Franklin Resources (BEN) 30 Jan 192019 Q1 Earnings call transcript

Company Profile

Participants

Unidentified Company Participant	Franklin Resources
Greg Johnson	Chairman & Chief Executive Officer
Ken Lewis	Chief Financial Officer
Rich Byrne	President of Benefit Street Partners
Patrick Davitt	Autonomous Research
Daniel Fannon	Jefferies
Craig Siegenthaler	Credit Suisse
Michael Carrier	Bank of America Merrill Lynch
Bill Katz	Citi
Robert Lee	KBW
Brian Bedell	Deutsche Bank
Alex Blostein	Goldman Sachs
Brennan Hawken	UBS
Chris Harris	Wells Fargo
Michael Cyprys	Morgan Stanley

Call transcript

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Unidentified Company Participant

Good morning and welcome to Franklin Resources' Earnings Conference Call for the Quarter Ended December 31, 2018. Statements made in this conference call regarding Franklin Resources, Inc., which are not historical facts, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve a number of known and unknown risks, uncertainties and other important factors that could cause actual results to differ materially from any future results expressed or implied by such forward-looking statements. These and other risks, uncertainties and other important factors are described in more detail in Franklin's recent filings with the Securities and Exchange Commission, including in the Risk Factors and MD&A sections of Franklin's most recent Form 10-K and 10-Q filings.

Operator

Good morning. and your Brenda operator is name I'll call be today. My in time, mode. all this a participants At are listen-only [Operator Instructions] And being recorded. as a reminder, this conference is to At the CEO, like I'd Franklin over Mr. this and Resources' to Chairman time, conference turn Johnson. Greg Mr. Johnson, you begin. may

Greg Johnson

Byrne, for our Thank discuss markets as today President also financials, our is volatility and this you. Street as me, credit Rich Lewis, on to available here the the address Ken on to we joining with clearly thank results. financial usual, Good and results CFO morning, Market you questions set of quarter's to this any we're have acquisition quarter. Benefit Partners, our Friday. close to alternative this impacted discuss

other income, more million the quarter. $XX net was of this fact, which effect and is mark-to-market, than In losses the predominantly unrealized

has been ours. of conducive more including success to strategies, investment of this Fortunately, environment value-oriented many the

this notably sales are of our see with We to pleased strategies net relative performance improve in several to month. continue improving our flagship

remained active through repurchases Lastly, shareholders program would quarter. have. in the that any approximately dividends now you to with I returned questions management we to million and welcome $XXX our capital like and

Operator

Thank question-and-answer Instructions] first of session. comes conducting be Our line you. Autonomous Patrick from [Operator the Research. with now question Davitt We'll a

Patrick Davitt

us down Hi. how walk expenses after the and guiding through for the get need the to of come Good in and versus XXXX. the can in you're investment you morning. puts being Thanks prepared XXXX? comfort expenses in can remarks question. like Looks Could being that, you down up that takes

Ken Lewis

is This Patrick. Sure, Ken.

can all those to business couple last kind investments you of working identify fund So with of in the and we've areas we where efficiencies the units leverage referenced. all been

the year through still be XXXX is rate we'll referenced. you that, -- to of that, strategic expenses run those will result be at this cost implement make that think the levels or the So and to investments able the that that initiatives we get cutting investments do we exercise below

Patrick Davitt

of great. bleed could is vein, XXXX of that in some so come I could that guide Thanks. that to end again? chance down And into guess, X% X% lower Okay, that the there a the

Ken Lewis

think I that that now initiatives cost I I non-recurring we you cost-cutting lower that that Right on execution think a as process would quarter. true we be go to able through next trending you are we go on of through Yes, guide. be say that's be better think end that I to and handle the will and will as give probably the

Patrick Davitt

Thank you.

Operator

line Jefferies. Our Daniel question is with the of Fannon from next

Daniel Fannon

Hi.

guess flat -- Just on quarter your a it I was could follow-up that. the comments and I closer XXXX fiscal flat. -- you to guided this opposite, about thought be towards comments last for for

to a X% X%, So, XXXX just change is had fiscal what your want guidance plus you clarify, a before? from to

Ken Lewis

memory going last No, by the of comments quarter.

For because at gave to X%, think, we seasonality, sure, made the guidance reference quarter, the talked where X% we of that's this flat. we when I to I But that about remains think the same guidance.

Daniel Fannon

Okay.

