Virtus Investment Partners, Inc. (VRTS) Q1 2013 Earnings Report, Transcript and Summary

Good morning. My name is Karen, and I'll be your conference operator today. I'd like to welcome everyone to the Virtus Investment Partners Quarterly Conference Call. The slide presentation for this call is available in the Investor Relations section of the Virtus website, www.virtus.com. This call is also being recorded and will be available for replay on the Virtus website. [Operator Instructions] I will now turn the conference to your host, Joe Fazzino.

Thank you, Karen, and good morning, everyone. On behalf of Virtus Investment Partners, I would like to welcome you to the discussion of our operating and financial results for the first quarter of 2013. Before we begin, I direct your attention to the important disclosures on Page 2 of the slide presentation that accompanies this webcast. Certain matters discussed on this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not statements of facts or guarantees of future performance and are subject to risks, uncertainties and other factors that may cause actual results to differ materially from those discussed in the statements. These statements may be identified by such words as expect, anticipate, believe, outlook, may and similar terms. For a discussion of these risks and uncertainties, please see the Risk Factors and Management Discussion and Analysis sections of our periodic reports that are filed with the SEC, as well as our other recent filings, which are available in the Investor Relations section of our website, www.virtus.com. In addition to results presented on a GAAP basis, Virtus uses certain non-GAAP measures to evaluate its financial results. Our non-GAAP financial measures are not substitutes for GAAP financial results and should be read in conjunction with the GAAP results. Reconciliations of these non-GAAP financial measures to the applicable GAAP measures are included in our earnings press release, which is available on our website. For this call, we have a presentation, including an appendix that is accessible with the webcast through the Investor Relations section of virtus.com. This morning, we will begin with remarks from President and Chief Executive Officer, George Aylward, who will review our accomplishments and operating results for the quarter. Mike Angerthal, Executive Vice President and Chief Financial Officer, will then discuss our financial results in further detail and will also review the balance sheet and capital items. We will conclude by opening up the call to your questions. Now I would like to turn the call over to George Aylward. George?

