Artisan Partners Asset Management Inc. (APAM) Q2 2017 Earnings Report, Transcript and Summary

Good morning and welcome to the Artisan Partners Second Quarter 2017 Earnings Call. All participants will be in listen-only mode. [Operator Instructions] After the today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please also note, todays even is being recorded. I would now like to the conference over to Makela Taphorn. Please go ahead.

Thank you. Welcome to the Artisan Partners Asset Management business update and earnings call. Today’s call will include remarks from Eric Colson, Chairman and CEO and C. J. Daley, CFO. Following these remarks, we will open the line for questions. Before Eric begins, I would like to remind you that our earnings release and the related presentation materials are available on the Investor Relations section of our website. Also, the comments made on today's call and some of our responses to your questions may deal with forward-looking statements which are subject to risks and uncertainties. Factors that may cause our actual results to differ from expectations are presented in the earnings release and are detailed in our filings with the SEC. We undertake no obligation to revise these statements following the date of this conference call. In addition, some of our remarks made today will include references to non-GAAP financial measures. You can find reconciliations of those measures to the most comparable GAAP measures in the earnings release. And I will now turn the call over to Eric Colson.

Thank you Makela. And thank you to everyone for joining the call. At Artisan we value time, so we appreciate everybody taking the time to listen to the call or read the transcript. Our goal on these calls are to describe who we are and how recent events relate to our long-term vision. Consistency, stability and predictability are essential on a people business. Moving to slide two, with all of the headlines and noise about industry disruption, this summer provided to be a great time to bring together Artisan’s investment team leaders and more than a hundred current and perspective clients, consultants and intermediary partners for an investment forum. The forum highlighted the passion that Artisan portfolio mangers have for investing, as well as the economy and independence of the investment team. Listening to each team presents, you could easily appreciate the importance of talent and economy to our model. You could also appreciate how the investment team use to greed [ph] the freedom, especially the flexibility to invest in companies throughout the world to generate returns and manage risk. The investment forum provided a really nice perspective on what matters. Through our institutional clients, intermediary partners, our funds and other collective vehicles there are thousands of real people trust enough the compound well and manage risk, getting the investments right for those people is what matters most. Slide three summarizes Artisan's recent and long-term investment performance. We haven't said much about the active passive performance debate for the ETF phenomenon, because our results speak for themselves. Our business model has produced multiple investment teams over various time periods with different investment approaches that deepen their benchmark passive indexes, net of fees. Over 20 years, we've established nine investment teams and offered 17 investment strategies to client. Over the years, we merged our small-cap growth team in today's growth team and we have shut down two investment strategies. Today, we have 8 teams managing 15 strategies. We believe that our emphasis on quality over quantity increases the probability of investments in business success. Long-term absolute and relative returns fair that out. After fees 10 of the 13 strategies listed have beaten the index by 156 basis points or more per year since inception with investment dates ranging from 1996 to 2015. Eight of the 10 outperforming strategies have since inception track records of 10 years or more. We expect each strategy to add value for our clients over time to obtain us to see that three negative since inception value-added numbers, we expect better. However, we understand and can explain those returns and are confident that over time and through full market cycles the value equity, US small-cap growth in emerging market strategies will add value for clients and investors. As all three strategies have done in recent periods. We don't usually highlight short-term investment results. Our year-to-date investment returns have driven AUM and financial results. At quarter end the non-US growth and global equity strategies had each generated more than 400 basis points of outperformance during 2017, net of fees and each of the growth team three strategies had generated more than 700 basis points of outperformance net of fees. To generate high value-added returns, we continue to add investment degrees of freedom. The data on slide four help explain why. Since 1996, there is been a steady and significant decline in the number of publicly traded companies in the United States. The surviving US publicly traded companies tend to be bigger and older than in the past. Whatever the reason for the so-called listing gap, the consequence is a smaller opportunity set in US equities, in particular, fewer small-cap and mid-cap companies. At the same time, the number of exchange traded funds have increased, some ETF provided exposure the broad market cap weighted indexes, like the S&P 500 that many ETF provide exposure to market segments for style factors for which investors previously used and actively managed product. We understand the trend towards ETF and other indexed products and we are evolving accordingly, launching our own exposure oriented strategies would conflict with our high value-added model. We have no expertise or competitive advantage with indexed products. Instead, we have focused on continuing to provide our investment teams with more degrees of freedom to differentiate returns and manage risk. We have several recent examples to report. In April we launched the Artisan Thematic strategy, which it idiosyncratic and