Artisan Partners Asset Management Inc. (APAM) Q4 2019 Earnings Report, Transcript and Summary

Hello and thank you for standing by. My name is Gary, and I will be your conference operator today. At this time, all participants are in a listen-only mode. After the prepared remarks, management will conduct a question-and-answer session and conference participants will be given instructions at that time. As a reminder, today’s conference call is being recorded.At this time, I’ll turn the conference call over to Makela Taphorn, Director of Investor Relations for Artisan Partners Asset Management.

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. Our latest results and investor presentation are available on the Investor Relations section of our website. Following these remarks, we will open the line for questions.Before we begin, I'd like to remind you that comments made on today's call, including responses to questions, may deal with forward-looking statements, which are subject to risks and uncertainties that are presented in the earnings release and detailed in our filings with the SEC. We are not required to update or revise any of these statements following the 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.I will now turn the call over to Eric Colson.

Thank you, Makela, and thank you everyone for joining the call or reading the transcript. Given the significant and ongoing change in the investment management industry, it's more important than ever that we at Artisan Partners know who we are and that we understand our competitive edge. It's also important that our clients and our shareholders understand this. So, you know what to expect and what not to expect.Artisan Partners is an investment firm. We provide differentiated and high value-added investment opportunities to sophisticated clients. We are not, nor do we aspire to be a product manufacturer, engineering distribution-oriented strategies to build scale and compete solely on fees. Our edge is the combination of our talent and our operating model.We partner with talented investors to build and develop investment franchises that deliver for clients. We provide our investment franchises with a unique combination of investment autonomy and operational and business support. Our platform is designed to serve our investment franchises. Their success equals client success, which equals our success. Everything we do is designed for investment talent to thrive.We are a growth firm. Thoughtful growth is important to our people, our clients and our shareholders. As an investment firm, our business growth has followed and will follow the success and development of our investment strategies and capabilities. As we mark our 25th anniversary, we continue to believe that this business model and philosophy are right for our firm and for our future. They have driven the long-term results and growth. I will discuss in a minute. And they will guide our operations and decision-making going forward. This is who we are.Turning to Slide 2. We continue to position who we are as a firm within the framework of long-term asset allocation and manager structure. Since we do not engineer products or vehicles for short-term fads, we must be thoughtful about investment opportunities and talent for the long term. As we have stated in past calls, this will produce lumpy results. Our first-generation strategies fit long-term demand for investment style, market cap and geographically oriented strategies.Our second-generation strategies have participated in the globalization of asset allocation and manager structure. With our third generation strategies, we are in the early innings of the current evolution, driving demand for low-cost exposure products on one end of the spectrum and alternative and private asset classes on the other end. We've been clear about where we fit and where we don't. We have no edge in the passive business, which is about the scale, packaging and distribution.On the other hand, alternative asset classes fit well with who we are. This space is talent-driven. Clients are looking for something different. They're willing to partner with a trusted investment advisor to pursue high value-added results over a longer time periods. We expect the current trends and our investment mindset to push us into deeper relationships with clients and business partners to deliver investment opportunities that compound well. If we execute as we have in the past, we expect our business to continue to evolve away from the scaled asset management firms providing packaged products and further toward an investment firm providing differentiated high-quality investment results.Slide 3 shows more specifically how we have reacted to the asset allocation trends. Over the last 10 years, we have grown from five investment teams to nine, added non-U.S. SMID capability to the global equity franchise and expanded from 11 strategies to 17. The talent we have added and the strategies we have launched are all in the direction of greater degrees of investment freedom, greater ability to generate differentiated investment results, less likely to be replicated with exposure-oriented products. We expect the future new teams, strategies and investments will continue in this vein. We also expect that we can and will maintain our recent pace of growth and diversification, provided we are able to identify and source the right investment talent.The data on Slide 4 validate the business decisions shown on Slide 3. In less than six years, we have built the third-generation strategies into $12.1 billion of AUM, including $9.1 billion of net inflows. All seven third-generation strategies have performed well for clients. Degrees of freedom have also worked in our second-generation strategies, which include our three original global strategies. During the decade, the second-generation strategies grew from $1.9 billion to $44.1 billion in AUM. That growth was driven by strong investment returns, including excess returns as well