景順投信 (IVZ) 2018 Q3 法說會逐字稿

This presentation and comments made in the associated conference call today may include forward-looking statements. Forward-looking statements include information concerning future results of our operations, expenses, earnings, liquidity, cash flow and capital expenditures, industry or market conditions, AUM, geopolitical events and their potential impact on the company, acquisitions and divestitures, debt and our ability to obtain additional financing or make payments, regulatory developments, demand for and pricing of our products and other aspects of our business or general economic conditions.

In addition, words such as believes, expects, anticipates, intends, plans, estimates, projects, forecasts and future conditional verbs, such as will, may, could, should and would as well as any other statement that necessarily depends on future events are intended to identify forward-looking statements.

Forward-looking statements are not guarantees, and they involve risks, uncertainties and assumptions. There can be no assurance that actual results will not differ materially from our expectations. We caution investors not to rely unduly on any forward-looking statements and urge you to carefully consider the risks described in our most recent Form 10-K and subsequent Forms 10-Q filed with the SEC. You may obtain these reports from the SEC's website at www.sec.gov. We expressly disclaim any obligation to update the information in any public disclosure if any forward-looking statement later turns out to be inaccurate.

And welcome to Invesco's third quarter results conference call. (Operator Instructions) Today's conference is being recorded. (Operator Instructions)

And now I would like to turn the call over to your speaker for today, Marty Flanagan, President and CEO of Invesco; and Loren Starr, Chief Financial Officer. Mr. Flanagan, you may begin.

Thank you, and thank you, everybody, for joining us, and I appreciate you changing your schedules so quickly.

Some very, very good news. We're going to talk about the transaction between ourselves, Oppenheimer and MassMutual and also go over the third quarter results. And if you're so inclined, the presentation is on our website if you want to follow along.

So I also realized there's been quite a bit of news in the market about this combination for a period of time. But before we get into third quarter results, I really want to clarify some very important key points.

The combination will result in Invesco being the 13th largest global asset manager in the world and the sixth largest manager in the U.S. retail channel, both very important when you think of the importance of scale and client relevance as we look forward.

The financial returns are extraordinarily compelling. For the partial year 2019, we're expecting 18% accretion. In the full year 2020, 27% accretion. And post-synergies, we anticipate an additional $1 billion of cash flow for the combined company. So really quite extraordinary.

We're also very excited that MassMutual is going to be a long-time strategic shareholder of 15% -- 15.5% equity stake in the $4 billion of perpetual preferred. Loren will get into the details in a few minutes, but what's really important, MassMutual is not selling. They are taking every dollar, every -- all the proceeds to put it back into the combined institution, showing their commitment and the excitement for the opportunity in front of us.

And the other point I want to make, we're going to initiate today a $1.2 billion stock buyback, which is also an important part of the discussion that we'll be having today.

So with that, Loren, you can walk us through the financials.

Yes. Thank you very much, Marty.

So on Slide 7, you'll see a summary of the results for the third quarter. We continue to demonstrate strong long-term investment performance, with 63% and 67% of actively managed assets in the top half of peers over the 3 and 5 years. While year-to-date gross sales are up 16.7% versus prior year, market dynamics and some near-term performance challenges continue to impact redemptions, leading to total long-term net outflows of $11.2 billion for the quarter.

Adjusted net operating income was $358 million for the quarter, and that was down from $377 million in the prior quarter. And that was driven by lower net revenue yield, resulting from a change in AUM mix, the negative impact of foreign exchange and the impact of lower transaction fees within other revenues.

Additionally, on the expense side, we saw some elevated marketing and technology expenses this quarter. These items also impacted our adjusted operating margin, which decreased to 37% from 38.7% in the prior quarter. We returned $124 million to shareholders during the quarter through dividends, and we've made good progress in paying down the balance on our credit revolver in early October. And we expect to have our leverage ratios roughly in line with our pre-Guggenheim acquisition levels by the end of the fourth quarter.

Moving on to Slide 8. We highlight long-term investment performance for the quarter over the 1, 3 and 5 years. As we've noted in past conversations, our investment processes and approach are focused on generating outperformance over a full market cycle, so we typically see fluctuations between quarters.

The current market cycle is impacting the relative performance of a number of large value-based equity investment approaches, representing more than 10% of included AUM. With some of that recent market volatility and more favorable market conditions, however, these teams have seen near-term improvements, as you'd expect. As an example, diversified dividends is now in the top decile on a quarter-to-date basis. And also, our U.K. equity portfolios and international growth portfolios are in the top quartile.

Let's turn to flows on Slide 8. As I noted, while gross sales remain robust for the quarter, up more than 17% on a year-to-date basis versus 2017, we did see net negative flows during third quarter as market dynamics weighed on redemptions and the net results.

We saw pockets of strengths within ETFs, with nearly $1.5 billion of inflows in U.S. ETFs. And that included nearly $0.5 billion of flows into our BulletShare franchise, bringing the flows in these products since close to nearly $1 billion.

Commodity ETFs in Europe and certain commodity ETFs in U.S. were weaker, in line with industry trends, which led to modestly negative passive ETF flows for the quarter.

On the active side, the outflows were largest in the U.S. than U.K. retail equity products, which continued to face some of the challenges as noted earlier.

Additionally, on the institutional side, we saw 2 sovereign wealth fund outflows, which totaled nearly $2.5 billion. We also saw a $1 billion outflow from an Asian client in our bank loan strategy, and there was a $1 billion real estate outflow, which we had mentioned on the previous quarter call, all of which contributed to the negative flow this quarter.

So despite these onetime outflows, I want to mention that our institutional pipeline is, in fact, an all-time high in terms of both AUM and revenues, with AUM in the pipeline that's won but not funded up more than 35% versus the prior quarter and up over 30% versus prior year. And that should help elevate our flows in future periods.

And I'd also like to note that while you don't see it on these charts, we did see very strong flows into our Great Wall JV money market product, with nearly $5 billion of inflows for this quarter. And that's a trend that we would expect to continue in Q4.

So with that, I'm going to turn it back to you, Marty.

Thanks, Loren. And why don't we now turn to the transaction? Again, we are very excited about it. It's 100% consistent with our strategy, and it really is going to rapidly advance the strategy that we've been talking about with all of you.

But if you turn to Page 11, I think importantly, really want to -- a fact-based OppenheimerFunds because it's clear, it's not understood, really, the robustness of Oppenheimer and how it's consistent with the strategy that we've been talking to you about.

The first thing we're really excited about, obviously, it's the strength of the organization. It's an incredibly talented group people. We're looking forward to working with them going forward and helping create something really quite special.

