Invesco Ltd. (IVZ) Q4 2013 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 of our operations, expenses, earnings, liquidity, cash flow and capital expenditures, industry or market conditions, AUM, acquisitions and divestitures, 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's 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. Now we would like to turn the call over to the speakers for today, Mr. Martin L. Flanagan, President and CEO of Invesco; and Mr. Loren Starr, Chief Financial Officer. Mr. Flanagan, you may begin.

Thank you very much, and thank you, everybody, for joining us. And this is Marty Flanagan, along with Loren Starr, and we'll be speaking to the presentation that's available on the website, if you're so inclined to follow. And we'll provide a review of the business results and also the specific discussion around the U.K. Loren will then go into greater detail on the financials. And as always, we'll have Q&A. So let me start on Slide 3, and let me hit some of the highlights of the firm's operating results for the first quarter. Long-term investment performance remained very strong during the quarter. Strong investment performance and continued focus on clients contributed net inflows of $5.2 billion for the quarter across a diverse range of investment capabilities. Adjusted operating income was up 34.5% as compared to fourth quarter of the prior year. And a continued focus on a disciplined approach to our business drove improvement in our operating margin to 40.5%, almost a 500 basis point increase from a year ago. Assets under management were $778 billion for the fourth quarter, up from $745.5 billion in the prior quarter. Operating income was $347 million versus $328 million in the prior quarter. Earnings per share were $0.58, up from $0.55 in the prior quarter. And the quarterly dividend remains at 22.5% -- excuse me, $0.225 per share, and we returned $450 million to shareholders during the quarter. Now let me take a moment and look back at the achievements over the past year, which will provide insights into our long-range plans. First and foremost, of course, we remain very focused on delivering strong long-term investment performance to our clients, which continues to drive the growth in the business. 83% of assets under management were ahead of peers on a 3-year basis at the end of 2013. And by delivering strong long-term investment performance to clients, long-term flows for the year were $34.4 billion. We continue to invest in capabilities where we see strong client demand or future opportunities, such as multi-asset, fixed income and liquid alternative capabilities in particular, and by hiring world-class talent, upgrading technology platform, launching new products and providing additional resources. The ability to leverage capabilities developed by our investment teams to meet client demand across the globe, we believe, is a significant differentiator of our firm. We will continue to bring the best of Invesco to different parts of the business where it makes sense for our clients. We also successfully completed our joint venture with Religare Asset Management in India, divested our private wealth management business and finalized the outsourcing of our European transfer agency process. And before I go into more detail -- Loren goes in detail on the financials, but let me take a minute to review investment performance. And I'm on Page 7, if you are following the presentation. Our commitment to investment excellence and our work to build and maintain strong investment culture helped us maintained a solid long-term investment performance across the enterprise during the quarter. Looking at the firm as a whole, 72% of assets were ahead of peers on a 1-year basis, 83% of assets were ahead of peers on a 3-year basis and the softness in the 5-year number reflect the rolling off of some very strong numbers in the fourth quarter of 2008 and a brief period where we trailed the market during the low-quality rally in 2009. Based on the strength of our recovery later in 2009, we would expect our 5-year numbers to demonstrate steady improvement over the second and third quarters of 2014. Now turning to flows on Page 8. You'll see gross sales remain strong during the quarter, and particularly strong numbers for active assets under management. These numbers also reflect the broad diversity of flows we saw across the global business during the quarter, which included continued strength in equities, alternatives and traditional ETF offering. Net long-term flows were $1 billion for the quarter. Although gross sales remained strong for the fourth quarter, redemptions increased. I'll provide more detail in a moment. We also saw upward trend in institutional channel, net long-term flows and continued demand in real estate and bank loans. Although clients in particular -- institutional clients continue to show interest in our asset allocation strategies, we saw further shift towards risk-based assets in the quarter, which resulted in the slowdown in the sales of IBRA. As we've said in the past, in risk-on environments, client shift demand towards equities and away from risk-parity strategies. This is exactly what we experienced. We saw $6.6 billion of improvement in equity flows in 2013 versus 2012, which more than offset $6.2 billion decline in IBRA inflows in 2013 versus 2012. It's important to note that our asset allocation strategies continue to perform well relative to risk parity peers, and we anticipate these types of flows during the type of equity rally we saw last year. That said, the choppiness we're seeing in the market currently is a likely favorable development for IBRA. Gross long-term sales for our U.S. retail business remained strong at $18.4 billion for the quarter, a 14% increase over the same quarter a year ago. The annualized redemption rate for Invesco remained favorable relative to the industry, as you can see on Slide 11. Flows into the complex were led by strength in U.S. equity, international global equity, traditional ETFs and alternatives. Our business has become increasingly diversified as allocation in alternatives grew to 37% of sales in the quarter versus 28% during that same period 2 years ago. We saw 18 funds with net flows of greater than $100 million over the trailing 12-months ending 12/31 versus 8 in the same period in 2011. We also took the opportunity during the fourth quarter to launch a number of new capabilities globally that will help support the future growth of the firm. In fact, we launched more funds during the fourth quarter than we did in any full calendar year over the past 5 years. A number of these capabilities is built on the work we've done over the past few years to strengthen our alternative offerings to the market. These products leverage 25 years of experience managing alternative assets for pension plans, sovereign wealth funds and other institutions. These product launches are designed to further solidify our position as one of the largest managers of alternatives for U.S. institutional investors, with more than $83 billion of alternative strategies. We continue -- we launched the global total return funds in the U.K., EMEA, the EMEA cross-border and the U.S. market as part of our efforts to further scale our multi-asset capability globally. Multi-asset absolute return funds provide exposure to a blend of investment ideas across asset class, geographies, sectors and currencies, something Invesco is extremely well positioned to implement. We also took the opportunity to expand our suite of investment capabilities in the fast-growing China market. We're pleased with the progress during 2013. We feel good about the momentum of our business. We believe Invesco's very well positioned regardless of where the markets take us. As always, we continue to look for opportunities to strengthen our competitive and financial position over the long term. And before I turn the call over to Loren for more in depth discussion of the quarter's results, let me take a few minutes to provide an update on our business in EMEA. As I have mentioned, we are very well positioned for long-term success across the U.K. and Continental Europe. We continue to execute our transition plan, which is going very well. The market has been extremely receptive to Mark Barnett, who has an excellent track record. Mark is supported by strong Invesco perpetual investment team as he transitions into the leadership role for U.K. equities. U.K. experienced record gross sales during 2013 and has experienced excellent momentum heading into the new year. We have many attractive, highly competitive funds across the franchise, and we will -- which we will use to offset any outflows in the U.K. equity income funds. Strong investment performance drove continued success in our cross-border retail business, which experienced $10 billion of net flows across 2013. We also made progress further diversifying our business during the quarter -- during the final quarter of the year, with strong net sales into global equities and European equities. We've also been pleased with investors' response to recently launched GTR fund, which has seen flows in excess of $250 million in a very short period of time. We continue to make further progress in promoting experienced, capable, well-tenured fund management team in Henley. Assets managed by our EMEA business totaled nearly $172 billion, as you'll see on Slide 15. During the fourth quarter, net flows into EMEA, excluding U.K. equity income, were $4.3 billion, representing an annualized organic growth rate of 15%. Given our efforts to thoughtfully manage the transition, we're pleased to report that client reaction to the departure news has been calm and professional, highly supportive of Invesco Perpetual's investment teams. From October 15 through the end of the year, redemptions from U.K. equity income totaled $4.8 billion, approximately 10% of the total. This is good outcome. We continue to see strong evidence that many clients are choosing to remain invested in the funds as demonstrated by Tuesday's announcement from Edinburgh Investment Trust that is retaining Invesco Perpetual as the manager of the trust. We find the results encouraging. We continue to do everything we can to deliver good outcomes for clients, retain assets and grow our EMEA business. Now I'll turn the call over to Loren to review the financials.

