Invesco Ltd. (IVZ) Q4 2012 Earnings Report, Transcript and Summary

This presentation and comments made in the associated conference call today may include forward-looking statements. Forward-looking statements include information concerning future results for operations, expenses, earnings, liquidity, cash flow and capital expenditures, industry or market conditions, AUM, acquisitions, debt and our ability to obtain additional financing or make payments, regulatory developments, demand for and pricing of our products and other aspects of our business or general economic conditions. In addition, words such as believes, expects, anticipates, intends, plans, estimates, projects, forecasts and future or conditional verbs, such as will, may, could, should and would, as well as any other statement that necessarily depends on future events are intended to identify forward-looking statements. Forward-looking statements are not guarantees, and they involve risks, uncertainties and assumptions. There can be no assurance that actual results will not differ materially from our expectations. We caution investors not to rely unduly on any forward-looking statements and urge you to carefully consider the risks described in our most recent Form 10-K and subsequent Forms 10-Q filed with the SEC. You may obtain these reports from the SEC website at www.sec.gov. We expressly disclaim any obligation to update the information in any public disclosure if any forward-looking statement later turns out to be inaccurate.

Welcome to Invesco's First Quarter Results Conference Call. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the call over to the speakers for today, to Mr. Martin L. Flanagan, President and CEO of Invesco and Mr. Loren Starr, Chief Financial Officer. Mr. Flanagan, you may begin.

Great, thanks very much. On behalf of Loren and myself, thank you for joining us today, and we'll be speaking to the presentation that's available on the website if you're so inclined to follow that, and it has been our practice to review the business results for the fourth quarter. Loren will go into greater detail around our financial results, and then we'll open it up to questions. So before we get into the numbers, I thought it'd be helpful to give really a sense of the macroeconomic background that has been impacting our business. During the fourth quarter, the markets fluctuated with the news coming out of Washington and the looming fiscal cliff. But in spite of the volatility late in the year, we did see strong equity markets. We have some PFs of 60% and the CIE were up 80% and much of this really reflected a mood change where there was a view that there was a modest economic recovery in the United States, improving situation in Europe and softer-than-expected landing in China. In this environment, we continue to see investors emphasize risk management when they were making their investment decisions and a continued focus on yield-oriented capabilities. Many of, which we all know very well, so very, very strong close. At the same time, prompted by the strength in global markets and this easing view of sort of the economic backdrop, we're seeing early signs that investors are risking as a way to generate stronger returns for the long term. We think with this dynamic in place, we're very well positioned to accommodate these trends with a broad range of investment capabilities and we'll talk about that today. So with that as a backdrop, I'll highlight the operating results for the fourth quarter. I'm on Page -- Slide 3 right now if you're following the deck. Long-term investment performance was strong across all time periods for the fourth quarter and delivering strong investment performance, to our clients contributed to solid operating results with adjusted operating income of 10% -- 10.4%. In addition, the operating margin increased to 35.6%, 150-basis-point increase over the prior quarter. Invesco's quarterly dividend is now $17.25 per share, representing a 41% increase over last year's dividend and reflecting continued confidence in the fundamentals of the business. Return of capital shareholders totaled $153 million during the quarter. Taking a look at the results, assets under management rose to $687 billion during the fourth quarter, up from $683 billion in the prior quarter. Operating income was $277 million versus $250 million in the prior quarter. Again, the operating margin was 35.6% and earnings per share was $0.45 versus $0.42 in the prior quarter. We said for some time that a major focus for the firm is to reinvest in the business to build on our strengths and further enhance our competitive and financial position. During the fourth quarter and throughout the year, we took advantage of opportunities in the market. We continued to invest in our products and capabilities, our brand, our global platform, and our people and ways to strengthen our business and our competitive position for the long term. Let's take a minute and look back at the achievements over the past year, which will provide some insights and the long-range plans for the organization. First and foremost, a portion made very focused on delivering strong long-term investment performance to our clients, which continue to drive growth in our business. 78% of the assets were ahead of peers at the end of 2012, up considerably from 2005, and 79% of our U.S. retail assets were rated 4- or 5-star by Morningstar, up considerably from 23% in 2005. We also saw the best ever investment performance from our cross-border fund range in the fourth quarter by delivering a strong long-term performance to clients. Long-term net flows to our business grew $12.4 billion during the year. We continue to invest in capabilities where we see strong client demand and future opportunities such as Multi-Assets, ETFs or entering the joint venture in India by hiring very talented people, upgrading our technology platform, launching new products and providing additional resources where necessary. The ability to leverage the capabilities developed by our investment teams to meet client demand across the globe is we believe a significant differentiator for our firm and we'll continue to bring the best of Invesco to different parts of our business, where it makes sense for our clients. And finally, we continue to further improve the effectiveness of our global operating platform. We'll continue to invest in our people through expanded training, development and opportunities and always looking to have the best talent available within the organization. Before I turn it over to Loren to go through the financials, let me take a minute to talk about the investment performance, which is on Slide 7. Our commitment to investment excellence and our efforts to build and maintain a strong investment culture helped achieve solid investment performances in spite of the volatile market environment during the quarter. As you can see, 66% of the assets were ahead of peers on a 1-year basis, 73% of assets were ahead of peers on a 3-year basis and 78% of assets on the top half on a 5-year basis. These numbers are equal to or better than the prior quarter and among the strongest performance numbers we've seen. And as I mentioned earlier, 79% of our U.S. retail assets are currently rated 4- or 5-star by Morningstar, an all-time high for the firm. Now our cross-border fund range is delivering very strong investment performance for our clients. We continue to see positive net flows in our actively managed capabilities with strong broad flows across asset allocation capabilities, real estate, alternative fixed income and a number of others. Offsetting this positive trend was the uncertainty in the U.S. regarding the situation in Washington, which resulted in higher redemption rates as investors awaited outcomes from the fiscal cliff discussions. Net long-term flows totaled $1 billion during the quarter, which was also impacted by a $1.6 billion outflow related to a CDO maturity during that period. Asset flows for the quarter were down due to $2.5 billion in QQQ outflows. Offsetting this were strong flows across low volatility bank loan and other income-oriented ETFs. And as an example of flows in traditional PowerShares, ETFs were $2.1 billion representing an annual growth rate of 33%, so very, very strong. I'm on Slide 9. During the quarter, we continue to see strong institutional flows offset -- but was offset again by the CDO maturity that I mentioned a minute ago. And as I indicated earlier, retail flows were impacted by the $2.5 billion in QQQ outflows and as investors reacted to the uncertainty in the markets during that period. Turning to Slide 10. Gross sales for our U.S. retail business remained strong at $16.1 billion for the quarter. This was offset by higher levels of redemptions as we saw some tax selling and greater caution in the face of the looming fiscal cliff. In spite of this, gross sales were up 9% year-over-year. Flows into the complex were led by continued strength in traditional ETF balance risk strategies, domestic Equity and International Equity. Note, although the redemption rate rose, they remained relatively favorable to the industry of the Invesco being at 26% versus the industry at 32% in that period. Globally, the Multi-Asset suite of products continue to generate tremendous interest from clients who are attracted to the capability with the strong long-term performance. That means we brought a high level of protection in volatile markets, which we did do. We continue to see strong growth during the fourth quarter across the entire suite of capabilities with net flows of more than $3 billion during that quarter. With 1 month into the first quarter of 2013, we continue to see very strong demand for the Multi-Asset capabilities. Though in spite of the mixed signals we saw from the market in the global economy late in the year, we are optimistic about the quarter ahead. Early signs show a global economy looming in the right direction and investors are showing renewed interest in rerisking as a way of building the returns of a long term. So maybe I'll put this into context because it seems to be sort of the broader question maybe the marketplace right now. If you look at the U.S. in the first instance in U.S. retail market for us, we continue to see strong interest in the asset allocation capabilities, as I just mentioned, and that would be consistent with this idea of people still being focused on risk. We also continued to see steady fixed income flows as, again, people still seeking yield. But really what has been quite striking in January is that the January gross sales of International Equity products for us are up 60% versus the Q4 average and maybe even more interesting is that the January growth sales of our domestic Equity capabilities are at 56% versus Q4 -- versus the Q4 average. And also, it's not unique to the United States, we continue to see growing interest in participation in our Continental European base capabilities. So again, the big health warning is January is not a year. It's not multiple years, but it is a very encouraging sign and probably something very different than what we've seen in many, many years. We'll see where that takes us. In 2012, we did make very good progress against our long-term strategic objectives, further invested in the business, our investment capabilities, our people and we feel very good about momentum within the business as we entered the new year and we'll continue to look for opportunities to strengthen our competitive position and our financial position. So with that as a backdrop, I'll turn it over to Loren.