The organization has $250 billion in assets under management. 75% of the assets are hard to replicate, differentiated, active and alternative strategies. They have exceptional investment talent, generating very good consistent long-term performance. 59% of assets are in 4- and 5-star rated funds. And the business is financially robust. Net annual revenues of $1.4 billion. The net revenue yield is 56 basis points and operating margin of 40%, all of which is accretive to Invesco.

On Page 12, I want to make it very, very clear, our strategy is unchanged. We continue to focus on strengthening our leadership in our core markets while executing in high-growth areas, and we believe we must do both of these to be successful going forward. And one is not going to be satisfactory for success as you look to the future. If you do both of these very well, we feel very strongly that you generate an elite set of capabilities for the benefit of both clients and shareholders.

What we truly believe is unique about Invesco is a combination of our leadership in core markets and our investments into these high-growth areas. The combination with Oppenheimer and our relationship with MassMutual will meaningfully expand our leadership in the U.S. wealth management industry while also strengthening our ability to execute in several of these high-growth areas. This transaction rapidly advances our growth strategy and is fully aligned with our clients' needs as we look to the future and that of the industry.

One final point that I would like to make on Page 14 is that from a context point of view, of the $87 trillion in assets under management in the industry, the U.S. wealth management segment is the largest segment in the world with 23% of global assets under management. It's going to continue to grow, but I think what's also very important, I think it's all clear to all of us that it will grow and be important, but it will be concentrated in fewer investment managers' hands in the years ahead. The notion of having client relevance and scale is an absolute necessity.

So turning to the combination itself. Creating a $1.2 trillion global asset manager. The addition of OppenheimerFunds provides a number of benefits to the combined organization. For our business and our shareholders, it represents a strong strategic and cultural fit for both of our organizations. And the power really comes from the combination of 4 different areas: scale and client relevance, differentiated investment capabilities, compelling financial returns and a strategic relationship with MassMutual.

If you take a look at client, scale and relevance, as I mentioned, we'll be the 13th largest global investment manager in the world providing the necessary scale to compete and invest on behalf of our clients and our shareholders. But importantly, the immediate impact of the combination will create a clear leader in U.S. retail, with Invesco becoming the sixth largest U.S. investment manager with $680 billion in client assets.

Another point of client relevance is looking at the relationships with the top 10 U.S. wealth management organizations in the United States. Our relationships will be meaningful -- meaningfully more important, as you can see with these key platforms. At the close, we will have 5 relationships with more than $30 billion in assets under management.

And when we turn to the investment capabilities themselves and the impact on the combined organization, it is incredibly compelling. Invesco's and Oppenheimer's strengths are very complementary to one another. It broadens our comprehensive range of investment capabilities, which will not only benefit the U.S. retail market, which is what we're looking at here, but opportunities in the combined firm in the institutional market, both in the United States and outside of the United States, and again, a number of these capabilities in the retail channels outside of the United States, too.

Importantly, 85% of the OppenheimerFunds are in high demand, alpha-persistent asset classes if you take a look international equities, emerging markets, global equities and also very important, income-focused alternative areas, high-yield munis, bank loans, et cetera. So again, the combined rankings post-transaction are incredibly compelling.

If you take a look at the investment profiles -- investment performance profiles of the 2 firms, they're also highly complementary, as you would imagine from my prior comments. They are generally countercyclical. This will -- this is great news for our clients. It will help them through different market cycles, and it is also a business benefit at the same time.

So I truly believe and the organization believes this is an incredibly powerful combination that will immediately benefit our clients, our shareholders and both of the organizations. And we couldn't be more excited about it.

I'm going to turn it over to Loren and have him go into more depth of the financial results of the combination.

Thanks, Marty. So in addition to the very compelling strategic rationale for the combination that Marty just outlined, we expect the transaction to provide strong returns for our shareholders in line with our previously stated financial criteria for acquisitions.

For those following along, I'm now on Slide 20. Excluding the impact of incremental intangible, amortization and onetime integration charges, our pro forma EPS accretion is approximately $0.38 or 18% in the year of closing. And this assumes a second quarter close date and 3 quarters of accretion. In 2020, with the full benefit of the cost synergies in place and a full year of financial accretion, we expect to achieve $0.80 or 27% EPS accretion. As a result of the combination and the inclusive -- and inclusive of the expected run rate synergies of $475 million, we expect to add nearly $1 billion in incremental EBITDA. And by 2020, we project to have an operating margin well in excess of 45% and a combined annual EBITDA of more than $3 billion.

The purchase price will be satisfied with the combination of roughly 81.9 million common shares and $4 billion in noncumulative perpetual preferred shares that has a 21 noncall period and a fixed rate coupon of 5.9%. Today's stock price, based on where we are today, that translates into a total consideration value of approximately $5.7 billion.

In addition, MassMutual will become a long-term shareholder and our largest shareholder at 15.5%. MassMutual intends to be a long-term strategic partner and a shareholder in Invesco. And in this regard, they're entering into a 2-year lockup on the common shares. In addition, MassMutual has indicated that they do not intend to sell their common shares after the lockup period expires. The transaction is a tax-free reorganization for them, and it's highly tax-efficient for MassMutual. So any sale of shares in the future could trigger a sizable taxable event for them. Again, an incentive for them to continue to hold those shares on a long-term basis.

So reflecting on the financial strength of the combined business as well as the additional cash flow that will result from the combination. As Marty mentioned, we are announcing a $1.2 billion common share buyback program, which is to be completed within the next 2 years. Importantly, this will be funded through operating cash. And as such, we do not intend to take on any additional leverage to satisfy that.

So onto the next page. As noted, we expect to add nearly $1 billion in incremental EBITDA after synergies. In terms of the modeling, for your purposes, we included some assumption of breakage in the acquired AUM of about 4 percentage points in 2019 and a modest level of organic growth in future years. Additionally, we've modeled modest fee reductions of approximately $45 million in future periods.

We have a plan to capture by 2020 an approximate $475 million in cost synergies within the combined organization, and that represents approximately 14% of our combined expense base. We have a high degree of confidence that we can achieve our synergy target, and this, clearly, is something we've demonstrated in the past through prior acquisitions.

The savings will come from the scale benefits and the platform synergies. And this will be focused primarily in the middle and back-office areas and activities such like -- such as streamlining operational and technology platforms, leveraging preferred vendors and rate cards across the combined organization. And the transaction, which has been approved by the Board of Directors of both companies, is expected to close, as I mentioned, in the second quarter of 2019.

And with that, I'm going to turn it back to you, Marty.

Thanks, Loren. I do want to come back to the history of our success in making these combinations work on Page 22. A number of you have followed us for years, and the track record is a proven track record. And I have a high degree of confidence in the team. It's highly experienced. I believe we have an industry-leading track record of success in delivering the benefits to clients and shareholders, as we have discussed and laid out here.

