BSIG - Earnings call transcript Q4 2019 | Acadian Asset Management Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the BrightSphere Investment Group Earnings Conference Call and Webcast for the Fourth Quarter and Full Year 2019. [Operator Instructions] Please note that this call is being recorded today, Thursday, February 6, 2020 at 11 a.m. Eastern Time.

I would now like to turn the meeting over to Brett Perryman, Head of Corporate Communications. Brett. ahead, go Please

Brett Perryman

welcome the conference year fourth XX, and our ended to results XXXX. for quarter to morning, call BrightSphere's discuss December Good and full

statements that get those Each performance. projected. materially cause is and may please actual we risks statement future note to that Before make and started, forward-looking forward-looking from uncertainties about subject financial results our business differ we could to

our release SEC today information in filings, the Additional appears regarding XX-K. filed earnings factors Form Form containing XXXX in our and these our X-K including

Any based forward-looking events. future to of today, undertake statements call that result we make or obligation on and on this no update are a information of them as assumptions as new we

referenced, can discussion. including GAAP we reconciliation measures also to found slides with part those be of a certain today's We measures. will Information measures reference of measures, our financial use as that the non-GAAP website on will along about non-GAAP any

to nothing solicitation deemed Finally, Officer; offer any Financial Chief Rana, and our and shall buy Officer, products. Executive Suren or the our to herein Guang call. lead President Chief Yang, be be will an investment

I'm now pleased to the to over And call Guang. turn

Guang Yang

morning, Good Brett. us today. Thanks for Thanks, joining everyone.

five our across share of ENI quarter. ongoing XX% quarter several by quantitative of slide reported well fourth third performance $X.XX per on presentation begin share through grew share compared the of some per ENI fees me Let the for to quarter-over-quarter, and full walking driven fourth strategies the the by repurchases. the for stronger-than-expected We highlights of quarter year. as $X.XX high-performing for as

previously strategies by $XX.X several with sub-advisory Barrow Hanley. billion were quarter the announced Net managed flows for billion, $XX.X Vanguard negative related of the reallocation to negative

billion, flows quarter Excluding the for a quarter. prior the $X.X fourth this improvement compared reallocation, to meaningful negative were net

our the forward. revenue has on overall the limited a previously, fee earnings and impact rates, going was lower Vanguard mentioned reallocation of impact of have we those reallocation limited, reflecting the sub-advisory As accounts

last high-growth we which to provide recall, in visibility business quarter, will into of restructured reporting segments industry. greater As you participation mix, our the broad our shows

in X/X growth you areas & right, the expansion. see significant for continued Solutions our can is As from the revenue on Quant and potential Alternatives, and that generated chart have of

to six. Turning slide

across We to strategy. growth progress make our long-term continue

segment, In headwinds experienced the excellent the of firm's five emerging and strategies Quant beating The is well the & but the and performance other long-term has in performance period. the the similar over over U.S. markets above the quant XXX% developed recent Solutions periods. to XX-year non-U.S. Acadian its in benchmarks nearly markets, benchmarks managers, is XX-year with three,

Acadian's multi-asset investor class strong remains to high. illiquid strategy appetite and the differentiated continue investors our interest to and an world demand In client segment, to products. increase terms excellent is both performance uncorrelated we tailored and in outcome-oriented highly as as around in Alternatives strategies off for the see solutions the start of allocations

segment, we a XXXX. As year opportunities range expect expertise deployment widely of in flows. to With capital new see previously and engaged rapid segment the significant clients our recognized this this in we're throughout build currently mentioned, momentum and of with fundraising investment into for cash wide

continues ample value, and to particular, suite offerings. critical investments. business composite strategies. periods Value In of investment five-year performance in markets investment fixed Large near pipeline the Barrow strong relevant Barrow's has including and returns with global and capacity over enhance healthy affiliates well as and continue term the outperform segment, has the long-term Cap continues a strong additional for emerging track multiple periods. over new income of as to time three management its diversified records to across value, Liquid Alpha build our In all Hanley outperformance offerings, Barrow non-U.S. has

on expanding focuses business. The strategy element of next in higher-fee our capabilities high-demand,

