Federated Hermes, Inc. (FHI) Q3 2012 Earnings Report, Transcript and Summary

Greetings, and welcome to the Federated Investors Third Quarter 2012 Analyst Call and Webcast. [Operator Instructions] It is now my pleasure to introduce your host, Mr. Raymond J. Hanley, President of Federated Investors Management Co. Thank you. You may begin.

Good morning and welcome. Leading today's call will be Chris Donahue, Federated CEO and President; and Tom Donahue, Chief Financial Officer. And also participating is Debbie Cunningham, Chief Investment Officer for Federated Money Markets. Let me say that during today's call, we may make forward-looking statements, and we want to note that Federated's actual results may be materially different than the results implied by such statements. We invite you to review the risk disclosures in our SEC filings. No assurances can be given as to future results, and Federated assumes no duty to update any of these forward-looking statements. And with that, I'll turn it over to Chris.

Thank you, Ray. Good morning. I will start with a brief review of Federated's recent business performance before turning the call over to Tom to discuss the financials. Looking first at cash management. Average money market fund assets were just about the same as in Q2, while the quarter-end totals increased by $6 billion to $245 billion. Our market share for money market funds remains over 9%. For separate account money market assets, the reported decrease in both average and period-end assets was due to the expected seasonality. The impact of yield-related fee waivers decreased again in the third quarter. Tom will comment further, and Debbie will discuss the money market conditions and our expectations going forward. The third quarter saw a flurry of activity on the regulatory front. On August 22, the SEC Chairman issued a statement on money fund reform, including indicating that a majority of the SEC Commissioners would not support a proposal to reform the structure of money funds. This was followed by a statement from Commissioner Aguilar on the 23rd and a joint statement from Commissioners Gallagher and Paredes on the 28th. Now we expect that the SEC will and should retain its responsibility for overseeing markets and protecting investors, including money market regulation. And it is important to note that this agency, the SEC, has an unparalleled multi-decade record of success in the regulation of money funds and is far better equipped for this mission than the FSOC. Furthermore, the Commissioners concluded all of their statements by inviting constructive dialogue, which is obviously continuing, while noting that money funds are "squarely within the expertise and regulatory jurisdiction of the SEC." And further, "we do not intend to abdicate our responsibility to regulate money market funds, which would be unjustified and at the expense of…

Thank you, Chris. Taking a look at, first, at the money fund fee waivers, the impact to pre-tax income in Q3 was $16.3 million, down from $17.2 million in the prior quarter. The improvement was due mainly to higher rates for the -- for treasury and mortgage-related securities. Based on the current assets and yield levels, we think these waivers could impact Q4 by about the same amount. Looking forward and holding all other variables constant, we estimate that gaining 10 basis points in gross yields would likely reduce the impact of minimum yield waivers by about 40%, and a 25 basis point increase would reduce the impact by about 70%. It's important to note that the variables impacting waivers can and do change frequently. Revenues in Q3 increased 3% from the prior quarter, due largely to having 1 additional day in Q3 and, to a lesser extent, from the impact of lower minimum yield waivers. Operating expenses were reduced by $17.3 million due to a recognition of insurance proceeds, all of which impacted the professional service fee line. Distribution expense increased primarily due to the extra day and to changes in the mix of money market fund assets. Investment income was up compared to prior quarter due mainly to unrealized gains on the consolidated products. Looking at our balance sheet. Cash and marketable securities totaled $368 million at quarter-end. Federated's Board approved a dividend of $1.75. This includes the $0.24 quarterly dividend and a special dividend of $1.51. The dividend will be paid from cash on our balance sheet. This will be the third special dividend paid since 2008, with a total of $5.53 paid to our shareholders in special dividends and $10.30 in total dividends paid over the last 5 years. Dividends return cash to our shareholders and are a result of our competitive financial performance and the earnings we have achieved. As with prior special dividends, EPS will be reduced by about $0.04 per share in Q4 due to the 2-class method of computing EPS, which requires that a portion of net income is a portion to unvested restricted shares for accounting purposes. We are able to pay significant dividends while continuing to invest for growth. Some examples of our growth initiatives are product line expansion, advertising, the recent addition to our sales force, the important steps that Chris mentioned in our -- in growing our global footprint in the acquisitions we have completed, particularly the 2 recent ones in Q3. Looking forward, cash and investments, combined with expected additional cash flows from operations and availability under present debt facilities, provide us with significant liquidity to be able to take advantage of acquisition opportunities, as well as fund-related contingent payments, share repurchases, dividends, new products seed and other investments, capital expenditures and debt repayments. I'd like to now turn the call over to Debbie to talk about money market conditions. Debbie?