And if you just look at what's happened from PowerShares with $6 billion in assets under management originally in organic growth and 2 follow-on acquisitions, $230 billion in assets under management today and then a #2 position in smart beta and 4 -- #4 position in ETFs overall, really quite compelling. The Morgan Stanley/Van Kampen track record by all accounts was also an incredible success for the organization, for our shareholders.

So when we look at our history, we have delivered each and every time. And I have tremendous confidence in our ability to do that with this combination between the 2 organizations. We will create an exceptional organization. We're going to have a better client experience by the time we're done with this, and it's going to generate excellent results for our shareholders. We're going to do this arm and arm with our new colleagues at Oppenheimer, and I couldn't be more excited.

And to put this all in context, we believe this transaction is incredibly compelling, bringing scale and client relevance, differentiated investment capabilities, really compelling financial returns for our shareholders, and an important strategic partner in MassMutual. It is going to be -- create a really special organization, and we look forward to doing it with our colleagues at Oppenheimer.

So with that, why don't we open it up to Q&A?

(Operator Instructions) Our first question today is from Bill Katz.

From Citigroup. So I'd like to just sort of come back to the savings opportunity. For a moment, I think you highlighted $475 million and Loren just gave a little bit more detail in your closing comments here. Can we break that down a little bit more a couple different ways? How much of it is coming from stand-alone Invesco platform? And how much is coming from the legacy Oppenheimer footprint? And then can you break it down maybe by line item between you mentioned middle office but comp versus noncomp? Just to get a sense of the savings because, I guess, the root of the question is you're running at about a 45% margin round numbers. They're running at 40%. Both are pretty good. I'm just surprised by the amount of redundancy that you've identified.

Yes. Thanks, Bill. So I appreciate the question. You shouldn't be surprised. So what is being presented right here is something that's been a conversation amongst the industry and the benefit of scale. And if you think of the Oppenheimer organization, an incredible organization, largely in the mutual fund industry, but their capabilities are beyond that. So that's another topic. There is the opportunity, as I said earlier, for institutional channel and non-U. S. But where I'm really going with this is you're looking at an organization where we have a mutual fund operation, too. The scale benefits from operation are astonishing, right? It's really the systems conversions that come out of it, just all the benefits you get from scale. That's really the model that we're looking at. And if you compare that to different combinations that you've seen in the marketplace, if it's 2 organizations in 2 different industries -- or 2 different segments or 2 different continents, you can't get scale benefits. This plays right down the middle of something that will be a huge benefit to the organization. So where we are right now, this -- we have a high degree of confidence in these numbers. It comes from all of our experience and what we know about the operating platforms. Oppenheimer was already heading down the path to make a number of changes themselves. You do have to look at it across the combined platforms. Our next step is to use our playbook, and we'll team up area by area with each of our colleagues at Oppenheimer and work through the plan and execute over the next number of months. And again, we just feel very confident and know the path forward. So the level of detail that you're asking for now, we're not in a position to share that. We have to create the plans with Oppenheimer and -- but do know, we know how to do this.

Our next question is from Glenn Schorr.

Can we first talk about distribution? I get the scale. And I get all the advantages you talked about of the scale and the rankings in each of the channels and wealth management is important. But is there much unique overlap on distribution where you were strong, they weren't and vice versa? Does MassMutual bring specific distribution?

Yes. So yes, the best way to look at the complementary nature of it is on Page 17, where we list the top 10 wealth managers. And you'll note where we're stronger and they're stronger. And again, it's a combination that is creating a much better set of outcomes. So that's at that level. So client relevance is -- kind of really come through with those wealth management platforms. But I think what I really want to point you to is that if you look at the investment capabilities, between the 2 organizations, they're very complementary. And if you look at really where -- going forward, the impact is in high-demand asset categories, right, international equities, emerging markets, global, et cetera. And you can look for yourself. And although we're presenting it from a mutual fund point of view for the 2 organizations, these are capabilities that are in demand in different channels beyond the U.S. retail channel. And again, I think it's very important to understand. I also do want to make a point, there are no revenue synergies contemplated at all in what you're seeing today, and so it's a very focused view on the existing business. Does that get to the point?

No, no. It definitely does. I appreciate that. It brings up the other interesting point of you noted 85% of assets are in those categories where passive is sub-10%, and you mentioned international EM and global. Do you have high confidence that those aren't just next on the passive hit parade? Because I'm pretty sure you have passive strategies that are trying to get ahead of assets in those categories. So I just want to make sure that we're not buying into just the next piece of secular decline.

Yes. So it all depends on your core belief. Our core belief is that passive in a particular factor, high conviction active and alternatives is here to stay. And if you -- the notion that you're going to have passive across the different asset categories is correct. You're going to be generating alpha from the active capabilities. It's just not going to go away. And that is not the common belief I would say right now. But if you look at the track records, they're compelling.

One last quickie on fund mergers on Slide 18. The -- as much as there's not lots of overlap on the high-demand strategies, there seem to be within each of those categories enough overlap. Have you worked through some of those decisions within each of those asset classes?

No. Look, we've -- we're all of 2 hours into the go forward. And again, we will work with our colleagues at Oppenheimer and over the next months, create a plan. And again, we'll share it with you. But we don't have that level of detail right now.

Our next question is from Robert Lee.

Robert Lee, KBW. Maybe, Loren, going back to the pace of expense synergies. If I remember correctly, when you did the Van Kampen deal, you were able to pretty much get the synergies like day 1 after close and not that you're necessarily expecting this. But can you give us some sense of kind of how you expect that to kind of layer in? And then maybe as a follow-up with the breakage assumptions, I mean, understanding mainly mutual funds and maybe a little less breakage than you'd have in institutional. But just given the importance of platforms and centralized research, can you kind of help us get to how you've -- how you have confidence that only $10 billion of breakage from Oppenheimer is kind of the -- a good number or a conservative number?

So what we've assumed in terms of the modeling and we have a feasible sense of confidence around is that most of the synergies, we think, would be sort of taken in the first year post-close. I think we have somewhere between 75% to 85% assumption in terms of what could be achieved, with the rest being fully achieved in 2020. I think, again, it's something that we feel like we have a good playbook in terms of how to execute this. So once again, it should not be very hard and complicated for us to go forward. I think in terms of the breakage, the numbers that we used are actually quite similar to what we had thought as a percentage for Van Kampen. Again, it's based on what we've done in terms of our studies of how these things work. We do think $10 billion is a reasonably good estimate. Obviously, there's some swing around that number. It doesn't make a huge difference. It is a few percentage points maybe accretion here or there. So -- but we don't think there's going to be anything much dramatically off of those numbers.