Good morning, everyone, and thank you for joining our call today. Let me start by reviewing the financial results for the quarter, which were exceptionally strong and represent a very good start to the year. We continued to deliver a significant top line and bottom line growth, including record sales, net flows and profitability. As such, we are continuing the trend of the past few years of sustaining a very high level of sales and consistently above average growth, which has translated into increased profitability and operating margin. We had record total sales and net flows for the quarter on the strength of significantly higher mutual fund sales and net flows. We also had contributions from higher institutional and separately managed account sales inflows. Total sales of $6.2 billion represented a 78% increase from the first quarter of last year and a sequential increase of 62% from the fourth quarter. We also have record $3.7 billion of positive net flows that nearly doubled the net flows from the year earlier and $2 billion more than our net flows last quarter. As a result of these substantial net flows and market appreciation from a very constructive market in the quarter, assets under management grew to $51.2 billion. The biggest driver for our growth continues to be mutual fund sales and we had our best quarter ever for fund sales. Sales were $5.7 billion in the quarter or 98% higher than in the first quarter of last year and 68% higher on a sequential basis. The mutual fund sales rate for the quarter was 90% so we continue to be at the top end of the industry for sales through intermediaries. This continue to high level of sales as a result of our product rep, strong investment performance and effective distribution and all of those elements contributed to our exceptional growth in the quarter. For example, we maintained strong levels of sales and net flows in equity products. In the quarter, 69% of our sales were in equity funds, consistent with the levels of the past few quarters and much higher than what the industry in general has been experiencing. On the distribution side, we had substantial growth in the independent RIA channel while we maintained a high level of growth through the wirehouse channel. As we like to say, we have multiple engines for growth and the results this quarter are certainly reflective of our many opportunities. We mentioned in our release that a key contributor to the significant increase in sales inflows in the quarter was our Emerging Market Opportunities Fund. After we informed fund shareholders have limited new investments to the fund to existing investors and designated broker-dealer platforms as of February 1, we saw the expected increase in sales from investors who wanted to have continued access to the fund. In the quarter, Emerging Market sales were $2.3 billion compared with $1.2 billion in the fourth quarter of 2012. In addition to these exceptional sales in Emerging Market, we're also able to significantly grow sales and other strategies, which reflects the effectiveness of our distribution and the breadth of our products. Even if you were to exclude Emerging Markets, we have $3.4 billion of fund sales in the first quarter, which was higher than the fourth quarter sales including Emerging Markets. So we effectively replaced the sales from Emerging Markets in the quarter even while we still have the benefit of Emerging Market sales. As a result of these strong sales, mutual fund net flows were $3.6 billion or more than double the net flows in both the first and fourth quarters of 2012. Our annualized organic growth rate was 56% in the quarter; once more, among the best in the industry. And we're pleased to see the trend a very strong net flows continue in the second quarter and we had more than $1 billion of fund net flows in the month of April. Operating income as adjusted reached a record level in the quarter as a result of higher revenue from our cumulative top line growth and generally stable fixed costs. Operating income as adjusted was $25 million for the quarter, an increase of 57% from the $16 million in the first quarter of last year. This increase reflects a 38% increase in revenue over the past year as a result of our growing AUM, particularly in open-end funds where assets are up 53% over the past year. The sequential increase in operating income as adjusted occurred despite an increase in payroll taxes related to annual incentive compensation and the impact of the higher sales cost from the significantly higher fund sales in the quarter. The profitability of the business is reflected in the margin, which was 39% in the fourth quarter, an increase from 34% a year ago. As with operating earnings, the margin expansion reflects the benefit of higher revenue on our going asset base. In looking at the margin compared with the fourth quarter of last year, there was a total impact of 580 basis points related to the higher payroll taxes we had in the first quarter as well as the increased sales costs. Earnings per diluted share were $1.73 on net income of $14 million compared with $0.68 per share in the first quarter of 2012. I want to mention a few other recent accomplishments. The strong relative investment performance of our funds were a contributor to our sales success and this quarter, several of our strategies were recognized by Morningstar and Lipper for delivering very strong and consistent results. Two of our international equity funds were given top awards by Lipper for their consistently strong, risk-adjusted performance over the past 3 years. Foreign Opportunities was named the Best International Large-Cap Growth Fund and Global Opportunities was named the Best Global Large-Cap Growth Fund. Both funds are managed by Rajiv Jain of Vontobel and he was honored earlier this year as the Morningstar 2012 International-Stock Fund Manager of the Year. In addition, our Newfleet team allowed us to take the top spot in taxable fixed income category in Barron's/Lipper ranking of leading mutual fund companies. That ranking is based on the 1-year performance of the funds that they manage, including the Multi-Sector Short Term Bond Fund, Multi-Sector Intermediate Bond and Senior Floating Rate Funds. This is the second time in 3 years that Dave Albrycht and his team have been honored by Barron's and the third consecutive year we have been the Best Company in one of the Lipper categories. We are proud of each of these honors because they are indicative of the emphasis we place on providing attractive, well-performing products. Finally, in April, we completed our previously announced minority investment in Kleinwort Benson Investors International or KBII, which is a U.S.-registered investment management subsidiary of Kleinwort Benson Investors of Ireland. KBII offers institutional quality, equity and resource strategies with an attractive income component and is a sub-advisor of the emerging market equity income fund that we launched last year. We're very pleased with these results and accomplishments and we believe that they represent a very strong start to the year. Let me ask Mike to review our financial results in more detail. Mike?