Ken Lewis

And we're changed. to of was right to tracking that hasn't now. X% guidance and lower the Sure, the X% that's up end

Daniel Fannon

of products, then And some of some up? that seeing you're specifically of is actually the sales some little kind a more and there maybe seeing where that the seeing guess, more I traction of the We're maybe momentum on just products of channels it. and you're Got U. the in in -- actually kind referenced it quarter. increase the gross it, S. about you you some at of talk pick can --

Greg Johnson

quarter you global one look in recently performance be moved quartile and the bond. for a if mean, where positive global tough driver which quarter, Yes, fourth big and MSCI down the We down XX was also the flows for and every we the bond. return to And three-year S&P in think had a segment top very absolute I the I the to as was XX. at tends is just know

near-term biggest bit uncertainty that product as to momentum month that we're more we that as tends had say flows are be this current one think a that think there's of before little and And more a that better and -- as people certainly selling saw seeing has I seeing I that. So, we I of through nervous, I would kind as a gives in little the well. turnaround said get

would but fund, product, The that's that a really had a We're big and pickup those be anniversary the income drivers out. and the the something the a muni message pickup numbers sales in we over in But be on as we fund. on press two our the well U.S. primary push saw gross sales getting that We other quarter kind is saw would U.S. in there. which put of retail we just

Daniel Fannon

you. Thank Great.

Operator

of line with Credit the from Suisse. is question Siegenthaler next Craig Our

Craig Siegenthaler

morning. Thanks. Good

of capital. regulatory the What of on capital, working excess can sort so Just and billion capital, here? excess back is $X.X the true within in feed first we level just

Ken Lewis

$X approximately That's billion.

Craig Siegenthaler

billion, so net? it then $X billion would be $X.X

Ken Lewis

to $X $X $X billion billion, billion billion billion, $X to net. so Well, $X

Craig Siegenthaler

Okay. what think potential special February. have in board up may And meeting just dividend another my actually here, follow-up, you is and coming the for as another I

that around given what capital? all excess So your just are that thoughts

Greg Johnson

the is potential before what feel see we powder said to decision as balance and feel decision. we and question sheet We consideration. a a strong is board that that think to think. we've the they to is -- we this, acquisition that always dry continue hard this for strategic It's feel having that, handicap having I

the that board at will weighed be meeting. February All of

Ken Lewis

things it in I change that's a bit industry and word market change think industry. you quite the could pretty think to very is know, and as period that that value But strategic we opportunities is I you undergoing what an mean, if a choose a word volatile and can of arise of a use. -- -- lot the and appropriately, a just it's this for can sheet, And shareholder not balance we excess add tends capital be the be use

Operator

Merrill Michael of is with Lynch. Our from America of Carrier Bank line next the question

Michael Carrier

Thanks, have update guys. seeing are Maybe in side the past the over of of is give an brokerage on you relative of of how seeing in commentary few that number mentioned and fee-based shifted multiple side business an initiatives much traction you're in the just U.S. of place? of as years retail. to us the you, the you a fee-based that business And say maybe in one platforms, has first just initiatives on how update you terms the products? of over the the traction years what the some on then for can your just Maybe been maybe these some

Greg Johnson

-- before, York channels, are retail of adding said and be service Exchange classes Exchange And seeing of in I change, well. bit specialized equipped an in New changing for significant of the the but were even different distribution environment we shares up York sales I the those and time, prior the but adding I think a we little and sets pricing better changing Yeah, products dedicated, think, think XX% New transitioning of us group, mean, last take Stock quarter. to and few skill results, of a years the changes to also investment kind created require really as U.S. quarter also, area I over of as only lot Stock we not has and we into fee-based been a

those So I changes but think destructive, that and several now. think, be I -- can they’re somewhat

they today talked development important, think area that interest the now of solutions, within in going we we think in we rolling of we model into lot growth is incremental have have we consider a indexing investment big best a funds, can be and product I we passive XX FTE that but underlying which is think which XX solution where incorporate I think, one about group it the lower now, and a can those to and we’re as outcome-oriented use are in seeing that us and our right occur funds, industry, cost and we what far there. multi-asset much more We out put another type product, because some have solutions. competitive as of gives just solutions, also

the I the far between versus probably think, brokerage today. at don't have the as -- into exact think as we world; brake, number but I look I XX% fee-based the is going

specific firms where ETF have is we been need pickup as have the that effect enough where the approval say what of year's, long to seen Stock that's be. firms get to to to shelf And I'd place very been one we've a trying those just we on York in some So strong do help get it Exchange consultants the we goes product metrics those big of and measure will last in now well, as the is And able ETFs changes New to there, types that important that have very and that And of or with and we on how the platforms. out well. because having into that. products the of managers

it fee-based I have and now hopefully It's going that momentum or a some continue. going and is momentum continue think, but better world. to we funds to I So, big Others on fit to good transition. maybe to not pricing to we modify the continue may have that think happen with adjust, there that's