Great. And if I can just have one quick follow-up. Just maybe going back, you guys have obviously been talking a lot the last couple years about the investments you've been making in the platform, whether it's Jemstep and other things, and certainly have been excited about that and thinking about 2019 as being the point in time where maybe we start to see the -- some of the fruits of that start to come through. I mean, are you at all concerned that just given the size of this transaction, that it just becomes kind of a distraction over the next 6, 9 months or 1 year as people kind of wonder about where they shake out in this and maybe that actually pushes the ability to realize some of those benefits out?

Good question. The answer is absolutely not. So again, we wouldn't be doing this if we think it was not going to advance the business and at the same time, be able to advance a number of those growth efforts that we've been on. And needless to say, as a management team, we've been through that and have -- with a high degree of confidence that that not do it.

Yes. I would say, I mean, year-to-date, we've had about $13 billion of net flows into the areas that we've been focusing on growth. We've talked about a lot of them already, ETFs, for example, some of the factor-based capabilities. A lot of that's in our pipeline -- institutional pipeline. We're actually seeing an enormous sort of buildup in our Jemstep pipeline, where we've got, I think, really very close to production and ongoing support as part of this process, some very large client names that will come through in short order. And the area where we're seeing more sort of in-contracting, we're winning probably the majority -- we're actually winning share in the space. I think we've sort of generated 4 out of 11 kind of major banks. And so we're feeling good about Jemstep in terms of digital advice and where that's going. So across the board, I'd say our growth engines are moving forward in a very positive way. And again, I mentioned China as yet another example. So obviously, we didn't have a lot of time to highlight it in this call, but I think we're absolutely going to continue to provide visibility in terms of how our areas of growth are going to continue to allow us to sort of turn that flow trajectory into a positive number into 2019.

Our next question is from Ken Worthington.

Ken Worthington from JPMorgan. So the deal comes 9 years essentially to the day after you announced Van Kampen so, I guess, we're going to have to pay attention closely to what you're doing in October 2027 for the next one. So I guess, congratulations. So what are your thoughts in terms of cross-marketing or cross-selling with MassMutual over time? Maybe as a place to start, what percentage of Oppenheimer's AUM is actually sourced from MassMutual? And then what kind of incremental investment dollars might you expect from your new partner? And what products -- Invesco products seem best positioned?

Yes. So great question, Ken. So we've already had half a day conversation with the respective leadership between the 2 organizations, and there are a number of areas where we think there are opportunities. By the way, we're just into it right now, so let me give you -- as you know, they have 8,500 advisers in the United States, and so that is something that's going to be an obvious focus area for us. MassMutual is also doing some very interesting things out in Asia, very complementary to what we're doing. So that's another area where we think there's some real opportunity for us. Those are 2 to name a few. And with their knowledge and skills in insurance and risk, along with what we do in investment management, I'm sure we're going to find some very interesting things. The -- there's going to be quite a bit of focus in this area. I really can't get to disclose the level of what they've done together historically. That's just not in our permit to do right now, but it is actually something that is, from our perspective, is going to be quite powerful as we go forward.

Maybe a little one for Loren. You guys mentioned AUM was about $250 billion. Market conditions, particularly outside the U.S., have been poor so far this quarter. Do you have a maybe more accurate AUM figure for us to kind of start out from or even an as-of-date of the $250 billion?

Yes. I mean, it's moved around plus or minus. I mean, they've actually held pretty closely to the $250 billion. I think they're probably still rounding roughly to $250 billion. So it has not been a lot of turmoil in terms of the AUM number. And the flow trajectory we do have seen has been on a very positive trajectory for their franchise, still somewhat slight outflow but on a positive trajectory over the last 2 months. So I think, again, in terms of numbers, I would still be thinking $250 billion is the right modeling number for you.

Our next question is from Dan Fannon.

Dan Fannon, Jefferies. I guess just building on that last comment, can you talk about in a little more detail about recent flow trends? And we obviously saw your results this morning on a stand-alone basis, where outflows are close to $11 billion. You just mentioned -- I think the data we can see is Oppenheimer has generally been in a little bit more outflow. It's improving, but still been an outflow. So give us a little bit more around why you think it flows on a -- 2020 basis will be positive given what we're seeing today from performance and kind of current industry trends.

Yes. So let me step back again. And again, for all of us, we're long-term investors that look quarter-to-quarter, which is probably not very constructive. So I'd put it in the context of I'm very bullish on the industry. It's an $87 trillion industry. It's not going to go away. The organizations that get it right are going to be very successful. We intend to be one of those organizations. So now let me bring it down here. We have been in net inflows for 9 years, some headwinds and -- because of where we are in this market cycle for some of our value capabilities, as we told you. That will change, and it is changing. It's -- we'll -- again, we'll continue to see the impact there. But what we're doing is building an organization that is -- to push through these more extreme market environments. Loren talked about the institutional flows, Jemstep in 2019, the opportunities that we're talking about with Oppenheimer here, but stay back to -- even put that off to the side. What we are seeing in the factor capabilities and our solutions capabilities, our multi-asset capabilities, they're real, they're meaningful, and we're expecting to be very successful as we go forward.

Another thing I would mention, Dan, they're in a global and international capabilities that are hard to replicate but have persistent alpha. They've actually done very well in terms of flows, and it's really some of the other areas, some of the domestic kind of equity areas that has been an industry trend, where you've seen the biggest outflows. So we do think, as we are able to leverage their -- the capabilities on a global basis, which are in demand, that we're going to be able to bring the whole franchise to positive flow. And again, we've talked about our own strategies around growth and how we think we can bring sort of the core Invesco capabilities also to growth. So that's why we -- 2019, definitely, we've got some outflow. It's not going to happen overnight. But we do think by 2020, that's a reasonable estimate. Again, modest but certainly positive.

Got it. And then just a couple questions on the accretion assumptions that you're making. Just to be clear, is that on -- based on consensus estimates? And then also, is the buyback that you announced this morning included in that accretion? And then also, just kind of like what -- and also, kind of what market assumptions are in that?

So -- yes. So effectively, it's versus consensus, so that is the right assumption. In terms of the buyback, the $1.2 billion, there's about $400 million of incremental buyback that we have modeled in as a result of the transaction occurring, but the $800 million is pretty much consistent with consensus. And so we're -- that's not part of the accretion number. So I'd say there's about 1% accretion in 2019 due to that incremental $200 million buyback and another sort of 2.5% in 2020.

Our next question is from Mike Cyprys.

Mike, we cannot hear you.

We are getting no response. We'll move to the next question.

The next question is from Brennan Hawken.

