富蘭克林資源 (BEN) 2014 Q4 法說會逐字稿

Good afternoon and welcome to Franklin Resources earnings conference call for the quarter and fiscal year ended September 30, 2014.

My name is Richard and I will be your operator for your call today.

Please note that the final financial results to be presented in this commentary are preliminary.

Statements made in this conference call regarding Franklin Resources, Inc.

which are not historical fact are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements involve a number of known and unknown risks, uncertainties and other important factors that could cause actual results to differ materially from any future results expressed or implied by such forward-looking statements.

These and other risks, uncertainties and other important factors that are described in more detail in Franklin's recent filings with the Securities and Exchange Commission including in the risk factors and MDNA sections of Franklin's most recent Form 10-K and 10-Q filings.

(Operator Instructions)

Now I'd like to turn the call over to Franklin Resources' CEO, Mr. Greg Johnson.

Mr. Johnson, you may begin.

Thank you.

Good morning, everyone.

And thank you for joining us today.

I'm joined by Ken Lewis, our CFO.

Overall it was a solid quarter highlighted by hybrid and global fixed-income inflows and record revenue, operating net income not only for the quarter but the fiscal year as well.

Hopefully you had a chance to listen to the commentary we released earlier this morning which should've addressed the majority of questions on the quarter.

Now we'll open it up for your remaining questions.

(Operator Instructions) Michael Kim, Sandler O'Neill.

Good morning.

First, Greg, maybe a bigger picture question.

Just wondering how your bond funds might be positioned assuming we see some sort of dislocation in the credit markets?

Because I think there are some concerns out there that maybe a potential step up in redemptions might force some bond funds to sell more liquid bonds into declining markets.

So just curious to get your take on liquidity concerns and how a potential downturn might play out for your funds.

I think first of all if you look at where the risk of rates going up and a huge part of our assets are in very short duration bond funds.

So you don't really have that kind of a risk to rising rates and hopefully are very well positioned, that certainly being the Global Bond Fund assets that have a duration of two years or under.

So we feel pretty good about that.

I think the other areas, liquidity is something you always try to measure.

It is difficult to get an exact answer to the trade-offs in running a fund on liquidity.

But again I feel like the areas where there's probably more concern is around less liquid high-yield bonds, things like that and while we have very large funds there it's not large again relative to our asset base.

So it is something we watch very closely.

We continue to do our own studies on liquidity.

Take an example of muni bonds, that went through a very very difficult period.

And we did very well as far as providing liquidity in the more recent downturn.

They tend to be looked at as one of the least liquid sectors.

Okay.

That's helpful.

Maybe one for Ken, just any updated thoughts or guidance on expense growth looking out to next year, just particularly given the recent step up in market volatility?

Sure.

So as you can imagine we've just gone through our budget cycle.

That budget was prepared probably before the market volatility happened.

So we were looking at some increase in expenses going forward into 2015.

And I think probably the biggest number is comp -- we're looking at an increase there in the 7% range.

But the important point there is that a lot of that is variable.

And so we would be able to react in this market volatility to adjust the variable component of that compensation.

But right now without any market assumption we were projecting 2015 comp to be up around 7%.

Okay, great.

Thanks for taking my questions.

Michael Carrier, Bank of America Merrill Lynch.

Thanks, guys.

First, just on the institutional part of the business, Greg, I think you mentioned a few things in the prepared remarks and I just wanted to make sure that we had them right.

It sounds like there was about a $1 billion win that you had but it sounded like that was offset by $1 billion outflow?

Then you also mentioned the high net worth outflow as well.

So I just wanted to make sure there was no overlap there.

And then on the outlook you still have two of the three mandates that you guys mentioned on the last call that should fund over the next quarter.

So I just wanted to make sure that we had that right in terms of the outlook.

Right, that is accurate.

We had a $1 billion taxable fixed-income separate account come in over the quarter.

We had three different global equity accounts that were terminated that totaled about $1.5 billion during the quarter.

And then as we mentioned, the $3 billion wins we had, one funded in this past quarter and we expect to hopefully to fund this quarter.

Okay.

And then just one thing on the numbers.

When we look at the IT cost, you saw the normal seasonality, just wanted to make sure that will resume?

On the occupancy I think you mentioned like a one-time item.

Just wanted to see if you had the size of that.

And then just the G&A, I think we've got -- I think there was $9 million related to the Darby gain.

