Allison Dukes: Yes, I mean, I would say the factors that impacted the net revenue yield and the just the overall base fee rate in the fourth quarter, we would expect a lot of those to continue into the first quarter primarily as we continue to benefit from the demand for our ETF and our passive strategy. So while that is a significant positive, and we are capturing demand where demand is right now that does put downward pressure on our average fee rate. And we would expect a lot of those trends to continue into the first quarter at developing markets in particular in global equities. And what happens there in terms of redemptions and demand overall, that will remain a headwind. If nothing else, just given the exit rate of those particular asset classes in December as we come into this year, that does put downward pressure overall because of the outflows that we experienced in the last probably three quarters there.
And overall though, I’ll just say, as I do every quarter, we’re not focused on managing to a net revenue yield or an average fee rate. We’re focused on managing the operating income and operating margin of the company overall. And so while we see that downward pressure given the mix shift in our portfolio, and that mix shift really did accelerate in 2022. We are really focused on how do we continue to operate the business to create scale and to get to scale and these passive capabilities. We’ve taken market share, we’ve gained quite a bit in terms of our organic growth over the last few years, but we’re not at scale in those capabilities and getting to scale and continuing to remix our expenses and reallocate against these higher growth capabilities is our primary focus.
And that’s what’s ultimately going to give us the opportunity to improve operating margin.
Bill Katz: Thank you very much.
Operator: And now Patrick Davitt with Autonomous Research.
Patrick Davitt: Hi, good morning everyone. Most of mine have been asked, just one quick one on credit ratings. I think S&Ps on record is saying their ratings and outlook are based on the expectation that your leverage ratio with the preferred will be in the two and a half times to three times range, which you went over in 4Q. I suppose the market recovery could already have that back below three times, which could you speak to any potential risks to your capital return or new investment outlook around that issue? And based on your past experience, how much of a grace period can we expect from the ratings agencies after kind of breaching that three times bogey for one quarter?
Allison Dukes: Hi, Patrick, I’ll take that. Look, we are €“ we’ve had no conversations with S&P that would indicate we have a risk there. I think the important point is all the work we have done in continuing to manage our debt balances lower. So, while EBITDA has declined, given the market impact, one would expect that to be more temporary in nature. Given we do expect there will be an inflection, excuse me, in the market at some point. And at the same time we’ve managed not only the debt on the balance sheet to the absolute lowest level in 10 years, but managed a number of contingent liabilities that would’ve been present when they made that statement two to three years ago. Those have all been taken care of as well. So in terms of the overall liabilities, we’re in a significantly better place than we were when they made that statement a few years ago.
We did receive an upgrade last year from Fitch. We do feel like we are overall in a good position as far as our credit ratings are concerned.
Patrick Davitt: That’s helpful. Thank you.
Operator: Mike Cyprys with Morgan Stanley. Your line is open.