From UBS. So just a quick one on the $45 million fee rate cut in your merger with Mass. I think that gets me to about 2-or-so basis points, which would suggest about a 59% IA fee for Oppenheimer. Can you -- number one, is that generally right? And number two, how much fee rate pressure has Oppenheimer experienced over the past year or 2, either through their own fee cuts or the headwinds that we've seen from remixing across the industry?

Yes. Let me hit the second part, and then Loren can pick up. Literally, their effective fee rate has gone up over the last 3 years by, I think, it's about 3 basis points. So they've been doing quite well. And again, their fees are very competitive, generate good -- just very good active managers.

So again, the $45 million is an estimate. Really, at this point, we don't have a real plan in terms of how the funds come together and which funds are going to sort of win in terms of fee rates, but there's definitely some amount of breakage that will happen when we bring funds together. So the $45 million is a number that I think still needs to be ultimately vetted out, and we'll obviously give updates as we get closer to a real plan around how the funds come together. But we think it's a reasonably conservative number right now, a little bit more than we actually hope will be the case. But it does have that impact in terms of the basis points, as you mentioned. There is no assumption of further fee cuts going forward per se because of their price -- their products are actually reasonably priced. And so again, in terms of the alpha creation and the ones that are higher priced and some of the alternative capabilities, they're also reasonable on the core products. We believe that there's no significant pressure on having to cut fees on the active capabilities.

Okay. And then have you spoken with the rating agencies about the potential impact of issuing this expensive amount of preferred equity? And is there any reason why the preferreds wouldn't be viewed as de facto debt given that they're noncallable in 20 years? And then finally, if you do see a downgrade from a rating agency, what kind of impact do you expect that would have?

So again, I think the agencies will release their reports. And ultimately, after they go to committee on this and we, hopefully, will hear some of the answers today. So we're not going to sort of go ahead of them doing that. I mean, I think we have our own views around the preferred and what it is. Obviously, there is the perpetual coupon, $236 million, that is going to be part of this deal. The 5.9% coupon right now, as you said, might feel expensive. But we think, over time, it might not seem as expensive. You're implying there is no commitment for us to have to repay the $4 billion. It's perpetual. There's a call option here that's out 21 years really as part of the requirement to have a qualifying equity as part of the tax reorg that's necessary for MassMutual. So again, we don't -- I mean, personally, I don't view it as debt. It has got a lot of equity-like characteristics in terms of it being noncumulative. And again, you can sort of make your own approach and -- or your own assessment. But certainly, you'll hear from all our ratings partners in terms of how they perceive this, and you can assimilate that.

Our next question is from Mike Cyprys.

Mike Cyprys from Morgan Stanley. Just a question more broadly on M&A. As we look across the industry, mixed results, many has -- to put it kindly. So I guess, just what do you see as you look across? What do others get wrong with M&A? What lessons do you take away with that? What do you think you have to get right to make this a highly successful transaction on the execution side for Invesco?

Yes, it's a good question. So it's just my opinion. I think trouble happens when you look at a piece of paper and it looks good on a piece of paper and you actually lose track of what really matters. And these are fiduciary organizations with talented people. And the value is really -- understanding what the value is and how do you maintain that and how do you have that talent -- how do you have that thrive. And so we are very focused on being very clear and jointly working through the execution with our partners. That's what we've done historically. And it might sound pretty basic, but that is, in my opinion, where things break down. And I -- but let me come back to this, Mike. We've talked about this in the past. There is this notion that there's going to be massive consolidation in the industry. Maybe, maybe not. I do -- the premise is that there's -- with that thought is that there's excess number of money managers that might be doing a middling job, and I think that is the case. And that will get resolved one way or the other. But the notion that you're going to see this massive consolidation with people that have not had experience and that is going to be done well, I think, is a misnomer. And so I'd look at this experience here, but the first experience I had was 1992 when Franklin bought Templeton when I was there. And so I've been on both sides of these things, and there is a way to do these and do these successfully. And I understand your sweeping comments, but I'd point you to our track record, and we know how to do this.

And somewhat related to that, maybe you could talk a little bit about the risk around the large fund franchises that Oppenheimer has. How do you manage that? And I guess, particularly, maybe you can talk about the incentive structures, the retention structures you're putting in place to retain key investment professionals and to what extent are they going to be integrated or not with the broader investment -- Invesco franchise?

Yes. So important question. So MassMutual has put in a retention program, which is great. But more importantly, people don't stay at organizations for money. They stay at organizations because they want to be there because they thrive and in particular, for investment managers, so they can actually express themselves through their craft. And we actually run our investment teams in a very similar way that MassMutual does. They're separate, they're distinct. We want them dedicated in the investment process and philosophy. We reinforce that. We want to make sure that they have the tools that they need to continue to generate alpha for their clients. That's what Oppenheimer has done in the past. That's what's still going to happen going forward. That's not going to change. And we've had the opportunity to meet with some of the senior leaders. It's a great culture. They really love what they have, and that's going to -- it's going to continue that way. And I think that's really important. And that's what matters. And again, this is where I come back to, when does it fail? It fails when an organization combines and somebody thinks they're going to institutionalize some process, and it's probably the worst thing you can do.

Our next question is from Michael Carrier.

Mike Carrier, Bank of America Merrill Lynch. I think the first one, just on the core business. Marty or Loren, I think you mentioned just the institutional pipeline is strong. Maybe when we saw -- especially I think it was in August, just some of the elevated outflows, just maybe what you're seeing and what gives you maybe the confidence with that pipeline that we're not kind of seeing the same level of redemptions. Or maybe any color on what drove some of those redemptions in the quarter?

Well, again, I think the -- I gave some color already. Obviously, a handful of individual accounts that decided to terminate. I think the sovereign wealth is one that we've seen a few times, that was the largest outflow. And so it's not a performance-related topic. It's not something systemic. It's not a trend. It's really just a single client topic more than anything else. It could -- I'm not saying it couldn't happen again, but it's not something that is sweeping across all our institutional business. This is really localized to the particular -- a particular client. I think we do feel very good about the pipeline because it's broad-based, it's across equities, alternatives, balanced, fixed income. And so it's actually -- again, I think it is a function of maybe things have shifted in terms of where client demand is going and we are actually hitting newfound areas of demand around factor, for example, and some areas around alternatives that we hadn't seen in the past. So for us, revenue yield is also extremely strong, and so the revenue level is also at all-time high. And then when we look at -- we do look at the pipeline of expected losses. That is not -- I mean, that's been flat quarter-over-quarter, so it's not escalating up. So I mean, that's why we feel that we're just getting through a rough patch here in terms of the institutional side, and it shouldn't be persistent going into 2019, certainly not anything we see with the information that we have today. Again, redemptions do happen. They can happen. We could get surprised, but it just doesn't feel like a trend, and it's not based on performance. Again, when we look at the products that are selling, these are products that are in high -- really performing well, real estate, bank loans and other products that are done very well. So then the other side of the flow story, I think, is the one we all know, which is just domestic equity, retail. U.S. has been an outflow. Some of the value-oriented capabilities that we've talked about have been under pressure. So that is something that I think in terms of the near term, for the turnaround that we've seen in October, in particular, just given that the market is sort of a proof point to our clients that what we said was going to happen is happening. Now again, it's anybody's guess as to where the markets actually go. But the fact is, we've said that this would happen when the markets begin to sort of turn around and you begin to see momentum become less interesting that our products are going to outperform. And if we do see the world kind of moving into that direction, it should be really helpful for us stemming some of those redemptions going forward.