But if there was anything else because that still seemed a bit elevated and I didn't know if that was seasonal, so just any color on some of the expense lines.

Yes, in the quarter we did have some one-off seasonality increases.

In the G&A line I think there was that $10 million Darby-related charge and from private equity there were probably some other expenses in that that we wouldn't expect to recur.

So year-over-year we're not expecting any significant increases in G&A.

But I think in the technology side and occupancy we are seeing some upward pressure on those line items going into next year.

Okay, thanks a lot.

Daniel Fannon, Jefferies.

Good morning, guys.

This is Surinder calling in for Dan.

One of the things we wanted to touch base on was just kind of the buildup in the US cash.

I think you guys mentioned that part of it is for kind of debt maturity but also that you guys are maybe looking at additional seed capital.

Can you talk about what kind of products you guys are thinking about, or looking at there?

Yes, I think the commentary was probably backward looking more than it was forward looking.

So we were trying to explain why that cash is maybe built up more than people might have expected last year.

And last year we were looking at -- we seeded funds such as the K2 Alternative Funds and some other maybe real estate products or funds the required additional seed money, so that's what we were talking about there.

We do have a debt maturity coming up in May of next year, so we will be looking to decide what to do with that as well.

And then maybe looking ahead, should we continue to expect additional products to be seeded or that balance part to grow?

I think there's additional pressure on seeding.

But I guess we've talked about this in the past, the philosophy there is to kind of look at maybe prior seedings and see if they have been successful, or see if they haven't been successful and repurposing that seed money, taking them out of the older funds and putting them into the new funds, and we try to keep it more or less stable.

But this year because of the nature particularly of the K2 products with the underlying managers there was some upward pressure on that but I don't expect that kind of product to occur next year.

But there's a lot of demand for seed money for new products but that's not an important business.

Okay.

That's helpful.

And then my follow-up question just related to it seems like you are seeing a little bit of elevated redemptions in Asia and other firms are also seeing some of that as well.

Can you talk a little bit about the mindset of Asian investors versus maybe rest of the world and if we should continue to expect to see volatility in that part of the region?

Yes, I think you never want to completely oversimplify a view of a region because I think Asian when we look at it is very different each country market and market and even the mix of what we sell there.

I think in general -- very general terms -- there tends to be more turnover, there's lower holding periods, there's more of a short-term focus.

Now that's more on your retail base versus your retirement assets, which tend to be more stable.

So I think whenever you have geopolitical events like we've had over the last quarter, you've had that market selling off a little bit more in growth concerns just in general in that region with China's uncertainty put pressure on equity.

So you have seen more of a short-term reaction and I would expect that that will continue but again it really depends on your mix on what you are selling.

If you look at for us, last quarter our Asian Growth Fund actually had strong inflows for the first time in a while.

And that is really on the back of relative performance so that is counter to what -- it went from $100 million out the prior quarter to up $620 million in inflows this quarter.

So I think it just depends on really what you are selling in what market and not looking at the region as a whole.

Okay, thank you.

Craig Siegenthaler, Credit Suisse.

Thanks.

Good morning everyone.

First on the May 2015 debt maturity.

Why not refi it or even pre-fund it now given the low level of rates rather than delever the balance sheet a little bit?

That's exactly what we are thinking.

We are looking at all the alternatives there.

I didn't mean to say that we were rolling that out.

It's just a consideration.

And second, have you seen a significant increase in sales activity after Morningstar upgraded both the Global Bond Fund and the Total Return Funds back to five star?

I don't how quickly it is from that but both of them had a very significant turnaround in terms of flows quarter over quarter.

So I think it's always good when you get that five-star rating and we have seen our Global Bond Funds took in over $2.5 billion net over the quarter.

How about over the last 60 days versus the prior couple months or quarters there?

Yes, I don't have that.

I would say when we look at the last 60 days we can't really talk about 30 in there and I don't really have the intra-quarter flows.

Got it.

All right, thanks for taking my questions.

Robert Lee, KBW.

Thanks for taking my questions.

This may be kind of a little bit of a follow-up to a couple of previous ones.

Can you give us maybe a little bit of color, if we look at the global fixed income, if I have the right numbers in front of me, total sales has been relatively constant within kind of $15 billion-ish give or take kind of range but you have seen this drop-down in the total redemptions.