Thank you very much, Marty. So quarter-over-quarter, our total assets under management increased $33.2 billion or 4.5%. This is driven by positive market returns and FX of $28 billion and total net inflows of $5.2 billion, of which $1 billion were long term. Our average AUM for the quarter was $761.7 billion. That's up 4.4% versus the third quarter average. Our net revenue yield came in at 45 basis points, and that was an increase of 0.2 basis points quarter-over-quarter. The increase was a result of improved mix, leading to a higher investment management fee rate, as well as greater performance fees compared to the third quarter. As a reminder, as we look forward into the next quarter, our fee rate, as it always is, will be negatively impacted by day count, as the first quarter has 2 fewer days than the fourth quarter. Now let's turn to our operating results. Net revenue increased $40.9 million or 5% quarter-over-quarter, which included a positive FX impact of $10.4 million. Within that net revenue number, you'll see that investment management fees grew by $44.8 million or 4.8% to $982 million -- I'm sorry, $982.8 million, and this increase was in line with our higher average AUM and an improvement in the effective fee rate during the quarter. FX increased investment management fees by $12.9 million. Service and distribution revenues were up by $9.4 million or 4.3%, roughly in line with the increase in average AUM. FX increased service and distribution revenues by $1.2 million. Performance fees in the quarter came in at $11.1 million, and that was an increase of $0.5 million versus prior quarter. Performance fees in the third quarter were driven by a variety of products and regions. FX increased performance fees by $0.8 million. As you know, performance fees are difficult to predict and could be volatile quarter-to-quarter. As we look towards Q1, we expect performance fees to be in the range of $5 million to $10 million, and this range includes the recent change to the Edinburgh Trust contract in the U.K. Other revenues in the fourth quarter were $33.3 million. That was an increase of $0.2 million versus prior quarter. FX increased revenues by -- other revenues by $0.1 million. As we've said in the past, other revenues are difficult to forecast. But I will say that we expect the average to be approximately $30 million per quarter in 2014, although fluctuations quarter-over-quarter will likely exist. Third-party distribution, service and advisory expense, which we net against gross revenues, increased by $16.1 million or 4.2%, and that was roughly in line with the increase in retail investment management fees and service and distribution revenues. FX increased these expenses by $4.6 million. Moving on down to the slide, you'll see that our adjusted operating expenses at $510.1 million increased by $21.8 million or 4.5% relative to Q3. FX had an impact of $5.9 million on those expenses. Within expenses, employee compensation at $332.3 million, increased by $4 million or 1.2%, and was largely the result of FX, which increased compensation by $3.5 million. Looking forward, seasonal payroll taxes and a 1-month impact from base salary increases will lift our Q1 compensation by approximately $15 million to $20 million. And it will then decline by approximately $5 million into Q2, as the decrease in seasonal expenses are offset by full quarter's worth of base salary. This assumes flat assets from the end of the year, importantly. Marketing expense increased by $7.6 million or 32.3% to $31.1 million. The fourth quarter included $2 million of new product launch marketing cost and $5 million in advertising and other marketing cost to support the ongoing business. And FX impacted these expenses by $0.4 million. We expect run rate quarterly marketing expenses to be roughly in the range of $28 million to $29 million per quarter in 2014. Again, fluctuation will likely occur quarter-to-quarter. Property, office and technology expenses were $74.9 million in the fourth quarter, and that was up $2.2 million. FX increased these expenses by $1 million. Looking ahead, property, office and tech expenses should increase slightly to approximately $76 million to $77 million per quarter, reflecting continued investment in front-office technology platforms and increased outsourced administration costs due to the higher levels of business activity in EMEA. G&A expenses came in at $71.8 million. That was up considerably, $8 million increase or 12.5%. The fourth quarter included $4.5 million of new product launch-related costs and also $2.5 million of, what I would call, other seasonal G&A costs. FX increased G&A by $1 million. And we would expect G&A to decline to approximately $67 million per quarter in 2014. Although once again, variation should be expected period to period. So continuing on down the page, you'll see the nonoperating income decreased $7.9 million compared to Q3. The decrease was largely due to higher interest expense resulting from the refinancing of our long-term debt during the quarter, which happened mid-November. And then we also had lower unrealized gains on certain of our real estate and private equity partnership investments. Interest expense will step up to approximately $18 million to $19 million per quarter, reflecting a full 3 months of interest expense impact. Firm's effective tax rate on pretax adjusted net income in Q4 came in a little bit lower than guidance at 25.4%. Looking forward, we would expect to see the effective tax rate, again, being around 26% to 27%. And that brings us to our adjusted EPS of $0.58 and again, as Marty said, our adjusted net operating margin of 40.5%. And I will now then turn it back to Marty to open it up.

