 37% of total revenues, reflecting its attractive fee profile and highly engaged client base. Importantly, these revenues are sourced directly, underscoring the strength of our differentiated farm to table model.

I'll close with slides 9 and 10 which highlight both the momentum of our private markets platform and the strategic value of our partnership with Equitable.

Over the past decade, we've scaled our private markets platform to $82 billion in fee paying and fee eligible AUM delivering 18% year over year growth. Anchored in credit-oriented strategies including direct lending, alternative credit, commercial real estate debt, and private placements, our platform serves a broad and growing base of retail, institutional, and insurance clients across a wide range of risk return objectives.

Equitable's $20 billion permanent capital commitment now largely deployed, has accelerated our expansion in private markets and strengthened our ability to seed higher fee, longer duration strategies. Our collaboration continues to evolve beyond periodic commitment cycles with the expansion of the commercial mortgage capabilities representing the latest in a series of successful initiatives, expanding residential mortgages, structured private placements, and private credit.

We view our strategic partnership with Equitable as a meaningful competitive advantage, reinforcing AB's capital-like client aligned model and enabling efficient and disciplined scaling of new offerings. With our proven track record and focused strategy, we're well positioned to transform the business, unlock new opportunities for our clients, and exceed our $90 to $100 billion dollar target for private markets AUM by 2027.

With that, I'll hand it over to Tom to review our financial results.

Thank you, Seth, and thank you to everyone joining us today. AB enters 2026 with clear momentum underscored by our fourth quarter and full year 2025 results and the progress we're making on our strategic priorities.

Fourth quarter adjusted earnings were $0.96 per unit, down 9% from the prior year period, reflecting lower performance fees, investment gains, and other revenues. Full year 2025 adjusted earnings of $[3.33] increased 2% versus the prior year, while full year distributions were $3.38 up 4%. The difference between EPU and distributions reflect the mathematical impact of the lower average unit count and the higher income generated in the second half of 2025.

On slide 11, we show our adjusted results which removes the effect of certain items that are not considered part of our core operating business.

For a reconciliation of GAAP and adjusted financials, please refer to our presentation appendix.

Fourth quarter net revenues were $957 million down 2% versus the prior year as higher base fees were offset by lower performance fees. Full year revenues were $3.5 billion flat year over year and up 3% on a like for like basis when excluding the $96 million of Bernstein Research revenue recognized in 2024.

Fourth quarter and full year base fees increased 5% year over year driven by higher markets. Fourth quarter performance fees were $82 million below the prior year periods $133 million which benefited from catch up fees at Carval on the private side and strong contributions from several public market strategies including Absa and Aria.

While full year performance fees of $172 million declined 24% year over year, they came in above our 130 to $155 million dollar guidance range, and I will provide additional details shortly. Dividend and interest revenue along with broker dealer related interest expense declined in both the fourth quarter and full year, reflecting lower client cash and margin balances in private wealth.

Moving to expenses, fourth quarter total operating expenses were $627 million up 1% versus the prior year, driven by 2% higher compensation expenses and essentially flat non-compensation expenses. Full year operating expenses were $2.3 billion down 2%, as slightly higher compensation was more than offset by lower non-compensation expense.

Fourth quarter total compensation and benefits increased 2% year over year with a compensation ratio of 47.7% of adjusted net revenues. This is above last year's 46%, but better than our 48.5% guidance. Full year revenues exceeded our earlier expectations, allowing us to reduce the fourth quarter compensation ratio.

As a result, our full year compensation ratio was 48.3%, slightly better than the [4.5%] included in our prior guidance. We will begin accruing at a 4.5% compensation ratio in the first quarter of 2026 consistent with last year's accrual and may adjust throughout the year depending on market conditions.

Our guidance includes the cost of investments in talent and capabilities such as building out the commercial mortgage loan platform that Seth referenced. Promotion and servicing costs decreased 1% in the fourth quarter and 10% for the full year, with the full year decline driven by the separation of Bernstein Research.