And maybe that's just different investor behavior in Asia or elsewhere but it would be interesting just to get some sense of how you are seeing -- what do you think is kind of driving that more moderate redemption rate?

And does it signal any change, or does it represent any kind of change in maybe the mix of regions where you are seeing activity?

Just some color on that would be helpful.

Yes, it's a good question and one that is fairly difficult because of the nature again of the platforms and how you can have lumpy redemptions in the retail sector by country.

You don't want to just take the view that they are up in that country because you had somebody take it off a large platform that that trend will continue one way or another.

I think it is sometimes difficult.

I think when you have a fund that has had significant growth like this and you have your first period of volatility, that tends to shake out some investors that may not want that kind of volatility, or may not have expected that.

So you have that initial.

You also have the fact that it's categorized as fixed income.

A lot of people just quickly say I want to lower my fixed-income exposure when we had that first move in rates.

And our job has been to get the message out there that this fund is very well-positioned against rising rates.

And we've been doing that but there's probably a percentage you don't get to on that, so you have redemptions there.

Also in a market that now you have seen some equity volatility, we've talked about this Global Bond as being more an alternative category that is not exposed to rising rates or really equity-type long exposure, that we feel it is very well-positioned.

So I think with that we would hope to see continued strength there and then more recently good relative performance for the one year, turn that number around.

So that helped the immediate flows as well.

Okay.

And maybe on a little bit different tack, if I look historically at the firm it feels like over the years whether it was the Global Bond franchise or the Equity Income franchise or Asia growth or what have you, or building up more of the mutual shares business, firm historically has been able to take a strategy really when it's working really kind of grow it and for lack of a better way of putting it, almost make them a little bit category killers and really build scale.

So if we are looking at the franchise now and you have a lot of products out there but are there one or two or maybe three that you would point us to that all else being equal maybe a little bit below the radar screen but from a combination of performance and position that you think should be what we should be focusing on from what's going to be the next big scale franchise that you think you can develop?

You'd rather have a more balanced approached.

I think part of the challenge in our business is just the law of big numbers and when you get $100 billion, $200 billion in a given category you can still be doing very well with market share and sales and it gets harder to grow that category.

You look at areas like hybrid which we think will still be very important in this kind of marketplace we've had over $10 billion in net inflows during the year.

So that is still the probably that along with Global Bonds are still the big opportunities for growth.

Now we have talked a bit about the alternatives.

We have one of the fastest-growing -- our K2 fund that is out in the market is doing extremely well and is now on 60-plus platforms.

So that's about $0.5 billion now and that could become very large as people continue to diversify their portfolios away from the traditional kind of 60/40 mix.

So that would be the other one and then just the tactical asset allocations are another area we have built in more the solutions-type area.

And in a rising rate environment that could become very important for us with real asset type real return funds.

Great.

Thanks for taking my questions.

Ken Worthington, JPMorgan.

Hi, good morning.

I guess first you called out the changes to the sales and distribution fees and expenses.

But as we look forward to world changes in Europe and some other factors, how should we think about the spread between the distribution revenue and the distribution and marketing expenses?

That's a good question.

And I think what makes it a little challenging to figure out and project is the fact that both on the revenue side and on the expense side a lot, 70% or so of it is asset-based, so driven by the market.

Our best guess is we think the spread will kind of be about the same.

We are thinking that both the revenue expense will increase 3% to 4% but we don't have any market assumptions in there.

So we don't think the spread will change that much going forward.

And my percentages that I am talking about are year-over-year percentages, full year.

I was thinking year-over-year but looking forward.

Right.

Okay.

And then -- I was going to move on to the next question.

Just on K2, based on the performance of K2 this year, what should we expect in terms of performance fees for calendar 4Q?

So this year we have had almost $60 million of performance fees, a lot of that related to K2.

We are not budgeting that $60 million to recur next year, although there could be some performance fees not only from the K2 products but from others.

But we expect them to be significantly less than they were this year.

Okay.

And is it calendar 4Q heavy?

Or is it evenly spread throughout the year?

I think it tends to be more on all of the products and performance fees tends to be more in our fiscal third quarter.

Okay.

Thank you.

I will take it off-line.

Mark Irizarry, Goldman Sachs.

Great, thanks.

Greg, maybe this is a question for both you and Ken.

When you think about capital planning, where do you stand just in terms of thinking about acquisition opportunities and where that ranks in deploying some of the cash?

