Affiliated Managers Group Inc (AMG) 2011 Q2 法說會逐字稿

Greetings, and welcome to the Affiliated Managers Group second-quarter 2011 earnings call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation.

(Operator Instructions)

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Allie Lynn, Vice President of Corporate Strategy and Investor Relations. Thank you, Miss Lynn, you may begin.

Thank you for joining Affiliated Managers Group to discuss our results for the second quarter and first half of 2011. By now you should have received a press release we issued this morning. However, if anyone needs a copy please contact us at 617-747-3300 and we'll send you one immediately following the call. In this conference call, certain matters discussed will constitute forward-looking statements. Actual results could differ materially from those projected, due to a number of factors including, but not limited to, those referenced in the Company's Form 10-K and other filings we make with the SEC from time to time. We assume no obligation to update any forward-looking statements made during this call.

AMG will provide on its website at www.AMG.com a replay of the call and a copy of our announcement of our results for this quarter, as well as a reconciliation of any non-GAAP financial measures to the most directly comparable GAAP financial measures. With us on the line to discuss the Company's results for the quarter are Sean Healey, Chairman and CEO; Nate Dalton, President & COO; and Jay Horgen, CFO. Now I'd like to turn the call over to Sean Healey.

Thanks, Allie. Good morning, everyone, and welcome to AMG's conference call to discuss our financial and operating results for the second quarter of 2011. Our economic earnings per share were $1.71, an increase of 27% over the prior year; driven by the strong performance of our affiliates and outstanding organic growth. With $24 billion in net client cash flows over the past 12 months and continued strong investment performance, especially in global and emerging markets equity and alternative products, our assets under management are now approximately $350 billion, an increase of 40% over the prior year. We generated net client cash flows of $7.5 billion this quarter and our flows were actually even higher than the headline number as Nate will describe in a moment.

Looking ahead, we see continued strong organic growth as investors around the world, both institutional and retail, are increasingly focused on specialized global and emerging markets equity and alternative strategies for the alpha portion of their portfolios. This strong secular trend reflects an ongoing globalization of client portfolios, as well as a growing recognition that global and emerging market equities along with alternative strategies offer the greatest opportunity for alpha generation. Together, these areas generate over 70% of our EBITDA and have produced virtually all of our net client cash flows over the past year.

We believe that boutique specialist managers have a competitive advantage in generating out-performance in these product areas and our affiliates include many of the industry leaders. Global and emerging markets equity managers like Tweedy, Browne; Genesis; Artemis; and Harding Loevner; and alternative Affiliates including AQR, First Quadrant;. BlueMountain, and ValueAct have outstanding, long-term track records and focused differentiated strategies.

In the midst of a weak macro-economic environment and political gridlock, industry-wide client flow trends continue to favor asset classes, such as fixed income, that seem less risky. But we believe over the medium to long-term, return-oriented products, including especially global and emerging market equity and alternative strategies, will capture an increasingly large share of institutional and retail investor allocations.

We've achieved strong organic growth in spite of broader market and flow trends, reflecting the successful execution of our global distribution strategy, as we combine the advantages of our affiliates' capabilities with the global reach of AMG's centralized platform. With over 55% of our EBITDA generated outside the US, our client base continues to diversify as we further expand in key markets adding incremental regional coverage in our offices in Australia, Asia, Europe, and Middle East. During the quarter, we appointed Andrew Dyson as Head of Global Distribution, a newly created position based in London. Andrew was most recently Head of the Global Institutional Business for Blackrock and his experience and track record of leadership will provide tremendous advantages as we continue to build out AMG's global distribution capabilities.

Finally, turning to new investments, we made significant progress in advancing discussions with outstanding prospects around the world. Our new investment pipeline is strong and diverse, and includes both alternative and traditional managers; and our competitive position and the transaction environment continue to be highly favorable. Finally, during the second quarter, we were pleased to formally launch our wealth management strategy through our new subsidiary AMG Wealth Partners, which, as you know, will apply AMG's proven investment model to the wealth management industry and will meaningfully expand the set of investment opportunities before us. With that, I will turn it to Nate to discuss our Affiliates' results in further detail.