Michael Carrier

return. just And then, helpful. follow-up capital on a That's Okay. Ken, quick

kind active to across of ways been going return the have different you're guys capital. You that

the Just how the terms XXXX pace of be on that any been the pace? just thinking update elevated, we just rest buybacks, of should the has about in given

Ken Lewis

had Yes, it's we've we've and had the policy that forward. pretty that practice same much going

opportunistic in But world that, if the good other think we then to capital. see any be and price, be dips market. need for systematic having so obviously, we'll both So kind take like in to of any going opportunities M&A volume active and holdback, at advantage we're said buy we stocks are there are things this of the

think more going we're continue of would be opportunistic. we don't I elevated would just the the but level, I know to this would -- volumes kind same. be just from to So that

Michael Carrier

lot. a Thanks Okay.

Operator

Citi. Our next Bill question Katz is of from the with line

Bill Katz

with Okay. Thanks very Could the savings in of you the where think a some for of down sort talk discussion you moment. incremental of margin some of can to much. versus maybe Ken, spent? of drill areas terms those you staying incremental get

Ken Lewis

to costs. we identify operations trying could it. we where is think do the every do worlds just areas what we how at I kind at changed. reduce of I across It simply and their The board, looking function think, and looking

outdated it, every procedures function. probably that of over so leveraging there's way we building been same and anymore. crosses that jurisdictions, the obviously, don't have lot low-cost need to years So in that a we the And do

And technology. one It's are of say leveraging really the I area it's forward investment then versus key what jurisdictions been kind the hard strategic So, another. we've levers particular an with very wide But to and low-cost enterprise effort. are. think then

So like would we savings. investments things and with continue other strategic fund solutions these them and

Bill Katz

as it's from here, more appeal areas a I'm follow-up. a implying Could that mentioned, to a backdrop to Okay, bit little the changing mind? M&A. in from and about rapidly a and that you more just strategic little talk bit sort make you maybe Greg, of what seem your interest

Greg Johnson

up you're landscape Well, before, we've how said it distribution, again, I I happen And different asset I Fiduciary about with at I and thinking be we high-yield own think business for for the distribution that, look could think, opportunities all we around I Trust want. would the scale one way seeing businesses as be I would I've cases would to of think grow places be we our that some to having than the means be the tie changing world. we I And us. investor. that think and would of strategic if one there's the think, is meant independent that business, that the a direct relationship up in that that traditional ETF manager. said, with said portions globe purely – distribution it that some of in or want think, high-yield,

well. would as think important I it be

for priorities be would the of distribution a worth just building those be net certainly So and capital. two couple high

Bill Katz

follow-up, if through you online, of some you fourth the terms get can since of And allocations update somewhat in Benefits, and they of terms quarter? a just have backdrop what the in credit Understood. – given wondering, are team of the just I from was quick seeing him

Rich Byrne

Sure.

Greg Johnson

are Rich, there? you

Rich Byrne

loan Greg. you the Yeah. funds. in funds We I'd as drawdown the of bond quarter, outflows Fourth to that. saw Thanks. take happy know, out S&P. with be and

all of into Some of that that our the is your of Maybe translated less that our private note up almost a question, trends delayed the locked so purpose liquid on markets – for capital. debt in capital effect pricing there. usually business is

that, for redemption's question like not your if any a So relates really things us. factor that's to or

word And fairly to most in and been low of powder. We've us, most the I lag of first defensive has everything, about declines particularly that's structure, know, quarter. is of from see risk debt retraced values. investment in more Pricing the we're quarter sort to most reflect has the fair the private of starting dry we where our opportunistic and reasonable generally a Mostly it's – just the the of market first lot function finally that fourth finally For starting into just philosophy. a position been of reward capital amount our hold. – equation top taken loan we've how to portfolios, of around But product. doing documents is a the a opportunity. of some lien, the

to more headwinds, us where strong. there is us, reasonable forward environment, but going know have can forward, buying been looking brings see relatively what is we're been some a we opportunity. a still for Fundamentals I So volatility invest. we'll this

