Artisan Partners Asset Management Inc. (APAM) Q3 2020 Earnings Report, Transcript and Summary

Hello, and thank you for standing by. My name is Andrew. I will be your conference operator today. [Operator Instructions] As a reminder, this conference call is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Makela Taphorn, Director, 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 your questions, may deal with forward-looking statements, which are subject to risks and uncertainties. These 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 the joining the call or reading the transcript. Today, Artisan Partners is managing more assets for more clients across more autonomous investment teams and strategies than ever before. We are compounding wealth for clients. We are creating new growth opportunities for internal and external talent, and we are generating results for shareholders. In the third quarter, we earned more revenue than ever before in our history, and we recently declared our highest quarterly dividend ever at $0.83 per share. These outcomes results from investments we have made in the firm over long periods of time, identifying, recruiting and retaining great investment talent; investing in new people and reinvesting in our existing franchises; launching high value-added investment strategies that fit with long-term asset allocation trends; building our flexible and resilient operating platform; and developing our high-quality leverage distribution model and team. In today's highly uncertain and rapidly changing environment, we are operating well. We are getting the day-to-day job done. And at the same time, we are making forward progress with business initiatives that we expect to yield further long-term sustainable growth. Turning to Slide 2. As previously announced in the third quarter, 2 experienced portfolio managers, Beini Zhou and Anand Vasagiri, rejoined Artisan International Value team and launched the Artisan International Small Cap Value strategy. Earlier in their careers, Beini and Anand worked as analysts under David Samra, the founder and leader of our International Value franchise. Beini and Anand are well versed in the team's value investing philosophy and process. The new strategy is a natural extension for David and the International Value franchise, providing the group an opportunity to exploit an inefficient part of the market and further develop the franchise's expertise and business. Also, Tiffany Hsiao and Yuanyuan Ji joined the Artisan Global Equity team. We are currently working with Tiffany and Yuanyuan to build and resource their team and design and launch a strategy to invest in post-venture firms in Greater China. We expect this strategy will include both public and private investments, providing investors with differentiated access to the Chinese growth story. The strategy should also fit with long-term demand from sophisticated clients who are increasing allocations to China to capture growth and catch up with China's status as the world's second largest economy. On Slide 3, you can see where the recent additions fit into the longer-term development of the International Value and Global Equity franchises, 2 of our longest-tenured groups. Our autonomous investment team model is extremely flexible. We try to develop a common set of franchise traits across all the investment teams, but the path and the form that traits take are unique for each team. David Samra and Dan O'Keefe founded the International Value team in 2002. On the strength of the performance of the flagship International Value strategy, they launched the Global Value strategy in 2007. They developed their franchise and business to the point that in 2018, it made sense to evolve into 2 separate teams, create an opportunity and space for further growth. Earlier this year, Dan's Global Value franchise launched the Select Equity Strategy. Now, David has taken another step with Beini and Anand and the International Small Cap Value strategy. For 25 years, Mark Yockey has been developing the Global Equity franchise. Today, within Mark's investment ecosystem, we have the flagship first-generation international growth strategy, the second-generation global equity strategy, the third-generation International small-mid growth strategy managed by Rezo Kanovich and the next-generation strategy we are working on with Tiffany and Yuanyuan. This team with an a team approach allows us to provide the space, autonomy and ownership necessary to attract great talent. At the same time, we are injecting new experience, expertise and ideas into established franchises, which creates new options for growth and should ultimately extend franchise duration. When we talk about growth, we always say thoughtful growth. That means growth that is consistent with who we are as a high value-added, talent-driven investment firm. Slide 4 shows some of the areas where we've been thoughtfully growing. It all starts with investments. We continue to add great new investment talent and to reinvest in existing talent. We continue to add degrees of investment freedom within existing strategies and with new strategies. We continue to develop all 3 generations of strategies, and we are exploring the next generation. The first-generation strategies continue to represent about half of our business, and we expect these strategies to remain an important part of asset allocations for many years to come. Our second-generation global strategies continue to experience strong demand, in particular from non-U.S. institutional investors. Year-to-date, the second-generation strategies have raised $1.6 billion in net client cash flows. And our third-generation strategies continue to see extremely strong business development, particularly in the U.S. wealth channel, which we expect to be a source of long-term secular growth. Year-to-date, the third-generation strategies have raised $5.7 billion in net inflows, an annualized organic growth rate of 63%. As part of our thoughtful growth mentality, we are trying to bring together great investment talent, investment resources and degrees of freedom and long-term demand. Within that framework, what might the next generation of Artisan strategies look like? We see public and private securities coming together, multiple degrees of investment freedom in the same strategy and more ways for clients to access our investment ideas and expertise, such as through co-investments. As we match great investors with additional degrees of freedom, they will have the ability to further differentiate themselves, and clients will have the ability to access multiple expressions of our investment ideas and expertise. Our thoughtful approach to growth extends beyond investment. We have always maintained a lean distribution model that complements our investment-first approach. By keeping our fixed sales costs low, we are not under pressure to generate or manufacture product to feed a distribution machine. Our distribution team is high-quality and flexible. They minimize the time our portfolio managers spend on distribution and they serve multiple client types across our target geographies around the world. We maintain this approach by focusing on points of leverage. Recently, we have spent more time cultivating and developing strategic relationships with clients and allocators who invest across multiple investment teams and strategies. These clients and gatekeepers know who we are and trust us as a firm. We are working to build on that trust and deepen those relationships. Our firm-wide year-to-date net inflows of $5 billion includes multiple investments from strategic client relationships. Our investment and distribution operations are enabled by our flexible operating platform. We have methodically developed our people, technology, mobility and resiliency over long periods of time. We were well prepared for work at home, and we have operated extremely well throughout this extended period. We will continue to invest in this critical part of our business. Our long-term investment outcomes are shown on Slide 5. Since inception, 12 of our 18 strategies have outperformed their indexes by more than 300 basis points per year after fees. We have generated long-term alpha and outperformed peers in first-, second- and third-generation strategies. We have diversified and broadened our sources of alpha across investment teams, asset classes and generations. Our greatest asset and our greatest source of future growth is the long-term performance shown on this page and the people behind it. Turning to my final slide. I want to emphasize our focus on thoughtful growth by placing our firm within the larger industry context. On this slide, we've laid out a simplified model of a horizontally and vertically integrated asset management company, a group that packages together investments, solutions and advice to deliver a holistic outcome for end clients, often retail clients. These asset managers are intensely focused on scale, packaging and pricing. Much of the recent industry consolidation is driven by this pursuit of breadth and scale. There's nothing wrong with this, but it's very different from what we do, and we want to make sure that our clients and other gatekeepers, our people and our shareholders understand the difference. Artisan Partners is an investment firm focused on high value-added investing. The red box shows our part of the investment universe. We focus on talent, investment resources and culture and degrees of freedom. We compete on the quality of our people and our net-of-fee performance and the trustworthiness of our brand. These are the things that we are most focused on. These are the areas where we have a competitive advantage. As long as we continue to get investments right, there will be multiple ways for us to reach end clients and for us to continue to generate long-term sustainable outcomes for all of our constituents. I will now turn it over to C.J. to discuss our third quarter and year-to-date results.