our has recent to quarter, very response to institutional last potential exclusive most markets. worldwide. investors positive, investors offer clients investment solutions is Early mentioned capability among with been innovation engaged an a a we new strategies. has global and loan we key partnership and successful total Mercer Hanley's As track currently been across with strategy, and and long-term the market as of factor well-established element such record of and single products, have as well a equities emerging multi-asset our Seeding as capabilities Barrow leveraged seeding class we're Acadian's

maintaining further continue focused on of as capital part our acquiring returns. we to business opportunities shareholder evaluate while new investment maximizing our diversify management to by pricing strategy Finally, capabilities discipline

in coverage We team Latin Third, we Middle expanded target remain and XXXX our focused America such increasing key global increase markets the Asia, markets. East. our in global distribution to from business as

around Our needs investors the investment and of provide and world to the meet seasoned understand their solutions of range sales objectives. BrightSphere institutional the help can sophisticated capabilities professionals

expanding track a have our factors macro the As over pace. presence of The by although as participation result, China, coronavirus a on recent helped increase but one our significant on course recent focused in us have trade were then impacted previously slowed get remain U.S.-China year. we in activity search discussed, we seen back Phase outbreak. our the Also, agreement the

the and are hopeful medium situation carefully that to near monitoring things term. over the are will We stabilize

forward number When on do, we be positioned they of will a well move to initiatives.

value XX.X pleased quarter throughout million per to to share. shares of X.X share year. value. in focused driving on have total the We're additional for shareholders the returned million accretion repurchases alone driving our shares repurchased We through ENI XXXX, a ongoing remain we XX% meaningful in Finally, to shareholder fourth

the remain opportunities. allocating Looking with the growth from to free recurring ahead, return highest streams, we on cash flow revenue capital and strong our focused diversified

to will to again, in the detail. Suren I our results greater over once Suren? now and call discuss turn you, Thank

Suren Rana

Thanks, Guang.

of the three slide mix. company's business an highlight that to overview eight, differentiated Turning it's our segments

customized in and solutions capabilities left clients about Our can generate XX% that long-term in Quant continued well accounted is we & through QX, positioned are Solutions for segment. highly our growth segment shown column, of the deliver seeking earnings which to increasingly because sophisticated this

of our private column, will market XX% from cycle. for middle particularly meaningful is and into increase of segment several organic us, which our fundraising to for accounts strategies in expected get growth as there, their next-vintage earnings drive Our Alternatives the

Our regions our of Liquid of provides clients accounting column, long-only this of a new, mix in and range classes, and fundamental the differentiated, asset right in cap ranges. across a diverse to for XX% Alpha we higher-fee seed our segment segment. strategies strategies develop earnings, And continue

our This suite important segment our of nicely and product is part business. overall an complements comprehensive

& third attractive this results positions show long for business growth segment. AUM and The company from very the produce well XX% $XXX nine, and million. strong Quant by So driven from quarter the the to in we $X compared summary, On the performance slide billion of approximately over market by organic third Revenue average AUM increased X.X% to quarter the the XX% higher mix fee year-end driven term. increased to quarter, Solutions our appreciation. ENI increased

strong a in the bps. to Long-term marginally remains with XXX% segment strategy large performance below outperforming period. investment declined almost XX-year from its strategies XX% this over XX% a performance benchmark X-year XX was as of number The by

XX. segment Now on let's turn the to the next slide, Alternatives slide

cycle. flows $XX.X growth, has historically XXXX previously, billion XXXX As fundraising the high generating than more strong in segment this we've of to fee posted mentioned

something be fundraising would year the revenue continues the starting of strategies segment was expect last to third increased our very third half in the this to to agent strong. to in that quarter. earnings on fee, the that by to as fourth back was than you quarter our placement and which their segment this at level item $X.X track million call multiple an the are lower the We quarter, due growing record recall compared this in flagged may higher normalized get a next-vintage In as we in AUM back nearing

segment, XX. Liquid on Turning our segment to third slide Alpha

reduced drop in billion, in by to billion primarily Vanguard $XX appreciation. from this the which to segment was $XX market partially AUM Our account, offset due