Okay, that's helpful. And then maybe one more for Marty. Marty, when I look at the history for you guys in the industry, it seems like you've done M&A on sort of the growth side, and then you've also done some scale transactions, and this one is a little bit of both. But when you think about Invesco going forward, like in the areas that are very competitive like the U.S. mutual fund industry, does this create, like, enough scale that you think over the next 3, 5 years that you can combat any future, like fee pressures and outflows? And then on the flip side, a lot of the investments that you guys have made over the past 3 years on the growth front, it seems like that you're still positioned in the higher-growth or differentiated areas. But just when you think about that combination, do you think going forward, Invesco is as well positioned as you can get it to basically grow where you can and then offset the headwinds through scale?

Yes, absolutely. And again, also the point I was trying to drive home. I mean, if you look at the U.S. retail industry, we become the sixth largest within that, and we end up as one of the absolute leaders. And I think that's -- but I also think what's important is just not just the number. It is the capabilities that we're bringing there. And so historically, if you think of the active management capabilities, the addition of Oppenheimer, it's dramatically expanding the capabilities that are in high demand there. You then add that with the early days of factor capabilities being picked up in that retail channel, early days of trying to get alternatives into that channel in a way that works for the channel, the solutions capabilities that are being taken up right now, the models that are being built by organizations such as ourselves for that channel, we're uniquely placed there. And there are not many competitors that can do that, but the scale just puts us on another level there. So I think it's really important. And the other thing that I do want to make really clear, where you're going, is the information that you're seeing today that we're putting forward, the expressives -- the vast majority of Oppenheimer's investment capabilities happen to be in a mutual fund wrapper. They are capabilities that are beyond -- there's greater demand beyond mutual fund capabilities, as I said. So it's the institutional opportunity, the non-U. S. opportunity, both institutional and retail, the opportunities are meaningful. And again, you really have to put this in the context of everything that we've been talking about and executing against, right? It is a combination of this high-conviction active, passive factor, in particular for us, alternatives. And I really feel really good about where we've gotten the organization over the last number of years -- last couple years actually, in particular, with this very rapid advancement of our strategy. And as I've said in the past, it's -- the world's not going back to the future, right? It is changing. It's changing rapidly. And our efforts have been get ahead of that curve in a meaningful way, and we think we've done that.

Our next question is from Kenneth Lee.

Kenneth Lee, RBC Capital Markets. Just want to know whether you guys have any updated thoughts on long-term organic growth targets post-acquisition, maybe post-2019 as well. Previously, there was sort of like a 3% to 5% range. Wondering if that's changing.

I mean, I think we're -- still believe that 3% to 5% is feasible for us as a firm across market cycles. The -- this acquisition, we think, is going to help significantly improve our ability to grow on -- not just in the U.S. in a more consistent way. But also, as Marty mentioned, taking some of the capabilities globally is going to be a big opportunity for us. So I think there's nothing that's really changed. Obviously, the market itself will have something to do with ultimately where we achieve and how we're going to achieve the growth. But the growth engines that we talked about are still ones that we feel strongly are sort of at a very high level, higher than the industry average, particularly around digital advice, China. Those things are double-digit kind of growth opportunities, factor-based. We think we can continue to really drive more growth there. So I think long answer to 3% to 5% still feels quite achievable for us.

Okay, great. And just a follow-up on an earlier question about the strategic partnership with MassMutual. Just want to clarify, is there some sort of agreement in place for Invesco to provide asset management services going forward for MassMutual's insurance and retirement products?

No. No, there's no agreement. I think what's really important to understand is MassMutual has put every dollar of the proceeds back into the combined institution. There's a high degree -- they are not getting out of the asset management business. They're staying in it, and they're expressing it through their equity holding and the preferred that Loren talked about. And as I said, we have had high-level conversations. I feel very strongly that the appropriate ways to work together will emerge, and it will be beneficial to both organizations. So again, just very confident in the relationship.

Got you. And just one last one. Just in the quarter, within the EU region, there were some outflows there. Just wondering whether what key factors drove some of those flows.

Yes. So that was the sovereign wealth outflows that I mentioned. Specifically, it was around some of our Asian equity capabilities managed out of our Henley team.

Our next question is from Chris Shutler.

Chris Shutler from William Blair. Within retail, how much of Oppenheimer's AUM is in the broker-dealer channel relative to the RIA channel?

Loren is going to seek out that number. I -- what I do know, as Loren's looking for some numbers that we have, but they have an incredible distribution capability, probably one of the better in the industry, very highly regarded and the sub-advisory results show that. They also have some very good success in the high net worth segment of the market, which we do not have. And again, so we look at the combination as being -- we will be better off with the Oppenheimer talent and the things that they have done.

Yes. So again, I'm not sure if it's -- if I have enough transparency to really start commenting in detail around the various assets and channels, but it looks like RIA's something around $15 billion of their total number. So it seems to be mostly the -- sort of the wealth management platform.

Wealth management platforms.

Wealth management platforms, yes.

1-5, 15?

1-5, 15.

Okay, okay. And then correct me if I'm wrong, but it looks like I think about 85% of their -- Oppenheimer's AUM is in a mutual fund wrapper. Can you give us some kind of breakout of what the other 15-ish percent of the assets look like? How much of it is institutional versus sub-advisory? What are kind of flow trends within that piece of Oppenheimer?

So I think they have a small -- smaller institutional capability, so that's been an area that they've been trying to grow because it's that's probably about $10 billion, $12 billion. Sub-advisory seems to be around $27 billion, $25 billion. So those would be big other pieces that we might not see through the normal sort of channels that you've seen. They do have some smaller other business, which, again, I think it's about $6 billion. So it's mostly the mutual fund side and ETFs, right, the small...

