VRTS - Earnings call transcript Q3 2018 | Virtus Investment Partners, Inc.

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Operator

Good morning. My name is Joel, and I will be your conference operator today. I would 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. participants a all mode. time, this are listen-only in At a there and time. After remarks, be question-and-answer that the speakers' at will period follow instructions will would host, to conference turn Fazzino. I your now the Joe over

Joe Fazzino

good you, would XXXX. our quarter I welcome operating morning, Thank financial to and everyone. behalf for Investment like discussion of the to of results On you and Partners, Virtus of third Joel, the

those this I in today's release the risks cause slide on forward-looking filings. disclosures begin, those we accompanies statements. factors Certain to set on unknown and and presentation annual are uncertainties, our to direct Form in the SEC Litigation differ may the two materially risks XX-K, and of statements the forth as to and on important Before discussed XX-Q earnings subject to, XXXX, including, Securities your known quarterly discussed the Page These contain on that Act uncertainties this meaning webcast. matters limited may but Form report of other and Reform report discussed results such, and in Private attention call actual from of not within

to GAAP to on addition presented non-GAAP financial Virtus its a results certain uses measures In evaluate results. basis,

to release, earnings for website. applicable measures financial our with measures available are these GAAP financial non-GAAP in conjunction Our should is measures included press not GAAP the read of on and financial non-GAAP in substitutes are be results GAAP which Reconciliations our results.

to George? CEO, Aylward. like would our call to President I turn and over Now the George

George Aylward

before an results. turning on with start to the quarter financial good it the provide Joe morning, Mike and Thanks I'll of detail today everyone. over to overview

results addition that advisors As our sustainable you X. closed which third remind growth we on include July began, the quarter or SGA of I'd

shift that a further asset results by positive in favorable the diversification of meaningful and believe flows, net strategy revenues, earnings we business I in note the would continued our of mix, strong In and quarter, diversity our the and reflect results the performance geography. at demonstrated and margin, the our business. strength particular, Looking continued product growth investment

performance retail account quarter. we separate with offset turning accounts and and as Kayne's the were which a year increased flows sales term in positive in positive in decrease Total flows result X.X% managers, with and at consecrated and funds. Retail annualized open well offerings, were market flows of a business. equity the accounts as positive positive growth the long separate net small large private in quarter So Edinburgh's assets will organic in increased continued and institutional, level funds X.X again mid-cap where asset challenging to liquidity for positive intermediary X.X problems. positive than positive The continued period end not strong Long a at billion more billion sold the [ph] net continues favorable from include AUM flows X.X in and managed sales X.X of billion. open growth and be by sequentially SGA, accounts representing strong net with than in net on result client flows generated for strategies assets billion environment Despite, mix very the in addition active XXX.X in term per meaningfully growth flows increased assets XXX.X to higher the management. billion a under billion primarily AUM funds. of open organic as high billion the rate remain separate end cap and sales domestic and including end Total assets Total from X.X of net flow ended divers prior flows. XX% the retail to sales the and

were terms SGA, contribution excluding rate Institutional billion, higher split evenly net sales between modest stronger fixed funded in of at billion various In Redemptions flows sales The of contribute high XX two new by our that income, net a well positive quarter as outflows as quarter. income existing across the had offset fund the redemptions. other closed affiliates. from a of mandates in affiliates. strategies outflows included and and significant were on accounts X.X

particularly has In we terms challenging of have overseeing extremely volatile had out mutual an first and outflows of to our the half month, month. in funds, turned October, in which the in be

Regarding a products, what it's structured flow we're the aware, net flat basis currently looking a other products and of in terms have CLO institutional, we on in in generally to space. be warehouse

The Operating and increase related results. fund was XX% XX%. benefited the that reflected to X% our rate as the of in due higher increase as but primarily open shift of positive market to performance due from the SGA, organic as market variable higher as fee investment related was financial growth, higher The assets. Operating employment XX% from contribution SGA, primarily by from due fee adjusted an operating fees margin to assets in XX.X end compensation, the increase decrease also to mix expenses increase. higher and increased based performance as increase partially increased Revenues and profit The in and as as rate adjusted appreciation to flows. adjusted. expenses our a appreciation fees by Moving rate. well income of average million a offset to SGA average and adjusted fee to increased other fees contributed adjusted addition sequentially expenses XX% assets and the management reflecting sequentially due revenues from favorable

the on sheet. balance capital to Turning

balancing demonstrated, to leverage. shareholders couple of returning our maintaining appropriate investing an includes level approach in to and our capital management the we've As business,

address the current As given we our three at indicated on and flow, circumstances priorities with based we any time. cash on our all call, last can level facts believe we of

stock used XX% million X in million was dividend we on common This for main repayment. addition, SGA. quarter, increase X% our made debt closing announcing capital and And share and investment repurchases, of usage in our our then

