BlackRock, Inc. (BLK) Q4 2012 Earnings Report, Transcript and Summary

Good morning. My name is Regina, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the BlackRock, Inc. Fourth Quarter and Full Year 2012 Earnings Teleconference. Our host for today's call will be Chairman and Chief Executive Officer, Laurence D. Fink; Chief Financial Officer, Ann Marie Petach; and General Counsel, Matthew Mallow. [Operator Instructions] Thank you. Mr. Mallow, you may begin your conference.

Thank you, operator. Good morning, everyone. This is Matt Mallow. Before Larry and Ann Marie make their remarks, as I do with each of these calls, let me point out to you that during the course of this call, we may make a number of forward-looking statements. We call your attention to the fact that our actual results may differ from these statements. As you all know, BlackRock has filed reports with the SEC, which lists some of the factors which may cause the results of BlackRock to differ materially from what's said today. Finally BlackRock assumes no duty and does not undertake to update any forward-looking statements. With that, I'll get out of the way and turn it over to Ann Marie.

Thanks, Matt. Good morning, everyone. I'm going to provide some brief comments. I'll point out a few highlights in the earnings supplement and, as usual, I'm going to be discussing primarily as-adjusted results. Overall, 2012 was a very good year for BlackRock's clients, shareholders and employees and we're entering 2013 with great momentum. We generated record full year EPS of $13.68, that's up 15% compared to 2011, reflecting a 5% increase in operating earnings and a 3% increase in revenue compared to a year ago. Record quarterly earnings per share of $3.96 were up 29% compared to a year ago, and that's supported by a 24% increase in operating income, and up 14% compared to the third quarter, and that's supported by a 19% increase in operating earnings. The fourth quarter operating margin was 42.6% and the full year margin was 40.4%. This reflects cost discipline, strong investment performance and a trend of continuous improvement. The full year margin was up 0.7 point from 2011 and up 2.2 percentage points since 2009 when we acquired BGI and even more than that, when you compare it to the pro forma combined margin. All that data is on Slide 4 of the supplement. Most importantly, fourth quarter earnings reflected strong revenue growth and positive momentum in net new business across each of our channels. Improved investment performance and positive market. These are important trends as we begin 2013. In the fourth quarter, clients continued to re-risk with particularly strong flows into equities. We saw $31.2 billion into equities, primarily into ETFs and institutional index product. We also saw $12.4 billion of demand for fixed income products, driven in part by retail investors, who maintained their preference for income-oriented products. Defined contribution plan growth drove flows into multi-asset class products. We also saw a demand for single-strategy hedge funds and private equity fund of funds while returning significant capital as we liquidated our PPIP fund after generating a 23.5% return. We believe our strong and consistent cash flow model differentiates us within the financial services industry and allows us first to continue to invest in both organic growth and tactical acquisitions such as the recently announced acquisition of the Crédit Suisse ETF platform that really expands our presence in Switzerland; secondly, it allows us to pay dividends, which we have consistently increased with earnings growth over time; and thirdly, to repurchase shares in the open market. In 2012, we generated $3.1 billion of operating cash flow and our -- and continued our discipline of returning that cash to shareholders. We announced today a 12% increase in our dividend to an annual level of $6.72 per share. This is our fourth consecutive year of a dividend increase with 3 of the 4 increases at a double-digit growth rate compared to the prior year. And to put this into perspective, our dividend is now higher than our 2008 EPS. We've repurchased about 870,000 shares in the quarter for $166 million, and our board approved a 7.5 million share increase in our repurchase authority. This gives us authority to repurchase 10.2 million shares, including the 2.7 million shares remaining under our prior program. And just to review 2012, we repurchased 9.1 million shares for $1.5 billion. And when you combine that with the $1.1 billion we paid in dividends, we returned $2.6 billion of cash to shareholders or 104% of our net income. I'm going to move to the earnings supplement, which you can find on our website. I'm going to skip a number of slides and focus on just 4 slides that tell most of the story. Let's start with Slide 8. As I mentioned previously, we produced a 29% increase in earnings per share compared to the fourth quarter driven by growth in operating EPS. The as-adjusted results reported here did exclude a $30 million onetime expense. In order to ensure compliance with new OCC guidelines regarding short-term investment funds or STIFs, BlackRock chose to sell certain legacy securities at a loss. And to make a onetime $30 million contribution to the STIF funds to maintain the dollar NAV of the funds, while also complying with the new rules. All of the securities affected by the new OCC guidelines have been purchased in BGI funds prior to BlackRock's acquisition to BGI, and were supported by Barclays under our $2.2 billion capital support agreement. Last quarter, we had successfully negotiated a partial release of Barclays' coverage in return for a onetime payment into the funds in excess of what we had expected them to receive under the agreements. Prior to the publication, the new OCC guidelines, BlackRock had been really successfully pursuing a hold to maturity or orderly sale of the securities. Importantly, all the securities added to the portfolio since the BGI acquisition have been at much lower risk. The funds are now fully compliant with OCC guidelines that don't go into effect until July. Also on this page, you can see our nonoperating results. Nonoperating results reflect a $21 million increase in the market value of the co- and seed investment portfolio. And just to mention, the fourth quarter as-adjusted tax rate was 31.4%. 31.5% is likely a good modeling for 2013 -- good rate for modeling 2013 based on what we know as of today. Moving to Slide 10. Fourth quarter revenues were $2.5 billion, that's up $312 million or 14% from a year ago. I already mentioned the strong performance on the disposition-related portfolio and a number of our single-strategy hedge funds with December locks, which both contributed to growth in performance fees of 63% compared to a year ago. We enter 2013 better positioned than we entered 2012, as we do not face the same performance headwinds we faced coming into 2012. So the performance fee related to the disposition portfolio will not repeat in 2013. And just as a reminder, fourth quarter is our peak performance measurement period, with that just eliminated number of funds actually have performance measurement periods in the first quarter, so you always see some seasonality there. We delivered full year growth in BlackRock Solutions and advisory revenues. That's despite the fact that we successfully managed a $75 billion reduction in advisory assets. Those revenues were replaced with core 11 revenues, revenues which are recurring and provide a solid foundation on which to deliver revenue growth in 2013, as the appetite for both Aladdin and advisory opportunities remains strong. Base fees, as you can see on Slide 11, were up $218 million with growth across almost every asset class. In the fourth quarter, we generated a 6.4% annualized organic growth in long-dated assets when you exclude the institutional index, which are lower fee and a bit more volatile in the flow basis. The full year organic growth rate on the same basis was about 4.2%. So when you combine this with market improvements, this was a key driver to the 11.7% growth in base fees in the quarter compared to a year ago. We entered 2013 with the benefit of our 2012 flows -- the 2012 market of improvements and positive flow and organic growth trends. You can see that in the pickup in the growth rate in the second half of 2012. This is all positive [ph] momentum for 2013 revenue growth. As we look forward to 2013, we've made real progress. Outflows and scientific, equity in the fourth quarter were down to $2 billion. And our outstanding performance track record leaves us very confident in this product. Our fixed income performance is also strong in attracting institutional and retail investors. And in fundamental equities, we've made a series of changes throughout 2012 that are beginning to positively impact performance. A number of trends from 2012 are expected to continue into 2013, such as the growth of ETFs retirement themes, including growth in defined contribution assets and growth in appetite for income, solutions and alternative products. In addition, we've positioned ourselves well through organic investments to meet investor appetite for emerging market product, as well as to take advantage of more opportunities with clients in Asia and Latin America. On Slide 12, you can see expenses were up 8%. That compares to the 14% growth in revenue, primarily driven by revenue-related factors, including performance fee-related revenue sharing. The full year comp-to-revenue ratio was 34.9%. This is right in line with our 35% trend, which has been totally consistent over the past 6 years. G&A expense increase is up $30 million were more than explained by our investment in marketing and branding, including the relaunch of our iShares brand. As we look forward, we will continue to invest in our brands. I would expect 2013 marketing expense to be roughly in line with 2012 for the full year, though we do plan to begin the year with very strong messaging. Given the positive client reaction to the campaign, we remain highly confident that this is a critical, long-term investment in the business. So to summarize, in 2012, we delivered organic revenue growth driven by our strategic focus areas, healthy margins and strong operating cash flow which we returned to shareholders. We've consistently run the business to serve our clients and deliver value to our shareholders. Year end is a good time to reflect on a few metrics, which put our consistency and our long-term track record into perspective. Our 2009 dividend was $3.12. Our 2013 dividend of $6.72 is more than double that level. Our pro forma 2009 operating margin for the BlackRock BGI combination was 36.8%. Our 2012 margin of 40.4% has reflected steady year-over-year improvement and has contributed 2 percentage points of operating earnings growth, that's beyond the revenue-related growth in each of the last 2 years and even more than that, in the year of integration. We're particularly proud of this result in light of the investments we've made to grow the business and to serve our clients in an increasingly complex and demanding regulatory environment. Most importantly, our platform, investments and client relations have generated revenue growth, which has been the core foundation to our overall growth in operating income which, when combined with our share repurchases, has accumulated to an 11% 5-year CAGR in EPS. Looking ahead, our focus on performance and the strategic needs of our clients and our ability to generate cash flow and reward shareholders leave us well positioned to deliver in 2013 and beyond. With that, I'll turn it over to Larry.