Thanks very much, Marty. So turning to the slide total assets under management, you'll see that our AUM increased $4.7 billion quarter-over-quarter. That was up 0.7%. This was due to $4.9 billion in positive market returns. We saw $1 billion in net inflows but these factors were then negatively offset by FX of $1.2 billion. Our average AUM for Q4 was up 1.8% to $680.2 billion. And also, I would like to point out on this page, that despite gross sales being down 1.4%, our active gross sales were up 11% quarter-over-quarter. Moving on down looking at net revenue yield in Q4, that came in at 45.6 basis points. That's an increase of 1.6 basis points quarter-over-quarter so that trend continues. 1 basis point of this increase was due to the higher level of performance fees that we earned in the quarter. The remaining 0.6 basis points was due to improved product mix. And the product mix improvement was driven by flows into Continental Europe, flows into our balance risk ABRA products, north of flows into our higher-yield in traditional PowerShares ETFs. So now let me turn to the operating results. You can see that net revenue increased $41.2 million. That was up 5.6% quarter-over-quarter that included a positive FX impact of $2.5 million. Looking a bit more closely, you'll see that investment management fees grew by $25.1 million, up 3% due $865 million and this increase was in line with our higher average AUM and the improvement in the revenue yield I mentioned. FX increased investor management fees by $3.8 million. Service and distribution revenues were up $3.3 million or 1.7%. That was also roughly in line with the increase in our average AUM. FX increased service and distribution revenues by $0.3 million. Moving on to performance fees. We had a good quarter. It came -- performance fees came in at $21.1 million, an increase of $17.7 million versus Q3. The fourth quarter performance fees were primarily driven by our Private Wealth Management business. Notably, investment performance remains strong and certain of our products that can earn performance fees in Q1 of this year and should this continue, we would anticipate performance fees around $15 million in Q1, just some guidance there. Total revenues in the fourth quarter came in at $27.4 million, an increase of $3 million versus the prior quarter and this pickup was driven by higher level of real estate transaction fees. Third-party distribution, service and advisory expense , which we net against gross revenues, increased by $7.9 million, or 2.4%, and FX increased these expenses by $1.6 million. Continuing to move on with the slide, you'll see that our adjusted operating expenses at $499.4 million increased by $15.1 million or 3.1% relative to the third quarter. FX had a $1.4 million impact on that number. Employee compensation at $3.2 million increased by $14.3 million or up 4.4%. However, you'll recall that there was an $8 million catch-up related to bonus that was booked in the third quarter. Taking that into account, we need to explain an increase in compensation of roughly $22 million quarter-over-quarter. And I'll do that for you right now. $15 million of that was due to incentive compensation expense linked to both performance fees earned in the fourth quarter, but also the sequential increase in operating income. We saw $1.5 million that was due to increased sales commissions primarily in Continental Europe. And we also had $5 million in the quarter, which is a result of miscellaneous staff expenses including the year-end benefit expense adjustment, as well as some relocation and sign on expenses as we continue to make investments in our business. And then finally, we had $0.7 million of the increase was due to FX. So again, in terms of guidance looking into Q1, assuming no change importantly in year-end AUM levels, we would expect compensation to remain flat quarter-over-quarter as seasonally higher payroll taxes offset declines in incentive compensation related to performance fees. Moving on down, the P&L, you'll see that marketing expense decreased by $2.7 million, or 10.2%, the $23.8 million due to reduced advertising spend during the quarter. In terms of guidance, looking into Q1 2013, we would expect marketing expenses will return to the prior quarter run rate of $26 million to $27 million. In the quarter, FX increased our marketing expenses by $0.2 million. Property, office and technology expense was $71.7 million in Q4. That was an increase of $2.4 million. The fourth quarter included increases in outsourced administration cost as we transition the U.K. transfer agency to a third-party provider. FX increased these expenses by $0.2 million. And then G&A expenses ultimately came in at $61.9 million. That was up $1.1 million or 1.8%. And the fourth quarter included additional professional services expenses associated with increased regulatory requirements in Europe. Continuing on down, you'll see that nonoperating income decreased $9.9 million compared to the Q3. You'll remember that the third quarter included roughly at that same amounts related to gains from certain of our CLO products. Our effective tax rate in the quarter came in at 25% and our guidance is that it will stay around that level until 2013, which brings us to our adjusted EPS of $0.45. As Marty mentioned, our adjusted net operating margin of 35.6%. With that, I'm going to turn it back to you, Marty.

Yes, thanks. Now we'll open it up to questions please.

[Operator Instructions] First question does come from Matt Kelly of Morgan Stanley.

So I wanted to start first on balanced risk. I know you guys have -- you talk a little bit about it in the prepared remarks, but just curious from here given that it sounds like channels actually would indicate that retail was buying those products like crazy in January. So can you give us kind of your outlook on whether those funds are benefiting more from the current environment in January and also, your potential growth outside the U.S. and is there more legs for growth outside the U.S. and in the U.S. at this point?

