富蘭克林資源 (BEN) 2018 Q1 法說會逐字稿

Good morning, and welcome to Franklin Resources earnings conference call for the quarter ended December 31, 2017.

Statements made in this conference call regarding Franklin Resources, Inc., which are not historical facts, 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 are described in more detail in Franklin's recent filings with the Securities and Exchange Commission, including in the Risk Factors and MD&A sections of Franklin's most recent Form 10-K and 10-Q filings.

Good morning, my name is Kevin, and I'll be your call operator today.

(Operator Instructions) As a reminder, this conference is being recorded.

At this time, I would like to turn the call over to Franklin Resources' Chairman and CEO, Mr. Greg Johnson.

Mr. Johnson, you may begin.

Good morning, everyone, and thanks for joining us today.

With me as usual is Ken Lewis, our CFO.

And you may be able to tell by my voice that I am recovering from that flu, so I have asked Jed Plafker, who heads up our distribution, if there's any questions around flows.

And we also have Gwen Shaneyfelt, who is our Senior Vice President of Global Accounting and Tax to get into any specific questions around the tax reform.

Today, we reported first quarter results that included a $1.1 billion charge related to the recently passed tax reform.

Hopefully, you had a chance to review the commentary we provided earlier today, which outlines the details of the charge and our expectation for taxes going forward.

We're excited by the options created by corporate tax reform and are currently discussing how we can best serve all stakeholders.

These options include committing resources to further develop our financial technologies and investment data science expertise; obviously, M&A activity; investing to optimize our global distribution efforts; and introducing and seeding new products and services.

We also plan to make investments that directly benefit employees and the communities where they do business.

Another exciting recent announcement is we reached an agreement to acquire Edinburgh Partners Limited, an established global value manager.

Now we'd like to open it up for your questions.

(Operator Instructions) Our first question today is coming from Michael Carrier from Bank of America Merrill Lynch.

Greg, you mentioned some of the priorities from the tax benefits and what you're thinking about.

Just wanted to maybe shed a little bit more color on that.

When we think about the $9 billion plus cash and investments, how are you guys thinking going forward on what you need to retain on the balance sheet, whether it's for operational purposes, regulatory purposes?

And then how much is excess?

And then of that excess, some of the things that you mentioned, whether it's investments, capital return, what's the timing on that in terms of making some of those decisions of what to do with the excess?

Well, I think the timing is really a function of what the board decides to do.

I mean, I think, ultimately, we are putting together various options, and I think, at the end of the day, we will always err on the conservative side of capital management because we feel it can be very strategic in the long term to have that flexibility on whatever comes up in any kind of market condition.

And we also find that there is a value from investors that are -- in our funds and separate accounts that the rating on the company, it's important to have that strength of the balance sheet.

So that'll be built into whatever cushion that we look at, and we're really in the process of doing that today to kind of figure out, looking at all the levers, what makes the most sense.

We've gone out to institutional holders and tried to get as much feedback as possible in this process, and we encourage any feedback directly to our team as well.

But it's really too early, and we're careful about setting any expectation around that.

But I think there will be some, obviously, more information forthcoming certainly after our next board meeting.

Okay.

And then so as a follow-up on maybe organic growth side.

You mentioned in the commentary some adds to platforms during the quarter.

So just wanted to maybe get a little bit more color on that.

And then on the flip side, just given the short-term performance that's under some pressure, how are clients reacting to that?

And I know some of the products relative to some of the benchmarks or the categories that they're in, there are some nuances there.

But just a little color in terms of the platform adds, how that might be a benefit versus the performance being a headwind.

Yes.

I mean, I think the point was that one of the things that we've done is continue to build out the consultant part of the distribution effort on the retail side, and that's so important in communicating what our fund's doing and its risk attribution, performance, all those things.

And you really -- as we've said before, I mean, it's like a funnel with fee-based.

You'll have -- you had a world where everything was on the brokerage platform today, where there maybe 30% of those funds on a given platform.

So every -- anytime you have funds that get added specifically to platforms, now that could be a style that's out-of-favor.

It doesn't mean you're going to get an immediate flow into a value-based global fund, but it means, one, you'll do a better job of retaining assets; and two, when the market turns, you have an ability to capture new organic growth where you wouldn't in the past.

I'll ask Jed if he has anything specific he wants to add.

Yes, I think that's right.

I mean, on the fee-based side, we're seeing now about 75% of the sales go to fee-based, which is almost double what it was 7 or 8 years ago.