Thanks, Eric. Good morning, everyone. I'll start with our financial model principles, which are on Page 7. A focus on long-term growth requires discipline and impatience. The stability of our recurring management fee revenue, coupled with the variable nature of our expenses, resulted in increased profitability and operating margins in the September quarter. We remain thoughtful about where we focus our time and resources, making targeted investments in talent, distribution and operations to support sustainable financial outcomes for our shareholders. We concentrate on compounding client assets by generating excess returns over benchmarks rather than focusing on net client cash flows. In 2020, we have been able to achieve both excess performance and net inflows, and the results which follow reflect the success of executing on our models. AUM at September 30 was $134.3 billion, up 11% compared to last quarter and up 19% compared to the September 2019 quarter. The increase in AUM over the quarter reflected a continued recovery in global equity markets and strong excess returns generated by our investment levels. In addition, net client cash inflows were $2.1 billion in the quarter, representing a 7% annualized organic growth rate. In the current quarter, we continued to see elevated levels of gross client activity driven by both institutional and wealth clients. Flows were driven primarily by large institutional non-U.S. mandates and our second-generation strategies and continued strong flows in our third-generation strategies. The AUM by generation slide, which we have provided in prior quarters is on Slide 9. AUM across all generations benefited from strong market performance and excess returns during the quarter and year-to-date. On a weighted average asset basis, our strategies outperformed their respective benchmarks by over 275 basis points in the third quarter. Both second- and third-generation strategies had net positive flows in the quarter. Third-generation strategies now account for 16% of total AUM, up from 14% last quarter as a result of both some strong investment performance and organic growth. Average AUM grew 20% in the third quarter compared to the June quarter and 16% compared to the third quarter of 2019. Year-to-date average AUM grew 8% compared to the same period in 2019, despite the significant downturn in global equity markets in the first quarter of 2020. Our complete GAAP and adjusted results are presented in our earnings release. My comments on our financial results will focus on adjusted results. Revenues in the third quarter of 2020 grew 15% and operating expenses increased 7% compared to the second quarter of 2020. Recurring management fees, which exclude performance fees, increased in line with the increase in average AUM for the quarter. Expenses increased in the current quarter, primarily as a result of variable incentive compensation adjusting to higher levels of revenues. Other expenses continue to be lower, primarily as a result of reduced travel in the current environment. Our operating margin in the quarter increased to 41.8% compared to 37.8% last quarter and 37.2% in the third quarter of 2019. Adjusted net income per adjusted share of $0.90 grew 27% compared to the previous quarter and 29% in the September 2019 quarter. Year-to-date, revenues were up 8% on higher average AUM and an increase in performance fees. Operating income grew 20% and our year-to-date operating margin was 38.3%, an improvement over 34.6% in 2019. Adjusted net income per adjusted share was $2.27, up 18% compared to the same year-to-date period in 2019. Key balance sheet metrics are on Slide 13. Our balance sheet remains healthy. We maintain approximately $100 million of excess cash to fund operations, seed new products and make continued investments. In addition, we maintain an undrawn line of credit of $100 million. Our Board of Directors has declared a cash dividend of $0.83 per share with respect to the third quarter of 2020. The $0.83 per share is consistent with our policy to distribute approximately 80% of the cash generated each quarter, and it represents an annualized yield of approximately 7.5% before consideration of the special annual dividend. As in prior years, in January, following the end of our fiscal year, our Board will consider the distribution of a portion of the retained cash generated in 2020 in the form of a special annual dividend. Each year when determining the amount of the special annual dividend, the Board will consider the amount of cash needed for general corporate purposes, investments in growth and strategic initiatives as well as the current market environment. Looking forward to next quarter's results, our U.S. mutual funds make their required annual income and capital gains distributions in the fourth quarter. The majority of these distributions are reinvested, but some clients choose not to reinvest. We estimate that the total cash outflows in the fourth quarter resulting from distributions that are not reinvested will be approximately $450 million. We intend to break this amount out separately in our AUM roll forward next quarter. That concludes my comments, and we look forward to your questions. I'll now turn the call back to the operator.