Maybe I'll hit on a couple of and Loren can chime in. So I think it's important to understand what the product is, right? And it is being -- advisors are looking at it as really sort of core holding that is really minimizing volatility. And so we think that's going to continue to persist in the United States for a good period of time. It's been in the U.S. market longer than anywhere else. But -- so by definition, there continues to be greater opportunity outside of the United States. We are seeing it out of the C Cap, out of Europe, we're actually more recently now starting to see a pickup in United Kingdom 1 year later, which we thought it was very early there so that's happening. So we continue to see, Canada continues so there continues to be interest outside of the United States. I think also importantly that we talked about a year ago, it is a broader capability, and we have launched a premium income product a year ago and you are now just starting to see greater and greater interest in that kick in. So again, you have to think of it as suite of capabilities inside of U.S. and out and we are definitely continuing to see that and there continues to be frankly institutional interest at the same time.

And Matt, I think -- generally to your question in terms of investment performance, obviously one of the Equity markets is going to be running strong or, say, really have a very strong beta movement. The ability for that product to outperform other products that may be more Equity oriented is not going to be there. It's certainly understood in terms of the product. It's been a diversifying element within advisors' mix of products that they've offered their clients particularly because you don't want to have net allocation product that's so heavily weighted to Equity markets so it will create far more volatility. And so I don't think and certainly our analysis of the product generally is that you won't see outflows in this category. When Equity markets are running normally, it will be at the expense of Fixed Income. So it's more of a trade-off, where Fixed Income products will outflow and moving to Equity products as opposed to this category of assets. So we believe that this product will continue to grow and thrive in this environment.

Okay. And then follow-up for me would be on your operating margin. How we should be thinking about moving pieces going forward in the 2013 given what's -- where you've been with comp in the third quarter where you had the true-ups. This quarter, you had some performance fee, noise in the comp lines. So how should we be thinking about that for 2013?

So we gave you a little bit of a peek into Q1 in terms of the guidance there, in terms of overall comp levels. Obviously, Q1 tends to be noisy because of the payroll taxes and some of the movements there. But that's a pretty good sort of guidepost for you to be thinking about comp into the year. The operating leverage and certainly the operating incremental operating margins of 50% to 60% should be something you will think you'll see and you should see going into 2013. Clearly, there was some noise around this. This year really as investment performance was very, very strong. It's hard to imagine even though we'd love to see it that investment performance gets stronger than that it is today. So I think in terms of where we are, run rate, this is not a bad place to be modeling.

Understood and then last one for me and then I'm done, I promise. Just on PowerShares, given the strong growth the industry saw in 2012 and the first week of this year included, how are you guys thinking about that? Is there more optionality there or chances to grow?

Absolutely, and I think importantly, what we're seeing happening and what's more interesting probably to all of us is that of the different elements of PowerShares, what we discuss as our traditional PowerShares in the commodity's bucket and so the QQQ builders, the most interesting is the traditional and you are just continuing to see ever-increasing traction in that area and not just throughout last year, but again and at the first quarter. And again, it's not limited to the United States. It continues to grow in Canada. Europe. Again, it's a different situation for ETFs for us right now. We're in the market but there's a lot for us to do there. What is more interesting quite frankly is Asia for us for ETF. So we think it's important franchise. It will continue to grow and we're seeing very good things coming out of it.

Next question just comes from Ken Worthington of JP MC. Kenneth B. Worthington - JP Morgan Chase & Co, Research Division: Maybe first a follow-up on Matt's question. Longer term, is compensation an area where you think you can get operating leverage from and maybe in terms of the $4.8 million increase to comp from the, I think, it was just 10 in Life team. How much of that is onetime and how much of that is recurring? You mentioned that some of it seem to be like sign-on bonuses and moving costs, but is it largely ongoing cost of that team or is that onetime?

Maybe, let me make it the overall comment. And so there's no question. You will see operating leverage in this business and as these markets and I say important operating leverage in the business. And at least, we don't need fantastic markets, but if you have slow steady markets, you're going to see a very strong margin expansion and I think that's the overriding comment. I don't want to speak of any specific team or the Life is more complicated than as you would know just from all of your own situations. All those things work, but I think the most important thing is you will see operating leverage in this business.

I think, I mean, one other thing just to mention, but I'm not sure how many people really appreciate, but just in terms of going from 2011 to 2012, there's about $28 million that was related to just how our accounting for our deferred compensation where we went from a 3-year vesting cycle to a 4-year vesting cycle back in 2009. And ultimately, 2012 was the first year where we've actually seen 4 tranches of amortization hitting, whereas in 2011, there were only 3. So some of that increase is really just around the accounting related to some of the deferred compensation. I would agree with Marty that there isn't anything in terms of our thinking or our plans that show that somehow operating margin is going to be the operating leverage as impaired going forward. Certainly, there has been some investment around the business and there will continue to be investment around the business. But it's our job to sort of balance that against the growth and we certainly are going to strive to do that. Kenneth B. Worthington - JP Morgan Chase & Co, Research Division: Okay. We could just move on. The standardized team, are they up and running? What kind of assets would you have expected to follow them to Invesco and where do they stand in terms of getting some of those assets that you might have expected?

Yes, so early days. right. They're all not here. So of the 3 -- so I don't think you should expect much in the first 3 quarters of this year. So it was sort of the transition over and the like and so they'll all be with us by the end of March and by the time you get something, it's the markets can be the latter part of the year. But again, I think 2 comments. It's a great complement to the overall Multi-Asset Strategy capability that we have in place and in the meantime, Ken, what we are seeing actually as I said earlier is that we are now, with our traditional ABRA products, seeing traction in the United Kingdom in the meantime. So it's probably a little bit out this year. Kenneth B. Worthington - JP Morgan Chase & Co, Research Division: And then last one. You had a big marketing campaign in 2012, just talk about the outlook and the strategy from marketing as we kind of migrate into 2013?

So it will be, Ken, as you know, as well as anybody, Invesco was much well known outside of the United States, least well known in U.S. retail channel and we've probably hit a level of consistency now that sort of from brand awareness to actually more specific around -- more specifically driven around campaigns and the like and so you'll probably see slight uptick in the marketing, but we're probably much closer to a steady state now. Kenneth B. Worthington - JP Morgan Chase & Co, Research Division: In terms of strategy, if markets are coming back, are you going to reposition? Is it about improving the brand like you kind of did last year? Do you start focusing more on specific products like strategy more than cost?

So the strategy is we still have to -- we're not exactly where we are with brand recognition, which we think strategically is very important now as you see. The fundamental idea is very hard to separate the asset buckets in time so we've all known from DB to DC, to DC to roll over IRAs and what we are clearly seeing and understanding is that even in the large institutions where you're managing a DB and a DC plan, they actually do care that they are associated with a money manager that is in the advice channel. That is recognized in the advice channel as their employees roll over from a DC plan into a financial advisor. So that becomes very important and that is the fundamental strategic reason why underneath it all, you need to have brand recognition. So, within it though, Ken, there are now specific programs and again, it depends on what the topic is we think is important, but it is much more investment-led type focuses as we spend time on that in the marketplace.