And so whereas we've been on platforms in the commission base, we're adding our funds and strategies to the fee-based side.

We've built up the team to meet with those research and gatekeepers.

Our next question is coming from Dan Fannon with Jefferies.

I guess, one of the -- I want to talk about M&A because one of the options for the corporate tax reform was not M&A.

And so just thinking about the -- I know you've announced a transaction here recently, but now with more proceeds and more cash available, like, how are you thinking about it on a longer-term basis?

Well, I think, we've always been -- we always think about it.

I think the difference probably today is that everything's fairly equal as we look at the world.

You -- in the past, if it was captive offshore cash, and before any tax reform, you may have had a bias to try to do something outside of the U.S. I think, today, the U.S., it's all fungible cash around the world.

So we would look openly to opportunities as much here in the U.S. as abroad.

I think that -- whether -- so I guess, the net-net would be you have an opportunity to do a larger acquisition in the U.S. than you did in the past.

That would be the only real change, I think, as far as how we look at the M&A landscape.

But it's safe to say it's not one of your priorities as you think about the next 12 months or kind of on a more near-term basis?

Yes, I think it's a priority as far as having the financial wherewithal and balance sheets strength to do that at any given time, so that's part of how we are going to look at capital going forward.

But it doesn't -- we don't feel any urgency to do a deal because of tax reform.

Our next question is coming from Ken Worthington from JPMorgan.

I apologize if I missed the obvious question here, or the obvious answer.

How much do you anticipate repatriating at this point, given where your cash balances are and the nuances of the law?

And then is it possible, given that you've been waiting for repatriation for probably at least a decade and have been thinking a lot about it, and even with Trump being elected, I think you guys were anticipating repatriation being one of its changes.

So can you give us maybe an estimate or, at least a direction, in terms of what we think will make it into a dividend versus what makes it back into a buyback versus what makes it into just investments in the business?

How do you gauge the level of each of those with the money that you bring back?

That is -- those are exactly the questions that Greg was referring to earlier that we are discussing with the board.

I think, to the first question, we talked about what we viewed as excess cash before in the neighborhood of $5 billion to $6 billion.

What we do with that is the first priority is to invest in the long-term success of the company.

What that means, it could mean M&A, but also, we're always -- we're going to continue our history of being shareholder-friendly.

So the tax law is a month old.

Discussions are ongoing.

We're going to be as transparent with the investors as possible, but it's probably going to take us a couple of months to work through all those questions.

Okay.

So no even feel for what might make into dividend versus buyback?

Is one a more obvious answer than the other?

Would it be equal?

Does one come more quickly?

No, I think that's a decision, first of all, that the board makes.

And so we just haven't had the opportunity to have those conversations with the board.

And I just think -- to speculate on what that -- or what that would look like at this stage, I think, we don't want to create any expectation out there before we've really vetted it and had board approval.

So I think you're right.

All of those are the obvious levers, and we will come back, but we certainly don't want anything out there right now that states the plan is to do x when we have to get that plan approved by our board.

Okay.

And I guess, just you had discussed investing back into the business and you gave some, I think, some higher-level themes that you were considering with some of the repatriation windfall.

Any chance you could flesh those out a little bit more here?

Yes.

I think, the first priority, as always, is to improve and deliver a good performance of the funds.

So we have made some investments in improving our capabilities in the investing area, in solutions.

We invested -- we've been investing in technology.

We're investing in also distribution, the changing distribution landscape and getting smart, investing in technology in that and new products.

So it's -- and marketing.

So it's kind of the list we've gone through in the past, all the strategic initiatives that we've gone through.

There's no change to that.

But I mean -- you want to?

Anything on the distribution side that we're investing in?

Sure, sure.

We're adding a fair amount of resources in a few different areas, one on the institutional side in the U.S. Greg mentioned consultant relations on the client service teams as well as sales.

We're building out the strategic relationship team, which is on.

The group responsible for getting funds on platforms.

We're adding people to our sales team.

We're rolling out more of a channel-centric model for some of the broker-dealers, and so we're adding people in that area.

So I think that there's a fair number of resources on the distribution side.

And also in alternatives and solutions.

And I would say, just on the capital side, one thing that we've been expanding on, too, is just using our balance sheet to invest directly in companies and forming funds in areas like industrial tech.

And we have another one that's in AI and FinTech, specialized area, too.