And then also, have you given some thought to maybe a different, more clear capital allocation policy that doesn't rely as much on sort of opportunistic share repurchase just given what seems to be opportunities that maybe are coming and going a little bit quickly, if you will?

I'll start and have Ken jump in.

I think first of all as we have stated in the past, we remain flexible in our policy and I think we have as far as the M&A activity, we still are out there looking at every opportunity.

And we have always felt that that strong balance sheet and the ability to move quickly is a tactical or is a real advantage for the firm relative to our peer group.

So we will continue to look.

And obviously anything we do overseas is a good use of that offshore cash so that would be a priority as well.

And we continue to look at that.

As far as defining and being clear on our policy, I think that is something that we continue to look at.

And certainly at yearend we are evaluating with the Board our capital management strategies.

I will have Ken pick it up from there.

That's right.

I would just emphasize the clear thing for the Board's priority is to increase the dividend, so that will continue.

It's probably well-known but we have done that every year since the past 34 years.

That has been about a CAGR of 30%.

So that's not going to change, but as Greg pointed out, there has been increased dialogue with the Board and there will be another meeting before the end of the calendar year.

And so that's one of the topics of discussion, more transparency.

Okay, great.

And then I may have missed this earlier but any comment just with the pickup in volatility recently and have you seen any behavior in terms of allocations or any response be it in areas of fixed income or equities globally that suggests that maybe there's a little bit of a change in investors' mindset here?

I think it's a little early but I don't think -- because you haven't really had any kind of uptick in rates and the pressure would be more on the equity side with the volatility but I wouldn't draw any conclusions on changing behavior at this stage from that more recent volatility.

Okay, great.

Thanks.

Bill Katz, Citi.

Good morning, this is actually Neil Stratton filling in for Bill.

Just want to ask a question around gross sales trends.

They have ticked down a little bit year-over-year and just wanted to see what strategies you might employ to try to stabilize that and grow it going forward?

Thanks.

Well I think if you look at the market it is probably more in line with what the market is doing.

The downturn in the last quarter in equity sales due to volatility I think that is consistent as well.

I think there is always -- we are going to always talk and look for opportunities and I don't think we look at it on a gross basis and say you have to increase it by this percentage.

We are looking at each market and try to just build the best suite of funds and products that we can have.

And we don't talk a lot about other areas because they may not move the needle as much.

But places like India that have had significant growth and continue to be very profitable for us over the past few years is another example of something that could be very important for us as that market continues to grow.

And again we are very well-positioned there.

The fixed-income side with a lot of the disruption in the marketplace obviously a lot of money in motion.

We're going to continue to go out there and tell the Franklin Templeton story and we think we are going to get opportunities to increase shelf space there especially in the defined contribution area that hopefully we can increase our wins there.

And that's a more near-term opportunity that hopefully will increase flows.

And I would just add from a strategy point of view we have currently eight sales and marketing campaigns going around the world talking about income in Europe and even country-specific like Italy's balanced fund.

So that's part of the strategy, too, is more educating those that distribute our products.

Thank you.

Eric Berg, RBC Capital Markets.

Yes, two questions.

I'm on slide 11 from your set of slides.

And what's interesting to me is that on the international side of the business at least in the quarter reported today, you seem to be doing much better institutionally than on the retail side.

What is your best hunch as to why that is?

Well I think again institutional business you do a lot of work and it can come in in different periods and spike up and down in both ways.

So I think the advantage we have as a firm is that we do a very strong brand, even stronger in places like Asia, than we do in the US and in other markets we don't have the retail brand that holds you back with consultants sometimes like it does in the US.

So I think we have a better opportunity and a lot of times to work directly with the sovereign wealth funds, that helps as well.

So that's where we see the better opportunities and then having operations on the ground and relationships on the ground in those markets, again differentiates us from a lot of other global competitors.

So we expect to see that trend to continue and that's an area we have really added resources.

If I look at the organization and certainly institutional side of the business where we have put a lot of emphasis is to continue to build out our Asian institutional capability.

And so I think that that is why we are seeing better growth rates there and I think we feel like that's going to continue.

If I could rephrase or just play this back to, are you saying from a brand point of view you have a not necessarily a better name but a bigger name institutionally than you do retail in that part of the world?

Yes, I think the US market tends to view because of Franklin and Templeton's earlier successes as a mutual fund company that that sometimes makes it harder everything held equal to win mandates versus more boutique-oriented specialized institutional firms.