Thanks, George. Good morning, everyone. In the first quarter, we continued to deliver strong financial results across all our key metrics. And this morning, I'm going to review our quarterly results, starting with assets under management, sales and flows. Then I'll review our operating results, including our key income statement line items and provide an overview of our balance sheet and capital position. Starting on Slide 7, Assets Under Management. We ended the quarter with total AUM of $51.2 billion, up 35% from the prior year and 12% over the prior quarter. The sequential and year-over-year increases in AUM are primarily related to the impact of strong net flows, which contributed approximately 2/3 of the growth and asset appreciation from the strong performance of the financial markets. The year-over-year increase also included higher separately managed account assets from the addition of Rampart. As a result of our consistent strong mutual fund flows, mutual fund AUM are up 53% from the prior year and 18% from the prior quarter. In addition, separately managed account assets are up 50% from the prior year and 10% on a sequential basis. Long-term assets increased 14% sequentially to $49.4 billion and also grew by $13.2 billion, representing 37% growth over the prior year. With our consistently strong equity sales and market appreciation, the percentage of equity assets increased 150 basis points to 60.6%, which is the highest percentage over the past 4 years and money market assets declined to less than 4% of our total AUM. These are key factors contributing to the increasing average fee rates and higher investment management fees. In the first quarter, we achieved record levels of total sales and net flows, as well as record results for mutual fund sales inflows. Total sales for the quarter were $6.2 billion, an increase of 62% from the prior quarter of $3.9 billion, and an increase of 78% from the prior-year quarter of $3.5 billion. Total sales were driven primarily by open-end fund sales, which were $5.7 billion in the first quarter or a 68% sequential increase and a 98% increase from the prior year. We also had a 19% increase in separately managed accounts sales compared with the prior year, primarily driven by sales in our small-cap strategies at Kayne Anderson Rudnick. The increase in institutional sales reflects sales in Newfleet fixed-income strategies and options overlay strategies from Rampart. Net flows for the quarter were $3.7 billion, which reflected an organic growth rate of 33% compared with 16% in the prior quarter and 22% in the prior year. We've now had positive net flows for 16 consecutive quarters, as well as double-digit overall organic growth for 8 of the past 9 quarters. Our primary driver of net flows has consistently been long term open-end funds. In the quarter, open-end net flows were $3.6 billion, an increase of 104% from the prior quarter and 111% from the prior-year quarter. Fund net flows for the quarter resulted in an organic growth rate of 56% compared with 29% in the fourth quarter of 2012 and 40% in the prior-year quarter. Also contributing to net flows in the first quarter were $133 million from separately managed accounts and $89 million from institutional. Our consistently high organic growth rates are reflective of diversified and strong performing product offerings and effective retail distribution. As George mentioned, a contributor to sales was the impact of notifying investors that we were limiting new investors into our Emerging Market Opportunities Fund to current shareholders and designated distribution platforms. The emerging market fund contributed $2.3 billion in sales and $1.6 billion of our mutual fund net flows of $3.6 billion. The $2 billion of flows from all other funds was an increase of 14% compared to fund net flows of $1.7 billion in the fourth quarter of 2012, which included Emerging Market net flows and an increase of $1 billion excluding Emerging Markets. Looking at these results another way, our annualized organic growth without the $1.6 billion of net flows from Emerging Markets would've been about 30%, an increase from 29% in the fourth quarter, including Emerging Markets, and still among the best in the industry. We are pleased that organic growth rates excluding Emerging Markets flows was at the same level in April. Our growth was based on our diversified product offerings and strong performance of our 45 long-term open-end funds. We experienced continued success from our top performing fixed income multi-sector short term bond fund and our defensive domestic equity premium alpha sector offering. In addition, we're pleased to see significant growth in other attractive offerings including the Foreign Opportunities dynamic alpha sector and senior floating rate funds. We believe the ongoing strength of our mutual fund flows is a testament to our diverse and well-performing product line that comprises differentiated strategies designed to meet investor needs across a variety of asset classes and investment styles. Slide 9 presents the continued growth in operating income as adjusted and the associated margin. In the first quarter, operating income as adjusted was $25.1 million, which is up 57% compared to a year ago and 2% on a sequential basis. The $0.6 million sequential increase reflects continued growth in revenues driven by higher assets under management, partially offset by $2 million of higher payroll taxes as well as $1.8 million of higher sales-based compensation. The substantial increase in operating income as adjusted over the prior year primarily reflects the cumulative impact of $8.3 billion of positive open-end fund net flows over the past 4 quarters, combined with 10% higher closed-end fund assets. The operating margin as adjusted for the first quarter was 39%, an increase of 520 basis points from the first quarter of 2012 and a decrease of 250 basis points on a sequential quarter basis. Two items had a combined 580 basis point impact on the margin compared with the prior quarter, all else being equal. As noted earlier, this quarter included $2 million of higher payroll taxes that had a 310 basis point impact on the margin and $1.8 million of higher sales-based compensation that impacted the margin by 270 basis points. Our capture