Michael Kim of Sandler O'Neill. Michael S. Kim - Sandler O'Neill + Partners, L.P., Research Division: First, Marty, you talked a little bit about what you're seeing on the retail side of the business thus far, this year. But can you just give us an update on what you're seeing in terms of demand trends on the institutional side of the business. And then more broadly, how are you leveraging some of your competitive advantages around scale, infrastructure, your balance sheet as well as other advantages you may have as it relates to kind of overseas markets?

Okay. Let me try to get a couple of those and Loren can chime in also here. So the institutional business continues. The pipeline is continuing to grow, which is a good sign. We are continuing to see some of the things that we have been seeing, bank loans, real estate and the like. But there are the balance risk capabilities, but you are seeing growing interest in International Equity capabilities, in particular. And so as the pipeline continues to build, the quantitative Equity capability where if you asked 3 years ago, you would have thought not just us but many people, you would not have thought that, that was a very strong capability. It's also a global capability. This is not just -- it's available globally. But also, the global capability of the Quant team is also very, very strong. So it just continues to broaden, which is a very good thing. With regard to what we continue to do as a business, it is that would be an example just where we have strong capabilities that there's global demand, you're just continuing to see greater outcomes and effectiveness of making those capabilities available around the world, the Quant team would be an example of -- it has clients not just on the continent, not just in the United Kingdom, but in the United States and Asia. Very similar to what you've seen in real estate capability, you're are also seeing at the asset allocation capability and that really continued. That is from our point of view. What we think is a competitive advantage and also gets back to some of the prior questions, that's also where you start to see scale advantages comp, right? So that's the more we can do that, the better off the clients are but better off as the business. Loren, would you?

Yes, I mean I think you've covered the big pieces. I mean I think when you look at the pipeline, which is growing, it's really spread over a lot of different capabilities as you were mentioning, Fixed Income, large in there. Real Estate continues to be a big piece of it. Quant, asset allocation. So in order for the sort of primary elements to it. And certainly, the focus and where we want to make the biggest impact around the products that can go global and so when we think about our investment and what we've been serving local needs and we want to continue to do that but our greatest opportunity is creating product that have the opportunity to go global and that is where the resource, the balance sheet, the product development is very much focused.

I think maybe less interesting, but it does gets so when your questions -- we continue to look at ways into how do you drive down your fixed cost structure and it tends to be around real estate and the like. And so we'll continue to focus on those things. They are harder to do and painful to do, but we'll continue to work on programs like that also. Michael S. Kim - Sandler O'Neill + Partners, L.P., Research Division: And then as it relates to PowerShares. I know you recently announced some fee cuts across a handful of specialized funds that I think was largely a function of kind of ran those fee rates more in line with other products, but more broadly, any signs of incremental pricing pressure that we've seen across the industry for more of the commoditized funds?

Michael, the answer is no. If anything, I think, I've mentioned it briefly. I mean we're actually seeing our effective fee rates for the firm as a whole improved because of what is happening. A lot of interest in products with higher fees within our traditional ETF so bank loan is a good example where I think it's at $2.5 billion or some really staggering number, and that had a pretty high rate. I think it's well in excess of 60, 70 basis points. So we are not seeing fee rates being eroded due to ETF and certainly, there are no expectations of any other fee cuts in the ETF space. That -- and I was just recently talking to our head of our business so I think that was a really one-off episode. Michael S. Kim - Sandler O'Neill + Partners, L.P., Research Division: Okay. And then just one more quick one for Loren. Can you just update us in terms of where you stand on kind of the European TA outsourcing just as it relates to kind of some of the different, some of the moving parts on the P&L going forward?

Sure. So -- glad you asked. But -- so I think we've mentioned that in the last quarter, we've already seen some of those savings come in. I think it was about $1 million that we had talked about rolling into G&A and unfortunately, obviously, we have seen some offsets to that as the regulatory environment continues to sort of increase requirements for us. But with that said, we would expect another $1.5 million to come in as savings into next quarter or next couple of quarters. About 1/2 of it into G&A, the other 1/2 into compensation, so sort of the run rate, quarterly run rate savings of the project is somewhere in the $2.5 million frame and that's roughly the $10 million that we talked about. So I do think we're going to get the savings we have wanted to. Some of that project though has been delayed so there is where we want to finish it by year end. It's sort of spilled a little bit into this year so we'd expect the completion to be done roughly mid-year 2013.

Daniel Fannon of Jefferies. Daniel Thomas Fannon - Jefferies & Company, Inc., Research Division: I guess first, Marty, you talked about January trends in terms of the growth sales. I mean could you talk about what redemption rates are doing and you also talked about generally kind of the diversity between international and U.S., but I guess it seems to be pretty broad-based and we're talking active strategies versus passive or a little bit of both?

So let me start with that. So when I had talked about the domestic and international capabilities, those are active strategies. So in addition to that, we continue to see ongoing strength in the traditional PowerShares typically, it's what Loren was talking about. So I was focused more on the active again because that is sort of one of the big questions. Was everybody just going to passive or not? So we're seeing continued participation in ETFs. We are seeing active investments in our active capabilities, which is I think a very good thing for the marketplace generally. And I'm sorry, what was the next part of your question? Daniel Thomas Fannon - Jefferies & Company, Inc., Research Division: Redemption rates versus you talked about growth sales, just redemption rates.

I don't have the exact redemption rates, but they're probably trending back from where they were in the fourth quarter.

Yes, they're definitely lower level. I mean we saw a lot of tax selling in the fourth quarter so our redemption rate was actually, with the whole industries spiked up a little bit, I think the graph kind of showed that so it's definitely coming back in line with the pre-Q4 levels. Daniel Thomas Fannon - Jefferies & Company, Inc., Research Division: Okay, great. And then back to the ABRA product briefly just with regards to potentially capacity constraints in the bigger products that have been growing. I think there's some issues associated at some point with some of the commodity exposures and what not, just remind us kind of where they sit in terms of the bigger funds now and then where you potentially would see the capacity constraint?

Yes, so I think in terms of the capacity constraints, we've said and there isn't a hard one, but it's somewhere around $40 billion and that was related to the traditional ABRA product. That's really U.S.-focused discussion and so we're still well under that number. We're well under $20 billion there so we can definitely grow quite a bit. The good news is, I mean, we've continued to focus on the suite of products and some of the other products like premium income, which they're still small right now. I mean, they're seeing really nice growth just like we saw with the balance risk. It took a while but if it continued at this kind of quarter-to-quarter growth rate, it's going to be something that will be material at some point in the future. And so that, again, it's important that we don't have everything based on one product and so I think we've done a good job of creating other products that will allow us to grow.

Mike Carrier of Bank of America.