Thanks, Sean. Good morning, everyone.

AMG's performance in the second quarter illustrates the fundamental power of our business. Partnering with outstanding specialist investment firms, which generate excellent investment performance, in products that are sold and serviced by a combination of dedicated affiliate teams and the increasing scale of our distribution platform. Our $7.5 billion in net positive client cash flows marks the fifth consecutive quarter of strong flow moment, and reflects the impact of a number of our strategic decisions that are paying off in the marketplace. But we see a trend toward investment portfolios becoming global in nature with an increasing exposure to global and emerging markets equity and alternative products, as well as the growing recognition that boutiques have competitive advantages in generating out-performance in these asset classes.

As we look ahead, we believe these trends will continue over the long term; and we see strong demand especially for our global equity, emerging markets equity and alternative products; as we and our affiliates continue to add resources to bring their product into additional, attractive markets and channels. But, most important of all, our affiliates continue to build on their strong performance records.

Now, turning to investment performance for the quarter, in the global equity category, we had another quarter of very strong performance, including especially from Harding Loevner; Tweedy, Browne; AQR; and Artemis. For example, all of Harding Loevner's global equity strategies outperformed during the second quarter. Tweedy's flagship global value fund and AQR's EC strategy each had another strong quarter and remain well ahead of benchmarks across all relevant time periods. UK manager Artemis outperformed in the quarter, with its largest funds featuring strong performance records for the quarter and year to date. While Trilogy Global Advisors and Third Avenue had challenging quarters in their global equity products, both continue to have strong long-term performance records.

On the emerging markets side, it was a good quarter; with strong relative performance. The flagship strategy of Genesis remains significantly ahead of its benchmark for the year-to-date 1-, 3- and 5-year periods, and outperformed its benchmark by 155 basis points in the quarter. In addition, Harding Loevner's emerging markets product outperformed the index by 100 basis points or more in the quarter.

Now, turning to alternative strategies, we had a strong quarter across a broad range of products, including ValueAct, which generated substantial performance in the quarter. In addition, I would highlight AQR's continuing outstanding performance across a wide range of alternative strategies; from their absolute return fund to some of their alternative beta strategies. In addition, both AQR and First Quadrant are having good success in the risk parity area, both from a performance as well as flow standpoint.

Finally, turning to our US equity products, Systematic continued to deliver strong performance across their suite of value strategies, with the largest strategies remaining ahead of benchmarks for the quarter 1-, 3-, and 5-year periods. Tweedy, Browne's US value strategy outperformed its benchmark for the quarter and remains ahead for the longer-term periods as well. Friess under-performed in the quarter and Frontier and TimesSquare missed benchmarks in their US growth strategies, but remain well ahead for long-term periods.

Now, turning to flows, we had another quarter of strong organic growth with positive net flows of $7.5 billion. I should note that the $7.5 billion in net flows includes the loss of a low-fee, sub-advisor relationship of roughly $3 billion from a prior minority owner at Trilogy, which decided to bring the accounts back in-house. Obviously, net of that, flows would have been over $10 billion in the quarter. With $24 billion in reported net client cash flows over the past 4 quarters, we are benefiting from the trend I described earlier, including increasing allocations to global and emerging markets equities and alternative products. In addition, we and our Affiliates are doing a good job of bringing their products into new markets, both new geographies and channels.

Looking forward, as Sean said, while some clients are reacting to the volatility and uncertainty by favoring fixed income and other asset classes that may seem less risky, in order to meet their obligations over time we believe clients will need to further increase allocations to return oriented asset classes, especially global equities, emerging markets equities and alternatives.

Now, let me unpack the flows for the quarter by channel, starting with the institutional channel. We had positive flows of approximately $7.3 billion. Looking at the flows in greater detail, it was a quarter we had a strong contribution across a large number of strategies, especially in global and emerging markets and alternative products. Notable contributions came from AQR, First Quadrant, Genesis, Harding Loevner, Pantheon and Trilogy. Now, as we always say, flows in the institutional channel are inherently lumpy and there were some significant large wins in the quarter. But the long-term signals remain strong, in terms of search activity, pipelines, and finals. We are working with a large number of our Affiliates to bring their best performing products into an ever-increasing range of geographies and channels, and we see continued, positive momentum in the periods ahead.

