So yes, I think that 50%, we do see growing both as a percentage of AMG and also driving our EBITDA growth. I would say that we’re somewhere in the middle of this journey, having started three to five years ago. So, I do think in the next three to five years, we did see alternatives being two-thirds of our business and driven by a balance of both of those. And maybe I’ll let Tom add, if you like, Tom.
Thomas Wojcik: Yes, maybe just a couple of quick things to add to the point that Jay made. If you think about sort of why it matters, right, to continue moving our business more toward alternatives. One, I think it’s very important as we approach that two-thirds level and maybe even get beyond that to three-quarters level over a longer period of time. That’s going to change pretty dramatically, the nature of the duration of the locked-up capital that we have. It’s going to continue to change the fee profile that we have. It’s going to continue to change the performance fee and carry the opportunity that we have. And all of that should contribute to the overall AMG fundraising and flow profile. So those things are all I think incredibly important in terms of what our business mix look like to Jay’s point five years ago and what our business mix looks like today, as well as what it may look like in the future.
The only other point that I’d add is, what’s also really important are the things that we bring to the table that help to attract, not just private markets or liquid alternatives firms, but the highest-quality, fastest-growing, best-positioned private markets, and liquid alternatives firms. And that’s where something like what we’re doing on the U.S. wealth side is a real differentiator for us, helping some of these firms to get into the highest-growth space in the industry, helping Pantheon to not only launch new products but also continue to drive growth, working with firms like Systematica and Comvest on new product opportunities. One, that helps us to really differentiate ourselves in the market as firms are looking for a strategic partner.
And two, once those firms become part of the overall AMG ecosystem, can help to drive outsized growth relative to what they may be able to do on their own. So, I think all of those things are really important part of our strategy and ultimately driving our business mix and the overall health and growth profile of our business, higher over time.
Jay Horgen: Yes, I think one other thing I would say, and it actually relates to the capital allocation strategy is like, we remain disciplined in getting to our destination. It is the case that we see a lot of opportunities and we could change our business mix really quickly, but in order to do so we would have to lose our discipline. So our – the one thing, I would mention here is that patience is a virtue and we are exercising that patience. But we – make no mistake about it, we are – we believe that we’re making good new investments that are changing the composition of our business. And when we can’t find new investments that meet our return thresholds, we’re fortunate to be able to repurchase our shares at the level that we’re repurchasing it, and therefore we’re just planning for more growth in the future, where we have fewer shares.
Operator: Thank you. Our next question comes from the line of Craig Siegenthaler with Bank of America. Please proceed with your question.
Craig Siegenthaler: Good morning, Jay and Tom, hope your both doing well.
Jay Horgen: Good morning.
Craig Siegenthaler: Also want to congratulate you on the on the 30-years into your employees’ job.
Jay Horgen: Yes, well, thank you. Thanks for saying that, Craig.
Craig Siegenthaler: My question is on net flows. So it’s nice to see the improvement, and that’s actually despite the fact that sometimes there’s negative seasonality in 4Q, but it looks like we didn’t see any of that in that number. But I think the math is pretty simple going forward. It’s improving private market flows and then it’s less outflows in active equities. But my question is kind of based on what we’ve seen, and we’ve seen flows improve. And then a lower exit rate heading into ’24, where do you think flows are heading versus the $30 billion-ish of net outflows we saw over the last two years? And then just a follow-up is, how did the EBITDA flows look underlying the net flow number, just given the much stronger contribution from privates where fees are higher?
Thomas Wojcik: So, Craig, maybe I’ll take that and I’m sure, Jay may want to add some thoughts as well. But the biggest point of uncertainty for us is what’s happening on the overall active equity side. We have a number of extremely strong Affiliate brands there, with very strong long-term performance track records. But obviously, that’s where we’ve seen some of the variability. And I think some of that variability will likely continue, but your point is exactly right. When you think about our core strategy, we’re really driving this evolution of our business mix more towards secular growth areas, and especially with the focus on alternatives in private markets. And as we execute against that, we do expect to continue to enhance the long-term organic growth and earnings growth of the business, and you’ve seen the evidence of that over the course of the last several years.
So, if you think about what that means to your question on the $30 billion that we saw this year. As the business mix continues to move, right, a higher and higher percentage of our business is going to be in areas that are experiencing growth, and those areas that are seeing headwinds, one, should continue to be a smaller part of our overall business, but two, we’re also entering into an environment where we think the opportunity for active management continues to improve and where the highest-quality franchises like AMG’s Affiliates have the best opportunity ultimately to drive growth longer-term. So, we feel like we’re very long the opportunity on the alternatives in secular growth side, but we also think that we have a real opportunity on the long-only side for those businesses to recover and ultimately be big contributors.