Thanks, Tom. Just to give you an update from a rate perspective for the third quarter versus the second quarter. Effectively, we had an improvement in overnight rates. Repo, in particular, stayed very steady in the low- to mid-20s for both treasury, as well as agency mortgage-backed repo. The rest of the yield curve, however, declined and flattened. For instance, 1-month LIBOR ended the period around 21 basis points, down 3 basis points from where we stood in the second quarter. And further out the curve, 3 months, 6 months and 12 months LIBOR all declined 14, 18 and then 18 basis points again, respectively. So although the front end of the curve, on an overnight basis, held very steady and actually improved, the curve itself further out to the 12-month area actually declined substantially in the double-digit mode. This is a reflection of fairly positive credit markets. We've seen good earnings again from a U.S. perspective. And although Europe continues to muddle along, there have certainly been improvements from a liquidity and a discussion perspective with the ECB, and that's played through to spread tightening in even the European sector. And when you look at our other global areas of exposure, Canada, Australia, you're seeing improvement again in those economies. Canada, even at this point, is talking about needing a rate increase, which is obviously something that is music to all of our ears. A couple other items that are of important note that are happening in the fourth quarter, and we continue to watch their development and how in fact the money markets are responding, have to do with the conclusion to Operation Twist, that will -- is the FOMC item by which they are removing from their balance sheet their shortest inventory and replacing it with longer…

Okay, Debbie, thank you. And we'd like to open the call up for questions now.

[Operator Instructions] Our first question comes from the line of Ken Worthington with JPMorgan. Kenneth B. Worthington - JP Morgan Chase & Co, Research Division: Actually, just a series of questions on the dividend, if I may. Number 1, maybe tell us how you came up with the amount? You're going from, I think, net cash to net debt. So how did the potential for money market fund reform and other role changes kind of factor into the decision on the amount?

Sure, Ken. The -- we'll go into net debt, which will be less than $100 million on our forecast. We're not using up all the cash balances. In other words, the cash is sitting on the company. So we're not borrowing to do this. We look at our availability with existing other investments and cash and our revolver and see that we will have what we think is ample supply of resources that we needed for acquisition, for other risk management purposes. And while the term loan keeps marching down, at least for 2013, at about $10 million a quarter, if we need to, we could borrow more from our stellar banking group. Kenneth B. Worthington - JP Morgan Chase & Co, Research Division: Okay. And then to keep pressing this, talk about the uses of cash next year. If you could tell us kind of what your CapEx projections are. You had mentioned expanding in Asia Pac. I assume there are costs there. You mentioned the launch of UCIT funds. I assume you're going to be seeding them. How much are you going to use to seed new products next year? And you mentioned deals, that's something that you guys have done in the past, comments there and size of deals. And then lastly, what are the specific, like, earnouts? You've done a lot of deals. They're earnouts that come in annually. If we look through the end of '13, like, what are payments that will need to be made, given the performance in AUM levels of deals that you've done? So just the -- really focusing on the uses of cash through the end of '13.

Okay. A bunch of questions there. We'll see if we get through them, and if we don't, make sure you follow up. The CapEx, we don't see huge outside things from what we've done in the last few years. We're continuing to invest in there. We're doing some long-term focus on our investment management systems, and so we'll be focused on that. That might move some dollars earlier that would have occurred in '15 up to '13 and '14. But I don't think it's an issue in terms of funding it in cash usage. The investments that we're making with Craig Bingham involve people, systems and that -- you're just going to come in and see that as an expense to us, which won't have a lot of revenue associated with it in the beginning. We will see products there that will be seeded out of our existing cash on our balance sheet. In other words, we'll just -- we'll move our investments around to the extent that we need. So there isn't going to be, we have to go and borrow to be able to fund those. In terms of the earnouts, I think Ray may have a comment there.

Yes. Ken, the earnouts this year will total about $14 million in payments. And next year, based on where we are today, that number would be, likely be under $10 million. Now it has the potential to be higher. There are still a few deals that, from earlier, that are active and have a higher top end. But at this point, it would look to be lower than this year.