With grow leverage. investing me the and capital can increased to to earnings. that over enhanced appropriate let higher scale, continue we margin Mike? benefits to turn Mike. We maintain of shareholders, our and return it believe With

Mike Angerthal

Thank you, everyone. George, hello and

revenues prior Operating our review from quarter prior growth benefits detail, grew increased both meaningful favorable more the Before ability a the significantly in model. result the particular, per and we a scale a some mix. Revenue of had and share of result higher the and reflecting of business positive the of let as leverage margins was AUM In earnings the AUM And the year. market provide the and highlights. me results flows. and the as also of key higher, I continued growth of SGA, appreciation

contribution in from Importantly, result the the was the by increase EPS complemented growth organic SGA. primarily of earnings

move the also flows in XX.X% of net of AUM market the of and increase positive year of role me sequential as prior billion assets in beginning quarter. assets institutional are an X.X Slide let term of X.X XX.X X.X of billion under X, from well net and retail reflected So as year flows X.X At billion, XX, billion billion accounts. management. separate forwards increase are from sequential billion. role long quarter September assets primarily were change July assets billion. of appreciation XX.X XX.X% to from Seven, reflects of a positive of SGA addition which reflects as The XXX.X prior in market The the and billion included increase The with and SGA the and other SGA X.X assets, appreciation

with with diversified disclosure become which exposure XX XX. more our As detail. to and expanded assets, more and compared Two has a include asset non-U.S. product term mix also long supplement I like us highlight. improved type September our of institutional, channel result financial primarily June additional of with asset AUM AUM at XX% class clients. points to would are adding comprising we SGA by to diversity XX% product provides class SGA's institutional at

domestic core, are equity assets nor more XX% diversified Our and exceeding further among strategies. And large growth with diversified value small by market cap total are of AUM. caps

emerging term and AUM. market of significant In are addition, long approximately equities comprise now portion less X%

funds of XX five retail fund AUM five company's five is had largest of the at of funds September Each mutual total stars. retail or Morningstar four XX% three of XX, or four representing a rated and As a of fund. fund XX XX% mutual representing five stars or AUM star rated funds four

were benchmarks a their of basis beating the five end on addition, In of institutional third the assets quarter. as year XX% of

and to organic Slide and reflecting respect institutional X.X Eight rate by offset asset retail positive open the open growth an of and billion X.X end sales in quarter annualized offset funds, net open flows Total mutual and Turning the for by end representing were XX% outflows growth sales. a end flows net from in With lower modest for sales to generated of were new sales were of rate fund X% partially end institutional. account funds. X.X%. billion, included rate separate positive funds open and X.X total This annualized sequentially a strong net in billion, ETS organic resulted quarter, decrease retail We separate close. flows higher sales accounts,

quarter. second down offset X.X loan strong, at Looking and offset cap large prior modest and income of at billion compared to inflows net equity in International X.X quarter. flows outflows funds while the consistent prior in mid-cap positive mutual the with X.X mid-cap short X.X small quarter, quarter. billion funds. strategies. outflows were billion funds of bond markets include in the X.X strategy outflows the generate developed Kayne investment the equity international were up sales Positive with term to the billion prior are billion grade of small the from Kayne's fund domestic elevated X.X strong core compared fund flows both primarily cap the X.X net the were remained quarter. growth X.X in with markets of and developed net in and of funds net cap the billion in as quarter, strategies modest And had in billion emerging strategy continued to flows by bank by small emerging Fixed prior outflows compared and had levels asset strategies sales of net billion which by they class,

can and Institutional which flows flows the offset in Regarding representing at of evenly recurring sub-advisory generate reallocation rate positive both Kayne redemptions. an It's quarter, and fund are to billion client relationships split positive across outflows sales flows X.X% SGA, in also accounts a net to quantitative X.X products, continued X.X that between including with new X.X year accounts, net have new other including closed Kayne intermediary organic of billion, positive annualized were sponsored passive of as XX% billion flows X.X existing an billion separate and outflows greatly, year-to-date in reflected by XXXX. strategies flows organic the noting growth rate inflows of and private same accounts fleet, vary are accounts. consistent The accounts, strategies. in net period worth and a on basis, various growth date reflecting retail primarily annualized client a that total

million Turning XX.X Investment higher due adjusted of to Nine. management. or as management assets increased XX% XXX.X under sequentially, Slide million, fees average to