results. by and X.X% XX XX flows of result, a revenue to Vanguard, a performance a Also, fee X.X%, from those our slide bps. out in in of segment. and broken X, showing increased client across rate cash XX-year the and of quarters, our net stable as snapshot five XX our in and is the the drop key this shows XX segment last generally The result segment segment by strong Slide As solid metrics from financial bps and respectively. five impact investment revenue for assets declined flows this lower period. fee ENI shows

reallocation, our The the Alpha net billion Liquid shows the on slide were reducing This total segment were overall bps at flows that bps while are the Vanguard quarter. driven the inflows improving, to to resulted XX, this right, net an by increase fee we chart side in bps. operating $X.X Note, in in while table billion, fourth show On the in our from at fee left-hand rate expenses. on flows account, the bps. that our XX XX outflows minus XX the in client were excluding the $XX.X the average at Vanguard segment negative cash XX bottom

an ForEx year-end note by adjustment was increase and $XX.X will million million, in expenses which driven to G&A $XX.X You from seasonality.

XX. million balance million $XX paid quarter, drawn. another at the shares repurchased the now by to compared revolver down which our third Turning slide to sheet We in of fourth $XX on $XXX and million our quarter stands

accretive allows compared leverage capital X.Xx recurring net us uses strong last the business cash to quarter. flow our Our managing that deploy ratio our shows while to X.Xx to leverage. This reduced from to

the to you we're back operator call questions the any have. turn to happy and may like I'd answer Now to

Operator

[Operator Suisse. from go Craig ahead. Please comes Instructions] Credit question Your first Siegenthaler from

is open. Your line

Craig Siegenthaler

deal objectives morning, when for to have that China about of a Good virus? happening the resolution trade think your the can place, China, Thanks. us and U.S. now remind Phase you the especially long-term everyone. we Guang, one in

Guang Yang

China. Yes, Craig. Thanks,

terms very potential we May term. for number As of longer engaged of presence expanded of we XXXX, before, our with have team China us in communicated a institutions, It's very us. partners as our of clients. there, for important markets important into in a stopped. there. on Since beginning We is we Hong on way when But kind that just the efforts distribution put was in Kong. outright U.S.-China the At point, well negotiation hold pivot trade efforts as the side

there. number institutions kind protest another of again, Hong But the hit a Kong. we in with roadblock engaged when happened of We

Phase place, number of we now meetings with up a after Year. institutions and actually New Chinese the with in one So had trade again, we're those agreement right lined engaged

those coronavirus, are of because now But canceled. meetings

two so quarter quarter, will probably event, another maximum to think speak. I be

happened Just like XX quarter ago, event. it's years XX, that SARS two the

fully are team engaged. to we prepared our have So

get the we but our have Of to don't situation we're prepared there, team resolves. course, right traveling for now, consideration, moving once the health

Craig Siegenthaler

probably it's spreading And it just rather be like XXXX. a out they'll going In the you think future, be as looks my in more given follow-up cycle fundraising their next fundraising across sort the Based big on do of XXXX. is many what year And in said, concentrated on a like than to Landmark. periods you year? probably

Suren Rana

Craig, of good more this would back more segment sort really in do little this of capital And strategies guess And rather here. timing. terms expect our fundraising in timing capital timing Suren the of across I the our out bit spread do that. we'd half going on We in in is of time We more segment, year. and really of comes 'XX. strategies you'll a terms Yes. a opportunities the see function affiliates of is expect see over Alternatives deployment different Alternatives deployment. of of the out of sort the activity than the our in in 'XX with starting earnest

contemporaneous, additional that raises strategies, and timing time of we observation would out. but is right see spreads Your bit the most was over a deployment it the

Craig Siegenthaler

Thank it for me. That's you.