Thank you, Ann Marie. Good morning, everyone, and thanks for joining the call today. As you can see from the earnings release, our quarterly and year-end financial results were very strong, 14% increase in revenues, 29% increase in diluted EPS compared to the fourth quarter 2011, with accelerating organic AUM growth approaching 7% annualized in the fourth quarter. During the fourth quarter, we generated $47 billion of long-term net new assets. In total, we generated $60.8 billion when you include cash and advisory. For the year, we generated over $107 billion of long-term net inflows. When you exclude the 2 index products that we previously announced in terms of our outflows, the big, large, fixed-income index product that we lost because we chose because of the fee compression that the client demanded. And also, we should keep in mind during the year, we reduced our advisory assets by $75 billion through the distribution to back to the New York Fed on Maiden Lane and paid a nice profit to the American taxpayers related to our success in navigating those portfolios. So at year end, we ended up with the highest AUM ever at $3.8 trillion. But more importantly, this was not just in one product area. Our AUM levels reached the highest levels in institutional, retail and iShares. Another testimony to the broad-based platform that we've created here at BlackRock. Our equity and multi-asset product classes are each at the highest AUM levels in history. This quarter, we crossed over $1 trillion in institutional index products. In EMEA, we saw client AUM, also at its highest level, now making up over 30% of our total AUM, another point above the diversification of our business model on a geographic base result. So these results clearly demonstrate the tremendous value and the still enormous potential we have in our diversification, our scale and our global reach. We are seeing proof that the investments we have made in people, products, technology over the past 3 years are paying off. And I think it's the consistency that we've been discussing with you that we are going to invest in people and technology. We're going to invest in brand and that is beginning to pay off in the financial results. This quarter, we saw positive asset flows across every client channel in every geographic region. At the heart of our diversification strategy has been a strategic emphasis, a combining act of passive [ph] capacity and capabilities to offer clients a holistic investment solution. To me, it is particularly gratifying that our people have shown quite dramatically that active and passive not only can live together, but indeed flourish to the benefit of our entire organization, but more importantly, to our clients. Our clients are coming to us, not just on one strategy, but a holistic approach. And the fact that we can provide them a beta, a alpha with risk management overlay, no other organization in the world can do that. We also continue to maintain a relentless focus on investment performance and we are seeing continued strong momentum in our fixed income performance and our scientific active equity products, where we have a number of top quartile performers. And we're seeing signs of improvement now in our fundamental equity product sets. And I mentioned last quarter, we have replaced a number of underperforming equity teams over the last 18 months, and I'm pleased to say that most of the changes are behind us. And in each of these new teams, they're performing above their respective benchmarks since they have taken over. These are the investments that we have made, these are the investments that in the short run are very costly, but we are beginning to see the results of those investments. And I feel very confident that we will see those benefits continue in the quarters to come. Our diversification gives us a powerful competitive edge as we move into 2013. In fact, BlackRock, more than any other organization is equipped to meet these client needs in an environment of unprecedented complexity and uncertainty that will differentiate us and help us ensure that we continue to track clients and nurture increasingly deep, hopefully productive, relationships with them. And that is why I'm as passionate as I have ever been about the future of BlackRock. Let me turn to the fourth quarter and the full year results. We have been living in a strange investment environment for some time. Economic and political uncertainty persist. Unfortunately, it will -- they will continue to persist. Lower rebate -- rates remain. A tax on savers remains a problem in terms of the underfunding of pension funds -- plans that are getting worse. And demographic because they're changing with more people entering retirement and living much longer in retirement and are not prepared to meet the needs of elongated longevity of life. So we are seeing with these big macro challenges, we're seeing several megatrends in investment behavior. The secular shift to passive investing in ETFs, a focus on income and retirement, clients are barbelling risk using passive and high alpha product strategies including alternatives. Importantly, these themes represent strategic growth areas for BlackRock with ETFs, income and retirement products, index and alternative strategies, which have accounted for over 50% of our flows in the fourth quarter and 75% of our flows of the year. So these are the themes we discussed over the last few years with consistency. These are the themes that we discussed in our branding initiative to helping our clients understand their issues. And I believe the results of those flows are speaking loudly with selecting the right themes and understanding the macro themes that are impacting the investment environment. Over the last several years, we've invested heavily in our businesses and businesses and teams to position ourself for these megatrends. In addition, in 2012, we began marketing the BlackRock and iShares brand far more aggressively than ever before. Our marketing communication efforts are designed to raise awareness about the investment challenges facing our clients and the breadth of solutions that BlackRock and iShares offer to help navigate these very challenging environments. These efforts have been extraordinarily positive, even more than I and all of us have expected. As measured by increased awareness of our brands, more traffic to BlackRock directly and through intermediaries, and most importantly, in growth in our market share and assets, which is particularly evident in our ETF flows. With ETFs, we continue to witness broad-based adoption among both retail and institutional clients. We finished the fourth quarter with the #1 share globally with -- in ETFs with $35.7 billion of new assets, our highest net new business in a quarter since the merger of BGI in 2009. In addition, iShares finished in 2012 with net new business over $85 billion or a 33% market share. Again, our best year since 2008, representing a 14% organic growth for the year. I am very pleased to tell you that our iShares AUM ended the year at $753 billion. Clients certainly appear to be re-risking in the fourth quarter. I am not sure I will call it re-risking going forward because when you look at the duration of treasuries, a 15-basis-point movement means you lose your entire coupon or your performance for the year. So what we are seeing is clients understanding the embedded risk that these low interest rates or bonds and are now migrating into equities, not necessarily in re-risking, but looking at the relative values of the income that equities can provide, and importantly, the upside potential in a modestly growing environment in our world. And so this is a huge benefit for us. And I know many people talk about this, a re-risking, and I think we should stop talking about a re-risking because of the nature and the nature of fixed income relative to equities. Our iShares equity in fixed income AUM is up approximately 27% and 25%, respectively. Our Core Series, the new products we debated in October, had about $4.6 billion in net new business, representing about 17% of our U.S. flows. And all our regions posted positive flows in almost every asset class in ETFs. In the coming year, we will do -- we will expect to see a pickup and actively manage ETFs with a change in the SEC rules on derivative use. But I'm very impressed with the statement from Barron's magazine that came out this weekend. And I state, "Actively managed ETFs maybe the biggest story that never quite happened." And so there was a lot of noise about actively ETFs. We believe in them, but we don't expect them to become anything large to the extent of what core type of ETFs will produce. I remain very committed to our -- growing our iShares franchise both organically and through acquisitions. Consistently, we announced last week that we entered into agreement with Crédit Suisse to acquire their ETF business. This is our second ETF acquisition in the past 12 months. Claymore, a Canadian ETF platform, was done in January of 2012, another good example of adding unique product capability and unique markets consistent with what we were saying for the last few years, doing fill-in acquisitions where we believe we have great opportunities. And the Crédit Suisse deal also represents a major new commitment for BlackRock in the Swiss market where we see significant opportunity to build out a full suite of investment offerings in Swiss dollars. And this is as evident by our acquisition or -- the Swiss Re Private Equity funds of funds business, which we closed this past September. Overall, a standout quarter for the year for iShares and we have begun 2013 with an incredible momentum as you could see in the public data of the flows and ETFs in our dominant position. Let me talk about our other strategic initiatives, and the first one is income, which continues to be a focus for all investors. It remains a key market theme and driver of inflows for us. In a low rate and volatile environment, investors are seeking products that can move consistently with the markets, that could withstand changes in our environment. And those are the products with high dividends and high-yield products that provide enough income to warrant the risks. This is leading to strong demand in our income-oriented products which, last year, we generated over $18 billion in flows. We saw this trend manifest up in our retail channels, where we generated long-term net inflows about $4.1 billion, dominated by fixed income and income-oriented products. Both U.S. international retail generated about $2 billion in net new long flows respectively. For the full year, we saw $11.6 billion of long-term net flows, and for the end of the year long-term retail, about $403 billion in this area. In 2012, consistent with what we talked about the barbelling of risk, we launched 3 alternative retail products to bring higher alpha institutional quality hedge funds to retail. We experienced one of our strongest quarters to date in the retail alternative flows about $275 million. We now have nearly $10 billion in retail alternative products. Let me turn to the second strategic initiative and that was retirement, which continues to be a theme about longevity, aging population, changing demographics worldwide which are driving new investment decisions. The market landscape is shifting from defined benefit to defined contribution which is driving strong flows for us. We, in our channel, we generated $29 billion in net flows for the quarter, which represents a 9% organic growth. There's no other DC manager that had a 9% organic growth and of that, $2.4 billion and that's inflows in the fourth quarter. Our LifePath target date suite is a key component of our retirement solutions, generating $3.3 billion of new business in the quarter and $14 billion of flows during the entire year. 2013 will mark the 20th year since we introduced this product, the first target date product in the industry. Another example of the innovation of our platform and anticipating needs for our clients. As we anticipated -- let me go into institutional products first. The institutional products produced about $7.2 billion in net long-term flows, driven largely by barbelling and continued to shift in the multi-asset and passive. For the year, we saw about $11 billion in net long-term flows, once again, excluding those 2 outflows that we proactively removed. And long-term institutional AUM at the end of 2012 ended at about $2.3 