Our basis term million for and XX.X assets points term higher result of XX.X fee fee increased under was management assets flows related of positive long rate X.X quarter. long Average average the fees. market quarter in on prior an performance from the quarter. SGA, a the average basis appreciation are during increase The the as and points, addition rate XX%

in rate the fees, the SGA was fee Excluding fee several have open second open between increased end addition the funds, related and to redemptions. a partially X.X a positive basis to XX.X performance is basis respect long XX the trend rate the we quarters, offset rate a which the higher The fee increase by basis over assets, result differential continuation the term points fee XX.X of past rate. points, the fund is end quarter. million of With points institutional average from of reflecting sales of seen

fee basis quarter, the approximately related points. This points rate at that on of redemptions rate product of mutual The million a on had X.X while XX was performance the blended approximately CLO a basis on strong basis XX points, fund sales was XX XXXX been previously vintage fee fee rate included structured called.

represented related for XX.X rate Institutional the fee, the points fee quarter performance prior impact XX.X a was the that of X.X account. and from quarter. points the of included performance measurement consistent related with prior million of product rate basis structured basis year increased fee the that the modestly Excluding first fee performance

in is seeing Excluding the points for of the quarter, fourth five for which going expenses. which performance them and sequentially clients fee fee reflects performance increased from the the be expenses employment a but quarterly and a Slide on basis XX.X structures. periodically employment XX.X the compensation. more trend based expenses do expenses fee, related institutional of the requests incremental GSA have will Total increase these rate we not was XX% million measured are rate basis The fees quarter. second in quarter. reasonable XX shows modeling have institutional forward, quarter every related profit types from variable higher in as adjusted of as employment We

Board the from Directors were prior XX.X, expenses equity quarter, As as operating a employment the X.X operating basis decrease The Other XX of adjusted reflects or of of a the revenues percentage activities. included as sequentially. were million our expenses million. annual and to a X% adjusted, operational XX.X%, grants of as which of expenses X.X product, adjusted, other timing trend distribution points of in decline

grants, SGA's expenses sequentially. expenses Excluding offset lower addition marketing the at the million as by director of flat and declined X.X expenses was sales were

net XX.X $X.XX XX ahead As earnings. to fourth or as of forward. the XX% acquisitions, million The contribution effective the second on XX% decrease the with SGA quarter CLO the million sequential the quarter tax share or prior quarter. seed and in adjusted share this illustrates per rate and XX.X range It's amortization, higher asset of per tax note the as adjusted income with per The XX% in result quarter's per compared good value to to the or the a the rate XX% Slide majority XX% of with provide two a the adjusted. revenues XX.X quarter. the $X.XX Net per tax are believe our ownership adjusted And we are of of million. or an intangible as in XX quarter. XX.X We from dividends was and tax our decline were in The year structure the tax of is to increased will $X.XX investment XX.X%, $X.XX for the a margin approximately quarter. higher from XX.X share years share on share after calculation the million X.X and tax end investments of expense. look XX% important million, from included going items from Interest tax asset organic that in both the quarter. is Operating economic for of modeling XX rates. expectations higher move that and the of prior diluted the related transaction result on of prior impact benefit million in increase $X.XX attributable expenses basis as quarter. million X.X over activities, increased next operating was there the to effective growth is Operating other as and not or the income in profitability could current of to SGA. year marketing cash Compared XX% as adjusted prior the sequentially remainder SGA of trend million of prior including from with majority the approximately $X.XX at of quarter rate the income sales year per

in $X.XX the income GAAP compared per $X.XX second Regarding was net with third quarter share results, quarter.