Fourth quarter G&A expenses were flat year over year.

Full year G&A declined 9%, driven by the lower occupancy costs associated with our Hudson Yards relocation, which dropped to the bottom line as planned. For full year 2025, non-compensation operating expenses were $599 million just below our prior guidance of $600 to $610 million. This reflects strong expense discipline amidst a volatile macro backdrop.

For 2026, we expect full year non-compensation expense to be in the range of $625 to $650 million. The increase reflects normalization in promo and G&A expenses recovering from last year's depressed levels and includes discretionary investments in technology and the operational buildout of new strategies.

Promo and servicing are expected to represent 20% to 30% of non-compensation expenses with G&A comprising the remaining 70% to 80%. As a reminder, promo and servicing includes transfer fees which move directionally with markets.

Our year over year non-com outlook implies 6% to 7% growth at the midpoint, slightly above our long-term objective of keeping increases below the level of inflation. This reflects investments to integrate our new investment management platform and complete the onboarding of the commercial mortgage assets, both of which we expect to be accred to earnings over time.

After a robust selection process, we selected an investment management platform that we believe will materially enhance our foundational data model and prepare us for the future. Over the years we have purpose-built technology that has served us well, but much of it is aligned to an individual investment teams and asset classes.

This new platform will allow us to unify around a single source of data, improving analysis, decision making, and reporting. We expect it to streamline operations and drive both business and cost efficiencies. The implementation is expected to result in approximately $40 million in total cash flow impact over the next four years, some of which will be capitalized before generating $200 to $25 million in annual net expense savings beginning in full year 2030 after all legacy systems are retired.

Our full year '26 non-com guide assumes roughly $10 million of P&L impact from technology implementation expenses in the onboarding of our CML platform. As Seth mentioned, we're excited to expand our partnership with Equitable as we scale institutional and insurance tailored solutions in commercial mortgages, an area where we believe we can rapidly scale.

The team and platform will be fully operational in the second half of 2026, and we expect to initially manage more than $10 billion of long duration assets for Equitable, with asset onboarding expected by year end. Excluding discretionary investment spend, non-compensation expense would increase in the low single-digits consistent with our long-term target.

Interest on borrowing has decreased by roughly $1 million in the fourth quarter and $15 million for the full year 2025 compared to the prior year periods, reflecting lower interest rates and lower debt balances.

ABLP's effective tax rate was 5.9% in 2025, just shy of the low end of our 6% to 7% guidance range, which reflects a favorable mix of earnings. We forecast ABLP's effective tax rate in 2026 to be 6% to 7%. In the fourth quarter, our firmwide fee rate was 38.7 basis points and our full year fee rate was 38.9 basis points.

As we've said before, the fee rate will continue to be mixed dependent, and several dynamics influence both the quarter and full year.

First, on the equity side, markets finished the year higher, but volatility meant that average AUM significantly lagged end of period levels. We also saw outflows from higher fee active equity services which put modest pressures on the fee rate.

In fixed income, elevated rates and FX volatility weighed on taxable fixed income flows and AUM. We experienced outflows and higher fee strategies such as American income while most of our active fixed income inflows came from [mini] SMAs which typically carry lower fees.

Offsetting these pressures, we continue to grow our private market's capabilities, which remain a key structural support for our fee rate. Our regional sales mix and strategic growth initiatives have helped mitigate broader industry fee rate compression, and our all-in fee rate, including performance fees, has trended higher over time as private markets AUM has expanded.

Slide 12 reflects a breakdown of our performance fees by private and public market strategies.

Fourth quarter performances were $82 million above our prior expectations. Public market strategies contributed $37 million well ahead of our $5 to $25 million dollar guide driven primarily by another strong year from our financial services opportunity strategy which benefited from both idiosyncratic and sector specific performance.