Just another question on the margin. If I just look over the past couple of years, like in 2010, you guys were kind of at this 35% level. In 2011, it ticked up, and now you're kind of back at 35%. If I think over those years, you had to be in camping[ph] in acquisition. You increased distribution. You had some improvement on the product investment. ABRA became a hit and you marketed that, but it still seems like the operating leverage and the model isn't the same degree maybe some of the competitors or to where expectations are. So I guess what I'm looking at 2013, like when you think about the things that you have invested in over the past 2 or 3 years, was that level more elevated than what's going to be, say, the more normal run rate, maybe over the next 2 years? Or is it just a combination of factors that have limited the leverage at this point?

So Mike, I'll just jump in, and Marty I don't know if you want to -- the thing that's important to note, until we see it. And maybe it's a little different than some of our competitors, our net revenue yield had dropped over that same period in time quite substantially to the product mix that we're offering, basically satisfying client demands, but in many cases that did call for a lower yield. And I think if you look at how that affected us relative to some of our competitors, it's probably more marked for us versus some competitors. And with that, despite that net revenue yields, I mean, yes, I agree, margins have been somewhat flat, but that's not been the easiest thing to do because it means expenses actually had to go down as a percentage of assets was well, and so a lot of work has been done. The good news, and this is why I do think we can and should be optimistic about margin expansion in the future is that, that trend of declining net revenue yield is now seems to be reversing. And we're starting to see net revenue yield actually improve quarter-over-quarter as the fee mix and the products that we're introducing are definitely at a higher yield than what we saw before. The Morgan Stanley acquisition, I think we've talked about it, obviously, a lot of those products were at a lower yield, and so that obviously created a little bit of a challenge in terms of a counteracting a cost structure that was set for a little bit of a higher yield. And so with all that said, I think we are making good progress, and I feel pretty confident in saying that it is our expectation that margin expansion and the operating leverage that you have -- expecting and we've been talking about quite some time is going to materialize, assuming markets are flatter or improving, right? So that is certainly something that I'd say structurally should take place. We are -- we can and we will continue to invest in the business. We have been doing that, but with net revenue yield improving, the margins will grow. With the incremental operating leverage are at 50% to 60%, that, we think, is important.

Yes, look, I would just reiterate. I think the most important factor to the -- the macro factor is, if you look at the effective fee rates, go from '05 to now, they've dropped quite materially, but at the same time, more impressively and probably harder is to drop the operating expenses as a percentage of assets under management between that period, and we have continued. They have not gone up. They have, for the last couple of years, say, flat to down. But it will be a very powerful thing, is an additional basis points and effective fee rate is very important to the organization. But I do come back to you will see margin expansion in this business, and we think we're set up very well for that right now.

Okay. That's helpful. And just follow up. Marty, maybe just on the retail side of the business, you mentioned that the pickup in sales -- maybe, if you look at normal Januaries, does it feel like either you're seeing more momentum than what you typically see -- you compared it to the fourth quarter, but fourth quarter was kind of challenging for -- hopefully that's not normal. And then just when you look at where the money is coming from, because it sounds like, on the balance side, you're still seeing some momentum there. So within Invesco, like, are you seeing it come from fixed income, from cash? Or is it new money coming in from either competition, meaning other fixed income products to cash, or just cash on the sidelines?

That's a great question. I think it's really the strategic question we're all asking ourselves, right? Is the market broadening for real and what does it look like going forward? Or everything staying at fixed income and just going into sort of passive products? So I think the first point is, no question, first quarter of the year is the strongest quarter of the year, right? So maybe the comparison of January to last quarter is not exactly the right one, but it was such a unique period, especially December, I think that's really the highlight. This -- again, one month is not any extended period of time. We all recognize that. It is a very different start to the year than I can tell you that I've seen in the last 5 years. And it starts to hit on some of the questions that people are asking. We continue to see -- continued just for us, specifically, continued level of sales into our fixed income capabilities and resulting in net flows. We continue to see strong interest and growth in the asset allocation capabilities. Now, my personal point of view, I think that is not just for us, but for an industry you're going to see for an extended period of time, people continuing to divest, invest in these allocation-type capabilities. I think that's probably here for a good period of time. We are seeing investment in active equities to a degree that we have not seen in a period of time, and most importantly, start it by growth sales in this -- The growth sales level in January, I'm sure, are quite a bit higher than they were a year ago, and it is quite broad. So I think those are all important trends, not just for Invesco, but probably for the market as a whole. If we stay away from the shock for a period out of the system.

Jeff Hopson of Stifel. J. Jeffrey Hopson - Stifel, Nicolaus & Co., Inc., Research Division: So curious what you think may happen on the institutional side. Obviously, many institutions are in a longer-term allocation trend toward alternative fixed income. Do you think -- and some of those categories perhaps have disappointed, but do you think there's going to be a relook, so to speak, on public equities? How long that might take? And then in terms of some of the regional trends, it looked like Canada trended a little bit better, U.K. a little bit better. Anything there that we should know that happened in the quarter that might be a trend?

So let me take up the first part, Jeff, and then Loren can -- So I think you're asking the fundamental question. I personally think, and I've said this before, institutions under the banner of code derisking, I think, are doing a huge disservice. You can't have an underfunded pension plan and close the gap by alternatives in fixed income. And I think part of it has been the extreme volatility in some of the experiences that the pension plans have had has been very difficult for them that have moved them that way. I think right when everybody said it's over, it's when things change. And I do believe that you'll probably see greater participation in pension plans, but where we're seeing it, International Equity is probably our primary focus right now into emerging markets. But I think also importantly, as so many organizations have DC plans, they are broad ranges of capabilities and we have seen a number of clients, say, a handful of clients, add our international and domestic capabilities to their DC offerings. So I just have to believe as markets become less volatile and the like to, you'll continue to see -- or you will start to see some greater exposures to equities.

And I think when you talk about some of the specific areas like Canada, I mean the performance has been just stunning in terms of the change. And so I think, in terms of the 1-, 3- and 5-year percentage of assets bidding peers, I mean, it's as good as I've seen it, don't know many years, right? So I think it's 60%, 70% bidding peers, maybe even higher, uncertain of the time frames. So that is definitely helping the flow picture of the success in terms of the products that have been introduced in Canada over these last several years, in terms of the asset allocation products, the ETFs, suites, some other investment capabilities that have diversified relative to the traditional Trimark product, have been quite successful. So we feel really very positive about the prospects for Canada going forward in terms of the flows on both new products, as well as the traditional Trimark products, which, as you know, have really good feed characteristics, and the whole structure is -- tends to have very good margin characteristics as well. So that's a positive movement into 2013. The U.K. and Europe generally have evolved. I think, done well and better. Europe is, I'll just do that quickly, I mean -- and that's been really, really strong for us. I think we came in #6 in terms of net flows for the full year relative to the cross-border flows. So that's a very strong showing for us where, I think, historically, we've been closer to the bottom of the Top 10. We're sort of moving our way up. And then -- so that's very positive. And that's not just been asset allocation. It's been fixed income and Continental European equities, and so it's broadly based. And then the U.K., generally, I think, we're seeing some of the asset allocation products beginning to take hold. And certainly corporate bond product and other products have done very well and continued to get good share of market. So I would say, we're feeling very good about our positioning in Europe, generally. J. Jeffrey Hopson - Stifel, Nicolaus & Co., Inc., Research Division: And if I could follow-up. We haven't talked a lot about the old channel in a while. I know there are some -- a lot of moving parts there, lumpiness. the real estate has been -- some harvesting CDO's. Can you talk about kind of the trends from here of how we should think about flows over time, recognizing things that you know about that could happen there, both positive or negative?