So any questions please?

[Operator Instructions] The first question comes from Ken Worthington, JPMorgan. Kenneth B. Worthington - JP Morgan Chase & Co, Research Division: Maybe, first on the buyback. So you closed the CIBC deal at the end of the year. To what extent were the big buybacks this quarter a front-end loading of the cash received from that deal? And really, given the deal closed on 12/31 and there's more money coming in from, I'll call it an, earn-out in the next couple of months, is there still meaningful stock you'd expect to buy with the proceeds? And then for the record I do understand you bought back a lot more stocks from the total proceeds from the deal in the quarter, so I get the math.

So the buyback really did reflect the front-end load of the value of the transaction, even though the money is spread over a couple of quarters. That is what the $350 million represented, Ken. And again, in terms of our interest in buyback, as we have in the past, we will be opportunistic and certainly be looking at a relative valuation and impacts on our stock due to market dislocations and other things. So again, we have a strong interest in being able to return our capital to shareholders, both through dividends and buybacks in 2014. Kenneth B. Worthington - JP Morgan Chase & Co, Research Division: Okay, great. And then, Marty, just on Neil Woodford. So Neil was sort of concentration risk that you inherited when you came to the firm. You put Mark Barnett in charge of the assets, and looks like it's helping retain the assets. You guys pointed out that he's being very well received. But you also maintained that concentration risk. So as you position for Neil's departure in the next couple of months, are there any steps that you either have taken or are taking to kind of minimize this concentration risk as we look forward into the future?

Yes. Ken, good question. I think the reality is we'll take good money managers all day long. And Mark has been a part of that team for a long time. It's the depth of the team that is there. We couldn't be this successful without that real depth. And I think that often, it is something that gets overlooked throughout, not just our organizations, but a number of organizations. And you have to have a portfolio manager pulling the trigger, and that's what we do and a very talented one, supported by a very strong team. And we think that is the right way to do it.

Ken, the only thing I would say is that we've been extremely successful, and we will continue to be working on continuing to grow other parts of the business in the U.K. So the diversification will happen largely through the success of our other teams. And we've had great success in the corporate bond area, in the global equity area. And obviously, the new GTR product, Global Total Return, has been off to a very strong start. So I think you'll see diversification created that way primarily.

Your next question comes from Craig Siegenthaler, Crédit Suisse. Craig Siegenthaler - Crédit Suisse AG, Research Division: Can you provide us an update on how the Henley based multi-asset team is doing? And I understand this is a pretty young team over at Invesco, but it would be helpful if you could provide some color on how sales activity has trended both, kind of in the U.K. I believe you have a U.S. mutual fund product within that fund now. And also, any C Cap cross-border activity in Continental Europe?

So let me kick off. So we're very early days. If you remember, the U.K. fund got launched in September of last year. And the, just want to call it, the pace is not too different generally than the United States. It's usually served 3 years -- you have to have good track record for 3 years and keep going. That said, the reputation of the team is strongly in place. And as I mentioned a few minutes ago, we've seen $250 million already head towards that team. So we look at that as a very, very good development out of the box. We have, as I said, just -- and that's one of the efforts in the fourth quarter. The capabilities now in the C Cap product, it is now in the United States. And it's hard to introduce in the retail markets in Asia, just because of regulation around derivatives. But it is a global effort, and we think it's a real strong complement to the risk parity capability that we have. And we think it's going to be a very strong capability for the firm in total. Craig Siegenthaler - Crédit Suisse AG, Research Division: Got it. And then just I want to touch on performance fees real quick. Given the 1Q guidance, and normally 1Q is a seasonally strong quarter. It seems that your performance fees will sort of trade -- trend maybe in the $30 million range next year plus or minus. Back 5 years ago, it used to be kind of $70 million, $80 million, $90 million. So -- and your alternative AUM is much higher. So maybe you could just help us think about what structurally has happened in terms of why the performance fee run rate is sort of lower than it used to be and not higher?

Well, I guess, one thing: I mean, performance fees in aggregate have always been a small part of our overall revenues, so that's kind of one point. And we like it that way. We like the predictability. So we haven't been sort of driving to increase performance fees overall as a function of our overall revenues. In some cases, they're sort of part of -- parcel with the product, and they're expected by clients. And in which case, we'll certainly have them. So in the past, going way back, I mean, we had quite a bit coming from some of our quant capabilities. And again, some of our quant capabilities have done extremely well. But some of the new accounts that we have with institutions have been not performance fee based but more straight management fee based, which, again, I think it's probably more predictable and provides greater valuation credit to us [indiscernible]. Looking forward, I would say that we would expect to continue to see performance fees. Even in the first quarter guidance, I feel the 5% to 10% is probably the right level. For us, there is still some opportunity to see performance fees that could show up through real estate. And then over the longer term, we think the private equity fund V, fund IV, they're doing very well, those funds. They are above their high watermarks. And again, none of this is realized. None of it is stuff that we can be booking. But ultimately, it could be substantial in terms of performance fees, if and when they get into the point where we could recognize that from an accounting perspective. So I do think performance fees will continue to play a part in our revenue stream. It's really just the U.K. element is going to be more muted than you've seen in the past.

Your next question comes from Dan Fannon, Jefferies.

Can you give a little bit more color on the Edinburgh Trust announcement just in terms of the size? And then what other kind of institutional dynamic or clients you've talked to or what other assets remain within the Perpetual franchise and how those conversations are tracked?

Yes. So obviously, Edinburgh Investment Trust is a very high profile investment trust in the U.K. It's probably just under USD 2 billion. A very seasoned, experienced board. And so we look at that as quite a very public endorsement of Invesco Perpetual, Mark and -- I mean, and Mark Barnett and the team. And so we look at this as very positive. Others institutions, as you know, they're confidential. They're -- they don't want to be talked about publicly. And so again, I think looking at that as a strong supporter of Mark and the team, I think, is a very good way to look at this.

And then, I guess, just thinking about the fee rate and what you guys are having success in selling products, particularly some of your C Cap versions versus kind of where you're seeing some outflows, whether that be IBRA or Perpetual, taking market aside, as you think out over the next -- into 2014, are you looking at your fee rate improving based on where you see the demand and where you're seeing redemptions?