as more than $19 billion in net inflows.Lastly, our first-generation strategies on which this firm was built generated approximately $56 billion of investment returns for clients, including approximately $8.8 billion of returns in excess of benchmarks. Net outflows from these strategies more than offset the organic growth in the rest of our business. A significant portion of the net outflows represent successful profit taking by our clients. The first-generation strategies remain relevant for large portions of the market that retain more traditional asset allocation.Putting it all together, during the decade, our AUM grew from $46.8 billion to $121 billion. We generated approximately $81.9 billion of investment returns for clients, including approximately $13.3 billion of returns in excess of benchmark indices. We expanded our non-U.S. business primarily with the second-generation strategies. We deepened our reach into the wealth marketplace, especially with our third-generation strategies. And we maintained fee rates that reflect the high value-added differentiated nature and relatively limited capacity of our investment offerings.Slide 5 summarizes where we stand today. We have nine investment franchises with outstanding leadership, strong track records and capacity for growth. Recent investment performance has been particularly strong. Last year on an asset weighted basis, we generated 578 basis points of gross returns in excess of benchmarks, translating into approximately $4.8 billion of excess returns. 13 of our 17 strategies outperformed their broad-based benchmark after fees. Our Developing World Fund beat the EM index by 2,352 basis points and finished in the first percentile of its Morningstar peer group for the year. Five other Artisan Funds finished the year in the top decile of their Morningstar peer groups, and 10 of 15 finished in the top quartile. In absolute index relative and peer relative terms, 2019 was an outstanding performance year for our firm.Client demand and distribution was also stronger than indicated by the headline number firmwide net outflows. The 11 of 17 strategies had positive net inflows. Five of our strategies had net inflows in excess of $500 million with our International SMID strategy leading the way with $1.4 billion in net inflows. For the year, our third-generation strategies had $3.9 billion in net inflows, an organic growth rate of 63%. On the outflow side, a significant portion of the outflows from our more mature strategies were driven by client rebalancing, not terminations. That's particularly true in our Global Opportunities and Global Value strategies.Turning to Slide 6. We are well positioned for the future. Our platform and model are proven across generations of talent, multiple autonomous teams, different asset classes and long time periods. There is a good supply of talented and entrepreneurial investors looking for a home. Operational distribution and regulatory hurdles continue to drive demand for our model. We are excited to add additional talent to our platform and expand our investment capabilities.Even more importantly, we continue to develop our existing franchises, deepening talent pools, expanding investment expertise and laying the groundwork for future strategies and capabilities. We plan to launch a second strategy for our Global Value team later this month. And we are actively working with other franchises to expand offerings in the relative near term. All of these ideas are talent driven, with the goal of establishing our investment franchises as go-to resources for a range of compelling investment ideas.We are also optimistic that our overall distribution outcome is improving. The third-generation strategies are well positioned to continue to raise funds aided by upcoming anniversaries and strong pipelines. In our more mature strategies, we expect continued rebalancing and headwinds, consistent with recent experience. Having said that, given strong track records and client demand, we believe several of the first and second-generation strategies are poised to grow organically over the next year or so.On January 1, Chris Krein started as Head of Global Distribution. Chris brings a wealth of experience to the job. He has served as a distribution leader at several other firms. And he has a deep understanding of Artisan's model, having spent the last four years successfully leading distribution for our Developing World team. By Chris, we're reviewing our distribution structure and strategy. We want to make sure we are appropriately matching resources with opportunities, optimizing both our service and sales efforts.I regularly speak about the changing distribution landscape, the rise of the wealth channel and relative decline of the traditional institutional market, the importance of reaching people digitally, globalization, a buyer's market in terms of fee structure and vehicle preference, demand for customization and tailored solutions. Many of these trends have cemented in recent years. It's important that we objectively review how we manage and grow the business of each Artisan franchise and make adjustments to maximize client duration and accelerate growth where we have investment capacity.In addition to reviewing our own structure and model, we continue our historical practice of exploring third-party distribution relationships. We focus on relationships that provide leveraged opportunities and access to different geographies and client types. We are excited about several of the opportunities we're currently working on.All of these distribution efforts will be consistent with who we are as a firm. Our distribution must complement and enhance our edge as an investment firm, protecting investment team time and finding the right clients on the right terms for what each franchise does. We have done a good job of that historically, and I have confidence we will do a good job going forward.I will now turn it over to C.J. to discuss our recent financial outcomes.