Bill Katz

you. Thank

Operator

the Our Lee next with is line question Robert KBW. of from

Robert Lee

of of with a new could bit, how some Thanks. mostly powder? couple with And Street, little obviously, last just there fundraising Are when you where other come of strategies I board capital number on a you you Thanks kind Benefit forward some kind whatnot, whether impacts, about going post-closing payouts strategies L, you that of could mean Number announced update P& the then have fair kind of drawing of be I maybe cycle can give think Maybe thinking the beyond lots the cycles, contingent and those a should factors a give you your that there's it's of kind suggested of of quarter, your of lot or for? start one, dry or maybe out the any raising us a questions. a we things there. guess, questions sense maybe, GAAP impacting be are for or deal you existing my either taking sticking kind non-GAAP? that the non-GAAP going maybe of forward I

Ken Lewis

February in over then it X.X% to in with expenses, start eight purposes, guys. percentage guidance, the looking that Xst, talked year, and left. me not modeling management closed fees we're then about Let absolute we Street deal that, in hand commensurate base, for at this we so and have Benefit for months about Right, increase on The investment increasing but dollar basis.

neutral think and still be fiscal acquisition terms this in accretion So we after that year, the accretive EPS would then of in that.

Robert Lee

Okay. any things higher, somewhat think going so cash obviously or? of or to we amortization the we maybe that’s intangible there going assume to want tax so impact, kind I benefits – mean there’s like be be that to some of

Ken Lewis

so in purchase Well, those price, And terms the it. we numbers expense include disclosed everything. cost, that's of

that's okay. So you, and it's payment number expense then and we gave upfront I disclosed pretty the that

Robert Lee

And of questions. Okay. sorry, some I'm maybe Right. on those the go ahead. follow up

Ken Lewis

the answer folks you? to Benefit you Street Do want

Robert Lee

great. that'd Yes,

Ken Lewis

Okay.

RichByrne

if Sure. at most I Fund parts mentioned or that see our debt. capital if funds our that or drawdown the as getting key in is money funds in up is hit were X. let private Well, the like. as locked That's can mentioned you of I me -- follow-up, you flagship We you're

debt. private senior-only in a have We fund

each certain funds our which situation fund. we When intend of funds, special those successor to a of to those. capital in have investing then We we threshold we to We're funds. get start successor a actively have usually drawn market

against power, that. the have if been have for we of better. pace, market gets leverage could remember And that buying use on funds the we additional opportunity we also generally on So all

nature sort pace we how question? remain So approach Did answer it. the we and on that of that of your

Robert Lee

your just mean to pace. was with since curious I I you on say, Well, familiar not say firm,

a trying you next sense investing to to So just kind and through halfway cycle? get X you period be that kind investment these fundraising years, in could of when hitting of of average have of

Rich Byrne

Yes.

and the As successor fund. referenced, fund the manage, drawdown we're we I have I drawn X But that cycle. all also capital current when on that and even mention And different funds invested of And are didn't that's our you XX% our locked the all a accounts rule, funds all general we and raise they we separate other XX% I that up. periods than mentioned. more in

So it's we are a little more but than detail, more halfway.

we'd funds. are successor than you should be you when launching assume more XX% to We half drawn some and get

Robert Lee

in, of it's investments or if the and points fee forward products. you do some talked new about lot how that down maybe Fair just can, quick of have made fee CIPs And and you own do kind think kind of four going or obviously, a modeling going and how have you internally? enough. in year question, basis overall or X Great. your made you you've go a changes of kind And handle given your Okay. whether rate? half? just modeling when I budgeting I you ETFs about it's kind adjustments, mean, I X or are of mean, that assume some to

Ken Lewis

-- we mix slight forward. that saw look do volatility quarter, bottoms We've all assets this build and Yes. a fee we degradation rate. so And of we with at up, going effective the the of the then

think might of we're be but external last that you And much, on so slightly the lot for XXXX, pressure that. that look fee if won't getting year, than forward lower change fee not the we rate a it

the budgeting we're effective forward. material in some not decreases going So fee rate

significant change XXXX Street if a that Street, in versus better. degradation that, without in give slight But XXXX. for rate but the effective math we fee see the for course, will of change I you Now, could Benefit don't Benefit

Robert Lee

questions. my taking for Thanks Great.

Operator

the question Brian Bank. Our Bedell with from of is Deutsche line next

Brian Bedell

the was to large whether also whether mandates institutional in you reception sales space? adviser in little bit also can side, the improved any maybe three-year do Obviously, the products, redemption lost slowing actually environment delayed mandate impacting a and about in different redemptions? Greg, heightened much. lot And through of see the January here December the in the the And very in on then And institutional talk one-year the investment a fundings across Thanks or given that's one then Great. that's periods? performance especially you industry. and pipeline?