Operator

comes question Robert KBW. ahead. Please go Lee from next from Your

open. Your is line

Robert Lee

Great kind guess guess -- keep one are capital XXXX Paulson's similar stake's for on are is you any issues kind given curious just been look you with Thanks ownership first is, any ahead I of questions, morning. of management assume back. taking buy the and -- we there, my if creeping steady there I you run up his buyback there I'm of kind into pace up when a ownership? to

issues of buyback? toward level if get this that buying the he kind XX% keep that at XX.X%, create does any as pace, with you kind future of So

Suren Rana

into this a we've to as look we goes general, accretive is potential deleveraging Suren is good Rob, investments acquisition uses them, and seed capital as look do well. organic one in repurchases Yes, the guess, deployment, that is like continue then also here. growth for our for for use, of we targets I capital. at capital, said, all And

flow this cash our all say, to would of also leverage. enough we opportunities. all of So we reduced recurring those those, have some And quarter, you did repurchases to as saw do we we and pursue in

terms in that say would we enough headroom we right So accessing the now of opportunity. of have repurchase

XX% And that approaching the threshold exceeding with to be pointed should an -- you alternatives level, continue are there allow is if would a we've our us that that we're of shareholder discussed them several where repurchases, level there to largest opportunity.

Robert Lee

activity? a Great. something on maybe, And activity, up off of or if activity XX%, at be kind call the new on I or would RFP you Guang, business follow-up had kind a mean, or I And any I mentioned, there's you that of trends. you your for apologize of pipeline if this granularity of look it's RFP kind maybe great. XX% give any on jump type pipeline But RFP quantifying year-over-year something could of moment. in kind to the color was if

Guang Yang

lot are sales to meetings. into our I and final RFP ready for example, early total hard a discussion busy. provide to predict numerical already. with got some know, least, involved already the it's the think I'm number. you or indication even are Mercer, the say, quite RFP, the ratio what's get a Since a for would solution to capability about conversion early mentioned funded But encouraging. team be don't team, RFP as the At mandate is business, you I But of They stage win all saying will our that very when in the for those really win. we're timing

Robert Lee

partial to the maybe question. And follow-up Craig's

feel kind some of global I some do about outside feel update Just -- you is and you you on investments of still maybe really made initiatives effort it's of and other do? investments, your may that to China. you've are kind us now kind need there there. of on initiatives you've kind of, execution like the spent on some or Can distribution did know complete of more build-out you your

Guang Yang

Yes.

have members Latin Middle America getting senior in lot communicated we're right team and America, Asia. now meetings, quite some and in China, for the East As Asia, the before, a now, search activities, on right we of distribution Middle And East. we added in And to many Latin example, particularly it's still Chinese been have date. physical meetings lot to there've conversations we be a terms calls been ongoing emails. canceled. But meetings, a and the after those scheduled Year, in New pause. later have they of through Originally, But of but conference now rescheduled right

Robert Lee

for you question. my taking Okay, great. Thank

Operator

Davitt Please from go Your comes next Patrick question from Autonomous. ahead.

open. is line Your

Patrick Davitt

good Hey, morning.

there question, that any On to call last the other side of I large redemptions guess, coming? out are

Suren Rana

guess, lumpy obviously, we redemption. that, have I noted you've Vanguard Suren. is the In this Patrick, like else. the fourth don't quarter, anything and large anything

can -- As you business predict. know, it's difficult institutional to

of are so quarter, we where So now, in as this right good. so far,

We now. as necessarily but predictable, anything, to haven't it's nothing but of not report seen

Patrick Davitt

without could XXXX the run are first how of the the that Great. of like In kind us we you headwind? and remind of the vein, year reset full three could be much of quarters try out what that outflow as in then for the that rate assets to came XXXX Vanguard from now

Suren Rana

Yes.

shared I outflow that a is, past had from we billion-plus think quarter what the in of we about may $X pocket. have

of that's if number. a level you sort around. that's a run a good high wanted But probably It's So number. moving moves It rate, high-level around.

Patrick Davitt

thank Okay, you.

Operator

Your RBC comes next go Markets. from Kenneth question ahead. Capital from Lee Please

Your line is open.