[Operator Instructions] The first question comes from Mike Carrier of Bank of America.

Eric, more of a strategy question, but you hired new teams and more recently, you added talent to 4 G, which has gone very well. When you think about having more strategies, is there a limit, like in the third generation, particularly from a distribution standpoint? And do you and the team spend like less time? Or is there a constant focus on talent as you start thinking about building out that next generation?

Yes, certainly. We've always said there's an operational limit to how we onboard talent. We've always done it in a fairly thoughtful way to make sure that the operations can support the new strategy without taking away from existing resources, supporting our current mature teams. We've thought about the vehicles and the channels and the geographies that we go into, do we have the right support and depth to move into newer strategies and teams. And if we're going to start a new strategy or a new team and set it up from day 1 properly, we have moved slower than probably most firms on finding talent and bringing them into the organization. To me, that's the real limitation, and it's a good practice to make sure that we fundamentally set up strategies for success day 1 as opposed to going with a strategy of launching 10 and hoping 2 or 3 work inside of a distribution platform. So that does govern the amount of teams we're looking at, but we -- from the number of meetings or just opportunities, we're seeing quite a few opportunities. So we're always in the marketplace looking for talent, and we continue to see a good array of opportunities. But the properly onboarded team does limit the amount we can do.

Okay. That makes sense. And then, C.J., just on the -- how to think about the model and margins? And you guys had shown margin from your time. But as you continue to bring in healthy flows and some of these strategies scale up, does anything shift, I mean, in terms of like compensation? Like whether payouts or structures that you see more coming to the bottom line? Just more curious on how it works or if there's like kind of tipping points in terms of asset levels that are driving that?