trillion. And as we anticipated, the shift to passive has proven to be a significant and long-term trend in the industry, one in which we are very well positioned to benefit. Globally, we added about $15.2 billion in net new business in our institutional index business in the fourth quarter and crossed the $1 trillion threshold of institutional index products. We saw outflows in our institutional active equity and some outflows in our fixed income products. The equity outflows was largely due to rotation out of a large cap equity style box and additional withdrawal from our scientific equity one. Some of this, we would expect it as we changed our managers. Some people buy by contract will change their -- they will pull out assets if we change their managers. This is something we anticipated. This is something that we expected. However, our new teams in these products have already shown a healthy change in our performance, and we expect to see that change over the long period of time as we continue to build out positive alpha in those product areas. And in the fixed income product areas, we are seeing clients trying to navigate, some moving out of core fixed income, into other products whether it is alpha products, like hedge funds, or in some cases reallocating back into equities. We still believe there is a lot of opportunity in fixed income, so I don't want to sound harsh about it. I think many of the income products of fixed income, we have great products. I am very pleased to say, which I'll get into a minute, about our performance. Our performance has been extraordinary in some of these products that we've already emphasized. Let me touch on -- before I talk about performance, let me talk about BlackRock Solutions. Revenues were up 2% for the year and 8% since the last quarter. Our Aladdin business posted a very strong yearly and quarterly growth of about 16% for the year and 10% for the quarter. We added $3.5 trillion in new assets on to our Aladdin platform, with the addition of 16 clients and expanding into 10 existing client mandates. I am very pleased to say that we now have 51 Aladdin clients, and we are analyzing on behalf of our clients' assets now close to $14 trillion of assets that Aladdin now helps our clients in terms of analyzing their risk. We see, at this moment, more opportunity for Aladdin and the use of Aladdin than we've ever seen in the history of our outsourcing of Aladdin products to our clients. The pipeline is extremely robust. The dialogues we're having for utilization of our Aladdin products has never been as strong. Let me now touch on performance, which I'm very pleased to talk about. We have, over the last year, talked about how we have this relentless focus on performance, making sure we fill the needs and the expectations of our clients. Our fixed income platform reap benefits from the past changes with strong 2012 performance. 84% of our fixed income AUM exceeds its benchmarks for 1- and 3-year period of time. We have -- our 3-year performance is better than the majority of our large competitors. And I'm very pleased to say not just in our core products, but we are top decile in our high-yield products. And importantly, our strategic income opportunity product, which is a go-anywhere fund, we are in the top quartile in that product for 1- and 3-year period, beating most of our large peers. In our scientific active equity area, we are going to make a very large push in 2013 because our results are terrific, with 84% of our products exceeding their benchmarks for 1 year and 90% for 3 years. A tremendous turnaround for the team. This product has better alpha than about 95% of all large cap series products in the world. And so we talk about this as a quant product. This product should be sold to the non-quant players. We hope to be showing this to clients who have large core holdings and large cap products because we have a very, very competitive story to-date. It's no mystery, we made some large changes in our fundamental equities because of mixed performance, with less than 50% of our AUM above our benchmark. We're not satisfied with it. We made some very large changes with the knowledge that in some of those changes, we're going to lose assets. This is a fundamental belief that we needed to upgrade our teams, build stronger and more robust teams, and I am very pleased with a short-term results of our new teams. Our emerging equity team that came on board early last year, they were over 700 basis points above the benchmark, exceeding almost everybody in terms of performance. And we are in dialogue with clients about these products. Our European equity, where quite frankly, there's just not much flows into European equities in the last year, but we grew by about $3 billion in European equities. Our 1, our 3- and 5-year track record is in the top quartile. So we have these pockets that have done well. We have had pockets of area that have done poorly, and we replaced those teams and are building those teams up to be much more respectable. In our multi-asset product area, we were about at the 49 percentile for some of the core products, not acceptable, right at the middle essentially. And we are working it very heavily in making sure our teams continue to build performance that hopefully approaches the top quartile. I am very confident in our teams though. Last year, despite being around the 50th percentile, we still produced 11% returns for our clients in that product. And I should say, it is now the 10th year in a row we earned and generated 11% returns. So on an absolute basis, these products have done fabulously well. On a relative basis, we were right in the middle of the pack. And we hope with the investments of -- in our teams to augment our existing great team that we have, that will -- this will benefit in terms even a better performance. And in alternative, we continue to build momentum, and we've had solid, solid performance in some of our products. One of our fixed income products had a 39% return. Other fixed income products had close to 15% returns. It's certainly -- we talked about the PPIP was a huge success we had for the American taxpayers and our clients in terms of 23.5% net performance. That's after fees, by the way, to our clients. Let me look ahead in 2013. I am very thrilled, excited about the coming year, probably more excited than I have in many years. We are seeing tangible results from the changes in the firm's architecture that we announced last summer to better align the needs of our clients. We're seeing a strong response in the investments that we built in terms of investments in brand and other things like that. And importantly, we continue to focus on execution to achieve consistent organic growth and momentum. We're starting to see the results of that in the last 2 quarters. Since the start of a year, we've generated over $14 billion in new fundings, and we're also looking at about a $49 billion largely institutional pipeline. So the funding at the beginning of the year has been large, larger than any year to have $14 billion of fundings in the first 2 weeks and still -- and having a $49 billion pipeline. So growth is coming from an increasingly global set of clients, with the AUM manage for international clients approaching about 50%. And we recognize the importance of reaching clients through the depths of our products, our technology and our global reach. Our focus areas over the past year have all shown good traction and will remain our focus in 2013. We continue to be heavily focused on ETFs. We'll be focused on retirement and income, alternatives, and risk management solutions will remain the growth areas for 2013. In particular, we are putting even a greater emphasis on emerging markets and, particularly, China represents a key opportunity for BlackRock as both the destination and source for investments. China's market development has been marked by a long periods of status quo, punctuated by regulatory driven and often unanticipated changes. To succeed, we realized we need to be engaged in the key discussions and decisions, particularly helping create options to be in the position to execute successfully when there's opportunities emerging in China. And to best position BlackRock in this market, we're developing key relationships by expanding our investments and identifying senior leaders as demonstrated by our recent announcement this week that Hsueh-ming Wang will be joining us as our Chairman of BlackRock China, which is a fantastic hire for us. We have a true noted leader who will be helping us and me guide our position in China. We already have nearly $200 billion in emerging market assets with the majority of those AUM passive products. We believe there's a tremendous opportunity to grow our active franchise. While it takes time, with strong managers, with performance that will attract clients' attention. For example, we hired a top-tier portfolio manager for Asian equities last winter and already his strong results are gaining traction with our clients. So looking forward, we are going to embrace the changing investment landscape and evolve our organization to maintain superior performance and to meet the changing needs of our clients. The drive for performance and excellence is implicit in everything we do, every moment, every day, every time we intersect with our clients. Our business is a fiduciary-based business. And as a fiduciary, investment performance remains our top priority. We are also focused on managing ourself efficiently and working smarter to ensure strong returns to our shareholders. As Ann Marie discussed, we remain committed to returning value to our shareholders. In 2012, we returned over $2.5 billion to shareholders with our dividend and continued strong repurchase activity, buying a total of 9.1 million shares for the year. This will continue to be a priority in 2013. I am very pleased to say that our board approved that 12% increase in our annual dividend and has given us the discretion to purchase additional 7.5 million shares, which is bringing up our capacity now to 10.2 million shares. The things that we have spent -- in the last few years preparing for and positioning our firms are now happening. I've discussed margins in every one of these calls. I said when there's beta, we will scale appropriately. Our business is scaling appropriately. And in the fourth quarter, we posted a 42.6% operating margin, which is a result of strong organic growth, beta, market discipline. And remember, this is a 40%-plus margin in a year where we absorbed a substantial new investment in our brand, investment in our teams and unprecedented levels of regulatory costs. I've always said that we could easily break through the 40% margin in strong markets, and we did. I continue to believe a full year margin of greater than 40% is appropriate, so we will continue to drive efficiencies to making sure that we continue to build our platform and to build the most efficient asset management firm in the world. So in closing, the key takeaways for me are this: One, after 3 years of continuous evolution and focus in investing in our people, our products, our technology and, more recently, our brand, our clients and partners are understanding our business model more than ever before and the results are validating the benefits of the diverse business model we have built. Secondarily, we've continued to differentiate ourselves from our peers, which uniquely positions us to continue to be driving momentum in 2013. And three, we are relentlessly focused on executing against our strategic growth priorities. Let me just state one thing because, obviously, there's always -- there was some uncertainty about leadership at BlackRock. Let me be very clear about my views of the BlackRock leadership. We have what I believe the best, the deepest management team in the industry. Myself and my team will be leading the business for years to come with skill and innovation. I can't tell you how proud I am in working with my team and how much I enjoy having a leadership team that helps me and the entire firm navigate a better future for our clients, a better future for our shareholders. Once again, I need to just thank our employees for really delivering a great year for our clients in terms of performance and what I would say, a great year for our shareholders in delivering the financial results that are expected from us. With that, thank you, everyone. And we'll open it up for questions.