Kenneth Lee

thanks taking my for Hi, question.

on looking Just still And level individual on at to your you versus outlook there? characterize are the for activity investment wanted focused M&A. get How current teams of thoughts the you potential would potentially firms? latest

Suren Rana

the that M&A, are product targets growth on platforms are in On we the areas we're fit the we solutions side channels well well as alternatives are be us as accretion. Suren. are teams. is or the disciplined to on distribution we as this aren't, strategic both that financial very but high in Ken, looking the as looking continue on that at And actively or where on side providing

something we the we as looking we capital accretive be at. the strategic a process, when to well are on come that finish pipeline hard other while more have that as to is it's uses So predict accretion fit, to satisfactory and to compared might line us the

structure, right obviously of teams, and conversations we again, alignment simpler. investment teams. that's a fit are the little right is On There, the cultural and again, with question bit multiple the in

Guang Yang

on other interested not highly yes, affiliate. focused words, another value. just So strategic bringing the in we're simply We're in

Kenneth Lee

one fee And it's operating expense the ratio XXXX at management think guidance, Understood. of revenues. if may. look just follow-up, I like I the I When XX%

Just what's wonder driving to year-over-year last that versus increase year.

Just want key factors to see if any there's there.

Suren Rana

on to Ken, continue on the be the cost expense, as on and operating are very said, disciplined so. we level, will dollar we've

a is expect removal conservatism as we bit lower fee in management on have a increase from the And a of is so the little you've for absolute the the but market numerator see account. the the of in function you It's won't We is, level don't of we is material guarded fee. and expenses. a that denominator. expect on So example, There denominator, ratio down. the of our material noted, a any the level which OpEx, large it's January, ratio change dollar

Kenneth Lee

Thanks helpful. very Understood, again.

Operator

John open. question go Dunn next is comes from Evercore. your Please from line Your ahead,

John Dunn

Thank you.

Just geographically maybe come a it you sales about think mentioned a through. global the traction? average of might there Mercer seems where relationship because that just more size of and effort, be And like a eventually you're it mandates it's seeing cycle be maybe little you bit the could good so the some growth. on maybe how just Maybe source

Guang Yang

Yes.

are unique third-party percentage offerings, a have I BrightSphere investors bringing and the to very allocated but to primarily potentially And solution with globally. think BSIG some Mercer institutional offering it's the managers.

number a of would really As meaningful managers otherwise And also make in sense. the be size of portfolios the you construction the decisions. Mercer and be really make not quite of strategies, mandates terms portfolio allocation, because since does would asset involving expect ranking expert is know, could an underlying we

would very down general, also institutions, insurance hard, know, to, at lot the And sovereign you very least funds, the positive since they're than we're in companies, sales I etc. early tend to would this cycle, etc, institutions cycle, It's normal a But say, really time. business say. the faster a sales move pin has talking been the this wealth large reaction exactly as I to in

John Dunn

synergies the talk And covers any potentially your thoughts could making? some like about you. you maybe the you're just of expense under to then good investments offset Got about

Suren Rana

at this I guess further John, we expect synergies. don't expense point

wouldn't pockets as we we finding I this expense because on focusing cost probably reinvesting But to are grow our opportunities we of expect some side growth whatever on point. are the the We expenses earlier, on in increase investments a and said material that are at capabilities. side, our then

John Dunn

Great, thank you.

Operator

next Harris from Your ahead. Chris go question from Fargo. Wells comes Please

open. is line Your

Chris Harris

Great, thanks.

So I any that net you last at reason in Alts. couldn't XXXX? $XX billion believe, guys there Is in $XX least in much from of next cycle do and the the to billion, inflows fundraising why XXXX cycle

Guang Yang

of. think actually, will knows number think, you the a actually I be a to that reference. think raising when good in think marketplace the I to probably as mean, nobody would you're a I but time that's and of what number by good happen close, money

Chris Harris

just that meetings for And up Phase understanding the to one China Okay. Very the so I opportunity you clarify opened to so want China. got have good. I'm through the and situation deal just in We trade correctly. in

beyond need mandate get So that based Can you trade and to potentially get mandate actually, constructive. Phase from fundings Phase potential and region? that two wins thing past for deal are get to China this those the there essentially do again meetings from just three coronavirus we you're on you happen or be Phase wins? to able one take those actually Assuming meetings and we

Guang Yang

XXX% agreement it's you can in benefit of have, started one foreign fund a ownership as that basically evolving how of moved past, for it's One know, limit XXX%. managers In is XX%, mutual the there asset now terms XX%, course, much us, then the foreign firm is Of with owned can the a managers apply license. Phase process. asset now like from to

on far do also, for there, can including months. Phase And agreement the we potential partnerships, very had we to those conversation place, some one try think thing the to I those ventures, been the push so important. to line. because terms finish But plan joint to license have meetings, is have one the of we with get that's So in our that's really in going discussions conversation

Chris Harris

Okay, great.