Thanks, Eric. I'll begin on Slide 7. Assets under management ended the year at $121 billion, which was up $8.5 billion or 8% compared to the September 2019 quarter and up $24.8 billion or 26% compared to the end of 2018. Growth in both the quarter and year were primarily due to rising global equity markets and strong excess performance, partially offset by net client cash outflows. Net client cash outflows during the quarter and year included $470 million of outflows related to cash dividends paid, but not reinvested in our U.S. mutual funds. In the 12 months ended December 31, 2019, excess returns added approximately $4.8 billion to AUM and more than offset net client cash outflows of $3.3 billion.Eric discussed the 10-year history of our strategies by generation. Slide 8 shows the progress we have made over the last year. As stated, we now manage over $12 billion in seven third-generation strategies, almost double the AUM from a year ago, and now those strategies represent 10% of total AUM. Growth has been through both investment performance and net client cash inflows. Our first and second-generation strategies also generated strong excess returns for their clients, offset in part by continued outflows, driven in large part by client profit taking and rebalance away from active equities.Turning to our financial results. Slide 9 highlights the changes in our AUM in 2019 and 2018. Given strong AUM growth in the fourth quarter of 2019 and ending AUM at $121 billion, we begin the 2020 calendar year with a 9% head start over average AUM in 2019 of $111 billion. This is a very different position than in 2019 when we began the calendar year at AUM of $96.2 billion as a result of the sharp decline in global equity markets in the fourth quarter of 2018.As always, I will focus the remainder of my comments on adjusted results, which we utilize to evaluate our business and operations. Our complete GAAP and adjusted results are presented in our earnings release. Revenues, which are on Slide 10, grew in the quarter 3% compared to the prior quarter and 9% compared to the December 2018 quarter, reflecting higher average AUM and a slight decline in the effective fee rate year-over-year, due to the mix of our AUM across vehicles.For the year, average AUM was 2% lower than in 2018, largely reflecting the lower levels of AUM at the beginning of the year. Revenues were 4% lower in 2019 than they were in 2018, reflecting the lower average AUM and slightly lower effective average fee rate, partially offset by an increase in performance fees in 2019.The changes in operating expenses are on Slide 11. In the quarter and year, they were largely due to the variable expense components of our P&L adjusting to the level of revenues. These variable expense components primarily consist of incentive compensation and third-party distribution costs and make up almost 60% of our operating expenses. Operating expenses were up 1% compared to the same -- sequential quarter primarily a result of higher incentive compensation expense, due to increased revenues and increased travel costs, partially offset by lower equity-based comp expense.Compared to the same quarter last year, operating expenses were also up 1%, primarily as higher incentive compensation expense was partially offset by lower equity-based comp expense and on-boarding costs incurred in the December 2018 quarter related to the non-U.S. Small-Mid Growth strategy. For the year, operating expenses decreased primarily as a result of lower incentive compensation and third-party distribution expense due to decreased revenues and lower equity-based comp expense. 2018 also included the on-boarding costs for the new SMID strategy. These decreases were partially offset by increases in occupancy expense related to investment team relocations, higher compensation and benefits expenses on an increased number of full-time employees, and increased technology expenses.Our operating margin in the quarter increased to 38.1% from 37.2% in the September 2019 quarter and 33.5% in the December 2018 quarter, primarily reflecting the impact of higher average AUM and revenues. For the year, our operating margin declined to 35.5% compared to 36.8% in 2018, primarily as a result of lower average AUM and revenues, partially offset by lower fixed expense items I explained earlier. Adjusted net income was $58.5 million, $0.75 per adjusted share in the December 2019 quarter. This is up $0.05 compared to the September 2019 quarter and $0.14 compared to the December 2018 quarter. For the year, adjusted net income was $208 million, $2.67 per adjusted share.Looking forward to 2020 given our AUM position at the end of 2019 and so far into 2020, we have a strong forward lean into 2020. In addition, we will realize in the first quarter of 2020 a performance fee of approximately $2.5 million from our Global Opportunities strategy. While client flows are difficult to predict, we are confident that our third-generation strategies are positioned well for continued growth. We will continue to invest in people and technology to take advantage of these growth opportunities and expect salary and benefits costs to be approximately 10% higher in 2020.Consistent with our historical practice, we granted equity awards this quarter, which will increase shares outstanding by approximately 920,000 shares or approximately 1.25%. We expect full-year equity-based compensation expense will be down approximately $6 million in 2020 as we roll off to 2015 grant and roll on amortization of our 2020 grant. Occupancy expense should be approximately $1 million lower in 2020 as 2019 included several investment team relocation expenses. As a reminder, seasonal benefits costs, which include employer contributions to health and retirement plans and payroll taxes, typically increase compensation expense by about $4 million in the first quarter of each year. Another $1 million of seasonal expense related to non-employee director compensation is also recorded in the first quarter.Capital management discussion begins on Slide 13. The Company's Board of Directors declared a variable quarterly dividend of $0.68 per share of Class A common stock with respect to the December 2019 quarter and a special annual dividend of $0.60 per share, which represents the remainder of the cash generated in 2019. Total dividends paid on 2019 cash generation was $3.08 per share, which represents approximately a 9% yield based on current share price levels. Process to determine the level of special dividend declared each year involves us assessing the current market environment and business conditions, and any needs to retain cash for strategic investment or corporate purposes. Absent retaining cash for any of those purposes, we would anticipate the cash generated each year will continue to be distributed to shareholders in the form of a special annual cash dividend.Before moving on to our balance sheet, just a reminder that in the first quarter of each year, a portion of our employees partners' pre-IPO equity becomes eligible for sale. In total, together with shares eligible for sale from former employee partners and shares that previously became eligible for sale, approximately 10 million shares held by current and former employee partners are eligible for sale in the first quarter of 2020. Employee partners are not required to sell any shares, and we don't know how many shares they will choose to sell, if any. Depending on their level of employees' desire to sell, we may execute a coordinated sale for some portion of these shares.Our balance sheet summary is on the last slide. Our balance sheet position has remained relatively consistent in 2019. The lower cash balance in 2019 primarily reflects the higher percentage of cash distributed through quarterly variable dividends in 2019 compared to 2018. Overall, our cash position is healthy, and leverage remains modest.That concludes my comments, and we look forward to your questions. I will now turn the call back to the operator.