[Operator Instructions] Our first question will come from the line of Ken Worthington with JPMorgan. Kenneth B. Worthington - JP Morgan Chase & Co, Research Division: I've got 2 questions; they're kind of related. One, there's widespread belief that investors will reengage in equities and you said in your prepared remarks about re-risking. I'd love to hear -- and we think of re-risking as more tactical in short term -- but would love to hear your latest thoughts on reengagement, which we think is more longer term and strategic. So when accounting for the fiscal cliff, are there indications of reengagement in either the retail or institutional investors? And maybe if so, what are you seeing differently in the beginning of this year or even the end of last year, that may have been different than what we saw in either early 2011 or even early 2010?

Yes. Ken, I was trying to talk about that. I agree with you, re-risking is a tactical trade. Obviously, in some areas, that may be happening. But the flows that we're seeing institutionally through iShares and mutual funds, it appears to me that people -- the Federal Reserve's actions in terms of persistent low rates and now making, in my mind, fixed income much riskier, it's hard for me to say moving from fixed income products to equities is a re-risking trade. It's more of a diversification of risk trade maybe. And we are seeing very -- beginning to see some large scale, what I'll call, systematic changes in behavior. Since the beginning of the year, we have one large institutional client heavily oriented towards fixed income. They awarded us about $6.5 billion entirely in equities, mostly in index. But in our conversation with the client, it is a reorientation of risk, how they think about it. And as I said, this investor has predominantly been a fixed income investor, and they're diversifying their portfolios accordingly. And so I think these are -- the movements we're beginning to see is -- it's not tactical anymore. It is much more of a secular movement. And I think that will -- even in the ETF flows, you're seeing a consistent flow. If you look at the flows year-to-date, and I'm talking about the first 15, 16 days in ETF, the flows, I think, as an industry are more than 80% in fixed income. This doesn't feel to me that it's a risk on tactical movement. It's people are looking for exposure in more equity-like products.