concentrated. There's no ETF or index products out there that can re-create or mimic what Chris Smith and the Thematic team are doing. The strategy is off to a solid start and we expect to launch an additional strategy for the Thematic team in the relatively near future. In June, we launched the second strategy for our credit team, which I will discuss in more detail in a minute. Lastly, we're in the process of launching a new strategy for growth team, the Artisan Global Discovery strategy. The growth team has had great success managing the global opportunity strategy, which has provided team with more degrees of freedom than the mid-and small-cap growth strategies, both of which have been impacted by the declining opportunity that I discussed earlier. Like the global opportunity strategy, global discovery strategy will give the growth team increased degrees of freedom. After the strategy is up and running we will have more to say about it and how it relates to the growth team's other three strategies. Turning to slide 5, degrees of freedom are only helpful if you have the right talent to use them. Since 1994, Artisan has been identifying and recruiting talented and unique individuals and partnering with those individuals to develop investment franchises. Use the credit team is an example, because the team's story is played out since we have been a public company holding these quarterly calls. Slide five shows screenshots from four of our prior calls. In the third quarter of 2013, we explained the right kind of talent for Artisan. We look for individuals who are or who can become recognizable leaders and who are committed to an investment philosophy and process that they believe in and that differentiates them from others. We found that kind of leader and Brian Krug, Brian joined us in the fourth quarter of 2013. Once on board, we provided Brian with a full range of support, helping him find and hire talent, filling out a new office in Kansas City and launching a first strategy. We minimize the amount of time that Brian had to spend on these and other business matters, allowing him and his team to focus on investment. After three years, the team's investment performance placed a high income strategy in the first percentile of its high-yield peers since inception and the strategy raised assets at an unprecedented rate for a new Artisan team both of which we discussed on last quarter's conference call. On slide six, you can see the progress that the credit team has made. Brian has put together a talented team of five experienced analysts and a trader. The team has come together nicely and is establishing a unique culture. Since inception, the high income strategy has generated average annual returns of 7.2% and 226 basis points of average annual outperformance, both net of management fees. As the team came together and expanded its knowledge base and coverage capabilities, the natural next step was to launch a second strategy, which we did in June. We seeded the new strategy with a $20 million investment and raised an additional $13 million from employees and directors of the firm. Because we are offering a strategy to investor through a private funds structure, we can't say much about the strategy on a public call or in public documents. The private funds structure should offer the credit team additional degrees of investment freedom not available on a 40 act upon. Those additional degrees of freedom include ability to invest in less liquid instrument, use of leverage, shorting and use of a broad range of instruments. The credit team is a good study and how we can use data strategy, execute and report back. With respect to recruiting new talent and adding degrees of freedom, we have been very clear about our strategy. We found a way to talk to lots of people and we are regularly considering whether certain individuals would be the right fit. The right talent for Artisan is scarce, difficult to find and difficult to recruit. Likewise, adding degrees of freedom cannot be forced. Investment teams need the right knowledge and skills, operation and infrastructure must be in place to support them and we cannot surprise client. When we do find the right talent, we have the resources and experience to build a team, design and launch strategies and add degrees of freedom. Our ability to resource existing and new investment teams has only increased, as we have gained new experience with both Brian and its credit team and Chris and the Thematic team. And with the addition of Jason Gottlieb, as our chief operating officer of investments. As I mentioned earlier, we believe in quality over quantity. So we are very selective when it comes to new teams and strategies. Each team and strategy is important as we did with the credit team. We have communicated our early step with the developing world and Thematic team. We expect both teams to be as successful at the credit team over time. On slide seven you can see how recent investment returns have growth our AUMs from $95 billion at the end of June 2016, to $109.4 billion at the end of the last quarter. Over that period AUM growth from investment returns have been partially offset by firm-wide net outflows of $3 billion, primarily resulting from $4.4 billion and $2.3 billion of net outflows from our non-US growth and US mid-cap growth strategies. For the same trailing 12 month period, our three global strategies and our high income and developing world strategies have combined net inflows of $5.8 billion, demonstrating that there are significant demand for high value-added, active investment strategies, especially strategies that gives talented investors broad flexibility to generate returns and manage risk./ On the chart we include the green 2016 line as a reminder of the unusually smooth ride thus far in 2017. Market volatility has been low and has been a notable absence of market drawdown. That has been nice, but as we have said since our IPO, we expect things to be bumpier. We have designed and operated our business with an expectation that market returns will be fickle and net flows will be lumpy for like 2016 than 2017. I will now turn it over to C.J. to discuss her financial results.

