Jonathan Levin: We’ve generally said that it’s ratable over a few year period of time. There could be some that’s a little bit longer, but that’s generally the guidance that we’ve given on that front.
Adam Beatty: Okay, sounds good. Thanks very much.
Operator: And our next question comes from Michael Cyprys with Morgan Stanley.
Michael Cyprys: Hey, good morning. And thanks for taking the question. I was hoping to dig into the absolute return business in terms of the fundraising outlook there. So I was just hoping you could comment on what you’re seeing in the marketplace in terms of LP appetite for absolute return strategies, particularly in light of the strong outperformance versus broad benchmarks last year in that strategy. What do you expect in terms of gross sales into ’23? Are there any particular strategies where you’re seeing more demand versus less demand? And any sort of expectation around redemption trends as well? Thank you.
Michael Sacks: Thank you, Mike. I think that the demand there is and the demand for specific strategies is mixed. So you’ll see people that have an interest in credit-oriented strategies. Commodities had a great year and last year you’re seeing people talk about whether they want to shift capital towards those strategies, you – there’s sort of – that space is so diversified in terms of the number of strategies that take place underneath and the ability to have funds and separate accounts that focus on different strategy sets and have different make ups that there’s always a level of demand. We have said for a long time that we think we’re not – we don’t think you’re in a strong net inflow environment. We think that the asset class is kind of growing through compounding, but not through incremental allocations to the asset class.
And I think we believe that continues to be kind of the overarching – the overarching theme there and don’t see any real change in that kind of macro picture for demand for hedge funds. I do think that when you have an environment like we had last year, you – people will tend to use liquid strategies and liquid portfolios for liquidity that may be is obvious that in terms of saying that, but I do think you see people that can take a little money from ARS to fund some things elsewhere in their alts book that they want to keep funding and want to keep doing, but they’re over allocated alts because of the denominator effect. And that’s a place for some liquidity, and we suspect that will abate somewhat this year. And in general, we have in our ARS strategy, which we talk about as kind of one vertical, there are a number of different approaches inside of that, some of which had very good results last year, and we would expect some of those to experience some growth this year, while others could see redemptions.
And – but on a net basis, we’re actually budgeting for some modest redemptions this year, more modest than last year and not seeing a major increase in the balance sheet allocation writ large to hedge funds. That said, Mike, I do want to just mention like we talk a lot about ARS and you know that we feel like our ARS vertical doesn’t necessarily get the respect that it deserves. And in a weird way, the performance of the portfolios last year certainly showed the value of the ARS strategies to clients as compared to traditional strategies. But equally important, I think, from a firm value perspective, you look at kind of what did the assets of the ARS strategies do? And what did the revenues do when you think about that as compared to traditional asset management, which is the comparison we’ve always tried to make that let’s not be focused – so worried about hedge funds and let’s think about it in comparison to traditional asset managers.
And if you look at the revenues last year and what the revenues did last year compared to traditional asset management firms, it was a much better business to be in last year than to be a long-only traditional manager, and we believe that will continue to be the case over time.