Greg Johnson

at too the historical sometimes I the money by it above in -- is think the of December. and many peer maybe little January After true sustainable to we draw part funds tax I just because so I XX% and in that selling other looks that, And in looking above the a get average. year, that's chart, tricky with because certainly think this that performance to for was selling, of strength us, January And is X% then bit retirement December, good other encouraged market are think our in XX conclusions average. strength top the with always time like get December year a overly for most January. the fundings, I ago, I hopefully and us, industry, compared think to some again over better after going tax wherein back

So think, in performance significant we know that's that shift that. I a

flow last the decoupling message mix have happened far get these. to but five-year sometimes, through disruption out We That I in people back, the And another side help things and a the again, get value that's We that shift market. being I important as bit should have predominantly our what's think said little the is over thinking a three-year months. we in of as few encouraged having it to happening market the about from a value by and takes numbers, it are think, that then

Bond looking more strong the I alternatives, about said I and before, it's So very think, as I equity marketplace. we things concerned as seeing, become in of valuations mean, story has are a just a And this kind nice Global people fit. and for

give tends talk see looks a your take I’ve say, one something about, faster, move time. the than may a to that numbers bit force think December. funds, bit January lot beginning and But we'll clearly, which and relative sales seeing and more little our that traditional we're little value better hopefully, as certainly I to bode said, retail So a

Brian Bedell

institutional side? Right. And on the

Greg Johnson

heard retracement Yes, had if I little I'm eliminate where anything a -- haven't haven't far in may that of -- probably the it we've think as aware there. you But that institutional, think market as to-date, you having been anybody really something timing think I case of but standpoint. you -- would if have haven't from I just saw delay the And a I that's -- not the heard delays, we that.

Brian Bedell

billion guess, can where a or expand distribution? the that distribution. Thank wanted I you you. just towards been And Ken, net cash? I in to architecture it to deeper I $X M&A to you general you view you else that's for talked your I decades? maybe, this was is Greg, in management, get on as capital just little with how then guess, own billion but the comments going high $X you just just then about fits said, excess open wanted on there anything think to if mentioned I on And, clarify, what And worth, trend you about that -- net capital of you think said

Ken Lewis

Yes.

get let your of remarks, reserve and $X.X liquid for satisfy prepared So moment, and regulatory operational in question requirements products. Greg our investments on in billion assets to excess, the capital the our its

Brian Bedell

Right.

excess the so capital that is you then And said word? use

Ken Lewis

need. we what that's No,

to So is us. is available and available the opportunistic difference

Brian Bedell

got got Got it, it, it.

Okay.

Greg Johnson

architecture-type that markets I have expand, those more we advisers have Just may of is and significant it this managers that U.S. be for platforms, investment where five four When -- -- market. -- of statement not I countries a be platforms could if for not mentioned share and it could enter ownership may it's have or probably a to to fee-based you when look way think technology guided a and platforms new good the U.S. for mean, look at really I I world, outside and the distribution, and the

the So those kind. are

banks have our as may said more a see to hey, a the impending and we That's It's that would and I advice another We we’re guided something of asset pure bank and to past, I are of things line. would more in have would we to talked that may fiduciary bottom -- in could there we’ve distribution we out network list. that, an regulatory a and something not that. at disbelieve certain trust independent to we strength markets like world. looking the and reasons, markets very manager manager think We open for how Where say ourselves high that the say we spinning be do think do think of certain on we're we asset successful and that in manager. and grow is want and just strictly meaningful architecture something that in be want about. that value area pure would in that be bigger it's change architecture open

Ken Lewis

are all alternatives, like that things just real the of estate, list But on too.

Brian Bedell

Great, okay, clear. that’s Thank you.

Operator

of from comes the with Goldman Alex question Blostein next Our line Sachs.

Alex Blostein

Hey guys, couple of clarifications just at point. this a

expect break restructuring expenses of the run actual a that of that? cost that kind out dollar when severance associated savings I of you and plan? that of the help include kind kind will XXXX, help are for any take with going be charges any associated out our at that rate again us fiscal of sort So guidance with to be And does expense kind that cost restructuring look of to amount

Ken Lewis

cost to does Yes, about cost reductions, any severance simply don't not know execution because is related or guidance include that so right now. we the

going when do expect the that in We we line be give item to next be XXXX. of all we a to to able that's quarter, and rest even will not year. by incurred in for that's So year idea the you talk bleed be. fiscal for of to you But to that better this

it, start in to slowly or build And looking so, we without levels quarter, fourth the XXXX of bulk being we're it, savings said, of the the then, number, regard with terms like out Benefit I next And to of quarter. gradually probably in at Street. get think, probably below it will

Alex Blostein

million just cetera. another requirements one I and that top? a that then payment number? et would Street, include Do that And was have I you to cash, you be the the guys kind to or don't upcoming know excess regulatory, which working would cash between think talking okay. So it, again, Got clarification, be about you a effectively that that of like $XXX capital, Benefit within reduction on on guys the but

Ken Lewis

that's in No, there.