Thanks, Eric. I'll begin on slide eight, our earnings release and presentation disclose both GAAP and adjusted financial results. And I will focus my comments on the adjusted results, which we use to evaluate our business operations. Our adjusted results exclude the impact of pre-IPO equity-based compensation and include the impact of post-IPO equity-based compensation, which is a non-cash expense. In the current quarter our average assets under management increased $6 billion or 6%. Thanks to strong absolute and relative investment performance. Higher average assets under management grow revenues by $12 million or 7%. Operating expenses followed suit is a variable expense components of our P&L increased with revenue and were offset in part by lower seasonal expenses. Adjusted operating margin increased to 37.1% in the current quarter and adjusted earnings per adjusted share increased 11.5% to $0.58. I believe these results continue to reinforce the transparency and predictability of our financial model. Taking a closer look at our AUMs on slide nine, assets under management at the end of the quarter was $109.4 billion, up 5.4% compared to last quarter and up 15% compared to the same quarter last year. The increase in the current quarter reflected market appreciation of $7.1 billion, a substantial portion of which was from alpha generation. Market appreciation was partially offset by net client cash outflows of $1.5 billion. Net client cash outflows in the quarter, primarily from the non-US growth strategy and to a lesser extent the mid-cap growth strategy. As Eric mentioned, since June 30, 2016 AUM has grown $14.4 billion or 15% due to market appreciation of $17.4 billion, partially offset by $3 billion of net client cash outflows over the trailing 12 month period. Moving on to our financial results on page 10. Compared to the previous quarter, revenues were up 7% reflecting primarily the increase in average AUMs, compared to the same quarter last year, revenues were up 9% and average AUM that was up 11%. Our average fee rate declined 1.8 basis points due to the continued increase in the proportion of our total asset managed in separate accounts, which generate less revenue, but which we believe are longer duration assets. As we have said before, the reduction in the average fee rate is driven by makeshift in our business, not a reduction in our rates. Year-to-date revenues were up 7% compared to the same period last year, reflecting a 10% increase in average assets also partially offset by a decrease in the average fee rate. Operating expenses are summarized on page 11, excluding pre-offering related compensation expense, operating expenses increased 3% in the quarter and 7% year-to-date, primarily due to increased compensation costs, which I will explain on Slide. Slide 12 is where we've broken out our compensation and benefits expenses. Compared to the prior quarter, comp and benefits expenses excluding pre-offering related compensation expense increased $3.1 million, which reflects higher incentive compensation which varies with revenue, partially offset by decrease in seasonal expenses. Compared to the same quarter and year-to-date last year, incentive compensation increased due to higher revenues. Compensation costs also increased due to added employees and the formation of new teams and strategies and annual merit-based increases. Lastly, equity-based compensation increased as we layered on expenses for the equity granted in January 2017. Moving on to slide 13, adjusted operating margin in the current quarter was 37.1%, up from 35% last quarter and 36.6% for the same quarter last year. In this most recent quarter, we benefited from the scaler [ph] model provides when revenues increase. Year-to-date adjusted operating margin was 36.1% compared to 36.2% for the same period last year. The substantially flat adjusted operating margin reflects the benefits of higher AUM, offset by higher expenses in 2017 related to the addition of our newest team and our 2017 annual equity grant. Adjusted net income in the quarter was $44.3 million or $0.58 per adjusted share, which was up from $38.8 million or $0.52 per adjusted share last quarter. Slide 14 shows our dividend history. Last week, we announced that our Board of Directors declared a quarterly dividend of $0.60 per share payable on August 31, 2017 to shareholders of record on August 17. After taking into account non-cash expenses, we generated cash flow in excess of $0.60 regular quarterly dividend during the quarter. Our calculation of quarterly cash generation principally includes the $0.58 per adjusted share and a non-cash expense the post-IPO equity-based compensation. Slide 15 shows our balance sheet highlights. Our balance sheet remains strong with a healthy cash balance and modest leverage at 0.6 times. We have $200 million of debt on our balance sheet $60 million of this debt and $100 million revolving credit facility are scheduled to mature on August 17, 2017. We have obtained commitments to refinance the $60 million of notes coming due and to extend the revolving credit facility in both cases subject to standard closing conditions. In summary, our strong balance sheet and are transparent and predictable financial model continue to support a stable environment for our investment talent. We believe a stable environment allows our investment talent to focus on investing and growing well for our clients. That concludes my prepared remarks, I will now turn it back to the operator.