Yes. Mike, as we onboard teams, all teams are different, but generally -- well, not generally, but specifically, every team will come on to the same economic model. The only difference could be the amount of start-up costs, but it's in sort of a tight range. And as you've seen in the past, it hasn't been material to our results in any one instance, and we do fund that from current earnings. So there's no pressure on the balance sheet. But the other thing is the time frame in which it takes teams to get to scale, which means they're fully supported by the 25% revenue share versus a firm supplement that we generally, as you know, guarantee for the first 3 years. So there -- I don't think there's anything material that you should know with respect to the teams we're bringing on or the model that we've employed from the past.

The next question comes from Chris Shutler of William Blair.

On the new International Small Cap Value and Greater China post-venture strategies, I realize it's very early days, but any thoughts on how, I guess, large those could ultimately be? And -- or how comfortable you would -- where you'd be comfortable? And how we should think about fee rates in those?

Yes. Both those strategies, I think, like most things we do, in the early phase are capacity-constrained strategies. Capacity-constrained strategies typically yield a higher fee rate. And then the case with the post-venture Greater China fund, this is a new -- a newer fund that has more degrees of freedom that will move slower than most to make sure that we're set up properly in the region and that we're set up properly to support the team. So I would expect both of those strategies to move and grow at a slower pace than we've seen more recently with some of our strategies that have come to market.

Okay. Got it. And then, Eric, you talked about working to deepen relationships with gatekeepers. Maybe just -- if there's anything that you're doing differently today versus a year or 2 ago or that you're emphasizing more today? Just any more color there?

Well, I think the environment's obviously quite different. We're all working from home for the most part, so seeing clients, seeing gatekeepers, seeing prospects and operating is quite different. We fortunately, over the last 5 years, have invested in a new CRM. We've put in a new backbone to our website. We've bought and brought in software tools for tracking and connecting with clients, consultants and prospects, that's yielding a great investment now. We're starting to utilize those capabilities more than I ever thought, and I think -- more than anybody would have thought given the environment. So that's helped us out normally. And that's different than just sending people to offices and flying around the world, so that's quite a bit different. I think we're well set up for that environment. We've, at the same time, invested in writers to create more content. We launched a blog called Artisan Canvas. We've put more video out. So I think we are doing quite a few things differently just because of the environment. And given our trusted brand, coupled with the content and connectivity, we are doing well in this environment.

Okay. Makes sense. And lastly, one for C.J., just on the occupancy expense was up a little bit in the quarter. Is this kind of a new level jumping off point? And maybe just what caused the increase?

No. We -- Chris, we had a charge in the quarter. We were subleasing some space in New York. And the firm that was subleasing it ran into difficulty given the current pandemic, and so we took a write-off for that space.

The next question comes from Kenneth Lee of RBC Capital Markets.

Just one around the potential for cash needs. You mentioned in the prepared remarks keeping aside roughly about $100 million for potential needs. Wondering if you could just call out any special uses of cash, any initiatives or investments that we should be aware of within that fourth quarter time frame, especially as the Board goes around considering the special dividend?

Yes. Thanks, Ken. Our policy on our dividend has remained the same. And to date, we have both distributed all the cash we've earned in a year through the special. And then there have been a few years where the market environment caused us to hold back a little bit. So as of now, it's the same policy. It will be the same process. We'll wait to see how the year turns out from an earnings standpoint. We'll consider any other uses. We'll consider the market environment. And at that point in time and -- when we get to January, we'll have a recommendation and the Board will weigh in, and we'll decide the level of the special.

And just one follow-up, if I may. Just on Slide 6 -- I appreciate the slide. Could you just talk about at a very high level, longer term, as the industry potentially consolidates, do you see any additional pressure on the firm in terms of maintaining distribution relationships. I think some larger peers talk about seeing some benefits of scale when it comes to maintain distribution relationships. Just wondering, from your perspective, how that could work out?

Yes. Certainly, I think that was part of the comments on strategic relationships and how we interact with distribution partners. We've seen a slight uptick in our strategic partners that we're working with. And as we continue to deliver more strategies across more asset classes than we've ever done and having the performance that we've delivered, we're seeing a greater breadth and deeper relationships with some of these partners. And as the world moves forward, as we laid out, there's always going to be a need for good investment strategies and opportunities embedded in whatever ecosystem is out in the marketplace. And we feel that the high value-added investment structure that we offer will always fit in some segment, and you don't have to build-out and be all things to all people.