So I think with the alternative category, obviously, it's the #1 place we've seen. Interest has been in the institutional side. Historically, it's been somewhat dominated for us by real estate, also private equity has been a smaller element, but one I think you will continue to see growth into 2013. But certainly in terms of institutional growth in pipeline. It's a measured thing. We're -- it's interesting, I think, for the industry and for us also is, in terms of the retail opportunity offering alternative capabilities, and we have, I think in aggregate, about $30 billion of assets that we would call alternative, that are being sold to the retail business. And that's an area where we think there is potentially a lot of opportunity to grow that have not been tapped. So we, like others, I think, in this business are thinking about how to do that well. And so that -- I think that's the story that's still sort of being written, but I think it's an interesting one.

Bill Katz of Citi.

Just coming back to margins for a second. I'm just trying reconcile, your big picture margin is moving higher, fee rate moving higher, but then I think you could have mentioned may have kind of dated too far-ly. [ph] I know you had mentioned in sort of the discussion on margins for the fourth quarter as a good guide post for 2013, you have incremental margins of 50% to 60%, in the flat to rising market how do you have the margins sort of trending flat to fourth quarter for 2013? I'm just trying to understand the math.

I don't think we said anything about margins. We talked about compensation. The comp was, for Q4 and Q1 of 2013, thought to be roughly the same.

I thought I heard 35.6% was a good run rate for the margins.

Oh, I didn't say that.

No, don't -- thank you for -- I hope no one else heard that. No.

No. So obviously, I mean, we're at a higher asset level at year end versus the average for Q4, and so that will provide some lift just naturally, but obviously, you do have payroll taxes being offset by some, I would say, higher level of payout relative to performance fee into Q4 that will sort of offset each other.

Okay. I'm sorry about that. I must have misheard.

I'm glad you asked.

Moving to the forensics of the flows, and certainly appreciate the year-on-year dynamics and Marty, your perspective in the last 5 years. I'm sort of curious that if you talked sales force -- I'm just sort of curious. There's a lot of really deep year end seasonality, I mean a lot of new seasonality to the first quarter that I still think are playing some of the growth sales per se, especially dividends and tag, [indiscernible], et cetera. When you talk to the distribution channel, how much of that -- of the activity reflects those dynamics versus a more structural change, if you will. And then the second part of that question is, we've seen the industry did fade a bit over the last couple of weeks, and sort of curious, in your commentary, your gross sales, are you seeing similar pattern? Or are you seeing some share gains, inherently?

I think I'll do that query. So one point, generally if we look at Europe, and Europe in Q4 we saw investors go into equities in a much stronger way than they did in the U.S. So they do it without any tax fund, but there was a legitimate sort of re-risking that was going on that we saw in Europe, which I think in terms of what we may be seeing in the U.S, is that, once you've gotten past all those tax aligning and some of this fiscal cliff stuff, so that's kind of some one backdrop. Again, it's hard to say because it's sort of real-time data as to what is seasonality and what is real. But we have not seen any tapering. I mean, January has been just an incredibly strong month for the firm as a whole. The U.S. piece has been probably one of the stronger elements within that mix, and so we've not seen sort it fade into the end of the month at all.

That's helpful.

The -- again, talking to the client base and people, yes, there does seem to be sort of fundamental shift of a greater willingness, and interest in investment capabilities can generate returns, right? So I think that's important. So you're asking the question that I think others can, and other have -- is January just the reverse of what happened in December? You'd have to -- maybe there's some element of that in the trees don't grow to the sky. So January times 12 is probably not the right answer, it never is, but there does seem to be a very different level of confidence and desire to invest more broadly.

And one person, I think, was describing to me that the hope is back. It wasn't there before. People are now dealing a little more hopeful, and that is helping them sort of to take on more risk. And not just in equities, there may be -- within the fixed income spectrum of what's being offered as well.

That's helpful. Just 2 for me. You mentioned scientific. You've seen some interest in that, again, in Quant, some of your peers are having more mixed dynamics with that, are you seeing a broad-based increase in the category? Or kind of what you're sort of suggesting in retail share gains? Are you seeing some sort of incremental opportunities relative to your peers?

I can't address the peers, but I can say, the Quant team, their global capability in particular, on the Continent and into the United Kingdom, in particular is getting an awful lot of attention. And will that extend to the United States, we'll see. There are some interest in it in Asia. So for us, we're having lots of interest in what could be some nice results.

Last one. Can you talk a little bit about your free cash flow priorities for 2013? I guess the one thing we continue to run into with investors is the very high debt levels, if you will, relatively speaking, enterprise value of the DA, any thoughts of delevering the balance sheet anymore in 2013?

So I think we are still focused on returning a committed level of capital to our shareholders through dividends. We think it's been certainly well-received, and certainly has not been a hardship for us in terms of being able to do that. And then our operating cash flow continues to grow, so you should expect to see our focus on dividends and payback in dividends to move with that. There isn't an expectation that we would sort of take a different approach than you've seen us do in 2012. With respect to our leverage, we were pleased to extend our maturities on our debt out 10 years. We locked in $600 million. That's in place. I think our focus on what we can chip away at is in the credit facility, and that is again there's not -- it's not been an issue. It's very low-fee debt for us. It's not created any topics with agencies. And then so over time, we can continue to bring that down, but there's not sort of an imperative to delever it. And as far as we can tell, it's not creating an issue with our investors or the stock price.

Robert Lee with KBW. Robert Lee - Keefe, Bruyette, & Woods, Inc., Research Division: Most of my questions have been answered, but since no good guidance goes unpunished, I did have another question on compensation, generally. I hear the comments about you have to pay for performance and investing in the infrastructure, but I'm just wondering, if you kind of dig underneath that, if you've seen any kind of pressure related to kind of the proportion, so to speak, of maybe operating income or revenues that you need to pay out in compensation. I mean you've got pretty successful real estate group. You have another successful asset allocation group, and those are groups that are in pretty high demand around the industry. So I'm just kind of curious if you're seeing any kind of competitive pressures, kind of -- even just change how you look at compensation in terms of the piece of revenue or earnings you payout?

That's a good question. We have had a overall compensation philosophy in place now for, my gosh, maybe 6 years, and it has served us very, very well. And within it, compensation plans are put in place consistent with that and it's really been received very well and it's done all the right alignments to focus on returns for clients and the like and meeting the needs of all the individuals. So we've not -- we're not seeing that as a problem for us as an organization.