Yes. So I think I'll step up one level and then come back down to it. It was maybe 3 years ago, we started to talk about we need some better jobs across EMEA and the efforts there. And you're now seeing very strong organic growth on the continent and, as I said, about 15% organic growth last year. We look for that type of growth to continue, and it's a reflection of not just, want to call it, the infrastructure work that we did, but really, if you look at the breadth of the capabilities on the C Cap product and its performance, it is really, really strong. And as Loren has pointed out, it is in broad -- bonds, European equities, global equities, the addition of GTR in it. So it is a very, very strong lineup, and we thought we are punching under our weight on the continent and we're starting to make some real improvement. So we look at it as a very, very strong dynamic for us. And also as Loren said specifically in the U.K., if you look at the depth of the team, the quality of the team and the performance across the global equity team, the European equity team, in addition to the bond team which has just been strong, it's broad, it's deep. And so that's also where we see money moving. So I think we're positioned quite well.

Yes. I would answer just, in fact, right, yes, we do believe that the net revenue yield excluding performance fees, and I'll just make that point, will improve year-over-year because of the dynamics that Marty just talked about. The performance fee is a bit of a variable that could keep it more flattish depending on kind of how performance fees show up in the year.

Your next question comes from Michael Kim, Sandler O'Neill. Michael S. Kim - Sandler O'Neill + Partners, L.P., Research Division: First, just coming back to U.K. equity income. On the last quarter's conference call, you kind of talked about redemptions above the historic reduction rate. We're about $1.5 billion in the back half of October. So not sure if that's apples-to-apples versus the $4.8 billion of outflows you reported for the quarter. But just wondering if you could give us a sense of how those outflows tracked through the quarter, and then early read into January trends would be helpful as well.

So again, I think it is apples-to-apples, the $4.8 billion is consistent with the $1.5 billion that we talked about. It obviously has been sort of a -- there's been volatility in because of some institutional accounts who have decided to sort of terminate, and then those can be a little chunky. So it's hard to sort of read into it. And I'd say, generally, most of the movement has been around the institutional side. The retail side has been a much more sort of slow kind of -- and even less material impact on the overall number, so -- which I think is encouraging. Because the vast majority of the assets are retail based. So it has been sort of a general improving trend month-to-month, I would say, but I don't want to read any -- too much into that because, again, we all understand that this is something that's going to go through a couple of more events ultimately to really realize how much impact this is going to have. So we're very focused on it. We're not complacent on the topic. And again, we're focused on doing what's right for the clients and making sure that -- we have Mark Barnett in front of all the clients that need to see him and get comfortable with him. I'm not going to comment on January trends because we don't want to be out in advance of anything that our own U.K. team is doing. But I'd say, the bigger events generally will be at the time of actual -- Mr. Woodford's departure, right? And that would be the date that we think most of the noise and activity would happen. So that's the date I would look to as opposed to something else. Michael S. Kim - Sandler O'Neill + Partners, L.P., Research Division: Okay, fair enough. And then maybe focusing on your fixed income business. Just curious to get your take on sort of the opportunity seemingly developing across institutional fixed-income managers, just assuming pension plans increasingly shifted to maybe more defensive asset allocations now that they've gotten closer to being fully funded, and how that might play out versus the potential for maybe some ongoing redemptions on the retail side of the business.

So I'd probably broaden it. And I think if you look at what our pension plans, what would you expect them to do, it was rally of equities. And those that participated, if they close those gaps, you could really see more movement into asset allocation. And in fact, one of the things we're seeing, continued interest and things like give breadth in the institutional channel and on volume set, as we saw in retail. But that makes a lot of sense. The effort in fixed income around multi-credit is a core skill that we have in credit. And that capability, be it in the markets, along with things like bank loans, are traditional strength in real estate. So we think we positioned ourselves very well for what could be happening in the institutional market.

Your next question comes from Bill Katz, Citi.

Just in terms of a lot of puts and takes in terms of what's coming and what's going out geographically, where you're seeing strength, et cetera, can you give us an updated -- I know you gave us a sort of tactical guidance for the first quarter on some of the line items for expense. But stepping back, can you give us a sort of a sense of where you think incremental margin opportunity might be? Is it still north of 65%? Or has anything primarily changed quarter-to-quarter?

Bill, so I would say, again, the discussion on the incremental margins has a lot to do with what sort of market we're in. And I think again, so we will provide sort of a similar perspective, I don't think it's changed. Which is when the markets are generally moving up strongly, we can see the incremental margins be at the higher end of the range of somewhere between 50 to 65. And we certainly -- we think 65 is achievable, maybe even higher in the strong equity market. In flat markets, which is what we normally plan for and hopefully we'll be surprised with better market, it is more on the lower end of that scale. So you're into the 55 to 60s range. So depending on what's your view in the market, you can select what sort of incremental margin would probably occur.

Okay. And then just a follow-up question. You've launched, I think you said the most products cumulatively in -- versus the last couple of years. So as you think through 2014, you put the Woodford assets to the side, which feels very tactile to me, and EMEA is doing very well, is it liquid -- where would you see -- where would you expect to see the greatest rate of traction of some of the new business trends?

Yes. So it's a good question. It sort of pairs very well with Loren's commentary and sort of what you see. So where we see the world will be, alternatives will continue. We think we're stronger and we'll continue to be. The efforts on fixed income, in particular on multi-credit, I think, in addition to bank loans and the like, is going to continue to be an opportunity for us. But again, I think you also have to go back to what have we done over the years and whether it be getting into the ETF business, moving into risk parity-type capabilities. The effort right now is around liquid alternatives, we think the depth and breadth of our -- we thought it very important to be holistic in getting a full range out there right now because the take-up time that we all know. So we think we're positioned very well in asset allocation, liquid alternatives. The Continental Europe in particular, I think is going to continue to be an opportunity for us. Our position in Mainland China, quite frankly, is ever-growing and will be something that will -- and to say nothing of the ETF business. Our market share was about 4% last year; as a percentage of gross sales, it was 7%. So we're growing the ETF business. We see that as a margin enhancer also. And we're continuing to get further strength in the U.S. retail business. So I do look at it as early days. And as Michael was mentioning earlier, if you look at our capabilities, it matches up very well where the institutional market could be going. So again, I think a lot of the things to pay attention to is we can't predict markets. But at one level, it really doesn't matter to us because we think we have the capabilities to participate. So I would look in the next 3 years as -- that we're positioned very, very well for where we think clients could be going.