That's just the nature of our business.

We don't have that same view in other markets around the globe.

My second and final question -- okay, that's very helpful.

My second and final question relates to your US equity flows.

Things seem to be not doing as well as they had been.

Do you think that this is a function of your equity performance or are you basically mirroring what is going on in the industry in your view?

Yes, I think if you look at the active manager side over the last quarter and look at overall flows it really has mirrored.

We look at it more from are we picking up share within our marketplace and we did that last year in US equity funds.

So I think that's an important metric for us to show that the emphasis we have made and continue to build that is working.

The performance actually has been very strong for our US equity funds in the short run and hopefully we can keep building on that.

The area that has had some headwinds and we've seen it in more recent flows is on the global equity side and Templeton, which historically is not hedged against the dollar.

A strong dollar is going to have a negative impact on relative performance in the short run.

And that is something that we've seen over the past quarter.

Thank you.

Brennan Hawken, UBS.

Thanks.

Good morning, guys.

So first on expenses real quick, thinking about the right starting-off point for comp.

The idea is to net down that almost $4 million from the carry transaction and then I believe in your prepared remarks you said that it was the decline was driven by both fixed and variable expenses.

How much of that sequential decline was attributed to the fixed side, if you could put some color on there that would be helpful?

Of the decline?

Yes.

I would say very little of the decline was related to the fixed side.

A lot of the decline had to do with marking down deferred compensation and some long-term rewards were forfeited back so that is part of the decline.

But very little of it, I think, had to do with fixed.

Okay.

All right, that helps.

I know it is sort of tough to be too specific and you guys unpacked a few of the issues earlier.

But should we think about the fact that maybe the US liquidity build has probably run its course or should we think about liquidity continuing to build in the US on the balance sheet?

Our view is that we do look at the cash flow from the US perspective and we do try to return it to shareholders in terms of dividends and share repurchases.

So I would say that that would continue going forward.

We would try to distribute most of US cash flow.

Okay, so the increase in liquidity for this quarter we shouldn't necessarily view as some sort of sign that you guys will be holding --

I think the increase in this quarter has to do with maybe lower levels of share repurchases due to the market performance all year.

It has been an upmarket, so we've had very little opportunities to be opportunistic, if you will.

Right.

I guess the volatility at the end of the quarter came when you guys were already in a blackout period?

Yes, that's a very good point.

Thanks for pointing that out.

That's true.

Okay.

That helps.

Thanks a lot.

Greggory Warren, Morningstar.

Good morning, guys.

Thanks for taking my questions.

When we start looking at global international on the equity side there, I know in past periods performance was a bit of a hindrance, a bit of an issue for generating flows.

But when you look at more recent performance on a one-, three-, five-year basis, things are looking a lot better than they have in a while.

And I'm just wondering what are you guys doing additionally to try and generate flows for that particular piece of the business both on the retail and institutional side?

Well, I think it just points to how it really does take a while to get back and especially the big drivers in the defined contribution are and getting those funds on those platforms is important.

So when you have those records -- and hopefully we are getting on those, it just takes time.

Also I think there is this a trend and you would probably know better than I at Morningstar, but just more around specialty funds and frontier funds and small-cap funds and regional funds within the global equity space.

So the traditional funds -- a global Templeton Growth or Value Fund I think is harder to sell than it used to be as people look for more specific kinds of exposures and opportunities.

That's why we are seeing a lot of interest in those other areas within global equities and grown quite a bit but the more traditional funds I think it's been a little bit more difficult.

So the offerings that you have are at this point, smaller and kind of overshadowed by what is going on with the larger funds then?

Yes, I don't want to leave the impression we are giving up in any way.

I think it's notable that the large categories and getting that message out there has been and continues to be a priority for us.

Because I think they are very important funds for us that are doing very well and they are kind of the flagships of Templeton.

Okay, good, good.

And then just real quick on Global Bond and Global Return.

I may have missed it in your comments earlier, but how much of those flows were retail driven and how much were institutional and where do you expect to see the better flows coming as time goes on?

Well most of that was in retail over the past quarter where we saw significant improvement, especially in Europe for those flows.

I don't think we had any significant separate accounts in that category over the quarter.

Okay.

Good, thank you much.

Douglas Sipkin, Susquehanna.

Thank you and good morning.

Just a technical question first and then a follow-up.