Your next question will come from the line of Robert Lee with KBW. Robert Lee - Keefe, Bruyette, & Woods, Inc., Research Division: I have a quick question, maybe following up to Ken's a little bit just on this topic. I mean, you gave that example where that one institutional client is looking at shifting its allocation towards equities. In your view, I mean how -- if we see that more broadly or if you've seen them more broadly, do you -- outside of maybe dividend strategies, I mean, how do you think -- do you think most of that will actually flow to beta strategies, like your index products, or more to ETFs? And to what extent do you think or the fact that tax rates have gone up at least on individuals and tax flow accounts that, that may even accelerate demand for ETFs and the index products at least in the retail world?

Well, I mean, this one client is a non-U.S. client so tax rates had nothing to do with this one client. It was a global client. I think everyone are looking at different strategies. As you said, I think there is a strong movement towards dividend-oriented products. There is strong movement into beta products, as you barbell, for those clients who are barbelling risk or going into beta products and may be at 20% allocation in the higher alpha products. But it's our view, and this is why we're making these large investments, there's going to be great opportunities in the alpha products. And so I think what you're going to see over the course of a secular trend, which may take 1 to 3 years, maybe longer, you're going to see people, as they get comfortable in equities, maybe through beta products, they're going to start navigating and seeing opportunities in alpha products as long as the risk reward, total return after expenses are greater than the beta products. And so to me, we believe that will be the trend. We're betting on it. We're investing in it. And quite frankly, I'm happy we're not seeing this today because we're building our track record with a lot of our fundamental teams right now. And if the re-risking was going on or the secular change in the active equities today, I'd miss a lot of it because I don't have the duration of time and performance with the new teams. We benefit in some of our teams but not all our teams. So we are pretty pleased with the reorientation into equities chiefly going into beta products. And as we build those relationship with our clients, and this is -- when we did the BGI transaction, I said from the very beginning to a lot of people's skepticism, that having beta and alpha side-by-side is a very strong position. Most people never thought they could be side-by-side. We believe by working with our clients, we're agnostic whether they go into beta or alpha. We want to have a relationship. By having our clients right now going into beta, we know what their emphasis are doing. We know what they're thinking about. And then we now have time as they think to relook at alpha products, that we could have that dialogue. So this is playing totally into our strategy. Robert Lee - Keefe, Bruyette, & Woods, Inc., Research Division: All right, great. And maybe just a follow-up on the money fund business, just kind of curious. I mean, yourselves and a bunch of your peers have announced just in the past week or so about reporting daily NAVs. And in general, at least my general sense is, I guess, the industry is kind of, yourselves including, maybe come to the conclusion that at this point it may not be perfect but maybe floating NAVs is the best solution for some products at least. Can you maybe talk a little bit about your client reaction to that to the extent you've had interactions about it or...

Sure, sure. Let me just be precise with it. We have always had a constructive positioning in this. We always believe that we needed to change the money market industry to make it much safer with less systemic risks. We always believe that we need to create a sounder product for our clients and users of the product. So I've always believed that we needed to have a constructive dialogue with the regulators in Europe and in the United States, so we have taken a much more constructive approach than some of our peers over the years on this point. I am very pleased with the movement that we made in this industry. This was led by Goldman Sachs. But I do believe daily NAV is a good step in -- by providing more transparency, which we've always said at BlackRock, we're prepared to do this. And we may disagree with the outcomes and how they -- what ultimately comes and how do we navigate risk, but we're having a constructive dialogue. I do believe that net result will be a safer money market fund industry, and I believe the product will be sound for investors. I'm not here to suggest that we're 100% supporting floating rate NAV. We believe there's other approaches that could probably achieve the same results without a float, but I'm not -- we're going to be constructive on this. But the key element is to make this a product in which our investors see opportunities to invest to make excess returns. At the same time, making sure as an industry, we don't represent real risk for the industry and for society.

Your next question will come from the line of Bill Katz with Citigroup.

You mentioned, Larry, maybe the last call, last couple of calls, the opportunity to grow the ETF business and the fixed income platform. I'm just a little bit curious if you could maybe update your thoughts on that and where you see the greatest growth from, either geographic or product-wise as well?

Yes. Rob Kapito is here as President. He's spending a great deal of time on this. He is the BlackRock board member on our ETF iShares platform. Rob, why don't you just come here and answer that question.