Moving to the mutual fund channel, excluding the Trilogy outflow I described earlier, flows would have been about $2.7 billion positive. This would be continuing the strong momentum we've had over the past several quarters. Within this channel, from a product mix standpoint, the trends generally mirror the broad trends we described. Also, putting aside the one outflow, the sub-advisory channel remains a strong contributor for us including through our sub-advisory distribution platform here in the US.

In our high net worth channel, flows are about $500 million for the quarter. We had positive flows into global equities and alternative products in firms such as Harding Loevner and ValueAct, while Gannett Welsh & Kotler continues to attract flows in the channel, especially through our US distribution platform.

Finally, turning to our overall global distribution efforts, as Sean discussed, we continue to invest in the strategic expansion of our distribution platform, and this quarter announced the hiring of Andrew Dyson as Head of Global Distribution based out of our London office. Andrew will work primarily with our Asia, Australia, Europe, and Middle East institutional teams and our US retail platform to capitalize on the opportunities we see helping our Affiliates across some of the most attractive markets and channels around the world. He will lead the growth of these regional efforts as well as the expansion into additional regions and channels. Now, looking ahead, we believe we are still at the early stages of this opportunity to combine outstanding autonomous investment-focused firms with the benefits of a truly global franchise. With that, I'll turn to Jay to discuss our financials.

Thank you, Nate. As Sean and Nate discussed, excellent organic growth highlighted AMG's strong second quarter, with net cash flows of $7.5 billion for the quarter and $14 billion for the fist half of the year. Together with market performance, AMG closed the second quarter with approximately $350 billion in assets under management. As you saw in the release, we reported economic earnings per share of $1.71 for the second quarter. On a GAAP basis, we reported earnings of $0.85 per share.

Our economic earnings per share included $0.19 of performance fees generated by several affiliates with the largest contributions coming from ValueAct, Genesis, First Quadrant, and AQR. Our economic earnings per share also included a $0.15 write-off of a minority investment related to the establishment of our wealth management subsidiary.

Now, turning to more specific modeling items, the ratio of our EBITDA contribution to end-of-period assets under management was about 16.7 basis points for the second quarter. For the third quarter, we expect this ratio to be approximately 16.5 basis points. And for the full year 2011 we expect it to be approximately 16.8 basis points, which includes a reasonable assumption for performance fees through the remainder of 2011. Holding company expenses were $22.1 million for the second quarter, and are expected to increase to approximately $23 million per quarter for the remainder of 2011, as we continue to build out our global distribution platform.

With regards to our taxes, our effective GAAP tax rate for the second quarter was 34.8% as a result of one-time inflow-through items. For modeling purposes, AMG's GAAP tax rate is expected to be 36% for the remainder of 2011. Our cash tax rate was 23.5% for the quarter, and we expect this rate to average 23% for the remainder of the year. Intangible related deferred taxes remain flat at $12.9 million, and is expected to remain constant for the third and fourth quarters. With reported amortization of intangible assets of $22.1 million for the quarter, our share was $18.7 million; and, in addition, we had $8.2 million of amortization from Affiliates accounted for under the equity method, bringing AMG's controlling interest portion to $26.9 million for the quarter.

We expect our amortization to remain at approximately $27 million per quarter for the remainder of 2011. We reported total interest expense of $26.4 million for the quarter, of which our portion was $24.9 million. This included non-cash inputed interest expense of $6.8 million pre-tax. We expect our interest expense to decline over the remainder of 2011.

Now, turning to guidance, we are leaving our 2011 guidance unchanged. The economic earnings per share guidance range of $6.90 to $7.70 reflects continued strength in client cash flows, our ongoing expectation for additional performance fees through year end, and is net of the one-time $0.15 charge I mentioned earlier. In addition, this guidance factors in actual markets through yesterday's close and then assumes 2% markets growth in the fourth quarter and a weighted average share count of 53.3 million for the year.

