Glenn Schorr: Just [indiscernible] follow up on that same topic is have allocations changed a lot? In other words, I hear you on the flows. That’s a very bullish commentary for the forward look. But if you took a snapshot of a year ago and 2 year ago allocations to where we are now and maybe 2 years forward, do you think we’ll see a major equity fixed income shift? Or I know it’s a lot broader than that. But like will fixed income allocations be a lot higher 2 years out?
Jennifer Johnson: Again, I think it depends on your view on rates. And as I think Adam or Matt mentioned, you — our fixed income teams are all kind of spread out as far as their view on where rates go. The frankly, guys probably think a little bit higher for longer Western is probably more aggressively positioned for rate cuts. So I think it really depends on your views. I do think if rates stay higher for longer, it has impacts on returns on equity markets as far as expectations, private markets as well. So Glenn, I think — again, I think it’s going to depend on where people — where they think they should position our portfolio. I don’t know, Adam, do you want to add anything?
Adam Spector: Yes. I think it depends on the client, right? You mentioned more fully funded pension plans, right? If we get a wave of more immunization going on, we’re going to see that drive fixed income flows. At the same time, really in every channel around the world. What do we see is a move towards alternative. That money is coming out of all of the other traditional buckets. So I think both of those are kind of competing with each other and pushing fixed income allocations in the opposite direction.
Operator: Next question will be from Dan Fannon at Jefferies.
Daniel Fannon: I guess, Matt, maybe we could start with some expense questions. So curious about what the delta was in comp versus your guidance and then as we think about the seasonal impacts of some of this quarter, how much do you expect to roll off as we go into 2Q? And then maybe update us on kind of the full year outlook for expenses.
Matthew Nicholls: Yes. Thank you, Dan. Yes. So a couple of things on expenses around the second quarter, I’ll get to the comp and benefits in a second. I’d just like to say that notwithstanding the higher resets around compensation calendar resets around compensation that I’ll talk about in a minute and meaningfully higher markets. If you exclude Putnam, which was the main addition we had in the quarter, our expenses would have been flat. So notwithstanding higher performance fees than we expected, higher calendar resets than we expected and higher markets than we expected. Our expenses for the quarter would have been flat when you exclude Putnam. So hopefully, that demonstrates some discipline there. In terms of your specific question around comp and benefits for the second quarter.
The difference is, I said it’s around almost half of it is the performance fee, a little bit less than half is performance fee increase relative to where we thought it would be. And then there’s these high — I would say, we were expecting Canada resets their composition, but they’re just higher than we thought they’d be. So things like the 401(k), mutual fund units in compensation — deferred compensation plans, vacation accruals. They were all — when you add all those things up, plus the performance fee delta, it adds up to about $30 million. So when you add the $30 million to, I think I guided [ $815 million ] on the call, that gets you to pretty much where the [ $844 million ] is where we ended up — where we ended up. So that explains that part of your question.
In terms of the annual guide, last quarter, we guided to $4.6 billion, and that’s excluding performance fees, but including the double rent that we’ve talked about around our New York City consolidation exercise. And I would increase that just slightly to probably $4.6 billion — $4 billion to $4.65 billion, a very narrow range. So less than 1% higher, and that’s really driven by the higher markets that we’ve experienced. If markets come back down again. as we’ve been experiencing very recently in the first part of this quarter, it wouldn’t surprise me if our annual guide remains flat. But right now, [indiscernible] remaining equal, we expect it to be just slightly higher for the annual guide.
Daniel Fannon: Great. That’s helpful. And then maybe just a follow-up on that with regards to the effective fee rate I think you had talked about it coming into the mid 38s as the year progressed. So I guess, given where mix is AUM levels, all the dynamics that go into that, how do you see that trending?
Matthew Nicholls: Yes. Thank you for the question. So the EFR for the quarter dropped to 38.5. And I believe that’s exactly how we guided for the quarter. And we’re able to do that because we had a pretty good feel for the mix that we’re coming in, in terms of flows. And I think I also pointed out that we were 1 basis point higher than usual, let’s call it, or the effective fee rate for the last quarter was inflated by 1 basis point based on Lexington catch-up fees.
Going forward, on an annual basis, I would say that our EFR should remain in the 38s probably in the mid-38s, it will be slightly higher than that, driven by episodic alternative asset fees, as we’ve experienced over the last 12 months and highlighted those clearly, I think, in our results.
And it can — and the other thing that will help it be higher is a larger percentage of alternative assets and a higher percentage of equities. With the public markets going up as much as they did in the first quarter, obviously, as a percentage overall, our alternative assets came down a bit, so that brought the EFR pressure down slightly.