So Bill, we see -- we still see a lot of demand in the emerging market sector because clients are still a bit confused as to how to take advantage of the individual areas in the emerging markets, and this gives clients great diversification very quickly with liquidity in that market. So we think that is an area that's going to continue to grow. We also see a significant amount of people that are looking for buy and hold, and that's why we created the new Core Series. And we're starting to see a lot of interest in that Core Series, especially from the individual investor. And that's very exciting and that's why we created that, so we'll continue to be talking about that. And then, of course, we have some innovations that we're going to introduce into the marketplace. One is an ETF that's going to look a bit like a bond but have all the benefits of an equity and the attributes of a bond. And with all people struggling right now to find diversification in the bond market, we think this will be a very liquid and transparent way to get into that market. So we're bringing the BlackRock innovation into the ETF market. And we hope in the next several months to make several introductions into this market with products that we think are very, very much in demand from our clients, both in fixed income and in equities. And I would say the other 2 areas that we're very excited about, of course, is the high-yield area. As people look for more income and diversification, the HYG product that we have continues to grow, and we have top decile managers in that area in the active space. And then we also have the ETF space to offer them product as well. And lastly, with the continued demand for income, our dividend income ETFs are also seeing a lot of interest. So we're very bullish on the products that we currently have. But we're going to bring the BlackRock innovation to bear very, very shortly, and we'll be introducing those into the market. You'll hear a lot about them.

Okay, that's helpful. And then just, Larry, coming back to margins and your commentary about at least 40% margin is notable. Throughout 2012, I think it was a very big year for expenses that you highlighted a few things. As you looked out to this year notwithstanding the marketing spend you mentioned this first quarter about messaging, but are you at a point where the investment spend can't keep up with the revenue growth, that could allow for the margins to be even structurally a bit higher. I mean, all I keep hearing is scale and flow leverage. And so I'm wondering, can you actually plow the money back fast enough not to let the margins go a bit higher?

As you know, Bill, we do manage our investments very accordingly to where we see the -- very specifically related to where we believe our margins should be. We made a lot of investments. I don't believe we have to make as large of investments in terms of portfolio teams. Now we need to start beginning to see the revenues there. But we are going to innovate. As Rob discussed, we'll be -- we are investing a lot of money in technology. We are actually investing a lot of money right now in terms of making sure we're compliant with all of the regulatory issues, which I think is going to be a burden, a much greater burden for our competitors because I don't think they have the technology to do that because I think all of us are going to be facing much greater scrutiny in terms of regulation. And this is not just a U.S. phenomenon, it's a global phenomenon. It's true in Japan and Europe and everywhere else. So it is -- it's broad-based, and we're spending a lot of time on that. But no, if we have a stable to upwardly moving markets, there is no reason not to think that our margins can increase and, therefore, we're not going to need to invest as much going forward as you would continue to see margin increases. But look it, I've come a long ways in the last few years. By talking about baseline around 40% margins, and we've been able to deliver -- some of you think I'm a little too pessimistic on how I try to manage margins, but I really do believe -- if I had to think about what we've done the last 3 years in terms of investing and now we're starting to see those benefits of investing, at the same time, very big increases in our margins. So we are -- we will continue to invest where we see appropriate. I will continue to buy fill-in companies in terms of capital management, buying companies that we see -- the opportunities like we saw with Claymore or the Crédit Suisse ETF platform. So it's going to be a mixture of investing and passing through higher margins to our shareholders.

Your next question will come from the line of Craig Siegenthaler with Crédit Suisse. Craig Siegenthaler - Crédit Suisse AG, Research Division: First, just given your focus on organic revenue growth really versus organic AUM growth, can you provide some perspective here on the mix shift that we're seeing away from active equities and alternatives and maybe look at it a different way? And I also know lower industry demand for C assets [ph] is kind of impacting this. But what do you really expect management fee accretion from growth from higher fee products? Is this something you're still looking for?

Yes. I mean, we still -- in our trends, we are still seeing the fact that revenue growth, from what we see in our own data, is exceeding AUM growth. And that's founded on -- some of the growth we're experiencing is in channels and opportunities where those fee relationships inherently are higher. And if you just think about within, for example, the fixed income world, what's more appealing now is a more specialized product compared to a more core product. So we have been seeing that trend within our 2012 data, and we do expect that again in 2013. Craig Siegenthaler - Crédit Suisse AG, Research Division: And then just a follow up on the Solutions revenue, which had a really nice sequential pickup here. Can you help us think about any seasonality or unusual items that may have impacted the fourth quarter results? And also, can you provide us an update on the revenue mix here? I believe there's kind of 3 main segments, one is sort of risk management Aladdin, two is long-term AUM and three is really short-term assignments.

Yes. Oh...

Oh, go ahead -- I'll talk about the -- you talk about...

Yes. So first of all, with respect to the quarter, it was a very clean quarter. A year ago, we had a onetime large completion. So when you look at it compared to a year ago, that's the difference you are seeing. But if you look at this fourth quarter, it was a pretty clean quarter. And as I've said before, the mix of those core Aladdin revenues are 65% to 70% of those overall revenues. So you're down to what I would call the non-repetitive. We've got to earn them again, or a vast minority of the assignments. So, so much of our BRS assignment revenues are now coming from the core repeatable revenues.

I would say what you're also seeing is a number of completions in the setting up of the Aladdin assignments. As you know, the setup of Aladdin, the implementation phase, very low fee, very highly cost in terms of manpower -- of the implementation. And when you begin to now go from implementation to having the full Aladdin setup working for our clients, then the overall fees kick in. And that's also what you're starting to see on the revenue line of Aladdin revenues. And as I always used to say, sometimes we got to balance it out because when you are doing the initiation and the setup of Aladdin, it's -- they're very low fees and very high expenses, harmful for our overall margins. But once that kicks in, obviously it's a net positive in the margins. And so you're seeing the completion of implementations and the beginning in some of these clients of the full Aladdin setup. And as I said, we have an extraordinary pipeline in 2013 in terms of the Aladdin utilization.

Your next question will come from the line of Michael Carrier with Bank of America.

Maybe a question on the cash flow. You guys increased the dividend and increased the authorization. I think if we look over the past 2 years just on the buyback side, you had some ongoing buybacks and then you had some, I don't know, unusual or the big tranches. So when we start thinking about going forward, your strategy on the dividend seems very clear. But when you look at the remaining, say, roughly $2 billion of cash flow that you generate, do you have like a sense of like priority of like 50% of that will be used for ongoing buybacks and 50% maybe for small acquisitions, investments, seed, regulatory? Just trying to get a sense if we can somewhat predict...

Yes, it's hard for me to -- first of all, we do have a strong consistent dividend policy. Then the rest of the capital management I look at are the opportunities we're investing. If I see opportunities in investing that are more creative than share repurchase, I will do more of that. If I don't see as many opportunities -- or we have many opportunities that don't require that much money. Our commitment is to be really robust in our capital management after, as you said, regulatory stuff and all that other stuff. So there could be a moment in which the ratios move quite extraordinary to all share repurchase of our cash to a period of time when we see opportunities, a smaller repurchase program because of opportunities in the inorganic acquisition area. But you should assume, if we believe -- if we are going to do an acquisition -- in every acquisition, it has to be accretive to share repurchase.

Okay, that's helpful. And then just as a follow-up, you mentioned in the past that the ETFs, sometimes you experience some seasonality as the year goes on and fourth quarter is strong. But it also feels like the structural growth in the adoption of the ETF product is underlying, driving a lot of the strength. So I just want to get a sense, like 2012 was a strong year overall, the fourth quarter was strong. Do you still tend to see some seasonality in the first half of the year? Or do you feel like, given the marketing spend, given the structural growth that you're seeing, that's enough to offset some of that seasonality?