Yes, just on the deals, Remember, Ken, most of our deals had to grow in order to get big portions of their contingent payments. And while that happened early on, on a number of them, the growth rates haven't been as significant to get them to their later year payouts. Kenneth B. Worthington - JP Morgan Chase & Co, Research Division: Okay. And then just the final one. You mentioned the financial safeguards you have in place, existing lines, bank credit, et cetera. Can you remind us of the numbers? And then in terms of, if you needed it, what you think you can get based on your conversations with the banks beyond the line. Just anything you could do to quantify.

Sure, sure. Yes, our revolver's $200 million right now. And right now, we have $318 million under the term loan. Our ratios with the bank group are that we are allowed to borrow up to 2.5x EBITDA. So that -- without causing any issue with the existing bank group, we could move up to over $800 million in borrowing capacity. Of course, we'd have to go and work with them and pay the fees and borrow the money. But it's readily available. We're -- our debt-to-EBITDA ratio is 1 and going down. Our interest coverage ratio is 24.5, and it has to be 4 to 1. So we have more than enough availability there and are excellent credit.

Our next question comes from the line of Michael Kim with Sandler O'Neill.

This is actually James Howley filling in for Michael this morning. Just wanted to touch on some of the things in the institutional channel this quarter. Wondered if there were any kind of outside fundings. I know you'd called out a few in the last conference call that would be hitting. And then just more broadly, how is that shaping up both across the traditional defined benefit business, as well as the SMA side?

Yes, on the -- this quarter, the equity inflows were, on the institutional side, were driven by the strategic value strategy. We continue to have RFP activity there and in other equity areas. And -- but really, the pipeline story for coming up, the biggest thing is clearly the Massachusetts cash mandate, which will be in the $9 billion range, which we talked about in the call, should fund early in 2013. We have some other smaller mandates in the high-yield side primarily. But the biggest thing happening would be that cash mandate.

Okay, great. And then flipping over to fixed income here. It seems like the Ultrashort Funds are still generating some pretty sizable inflows. Just wondering if you could expand on some of the drivers behind that strength? Is it really just all about the incremental yield versus money market funds at this point?

Mostly, what that is, is really investable assets. No matter how you look at it, the size of the ultrashort fund market never gets up to 5% of the total of the mutual fund money market. And so yes, we have adding better flows there as people are looking more towards longer cash due to low interest rates overall and to their reticence to apparently go out into other risk things. So we're up to $7 billion on that at this time.

And James, I'd just point out on the flows for last quarter on the fixed income fund side, we were about $1.4 billion, and less than 25% of that would have been from the Ultrashorts. The biggest fixed income story in terms of Q3 flows is high-yield where our records are outstanding and products are highly rated. So that was kind of first and foremost. Our capital preservation, which is a guaranteed investment contract product, that's done very well in retirement programs, would have been the next biggest contributor to flows. And then we had a variety of other products, like our corporate product, Federated bond fund. We mentioned the Emerging Market Debt Fund being positive, our Muni Funds, Short Intermediate Duration Muni. So really, the story from a Q3 flow standpoint as it goes to fixed income is a story of diversification and a series of strategies that are getting traction in the market.

Our next question comes from the line of Cynthia Mayer with Bank of America Merrill Lynch.

It looks like the strategic value fund is underperforming year-to-date. And I'm wondering if this is having any impact on flows, or would you expect to have it impact? Or is the 3-year more impactful? And I guess the 5-year looks like it could fall next year as you roll off a good 2008. So any thoughts about what time period you see is most important in terms of the channels where that's sold would be great.

Cynthia, the beautiful thing about the strategic income fund is that its sales and its essence are not really controlled at all by the relative performance in that category. So we have seen this fund, even though it would be in the bottom part of that category, continue its strong sales. And so, its participation in the performance rankings is due to how people look at financials or other dividend paying entities. The key to this fund is the 5% dividend and the 5% appreciation in dividend or increase in dividend, and the old standard Graham and Dodd analysis of companies that are able to continue to pay and increase dividends. And this particular mandate has shown itself to be very, very strong and impervious to relative performance situations. So we don't really pay a whole lot of attention to it. And that relative performance looks more like being on a pogo stick, whereas the sales and the performance against the mandate, as it's been articulated, have been steady increasing and very, very customer friendly. Ray has a comment on this as well.

Well, Cynthia, I just wanted to point out, when you hear Chris talk about the specialized income strategy that it follows and has followed for years and has resonated with the advisors enough so you see the flows. From a category standpoint, it's in a very broad MorningStar category, large cap value fund. When we look at the fund, we're looking at things were like the Dow Jones Select Dividend Index as being more appropriate for the particular dividend strategy that, that fund is following. So it's one of those cases where the category is not particularly descriptive of what the fund is actually doing. And we think the advisors understand that.