The lower end of our 2011 guidance includes a modest contribution from performance fees, while the upper end of the range assumes more robust expectations for performance fees and organic growth. As always, these assumptions do not include earnings from future new investments, and are based on our current expectation of Affiliate growth rates, performance, and the mix of Affiliate contribution to our earnings. Of course, substantial changes in equity markets and the earnings contribution of our Affiliates would impact these expectations.

Now, we will be happy to answer your questions.

Thank you. We will now be conducting a question-and-answer session. (Operator Instructions) Craig Siegenthaler of Credit Suisse.

Thanks. Good morning, everyone.

Good morning, Craig.

Just trying to think here on the capital management side. Two questions here. First, how large and attractive is the M&A pipeline relative to the first quarter? Then what level do you have to reach, in terms of capital being put to work roughly, until at the point when you actually start raising equity?

Okay. So the pipeline and our level of pipeline continues to be strong. We have made progress, Craig, in the quarter and through the year. We feel very good about our pipeline. And so, relative to the first quarter, I think we've made progress and we see good opportunities. As it relates to your capital question, you're probably referencing the equity forward program we put in place this morning. We do view that as normal course. It is a readiness program. We are cautious about equity issuances in general. We would only do so if we saw substantial new investment activity. As you recall, we issued approximately $300 million in equity in 2010 after about a $1.1 billion of deals. So I think we would have to see substantial new investment activity, either in the size of a single deal or in multiple deals.

Got it. Then in the existing balance sheet now, if I look at your debt which is actually come down a little bit, and then your cash which has some excess in there. How much excess capital versus rating agency constraints do you have imbedded in the balance sheet today?

As far as check-writing ability, we have pretty significant check-writing ability just with our current cash flow, the revolver and cash that we're building on our balance sheet. You're right to note that we are building cash on our balance sheet. I think we always want to be in partnership with the rating agencies making sure we're not out of line. We will be cautious on our equity issuance.

Got it. Great. Thanks for taking my questions.

Thank you. Bill Katz, Citigroup.

Good morning, everyone.

Good morning, Bill.

In terms of the flows, obviously you're doing very well in terms of positioning and where the industry is headed. From a capacity perspective, given some of these are more boutique in nature, are you balancing up against anything that might otherwise swell some the volume trend you are seeing?

Short answer is no. I think the way we would look at that, there are a few products here and there where capacity starts to be an issue. The other piece which -- and maybe we should talk more about this-- the other piece is there's a number of sort of new products and new strategies being launched by these boutiques as well and that really runs across a lot of affiliates. Artemis added a few different products and teams this past quarter in both global and pan-Europe. AQR added some additional products, both additions to their equity suite as well as things that are more expansions or alternative set, like a reinsurance product. Trilogy added an emerging wealth product. While there are probably fewer products where the capacity thing starts to be an issue, the real trend that I would say maybe we should talk more about is the product development trend that's going on inside these boutiques as well. There are some [virtuous] circles as we add distribution, get exposure to these clients, begin to have the conversations about how do we solve -- I don't want to be talking as though it's a complete solutions thing -- but how do we address client needs? There is a fair bit of product development going on as well.

Okay. That's helpful. Then from a big picture perspective, you highlight the strength of the pipeline and discussed it, but could you talk a little bit about where you are seeing the greatest opportunity set and the related pricing thereof?

Sure. As we've said earlier in the year, the opportunity set is increasingly global and increasingly alternative. Although we see a diverse group, which includes a number of traditional managers as well in the pipeline. And to echo the points that we made earlier, the pipeline is very strong. You know we don't get in the position of quantifying the size of the pipeline at any given point or predicting the precise timing of new investments. But we feel very good about the pipeline and obviously the underlying new investment effort reflects our strategy of focusing in product areas like global and emerging market equities and alternatives. Although we are very happy to invest in great firms, wherever and however they are positioned.

In terms of deal pricing, any major shift in the eight to ten times to run rate EBITDA?

No. I would say the environment remains quite favorable for us and for sellers in general. So, no.

Just one last question, thanks for taking them all. In the retail business, if you look at the Simfund data from the US, about $1 billion, I think, for the quarter. But then if you strip out the $3 billion lumpy runoff that Nate highlighted you about double that. Could you talk a little bit about the delta, in terms where you are seeing the lift? Is it in the supply managed account area? And if so, what products might be driving that?