Thank you. [Operator Instructions] Today's first question comes from Chris Shutler of William Blair. Please go ahead.

Hi, guys. Good morning. This is actually [indiscernible] filling in for Chris. My first question, I'm looking at slide three and the year to date performance, in the non-US growth strategy its been really strong, just curious if you’re seeing any signs that outflows are slowing in that strategy?

Hi, Andrew. It’s Eric Colson. Clearly we’re happy about the - of the turnaround in performance and we do expect as an active manager that will have these year-to-year return differential versus the index. Clients I think have a bit of a lag when they are looking at performance, when you have strong performance you tend to see clients chasing that, when you have performance that’s weak, again there is a lag of redemption. So, I think our expectation is it will slow down, but the lag effect is hard to predict.

Okay. Thank you. And then separately I was just wondering if you could provide an update on the global opportunity strategies capacity. I know – I believe it was last quarter which – where you closed to new accounts, so if you could just update there, it would be helpful?

Sure. That the global opportunity is a bit complicated because of the mid-cap flows on one side and the launch of the Global Discovery fund that's coming out and just as the velocity of flows that come into global opportunities, when you take all those three together its very hard to predict the flows and the exact timing of any strategies closing or when we reopen strategies. I was always will be cautious to protect alpha, as opposed to maximizing flows, right now or in the very cautious stage of managing flows to protect the clients that are in the strategies, so that we can deliver returns. So the update is stay cautious approach and a closing process that is in progress right now.

Thanks for answering my questions.

And ladies and gentlemen, next question comes from Michael Carrier, Bank of America Merrill Lynch. Please go ahead.

Hi. Thanks for taking the questions. Actually Jeff [ph] filling in for Mike. Just wanted to ask on the international fund, I think this was hit on the last question, but given the strong year-to-date relative performance an elevated outflows over the past couple years, and for that fund, as well as strong demand it seems like the industry actively manage international or global equity strategy, is there been any discussion about reopening that fund to new investors?

We've definitely seen that the cycles, if you go back on the last 3, 4, 5 years of the international growth strategies flows, we had a large inflow. A few years back then you saw quite a few intermediary essential research take a step back from the EC exposure, you’re starting to see that balance out. But when we look over the he longer timeframe outflows and not just year-to-year flows, we still feel that there is an elevated AUM in that strategy. And furthermore given the soft closed nature there is still an ability with a lot of the intermediaries and larger clients that they can add to their current position, given the nature of flows and the soft closed and ability to take on money, we have not the made any indications of opening that strategy. And further like all of our team, especially our mature teams, we've added a more higher degree freedom strategy in all of our teams and the global equity strategy has the significant capacity that can grow and we have to take that into account if that does move forward how that impacts international growth strategy as well.

Okay. Thanks. That’s helpful.

And our next question comes from Robert Lee of KBW. Please go ahead.

Thanks. Thanks for taking my question. Just on curious, I mean, you mentioned I guess in the past quarter or so, you can start two private funds, one in credit one in Thematic, I am just kind of curious as to I mean the structure of those, I am assuming those are kind of a committed - those more of committed capital, broadband type structures that distribute - if those are structures and if you kind of raise capital that –for any those that hasn't get shown up in that?

Sure. Rob, its Eric. I mean, our private funds, we cant get too much into the details, but now they are - you know, traditional came master theatre [ph] funds. Our goal here is really to differentiate on our investment results in the portfolio and we don't expect to really differentiate our space – our sales based on a vehicles. So that is very much in line of the traditional Cayman [ph] structure.

Okay. And as credited its three year numbers, you know which are pretty good, I mean, are you noticing any kind of pick up in institutional activity around that, I mean, obviously leading up to and having it, is what you would hopefully hit three-year number starting to transpire?

I think we’ve clearly been happy with the growth in the high income strategy, I think specific to the institutional channel, we’d like to see some more growth there, but we understand where the spreads are at and given last year's returns, clients have been somewhat cautious on their high-yield allocations. And as we see the replacement cycle or opportunities come to the forefront, we expect it will be on the top the list against our peers.

Okay. That’s all I had. Thanks for taking my question.

And our next question today comes from Bill Katz of Citigroup. Please go ahead.