Alex Blostein

That's Got in there. it.

Okay. Thanks.

Operator

Our next Hawken the UBS. questions line from Brennan with are of

Brennan Hawken

morning, my for taking guys. Good Thanks questions.

numbers? lead that flow item, substantially have can we noise from point. might going expect in a but Just here greater post core we that quarter fees so quantify And a the can maybe the that then are to we're break Can at spoke actually you fee you least that rate couple out where at of you off to try line and you I -- just performance ESP know larger. that to so could to trends to deal, rate, left Is it core please some you this our avoid performance though starting fee this fees going the seems calibrate as clarity be as basis? into

Ken Lewis

Sure.

fees $X So you're for about performance quarter-over-quarter is delta million.

higher right. if be you're million. And so million forward, they going were And $X than do And yes, they're higher. they're about then this I million, quarter, about quarter We last expect to fees quarter. I this about $X remember, performance quarter think last $X

it how call but out. sure, We haven't decision made a present will that, for will we we on

the prepared call remarks. We in out it will

call to statement, see that the sure haven't Kind geography, we to of for waiting what but of out. all there. the of what decided terms In income is, do we'll the magnitude

Brennan Hawken

Okay.

Greg Johnson

to That’s investments income we're the quarter-to-quarter, look we're too. bit like be going of some the because just good effect look little line mark-to-market a at, can at hold, point, we and noisy and thing other to look that going at the

Brennan Hawken

see on BSP other Thanks. on, explicit curious about other being fair. very, of some lot being with similar to accretion there's comments that these part though the activities, And it are lending that's don't appreciating which much BSP types of of also we the and leverage and funds the marked other about not alternatives. Sure, activities drawn change, of even then, lending you lending said expectations. is does, very a -- et really attention just you know that structure, cetera. as I the leverage Certainly, be to just similar fully think what in going

know of the non-accrual opportunity. is these volatility in an example, leverage But SNC remaining for turns accretion, at these flagged be could if as And for from like too credit lot impact assumption you an that you accretion out there almost review, products, that I of of Thanks. and lending significant credit substandard losses there's of was in think about much how this up Fed optimistic your deal? in zero three-quarters been recent when go how XX% commitments. loans. a much So see impact and fundraising outlook lending, losses and risk still to that the does

Ken Lewis

let consistent very we Benefit Well, we Street with default -- guys I analysis. assuming results, mean, assuming the very are historic the about are in in -- portfolios, accretion rates talk low the but risks our low

Greg Johnson

an narrow. late class think at before fair the and would And this credit to we mean, concerns we comments we well I this think that's the and say, once is stay. business as here and we’re fourth were in those had asset economic say quarter. And again, I and cycle we spreads I look would are -- all -- And

are puts continue comfortable on capital to the side forced to have to you the other we the got Those right trade, vehicles kind of things having are I think the and with. sell of that when dry markdown.

harder to of as growing clear. to market mean, and I more our are let commitment place the lien it's and that environment long-term. rates and yes, there's in rising that's right think in open of there's defaults lower. where wide be sense to of and give senior-secured. think take an like I sites And that far being be has to with kind all less issues, think feel the you means. that’s are it going hard And asset credit going come recovery But fundraising, from as it's – that's that class I'll and the out spreads very know junior on arguments there. fact side a we first that what any we But one that, I there from the Rich is Benefit in the I that into Street we

Rich Byrne

Thanks, Greg.

hit Ken little I the I about and just think bit I most you you of question the few would a add points. guess, talked key unfolded, a think I things. marks. One, as

this The in always is the change seen Just across lag not be quarterly sometimes, a really feel debt talking we but of mentioned, in is marked we and capital haven't at about we correction, There’s generally course was correction -- assets evaluation mostly be the maybe by very quality top on energy. haven't -- seen We we're it of are S&P we mark comfortable some material book oil and structure. debt the all real the private with to the the markets I issues, Greg There a drawdown outflows prices. private to a material and our we're there defaults. Those that -- quarterly. really third-party firms. technical basis, in were mark in affect or marks, here. credit assume, clear, any a going the book. termination But of appropriately

default been very be historically. very fortunate We running to have at low rate

greater in But nothing us our books all assumptions that's or Of model always the are something X our materially defaults change of to led think rates. recovery happened course, we books. in has our we around quarter appropriately. to than fourth are And marked going