If you try to draw the line between the Simfund data and our mutual fund channel flows, there's probably two major components. One is sub-advisory, where I think are some sub-advisory wins as well, including some sizable ones. And so that's one big piece. Then the other piece is the non-US mutual funds, so a firm like an Artemis which has a family of very highly regarded funds in the UK is also in our mutual fund segment.

Thanks, guys.

Thank you. Dan Fannon, Jefferies & Company.

Good morning. In terms of the distribution, you talked about the international component. If you could break down how much of the flows are coming from the affiliates themselves and what the AMG sponsored distribution is contributing?

Let me do a couple different pieces here. And first, let me step back a little bit which is so everyone understands. On all of the flows, the affiliate is still playing -- the affiliate is playing a very significant -- I'll say the most significant roles in winning the business. Even where our sales guys in some market are making the introductions, a significant portion of the work to bring it from that point through the finals into the win is being done by the affiliates. We would never talk about it as -- hey, this is us versus. So that's one observation.

The other important point is we build our platform to work and integrate seamlessly with each affiliate, and the affiliates have different strengths. One way to express this is some affiliates are heavy users of us in some geographies than others, and affiliates can map us to their own resources as well. That's another important point to make as you think about the platform. So it's the affiliates are doing a lot of the work. We're seamlessly integrating, the thing we are adding in a lot of geographies is the very high-end local sales marketing client senior or sales marketing client service professionals who has local market expertise, local market client relationships, those sorts of things. Within that framework, it's obviously going very, very well. And this quarter a significant portion of the flows involved our resources. It was a big contributer this quarter.

In terms of the redemption trends on the institutional side, if you could talk about what managers are seeing redemptions and does that differ from where the sales are coming from?

Yes. So just isolating on the institutional channels then, so I think the really was -- the redemption trend actually in the institutional channel I think came down a little bit. The places -- if you sort of think about the broad themes we described, some of it is product. We were seeing more redemptions in US equity, and more sales in global emerging and alternatives. So that's definitely a piece of it. And then within the institutional channel we're also seeing more -- and some of this is also a combination of mix and geography -- we're also seeing more sales outside of the US and a different mix in the US where we are seeing more redemption. But that's also a function a little bit of product mix and what products are being sold. We obviously have a larger, installed US equity base in the US It's hard to separate those two out.

I think I would add that the US channel -- the US retail, but also institutional channels represent a huge opportunity if you think about it. They're continuing to show outflows and active equity. And we've been saying for over a year that at some point we see a re-risking and I think that will still -- it obviously hasn't happened yet and it will depend on macro-economic factors and political factors. But over time, our view is that inevitably retail and institutional investors in the US, as the investors -- especially institutional investors outside of the US have already started doing -- will increasingly focus on return-oriented assets. So we think we're ideally positioned for that turn, that re-risking. It will of course also benefit our US equity affiliates and products. But we think when that turn comes, it's a big opportunity and we're generating very strong growth into equities, global equities, emerging market equities and alternatives; not into fixed income, not into passive. Obviously those aren't big product areas for us. And we are generating those flows without any material contribution from US investors to this point.

Great. Thank you.

Thank you. Cynthia Meyer, Bank of America.

Good morning. Thank you. Let's see, couple of questions. One is in terms of building out the distribution. Can you talk about what kind of further investments you expect and is that all included in the guidance you gave on holding company expense? Or were those expenses in other lines?

I would say it's all included in the guidance. Obviously for this year we haven't guided to next year, yet. But all of the investments that we have made and will continue to make are embedded in the guidance. Nate, why don't you talk about where we are specifically adding folks?

This actually is a good follow-on from that framework we described, where what we need to do is add those -- especially in the global institutional regional builds -- add those very senior resources. So we've been adding -- you see we've been adding judiciously and we've really been building it along where we see the flow momentum. So if you look back at this year, we really only added one regional coverage, the Nordics so far, as well as obviously adding Andro, which is a significant move for us. Looking at the rest of this year, I think you'll see us probably add at least one more of that same regional coverage, and as you heard us say, we're opening our office in Dubai. We've been running our Middle East business from London to this point and we'll be moving some resources, but I also think you'll see us adding additional resources as well.