of per closing capital reflecting SGA in shows per costs related net tax share with to one-time liquidity of unrealized our following at business, included related and transaction, return costs, XX.X the outstanding related per earnings share increased of XX, and $X.XX associated benefit, integration GAAP debt million and in XX primarily capital and of share losses September the quarter investments a Third XX% $X.XX position the XXX.X earnings, capital to Slide acquisition trend investments. or million Working operating XXXX the sequentially, shareholders. in $X.XX tax metrics. on changes of the items. to

million, to the July quarter, This closed in investment XXX on the outstanding of XXX.X For balance Gross XX is and transaction borrowings SGA toward was we million gross and financed XX.X be resources. payment publication million with of of debt that flow cash closing will was debt million debt, annual September existing date. XXX.X payment million applied we X.X due XXX.X in an on that during as increased which repaid scheduled million the additional $XX at a X suite sheet business, our the million the quarter first representing XXXX.

working of million reflecting months. capital an related September XX, the XX, flow leverage an The for to June sequentially. had June at our SGA was second the down borrowing times publication excess cash effect next increasing Bank XX, As quarter net the quarter estimate EBITDA million ratio the the the which estimate of the working the our capital call, required we increase September to was suite XX by XX XX from repayment of on was debt X.X XX million. third million X.X EBITDA At net debt includes at over the from XX at transaction. primarily times implemental mentioned XX,

of total repurchases stock, totaled shares as common represented capital shareholders, common in adjusted. approximately share XX,XXX shares to million the of return Regarding quarter or of outstanding X.X% which X

business XXXX. back addition, implemented a the share. over per and call flow the dividend George? The turn to reflects In increase the me represents George. $X.XX $X.XX to higher that, let to announced first increase dividend generation a since increase common With cash of we in the we the

George Aylward

Thanks, Mike.

the close strong and growth. that position classes, our our and us performance advantages ability leverage of further well of affiliates, confident diversification asset for channels remain invest and our we'll products ahead, Looking multi-boutique model,

lines, questions. up your can take please? will the you So with Joel, we that, open

Operator

first [Operator with Ghosh from question Ari comes Instructions] Credit Suisse. Our

open. now is line Your

Ari Ghosh

morning, everyone. good Hey,

George Aylward

Ari. morning, Good

Ari Ghosh

just quite curious performance, strong early curious October AUM? mentioned the market the but are how notices institutional if given like you overall believe been then could is so color for near redemption the On channel, curious you Kayne but also, backdrop, in term the over that's a the also I year dynamics overall like playing pickup here. give us what out believe, has on quite flattish the I just the term looks there? Anderson the The pipeline flows look some And you one nicely on growing are in longer seeing

George Aylward

looking of a it the generally On flattish. And And that institutional, sort I articulate is on first lot where what are the indicated October. I of a way of month of weeks into half what is is people month. and the is not as sort doing so think I lot sort three referring again one the - wouldn't of we're we're would I here that right now, just to aware been a has really a because challenging so that's

a other but of we So lot pipeline there's it's do go we that do some not trending sort of happy things could there think in sales with activity and is We're it. net. out and eventually have the still

multiple As of to sort legacy sales going on you out given a quarter for in bit a the smaller that's basis. affiliates just pointed normal positive a of the is we because separately little call, a have momentum having us business having in some of run

the rest include getting That did we sales are where growth know flows institutional the again the are. necessarily driver And we as that to the see sorry, pans And do I'm modestly referred diversity talking were for strategies. other in generally how will depending pass So for knows what client was that quarter continuing alluded our the about be out. the of flattish of us, for couple but reallocation the as impact of as what to and And negative. of they were on to did question? the of the which situation sales that sort We equity investors you year don't primary you is who of your part strategies. the institutional to

Ari Ghosh

of of by Kayne overall that on flows a driven performance, just then - Anderson SME in is a And as your lot the because the side, lot institutional well. Kayne

for peers what nearer overall across deterioration term? performance given you've in if the one are - the seen border you looks was overall some so them, on wondering year like with like just looks markets of keep like what your curious what near So doing, the term their the

George Aylward

feeling related the Yeah, lot Kayne focus caps be you small to influenced look with I will the to classes why their caps. market think by mean how - them a and investing a the Kayne asset in market is those on approach of attractive right. with is as and mid-caps, the and activity a see is I Kayne manager disciplined about is very quality

to way the think them. that's of So

So attracted have to outperformance where underperformance, have very like competitive low people with the are or periods the even that them defensible advantages. in debts that people they you who are companies

entered we've our is what think when XXXX have years the and is volatile invest competitive the from seek attractive, companies more investing they actually with equity the more their advantage, because to approach more to market Kayne. lower those God So seen of, defensible actually into debt, the Their are the much over and in. relationship I we was companies weaker generally

but to cycle to saw - two what mid-cap we in is We've quarter the just be in to a is smart in which level caps of was see rest will the be seen it'll where the uptick and the like. we the high they this play as shakes second think how smaller is demand of next in interesting quarter - an will the point be So months out. the look in the year there in subject question