And part of this is just strategic for us to stand in the forefront of those developments.

And part of it is to also build out within alternatives a capability within private equity and venture in that area.

So that would be the use of capital.

Our next question is coming from Brennan Hawken from UBS.

A quick one following up on Ken's question.

Is debt pay-down one potential use of the funds that you guys are considering as well beyond the previous priorities that you mentioned?

Yes, absolutely.

As is the tax charges payable over the next 8 years.

So those definitely come into the equation.

Okay, terrific.

And then is there -- just thinking about maybe potentially framing possible investments.

Could you give us an idea about how much expense uplift was driven by those types of investments that you guys have made recently, just so we can maybe keep that into context and consider possible alternatives?

Sure.

I think when we talk -- when we spoke last week, we just finished our budget.

And our estimate at that time was that those -- that laundry list that I gave you was going to probably increase expenses year-over-year by about 5% to 6%, and I think we're still on track with that guidance.

Okay, perfect.

And then just sneaking one more here.

You had mentioned tied to your expense outlook for the year that would be beyond Edinburgh.

How should we think about what Edinburgh will add from revenue and expense perspective?

I think we'll be in a better position to give you kind of specific line items maybe the next time that we get together.

But generally, it's -- from a cash flow perspective, it's accretive.

From a GAAP perspective, it might be slightly dilutive, but not materially so.

Our next question is coming from Bill Katz from Citigroup.

Greg, I'm still a little foggy on your priorities for this capital management.

I've heard you've wrote certain things in your prerecorded commentary with a supplement, and both you and Ken have sort of ticked off a couple of different things.

Could you just again prioritize where you sort of think the waterfall for these priorities are?

And I guess, within that, when is the board meeting?

Because I think the market is a little surprised that we don't have news today.

And so I'm just trying to understand, like, what is going to change in the next x days as we think about that priority list?

Bill, well, if you're foggy, we've done a good job in communicating the plan at this stage because, again, I just think you don't really want to get in front of something that's important like this.

And you have -- as you know, you have all the levers in place.

You've got your buyback policy, you've got your dividend policy, you've got special dividend policies, you've got -- determined what is the appropriate level, and that's a big discussion that has to take place, that we're all comfortable with.

And we continue to seek input from as many stakeholders as possible.

There's a lot of different views on what we should do.

So I think, rather, there's no rush here to say to the market that we're going to do x tomorrow.

I think you do want to be thoughtful and come back with something that we think makes sense and represents the best interest of all stakeholders.

So I think, unfortunately, we don't really want to communicate any priority of all of those things until we've had a real chance to vet that appropriately.

And then just a clarification.

Of the cap -- of the cash that sits on the balance sheet now, the $9 billion, in your recent K, I think, about $3 billion of that is sort of earmarked for operational purposes, et cetera.

Is that still the right number?

Ken may have said it.

I apologize if I missed that number.

I'm just trying to think about that incremental number relative to maybe the $6.5 billion, Greg, you had mentioned last quarter as sort of net available with this tax reform.

Yes.

About -- that could be a little bit on the high side, but that is in the ballpark.

If you factor in also longer-term debt repayments and the tax charge that I mentioned, it's probably a little lower than that.

Okay.

All right.

And just a little follow-up question, a little more tactical, maybe to get off the capital management discussion.

You recently launched the ETF business, a bit of a passive approach to it.

Can you give us a sense of where the AUM stand and what some of the net sales have been so far and how you sort of think about where the incremental levers are to grow that part of the business?

Well, I think the overall assets are around $1.2 billion.

I mean, we just introduced them.

I think our feeling is that if you're going to be a significant player in the ETF business, passive is obviously going to be very important, and we view this as kind of the last available space to do that by having lower costs, country-specific and regional global funds available.

So it's not -- it's only been out, really, a very short period.

You didn't see a lot of movement at year-end because of the tax consequences of doing that.

And so to date, very -- as expected, some flows but nothing significant.

And we're just really in the process of going out and getting that message out there that's available.

And I think the point in those categories is that there's already significant funds with much higher expense ratios.

So we think that part of that should take care of itself.

And while it's not going to have a large impact on the revenue side of it, I think it's important on just the flow and building the brand within the ETF space.

Our next question is coming from Alex Blostein from Goldman Sachs.

A couple of quick clarifications, I guess.

So Ken, back to the expense discussion.

When you talk about the previous guidance, I think it was 3% to 5% growth, sounds like you guys will be 5% to 6% growth in expenses ex distribution.