ratio for the quarter, which we define as incremental operating earnings divided by incremental revenues, was 11%. Excluding the higher payroll taxes, our capture ratio would've been closer to 50%, which is at the low end of our historical range. Concerning GAAP reported results, net income attributable to common stockholders was $14 million or $1.73 per diluted common share, representing a sequential increase of 15% and a year-over-year increase of 154%. I'd like to point out our mark-to-market gains for the quarter were $1.2 million or $0.09 per fully diluted common share on our marketable securities and consolidated investment products. This mark-to-market equates to an approximate return of 2.2%, which reflects that approximately 50% of our seed capital portfolio is invested in the emerging market debt strategy that is benchmarked to the EMBI global diversified index. In addition we incurred approximately $200,000 of severance expenses in the quarter that reflected current period adjustments to actions taken late in 2012. Finally, our effective tax rate for the quarter was 37.3%. And as we stated during prior calls, the company's cash tax rate remains in the low single digits allowing us to retain a large portion of the cash we generate from operations. Turning to revenues on Slide 10, investment management fees increased to $57.8 million, up 9% on a sequential quarter basis and 38% from the first quarter of last year. The 2 key drivers of investment management fee growth are average long-term assets and fee rates. Average long-term assets of $46.4 billion increased 10% from the prior quarter due to strong mutual fund net flows and market appreciation. The average fee rate increased to 48.5 basis points, up 0.5 basis points from the sequential quarter and an increase of 2.1 basis points from the prior year. The increases over the sequential quarter and the prior year are primarily driven by net flows and the higher mutual funds. Over the past 4 quarters over 65% of our net flows have been into equity products. Lower expense reimbursements on our variable insurance funds and for the year-over-year increase, the addition of the VGI closed-end fund, which has a 95 basis points management fee. Total employment expenses for the quarter were $32.4 million, an increase of $4.6 million or 16% from the prior quarter. The sequential increase is attributable to payroll taxes related to annual incentive payments that occur in the first quarter of each year, resulting in a higher expense of $2 million compared to the fourth quarter and increased variable sales compensation due to the $2.3 billion increase in mutual fund sales from the prior quarter, which resulted in $1.8 million of higher employment expenses compared with the fourth quarter of 2012. The key metric to consider is the ratio of employment expenses to revenues, which increased 330 basis points on a sequential quarter basis to 50.3%. Excluding the impact of the higher payroll taxes, the ratio would've been 47% or a significant improvement from the prior year. This improvement demonstrates the continued leveragability of our cost structure. We believe this ratio must remain in industry averages and a very strong result given our multi-management business model. Moving to Slide 12, other operating expenses. The trend in other operating expenses demonstrates the scale of our business as these expenses continue to remain in a relatively stable range. Specifically notable is the improvement of other operating expenses compared to revenues as adjusted. Other operating expenses in the first quarter increased by $1.1 million from the prior-year quarter, and we're essentially flat on a sequential basis. The ratio of other operating expenses to revenues as adjusted declined 90 basis points to 13.9% in the quarter compared with 14.8% in the fourth quarter, reflecting the increased scale of the business. The year-over-year improvement in the ratio was 270 basis points, including the impact of the additional expenses related to Rampart. This declining ratio demonstrates our ability to leverage our cost structure and expand profit margins. Touching on our balance sheet and capital position, as we've mentioned on previous calls, our first quarter cash position is typically the low point of the year as annual incentive compensation is paid during the quarter. In addition, we continue to return capital to shareholders in the form of common stock repurchases. As a result, cash balances declined $17 million on a sequential basis and cash-to-annual spend ratio declined sequentially from 27% to 18%. With regard to share repurchases in the quarter, we repurchased 60,000 shares at a total cost of $10.4 million. After the first quarter's activity, there were 45,000 shares remaining under the share repurchase program that was authorized in the fourth quarter of 2010. In addition in the first quarter, we utilized $5.2 million to net settle vesting of 27,747 Restricted Stock Units. I'd like to point out one minor accounting item this quarter related to the $58 million of marketable securities. As noted in our press release, marketable securities include $35.1 million of consolidated investments we have made to seed new funds where we have a majority interest in the investment. This balance decreased $5.3 million from the prior quarter as a result of deconsolidating 3 seed capital investments that had previously been consolidated as sponsored investment products. There's no economic impact from this action. It is merely a reclassification of line items and reflects the fact that we no longer hold the majority interest ownership level as a result of new sales into each fund. Looking at working capital, the metric we've focused on is working capital excluding marketable securities divided by our annual spend, which is defined as our GAAP operating expenses. We ended the quarter at 19% on this metric, unchanged from the prior quarter. By comparison, the industry average is in the 50% to 75% range. As we've discussed previously, we manage our capital to provide operating flexibility and to maximize shareholder value. We continue to increase our financial flexibility to be in position to capitalize on the opportunities and maintain our growth. With that, let me turn the call back over to George.