Okay. Thanks very much and I apologize I joined the call a bit late. So a lot going on in the industry. Eric, you may have covered this in your prepared remarks, again I apologize up front. And its throughout the question, on the private funds is there anyway we could think about just any kind of aspirational sizing of these are recognize in a marketing period perhaps now. But anyway we just try and sort of scale this, and we should think about the income opportunity?

It's hard to predict that, I’d be very hesitant to give out a number on the private funds and what our expectations are. Obviously, we expect them to be more limited than our traditional strategies, given the liquidity in the nature of these funds. And we expect that we would have more diversification across strategies to take advantage of opportunities in the marketplace. So no set numbers to throw out for capacity.

Got you. Okay, just a second question for you, just looking at your grow sale trends now over while, actually contrasting that against continue to be some very good long-term performance metrics. What strategy, if anything do you have to potentially increase any kind of spend to amplify growth? How should we think about that trade-off?

The growth has been occurring outside the US for us. We have hired two new individuals in our London office, one focus more on the Northern Europe and the other individual a little bit more focused on the institutional UK market. We are starting to see a pick up in many of our business leaders in outside the US as well. And so that has helped diversify the firm. I think, will go a little bit deeper outside the US into the intermediary space, which we historically have not spent an enormous amount of time, working in the various platforms of Europe and to the spend and travel we focused in those areas and a little bit more emphasis on the wealth channel in the US, which is to be difficult to show up in the intermediary or the institutional, given the hybrid nature of endowments, the family offices to high net worth individuals. But more attention in that space as well, given the alignment with our degrees of freedom and private vehicles.

Okay. Just last one from me. C.J. you may had this in your prepared remark as well, just in terms of on the balance sheet, the tax receivable, how much is left and how you think about as you approach year end?

How much is – what you mean how much is left?

How much cushion do you have beyond and so cash flow from operations that might feed into the year end dividend is the question?

Okay, okay. Yeah, it’s not mature, I think we said we held back to a few million from last year on the dividend just to be conservative. So, going into year end obviously AUM has been better than we would have anticipated due to both know alpha and beta. So were tracking quite nicely towards that year end dividend, but our special dividend, but it was still just six months ago. So I am not making predictions. But we’re on track and a little ahead of it.

Okay. Thank you very much.

And our next question comes from Ari Ghosh of Credit Suisse. Please go ahead.

Hey. Good morning, guys. Just given that it feels like the overall sentiment around the active casing [ph] to be relatively better than what was 12 months ago. I was wondering if you’re seeing any of this reflected in the conversations that you're having with either distributors or your institutional clients, especially as you begin to roll out in your strategy?

Yes. Hi, Ari. Its Eric. I think the overall sentiment is still muted overall with regards to the broad active passive. However, its a different conversation with the newer strategies because they are highly differentiated from traditional strategies and I think you also a little bit more excitement around new strategies. So those conversations going to bring up the past development because its so differentiated that its not a debate. I’d say it’s a mix result right now and given the strong performance, we expect to see a better outcome going forward. But those don't show up instantly when you operate in the institutional marketplace or institutionally oriented marketplace, whether its committees and process in place that takes time to play out versus a six-month trend in performance.

That's helpful. And then real quick, some of your peers have been calling out high projected expenses, partially related to technology and regulation. So just wondering if you’re seeing any of these like similar needs, added that changes your expense outlook for the second half this year?

Yes. I know I don't figured changes in our outlook for the rest of the year. I mean, we have you know, if you followed our technology spend over the last couple years, we have begun and have you know, picked up, that's been quite meaningfully. So as we look out for the rest of the year, I think you know our spend, you know this quarter is fairly representative. Although, our G&A was up a bit because Eric mentioned the investment forum we put on, so that’s slightly higher than we would expect are ongoing, but the rest of our expense line at least on a fixed cider - our expectation to be pretty consistent.

Great. Thank you.

And our next question today comes from Kenneth Lee of RBC. Please go ahead.

Thanks for taking my question. Just had a follow-up question on the on the private funds, given the quality that you guys have in terms of leverage, a ability short and illiquidity, is it fair to say that these kind of products are going to competing against traditional and alternative investment strategies.

Sorry, Ken, what was the last part, they are going to be competing against traditional?

Competing against alternative investment strategies?

Yeah, they will be competing in the long short or the credit long short in the alternative space, that's where we expect the competition to bear out, that would be our mindset.

Got you. And just one final bid, in terms of the underlying economic, I mean, should we expect more like performance fees, or any other differences with these kind of vehicles?