Operator

from Michael Morgan Your next Cyprys comes question from Stanley.

ahead. line go open, Your please is

Michael Cyprys

Great. the Hey, Thanks good morning. for taking question.

your back, the come Just Suren, wanted point on to seeding. to

get curious the how on about of an are you to kind update seeding guys thinking strategy. Just

the I think size, you ago how in book, curious just in a adds the year versus the and the mentioned deck where of of kind was gross compares that it in versus terms what next? two strategies out? see any playing the looking of next of over how sense And you sort the or make terms seeding recycling, year views as that in you're on out but

Suren Rana

give illiquid from strategies. currently of or has Michael, portfolio said, as a long-only to long-only more It $XXX bit a take. we've alternative our seed strategies solutions about is been exclusively little million, and mix transitioning

There's that direction. answer of we amount our velocity see total we see your sometimes do strategies seeing we including, moving the that have so and the So probably we Does either experiments we example, alternative that or that to opportunities are trend there like for themselves solutions-oriented, continue continue clients more capital else. we'll in get failed and prove as something third-party things move that. question? well, as in And are as products side, that solutions that growth as good product, out

Michael Cyprys

you in then of forward all as looking of recycling? And seed Are just from funding is here? it move you the just size book the through it, terms grow to

Suren Rana

Yes.

next We it size timing would are depends A be seed bit on of We would to ideas million. the with to growing little the $XXX drive growth. that that growing work million it open opportunities. that collaboratively best our comfortable also affiliates $XXX to of we from

over about we from $XXX grow So think would it to million million. time I $XXX

Michael Cyprys

on the know headwinds & just performance. mentioned I Quant on Solutions some follow-up investment And Great. you segment. a Okay. question recent

more have if that forward couple impact reasonable assume what, it segment sort any the do in little could what curious that, bit on being Just actions flows? terms of we potential Is that. of be of any, are over a to quarters? expectations address a standpoint guys of sort as flow look challenging you to from And taken next

Suren Rana

see we I core have few so, on underperformed guess, half years benchmarks. and multiple the an had the stocks What definitely have on last performance in outsized just Yes. one because there, or influence factors growth

that's that. sustainable Quant like trend that a understand strategies like clients that Now are more our market. factors short not and a Similarly, rising a the that of Solutions would term considers on. & in volatility approach That, low the segment our all strategy holistic there large multitude focuses tend to underperform in

strategies delivering would giving clients are but that, some say, too. And volatility up those So upside. low I also understand

be mean, So the look say, off, would may longer-term signed That's longer-term institutional, any volatile focus up is the being Similarly, I tend strong term. clients like what, that be on model to while track emerging the could are a our that but X-year strong period we records. our tend for primarily to quite And near majority clients performance and is we for. that why said markets, works. term, number the clearly clients performance have have X-year of the we I example, there off, and longer on

question, changes models. our to So there any are to your whether

philosophy, well that periods. have the time have approach, We through model worked high over technology and conviction longer very

Michael Cyprys

Right, thank you.

Operator

Lynch. Bank line Michael Please America Your next comes Merrill from go is from open. Your Carrier ahead of question

Michael Carrier

Great, thanks.

question. one have Just

more distribution with bit You products making either growth the China? which the ahead, try affiliates drive a you ex guidance, front, investments expense maybe color the where But on you're is on provided or and helpful. to on little can the provide

Suren Rana

Certainly. Yes.

hence are I needed. we So increase clearly, where guess, the growth is is investing and

expenses For will and as AUM are example, we segment, our to our in naturally be need deployed. Alternatives growing are capital the there we increasing

do the into we on are investing more are access we people, we to adding expect or new and we were so and get as this as we markets of And to continue that do not. where year. We side distribution channels

Operator

question-and-answer like to to session. the turn back Yang. I'd This conference Guang over call concludes our

Guang Yang

all us Thank joining you for today.

Acadian Asset Management (AAMI) 7 Feb 202019 Q4 Earnings call transcript