Your next question comes from Luke Montgomery, Sanford Bernstein. Luke Montgomery - Sanford C. Bernstein & Co., LLC., Research Division: So the operating margin is looking pretty healthy, above 40%. Notwithstanding that, we've talked a little bit about how maybe less scale in your product suite might be holding down the margin relative to some of your peers. Just wondering what levers you might pull to address the scale issue, whether that means rationalization of products or -- and redeployment of human capital, seed capital. Or is this really just more about getting the flows up? And if it's the latter, you touched on them just a second ago, but what are some more obvious opportunities by distribution channel or geography to increase that scale?

Yes. So you are on the topic. And I think, again, what I'd point to is just -- and we've talked about it. And here's an example of it right now. So we are taking the -- to the degree that we can take our investment capability to take them around the world more concurrently, that's going to make quite a difference. And I think you can just see from what we're talking about this quarter that is a real effort in that way. And we think by organic growth, with the quality of the teams, the long-term performance of the teams, that's where we see the real opportunity for us. And yes, we agree with your observation. Luke Montgomery - Sanford C. Bernstein & Co., LLC., Research Division: Just in -- and is it -- could it be a little bit of both? I mean, is there some rationalization of products and redeployment of capital? Or...

So we always do that. And I -- if you add up the number of things we've rationalized over the years, it's quite stunning, honestly. But we'll continue to do it. There's probably less rationalization, but we're always paying attention to that. And same thing, we deploy resources whether it be seed capital or talent to those things that we think have the highest probability of success, and that's what we think we're doing right now.

I would also just mention, I mean, maybe the areas where we've seen less scale, I mean, there's definitely been a benefit just generally in terms of the flow activity. So all our regions are improving in terms of profitability. There isn't a particular area that I would say is a real problem or there's something going wrong someplace. So we're seeing really good traction just in terms of bring the flows in, and the top line is making it happen. Luke Montgomery - Sanford C. Bernstein & Co., LLC., Research Division: And then on the comp. Even with the FX impact that you called out this quarter, looks like comp revenue is the lowest it's ever been. So first, do you expect any continuity in that FX impact? And I know you don't target a specific ratio, but what's the likelihood you can keep the comp ratio down at this level?

I mean, I think, we -- I mean, given the guidance, I think -- and obviously, we get a sense of confidence. We wouldn't provide it. It is something where we don't manage to a comp ratio. Looking at compensation to revenues, we -- again, we provide a lot of detail on how we think about compensation should work in some compensation. But ultimately, we do feel that this is a sustainable good level with the variations around payroll taxes and then the obvious decline coming in for the second quarter as payroll taxes roll off.

Your next question comes from Michael Carrier, Bank of America Merrill Lynch.

One, maybe -- you might have hit on this, so just wanted to check, just on the buyback activity, you obviously got a pickup this quarter. Just in terms of the 2014, just in terms of what to expect. Should we just be going back to sort of that normal run rate that you guys have -- I think it's about 1/3 of your cash flow. But I just wanted to get an update there.

Yes, I mean, I think that's a good starting point to think about what to expect going forward. However, honestly, we're not driven formulaically in our thinking on buybacks, and we will have some variation quarter-to-quarter. We have said, and this will still be the case, where we do have some of the equity grants to get issued is on a deferred basis to employees in the first quarter. And certainly, we would do our very best to try to mitigate any dilutive impact by, certainly, focusing on buyback as a strategy.

Okay. And then, Marty, you gave pretty good updates in terms of what you guys have been doing on the EMEA side and then also on the balanced or the asset allocation products. And I think when I look at the U.S. business, you kind of gave the same updates. And over time, post the Van Kampen transaction, there was maybe a period of 1 to 2 years, where -- whether it was launching products, consolidating products, improving the performance, you're gaining traction on the distribution platforms. And then we gradually saw the flows improve. So I guess, in EMEA and in this -- the balanced risk or the allocation products, I guess, just kind of similar maybe color in terms of you got maybe one issue in each of those segments; but on the flip side, you're doing a lot to grow those businesses. I just wanted to get a sense of where you see Invesco in terms of like the inning the growth in both of those, whether you want to call it product areas or geographies that partially offsets some of these near-term issues?

That's a good question actually. And so let me provide the perspectives. So if you go back with the talk -- a good inflection point was the Morgan Stanley and Van Kampen transaction, and we thought we just -- we weren't anywhere in the U.S. retail business at that time and we laid out our perspective of where we're going. I'd still say, in the U.S. retail business, it's going very, very well. But I'd say, we're fourth inning. Where if you want to use the headlines of where we're recognized by, as a brand, it's -- we're now ninth, tenth in the U.S. retail channel. We -- you couldn't even -- we did the first survey, they couldn't find our name. So it's -- that's a tremendous change in a short period of time. We still think we've got to move up a handful of notches, and that will make a big, big difference. EMEA actually, or Continental Europe in particular, it is somewhat of a replay. We are in the first inning of where we think we can go. Now the last couple of years, when we started to highlight this as an area where we're spending time and money, we have a lot of plumbing-type work to do. And the outsourcing and TA and things that you might think are sort of maybe not interesting. Well, the fundamental fact, if you don't have strong operating infrastructure, it gets in the way of success. And so a lot of the plumbing is now in place. There's a lot of rework on the product range. And again, I mentioned a few minutes ago, it's broad. It's deep. It's strongly performing. But we're still very early on penetration of -- with principal distributors on the comp. Now there's areas of real strength. In Italy, we're really, really, really strong. Germany, we should just be dramatically stronger than what we are. We've vetted Germany for decades. And so -- and also Switzerland, again, we're very much undershooting our weight. So we look at the continent as a real opportunity for us. And so the analogy's probably a very good one that you pulled out.

Your next question comes from Brennan Hawken, UBS.

So you guys have described IBRA as more conservative than a bunch of peers. And clearly, January has started off as a much more risk-off-type market. I know you indicated that this was likely favorable. But could you give us maybe a little more specifics on whether or not what you've seen in January -- obviously, the performance is balanced nicely. But from a flow perspective, has that balance in performance helped sort of stem the trends that we saw in the fourth quarter?