Okay. And then in terms of the performance fees, you mentioned that ValueAct generated a big performance fee in this quarter. Could you just remind us what the timing of their performance fees in terms of 2Q versus 4Q or other quarters?

Yes. The most significant quarter of course for us is the fourth quarter. We do experience performance fees throughout each of the quarters. Our second quarter is generally our highest quarter outside of the fourth quarter. And we did get performance fees from a large number of contributors in the quarter, ValueAct was one of the larger ones. But of course we had AQR, First Quadrant and Genesis as well. And we continue to see the opportunity at ValueAct as well as the large number of contributors for the back half of the year.

Last question, maybe you could talk a little more about the wealth management strategy? What is the timing on those kinds of acquisitions? And maybe a little bit how you see the profit and growth characteristics of those? For instance, if they are more high-touch with clients, does that lead to more succession issues? Would they be more or less -- is the growth rate more or less fast? Thanks.

Sure. Well we're obviously just launching our wealth management strategy. I would say it's off to a great start. We hired, as you saw, John Copeland who has a tremendous track record of experience and relationships in the wealth management business, most recently from a senior position at Morgan Stanley. John and his team, I think, are going to do a fabulous job in building relationships and articulating the opportunity. Which is of course different but related to the AMG partnership approach. And I think combining the focused strategy with our track record of successful investments and our approach to being a good partner and our understanding of the structural elements in making investments of this form I think is all going to work very well. We've already been working -- or they are working actively with a number of prospective new wealth management affiliates. There is no -- like our approach to new investments, generally we avoid a specific target in terms of the number of new investments or the precise timing. But obviously over the medium to long term, we'll know what success is and I think we are quite confident that they will be successful in building a really scaled business.

With respect to your question about the dynamics of wealth management firms relative to institutional boutique asset management firms. Hard to generalize, but wealth management firms typically will be more stable over time because of relationships are on a broader base of products. But they are less scalable. You've got to add more key people to achieve growth as opposed to institutional firms where you can achieve obviously very dramatic growth in assets without necessarily adding lots more people. So a different dynamic, but one that I think is a nice complement to our broader business and we are looking forward to seeing them grow the business and succeed over time.

Thanks a lot.

Sure.

Robert Lee, KBW.

Thank you. Good morning, everyone.

Good morning.

If we could shift back to the global distribution initiative and understanding you are still building out some regional capabilities, opening up the office in Dubai. But if we look down the road, what -- is there a next phase you would see to this? I assume there are only so many locations you can expand to and beyond adding some incremental staff here and there, is it reasonable to think that somewhere down the road you'd start even developing some type of product capabilities that can rope in various managers to manage strategies? Or is that too far afield from how you envision the business?

I will start and then ask Nate to fill in more of the details. I think it's important to understand that we've been at this for awhile now. We began prior to the financial crisis in 2007 and we've been building throughout the past four years. And what we have put in place is obviously working. It's early in some respects, but we are in many of the key markets and the penetration is good. But we continue to see opportunity to sell additional products through the relationships that we've established and obviously where existing affiliates are adding new products. And as we bring on new affiliates there are even more opportunities. We feel very good about how we're positioned and think there is a lot of growth based on what we've already built. But as you know we are still building. So why don't I let Nate talk about that.

Maybe to use the framework you've set up which is stages. So one stage is certainly regional coverage and we have been adding regional coverage starting where we think -- and we here is us and our affiliates working together -- where we think we can get the most leverage. So you saw us do Australia, Middle East, Europe and Asia and then within some of those building out focused regional coverage of the Nordics example I gave. The first that I'd say is while we have been doing this for awhile, as Sean described, some of these -- Asia is a perfect example, is really not producing in the way that it will as it gets mature. We've got a roughly couple year cycle as we enter a region to begin getting the benefit of the focus of the individual we've got in bringing this story and individual affiliates to market. And so some regions we have done that and we're sort of past that stage. Some regions we are still doing that first stage.