Private market strategies contributed $45 million slightly above our $35 million to $40 million guide, with the upside largely driven by our middle market lending platform. As a result, full year 2025 performance fees total $172 million above our $130 million to $155 million outlook, though below last year's $227 million.

The year over year decline reflects the unusually strong 2024 contributions from public market strategies such as our securitized credit strategy ABSA and our long short strategy, as well as one-time [carval] catch up fees that we did not expect to recur in 2025, as we noted on last year's call.

Looking to 2026, we have good visibility for private market strategies to contribute $70 to $80 million in performance fees. We also expect public market strategies to contribute at least $10 to $20 million based on current market levels.

Assuming no major market drawdown, we view this outlook as a floor, though we would caution that sector or asset class level dispersion can materially affect performance fees, even in constructive broader markets. While public market alpha is inherently volatile and difficult to forecast, our public alternative franchise provides meaningful upside and favorable market environments and enhances our overall market leverage profile.

This upside potential complements the more steady and predictable performance fees generated by our private markets business, resulting in an attractive and diversified performance fee opportunity for the firm.

Finally, closing with slide 13.

As previously mentioned, the adjusted operating margin increased sequentially to 34.5% in the fourth quarter. 2025 results benefited from favorable markets and improved operational efficiency, resulting in a full year adjusted margin of 33.7% above our 33% market neutral forecast.

This margin is at the higher end of our investor date target of 30% to 35%, which we expected to achieve by 2027. We are pleased with the progress we've made in strengthening our margin profile. Having successfully executed our major market neutral initiatives, including the Bernstein Research separation and our North America relocation strategy, we now see market performance and scalability as the primary drivers of future margin expansion.

We have demonstrated meaningful operating leverage from both markets and scale with incremental margins well above our long-term 45% to 50% target. We expect constructive markets to continue boosting the profitability of our existing services, reflecting improved flow through to earnings.

While we remain disciplined on expenses, we are also committed to investing in growth to create durable value for our unit holders. We expect to continue allocating resources to high conviction initiatives that support organic growth and increased long-term profitability.

Our strategic priorities include disciplined investments and targeted growth initiatives such as new investment services, product innovation, and expanded marketing efforts designed to enhance earnings power over time.

The expansion of our commercial mortgage lending capabilities is a clear example of an investment that we expect to be a cred and value enhancing over the long run.

Before opening the line for questions, I want to express my gratitude to our colleagues for their considerable efforts and unwavering commitment to our clients, unit holders, and all stakeholders. With that, we're pleased to answer your questions, operator.

(Operator Instructions)

John Dunn, Evercore ISI.

I wanted to maybe get a little more on the outlook for high yield funds, distributed in Asia. Some of the --almost beyond interest rates, some of the puts and takes of, that influence demand, month to month.

Sure. Hi, John. It's an honor. Let me, take that question.

In terms of the broader trends in Asia, obviously there are macro factors, such as the effects (inaudible) risk for foreign investors relative to US dollar, the rate outlook, etc. I mean, obviously we've been navigating those macro factors for decades. Some of our products in Asia has been in existence for 30 years.

We have not seen a tremendous impact from a structural demand perspective in terms of the effects (inaudible) risk yet. Yes, there are some ebbs and flows, and on a relative basis, investors are a little bit more sensitive or concerned about the effects risk, but it has not dramatically impacted.

The structural fixed income demand, as the Asia clients, the retail particularly likes income, and still the US dollar denominated strategies and global strategies deliver attractive income. Hence, the structural demand remains strong.

In terms of our business, in terms of a couple of positives, as we started globalizing our ETF franchise and we started with fixed income, given our strong brand in Asia, particularly in fixed income. And we added our second active ETF in Taiwan. If you recall, we were the first active fixed income ETF launcher in '25. This year we added a high yield fund, and it was a successful IPO, top in its category.