Brennan Hawken

Thanks for color. the

Operator

are Fargo. next the Wells Harris Our from Chris of questions with line

Chris Harris

Okay. like about you of a arise do distribution, that? in about guys might conflicts investing as a deal that earlier how Thanks. result the and think M&A The possibly commentary

Greg Johnson

you you're fee-based the world was Vanguard marketers, through U.S. that's our strong get considerably that, with thought you make think of I really old with today where your doesn't direct business -- your going why just competing very I where of class do track in don't days, this the funds to if envision where direct said And got I But have you've never a certainly I and and the in to changed has to go think, sold could in the having consumer, that's advisors. world Well, anything the distribution. record best you'd conflict. sure, it it's you conditional

is conflict in distribution. would the us would think doing the although I that don't I own states big, say So anything I don't envision

think very too. look and has way most you the and which and have a as closed more, trending I more we Canada that is guided markets it's Europe, at far that closed more or market become at that closed look -- has distribution than as goes,

has co-owners seeing others like where and could fun are Italy that sponsors. countries distribution be We

traditional in and it's Latin the change just I would we’re banks makes up And think are where things looking those a how tie markets America being certain independent, dominate that markets… it like in places we our view sense mission of in So mandate the at. one may to just

Ken Lewis

And India.

Greg Johnson

India, do of may the a world, that. I think the just places where make long-term outside lot to around there’s it U.S. sense

we a think I M&A in past. would far as thinking different as the that's how just approach

Chris Harris

had follow-up perfect the on in makes that see generalize, was might things at you when it to one good but look difficult know right trending then direction Okay, across performance. thing sense. question Obviously, And I be see your investment just there. asset driving fixed like to U.S. your that below income Is would classes, thing fixed of a guys that where tax kind numbers What free like little still income them. and duration bit perhaps? point? at probably is to the a this I in

Ken Lewis

Yeah.

things. I think few so -- it

in worry to about as want we those the and important of tax about asset how ranking. I we’re much run in mean, think income I sure area we It's fee to providing because we middle kind those. one return we we value. net of don't be it. that's a there, how tend total have where out some stable We funds. your sell highest And want we -- the make think that's the

I lower tended think far a and better. to last and the we quality bit would higher munis in on makeup of credit few why we've over end underperformed as credit were do the be as the the years

predefined down where duration, of strong really in and performance the others quarter reverse the fourth were lower stronger And duration that end we switch. with saw we we compared on credit Although, don't think of many because bonds. as a We from and to very of duration trying about that's make high and income how more really and think that stability this bets, and running people dividend again, what want. we those bets. And our duration have to funds had goes for up

above want funds and -- we make as sure are So We much markets that or high categories, all that of equities. types don't stable we the occurring in don't I in average that below provide to do certainly in worry income.

Chris Harris

Great. you. Thank

Ken Lewis

Thanks.

Operator

questions And Cyprys of Stanley. the Michael next are from line with Morgan

Michael Cyprys

on good question. your Greg, morning. to circle for I pricing. to the Thanks comment Hi, fees taking back, earlier and just wanted

to played of mentioned expectations? pricing in some you looking pricing, have the your talk you now terms are redemptions, you. about? approach that is about Can Where there? that just expectations this modifying How -- And or you more sales You products. stem to on your how Thank modifying grow modified? to about thinking that's approaching

Greg Johnson

fees not world. space of if fee-based a and and in fourth a mean going recognizing performance, new you're just in have I quartile that it's -- get think fee shelf Yes, high-end a top on you're I to the being

competitive So, we be at have look to we are to the on and fee you positioned against the least have universe how at I think side.