Certainly, maybe this will operate in the traditional private structure management based management fee and performance based fee will be seen in these vehicles.

Got you. Okay. And just one final question, just a bit of housekeeping, in terms of the comp expenses, what kind of trajectory should we expect for the second half of the year? That’s it.

Yeah. Well, as you know, the majority of our comp expense is a variable in nature. So that's going to fluctuate with the revenue levels. The equity-based comp, which is a significant - the other significant component, we do our grants in January of each year. So you'll see a similar expense instance since the grant happened this past January.

Okay. Great. Thank you very much.

And our next question comes from Surinder Thind of Jefferies. Please go ahead.

Hi, guys. Just following up on an earlier question about you know, expenses, my question relates to kind of when we look across the industry, there has been some elevated activity and part of that is actually looking at or exploring investment capabilities or enhancing those related to lets say big data or AI. So from Eric from your perspective, is this something that you need to give serious consideration to or this just something more of pad and then related to that like what conversations if any are you having with your investment teams around these topics and maybe any feedback you’ve gotten from them would be helpful?

Sure, Surinder and its a topic that comes up with various teams, not all teams, that you know, data usage has been increasing, how to sift through and analyze that data and then how to bring that the bear and decision-making, those are the discussions we have with some of our investment teams. We have been building out data over time. We have data governance team, that we put in place the few years back. We had some spends on various functions in our technology group and within teams to help manage and sift through that data and we're getting feedback from our investment teams on the value of that information and decision-making. So that is been feeding through the firm over time, I think, will increase you know, the stands and interest in that area at a pace that's been in place for the last couple years, which is even into that. What we won't do is back the truck up and say we’re going to compete with the quant [ph] and try to figure out AI and hope that it works. We’re looking for a strong feedback loop from our investment teams and a value propositions to end client and until that services will just keep a little bit more consistent spend it in that space.

Understood. And then you also related to that, mentioned that there's maybe a few teams at quant [ph] kind of looking at these topics, is that simply situational in the sense that their investment process might be sufficiently differentiated or there's just not me that opportunity in that space. It just seems that this is kind of the topic to assure that everybody is talking about at this point.

I think its highly dependent on the investment philosophy process and strategy you know, on how much you value information flow for decision-making and that marginal information flow tends to lean a little bit towards a growth oriented investors and not all investment teams are going to trade on that marginal information and other investment teams are really looking for the bulk of their alpha coming from unwinding a discount in the investment they've made. So, I don't expect all teams are going to go towards this and this goes back our belief that there's a lot of different ways to make money, lot of different ways to structure investment teams and given people the freedom to execute on that is our model and its worked multiple time.

Got it. And then touching on an earlier topic about just international clients being a primary source of growth and I think you mentioned that in the past as well. It is simply a geography issue in the sense that you just have less penetration overseas or is it simply that there is much more institutional demand from overseas clients versus US clients for your products?

Its more of the latter, as we talk about on this call and other calls, we've seen a strong reduction in the number of publicly traded securities. We've opted for degrees of freedom, which would mean using more global oriented products or moving into the private funds space, so that we can use more Ill-liquid source synthetic securities to deliver return and manage risk. Our first phase and degrees of freedom was the global oriented strategies and there is just a much higher demand outside the use for global strategies, as opposed to the US for many of the advisors and intermediaries still breakdown the world with domestic and non-US mandates, until you see a higher interest in demand by US pools of assets for global strategies, we would expect the demand to continue outside the US, given our product mix.

Got it. And then maybe one other quick question here, just on the Thematic team, perhaps the comparisons are not quite fair, but both high income and developing world just though since you started running right out of the gate, is Thematic simply a harder strategy to sell than perhaps more mainstream or these other strategies that were more easily described. Just may be any color on the conversations you might be having with you potential clients that you trying to sell Thematic?

The real difference there is Brian Krug and Lewis Kaufman both came from established organizations with mutual funds and a publicly available track record. So connecting the dots is a lot easier for consultants and intermediaries, given their history, while Chris Smith has a great track record, and with strong firms in the alternative space, it will be a little harder for people to connect dot, but the performance will come through which we’re starting to see now and we expect a little bit slower build with Thematic than we did with both developing world and credit.

Thank you. That's helpful. That's it for me.

And thank you. This includes this question -and-answer session, as well as today’s conference call. We thank you all for attending today's presentation. You may now disconnect your lines. And have a wonderful day.