Just so I can get a better understanding, obviously a nice foreign-exchange benefit in the quarter.

I guess I'm just trying to think about on the go-forward, generally speaking stronger dollar across the board versus really anything will drive sort of gains and vice a versa.

Is that a reasonable way to think about it?

I think that may be a little too simplistic way to think about it.

Because I mean there's different factors, there's the effect it has on the fund performance.

We do have (multiple speakers)

Well, I'm just talking about in the other revenue.

Yes, so we do have products -- we do have cash that gets translated through the income statement because it's US cash in a foreign entity.

Offset of course goes through the balance sheet, so it is net-net neutral, more or less.

And so in that particular line item you could expect that to recur in the same environment.

Okay.

And then just shifting gears, obviously Templeton Global Bond, Total Return great marks from Morningstar, obviously tremendously successful product.

Is there anything you could do to further leverage that, i.e.

maybe incubate some new stuff, new strategies, maybe targeting a little bit more of a niche audience?

I know the Total Return has done that to some extent over time but still very strong results.

But given the size of the products I am thinking maybe a little bit harder to drive from the level that those existing products are.

Maybe you can find something new to leverage the expertise and sort of come out with a new offering or something?

I think we have done that and are continuing to look at other ways to leverage those capabilities.

The balanced funds have been a big growth story for us over the last few years and that is really combining that Global Bond expertise with the Templeton equity side and those are billion-dollar funds now doing very well.

We have offered a constrained bond fund, which again takes those capabilities and limits a little bit of the volatility and exposure because some of the market likes that versus the unconstrained version.

And then the other finally that they are included in our solutions-type funds too is we have exposure into that in our tactical asset allocation funds.

So we have built the capability, I think, wherever appropriate and we will continue to look at it.

But the balanced funds are really where we are getting the most leverage from that.

Great.

That's helpful.

And then just last one, just hearing your prior comments on lockout, I guess I am assuming you have been locked out, are you guys locked out up until today for October, or were there places where maybe you could take advantage?

No, that's our policy.

A little bit before the quarter earnings -- a little bit before the end of the quarter and then through today.

Through today.

Okay, perfect.

That's helpful.

Thanks for taking the questions.

Robert Lee, KBW.

Thanks.

Thanks for taking my follow-up.

I want to maybe go back a little bit to the -- Greg, you had touched on a little bit the DC business and I am just curious, if I look at the DCIO business as well as maybe the broader sub-advised business, if I understand your comments correctly that maybe with some of the things going on at HIMCO and Money in Motion and that there hopefully can be some new opportunities to pick up some share, if you will, within either one of those or both of those channels.

But if you step back and think of outside of that call it opportunity over the coming year or so, it seems like those channels have been kind of slower growing for the whole industry than they were say 5, 10 years ago, the DCIO business.

So how do you think of not just the near-term but more the intermediate- and longer-term opportunity within the DCIO market, the sub-advised market?

Do you think that ultimately you need to come up with just given a focus on fee rates and whatnot, a different kind of offering to grow those over the long term?

Or just trying to get your sense of how those businesses are shaking out.

I would start with, I wouldn't agree that a slow growth rate means a small opportunity.

If you have a huge huge pool of assets, which you have in that area, and you feel like you don't have your market share or you haven't penetrated that asset class, that is a huge growth opportunity for the firm.

And I think that's what we are really talking about here.

So that's much better to know there's a huge pool of assets than a smaller one growing fast.

So we feel like that's an area we have a large opportunity to continue to grow and certainly with those kind of funds our strategic income, our Real Return Fund, are well-positioned to do well -- have very strong performance records in that area.

So I think that's -- and it's the same really for global equities.

The more we can get increased shelf space that's really the best thing we can do to incrementally grow the business going forward.

And what was the other part of the question?

Well, just trying to get a sense for what you thought was the opportunity there.

I know particularly in the sub-advised market, say the variable annuity, they've almost been going more the index route it seems just to make it easier to hedge.

Yes, I think that market is getting much more difficult and actually some of the big redemptions that I talked about this quarter were due to that market and that trend on the global equity side.

All right, great.

In the variable annuity space.

Well, I appreciate taking my questions there, thank you.

We have no further questions at this time.

Okay.

Well, thank you everyone for attending our call and we look forward to speaking next quarter.

Thank you.

Thank you, ladies and gentlemen.

This concludes today's conference.

Thank you for participating.

You may now disconnect.