Ari Ghosh

That's helpful. it. just then on capital. Got And

versus the current are deal of what cash buyback thinking little it buybacks be to a sort looking overall more You stock continue the aggressive markets valuation a the the you of so the of aggressive, valuation but flow get traditional are you like and I more little with highlighted a of given behind you the optimistic how that a you're it free doing could more little spread peers? you close and here. each what just given get to kind will quarter modest to about the amount now, guess take

George Aylward

it's been products. facts upon as been And investing circumstances has right. And we've would sort the Yeah. in and our lot articulate prepared repurchases, look been the it, of way launching historically, of the remarks, and where Sure. primary I depends at indicate of you some capital periods acquisitions has question. if focus sort had Great quarter I the in as a in it of some in

So closing cause capability. great exposure on a quarter in which great a transaction complete. cash diversify think our acquisition would and give utilizing to But a growth is to fact circumstance is a to equity asset high be a base, obviously us quarter But and we is give conviction access to non-U.S. every us more different. us

might can be repurchases. aggressive advantage so we and we peers. done do what is in stock then our very trading opportunities quarter and past and in the quarter be our So a whole the one take all capital consider us point it relative is think as of reasonable structure including how of transaction the one to in might we is having And factors stock the flexibility we've

strength at we differently. pleased sheet of proceeding flow us have our cash things prioritize we're balance to So of allows what the available in terms

weeks toggle as really in our forth would it first of three here, and prices different this depending I been month. look price So than has is upon our that last And stock between different something the is quarter at it's things. we stock back

something very So that's confident we're about.

Ari Ghosh

you. Thank it. Got

Operator

Thank you.

question Michael from comes next Morgan Cyprys Our from Stanley.

is line Your open. now

Michael Cyprys

question. the Thanks Hey, good for morning. taking

bit the the have sheet. seed and little that about investment a talk balance to on portfolio book you the wanted Just

bit on where those I had presentation, update that think stand, on just could where access of at you little shareholders for could if returning they us truly redeploying, point? you some in about you a If forward this the just is talk stand the of composition you how in that either much is would and today, terms what to the amount going say expectation

Mike Angerthal

year range Yeah, of $XXX or that. capital couple in Mike so Angerthal. Hey, and and probably it's half we've I'll between the $XXX and ways think our a $XXX about between $XXX Michael, answer consistent million I'll and I been last start talked we've million over on and a million. million seed

product So to to I organic as are facilitate alluded in we that growth. to seeing And organic small George products at others think in the Anderson know have those been you about Kayne deploying the you're way we're cap that and think instrumental growth. that like international there

CLO So that's million really the the for is impetus million - that that and again that really $X.X of non-GAAP to portfolio which meaningfully $XXX part you of that's to we or not talked a and the the in that balance That's contributing is the measure. we we referred about. like $XXX the levels that is drove not sheet return dividend our million quarter know interest include income do as really

So that's something which $XX EBITDA that is the we for highlighted, was that million included in quarter.

execute that capital important component flow to of it's that some So an George us enables cash of on generating our priorities and alluded to.

debt capital working quarter with be continued capital strong now. would enables activities. overall, generally opportunistic look where us that generating meaningful So I this part would to operating capital the flexibility. other that quarter $XX has When just have to at we to look cash capital have at enabling paid dealing the level the that's little using to strength us generally range elements a we in a withstand of we're in And we on do and don't what in be shareholders. we the ensure million a market as shocks about those think our to We've had sheet line execute return flows, to of spend to of with we balance

supporting the launches managers assets balance we where they our product instrumental our necessarily look on to I generally flow side. structured the to are product the cash assets important CLO for look launches seed would for I wouldn't and were in redeployed. product be for So those sheet to generating. fixed the income And

Michael Cyprys

small CLOs, grand is And base, larger are quite a past your the scheme the real over portion but in significantly things on it years. couple just Great. of of becoming the AUM

and So use CLO pockets and couple or on little a in a the marketplace growing growth a and also maybe thoughts is but light of funding some seen covenant which just curious of provision your in past CLO some lot challenge some quality around the bit the equity there's concerns credit industry overall also weeks.