But when you think about some of the incremental initiatives for growth that you've highlighted, whether it's tech or investment in data, et cetera, is that inclusive in this, call it, 5% to 6% growth or that could be on top of that, once you get make all the decisions about capital and how you're going to spend the money?

That is inclusive of all of the items that we talked about that are known and we decided to do.

So I think we're still pretty comfortable of that 5% to 6% expense growth, excluding underwriting distribution, is inclusive of all the initiatives that we mentioned.

And if we come up with future initiatives with costs, we'll be transparent with that as well.

Got it.

And that could be on the back of the discussions with use of capital from the tax reform?

Correct.

Okay.

And then in the press release, you guys -- when you went through the number of different things that you could use the excess cash for, you highlighted optimizing global distribution efforts, and I wasn't 100% clear what you guys meant by that.

So maybe flesh that out a little bit.

And just any sort of implications when -- if you think about that on how you're selling the product, any incremental focus on one region versus the other, that'll be helpful.

Sure.

In addition to the resources we'd talked about on the USI, we're also increasing our spend on advertising, both on the traditional side as well as on the ETFs, as Greg mentioned.

So that's certainly an increase.

Okay.

So it's not really like moving people around geographically.

This is literally just investing into distribution.

Right.

I think there's some additional resources included in our kind of expanding the international distribution function as well.

Just the increased headcount.

Our next question is coming from Craig Siegenthaler from Crédit Suisse.

So the $1.1 billion tax charge, when you changed the territorial system, just how was it calculated?

Because it's a huge number.

Okay, this might take up the rest of the call.

It is calculated based on our accumulated earnings that haven't been repatriated that we disclosed in the K. But this is going to be a good opportunity for us to let Gwen have a chance at the mic.

Right.

So Ken, you're exactly right.

So basically, we look at what the earnings we have yet to repatriate.

And when we do the calculation, really, you have to add back kind of the deemed -- the taxes that you've deemed paid in the foreign jurisdiction to come up with a number and multiply it times the rate.

Take credit for those taxes and that's what comes out to that $1.1 billion number.

Also, obviously included in there is some -- there's 1.12, which talks about the potential for state taxes on those.

So we have included certain states that don't follow federal automatically.

We may have to pay some state tax on those dollars we bring back as well.

Got it.

Okay, and then just on a second subject.

I saw that China and also India had good sales momentum in the quarter.

What's driving that?

And maybe also, what products are seeing better demand there, too?

Yes, so that's accurate.

So in India, it's all of our locally managed funds, both equity and fixed.

We've had strong performance on both sides, and we've had good sales there.

In China, it's really Greater China.

So for us, that includes Taiwan, and we've seen a huge surge in some of the global macro funds.

In particular, emerging market bond has been a big fund of interest in Taiwan.

And maybe just to mention in China, we've recently upgraded our license in Shanghai.

And the rules are changing in China on the ownership that you can have as a joint venture partner, which hasn't been released yet, just the actual rules.

But we expect that, that's going to be a big market for us going forward.

Our next question today is coming from Glenn Schorr from Evercore ISI.

Just a question on the retail fixed income side.

In periods of rising rates in the past, I think the retail investment had been a little bit more emotional.

We just had a 19% lift in the equity market in the U.S. and not much at all, if not a little negative in fixed income.

Just curious if you've seen any reaction yet through January and as people get statements and what you're thinking on that front going forward.

Well, I don't think the uptick at this stage has been dramatic enough to change.

I think you are certainly getting more headlines on the risk.

I think probably the drop in the munis could be for other reasons.

High-yield doesn't appear to be -- as long as the economy is strong there, they're less sensitive to duration.

So we don't really have huge exposure to duration risk.

If you look at even the global bond fund, which is -- or the global macro, the largest category, that has a flat to negative duration in that fund.

So we hope, in a rising rate environment, that could be a very strong story within fixed income.

The other -- I think, just from a behavioral standpoint, the difference of fixed income and equity markets is when the equity markets drop and fear comes in, it's hard to get people back in.

Fixed income, remember, somebody was on the sidelines because of where rates are, and they back up suddenly look at the equity market and say, "Gee, now it's a good time." They backed up 100 basis points, 200 basis points.

So you attract new buyers, you attract certainly people locking in liabilities as rates go up as well.

So there's always a demand despite a rising rate environment even within the retail side, I find.

I think we found that historically.

