We’re not here to first and foremost distribute. We’re here to produce world class differentiated results and find the right clients on the right terms to deliver that outcome. And so we’re going to remain very consistent with our past and our history and take the right shot as and when it arises, recognizing that it might take time.
Operator: The next question comes from Bill Katz with TD Cowen. Please go ahead.
Bill Katz: Okay, thank you very much for taking the questions and appreciate the prepared commentary. Just maybe start off on the flow side. So it seems like there’s a lot of different opportunities here, and I guess you made some comments in your press release around the opportunities within equities. Is it some of the smaller incremental vehicles that you are sort of seizing into attractive timelines, attractive performance, or are there some maybe older, more seasoned vehicles where you’re seeing the demand? And I guess for lately, you’ve always watched capacity pretty carefully. I appreciate you highlight the International Value Fund, but at $40 billion, my instinct was, okay, that’s a pretty big fund. Where do you tend to sort of cap out incremental new dollars coming into that? Thank you.
Jason Gottlieb: Thanks, Bill. It’s Jason again. Yeah, our franchises have continuously sought to identify opportunities for expanding degrees of freedom. They’ve come in many forms, including broader securities via differentiated markets, market caps, liquidity structures. Also, we see our teams build capacity through recruitment and acculturation of that talent. David Samra with high value and, as Eric mentioned, Bryan Krug with credit embody this mindset. Importantly, with their success, they have the ability to work with like-minded, sophisticated clients who understand their philosophies, and importantly, their time horizons. This is in large part why we believe the opportunities for modest, thoughtful growth are in place while they remain methodical in the pursuit of their top-tier returns for existing shareholders and so we recognize that David’s success on the return side has propelled him to a reasonably large-sized fund, but his team has broadened out the types of securities he can use.
You’ve seen us, and I mentioned this on the commentary, having Beini and Anand join the team, getting down market cap, really does give a much more expanded opportunity set for David and the international value franchise. And then, more broadly, I guess I would say, and this isn’t specific to any one team or any one market, but you’ve just seen a huge increase in the world of money market vehicles. I might get the numbers off a little bit, but I think it’s grown from somewhere in the high threes to about $6 trillion at the end of 2023. I don’t know what the numbers are today, but until we see a reversal of that, I think there’s a lot of pent-up demand and money on the sidelines, but when we do see that reversal, we think that our returns and our performance and our teams speak for themselves, and we think that those assets will ultimately find a home, whether it be with high value or credit or some of the global strategies in the institutional space or in EMEA.
So we’re just going to stay thoughtful. We’re going to stay patient, but we think when there is that move back out of safety and money markets, we’re very well positioned to capture that.
Bill Katz: Okay, thank you and maybe one for C.J. As you look ahead to the year, how are you thinking about balancing reinvestment back into business versus the payout? I guess your payout ratio came in maybe a little bit at the higher end of what I think folks were thinking about this year, like 96.5% if I did the math right. You’ve been running closer to 90%-ish a couple years before that. So when you look ahead to this year, recognizing some of the seasoning, some of the reinvestment needs, seed capital, etcetera, how do you think through the payout ratio as you look ahead for the year? Thank you.
C.J. Daley: Yeah, sure. Bill, at this time, I think we’re staying the course. We held back some cash this year to seed new products. I think we feel pretty good about where we are in the size of our seed book. So there could be potentially some additional cash freed up for other uses next year, including adding to the special dividend. But, as we sit here right now, we continue to see the 80% variable dividend paid each quarter, along with that special dividend at the end of the year to be our course of action. So I wouldn’t anticipate any major changes to what you’re seeing from a payout percentage.
Operator: The next question comes from Kenneth Lee with RBC Capital Markets. Please go ahead.
Kenneth Lee: Hey, good afternoon. Thanks for taking my question. Just one on the credit alternative investment strategies, I wanted to talk a little bit more about how you see potential demand, especially in the current rate environment. Thanks.
Eric Colson: Yeah. Hi. This is Jason again. I’ll talk about a couple of them and then if there’s a follow-up question, just let me know, but when you think about the credit opportunity strategy that Bryan has been building and developing over the past six years, we now think we’ve got a phenomenal asset in the form of his performance, as we highlighted. It’s around almost just shy of 10%, 9.8% net of fee and we’ve always been really patient on the distribution side because we firmly believe that time well spent is time spent owning the record and we’ve now done that. I think the uptake with clients, whether it’s existing clients that are evaluating Bryan in a different way through an alternative lens, or some of the new clients that are starting to evaluate him that are building up in the pipeline, we think that that’s a really interesting opportunity for us to continue to develop and build and grow the alternatives allocation and then going back to the global unconstrained strategy on the EMsights team, likewise, what’s interesting is this is somewhat counter-cyclical to the money market conversation that we just had on a prior question.
Whereas if you have money market rates somewhere in the 4% to 5% range, and the strategy that the global unconstrained strategy deploys, if you can generate a 3% to 6% excess return on top of that money market rate, you get really, really interesting outcomes. Somewhere in the, let’s call it mid to high single digits, potentially in the low double digits if we’re able to execute, tends to be uncorrelated to the broader markets and I think people are starting to take note of that. Again, it’s very, very early innings, as Eric mentioned. We’re sort of two years into the journey, not even quite two years and we think that once people evaluate the team early stages, they hit their three-year record. We think that that could be a really interesting leg to the growth stool and I’d be remiss if I didn’t mention the dislocation, the drawdown fund.
Raising $130 million for Bryan in dislocation opportunities is really a testament to, I think, the strength of his brand and our credit platform broadly and this is hopefully going to be one of many. Once we deploy that capital, Bryan produces the returns, we return the capital. This should be an opportunity to continue to develop and grow and build a really exciting platform around these drawdown vehicles and so I think we’ve got really interesting short, intermediate, long-term duration opportunities for the platform and there’s more that will ultimately reveal themselves, whether it’s with the existing teams, which is the highest and best use of our time to develop that. The probability of success is much higher. Or whether we go out and we identify the next team to bring out of the platform, we still feel like we’ve got really good opportunities for growth here.