Yes. Brennan, I think there's probably a little bit of a lag in terms of how people respond. And so again, generally, we are still seeing strong interest in equities in January. So again, how long that persists is a good question. And I think we're seeing sort of a consistency in IBRA. The sort of flip side to that where that's been more on an outflow perspective. So I don't think we're seeing any change in behavior in January per se, at least in the flow data. But again, that's something where, within a week, you could begin to see something shift perhaps. So it's just a month, so it’s hard to really say where it's going. I would just mention, it's probably worth just having this point out that in the month of January, we have more flows in the month of January, long-term flows than we saw all last quarter. So it's been relatively a good month for us.

That's terrific. And then a follow-up to Ken's question, I know that with Woodford, you guys didn't have some of the protections like non-compete and such agreements. The assumption would be that you guys learned from that with Mark Barnell -- Barnett, excuse me. Is that a right -- is that correct?

I don't think so, no. And again, it's -- everybody has terms of employment, in the U.K. in particular, and it has the traditional, what would you say, things that are in place generally. So -- and again, it is a free world. So we're very happy to be successful going forward with the depth and breadth of the team that we have. So we think we're very well placed.

Your next question comes from Roger Freeman, Barclays.

Just one more on Woodford. I think, Martin, you touched on this and pointed people to look at the sort of the departure date in thinking about when the -- maybe the bulk of the flows could come out, if they do. In another case, it seems like we've seen, I guess, a tail on that, even a couple of quarters beyond. And I'm wondering, because you kind of have a transition taking place over, call it, a 6-month period before, whether maybe that mitigates the potential tail effect.

Good question. I mean, here's the reality: The reality is, and I said this previously, there's 2 types of outcomes, right, that you've seen traditionally when there's change. It's sort of unplanned, unpleasant departures, and that usually -- no one does well. The clients don't do the well, the organizations don't do well and, hopefully, the individuals don't either. This, we think, is very, very different. It has been a plan that's been in place for a very long period of time. We are executing that plan over what is many, many months. And what is happening is what we would hope happen, and that you are seeing -- Neil had a great 25-year track record but also overshadowed the depth and breadth of the team. And I understand that from growing up -- working for Sir John Templeton. They are big trees. And the truth is there's a lot of talent underneath there, and that's what's happening. And the point of having a long transition is to have the marketplace fully recognize the depth and breadth of the talent. And Mark and the team are being very -- recognized very, very nicely for well-deserved recognition in their depth and history. So the reality is we don't know, right? And I think importantly, we're doing all the right things to do good things for our clients. And if you do that, you get better outcomes than you might have otherwise. So again, we wish we could be specific. The truth is we just don't know.

No, fully understood. And then, I guess, Marty, on the U.S. retail sort of brand recognition. You mentioned being sort of ninth or 10th. Correct me if I'm wrong, it seems like you've sort of been around that level maybe a year, 1.5 years now. And you've said that in the past, the hardest part is kind of moving up in that top 10. And I hear you say you'd like to move up couple of few rungs higher. I'm just wondering how you're thinking about in terms of maybe a timeframe. And does that come at a much higher sort of advertising expense?

Good question. So we -- as I said, we went from -- you couldn't find us on the list, moving to 10 and sort of 9, sort of right on the cusp. It doesn't look -- we're going to stay on the path we're on, right? It is really driven by investment reputation and client engagement and we're doing all those types of things. And again, from my prior experience, it just takes longer than you would think, reality would suggest. And what I do know is if you go to the leadership of the distribution partners, we're very, very strongly placed and recognized as a very, very important partner because of what we're doing for their clients. Yes, it's harder when you get to tens of thousands of FAs throughout the country, and that's what takes it longer. So it's really just going to -- more of the same, keep working, keep doing a good job, keep generating good performance, keep generating -- taking care of clients and the range of product. And we'll push it up a few more notches. So -- but it should not be -- we're going to stay on the track that we're on spending-wise.

Okay, got it. And, Loren, just quickly, I heard you mentioned sort of new product costs a couple of times, running through the numbers earlier. Just wondering, thinking about it on a sort of a full year basis, how do you think new product costs, say, 2014 versus 2013? I'm just trying to get a gauge for the significance of the new launches this year, given you're calling some of that stuff out.

Yes, I mean, I think it was rather exceptional in terms of what we did this fourth quarter. And so normally, they get spread out. And -- but I think just the sheer number was also somewhat extraordinary. So in terms of the G&A impact, we sort of guided, I think, to a number that should be a little bit lower than sort of backing out the extraordinary amount in the fourth quarter.

Your next question comes from Eric Berg, RBC Capital Markets.

I wanted to start with the situation in the U.K. and I wanted to sort of sharpen and make sure I have the right understanding about how you're characterizing the December quarter results. Are you saying that the $4.8 billion outflow net is encouraging, consistent with your expectations? Are you saying that it's discouraging, but that you're doing so well elsewhere that on balance you're pleased with the results out of EMEA? Just I want to make sure I understand your characterization of that $4.8 billion number, because 10% for a situation in which the manager hasn't left yet does seem like a lot.

Yes. So let me -- we are extraordinarily encouraged with the results in EMEA. We're extraordinarily encouraged by the results x U.K. equity income. We would think that a 10% redemption is not that extraordinary considering the history and the reputation of Neil and that it was not anticipated in the market. So that's how I would characterize it.

Okay. Switching gears to your global equity business. While you did have positive flows in your global equity business, it looks like company-wide, the flows were on a net basis $1.5 billion. It also looks like if one subtracts out the effect of the passive equity business, that sort of your active equity business was actually in outflow mode. Now maybe that's reflecting what's happening in the U.K., maybe not. But I would have thought that given the strength of your performance in your equity business and given the general renewed interest in common stock investing by bulk institutions and individuals that you would have enjoyed positive flows to your equity business.

Right. So Eric, I would say, I think you've answered your own question in a sense. If you add back the $4.8 billion associated with the impact on equity income, that would give you a different result, one that would be more in line with what we're talking about.

Right. And lastly, as you think about what's happening in fixed income and the assuming growing interest -- sorry, growing interest in equities, decreasing interest in fixed income because of what's -- or traditional fixed income because of what's happening in the interest rate environment, do you perceive a difference in the way that institutions versus individuals are behaving in response to this increase in interest rates?