Yes, $3 billion in ETFs. But -- so let me come back to that. So -- what I do want to make very, very clear is the bulk of the business has been in mutual funds. That is the vehicle. The capabilities within mutual funds are really very, very strong, and we look -- there is going to be an opportunity for a number of those capabilities to be taken to the distribution channels we have outside of the United States, retail probably the most immediate, followed by institutional both in the U.S. and non-U. S. So again, the high-quality investment team has really offered up some real opportunities as we look forward.

All right. Last one, guys. Real quick. How much -- and you may have stated this already, so I apologize if that's the case. But the -- how much of the AUM at Oppenheimer is in kind of an overlapping strategy with Invesco, where there's 2 strategies that look pretty close?

Yes. Very little overlap, which is actually what is so attractive about the combination. So again, we look at the combination of the teams and the strategies as complementary and additive as we look forward.

Our next question is from Alex Blostein.

Goldman Sachs. I would like to go back to the cost synergy question just one more time, guys, and I'm sorry if I missed it. But if you think about the $475 million, it looks like it's 50% to 60% of Oppenheimer's cost base. That's well above what we've seen with any other transaction in the asset management space of the size in recent history. So what makes this one different, I guess, to get you guys to this level of synergies? That's, I guess, part one. And part two, when you guys talk about the $450 million of integration cost, that also feels pretty sizable. So maybe help us maybe break that up, kind of what that comprises of and how long do you think these integration costs will be in Invesco's run rate.

Yes. So the -- I want to clarify that point. So you cannot look at it as a percentage of Oppenheimer's base. That's just not factual or correct. So what we said earlier was the opportunity becomes the dominance of their platform being in mutual funds and our mutual fund capability, all being in the United States, the scale benefits that come out of systems integrations and the operations supporting the mutual fund business across both platforms is material and real. And Oppenheimer already was heading down a path of simplification and the like. So this will just speed that up. So again, it is -- that's what's very different than the other combinations that you've seen in the marketplace.

Yes. And then the $450 million, so again, there's all sorts of costs associated with completing the transaction and getting proxy solicitation and so forth. And so we have some estimates in here in terms of getting to one platform plus one platform, get -- you have to get to one platform, so there's cost around technology and integration to get there. So it's a generous number, but it's one that we think is conservative. But potentially, you're going to be all used given the degree -- and the $475 million is a big number, as you mentioned. So we would expect to see that sort of in line with the timing around the synergies. So you can think of it sort of occurring roughly in step with mostly in year 1, and then the rest sort of getting finished up in year 2 being the smaller piece.

Got it. And then the $450 million is mostly cash or I'm assuming, cash expenses?

Yes, those were the cash expenses -- onetime sort of cash expenses.

Got you. Sorry, last one. On the tax rate, so I'm assuming you guys will kind of proceed with the adjusted tax rate methodology in terms of how you report earnings. This probably creates a pretty sizable amortization shield. What should be sort of the adjusted tax rate we should be thinking about post the transaction? And does that feed into your accretion math?

So there is no benefit here from a tax perspective for us, so there's no element in the accretion related to tax benefit. The accounting around the intangible amortization is going to be small, modest, probably somewhere between $50 million to $70 million a year, but there is no tax benefit associated with that. So nothing -- so the step-up in tax rate is going to take our current rate of roughly 20.6% and probably add another 2 percentage points to it for the firm as a whole just because there's a higher degree of U.S. earnings that we're going to be generating.

Our next question is from Jeremy Campbell.

It's Jeremy Campbell from Barclays. Most of mine has been answered. I've just got one quick cleanup question here on the OpEx thing. Loren, I think you obviously mentioned that 75% to 85% is going to come in '19. With a few months of planning ahead of you guys on the books here, are we really looking at something where you can come out pretty hot and heavy out of the chute? Or is it going to kind of gradually build from to 2Q through 4Q?

Yes. I think, again, a little early for us to get into details. We need to work with our colleagues at Oppenheimer to really understand how to execute this. Obviously, our intention is to go reasonably quickly. We don't think a sort of long time frame is helpful for anyone, but we need to be thoughtful in terms of doing this and the way we execute it. So I think we'll be able to provide more color exactly around kind of how it gets sort of split by quarter as we get a little bit closer to close.

Got it. And then just one quick follow-up on Alex's question there. I just want to be sure, a point of clarification, that outside of like the OpEx and then to a very kind of small extent, the buyback here, there's no other kind of elements to the accretion math that we might be missing there, right?

Nothing else, no. As I mentioned, the only thing is $200 million of extra buyback in 2 years, and so I've quantified that. That's about the only thing. Everything else should be straight from the numbers that you're seeing.

Our next question is from Brian Bedell.

Deutsche Bank. Two main questions, one on the cost synergy side and then one on the potential for revenue synergies. And maybe just starting on the cost side. We naturally took a crack at trying to estimate the synergies after this was rumored in the press. 14% cost save on the total base is pretty high and implies some product rationalization around this. And so we took a crack at that and came up with around $150 billion of AUM on the mutual fund side between both organizations that could potentially be merged, and that was almost $200 million in cost saves the way we came up with it. So I just want to see if that's way off base. And then if you can just talk about the process of timing of doing those fund mergers. For example, do you have fund board approvals yet? Or does that come after the deal closes? And then would you look to integrate funds fairly quickly as -- so that you're put on a gatekeeper watch list?

Yes. So with all due respect, that's not how we do it. So there are no plans for fund mergers. Our focus right now is to get to a combined operating platform. That will be the 100% focus between now and closing. And the synergies that you're seeing are coming from what I've talked about. This is the benefit of scale within an organization. And again, it happens because it's the operational benefits that you get through merging operational capabilities within largely mutual fund capabilities within the United States. That's where that's coming from. And there's no contemplation, no plan for fund mergers in this work, and there won't be until after. And we'll turn our head to -- and sort of what -- after the closing and see what makes sense there.

And so if you do come up with fund mergers later down the road, would that be upside to the $475 million then?

Yes.

Okay, great. And then maybe on the distribution synergy side. So I appreciate your comment on the new product structures. Obviously, mutual funds has been a challenged product structure for a long time. But if you have the investment teams in there and Oppenheimer didn't really create a big product range in that area, how quickly do you think you can come up with institutional product structures to really crank up the net flow ability of the franchise? And the $10 billion that you estimated, I assume that's a growth outflow number. Or is that net of potential of new products offsetting some of the mutual fund outflow?

Yes, so let me hit on that. So again, we're all of 2 hours into this, so we have some work to do on being clear. But what we do know, spending time with the teams, they are high-quality teams, they are in high demand areas. We, as an organization, have a very robust institutional capability to get teams, what we call, client-ready for the institutional channel. And we are very well equipped to introduce, if you want to call it, retail structures outside of the United States, but it's just not the structure. It is really the go-to-market strategy matching up against client demand, the sales forces, the marketing capabilities. That's what is so robust about this. So again, once we spend time with one another and figure out what clients are looking for, we'll get after it pretty quickly.