on what the in seeing of equity on composition you balance on just terms in CLO's on So vertical and of source just that CLO using ability sheet in any around color curious versus CLO of of terms the slices in the the of sheet are you're the the terms balance the thoughts marketplace that's today books that how versus equity? what's the

Mike Angerthal

on there I are Yeah, start I points a that. couple Mike of think It's Angerthal.

year has we in balance rules. this Our the been changes retention beneficiary exposure CLO exposure, the our were of and reduced sheet risk

So we're with pleased that.

alluded to have but high they sponsor in and to asset an looking management product are product in equity lead our basis, of we of generally issuer warehouse bank will by his and long as in manage them a party launches also seasoned and and and with team. George it team. that been sites launching confidence have in products, loan support well. They product is to a probably sponsor currently. the leading third a term phase as product have years positions a They degree a alongside They decade I that the George products. affiliate has take over industry to, back going that under XX warehouse As a

ups degree tune will And choppy with CLO are to participant there, that navigate in and we significant degree So in flows the markets. that. through great these a very market kind there ability and go in confidence of they're of have And have are we great confidence certainly their but market. in they through of the a

side. the there, this CLOs they the warehouse Newfleet transaction also has there's Newfleet the currently but on in in past. But year now nothing done right a refinanced

George Aylward

on just CLO, analogous coverage of you to non-paper to of used kind a the the make lot put on probably create that of to place mortgages been I there have know financial little to, that penology and differences CDOs, about in CLOs because in terms think Yeah, quality. sort an the crisis. you again curve were imploded of just bit alluded the And those to products light risk trying don't CBOs some fair credit of that high structural make differences a think and I it's particular, there's during in connection

on And we're even the the to financial the it's CLOs like And to are then enhancement are quality very experienced strong those the of those crisis. done underwriting only is in new through many and I'm companies the addition if seasoned curve being investment ourselves the grade it structural a products. being our a the which that's family opposed and issuer. from below that that and pre-financial is companies crisis surprised made we - thing they that light are size So had as always of caliber focusing

I'm So mortgage make occurred I analogy think crisis. the people security over an in to financial back surprised, that issues the

Michael Cyprys

of CLOs, the point. a sheet position of use is base that around is just what all warehousing or follow-up balance balance sort any construction there that extent sheet of And the quick the and CLOs? The and on equity to the rescue

Mike Angerthal

the held year. slices $XXX vertical loss is tranches exited earlier where equity, in the we first generally The million we debt of some

the it in As for there's expect over that. to exposure securitize on million. phase, the expectation X or our $X.X be capital X we investment our warehouse next market We the based months and do so. conditions would But to have like

we that earlier So year. this investment made

Michael Cyprys

Thanks so much. Great.

Mike Angerthal

you. Sure. Thank

Operator

you. Thank

from comes next Sachs. question Goldman Blostein Our Alex with

Your line open. now is

Alex Blostein

good morning, guys. Hi,

so you show channel you a and public guys around lot end was your on some in First the it open that something a question are up, of range the is highlighted Kayne. follow-up $XXX earlier from coming challenges to think seeing October, outpost million just discussion flows, I it far is would of do

went think on the the So, into few last years? over accounts that of money of the that stickiness the go What that and Kayne the product type type over maybe years or we into last should comment near a about we strength strategies couple of of in term and sort see from markets? the turbulence flows how where little given what the bit

George Aylward

a Well things. couple

that so first nature which October, to - half investors hesitate. year has the It cause just the was the for the we of And alluding So volatile of awful really the general have sort month, to just that, give negative categories. a we flows. of month attribution month. scary of One particularly half I of does a couple first is of in of half probably an is sort for first the - so been October

So that we're impact on I think sales seeing side. some on the

in first saw caps the month we and that of to of a elections. with of using in be asset little attributable mortgage bit half the advance out And deal cycle some of and how think in of in also favor And again did and of the mid-term how also where somebody terms cap, small if had are activity I about some small in reallocation. you specifically feel then are. we could they classes favor you