So we see broadening of the vehicles that will help us. And another thing that that will help us in Taiwan, we were facing some regulatory constraints in terms of percentage of assets that can come from Taiwanese investors in some of our vehicles. Taiwan raised those minimums from 70% to 90% for us based on some of the commitments. As a result, that will help us unlock more opportunity in Taiwan.

So as a result, there are a couple of unique AB specific factors that will help with the demand in 2026. And then obviously in the broader markets there will be definitely competition across strategies and depending on how our strategies perform on a relative basis, we'll gain or lose market share as we hold very strong market share in border vehicles that are used in markets like Hong Kong. We are typically a market leader.

Sometimes we give up some market share or gain some market share, depending on particularly the positioning of the rate curve, given we tend to be long duration and long credit structurally in most of our products.

Got it. And then, private wealth did well, in the fourth quarter. Could you maybe talk about the seasonality you might expect over the course of the year and then kind of frame a little more, the areas where you expect to see, flow demand.

Sure, yeah, as you pointed out, we're very, pleased how, we finished the year in private wealth, almost 7% annualized, sorry, 7%, net new assets, organic growth rate, so feeling very good about that, in terms of seasonality, you always have the tax impact, in the second quarter, so that's always the biggest.

Thing to, consider, overall, other than that, seasonality, maybe sometimes you have a little bit of a softness in August, with the holidays and all that in most parts of the US, but broadly I think it's a more second quarter tax related seasonality for the most part.

And beyond that we're feeling pretty good about our pre pipeline in terms of our business as you recall when we mentioned in the past. One of our big drivers of growth in terms of particular new client acquisition is, the exits as the M&A activity has been robust and given we have a very strong ultra-network proposition with business owners and entrepreneurs, when we have strong exits through M&A, we tend to do quite well, in terms of onboarding new ultra-network, clients, so we continue to see, strength in that area, as an example.

Benjamin Budish, Barclays,

Hi, this is Nathan on for Ben. Just a quick question with AI related volatility impacting software evaluation. Can you size AB's private credit exposure to software cost the portfolio by, percentage of AUM, maybe top exposures, and like any areas where you tie in underwriting or adjusted risk limits?

Sure, it's owner, let me, take that as well. It's not a, very significant exposure for us given our broadly diversified global asset management platform. To recap, our private alt platform is around $8 billion to $2 billion of assets based on fee earning and fee eligible AUM. Within that, roughly 25% is our corporate direct lending business PCI.

And in that business, typically it is, we are the lead, underwriter in middle market, loans, against, sponsors typically we work with 250 sponsors in the United States. Typical, companies we work with are in the $10 million to $75 million dollar EBITDA range.

So within that PCI portfolio we have exposure to technology or software, kind of companies. Our exposure tends to be in line with the rest of the corporate direct lending markets. So typically around 25% of the AUM tends to be related to software.

We have a long standing history in terms of operating in technology and software, and we have not seen any. material change in terms of our loss experience, and we have been very diligent in monitoring our credit watches and staying close to those borrowers.

But so far again no major deterioration and even it was to deteriorate materially it's not going to impact our business given middle market lending is only, roughly $25 billion, of AUM, and within that we only have a certain percentage exposure to software, as I mentioned, so we we're not, that sensitive to it.

And the follow-up would be, given we know, we understand that it's early to update, of the target of getting like $90 billion to $100 billion of private markets [AUL], but like how are you thinking about growing that private market piece beyond that time horizon?

Well.

Let me answer it, it's Seth. Let me answer it this way we're not including the money that, we will be on boarding this year from the commercial mortgage lending, team.

I mean, yes, that counts as private market assets, but we continue to focus on beating the $90 billion to $100 billion, that we forecasted. For 2027 we will in with our second quarter earnings revive that target for you, but we are ambitious and we see further opportunities to expand it.

(Operator Instructions)

There are no further questions at this time, Mr. Jorgali. I turn the call back over to you.

All right, thank you all for joining this busy day. Please follow-up with us if you have any additional questions.

Thank you very much.