And the $10 billion is a net -- it's a net outflow number, so it's not just a redemption number. It's a net flow.

A net number, okay. And then so you -- without the fund mergers here, you really don't anticipate being put on watch lists from either gatekeepers at big distributors or consultants?

No.

Our next question is from Patrick Davitt.

Autonomous Research. I appreciate Slide 17. That's helpful. I imagine most of these probably want to be doing business with less managers, but is there a risk of hitting any exposure limits with being bigger with all these guys?

I wish we had that problem, but no.

Okay. And then you mentioned the Great Wall flows. I imagine that's all money funds still. If not, that's great. But what's the kind of runway to getting more nonmoney fund kind of flows from that distribution?

Yes. So a couple points. Let me -- we couldn't be more excited about that, actually. So -- and if you look at our joint venture partnership there, it is, as you know, a very digitally based economy within the retail world. And through Ant Financial, we are the first and only Western joint venture partner that's in there, and it starts with money funds. And by the way, it's 10 basis points, so that's 10 basis points. Tens of billions of dollars isn't so bad. But the natural follow-on is -- including further investment capabilities in that platform, we anticipate that happening in the future here. I don't have the specific dates of it, though, but it's a good start for us.

Our next question is from Chris Harris.

Wells Fargo. Can you guys talk to us a little bit about how this transaction came about and maybe share your perspective on why MassMutual is selling?

Yes, let's see. The transaction came about simply from conversation of where do we think the world is going. We were very like-minded in where we thought it was going. But all the things that we've talked about today are real and they're meaningful. And when you have an alignment like that, you tend to continue to focus on what can you do together. But I do want to clarify a point. MassMutual is not selling, and they're making that very, very clear. And they are taking -- they're holding the -- was it 81 million common equity shares and $4 billion of preferred over the long term. As you know, they are a mutual company. As they talk about having a long-term view, it's extraordinary. And every single dollar that would be proceeds is going back into this combined institution, and I think it's really important for people to hear and understand. They're committed to the combined firm, and they have a high degree of confidence in what we're going to do together going forward.

Okay, understood. And kind of an unrelated question. Some of the larger OppenheimerFunds we've looked at that have had really extraordinary performance, they do have a large overweighting in the tech sector. And so I guess, I'm wondering, is there a way you guys can mitigate the risk? Or how do you mitigate the risk of acquiring that after what's been a very good run for stocks in that particular sector?

Yes. So you're really hitting on a question that comes up in a different way. They -- no different than at Invesco. The investment teams manage money consistent with their investment philosophy, and that's 1, 2, 3 on the list. That's what we want them to do, and they're going to continue to do that. And they generate, as you say, very good performance over market cycles. And what's in the portfolio, so the full discretion of the portfolio managers, that's not going to change in Oppenheimer. It's never changed at Invesco. The way that it gets, if you want to call it, mitigated is through having complementary strategies, and that's what we were trying to point out earlier. And so when you look at the lineups side-by-side, if you want to call it, that's how you're mitigating the different styles when styles are in favor or out of favor as an organization. It gives clients choice, but it's also good for having a more stable business.

And we do have time for one final question. Our last question today is from Greggory Warren.

This is Gregg Warren from Morningstar. Just a quick question. I wanted to step back to kind of the breakage forecast you guys put out there. I understand that you're basing it on what you saw with Van Kampen. But in all honesty, that was 10 years ago, and that was a completely different market environment. So what gives you the belief that with a disruption like this, with you guys picking up OppenheimerFunds, that you're only going to see $10 billion in outflows out of the gate? I would assume you'd see something slightly higher than that. And I guess a follow-on to that is how much of MassMutual is actually invested in OppenheimerFunds? How much business are you guys getting from them?

I think with the Van Kampen transaction, we used the estimate of $10 billion. It was nothing close to that. It was much less. So that $10 billion was way conservative back then, and we think it's probably still conservative, but we're using it. And again, when we think about it, it's really -- because there is no real breakage, we're not forcing teams to sort of come together and do anything different with the process. So it may be that, that $10 billion is just not going to happen. So it's there just as a point of conservatism in the modeling. I don't think there's anything explicitly that we expect to sort of trigger big outflows as a result of this transaction, but we thought we really needed it when we're thinking about just the uncertainties. So that's why the $10 billion is there. It's not based on fact or data. It's more kind of conservatism. I think your -- what was your second question, Gregg? I'm sorry.

Yes, I was just wondering how much does MassMutual actually have. Because usually in most situations where the life insurer -- an insurer owns part of an asset management firm, there's plenty of cross business between them. So I was wondering how much does MassMutual actually have invested in OppenheimerFunds at this point.

Yes. No, it is not a large number. And again, I'm not trying to -- I just don't feel liberty to -- that I can have that conversation. So it's not a large number. The intent going forward, though, is -- one of the first parts that we collectively want to look at is making available more robustly the investment capabilities to -- here in the United States of 8,500 advisers.

Right. And in terms of the general accounts, there's really no relationship between what Oppenheimer is doing and the management of MassMutual's general account.

Okay. And then, Loren, just real quick. I don't know if I caught it or not during the course of the call, but you've got $1.2 billion in share repurchases sort of authorized now. Did you give an indication of how soon you might start buying back stock or how much on maybe a quarterly run rate you're looking at?

So we can start and we have our intention of beginning after, obviously, this release gets its due process in terms of 2 days. So think about starting next week. And so we're going to be, obviously, interested given the fact that the stock, we feel, is incredibly undervalued, particularly in light of this transaction. But we're also being sensitive to the fact that we haven't yet completed the deal. And a lot of the buyback -- the extra buyback is really on the backs of this deal ultimately bringing in more cash flow. So with that said, we are absolutely intent on sort of starting in a very serious way the $1.2 billion. It was not laid out by quarter at this point in time, but we will be in the market almost immediately.

So would it be comfortable to say you could easily finance 1/3 of that right out of the gate?

No question.

Operator, I think that's it.

I would now turn it -- the call back to the speakers for closing remarks.

Good. Again, I just want to thank everybody for changing their schedules and really appreciate the engagement, the questions. And as you can tell, we're very excited about the opportunity in the future here. So thank you very much, and we will continue to communicate progress on this combination. But also, as Loren pointed out, many good things are going on in our core business, and we'll bring you up to speed on those in future calls. So have a good rest of the day. Thank you.

Thank you. This does conclude today's conference. You may disconnect at this time.