Next question comes from William Katz of Citigroup.

So Eric, you made sort of 2 comments I sort of found intriguing. One was the Gen 4 opportunity. And then one was some of these more strategic relationships that sound like more of a multi-asset opportunity. Could you, on the latter, maybe size, what kind of assets you have and maybe tenor of those assets? And then on the Gen 4, could you maybe expand a little bit more about sort of the multiple investing opportunities? I just didn't quite see the linkage to that, but it did sound interesting to me.

Yes. I guess on the size and tenor of strategic relationship, it really runs the gamut. We've seen really an uptick with some of our large institutional corporate clients. This past quarter, we've seen some more larger broker-dealers. We've seen some regional broker-dealers. Probably the most interesting though comes into the regional RIA and financial advisers. We're starting to see a little bit of uptick there. It may not have the scale and size of a larger broker-dealer, but that wealth channel and the growth that's occurring in the RIAs and many of the financial advisers has been growing in the number of products they're using. So it's both size of dollars and size -- number of products that's peaking our interest in the reason for the comments around strategic relationships. When it comes to the Gen 4 or using multiple degrees of freedom, originally, we started broadening out by geography or started broadening out by types of securities. Now you're starting to see teams wanting to use private securities. They want to also be able to hedge in those strategies. They want to use multiple asset classes and different securities. So in the future, you could see teams wanting to use public and private and also using on the public's and ability to hedge a bit. And those degrees of freedom will come into play as opposed to just a one-dimensional change that we've seen in the last change of going from generation 2 to 3.

Okay. And just a quick follow-up for me. You had mentioned earlier that Gen 1, which is about half of your assets, continues to be an area of interest to investors. Is there a tipping point where that platform can get back into positive flow? Or are there more structural headwinds to be considering at this point?

That's a tough one to look forward on, and we've been fighting the active/passive. And so there's been quite a bit of passive movement in that segment. I feel confident that you're going to have a market cap-style structure that's going to continue. It's been prevalent in many of our clients for a long period of time, and we don't see that changing. And we see the strategies that we're offering producing very competitive performance that's given us good flow. But with regards to the use of more passive or pressure on that, it's hard to forecast that.

The next question comes from Ryan Bailey of Goldman Sachs.

I actually wanted to come back to the very first question for Mike about having investment professionals and PMs to existing teams. Is this a change in preference strategically from you that you would rather have more investment professionals go to existing teams to benefit from scale and reputation or is it more of another tool in the toolkit? And maybe just part of that, C.J., are there any additional comp expenses we should be thinking about for 4Q above sort of the usual comp payout rate?

Ryan, this is Eric. There's no change in how we think about bringing talent into the organization, and we highlighted that we have quite a bit of flexibility of how we bring in talent, and it may vary inside of an existing team such we've done more recently or onboarding a new team. So I think it's just another tool that we're highlighting and showing the flexibility of our model of how we can bring talent into the organization.

And Ryan, with respect to expenses, both additions to our firm occurred during the third quarter. So there will be a little bit more expense, but nothing material that I would guide you to model in to your existing expectations.

Got it. And maybe if I could just follow-up on a point that you made around the differences in the sources of flows for Gen 3, that being more well focused. I was just curious, considering how good the performance has been with some of those strategies, is there a reason why you haven't seen as much interest from -- or I guess, less interest from the institutional side?

Can you restate that question again?

Sure. So I think during some of your comments, you had said that Gen 3 is seeing a lot of growth from the wealth and intermediary channel and maybe a little bit less of net flows from the institutional channel. So I was just wondering why you haven't seen as much demand from the institutional side when performance has been so good in the Gen 3 strategies?

Yes. We do see good interest from the institutions and consultants. I think when you break down the institutional client base of corporates, endowments, foundations and the like, they're still continuing down that trend of private equity and into private debt and to real estate. And so given the opportunities that, that group has to really push deep into alternatives, we've seen the institutional marketplace having a greater focus there. I think you are starting to see the commercialization of those strategies back into wealth or into the retail market that's starting to occur, and you saw the tipping point there with bringing it into potentially target date funds. But I think the real difference is institutional clients are focused deeper into the alternative space.