-- of that -- need income So, different they payouts competitive are lot just that fees made we of our that fees equity to lowered funds. not funds, more lot of in these competitive affects well. think models the mixes very new mentioned We've XX think gets and in we're excited some And shifts, on combine but duration series all we but you that we -- And things. and still your is traditional our the brokerage fixed a about international on a that's reallowance I margin, I for be reality overall funds of growth on changed that as of then modifications we've where attractive we that fee fee. mean a side, I -- lower outcome-oriented are more lowered to products. be. using with -- limited to then this dramatic those a think that we've market I income have

that think consultant the I it's the a return. it's where or looking So, recognition at just the the world looking your positioned total where you're buyer fees. just in at or is just They're not gatekeeper certainly

So, good that end that lower think we we have news is of and are -- equation. the always to I the on

it material to than or but international said, the fee that's greater equities to fee to any have positioned. year there at all look fund really I down just obviously or equities huge and changes as going that next industry, it will don't -- emerging on I up, group going effective the sit effective our like on reflects are funds. are basis the we a I regular see what's if rate at effect of think So, that we our well. sit feel continue a a markets effect dealing of tinkering much have and of amount with ahead, a And by on day, Boards where but with affect that in have as Ken end it's the us and doesn’t of rate overall But go do with nature and we our forces individual and the every

Michael Cyprys

with a cetera. just your question you bond risks funds? around some around Got to funds, in liquidity, okay. credit follow-up actions daily talk taking on cycle about yield such as daily larger And more and loan and broadly high it, portion et there leverage a redeemable going funds, liquidity buildup corporates to just maybe mitigate what concerns you're by any Can funds,

Greg Johnson

senior-secured floating liquidity need think papers, like many certain markets market many you in to concern this and I it things careful journalists debt obviously, academic mean, that, -- rate is certain and and a -- I about. be have that do covered Yes,

and feel to things not make a force-selling in we So, comfortable area that you're want assets. have I doesn't look again, that market a and lot of liquidity have sure think, But, we test at lot into of don't a stress where we that's where these like an buyers. we position and be most, a

to effective structure structure think on benefit like with dislocation -- and very funds more think are private equity can in way from -- be So, a liquid I that why we that funds. Street that liquidity daily a is benefit

some category us far I funds in concern, a not we say a as not just lot I that for – those have assets of are significant So don't areas, where size. there's it's as we a think they but would mean, that's just

Michael Cyprys

you. Thank Great.

Operator

question next the is Bank. of Deutsche with Brian Our from line Bedell

Brian Bedell

Great. Thanks taking follow-up. my for

on future potential more one Just opportunities, to want M&A, do longer-term powder you maybe Ken, especially mentioned if get view, the dry know, for I preserve tough. markets you a

and those organic if from a mean, execute deals engaging kind lot a perspective, But those a do and that's you prolonged away for starting market large growth about we of if So to we and have industry-wide something shy do the environment in Greg, interested to level M&A that? market hard and are from into like you even years, think well, typically perspective do it much see involved in be and them. of you even where and we how three if would move both next form manager's to be over my scale tougher would deals a And I period two lost are there cycle do late period cost-cutting. rationalization – a the of bear recession product

Greg Johnson

execution can to Well, do a I very much we're management time-consuming I get look it and synergies. going if the synergies very also that. we And on never never, you that's by it for add disruptive very is brand The and and But think it think costs can value say hit on you we something to head. It's shareholder efficiencies think question and throw it's distribution and at. the those challenging. and of how certainly

on you're media of on are relies difficulties you that ones teams the smaller getting you're platform. not not different goes going combine managers bought in you're management platform the to that's that moving that distribution of to and there. where Those and I more to narrow larger and the versus probably that be with see that and fee-based on bigger able will if it, it's the will by lie firms think styles all smaller benefit that sudden So are group and managers a

difficult, just the execution ones larger very is the but you I paper, think they said. challenging as are look side good on

Brian Bedell

something about to is your I a meaningful back And then or road for guess, opportunistic with the it? more comment around continue BSP, a assets shift way, you into your as edge the thinking desirable alternatives in to of that, there as rather well alternatives be down maybe just just going

Greg Johnson

landscape believe we're of traditional helpful really looking wars with the No, these seeing grow that access alternatives, is I KX that of at it's team along in area our BSP be very And depth on for in will at I and like his think think think and involved that that priority opportunities the the I it accelerates to – the a Tom in model. senior pricing team us vulnerable is. by none looking We the business. stated and Group senior strength shifts other that are we and having of Gahan passive that somebody to

Brian Bedell

much. Okay. Great. very Thanks

Greg Johnson

Thanks.

Operator

our to you. of I'd turn closing floor reach We the like back comments. for session. over Thank question-and-answer any the end

Greg Johnson

next to Thank Well, look participating thank the speaking call, we everyone, for on you, forward quarter. you. and

Operator

concludes This teleconference. today's

You participation. time. this thank you lines And may disconnect your for your at

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