Well, last year, we didn't see that seasonality that we saw all the years before. So we always used to see a huge fourth quarter and outflows in the first quarter. And last year, that did not happen. And so far, this year, we're seeing strong inflows after a strong fourth quarter, which, if this persists, I think it is fair to say there's structural growth in the industry itself. And it certainly feels like there's structural growth in the industry. And as the largest participant in this, we're a beneficiary of that. So I'm not going to make one claim at the moment. I don't think I have enough information. But if we're -- in our conversations with our clients, more and more clients are adopting a utilization of ETFs. In fact, clients today that have heavily used lower fee index funds, they're now saying, "Okay, I want a percent of my index funds to have even greater liquidity." And so they're seeing -- so they're seeing some now investing in higher cost ETFs relative to their index fund, but that allows them with much more flexibility and portability for them in terms of navigating their asset allocations. So you are seeing more utilization, more adaptation of ETFs, I think, worldwide.

Your next question will come from the line of Marc Irizarry with Goldman Sachs.

A question on the alternative business. You mentioned that you're growing your alternative retail AUM. You had some good flows there. But I guess if you look at the overall dollars in the alternative buckets, still relatively small, I guess, versus the totality of the business and maybe the opportunity. Can you talk a little bit about this convergence, which I think might be a bit of a buzzword? But I mean, the alternative retail opportunity for you guys, what that means and what sort of the outlook is to grow alternative product in the retail channel?

Yes, let me let Rob answer that.

So like institutional investors that are trying to get some more yield and better returns in a low rate environment, the retail investor has also now started to look for alternative investments. Previous -- in previous years, you had to be an accredited investor, and there wasn't a wrapper that was sufficient to be able to sell to the individual investors. And over the last several years, we've cracked that code and have been able to create mutual funds that have alternative type investments in them. We have launched a series of these mutual funds now that have alternative type investments in them in the various sectors, whether they be anything from commodities, real estate and almost quasi hedge fund-like products that we are already seeing some very strong demand and have interest from all of the wire house systems to be the manufacturer of that particular product for their distribution. So we expect that to continue. The second area that I would put in alternatives would be model-based investing where a lot of the individual investors are also clamoring for more yield. And that is going to be distributed through models that we are going to provide to the distribution houses where they will either execute the trades based upon our models, or we will execute the trades, and a good portion of that is going to be in alternative investments. So today, there is much better wrappers and much better products that are going to allow the individuals to invest. And we expect to play a very big role in the manufacturing of that product for the individual investor.

Okay, great. And then just in the multi-asset class segment, if you will. Can you talk a little bit about how those products are being used in the channel? I mean, obviously, performance, is there sort of, I guess, more of a risk-management approach when you think about those products versus maybe more sort of upmarket capture vehicles? Or you could just discuss what's happening in multi-asset class a bit.

So there are both sides to that. There are those that want to take more risk in those, and there are those -- there are probably more people that want a risk-managed approach to the multi-asset product. And there, again, we're doing the same thing for the individual investor that we're doing for the retail investor. I would just say that the space has become very crowded because a lot of the smaller hedge funds are crowding into spaces such as the distressed areas such as the credit area. But the biggest piece of that is going to be what we're going to call "outcome type" products where people are looking for a specific outcome and -- or you can describe that as target date. And we're putting together those type of products in the multi-asset area that I don't think a lot of our competitors are really thinking about. And that takes a lot of technology and risk management in order to provide the appropriate outcome to the type of investor that's there. So in the generic hedge fund, distressed type multi-asset, there we're seeing a lot of competition. But in the multi-asset where it's more risk managed, target date, outcome oriented, that's where we're really going to be able to grow. One area that we have that you'll notice, we're working on the performances, our global allocation product. It's a flagship product. Over any 10-year period you want to look at, it's had stellar performance. Last year, our performance was not as good as some of our other competitors, and that's because we had a little less risk on it. But the long-term performance is very good, and it's a go anywhere-type of product, global-type product that clients will continue to look for, and we have a good long-term record in that. And we hope to continue to raise more assets in it.

Our next question will come from the line of Alex Kramm with UBS.

So I just wanted to come back to the ETF business and maybe a little bit more detail. You just talked about the strength in the fourth quarter and year-to-date, but I think one of the things we would point out is clearly, that you've benefited from the whole index shift between, well -- that Vanguard announced. And when we talk to some investors in that space, clearly, some people switched right away back to your product. So just wondering, when you talk to institutional investors in this space, do you think there's still a big pipeline of folks that are evaluating and might shift back to -- or want to be in the MSCI products and will be in your iShares products? Or do you think that's basically behind us and it's now a battle for new flows?

Well, first of all, Vanguard is a tremendous firm, a great competitor. They're a big client of ours. We have never done anything in -- as something that we are -- a fight between BlackRock and Vanguard, that's a topical myth by the media. We are just trying to execute our strategy and provide what we think are great outcomes. We are still in conversation with a number of large-based clients right now on our emerging market product to go into our emerging market ETF. And so specifically, to your question, there are still more flows to come, we think. But let me just cite one other reason. Our tracking error on that product was better than our competitors. And so when -- once again, people just talk about management fees, and we have kept on telling everyone, "You're not looking at the total way how they should be looked at." Especially for institutions who are cognizant of tracking error bid/ask spread among the issues around management fees. And so when we look at our positioning and our -- even in our emerging market product area, we had a very competitive product last year. So it's not just because of a change of index. It is also because, if you look at our success in navigating that portfolio in 2012, we had better tracking error, and we have a very tight bid/ask spread. So you add tracking error bid/ask spread plus the fees, they're very competitive to each other. And that's how we look at everything. And I think the marketplace is starting to recognize it in terms of efficiency for after-tax. No firm can claim better than us. We spend a lot more time in making sure our clients get a complete product, whether that is tracking error, whether that's tax efficiency. So we think about all these things. We just don't think about one dimension. And I do believe it is that consistency of looking at it on behalf of our clients, whether this is the appropriate index, whether we have the right tracking error, whether we are managing to an after-tax return, I think it all comes together that we have a very compelling product.

That's very fair. But just to stay on the index side just for one more minute, or one more question here, I think in the past, when you've talked about the whole pricing competition and so forth, you've also said that maybe in the process, you might be able to reduce some of the index fees you pay to save some of the expenses. So does this whole index selection now show that there's actually a lot of power in the index and we'll not see abilities to reduce pricing there? And then on the flip side, does it actually give you more appetite to be in that index business yourself, if regulators allow it, either by buying somebody or building something out organically, which I think you've talked about before?