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Mike Carrier with Bank of America. Please go ahead.

Hi guys. This is actually Shaun Calnan on for Mike. So, you mentioned you're reviewing the distribution structure and strategy and looking at some of the third-party distribution relationships. Can you just tell us what some of the areas of interest are in terms of channels and geography?

Yes, sure, Shaun. This is Eric. I think we've all seen a pretty progressive change in distribution partnerships moving to more captive distribution, so a downtick over the last few years and open architecture to more captive distribution. And there are partners that we want to look at from a regional standpoint to partner with.There are partners that we want to think about with regards to vehicle or holdings-based delivery to help diversify how we distribute, and we're reviewing those groups, which we think will help bring leverage to our model as opposed to us trying to replicate and become a vehicle-oriented firm. So we continue to look for those opportunities. And as distribution has been changing and networks have been evolving and including technology, we are fairly optimistic in this year and next year of expanding how we distribute with various partners.

Okay, got it. And then just as a follow-up on performance fees, do you guys had strong performance this year. And we typically see some fees in the fourth quarter. I know you mentioned a couple of million next quarter. But just wondering why you guys didn't realize any performance fees this quarter and how we should be thinking about them going forward in terms of seasonality?

Yes. So -- this is C.J., Shaun. We have a number of handful of performance fee accounts, about $2 billion in AUM. Two of those have a December 31 performance measurement period. And based on the formula, we just didn't any -- earn any in those two. So it's quite a limited opportunity in each of the quarters. The one in next quarter had a January measurement date. So that one is fairly locked in, which is why we indicated that we'd be realizing that.

The next question is from Chris Shutler with William Blair. Please go ahead.

You mentioned private markets and alternatives, maybe just provide a little more detail there on, I guess, where do you think you'll be in a few years in that space, and is the Global Value Team strategy in that area as well?

Hey Chris, it's Eric. First on, the Global Value is not into the alternative space. It's leveraging off of their current core capabilities with regards to the alternative and private market space. We clearly see that's where asset allocation is going. We think that our model fits quite nicely. With the success of some of our newer strategies to fit into that space of asset allocation, we continue to see more teams externally that we're looking at as well as more thoughts of how to develop that within our teams and you're starting to see an uptick on how people create public/private strategies that have a crossover capability, which I would define is just another confirmation of our thesis of degrees of freedom.And we believe that, that should be the broad definition that dictates where we go going forward as opposed to this lose definition of just what is an alternative space. So we continue to challenge our current teams on how to differentiate -- use degrees of freedom. And we continue to look at new investment professionals and strategies that would enhance the direction of the firm and the direction will be toward the alternative or private market space.