I very much appreciate that.

Just one follow-up.

So I'm just curious.

I think we've -- on this call, we've revisit this several quarters ago.

But I'm just curious how you're managing through the shifting landscape in broker-dealer land as we move from commission to fee-based.

Historically, you've had a good chunk of your assets on the commission side.

I just don't know how you physically manage what you can do to influence that behavior in the channel.

Well, I mean, I'll start, I think the -- and then maybe have Jed jump in.

But it does require a very different approach to how you sell, and I think we have to -- a very small portion now going into the traditional front-end sales charge, brokerage account.

And a gatekeeper is controlling what's available.

And also what's available sometimes is put into a plan already for advisers to sell, I mean, as they recommend various buckets and pockets and move back and forth.

So the good news is if you get shelf space, you've got bigger opportunity.

The bad news is 1/3 or 40% of your funds may get on that shelf from before.

So I think the net-net effect is, one, you'll see more mergers and consolidation of funds that may not be well positioned in a fee-based plan; and two, you've had to add resources at an institutional level to have the right kind of people and consultants representing your funds to those platforms.

So those have been the big changes as well as really retraining your sales force to not talk about a story and a fund, but talk about how a fund fits into a plan.

I think that's a very different tact and one that we've spent the last probably 5 years working on.

Jed, add anything?

No, that's right.

I mean, you have to adapt, obviously, especially in your service model.

So on the fee-based side, performance is obviously going to be a big issue, but past that, it's helping advisers construct their portfolios for their clients.

And so we're doing a lot of work on portfolio construction and portfolio construction tools and working with advisers to look at our strategies and products and how they fit in to meet the clients' goals.

So as Greg mentioned, there's a lot of retraining and training going on, up-skilling and repositioning people, but still a good opportunity, I think.

And I think the other is just making sure you're -- one thing's performance, another is fees and the fee pressure from the -- on the fee-based side is greater than ever as one of the attributes of any fund that's going to get on that platform.

So we continue to look at any funds that may not be competitive on a fee basis and we'll recommend reducing those.

I think that's an outcome as well.

Our next question is coming from Robert Lee from KBW.

Perhaps my first question, I mean, maybe a little bit of a technical question around taxes.

But I think your guidance for 2018 for your new tax rate, and I think it was 24% to 25%, I believe, since technically speaking, your fiscal 2018 includes one quarter of -- at a higher rate, am I understanding this correctly?

So is that 24% to 25% kind of a blended rate, a little bit of a blended rate and that the kind of the core rate going forward is actually a little lower?

Yes, that's right.

It is a blended rate that, on a pure statutory basis, 24.5% applies to our year.

That's how it works for fiscal year taxpayers.

Next year, the rate that will apply on a statutory basis will be 21%.

So obviously, we would expect for FY '19, the rate to go down.

Okay, great.

That's helpful.

And then maybe moving away from taxes a little bit.

I'm just curious, with Edinburgh Partners, its founder and CEO is also going to become the head of Global Equity Group at Templeton.

So presumably, their investment process is pretty similar to what Templeton does currently, how are you thinking about the integration of the 2?

And is there kind of any thought or concern that gee, this leads to some, let's call it, asset breakage, if you will, in Templeton or elsewhere, just as you kind of change up leadership there?

Yes.

I mean, I think, first, if you look at their distribution channels and where their shareholders are, there really is not any overlap.

So we see it as adding distribution.

Certainly, U.K. side as well as they've had very strong sub-advisory business here in the States without a big retail presence at all.

So I think they are complementary.

As far as international value, they do have distinct styles that both are value-oriented, but both are distinct and some similarities, obviously.

But one that we view it as adding more value options at a time when they're out of favor.

And as value investors, we think it's a good time to add to our portfolio of value.

And I think the other is just somebody that we respect a lot to bring back under the Franklin Templeton roof, Sandy Nairn, who is highly respected in the industry, a real thought leader, can just -- can increase the profile overall of value and global equities for us, and be good just another eyes and ears on what we're doing on both sides.

So for today, they're going to be 2 independent brands and they're really sold through different channels.

And we'll kind of figure out where there's any synergies or any new channels we could add.

But for today, we don't, for example, compete in the sub-advisory channel, and some of that's due to fee issues with 40 Act funds in the states where we can do that here with somebody who doesn't have that potential conflict.

So I think there is clearly immediate benefits from a distribution side of having more value equity records that are sold in different channels.

Great.