Thanks, Mike. Before we take your questions, I just want to provide some final thoughts. The strong results of the quarter follow a trend of continued and progressive growth in sales and profitability. By successfully leveraging our business model and executing on our strategy, we've distinguished Virtus as a fast-growing company. We believe that we're very well-positioned to continue that growth as we have the critical elements in place including our model, our breadth of product, our strong distribution capabilities and the effective execution of our strategies. With that, we'll take some questions. [Operator Instructions] Karen, can you open up the lines, please?

[Operator Instructions] The first question we have comes from the line of Michael Kim of Sandler O'Neill. Michael S. Kim - Sandler O'Neill + Partners, L.P., Research Division: Just a couple of questions for me. First, George, can you talk a little bit more about sort of the outlook for asset allocation trends or themes coming out of the first quarter across both retail and institutional investors? So would you expect investors to maybe continue to gradually move up the risk curve, assuming the broader markets remain constructive? Or do you think there's some risk here that we kind of returned it to somewhat of a holding pattern?

Great question. I -- earlier, I think in the first quarter, we did see more of an interest in more of the riskier assets. And the big question has been whether that will come at the expense of the fixed income products or whether it would come more from cash on the sidelines. I think from our experience and what we've seen, a lot of that in the first quarter came more so from cash that had not been put to use as opposed to the fixed income. And for us, we continue to see a strength in the fixed income as well as the increase of the riskier per se, equity types of assets. I think as we see going forward as we look through what we've seen in April, we're thinking going forward. I do think there'll be a continued interest in the non-fixed income assets. And I think people will be making investment decisions not only just per se, saying I'm willing to take more risk but I'm willing to put my money to work in other types of strategies as opposed to traditional credit. And we think on the fixed income side that really the change that you'll see is people trying to take opportunities in strategies that they may feel more comfortable with in the environment going forward, will perform better than maybe some of the categories where they were generally putting money. We feel good on the fixed income side with our emerging -- with our senior floating rate, as well as our traditional Multi-Sector Short Term Bond Fund that those will continue to be a great place to put your fixed income allocation going forward. But I think a lot of what we see in the latter part of the year is really going to be driven by what happens in the macro environment as we move through the next few quarters as people are trying to determine what is the economic outlook here in the U.S. as compared to outside of the U.S. But we continue to see people needing to put their money to work, maybe thinking a little differently about how they do their allocation. But they're still touching upon many of the other traditional categories where there's assets. Michael S. Kim - Sandler O'Neill + Partners, L.P., Research Division: Okay. That's helpful. And then can you maybe give us some color on how the mutual fund flows trended through the first quarter? And then maybe how that matches up against the $1 billion of inflows that you mentioned for April? So just curious if you've seen any sort of volatility or any meaningful shifts in kind of flow trends more recently.

Yes, I mean, obviously, the whole industry, we experienced a very positive early part in the first quarter. Again, and it's really just following up onto your point, which was people beginning to have more of a risk appetite. I think for us, we generally saw that sustained and be pretty constant. I mean, for us, we've seen more increase in some of our products that we think should be attractive like the senior floating rate. For us like the dynamic AlphaSector, which is a long short variation of our other successful premium AlphaSector Fund. So we saw that to be a continued strong trend throughout the first quarter and again, as Mike and I both alluded to, we basically saw the similar type of results in the month of April. So again, that's -- again, it's just 4 months of the year and I think there are a lot of things that could influence the behavior in the second half of the year and we'll sort of probably see that as we emerge. But we're pleased with what we saw in the first 4 months. Michael S. Kim - Sandler O'Neill + Partners, L.P., Research Division: Okay. And just one last quick one. Appreciate you taking all of my questions here. And maybe for Mike, just a follow-up on the capital management front, is the priority to still further strengthen the balance sheet? And then in that context, how are you thinking about share repurchases going forward? Maybe being a bit more opportunistic, just given the rally in the stock or sticking with more of a consistent buyback?

Consistently, on our share repurchases, we have generally used the program to offset dilution based on the fact that we're using equity in connection with our annual incentive programs. And that's a trend that we would expect to continue and as what we've been focused on over the past several years. With respect to the strength of the balance sheet, we've talked about our ability to retain the capital that we generate and start to move our averages of the metrics that we look at, which is both cash as a percentage of spend and working capital as a percentage of spend, where we exclude some of the seed capital investments closer to industry averages. So we'll continue to look at that and we'll be selective and opportunistic to deploy capital as well. So I think the trend and how we've demonstrated our capital management is really to provide ultimate flexibility to operate the business, which we'll continue to do.

The next question comes from the line of Steven Schwartz of Raymond James & Associates. Steven D. Schwartz - Raymond James & Associates, Inc., Research Division: If I may, I just -- I thought I had it and I got a little bit confused, I'm not quite sure. George, the $1 billion of flows -- net flows that you cited in April, that -- that is the total complex that is not excluding what I would assume would be outflows out of Emerging Markets?

