Allison Dukes: So let me start with just maybe an update on the flows, so I think we noted modest inflows on the direct real estate side, so about $400 million. And again, that’s really divestitures net of acquisitions. And so we continue to see some modest improvement, which is nice to see just given some of the challenges in the real estate market. On the private credit side, we talk about $1.2 inflows. Again, our business there is only about $42 billion. So a relatively nice pickup inflows there. That was primarily driven by bank loans and CLOs. And some modest inflows in there are distressed credit capabilities as well. That’s all on the private side, and that was largely offset by outflows on the public alternative side.
And that’s driven by commodity ETFs, listed real estate and global asset allocation that I noted on the call. So you’ve got a bit of a mix in our alternative strategies, again, with good gains on the private side being offset by some outflows in the public alternative strategies.
Andrew Schlossberg: And as we look forward, we continue to view private markets and alternatives as one of our best opportunities. As Allison said, on the credit side, about $45 billion in assets. And on the private real estate side, another $70 billion in assets and seeing some moderation of flows and some positive gains, as Allison mentioned, we’re first to see in this environment. I think if we take the long-term view, what we’ve been very focused on over the last several years is diversifying from a largely institutional base into a wealth management base and the issuance of our non-traded REIT credit real estate credit strategies and other sort of distressed and direct lending strategies, both into institutional, but probably more impactfully into retail, we continue to see as a great long-term opportunity for us.
Daniel Fannon: Understood. And then just switching to expenses. I understand some of your comments. But maybe Allison, if you could talk to, is the State Street project? Is the goal to ultimately reduce expenses or just flat – get flatter growth going forward? So I just want to understand the components post the $10 million a quarter you mentioned for this year. And then underneath that, how we should think about the general growth rate of kind of G&A and other expense items for the year in terms of inflation or other factors?
Allison Dukes: Let me start with Alpha. And if you think back around the implementation costs for the last few quarters, they have been growing. So we — it was $7 million in the second quarter, $8 million in the third quarter, $12 million in this most recent quarter. And then our guide was to roughly $10 million a quarter per quarter throughout 2024, there will be fluctuations. It is not precise. We are deep into implementation. And so there is going to be some variability and some uncertainty quarter-to-quarter, but I think the $10 million expectation is reasonable with what we know today. The expectation is we are building to a peak, and then there are expenses that will be coming out the other side. So – and that is 2025 and beyond.
So we’re not ready to give exact guidance on that yet. But it isn’t just a flattening out. It is building to a peak, and then there are some expenses that start to come back down. As implementation cost fade and there are some – the ability to continue to rationalize and streamline some of our systems, which will lead to some expense rationalization on the other side. And as a reminder, that is as much about — the whole effort is as much about really eliminating the duplication of systems and some of the heavily customized processes that we have today and really moving towards a single operating model to streamline our operations and accelerate some of what we can deliver from a client experience perspective. I think you mentioned some of the other expense line items, maybe let me touch on some of those.
Note that the G&A was seasonally high in the fourth quarter, and I would expect that to be a bit lower in the first quarter. From a compensation expense perspective, as we noted, there’s always seasonality in the first quarter. We typically expect to see compensation expense about $25 million higher in the first quarter for taxes, FICA and the like, but we also expect to fully realize our $50 million in expense savings. So there’s another $6 million that we expect will be realized in the first quarter. All of that is, of course, assuming flat markets at 12/31, et cetera, et cetera. But hopefully, that gives you some color that relates to the primary driver of alpha seasonality of G&A coming back down, seasonality and compensation expense going up modestly, but that’s offset by the realization of our expense savings.
Daniel Fannon: Great. Thank you.
Operator: Thank you. Our next question comes from Ken Worthington with JPMorgan. Your line is open.
Ken Worthington: Hi. Thanks for taking my question. I wanted to follow-up on margins on slide 10. Excluding the unusual items, margins in 4Q 2023 were the lowest level on the page. Can you give us some color as to how business mix is impacting margins? To what extent is margin pressure being impacted by growth of lower fee, lower margin businesses and slower negative growth in higher margin, higher fee businesses. And I know it used to be some of the non-US businesses were the highest margin. At this point, can you kind of call out what are your highest margin and lowest margin businesses?
Allison Dukes: Sure. Let me take a stab at that. So yes, you are correct. The fourth quarter adding back severance expenses would be our lowest quarter. And so what is impacting that? Certainly, it’s business mix. Before I go to business mix, I will also note, just from an underlying expense base standpoint, keep in mind, for all the years prior to the last three quarters on this chart, we had TIR as a line item. And there was a significant amount of our expense base that within TIR. So our expense base has been fully loaded for the last three quarters inclusive of all the alpha implementation costs. So that is part of the pressure on margins, although it is not the whole story. The business mix story and the degradation in revenue is absolutely part of the story as well.