And if I could maybe just one follow-up.

Going back as really maybe a follow-up to Glenn's question earlier.

When you think about kind of the intermediary channels, I mean, clearly, the SMA side of the business and their fee-based products and one place where there's been some reasonably good demand at some of your peers.

And that's a product set that, I don't know, I think you guys have always -- my perception has always been as big maybe because some of your strategies don't lend themselves to SMAs directly, global bond or equity income.

But can you update us on kind of your initiatives or how you're thinking about building more capabilities in that product line to maybe kind of try to tap into some of those opportunities?

Yes.

No, that's -- it is an area that we are actually looking at right now and looking to add some strategies in that area and some relationships.

So it probably is an area that, over the past few years, has been growing, and we haven't been necessarily growing with it and it's something that we're looking at actively.

Yes.

And I think the other is just it was always -- I think the portfolio management tools and technology are a lot better to compete in that wherein in the past, it was cumbersome for the PMs.

And then pricing differentials, too, were a little tricky.

So I think you're right, that's an area that is -- will continue to grow.

And the potential for tax efficiency within the SMA customized portfolios, I think, is another one that we are clearly looking at today, that we can do in those type of accounts.

Our next question is coming from Chris Harris from Wells Fargo.

If we get a uniform fiduciary standard out of the SEC, do you think that could represent another risk for industry flows and your flows in particular?

No, I don't.

I mean, I think a standard -- that's the appropriate place to have a standard for the industry.

And I think it will be a more workable standard and probably one that brokerage can coexist with fee-based.

So I don't think it's going to get any worse by having a common standard.

But I think the point that many of the major distributors have already gone down the path of adopting a fiduciary standard.

We are, with some of our distributors, putting out share classes that do just that for them, specifically.

So I think to sit there and think it's going to back to the old way, it is not.

Fee-based is the future, in many cases, and will be the dominant area.

But I think, with the new rule, brokerage can survive, and it doesn't -- I'm hopeful that it doesn't mean it has to be all at one price, and you can have some reasonable differentials.

That, I think, is an outcome that we certainly favor.

Okay.

And then a question on global bonds.

Shortly after the election here in the U.S., we had interest rates spiked up, and the performance of global bond was really good.

We're seeing another move-up in rates here in the U.S., but it hasn't really necessarily bled into stronger performance for global bonds.

So just wondering if you can elaborate a little bit on that, why the 2 differences there.

Yes.

I think, this time, it's just the euro.

They've been negative on the euro, and that's been so strong and relatively stronger on the dollar, and that's been weak.

So that's probably offset the duration relative attribution you got from rates going up.

And then Mexico with the Nafta noise, again, kind of some bouncing around in that short-term period.

So it's not like the fund's losing any money or anything.

It's just the move of the euro, I think, is the real dominant factor as well as Mexico in that short period.

Our next question is coming from Patrick Davitt from Autonomous Research.

A lot of conflicting views on the broader M&A opportunity.

On the one hand, getting through tax reform could unleash a wave of new deals.

But on the other, with equity markets at all-time highs, the pricing for buyers and sellers still feeling very far apart.

Could you give your thoughts on that conflict and which side you think is winning out?

Yes.

I mean, you're right, I think, but the other side of that coin is that when the markets are high, you tend to have more sellers, too.

So you have more availability than you'd have when markets are low and the time you think, "now is the time to go strike people," aren't exactly selling unless they have a reason to.

So I think you will have activity and probably more activity.

But like you said, there's going to be a certain caution when p multiples are at their historic highs across almost every type of equity out there.

So I think you have to be a little careful on how big of a bet you make in this kind of market.

Okay.

And then on the China question, given your historical strength down the retail side, I'm curious about your thoughts on getting involved in the qualified foreign institutional investor program, which I was a little surprised not seeing your name here, but wondering if that's in the works as well.

When you say not see our name there, I'm not exactly sure what you mean.

We participate in pretty much all the programs that are available in China in one way or another.

So -- and that's something that we see will continue.

Recently, the government has loosened some of the quotas and things that they're allowing.

And so we are, and we plan to increase that as we can.

We've reached the end of our question-and-answer session.

I'd like to turn the floor back over to management for any further or closing comments.

Thank you, everybody, for participating on the call, and we look forward to speaking next quarter.

Thank you.

Thank you.

That does conclude today's teleconference.

You may disconnect your line at this time, and have a wonderful day.

We thank you for your participation today.