Operator: Thank you. The next question is coming from Brennan Hawken of UBS. Please go ahead. Brennan, please make sure your phone is not on mute.
Brennan Hawken: Thank you. Thanks for taking my question. I appreciate it. Sorry if this is a bit remedial, but cost of funds came down quarter-over-quarter. I don’t know of another company in financial services where cost of funds came down. So could you maybe speak to what drove the lower cost of funds, whether or not there was any one-time items and how sustainable that is?
Martin Kelly: Yes, we had — you need to look at the normalized net spread. That’s why we try to focus on the net of the two. There was a benefit in cost of funds for the quarter that we telegraphed last quarter related to the Venerable reinsurance transaction. And so that impacted cost of funds, which we then normalized out in the net spread. So I would look at the 165 basis points as the guide is our current best view and it takes account of things like that, the Arco buy down during the quarter, which are sort of episodic but not recurring.
Marc Rowan: But I’m going to use this to make a point, which I’ve made previously. When you originate new product, you originate product that is protected by surrender charge, market value adjustment, or in the case of PRT is fully locked in. You should, therefore, be willing to have a higher cost of funds for fully protected product because you can invest against it. It gives you longevity. It gives you certainty. We have four different channels and we look at each of the four channels on a regular basis and we try to keep our cost of funds low because we know if we have a low cost of funds, if we’re not good investors, we can earn spread. And if we’re good investors, we can earn a lot of spread. What’s happened in our market is you now have a number of entities who have seen what we have built and are late to the game.
The way they intend to get into this business or trying to get into the business is to buy back books of business. Buying a back book of business with degraded surrender charge, integrated market value adjustments in a low rate environment may be sensible, because in a low rate environment, the contract rate is above the rate in the market, therefore you expect the book to behave predictably. But in the market we’re in right now, for someone to buy a secondary book of business and pay for a cost of funds in excess of that of retail kind of tells you all you need to know about the quality of the business that people are buying. And I encourage you to push as hard on cost of funds across the board. It ultimately simplifies what is a very complex business.
We’re in the spread business. Having low cost of funds is really important.
Operator: Thank you. The next question is coming from Ben Budish of Barclays. Please go ahead.
Ben Budish: Hi. Good morning. And thanks for taking the question. I wanted to ask about the old return of the Athene business, it’s been below the sort of normalized 11% for several quarters. Anything in particular to call out there? I know we always spend some time trying to triangulate what it might look like and there’s many kinds of components to that. Any color on sort of the key drivers over the past year or so. And what do you think might get that back to sort of the normalized expectation going forward? Thanks.
Marc Rowan: Sure. As you know, the old portfolio is made up of 150 different positions, about half of which relates to our origination platforms, about a third — the remaining quarter is about funds and other I would say hybrid type products. And then the last quarter would be other bespoke and direct investments. Overall, we still look at that portfolio as being, call it, 12% plus the last couple quarters. Given the environment, there’s been a little bit of slower appreciation, as you’ve just seen in the broader market, but really no fundamental concerns there about what’s in that. As we’ve always said, that portfolio will sort of deliver you 8 in a really bad year, 18 in a really good year and 12 to 15 expected. And we see nothing deviating from that.
Operator: Thank you. This brings us to the end of the question-and-answer session. I will turn it back over to Mr. Gunn for closing comments.
Noah Gunn: Great. Thanks for your help this morning, Donna, and thanks again everyone for joining the call. Just a couple of reminders. We would encourage you to participate in Athene’s fixed income investor call next Thursday, November 9, and then our origination deep dive that we mentioned on November 14. If you have any questions regarding anything discussed on today’s call, as usual, please feel free to reach out to us. Thank you for your time.
Operator: Ladies and gentlemen, this concludes today’s event. You may disconnect your line or log off the webcast at this time and enjoy the rest of your day.