Got it. Makes sense. And then I guess secondly, any thoughts on non-transparent active ETF space. I know it's super early days, but at a high level, are you leaning more positive or more negative on the potential for that wrapper?

We are very indifferent on the wrapper. If the wrapper is something that clients request and start demanding, we're very open to packaging up our strategy in a more effective wrapper for clients. And as that takes hold and it fits who we are, we'll move forward on that. We rarely get excited about a vehicle or a wrapper, as opposed to investment talent.

The next question is from Bill Katz with Citigroup. Please go ahead.

Okay. Thank you very much for taking the questions this morning. I appreciate your prepared comments, so just starting off with maybe that last sort of line of questioning. Two part question and then I'll ask my follow-up after that. So first part of it is, do you have enough real-time capacity today to more meaningfully compete? It seems like in the alternative space among the publicly traded names, one of the themes is there has been global solution providers, they're able to sort of consolidate market share from LPs. And then secondly, just sort of a challenge you on not scaling the business a little bit more. Those same companies are able to generate significant alpha on the quantum level of higher AUM. So why not open yourself up to a little bit more growth in some of the most scalable opportunities?

Yes. The -- part of the real-time capacity to compete for what we're trying to achieve and we review capacities for consistent and long-term alpha generation and our team in the middle works with each of the investment franchises to discuss capacity. We make joint decisions. And as we see alpha waning or if it's difficult to put the dollars to work, we will review capacity on a very frequent basis. So my mindset and I think the firm's mindset is all about excess return delivery. And if capacity gets in the way of that, we will shut the strategy down. That doesn't generate the level that the market anticipates for stock price.The client comes first, so as alpha delivery. And the fact that others can significantly scale up. That is always something we're looking at how firms can compete and scale up and consistently deliver alpha, and we will learn from those firms. But we will stay true to who we are and deliver the alpha first and foremost. The compounding of that wealth and the consistency of those clients and the present value that creates with long duration clients, I think, is the most powerful thing in this business as opposed to just pure capacity and asset gathering.

Okay, that's helpful. And just a follow-up maybe on the same line thinking. Thinking of your prepared comments, you talked about a number of products out there that you sort of feel good about as you look into 2020 and you also mentioned that sort of the pipeline. Do you have any sort of color on sort of what's coming in the door for Gen 3 versus any kind of potential rebalancing you might see and how that might compare to maybe last year or two or the last couple of quarters just in terms of relative impact?

I mean, the signaling is what we stated, which I think our model given the results we've produced in 2019 and the consistency and longevity of our strategies and professionals speaks for itself in the marketplace. And that output is highly differentiated versus going to a large hedge fund. That's multi-strategy and manages a risk at the central -- at the center of the firm and allocate dollars out versus the risk of going to start your own firm. The model is picking up in the industry. So we are seeing more and more talent and reviewing that talent, and the direction is a continued degrees of freedom.What we've always preferred and like to do is to take those steps of degrees of freedom that doesn't tax the operational infrastructure at a heavy load. And so, we've tried to incrementally step out of degrees of freedom that links to the operational footprint we have. And we've developed into the alternative as well as to the credit space. So we have a lot of operational capacity there, but we will be mindful not to get too extreme.

The next question is from Kenneth Lee with RBC Capital Markets. Please go ahead.

Hi, thanks for taking my question. You touched upon within your prepared remarks, they could potentially see some growth within the first generation and second generation over the next year. So just wondering if you could just highlight what specific strategies you had in mind, one that could be poised for growth. Thanks.

The strategies we are optimistic about is there's been a few strategies that there has been some rebalancing around that have picked up capacity, as well as have extremely strong performance. And the comment there revolves around those three points that we do think rebalancing ebbs and flows. And as long as you have a healthy relationship with clients, you can expect that money can come back in the strategies, coupled with we've opened up some of our strategies or some available capacity as well as strategies, such as our Global Equity has quite a bit of overall capacity to grow. And given the performance that we've experienced last year and now over longer periods, we have decided to make a more optimistic statement on some first and second generation strategies.

Okay, very helpful. And just one follow-up if I may. In the past, you mentioned in regard to the third-generation strategies, there could be some potential opportunity to expand further into the institutional channel, wondering if there's been any progress updates on that front. Thanks.

There is -- that's helped us in the marketing and distribution to some -- open some doors that we haven't seen in a while. The institutional marketplace more specifically, that the endowment and foundation space, given our newer strategies fits that segment, they've -- the third generation has done well in the intermediary space, but the blending of intermediary and institutional kind of fits in that family office, endowment and foundation space. So we haven't seen an enormous amount of wins in there in that space, but we continue to see a strong interest.