Okay. And I guess, maybe just a follow-up on the special dividend. Did your thinking on potential for capital buffers impact that at all? Or did you -- should we take this as a sign in some way that you don't see capital buffers as likely?

We -- when we borrowed money about 3 years ago, the original loan of $425 million, we kind of had a list of things that we called risk management possibilities. And we wanted to have availability of that size of dollars around for what I described as risk management possibilities and acquisitions and other things. So capital buffers would be fit in under the risk management possibilities.

But I can't let the opportunity pass without commenting that we still don't believe that risk buffers are efficacious in a money market fund arena. As one of the Commissioners has pointed out, they create merely the illusion of protection, either being too small to matter or too big that it kills the industry. So I just always swing at that pitch when it goes by.

Okay, got it. And then the -- just a modeling question on the marketing distribution. It looked like it was up a bit more than I expected, even though the revenue share portion of the fee waivers looked similar or even a little bit better. Is there something else going on in the marketing and distribution this quarter?

Well, remember, we talked about the mix. And what I'm referring to in the mix of money market assets, there is more in prime than in the government and the treasury. So then you end up with higher distribution expense.

Our next question comes from the line of Bill Katz with Citigroup.

Can you guys qualify -- quantify, excuse me, the amount of spend related to some of these new non-U.S. initiatives? And then from past experience, what you saw in the UCIT opportunity, in particular, how quickly could you anticipate some volumes ramping through the system? And what products, perhaps, you could see first?

On the dollar spend, if in the next 12 months we spent over in Asia Pacific $5 million or $6 million, that wouldn't surprise us. In terms of when we're going to get products up and running, we still not have a lock on that and we're still working through what's involved there.

Yes, and that's on the Asia part of it. On the European side, the arrangement with Bury Street is off and running. In fact, we'll be active in Europe next week on a roadshow focused around U.S. high-yield. So it's hard to predict volumes, but that part of the effort is active.

Okay, that's helpful. And then just big picture. Chris, coming back to your commentary, it does seem like the -- when the regulators are open to, I guess, maybe even a fourth outcome for money markets, and it seems like capital buffers and [indiscernible], those seem to be more dead-on-arrival than not. What could some of this fourth type of scenarios be? There's been some discussion of maybe selective redemption gates like we saw in 2008 when Putnam went through its issues. How do you sort of see it? And when they talk about having discussions from stakeholders around, I presume they're talking about both the users and the issuers. And where do you think we stand on that, and then timing of that? I know a lot of questions in there, but that's all the question [indiscernible].

Well, let's set the stage. The first thing to us in this whole package is to enhance the resiliency of money funds. You know that. That's repeat the sounding joy from Chris. The next one is that you mentioned, which is "engaged stakeholders," which is precisely the paragraph is in Secretary Geithner's letter, which functions as an invitation for alternative approaches and engaging stakeholders. And so that effort is going on, apparently. And we think that sets the stage for allowing for other ideas to come into play. And you mentioned our favorite, which is the voluntary gating, a la the Putnam situation. To refresh everybody's recollection of that, when Putnam had large redemptions, they decided to put a hold on the fund on redemptions for a week, and then the funds ended up as part of our funds because they had no credit problems. And then within 1 week, all of those redemptions were honored at $1 and it was a big no harm, no foul deal. And so this supplied us with the experience and the enthusiasm to recommend in the 2010 and for the 2010 amendments that we empower the Boards to do this voluntary gating for the 1 week period. And that was not included in the 2010 amendments. And so any of these other ideas that people come up with regarding liquidity and other kinds of gates, we think it would be wise to combine it with, giving the Boards the power to do this. And the reason for that is very simple, that based on the experience of Putnam, that Board made a wise choice looking at its a priori duty to treat all shareholders the same. And we think that kind of flexibility would be important if you're approaching some of these other liquidity triggers that others are looking at. So I think one of the other things that's important, doesn't get mentioned a lot, especially in this kind of a call, is the importance of jurisdiction and who's in charge. And we really believe that the SEC who, as I mentioned in my remarks, has done a commendable job on money funds. There have only been 2 who've been stepped out from being $1 in all those years. And that the jurisdiction of the SEC is well recognized by Secretary Geithner and by, obviously, the SEC, which is why I read those comments in my remarks on that. And that the relationships among the SEC and the industry remain cordial and collegial as they have always been so far as I know. And the reason for that is very simple. This is the way it has worked since I've been in this business 40 years. And we all have to go back and deal with our regulator in any event. So those would be an attempt to answer the various questions posed.