The number I referred to, it is the open-end mutual funds. That's the number that I was really sort of addressing. And that -- that does include the -- any impact from Emerging Markets. Steven D. Schwartz - Raymond James & Associates, Inc., Research Division: Okay. Great. I wanted to make sure that last point.

Let me just say, Mike, separately gave you the growth rate for April that was consistently at the 30% level excluding EM. Not including, but excluding EM so I can sort of give you a flavor for how much of those flows are EM versus non-EM. Steven D. Schwartz - Raymond James & Associates, Inc., Research Division: Okay. So the 1 -- that's why I got confused. The $1 billion that you cited includes EM. The growth rate that Mike cited excludes EM? Got it.

That's right. Yes. Steven D. Schwartz - Raymond James & Associates, Inc., Research Division: Okay. And then just thinking about the effect of EM. I guess the first thing is that obviously, flows remain good in the first month of this quarter. That's good. Your sales guys, your wholesalers, they have basically begun concentrating more on the floating rate product, more on the short-term duration product. Is that fair to say or is there may be something else that's coming up?

Good question. I mean, we generally focus on multiple products at any point in time. So just looking at the fourth quarter where our best selling product was the Emerging Market Fund. But to be honest, you don't need to spend a lot of time talking about one of the best-performing Emerging Market Funds. So in that quarter, we did $1.7 billion of net flows. Then in the first quarter, upon first day of January, announcing that there's going to be a closure on the EM fund. You see a rush of people getting into the funds so that they can continue to have access. But even in the first quarter, if you exclude any benefit from EM, which was huge, the sales of all of the non-EM products were actually greater than the -- and the net flows were actually greater than the fourth quarter. So that is the illustration that the wholesalers, who always focus on multiple products, in some ways had a great opportunity to now start talking about other things as they continue to focus away from the attention that they were paying on the EM side. Our issue, I think, as we tried to illustrate before, is we have too many things to sell as opposed to we have too few things to sell. But we do think the environment as well as our efforts are making things like the senior floating rate, the dynamic AlphaSector continuing to make Multi-Sector Short Term Bond Fund and all still very attractive in this environment. So for us, we really have sort of have to look where the demand is in the market and given a certain cycle and flows and our broad-enough menu, we'll just sort of make sure we have something that matches up to that. So a combination of what we do from a sales execution standpoint but it's really just mirroring up to where is the demand emerging and to Michael's earlier question, sort of where are people on the risk appetite continue on in terms of what they're looking to access. But we have a large number of very attractive, high-performance products on both the defensive side as well as on the higher end of the risk spectrum. And I think that's -- that's one of the reasons why again, we were effectively able to replace the sales of our best-selling fund in the fourth quarter with other flows in the first quarter. Steven D. Schwartz - Raymond James & Associates, Inc., Research Division: Okay. Just to beat this horse one more time, the effect of this though -- you've got the sales, which is great. The inflows, the effect of this though I would presume without going and looking it up, would be that there would be some headwind on the effective fee rate? As you transfer from the Emerging Markets to these other funds?

I'm sorry. The Emerging Market Rate Fund has higher fee but a lot of the other funds -- the blended average rate of those funds, particularly dynamic AlphaSector, is not going to be that different. So I don't think you would see material difference in the…

Yes, in the shift of sales between equity products and fixed income products. I think it's generally consistent as well. Steven D. Schwartz - Raymond James & Associates, Inc., Research Division: Okay. And then one quick numbers question for Mike. The $2 billion -- $1.8 million increase in expenses due to the high sales, that was about 63% of sales. Is that a good number to kind of -- if we thought sales were going to go down $1 billion to use -- that would be 0.63% of that?

Yes, I think we typically talked about that as the basis points. The challenge in the total $2.3 billion increase is there are different channels where that $2.3 billion comes from, where some are commissionable sales and some are non-commissionable sales. So I think the basis point average in that instance is about 7 basis points if you just do the math, which is probably lower than some of the impact that we've talked about and experienced previously. So I would think about it on a basis-point impact and this quarter's impact is again about 7 basis points, which is below -- and I would probably think of, we've had experiences in the 12 to 15 basis point range, which might be a better number.

There's no further questions at this time. [Operator Instructions] No, there's no further questions coming through. So this concludes our question-and-answer session. I'd now like to turn the conference back over to Mr. Aylward for any closing remarks.

I just want to thank everyone for joining us this morning and obviously, we encourage you to give us a call if you have any further questions. Thank you.

That concludes today's teleconference. Thank you for participating. You may now disconnect.