Connor Teskey: Thanks, Ken. Apologies for being redundant, but a position that we’ve had for I think a number of quarters now is interest rates are higher than they’ve been in the past, but they are not exceptionally high by historical standards. They’re very much in a range that is very constructive for our business, both for deployment through M&A, development of new assets, and for monetization activity, but what we really needed in order to facilitate a more constructive transaction environment is we needed rates to stop going up and that is certainly what’s happening around the world today. As Bruce mentioned in his opening remarks, interest rates do seem to have crested. Governments around the world have done a great job in terms of taking the hard measures in order to get inflation under control and therefore, we do see a much more constructive environment for transactions going forward.
In terms of where we’re going to see that transaction activity, I would say it’s very broad-based. This interest rate environment is incredibly constructive for I would say our infrastructure renewables and our infrastructure renewables and transition platforms. But the three other points I would make is the interest rates are elevated to where they have been in the past and that means there is going to be an incredible opportunity for our credit products to refinance the wall of maturities that are coming. Secondly, with the plateauing of interest rates, we expect the liquidity to return to the real estate market, both in terms of new investments at what is going to be very attractive value entry points, as well as creating the opportunity for monetization activity of best-in-class assets.
And then lastly, as markets continue to strengthen, we are going to see increasing liquidity in the leveraged loan market, which should facilitate more transaction activity in our private equity platform. So I would broadly put it in those buckets, renewables and infrastructure, they work across all interest rates environments. We’re going to see a tremendous opportunity in credit and real estate and as the leveraged loan market recovers, it’s going to be a great opportunity for our private equity business.
Ken Worthington: Great, thank you there and in the prepared remarks, you commented that 2024 would be an excellent year for dividend growth. I think with the spin out of BAM, the goal was to distribute the majority of the cash flows. How are you approaching the right dividend level for next year?
Bahir Manios: Hi, it’s Bahir, I’ll take a stab at that one. So look, our stated target when we spun off the company is to return 90% plus of the total distributable earnings that we generate in the business back to our owners, predominantly through dividends, but also through stock buybacks. Look, we’ve gone through the momentum that we have on the fundraising side with a path to getting somewhere close to $150 billion. I would note 80% of that is capital where we make fees on committed capital versus on deployment. So with a lot of visibility on that, in addition to the remarks I made earlier around margins and having that expand going into next year, we believe that 2024 could be a step change year with respect to growth from an FRE and distributable earnings perspective.
And so based on that, and you can deduce that the dividend growth for next year could be quite sizable, and we’ll get that all approved at our February board meeting and announce it with our February results.
Operator: Thank you. Our next question comes from the line of Nik Priebe with CIBC World Markets. Your line is now open.
Nik Priebe: Okay, thanks. Maybe as a follow on to that last response on operating leverage, you’ve been essentially holding the line on expenses for a few quarters now. How would you guide us to think about expense growth looking out into 2024? I’m just trying to size the magnitude of the margin expansion opportunity with some of these chunkier fund closings starting to accrue fees toward the end of this year?
Bahir Manios: Good morning, Nick. It’s Bahir again. So I think our expenses year-to-date are up somewhere, I think around 13% to 14% and because our fundraising this year was more, as you know, more backend loaded, our revenues, our revenue increase has been much smaller than that. I think 2024 is going to be the exact flip first. While I don’t have a certain percentage to guide you to, I can — we feel pretty good that our growth in expenses next year should be much lower than what it was in 2023, now that a lot of the material investment on the people’s side is already behind us and as I highlighted at our Investor Day, back in September. So the expense growth is going to be much lower. A lot of the fundraising would have been done already. So you’re going to have that revenue growth pickup with a much slower expense growth and so there should be — the impact on operating leverage next year could be quite sizable.
Nik Priebe: Okay, yeah, fair enough. And then just in light of some of the comments on the private credit franchise, I just wanted to get your thoughts on how the product line-up might evolve over time to accommodate a step change in the scale of the insurance business. Do you see potential for inorganic growth as a means to further broaden out that suite of capabilities? Just wondering if there are any obvious gaps in the product line-up that you might look to address in private credit specifically?
Bahir Manios: Certainly, so I would make two comments there. Today, our partners at Oaktree are the premier credit franchise around the world and while they have a 30-year history in opportunistic credit, they have a multi-decade history in other forms of credit, notably performing credit, loans, other strategies as well. And perhaps what’s most understated in that long history is their ability to develop and build new strategies when the market opportunity presents itself. So similar to us, if there is an opportunity where we can acquire a capability and it makes more sense to buy versus build, we will work with our partners at Oaktree and consider that, but I would say similar to what we see in our infrastructure or real estate franchises, when you have such a capable franchise as Oaktree, many times it’s easier to build those capabilities organically, but both options do remain open to us and given the broadening of the credit space and the different products that are available, different forms of asset-backed lending, other forms of credit products, we will continue to look to broaden our product set, but we would expect the majority of that growth to be organic.
Operator: Thank you. Our next question comes from the line of Mario Saric with Scotiabank. Your line is now open.
Mario Saric: Hi, good afternoon. And two really quick ones for me, more of a clarification on both. Just coming back to Rob’s question on private fund distributions, is there a kind of quantum range of expectations for ’24 that you’re comfortable providing, like taking into consideration the underlying market liquidity that you think will support the forecast deployment initiatives that you have? Or is it hard to say what that may be at this point in stage?
Connor Teskey: I would say it’s probably, I’d perhaps answer that question two ways. It’s probably hard to forecast exactly how much we expect to sell next year, but I would perhaps draw a slightly different conclusion. That is to say that I would say that we feel very confident about our fundraising projections, regardless of if we hit the high end or the low end of our expected monetization range. Trying to put a pin in exactly how much capital we will return, that’s probably unrealistic at this point, but I would say we’re comfortable returning a level of capital that will ensure that we’re well positioned to deliver on both our fundraising and our deployment targets next year.