Our next question comes from the line of Bulent Ozcan with RBC Capital Markets.

I have a question regarding the FDIC insurance and expiration thereof. It's estimated that about $450 billion in money could be deployed in the markets again once it expires. What are your thoughts in terms of flows? What will you get into money market funds? And what would be the implications on interest rates, short-term interest rates if that money was deployed?

Well, I will handle the first part of the question. I'll let Debbie handle the question on the interest rates. I couldn't exactly hear the kinds of numbers you were talking about but I'll give you my view of the TAG program. Roughly, depending on whose estimates you look at, there's about $1.3 trillion in that effort, which was basically to let people have unlimited FDIC insurance and 0 interest at any bank in the U.S. that has FDIC insurance, okay. Well, 75% of that money is in the top 10 banks in the U.S. So those customers have already made a decision that they want to be in a very big bank. Whether they're looking at it as too big to fail or not, you can make your own judgment. And so, how much of that money moves into money funds? You get various opinions. I don't think a whole lot. Some of the rest of it, yes, I think that would be eligible for money funds. But -- and so it's hard to say how much of that would go. Our market share is about 9%. Our market share of ultrashorts is about 11%. So somewhere in there, whatever money comes out, I would think would come to the home team here. You can't underestimate the importance of how people might go direct, depending on their facts and circumstances, or to other types of cash vehicles that people create or that exist elsewhere. So it's a pretty hard formulation to get to, but that's the way I would scope it.

When I think about it in the context of the expiration of the unlimited. So it's not as if the insurance expires completely. It goes back to the original level, which was $250,000 per account. So there's some amount that will stay. I agree with Chris that in the large banks, there probably won't be much, if any, movement. But for the smaller banks, there will be still some amount of that, that stays that's underneath that $250,000 limit. In the context of those that will be moving and looking for a different home, they're going to seek characteristics that are similar to what they already have. Those characteristics would be very, very low risk with government backing of some sort, no return, basically, and liquidity in the product. You can get those in the direct securities market through the treasury and agency discount notes sector. Or you can get those through funds that are purchasing those types of securities. And what effectively happens then at that point is, you have a larger demand for that short end yield curve security type that is government backed. And when you have a larger amount of demand with a significantly stable supply, it's very simple, rates go down. It's hard to measure, though -- it's hard to quantify the exact amount, given that we don't know how much will move. We don't know how much will remain. And what does move, we're not exactly sure if it all will go into that sector, that is the short end of the government yield curve. But in any case, if the expiration occurs, we're confident that rates in that short-term treasury agency and mortgage-backed traditional repo market, as well as the direct securities of those notes, will decline in yield from where they are today. So that's one of our reasons for looking at the outlook for repo to go down. But also, we've been very steady on short-term bill rates and short-term agency rates, and we think if in fact QE3 expires from an unlimited – or not QE3, the FDIC insurance expires from an unlimited perspective, we'll see the 9 and 10 basis point 3-month T-Bill rates that have been holding pretty steady also start to decline.

I see. In terms of the interest rates, low interest rates, would it be fair to draw some parallels to Europe? I'm asking the question because TIMCO declared that it's going to exit some of the funds. They basically have a EUR 80 million liquidity fund to which they will liquidate and return to assets to the shareholders. The reason being interest rates are too low and there basically -- the net asset value -- the stable net asset value is being threatened by low interest rates. Could that happen over here? Could we see interest on excess reserves go to 0? What are your thoughts on that?

Debbie?

Sure. It's always a possibility. You can never say never. I would love to rule that out as any possibility, but that would be inappropriate. And certainly, we're watching it play out to some degree in Europe. First of all, from a European perspective, most of the funds that have closed in the euro-denominated sector, from a money market fund perspective, are euro government funds. So they're euro-denominated funds that can only purchase government securities, so they're purchasing Belgium, Germany, France and short-term debt of those particular countries. Most of the euro prime funds of that have the capability of buying credit, banks and corporations have not closed and have suffered from a rate decline perspective. And perhaps, some of them are waiving fees. But that's nothing new to us here in the United States. IOER has been one of the things that when questioned about it, Chairman Bernanke has not shown a whole lot of interest in. And certainly, reading the meeting minutes from various of the FOMC meetings, it is all -- it is still on the table from a consideration perspective, but we think it's a distant last item in the context of easing. We also think that because Europe at this point is not gaining a lot of traction from their current 0 and negative interest rate environment, that probably adds even more fuel to the Fed's fire for thinking that strategy may not be particularly beneficial at this point. So although, again, we can't rule it out and we would not put it on a 0 probability, it's lower on the likelihood scale.