It's a very good question. I'd say, what are we seeing in all of us, right? So the declaration of great rotation really has not happened. There's been some movement to risk on assets. You would think over time if -- in a rising interest rate environment, it's really traditional fixed income that's going to be under the most pressure of that subsector. And what we ourselves compare -- retail investors, we saw much risk on appetite. And as we talked about earlier, there's a little bit from -- because we saw risk parity into equities in particular, we think that's frankly a good sign. Contrary to that, and again it's plan by plan sponsor, they are continuing to be in a risk-off mode. And so you could understand, if you have closed your underfunded gap why you would do that. To have an underfunded pension plan and to be in risk-off mode, I just don't understand, but that continues to be the case. So I would say institutionally, you're still seeing much more of a focus on low volatility, alternative-type capabilities, fixed income, multi-credit, those types of things. But again, there are many, many, many pension plans that are deeply underfunded, and not to be having equity exposure, quite frankly, is surprising to me. But that is what you're seeing.

Your next question comes from Chris Shutler, William Blair. Christopher Shutler - William Blair & Company L.L.C., Research Division: If we -- one question on the U.K. and then Asia. So on the U.K., you had about $4 billion of net outflows but growth sales are actually very consistent with the rest of the year. So I was hoping maybe you could talk about that dynamic. So is the consistency in the growth sales a function of equity income continuing to see consistent sales since October 15? Or have other products been picking up that slack?

Well, I think there are some other products that are picking up the slack. The global equity product in the U.K. has been -- really seen a lot of this [ph]. So I would say equity income to sales, it has certainly declined somewhat on equity income but it's not been as big an impact as the redemption, obviously, that we were talking about. Christopher Shutler - William Blair & Company L.L.C., Research Division: Okay. And then in Asia, obviously, nice flows there once again. So can you just talk about what products have been most successful there? I'm assuming it's helping mix of alternatives and maybe some others.

Absolutely, exactly. We've seen bank loans. We've seen real estate and equities as well. So all those 3 are probably represent 90% of what we're seeing there. Christopher Shutler - William Blair & Company L.L.C., Research Division: All right. And if you don't mind, if I could sneak one more in here on the Edinburgh Trust contract. Is there anything more you can say about the specifics of how that contract may differ now versus the old terms?

I think that's public information. So it is essentially a -- there's a reduction of the management fee of 5 basis points. And going forward, there'll be no performance fees other than in Q1 where there's a reduction of about, I think, GBP 7.4 million off of what otherwise would have been paid. So that's the, I think, the bottom line on changes there.

Your next question comes from Robert Lee, KBW. Robert Lee - Keefe, Bruyette, & Woods, Inc., Research Division: I appreciate your patience with the long lineup of questions. Just question on the ETF business, which, I guess, to Marty's point, people, I guess, maybe it seems forgotten a little bit lately, but it's been doing pretty well. But can you give us some update on how that's progressing outside the U.S.? I know that had been a priority for a while, and maybe it hadn't lived up to your hopes or expectations. I mean, so are you starting to see more traction with that business outside the U.S? Or is it still pretty much -- that's being driven by the success in the U.S.?

Yes. So U.S. is a driver, no question about it. Canada has also been really quite strong. What also gets hidden, though, is that it's frankly hard to track. Institutions from around the world buy the U.S.-listed ETFs, right? So we have investors from, frankly, almost 150 countries in the ETF business in the U.S. listings. And so the non-U.S. is broader than you would expect. But let me be specific to your question. So a number of years ago, we started an effort on the continent. The continent has become a very complicated place, as they have to serve the ETF. The environment is changing very, very much. We still look at that as an opportunity, and it just needs to settle down from its evolution. And so we are looking that as -- we've not given up. We just, as we're talking earlier, you want to focus on places where you can make a difference. We thought it was too unsettled to try to drive that forward in that change, but we think that will be an opportunity for us also. Asia is an opportunity. But again, not to the same degree as Continental Europe. But again, the lion's share of the activity is the U.S., as far as what we see.

I think the other thing I would just say is -- and part of it is our focus on ETFs had been in the smart beta and specific access and some of the interest on these ETFs and some of -- outside of the U.S. have been more focused on traditional cap-weighted product. And so we didn't really have a product that maybe was understood or accepted. I'd say that is shifting rapidly and that we're seeing more and more interest in understanding some of the smart beta products. And so again, I think in terms of the demand in the market, it is opening up to us. But we were sort of a little bit early, I would say, when we first entered. So it was not a product that was in demand or understood. Robert Lee - Keefe, Bruyette, & Woods, Inc., Research Division: Maybe as a follow-up question, I don't know how you would specifically track this. But do you have a sense of how much -- when you talk about U.S. retail, how much of the improved traction there or how much of the flows to your ETF products are being driven by your greater penetration of the U.S. retail market through your various platform relationships or wholesaling relationships that you wouldn't think of that like a wholesaler is not maybe going to write a ticket on the ETF or maybe he does? But how are you -- how is that translating into better ETF flows, your better U.S. retail distribution.

That's a very good question and sort of fundamental to our business. So when we bought it, what we thought, it was interesting and somewhat unique. It was -- that was focused on U.S. retail business. And we saw an evolution in the financial advisor channel more to comprehensive plans for their clients, whether it be a combination of sort of -- think of core equity products or balanced risk product at the core and people using things like ETFs around it. And that has proven to be true. So our strength is in the retail market and in the United States, and that is not traditionally where the ETF business has come from. And it is no question self-reinforcing our traditional retail business with the ETFs and mutual funds ETFs and, frankly, UITs. So the combination thereof is really, really strong for us. And it gets to the prior question you're talking about, when you leave the United States, quite frankly, it's not a retail market; it's much more an institutional market. And so where we went to Europe with the idea that it would also evolve as a retail market. We were, quite frankly, too early in that development. Robert Lee - Keefe, Bruyette, & Woods, Inc., Research Division: Great. And maybe one last kind of broad industry question, Marty. The OFR put out that piece a few months back and seems like there's been a lot of back and forth between the SEC and the FSOC. So I'm just kind of -- maybe your take from your conversations with whether it's powers that be in Washington and elsewhere, kind of what's your take and how you see this thing kind of evolving over time. And also I'm just curious, to the extent that you are domiciled in Bermuda, does that feel like -- if anything does come down to pipe that provide some level of insulation from some of these things that you've talked about?