I - earlier have little have way to of exposure. less quality higher less the And Kayne. about if spoke is companies would and generally generally - in there with you again you're higher it asking and invest about specifically Kayne With investments because want why debt a and you bit

accounts were in those So placed. to But around firms, generally create time. people does October funds. where think the are really me generally retail others. of three also those two you too funds. weeks There to communications separately of always of ended the mutual I markets most up have then on and the period accounts. is which behavior into I've - different soft And little And the you some much, to would then generally for you'll those out be volatile bit certain volatile know a for it's as we is assets separate did say in the was a confident and attracted seen separately retail in and not in reach and really versus what you separate half others closes those in products, get both some are while same of that accounts some strategies Those regarding market. historically a well it, terms which and you in as more refer of hard - I in see sometimes managed as see of Funds more as is

really helps. would that the that characterization be So

Alex Blostein

Got it. Yeah. that your That's helpful. earlier in seeing And institutional structures. then performances changes second for you're question fee I was hoping around you the on guys up comments could expand

just rate which versus that between fee those not thoughts more kind fee So in little on fee of a product, whether bit business? or you of performance arrangement broader of base to maybe institutional talk how the typical adopt expect your could structures impact about what's and and type

Mike Angerthal

you're a a of at and a type a right. versus fee It's performance Yeah, analysis and percentage discussed there's quarter. again in one structure, we've we similar of base tells one type they implemented and will measurement type process, of hybrid where on of one of one that of base seen fee funded at have and generally mandates a affiliates the RFP component we structure of clients our got relative actually their relative these benchmark. of a have our benchmark. then We the saw that sort that structures on we're of where you this that saw seeing And affiliates fee this

clients So more it from and generally and manager portfolio more interests we're seeing outcome the from clients. with to the institutional align the

one for but full this to we think performance still the it period, at a benchmark we're vary obviously our around one X% bit things it note was it's of more but we're of relative the be important quarter, total more expect to and revenues the the seeing of in a than other more period going provide will transparency it's a it we I it if year it So million I forward, to $X.X And this becomes monitoring it. on recognize it. factors, that level so less something will on something meaningful, is would based something

Alex Blostein

What's the structure the in base fee trying reset fee end magnitude prior formal extra and flavor guess I the a between of to to terms for you delta lot terms the Yeah, of guys typical of just kind all get the makes fees? of a change, versus change am in sense. a I seeing based of fee

Mike Angerthal

will again its couple we depending only It's hard, have on of it vary asset class them.

will period period hard what the that to higher, outcome specifically. characterize in some be fee base in was. the than will It's some it be So lower net

Alex Blostein

Okay. Understood. just And clean last up the question. going

of also this then earnings and to reported about, $X.XX mentioned talked in for reason is guys the with tax that's the think any network you interest in you I looks you dividend decline rate yield dividend reporting similar decent I being you XX% peers income know shifting you the like thoughts specifically, a earnings adjusted run the capturing of down kind interest to incorporate these And your space of see I quarter Mike guess adjusted $X.XX what number, a sequentially, for its your back almost items in in envelop of you a the get and kind guys. here? to it's lot So about then the the in know not $X.XX respect of

Mike Angerthal

increased an the materially I transaction Yes, of it's the balance we and for more Ridgeworth question good changed because specifically the business. the did earlier contribution mean had meaningful I'll question and when has ballpark, we sheet, the CLO the just investments significantly makeup of that on

something and haven't our the we a metric we're since time So transaction updated at. spending looking lot internally of

and look at looking investors be cash component should like what sheet are that, companies and out so cash the flow ours of ours. at consistent do value balance to the investments, firms the from of look at generation think with we certainly investors how we So evaluating like is spiking in it

we our are we metric, So that. going to carefully performance be looking in Any evident want at what's change measured of time we context on.

relates do something thoughtfully, very is in we income. interest especially evaluation that it So it but to as dividend the under

look seen $XX.X the tax MPV you're sheet basis. highlight an we look a prices on that said We we at describe value about as that and basis looking are and try On and to provides investors present the which tax so investors when or cash if their you're we've net try know a tax speak talk right, that's rate have over XX and very that's the absolutely at at at meaningful tax And million variances practice their cash we're in to level the estimate and little then bring rate. that. somewhat the meaningful, asset a tax point benefit to seeing side, years deferred stock current there's shield there some balance value to and on difficult, more on you we where will

metric am to of context advanced far metric, provide in not on on on the one as continue transparency we'll first So we'll I that the it evaluate I'm in as that item.