So as a fiduciary, we have to be relentless in terms of our expenses. We have constant dialogue with our service providers, whether they're index providers or custodial banks, to get the lowest fees possible. At this moment, we have no true desire in buying an index provider. They do a very fine job, but their -- our job is to be a fiduciary, making sure we get the lowest fees, but also helping -- being partners with the index providers. And quite frankly, we believe MSCI provides a great index product. They've done a very good job, in my mind, navigating global index products. And we will continue to work with them, but we will continue to be a fiduciary on behalf of our clients, making sure we have the lowest fees.

Your next question will come from the line of Matt Kelley with Morgan Stanley.

So just wanted to come back to the institutional client that you mentioned who is predominantly fixed income switching back to equities or in discussions to do so.

They have done it.

Okay. So it's done. So curious to get -- I've seen you talk about it in the past increased allocations to alternatives, now we have this whole debate of fixed income to equity. So that particular client, what sort of allocation strategy did they have before in percentages by asset bucket, if you will? And how are they shifting that now?

I don't -- that's -- I've never -- I don't know that. That's not terribly transparent to me. We -- but it's fair to say this client is heavily dominated by fixed income products by the nature of its liabilities, the nature of what it historically looked at risk. And what they're saying today, that because of low interest rates -- and keep in mind, this is not a dollar-based institution. It's not a U.S. institution. They believe you're going to be able to get higher returns with the appropriate risk. So it was an extraordinary amount of reallocation into equities and we are a benefit of that. We having dialogues with many global institutions now about this whole idea of relooking at equities, and I think this is going to be one of the major themes of 2013. And as I said, I don't know if this is -- we should call this a re-risking strategy anymore. That's my new view. It's looking at, on a risk-adjusted basis, where -- on a relative value, where you can have the most appropriate returns. And so I think you're going to see movement -- more movement into equities, and this has been my overall theme personally for the last 2 years, and it's now starting to manifest in behavior with our clients.

Understood. So along the same lines, and then I'll -- just one last one from me after that is, is there an intermediate step in terms of -- do you think that balance funds, hybrid funds take more inflows than equities in the near term instead of just a larger shift from one asset class to the other?

No question. There are going to be some -- especially on the retail side, you're going to see people looking for more -- a global allocation-type of product, giving the management of a fund the responsibility of allocating across sector and product and region. So it really depends. So a lot of clients believe they could do that themselves. They have their own CIO, and they're using our products as vehicles in doing so. And other ones are going to say, "Why don't you guys do that on top of what we already asked you to do?" So I don't view it as one trend in that. It really depends on the specificity of a client. Does the client have their own CIO? Do they not? How do the clients think about it? Do the clients have consultants -- if a client has a consultant, they may think a little differently because a consultant will do the allocation, working alongside with the client. So I don't think there's one prescribed behavior. I am pleased to say that we are in dialogue with many clients working alongside with their consultants, working directly with the clients in terms of talking about risk exposures in a low rate environment.

Okay. And then one last one for me, and sorry to make you sort of repeat yourself on the operating margin, but we've talked a lot about the marketing spend and where you are on that, but you also made a comment that a lot of the hiring on the equity side, the active side of the business, is kind of behind you. So given that, if we continue to see a bigger portion of your assets and revenues in the passive side of the business, is it fair to assume that the comp ratio should go down? So that should be an incremental benefit to the margin as well, right?

Well, I hope our barbelling at BlackRock continues and we have just as great a performance fees, if not greater. I am very pleased to pay a lot of comp when our teams pay -- provide the returns that they did. So I'm not going to make a judgment on that, but if -- there's no question, if more and more money goes into beta products, then you would see changes in the comp line in terms of that behavior. But our success will be -- if a lot of money goes into beta, there is going to be money going into the alternative strategies that we get a component of that, too.

Your next question will come from the line of Daniel Fannon with Jefferies & Company. Daniel Thomas Fannon - Jefferies & Company, Inc., Research Division: I guess just a follow up on a comment you made about some of the outflows you have been seeing on the active equity side as a result of the personnel turnover. I guess, where are you in that process? And do you think we should see more of that over the next kind of 6, 12 months?

Actually, with -- one of our recent teams that we brought on we're actually in the process of potentially having a big block of assets moving to BlackRock. So -- but if we have the performance with our new teams where -- we will not see the outflow. So I don't -- I think we're chiefly behind. I know of one area where we -- I think in the first quarter we're going to see some outflows, but it's very modest. But in all the other cases, I think those outflows are chiefly behind us. And as I said, we're now seeing -- we're now in dialogue of a big block going into one of our new team's products. Daniel Thomas Fannon - Jefferies & Company, Inc., Research Division: Okay, great. And then I guess on the regulatory front, you've already addressed the money markets side. But I guess, if you could maybe update us on the sec lending potential changes in Europe and then any other issues out there that you are either monitoring or thinking might be impactful to the business over the next kind of [indiscernible]...

Well, there's no regulatory changes for sec lending. There was a non -- there was a group that's talking about sec lending, but it was -- there's nothing -- that was not a regulatory statement. It was just a group that's saying there should be issues. So that's not -- we're going to have more supervision. We're going to have to be more buttoned down. We're prepared to be working with all our regulators and providing more data, more research. To me, that's going to be -- we're going to see a lot more scrutiny and much more need for information to our regulators worldwide. So it's not -- it's something we're living with. We're not fighting. It's just part of our business. But I don't -- we're going to see in Europe the whole changes in retrocessions, so the -- that is going to be probably the biggest change. How do you reward your distributors? How do distributors make money in an area where there's no retrocessions? That's going to be the big change in 2013 in Europe. And quite frankly, I think, worldwide, that question is being asked. How transparent are the costs of execution? How transparent are the costs of information to the retail clients going to be? And how does that impact manufacturers like BlackRock and everyone else? But we're in front of it. We believe we are navigating this quite successfully. As you know, part of our investment in teams, we have teams in Brussels and we have teams in Washington working with our regulators. And so we're involved in that. That was part of our investment, making sure we are considered a constructive information provider to our regulators that we're helping them think about risks and thinking about how they should navigate going forward. So it is just part of our business, and we're not fighting it. And we're building the functionality to provide the information that our clients -- that our regulators are going to ask of us. And I would underscore -- they're going to ask us for that information. They're going to ask every one of our competitors. Maybe that's one of the reasons why Aladdin is picking up more an accelerated type of request for Aladdin because we're going to be in a pretty good position by having our Aladdin position, by providing the transparency of information to regulators. I can't say that about a lot of other firms, and that could be why we're seeing more inquiry.

Ladies and gentlemen, we have reached the allotted time for questions. Mr. Fink, do you have any closing remarks?

Hopefully, everybody enjoys 2013. And let's hope Washington gets its act together and that we could have a sensible solution in terms of our deficits. And if we have that, we can have a very productive year in our markets. That is, in my mind, the biggest drag to our economy. The economy is not dragging by itself, but Washington is dragging our economy by inaction and importantly, confusion. So I'll leave it at that. Thanks, everyone. Thanks to all the employees. I look forward to talking to everybody after the first quarter.

This concludes today's teleconference. You may now disconnect.