Yes. So let me start with Bermuda. I think not. I mean, the regulators are interesting, where you might have thought after the crisis, at one level regulation is getting more local. But at another level, it is actually becoming more global at the same time, with the various risks oversight bodies working together. So it is a global topic. But what I would say, just with the first report that came out, I would say -- let me say it this way: The fundamental facts are very different than what the report might have talked about. And I think what you're going to see is the industry do a very, very good job of communicating in a very just clear way with the oversight regulators of what this business is and what it isn't and pointing out that it's not a big risk to the world. That said, we would also say as an industry, where there are areas where we can improve, we're going to improve. And we want to be constructive. And -- but again, I think it's going to be a long conversation, and I think the industry facts are very, very strong.

Your next question comes from Marc Irizarry, Goldman Sachs.

Marty, on IBRA, I'm curious if you have some perspective at the retail level. Are you seeing a portion of the outflows? Are they staying, you think, within the asset allocation category? You mentioned that obviously there's a rotation into risk and you're seeing a pickup in equities. And I'm curious, within the allocation category, it looks like the grosses have come down along with redemptions picking up. And I just sort of want to get perspective on how you view that category and product and building out product within balanced?

Yes. So let's see, I'll approach it 2 different ways. As we talked a handful of years ago, when we introduced this, we were very clear, we thought, one, there'd be rally in the equity markets on risk-on, we thought there'd be movement towards equity products, and we saw that and we saw it very much on our complex, as I talked about earlier. So not surprising. We also think, though, January -- just reminding people, there is volatility in the market. And that we look at asset allocation products, in particular low volatility-type products also just that broad range of asset allocation capabilities, it's here to stay and it will more and more be part of retail investors, one of their core holdings going forward. And again, that's back to why we were so focused on making sure that we had our -- start the clock ticking on the track records for the full range of capabilities. So again, I don't think we should extrapolate a quarter into -- or probably January into long-term trends. I personally think asset allocation is here to stay.

Okay. And then just 2 quick ones. Is there any concern -- there's been a lot of retail money going into floating rate funds. Any concern around bank loan capacity in your products?

No, we've not had that concern. But what I will say, just very explicitly, the team knows that it's clients first and ensuring that they stay dedicated to investment process. And if they ever feel that there's not enough inventory, they just put their hands up, and we'll stop. But that's not been the point of view as yet.

Okay. And then just real quick on the retail liquid alternative distribution in the U.S. I'm curious, expense-wise, if you're sort of building increment -- devoting incremental resources on the distribution side or if it's leveraging what you have already. And then also from an allocation perspective, where do you expect that those products fit into the portfolio, i.e. where do you think the share is going to come from?

Yes. So again, we're utilizing our existing resources, right, so as long as stocking -- that said, there's been over the past -- last couple of years or last year, in particular the new products, lots of effort on training not just internally but also into the retail channel. Probably a governor on absolute growth in alternatives will be really the educational process in the retail channel. So again, I look at this as growing over time, tremendous straight up, which is frankly a very good thing. Sorry, I just forgot the rest of your question. Oh yes, so where is it coming from? So we think very much that what you've seen happen with the asset allocation, some of the things that have been more short-term fixed income capabilities that people have in their portfolio has gone into alternatives. It's also come out of some of the more well, frankly, everywhere. Some of the core fixed income has moved into it because of several low volatility capability. And I think how many firms are positioning to the client is -- think of it as an anchor in your portfolio, and that's probably the predominant way that we're seeing it positioned. And so whatever people thought their anchors were before are being some of the sources for this.

Your next question comes from Patrick Davitt, Autonomous.

I just have one question. I think you said last quarter that more than 50% of Perpetual's assets were platform related. We've seen a lot of unbundling announcements in the last few weeks from them. It does look like they're being pretty aggressive in terms of the fees that they want from the managers. How are the discussions going from your end? And do you think that's a meaningful headwind to your fee rate in that business?

Patrick, I'd say, those discussions have been around for a long time and probably will continue in the future. We've been fortunate in terms of our business having really high quality product with super performance. And that relative to others is a very nice moat that prevents too much of that kind of conversation pushing through. I don't want to say it doesn't happen because it does. But we feel that, that is still very much in place. And so I don't think anything's really changed overall in terms of that dialogue. They always are aggressive, and I don't think that's going to stop.

So essentially, the RDR and unbundling hasn't really affected that pressure. It's not incrementally higher.

Yes. I don't think it has. And again, we have certainly delivered a track record in the past of having excellent value for clients for the fees that we've charged. As long as we can continue to do that, I think we're going to be largely safe from [indiscernible] erosion.

Your last question comes from Bill Katz, Citi.

Just 2 quick follow-ups. Marty, on the ETF side, there seems to be a little bit more interest in the marketplace around nontransparent ETFs. So wondering if you can comment on how vibrant of an opportunity that might be. And then separately, any updated thoughts on money-market reform. We've heard from one of your peers. I'm sort of curious what -- how -- what your bigger perspective might be.

Nontransparent ETFs...

Yes. So again, the nontransparent ETFs, I mean, it's been a conversation along for a while. There seems to be more developments there with New York Stock Exchange also joining the fray. And again, I think the developments may happen. I'd go back to a couple of things. We were early on in launching an active equity ETF, I'm losing track of the years now, but it might be 4 or 5 years ago, and there's -- the level of assets is very low in it.

So it's still the same.

Still the same. So it may evolve over time. And with a nontransparent thing, there could be another development. The way that I look at is that we don't have -- there's a place for ETF, there's a place for open-ended mutual funds. And for the vast majority of the active managers, the open-end mutual fund is a very good way to do it. And again, I understand the nontransparent would have -- replicate some of that. But again, that's not why a lot of people buy the ETFs. And I think that's really the core point for my perspective. Now you could see active ETFs evolving more on the fixed income market, that makes more sense to me. But again, I don't view it as the holy grail that some might be thinking right now. And if it evolves to be important, we'll be there. And as regard to money fund reform, I think we're all just sitting tight right now and we suspect an outcome that will be very manageable for the industry. Again, on behalf of Loren and myself, thank you very, very much for your time, and your questions are very valuable to us. And we will talk to you next quarter. Take care.

This does conclude today's conference. Thank you for attending. You may disconnect at this time.