The next question is from Robert Lee with KBW. Please go ahead.

Great. Thanks for taking my questions. Maybe one for you, C.J., just a little bit of a modeling question, I just wanted to be -- make sure I understood your comments around comp expense for 2020. I think you said, up about 10%. I want to make sure I have that right. And is that kind of assuming kind of static asset levels?

Yes. So, I was specifically referring to sort of the salary and benefits line. Obviously, incentive comp is going to fluctuate with revenues. Equity-based comp, I think we've given some guidance there that should be down over next year as well in total, by about $6 million. So my 10% was really focused on the salary line just due to some hiring plans that will move forward with for the most part despite what the markets do.

Okay, great. And then maybe just a broader question, Eric, maybe this is part of the distribution review kind of you're going through, but can you talk a little bit about your kind of your non-U.S. initiatives or are you thinking there? I mean, for many years, that had been kind of an incremental contributor to growth. It's certainly been a key driver. And I mean, if I look at last year, the market share of assets from outside U.S. has been pretty flat, had a little bit of outflow probably for similar reasons to hear from rebalancing. But kind of do you feel -- how do you feel about your kind of non-U.S. footprint? Do you see that as a particular opportunity for growth in investment going forward?

Yes, we do. We really attack the non-U.S. space over the last 10 years from our institutional reputation and institutional relationships. We are broadening the breadth of channels we're looking at and continue to think about how to expand into the intermediary and family office space outside the U.S. We also believe that some of the strategies, such as Developing World and Emerging Markets.The Sustainable Emerging Markets and the Developing World strategy, both have good opportunities outside the U.S. that we think look promising in this year and next year, and as well as the Global Discovery strategy establishes their record. And the early alpha generation has been very strong. That will spark another -- I think another growth phase outside the U.S. So it's a combination of having the right strategies and broadening out our distribution footprint.

And if I could maybe one last quick question. Maybe it's a little bit more near term, but clearly given the run-up in the markets to past year or past decade I guess -- for the past year, you talked about obviously some rebalancing, we'll call it profit taking. But as we look ahead to this year, do you have any sense that a lot of that actions kind of happened already or would you just expect normally? As you get into the new year, you could see some more of that at least over the first part of the year?

Those are always hard to predict. I'd be looking into a crystal ball if I answered that so far through January and there tends to be some rebalancing, but most are looking at their asset allocation and resetting their capital market assumptions. And throughout the quarter, you will see some rebalancing. And as the quarter progresses, we'll get a feel for that. But clearly with the current market environment with regards to the rates and where equity markets are at and I think you would see some continued rebalancing away from equities, but everybody is at a fairly low allocation. So I'm not sure how much lower they will go.

The next question is a follow-up from Bill Katz with Citigroup. Please go ahead.

Okay. Thanks for taking an extra question. Just going back, maybe C.J. for you, spend capital allocation as you think about 2020, given your commentary around potential unlocking of shares that could be sold by employees and the size of it, what is your thought or how are you thinking about sort of capital management policy between the dividend payout? I appreciate your prepared comments, sort of seeing this year will look like 2019 strategically, but any sort subtlety to that, flexibility to that to potentially absorb some of the secondary pressure that could be in front of you?

Yes. Bill, there really hasn't been any change to our thoughts around allocation of capital or repurchasing shares to offset the public. We -- the number of shares that have been available really haven't changed dramatically, available for sale haven't really changed dramatically. We do have -- each year, another tranche becomes eligible, but that number has been 7 million, 8 million for the last two years. And up to now, people have opted not generally to sell. So the short answer is, no, we haven't changed our thinking here.

And just one last qualifier, I'm sorry to be the dead horse here. Eric, just comes to rebalancing, maybe to answer the question this way, since you are through the month of January. How does this January look for rebalancing perspective versus a year ago, obviously a lot going on in the market levels as well?

All right. That's a dramatic change year-over-year. You're talking about fourth quarter of '18. That was down significantly. I think there is a little bit of people and clients a little frozen by the major decline.And then the compare that after this fourth quarter and coming into this year, I think there is more optimism coming into this year. And I think we see -- I would say, we see more opportunity after this January than last January.

This concludes our question-and-answer session and the conference is also now concluded. Thank you for attending today's presentation. You may now disconnect.