George Aylward

Yeah, on value truly that or outflows think be us how to is you're and highlight always true earning value for which try economic items that some cash valuation and to create bottom those about of describing should two cash line is is it again highlight shield do to either people we form streams it it are create that to. might are what those because doing of reason

Mike Angerthal

we've had And what an your period-to-period. that's range equity from don't over decline point I the sheet. with we've know over as is them, a X.X% tranche million coupon or on we you that's yield interest associated like And a to the in majority annual What they have of the probably CLO talked distributions period balance coupons on as contribution that due a alluded of generally the could $X yield vary generally about there. rates quarter-over-quarter so dividend and on income. the CLO in lower seen the Alex, little second to then the investments. Again investments of And to

of So the over stuff context it look has about it we've period of level more at we sort an annual when think general seen. and we that been a

Alex Blostein

answering for Thanks all my questions. Great.

Operator

you. Thank

Barclays. comes with Our next Campbell from question Jeremy

is now open. line Your

Jeremy Campbell

clean it thanks, kind Hey, just but been guys. answered up question one of of have here. Most

X heard to I base your I've incentive the think mean like increasing comp? XX% call billion that of X.X between some kind incentive to peers, that through Is comp I relationship think think of given is, really contributor ratio gets was the think $X.X line. for does I of so I the that of rough revenue to kind the is applicable revenue, back your

Mike Angerthal

don't affiliate we Yeah, level on ratio typically what I share is. mean information

highlighted at and fees employment at in to on incentive line, ratio. employment it as the a the think you compensation at impact are expense of George? it came to I elements we range and low does there that way those end quarter better XX% the - this know look that is

George Aylward

affiliate them plan breakdown piece in Yeah to detail that of again, all into together that. of of we really a the things you many doesn't lot. the give the creation because don't in no that comp a so sharing come give give There's

Jeremy Campbell

just like is want I way forward for for expense thinking piece of fee what off to? also sure extra just to trying side rate the go about modeling the of earlier, talked that right Yeah, the lopping I'm guys you sort make about that we're

Mike Angerthal

may equal, that you a and it. just a XX%, want Yeah, talked you think being it's to about all do way just is incremental the margin good about to

Jeremy Campbell

it. Got Great. guys. Thanks

Mike Angerthal

Thank you.

Operator

you. Thank

Merrill Our with question Lynch. from of America Michael Bank Carrier comes next

Your now line is open.

Michael Carrier

guys. thanks, Hi,

Just one for me.

the shifting strength dynamics Just quarters and in October and given what terms of kind market. you in we've past seen few then in flow mentioned over obviously the the of the

an side. Just the the wanted to the soft shifting small over kind where what line the the have, sense in maybe to of you stand potentially in more of When XX that the XX in maybe on would you months? guys backdrop about product the sales are caps out start next up, are products think closes, guy's a ones distribution value interest some the to of think get you teams little is bit when your a environment

George Aylward

more there's more question assets definitely something I would a lot generally quality obtain market defensive want don't Yeah, we is to become people types think than rather a unknown people. we is positive Again at in then it's of is with terms And I income. happening where yield big the where The great pointed question our high value strategies looking interesting that be the have approaches. where We interest rates a right volatile, lot of really fund types quality value. capabilities. income types mean be think the go high have go, in of capability, do people that oriented more fixed in for real And from to of out higher And overweight you a more so but could they growth a what's access scenario know I market and slightly movement could is want right. generally is and are sort now where there of investor strategies. would those the preferences to strategies that be of really how is and of to our or flow.

people at that's a attractive grade. So is going look taking right but to investment be like are things now different

So have capabilities line one of one the in the a when that in bottom right. a to is favor, reason favor, out is managers that and the is other of diversity variety hopefully we different try is

can favor that and investment in favor, income sleep quality can of high we is is And if growth at and in fixed if that. grade night out out well. play favor, So play back favor as spread to we is of values

we can sort that in fees terms to the cycles. for mean and have that in suite So is but sort out think so that we of attractive us things through our I do it's family point different of market avoid product bit, means offerings blend good that flexibility. the of a concept, to have little try that whole sometimes we to which

elections So to in the to it XXXX. the the in year I be wants think interesting be see midterm market decide it'll what will after later probably in

Michael Carrier

lot. a Thanks Okay.

George Aylward

you. Thank

Operator

back Aylward. Mr. Thank you. like question-and-answer concludes I'd session. turn to our over This conference the to now

George Aylward

Thanks have questions. do, and to have call you you. you I we thank want the other I further give weekend. everyone Great, to And thank as for us great always would joining just today. And encourage if a any

Operator

concludes for you participating. That Thank teleconference. today's

You may now disconnect.

Virtus Investment Partners (VRTS) 26 Oct 182018 Q3 Earnings call transcript