Next question comes from Dan Fannon of Jefferies.

Just wanted to ask about capacity given the move in markets and your AUM from both flows and beta, if there are certain strategies that are close -- that you're watching in terms of managing that capacity?

Yes. There's a few strategies that we've -- that we're keeping an eye on, and we've seen really strong interest in the growth team. And so global opportunities is something that we've kept an eye on as well as the U.S. small-cap growth strategy that we're very mindful of finding the right clients on the right terms, given where those strategies are at. Otherwise, we've been managing a few other strategies. And I think I said this last quarter, it's been a bit more difficult given the uptick in gross flows of both what's coming in and what's coming out. So we're still leaning towards looking at replacing dollars that are going out, given the gross outflows. But probably the only -- those are -- the growth team is probably the 1 team that we're really monitoring.

Okay. And then, C.J., just kind of a follow-up on expenses and given the environment, obviously, certain discretionary things are lower. But as you think about next year, is there anything on the technology side, office, other things that we should just be thinking about that might be out of -- more of the natural flow of expenses? And then just as a follow-up with that, performance fees, if there's more of this AUM that's coming in through SMAs that we might be thinking about being a bigger contributor into next year or beyond?

Yes. So I'll start with expenses. Obviously, the pandemic and work from home and the ability to travel has had a positive impact on our expense trajectory, that remains to be seen. Generally, we're of the belief that those expenses will return back to normal when life returns back to normal. When that happens is obviously anybody's guess at this point. With respect to technology, we're running pretty flat to last year, maybe up just slightly. And I would expect, in 2021, you would see maybe a mid-single-digit growth in technology just as market data and data costs go up and contracts renew at higher rates. So more inflationary plus a couple of percent growth there. Other than that, there really isn't anything that I would see worth mentioning. And on the performance fees, we do have -- you have seen an uptick this year in performance fees, given our performance. There is about $3 billion of separate account AUM that's subject to performance fees as well as our 2 hedge fund, private fund vehicles. So there are opportunities coming up in the fourth quarter. It's our largest opportunity, and there are a few accounts that are tracking towards performance fees. And then into next year, given performance being measured on an annual basis and the strong performance this year, there's probably likely some good opportunities for next year as well. But as you know, it's all predicated upon performance.

Next question comes from Robert Lee of KBW.

I apologize maybe this came up already, but Eric and C.J., with the new teams and the new structures, kind of the private funds, the liquid assets, I'm just curious. I mean do you feel -- you have been fully up the necessary infrastructure to handle those types of fund structures and reporting requirements or is it kind of incremental costs pretty small? Just kind of curious, is that more of a discrete fund, like one fundraise and investment? Or is it going to be something more akin to -- likely better analogy, a perpetual fund that's constantly raising .

Rob, it's Eric. I'll let C.J, make comment after I talk about just a little bit on the fund structure. It's the strategies that we're putting now and the vehicles that we're thinking about -- really, the vehicles are in place. We've had private funds. We have invested in the distribution. So really, it's setting up the team appropriately. It is making sure that's done in a prudent manner. But with regards to your comments on the vehicles, we're -- we have a handful of private vehicles in place, and we believe the operational infrastructure is in place. So our expectation is you wouldn't see any uptick of expense requirements to move forward with regards to vehicles.

Yes. I don't really have anything to add. Our operations is ready. We've been preparing for this for a number of years.

Yes. I appreciate. Just curious, if it's more like an interval fund-type structure, but -- as opposed to kind of just a discrete raised capital invested and returning on realization type structure?

No. We're going to be using -- we're not going to be launching a new vehicle.

Okay. My last question. Again, I apologize if this was asked earlier. I may have missed it, but now with the success having maybe particularly in some of the second-generation strategies or even some third-generation, should we be thinking as we look ahead, assuming trends continue to look ahead into the first part of next year that start running bumpy to any kind of capacity issues or may start thinking about limiting, whether it's institutional or individual investors as you have in the past to kind of control the mix?

Yes. We certainly will, in the future, manage capacity as we've managed other strategies and other teams to make sure that we have a long-duration client base, a robust fee mix. And we certainly intend to continue that practice on a go-forward basis. So that certainly will come down and come into play in the years to come.

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