And I think, I mean, I would say, Rob, is, I mean, granted some capabilities are more scalable than others, and so my comment earlier about trying to focus on products that can go global in that scale, I think is very much an important element to margin expansion. Certain businesses, certain capabilities are more people on the ground. They're more people-intensive and that's just what they are, right? And so the mix can have an impact on margin, but in terms of where we're expecting to see more growth and where the fastest parts of our business are going, we would expect to see margins expand. There isn't any part of our business where it would grow and you'd see margins decline. I mean, we really don't focus on those types of instances. And so -- but generally, there will be some businesses that if you can get a greater ratio of the assets to the portfolio manager, generally, you're going to see greater scale in margin expansion. So these big flagship funds, these types of things, make a big difference. Robert Lee - Keefe, Bruyette, & Woods, Inc., Research Division: That's great. And one last question. Since we toured the world, the one place we didn't in cover, I guess was -- too much, was Asia. I'm just curious how the Great Wall JV has been going. I -- that's had also its own kind of flow issues the past year or so, but if you're seeing that business -- any change there?

It's been thriving. I mean, it's a very -- it continues to be one of the top JVs. I think the good news is China. The optimism around China seems to be improving. And then I think the mood is improving, sort of a lot of new product introductions being contemplated for 2013. It's now a broader platform than it was 3 years ago where it was almost all equities. Now it's equity and fixed income, and we're looking at other product offerings as well as, Marty mentioned, ETF. So we think it is going to be a very important part of Invesco's business, and it's one that -- 2012 was a difficult year for China and Greater China, generally. And so we are hopeful and optimistic that you're going to see things improve with a better tenor in the dialogue. And certainly the leadership change; in China, I'm not going to talk about politics, but apparently, that's been well received in terms of setting a good agenda for growth.

Marc Irizarry of Goldman Sachs.

Marty, can you talk about ABRA as up market capture-type for you, as you've seen part of the fundamental shift toward return and some of the fund flows, is ABRA sort of gaining share of the pie? Or do you think maybe this product is a little bit more of a -- a little bit less of sort of the up market capture vehicle?

Yes. So it is not designed to -- let me say it the other way. So in a market that we've seen very, very strong equity markets, it will relatively underperform. And it is -- I think importantly, I think for all of us to understand is that is what has been the attraction for many -- for the investors, and that is how it is being clearly communicated to the investors, and that they look at us more as an anchor in the portfolio. And there's not a surprise, it would relatively underperform in a rapidly rising equity markets. So I think that's important. I think you'd contrast that to -- and I think the basis of the question is, what happens if a market like this continued? Is it like the old days if all the money grows into aggressive growth capabilities and then all of a sudden there's a big shift change, I just don't anticipate you'll see the mass of redemptions out of an asset class like that. This just not what the capability is, and I think that's important to understand. We'll see but that is fundamentally what it is.

So far, in January, the fund flows straight for ABRA. They have sort of kept pace in terms of the acceleration you've seen broadly?

Absolutely.

I think it's still on pace to set a record. So I mean, it's definitely not been slowing down.

Okay, great. And then just one more on -- Loren, for you, on the margin. You mentioned sort of the fixed side to the equation is harder to do, but when you think about the priorities for '13, when you look at the fixed cost bucket, I mean you sort of more keenly focus on making some of -- sort of controlling your destiny on the fixed cost side of the equation? Or should we just be thinking about sort of incremental progress there?

Yes. That's a great question. I mean, we're always looking at our expenses, trying to see if we can be more effective, more efficient. Continuous improvement is a focus throughout the organization about trying to use our resources more effectively. So some of the things -- it's just going to be continuation largely of the things we've done in the past. But for example, if we can get greater scale in our operations, particularly in some of the locations that have shown to be really good at delivering results at a lower cost, we're going to do that. And so that's -- those are the things that can take time. They continue on. They do save significant amounts of money, but it's not going to be so noticeable as you're going to see suddenly tens of millions of dollars of costs pulled out in a year. It takes time.

Eric Berg of RBC Capital Markets.

In this call we've talked about many, many topics other than domestic active equities. I can't remember them all, but they have included alternative investments including real estate and your Asset Allocation products and Fixed Income and International global. The list is very long of topics other than domestic equities. My question is, the public discussion about the asset management business continues to focus on what's going on with the domestic Equity business and in particular, with the active domestic Equity business. Given that your business and the business of so many of your competitors has to do with so much more than domestic active equities, I'm just wondering whether the discussion needs to be redirected or redefined?

That's a good point on the last one, and I think everybody tries to do that. And I think if you look at the totality of people investing in equities, you are net inflows, right? The focus has been on active domestic equities and how it's been in outflows over the last number of years. But what I would say, I do want to clarify one point and again, this is for us and you can figure out what it is for the industry. In January, we had domestic equity growth sales increasing 56% over the monthly average in -- the average from the fourth quarter. So you're definitely, again, a month is only a month. You are definitely starting to see something different, and that's all active domestic equities. But your broader point is correct. It's -- people are getting exposures to equity and it should be discussed, as such.

Now my second and final question then is this. Again in this call, you described multiple capabilities as doing well, whether it's your international capabilities or your asset allocation capabilities, and you've said that -- but you've also said that ETFs are doing well and that in the month of January we have this really striking turnaround in sales of domestic active equities. When you put it all together and you sort of look at who's sort of grow -- which asset class or which capability is growing the quickest, I'm trying ultimately to get a sense for what all this prosperity on multiple fronts portends for the domestic active equity business. In other words, if it's doing well, but the other capabilities of Invesco were doing even better, it would suggest that the domestic active equity business will continue to grow but become progressively less important to Invesco. And ultimately my question is, is that what's going on here?

I have a data point of a month. I can't give you evidences to support your thesis, a lot of it fine. But again, our basic belief is that all investors have a different set of investment objectives and different time horizons and we are focused in making sure we have those capabilities performing well to meet those objectives, and we think we're in a position to do that right now. So that's unique to Invesco, and I suspect others would probably have some version of thought, too.

The other one element is that people's exposure to domestic equity may not be in the form of a traditional domestic equity mutual fund anymore. I mean, it may be that they're getting it through different ways, asset allocation, ETFs, other forms. So how we look at this also may slant our view, which may not be helpful when we talk about domestic equities, a class that is somehow struggling or dying. And then maybe -- actually not quite as dire as people presume because it's actually introduced into other types of products in different ways. And so I think it's an interesting discussion, but it's not one that is obvious.

Yes. That's -- it's apparent that there's a lot of detail here that needs to be studied.

Roger Freeman of Barclays.

I might have missed this earlier. Did you say what percent of those long-term flows were ABRA last quarter?