Great. And maybe final question on the international aspirations. What are the goals there in terms of revenue contribution? What are the milestones, the timeline? And how do you plan on getting there?

The overall goal we have articulated before is to have the revenues sourced from international clients get to $100 million in short order. I'm not going to give you a specific timeline on that because that's being created when you're hiring people, putting it together. That's what we're looking at. Right now, we have about $25 million in that category. And so we're looking to grow that pretty substantially. The theory there is that we wanted to impact the overall revenues of Federated and be able to move the dial. And once you can see clear to the $100 million of revenues, then you can see clear to stepping off your growth and perhaps, even capturing PE points available to those firms that are on the international side.

Our next question comes from the line of Roger Freeman with Barclays Capital.

Just on fee waivers. I think, Ray, you were saying probably flattish at this point, I think holding sort of current rates constant. And Debbie, I heard you say, I think, that you expect overnight funding rates come back into the teens. So I was just trying to triangulate those 2. I guess, if your view pans out, is there a risk that the fee waivers will be higher? Or is it, from an averaging perspective over the quarter, it's still flattish?

Roger, it -- there's the rate part of the equation, there's also the volume part of the equation. So the prime funds, as Tom mentioned, during the third quarter actually gained several billion in average assets and the treasury and government actually went down. And the yields remain higher on prime and the waiver's lower. So that certainly enters into the equation.

Okay, that's helpful. And just, I think this might be obvious, but the -- maybe you said this earlier. But the timing of doing the special now, is it a function of dividend tax rates set to expire?

Well, we know that dividend tax rates might expire. And people thought that in 2010 and 2008, and they didn't expire. We're not really -- so that's obviously out there. Chris is looking for more PE points, as we all are at the company. And we're earning the dollars and not getting the recognition in the stock price. So this is another way for the shareholders to get what they deserve.

Yes, okay. And just lastly, has Pru Bear been -- seen a pickup in flows recently with the market weakness?

Pru Bear, in the third quarter, was positive, nominally positive, I would say. For the first 3 weeks of October, it's actually very slightly negative. So no, we have not seen a flood of money into Pru Bear at this point.

Our next question comes from the line of Greggory Warren with MorningStar.

I'm trying to sort of -- from a modeling perspective, I'm looking at some of these flows that are expected to come through. I mean, you guys did note that the $9 billion from Massachusetts will be coming in early next year. But I'm looking at the assets that you acquired during the quarter. I'm assuming that the Fifth Third assets did hit the money market funds?

Yes.

I'm curious in all of the performance fast [ph] trends, did those hit during the quarter? Are those coming through during the fourth quarter? And then...

They -- I'm sorry, they hit in the quarter, and we actually called those out. So we do not include those in our net sales numbers, but they are in a separate acquisition line item.

Okay, okay. So I was -- I just wanted to get that clear. And then on the Massachusetts, the mandate. Is that typical for it to take that long, that 6 months, to sort of fund up? Or is it just a situation where they decided they wanted to fund in the first part of next year?

It is typical, and it took us a lot longer with Florida. I forget how long it took with Texas. But everybody has to get everything right when you're moving this big of a deal, that this high – that's this high profile and this important, especially to the State of Massachusetts and to the holders thereof. There -- it is necessary to staff up positions locally in Massachusetts. And so there's a lot of good things that have to happen. So this is not an unusual thing or a worrisome thing, it is just to be expected.

Okay, okay. That's good. And then I just had one quick question on sort of the money market reform. It just -- it seems odd that there -- the news is breaking now that there's some sort of compromise coming in when it seemed like this was dead and then not dead. And the feeling was that they would wait until after the first of the year to start anything new.

Unusual has been the rule of thumb in terms of dealing with the regulations on money funds. And having been in this for 40 years and watching all of the back and forth, it -- nothing really surprises me at this point. And so if I go further than that, I'll simply repeat the comments I made in answer to Bill's questions about the resiliency of money funds, the importance of jurisdiction, how much we like the voluntary gating, the study that the chamber did and the invitation that Senator -- Secretary Geithner made, and that's about where I would leave it.

There are no further questions at this time. I would like to turn the floor back over to management for closing comments.

Well, thank you. That concludes our call, and we thank you for joining us.

Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.