Then once we do that it's -- we've built the pipeline, we start winning business and I think we've talked about this a little bit before, but the next sets of stages are getting the leverage, both within a region as you move from selling, talking about the story to selling a product and then cross-selling into client relationships. The beauty of our model is each of these people will be able to come with a range of products and will always be able to be helpful to a prospect or intermediary consultant or platform. So that cross-sell within regions and then the cross-sell across regions and the leverage inherent as we're building relationships -- global relationships with other global players, whether those are consulting firms or platforms. We're still in the execution stages of all of those and for some the very early execution stages. So it's adding coverage as well as getting leverage out of it. On the other end of that there are additional things to talk about, as you said other ways we can be doing things in product development and whatnot, absolutely. But we've got a lot of very good things we can do before that.

The last thing I would add is that we should highlight the addition of Andrew Dyson, who is a tremendously highly-regarded executive in this area with a great track record of success at BlackRock and we are very confident that Andrew is going to make a very substantial contribution to accelerating the growth that we're seeing.

And maybe one follow-up question, still on the global distribution. To what extent are you seeing in different countries I'm thinking maybe in particular Australia if there are super annuation products. To the extent you are seeing sales come in what I call a recurring sale platform where you win an initial mandate but then there could be ongoing sales for whatever reason?

Absolutely. We have made sales in Australia as an example into platforms that have a recurring component to them, as well as the cross-sell opportunities I mentioned earlier. I will say one of the other places we have not yet done, and Andrew, I think, will absolutely [believe] this, is that there is a lot more we can do in the platform sales area. There's some packaging components to that as well. There are other -- it's not just geography, it's also channels within geographies that we still have really just started to work on.

And it's not limited to super annuation funds. Obviously sovereign well fund clients in many cases are rapidly growing their assets as well. If you have a strong position starting with an overall firm relationship, but also a set of specific product relationships, that positions you very well for ongoing growth just from that existing client.

Great. That was it. Thank you.

Thanks.

Thank you. Marc Irizarry, Goldman Sachs.

Thanks. In terms of guidance, maybe for you Jay, the range not going up here your second quarter, to get $0.15 or so to consider one timers in there. Is this just conservatism? Or is it performance fees that will generate in the second quarter? And then talk about how much performance fees are of that guidance range?

Okay. So your first point, we did reflect in our thinking the one-time charge. I think the most positive thing I can say is in spite of modest data year-to-date, our flow profile has substantially offset and even exceeded the offsetting beta -- lackluster beta. When we look at the guidance range, we imagine that we have a continuation of the current trends and flows and we also see additional opportunity for performance fees. So those taken together, we believe that the guidance being unchanged is the right guidance in spite of the $0.15 charge. Indeed it's effectively adding $0.15 to both ends of the guidance range.

Great. Thanks.

Michael Kim, Sandler O'Neill.

Good morning. Given the existing capacity on the balance sheet, does the new forward equity agreement suggest anything new here in terms of how you're thinking about the deal pipeline? And then, how should we be thinking about the funding mix for incremental deals in terms of utilizing, again, existing capacity versus maybe drawing down on the equity forward?

So, Michael, I think the most important thing to say is the equity forward is good house keeping normal course filing for us, where we want to be ready to the extent that we see substantial deal activity in front of us and if we do then we will consider using this program. As it relates to mix of capital structure, we are always going to be cautious about issuing equity. And there is certainly a level of deal size that we can do right off our balance sheet either through the revolver or just cash that we have on hand and we imagine that number is pretty significant today. I think as I mentioned earlier to answer the earlier question, we did about $300 million of equity in an environment where we had $1.1 billion of deals. And we are a bigger Company today and that's probably as close to the right framework. Ultimately it depends on the type of deal, it depends on the spacing of transactions, and it depends on our conversations with other constituents like the rating agencies.

Okay. Great. Thanks.

Sure.

Thank you. There are no further questions at this time. I would like to turn the floor back to Mr. Healey for closing comments.

Thank you all once again for joining this morning. As you've heard, we're pleased with our results for the quarter and believe we're well positioned to continue to generate strong organic growth as well as to enhance our growth through accretive investments and new affiliates. We look forward to speaking with you again in October.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.