Well, I think we have a chart that shows that long-term flows for ABRA in Q4 were roughly $5.7 billion. I'm sorry, what's that? I'm looking at $2.7 billion, forgive me. $2.7 billion or $3 billion. So there's a chart that was in our deck that makes that out.

And just -- it looks like the performance probably relative to -- that appears over the last quarter was falling off. And I know I heard in your comments before about how it performs in a good or bad market. Is it just sort of that dynamic? Or is there anything else that you can point to playing out there?

In terms of the flows...

More of the performance of the fund?

Well the performance of the fund as it -- obviously, in a near-term basis, may have seem a little more challenged because of the very strong equity markets, and then it tends to balance its risk across commodities, equities and fixed income. So we've not seen any impact in terms of sales or flows as a result of that. And I think the question which we've been asked -- and I still think we obviously have yet to see what ultimately happens. But we don't think it's going to have any sort of major impact in terms of customer demand for that product because it is certainly designed to provide a balanced return over a longer period of time. And it is not a rocket ship that's going to go up when markets are up and fall when markets are down. And then specifically used that, the diversify safety elements in people's portfolios, which I think is still in demand.

Yes, okay. And then just lastly, you talked a little bit before about selling alternatives into retail. And I'm actually curious, I've had some questions, just generally, about this. Is -- where have you seen the most success, either in sort of segments of the retail market or channels, and what are the biggest challenges that you're facing there?

I think -- I mean, our greatest personal success has been in the area of real estate as an asset class and REITS, and that's been a global phenomenon. And the largest part of that $30 billion that I mentioned is definitely in that category. We've seen it, though, in terms of commodities and that's largely in ETF space that we offer those types of products, and so that has shown up in retail. And it's not just ETFs. It is our balance commodity products, too, has been used as a mutual fund by retail investors. We've focused on some other asset allocation capabilities that are set off for total return-type of capabilities that are introduced and have been introduced into our retail segments. And that's one that is sort of new, but one that we think is -- has a lot of opportunity to grow. So again, I think there's -- it's still, as I said, the script is being written on how well this is going, but it is one where when you think about retail investors and what they're looking for, I think, a lot of things that alternatives offer are interesting and attractive to them. And the biggest issue is making sure they understand the product, understand the risks to the product and importantly, the liquidity of the product. Can they get in and out. And if they can't, obviously, they have to be qualified investors who understand these piece issues.

Our last question does come from Stephen (sic) [Kenneth] Worthington of JPMorgan. Kenneth B. Worthington - JP Morgan Chase & Co, Research Division: So I have a couple of questions. They're kind of interrelated. So unfortunately, I'm going to come back to comp question, which seems be the topic du jour. I guess what I'm trying to understand is, I cover about 7 large publicly traded asset managers and if I'm not mistaken, you've got the second highest comp ratio. I mean, the only one worse, I think it's Legg, and they're kind of a basket case. So I understand what you're saying about the fee utilization rate and how it's trended over the years, but it just seems like it's taking a long time for you guys to get operating leverage on that line item. And it also makes me wonder, overall, just -- how is management at Invesco being compensated? Can you just refresh my memory on what sort of targets you have? Is that total shareholder return versus peers? Is a pretax margin? If you have a target, like, if you can refresh my memory on that as well? Is it organic flow rate? Is it EPS growth versus peers, either an absolute or relative basis? Because all of this, of course, comes into consideration when we have to do the say on pay vote, and what I'm seeing on the comp line is not particularly encouraging.

So Steve, let me give a couple of thoughts on that one. I mean, one, we see where the comp to revenue ratio is. I think the lines referred to by Mason have higher ratios than we do, but obviously, that's not how we have organized our comp. It's not sort of investment banking model or anything. That's sort of just formulaic because we have the view of paying for long-term performance. that's the biggest part of our compensation. And certainly, as we've said our comp -- and our investment performance is probably as strong as you've ever seen it, so compensation, in some ways, reflect that. So that's kind of one point. And we think that's the kind of right way to manage an asset management firm. So one thing, one data point there. And in terms of -- and a lot of that is deferred to. So again, that's another element that is important. And obviously, if it's deferred, it is somewhat fixed and it won't vary based on the market. And so the challenges, I mean, that's one of the realities of how deferred compensation is accounted for. I mean, our senior managers and how they are paid, I think if you go to our proxy statement, last year, it lays it out pretty explicitly in terms of how it's thought about, and just to run[ph] people in case you haven't seen it, and things about compensation, incentive compensation as a percentage of pre-cash operating income. And so pre-cash operating income grows or shrinks, so does the compensation for senior management, and that's what you should expect to see. So again, you shouldn't have an issue in terms of say on pay because obviously, the compensation numbers that you're seeing for the firm as a whole may not be reflective, and probably in this case, won't be reflective of what's going to go on for senior management because operating income is actually down year-over-year. And so that is the reality of how composition is going to work for senior management. So again, I think, good point, it's something that we're aware of. It's something that is not lost on us. We think the way we're doing compensation is right. The real topic, I think, ultimately, have to do with, it's easy for you to say, is the revenue issue. And do we have the right revenue dynamics that supports the teams that in place, and that's is all about growth and finding these global products that scale and making sure that our resources are focused on building those capabilities. And as you can imagine, it's very expensive to provide local capabilities locally, because they can never truly scale unless it's exceptional, like in the U.K., where you're #2 or #1 in the market. So that's the challenge of the dynamic that is, I think you're probably aware of, with Invesco. And it's one that I think is manageable, and one that I would expect, as you can see the 2013 comp, the revenue ratio will decline, and then should begin to normalize in a way that you'll be pleased with as a shareholder. Kenneth B. Worthington - JP Morgan Chase & Co, Research Division: Okay, because the only follow-up I'll just make is, Alliance Bernstein and Legg Mason, both of which have had massive outflows, are the only 2 better that shows there's a problem. Because there's a lot of other asset managers with kind of weak-ish organic growth because it's a difficult environment, admittedly, but they still have much lower comp to revenue ratios. So it just kind of suggests to me that the overall cost structure is a little high there, or that you've invested in these teams and this infrastructure and the revenue pay off has not yet come. And it's just a question, are we waiting for Godot, or are we actually going to see it at some point? Or you're going to have to do kind of a restructuring then you bring down this.

I think, No. I think is- I appreciate your point, it's much more -- it's broad-based than what give flows and what get comps. We don't comp pay people based on flows. We think that's a flawed way to do it. That said, it could that net inflow is a whole lot better than being in an outflows. And I think it would very instructive to take a look, as Loren said, the -- again, you look at the operating expenses as a percentage average assets under management that's happened over last number of years has been extraordinary. And also in this environment of the effective feed rate dropping in this environment with an asset mix change, those are the principal dynamics. And I think you will find it hard-pressed to find an organization with the same level of operating expense discipline that you will have find here. But happy to engage with you on it.

At this time, I show no further questions.

Thanks very much, everybody. Appreciate the time.

Thank you. Today's conference has ended. All participants may disconnect at this time.