Daniel Fannon: Thanks. Good morning. A question on expenses. First, a clarification. I believe Allison, you mentioned that the savings from some of the charges won’t be in until next year. So, curious as to why you’re not seeing some of the savings here in 4Q? And then there’s a lot of changes or kind of streamlining, I think, that was talked about. Could you maybe summarize like what you see is the most impactful in some of these changes that you raised?
Allison Dukes: Sure, good morning Dan. So, on the expenses, let me clarify that, we expect that, that $50 million will be fully realized by the first half of 2024. And so that — I expect we will actually start to see some of those savings materialize here in the fourth quarter. I’m expecting somewhere around like $10 million improvement in compensation expense in the fourth quarter. So, that run rate is out to almost probably $40 million. So, I actually think we’ll start to see the majority of those savings materialize in the fourth quarter and then continue into next year. That, of course, is all things being equal and dependent of AUM and where markets go in variable compensation. A part of the increase in the severance and reorganizational expenses in the third quarter is because we did pull forward some of those savings, so we would start to realize the benefits of them in the fourth quarter.
And so again, I know there were some expectations because we provided an expectation that severance is expended to be closer to $20 million in the third quarter. It was $39 million as we seek to pull forward some of those savings. Where do we expect to see them? Honestly, it’s quite broad-based as we are looking at just making thoughtful streamlining decisions across our entire organization. It’s everywhere from areas of operations to streamlining some of our investment teams. As Andrew noted in his remarks, to just pocket the simplification where we can globalize some of our teams and seek to do things one way across the globe instead of multiple ways. I couldn’t point to any one particular area. I will tell you the majority of the savings you will see are in compensation expense, and that is, of course, excluding any first quarter seasonality that you see in payroll and taxes and the like.
Daniel Fannon: Thank you. That’s helpful. And then just on the institutional outlook, the overall pipeline, I think the numbers you didn’t disclose. You talked about the slide is 35% still solutions, which has been in the range it’s been. So, maybe just some context around the institutional activities you see it in building into fourth quarter and obviously into next year.
Allison Dukes: Sure. The institutional pipeline, the one not funded pipeline, so the same as we typically provide some color to, it was about $20 billion in the third quarter so a little bit lower than the prior quarter, although the fee rate was a little bit better, the composition pretty consistent. So, it still looks pretty good. I would say, if I look at our inflows, excluding the GTR, very sizable redemption that we pointed to. If I look at our gross inflows in the quarter, it was about $17.5 billion in gross inflows from the institutional channel and that was about 43% of that was from our pipeline. So, our pipeline continues to be healthy, strong. It does not really reflect the full breadth of the activity in the institutional channel. But it’s certainly a good health measure and it’s kind of consistent in that $20 billion to $30 billion range.
Daniel Fannon: Great. Thank you.
Operator: Thank you. And our next question comes from Ken Worthington with JPMorgan. Your line is open.
Ken Worthington: Hi, good morning and thanks for taking the question. To follow-up on the pipeline question, what was the backlog for alternatives? If solutions increased to 35%, I guess, what sort of shrunk relative to — in the pipeline? And where does alternative stand? And — well, to start there. Thank you.
Allison Dukes: Sure. Good morning. What shrunk would have been equity. Alternatives actually held pretty consistent to the prior quarter. And I think we mentioned we’ve got about $6 billion in dry powder and that’s been pretty consistent. So, it’s actually been one of the challenges is it’s been difficult to deploy just because the transaction activity, particularly in private real estate is relatively low, just given some of the financing dynamics that are going on. But what we saw was a little bit of diminishment in the pipeline for equities overall.
Ken Worthington: Okay, great. And then in private markets, so on the $6 billion of dry powder, where — what represents the bulk of that dry powder? Is it real estate? Is it credit? Is it sort of split between the two? And are there any big funds in private markets that you expect to come to market in the next 12 months or so?
Allison Dukes: The bulk of the $6 billion would be more real estate-oriented than it would be private credit. We’ve got several things that are — we are working on, I would say, in terms of what we’re trying to bring to market in both the real estate space and the private credit space as we look to capture some of the opportunities there out there right now, particularly from an opportunistic standpoint and a stress standpoint.
Andrew Schlossberg: Yes. And Ken, in particular, real estate debt for both institutions, but mostly in the wealth management channels is probably the area where we’re seeing the greatest amount of demand and we’re in market with strategies there. And then as Allison said, on the private credit side, just traditional direct lending, both in Europe and the US.
Ken Worthington: Great. Thanks very much.
Operator: Thank you. And our next question comes from Brennan Hawken with UBS. Your line is open.
Brennan Hawken: Good morning. Thanks for taking my questions. I wanted to start on fee rate. So, the actual investment advisory fee was a lot of pressure, but distribution offset kind of allowed the net revenue yield to be only down modestly. So, was there any noise in that net distribution line? Or is that the right way to think about that going forward?
Allison Dukes: I’ll take that. Good morning Brennan. The net distribution line, it tends to — in that third-party line, it runs about 41% to 42% of management fees on an annual basis. I think last year it was about 41.5%. Year-to-date, it’s about 42%. Third quarter was a touch lower, though. So, I mean, there’s just some noise and it fluctuates quarter-to-quarter. But I would say in line, it’s pretty in line with history right now.
Brennan Hawken: So, are you saying that we should look at it more on a year-to-date basis than this quarter specific?
Allison Dukes: I would. Absolutely. I would think about it in that 41% to 42% range and this quarter kind of brings up 42%, starts to bring it down a bit. I would look at it in the range. That’s how we think about it. It’s hard to manage to it quarter-to-quarter.
