Andrew Schlossberg: Hey, it’s Andrew. At the moment, the focus is very much on the organic side, the priorities around the balance sheet and the uses of cash, as Allison described stay true. As we have described in the past, the place where we see opportunity for us to add on in time for the right situation, opportunity would likely be in that private market space as extensions to the things that we already believe we do well today and could continue to grow both organically and inorganically. And that would be in the real asset space and in the private credit areas. But for now, very focused on the work we have to do organically.
Mike Brown: Okay, great. That’s good to hear. And then maybe if I just change gears to the developing markets fund. You had flagged performance has improved there. That product is still outflowing, but assuming that performance can continue to improve. I guess my question is what causes client interest to really come back to this fund, just given that seems like investor sentiment and interest in EM strategies is just kind of remains tepid. Is this going to be more about a kind of lower redemption story and kind of narrowing on the redemptions? Or can that eventually translate to more of a growth story?
Andrew Schlossberg: Yes. Look, I think you outlined the question well. It’s probably a bit of both. I mean the first thing is continue to strengthen the investment performance there. And we’re unknown, as you know, a known emerging markets manager well known in the space, well placed in the wealth management channels. So, the things we can control our investment quality. What we have started to see a bit is the redemption picture improved, and that’s sort of early sign. I think you’re not really going to see a material uptick in gross sales until you see more demand come back in the marketplace from investors. And it’s — we’ve been waiting for that moment, and we haven’t seen it difficult to predict, but it’s an important category as is more broadly what we’re doing in international equities and global equities, where those categories as well have been under some pressure.
Our performance has improved materially, redemption rates declining, but same comment on the gross sales side.
Mike Brown: Okay. Thank you, Andrew.
Operator: Thank you our next question comes from Brennan Hawken with UBS. Your line is open.
Brennan Hawken: Good morning. Thanks for taking my questions. Allison, I appreciate the color on 1Q expense. But when we’re thinking about full year 2024, is the right base by which to grow off of that 3.06 billion that’s adjusted for some of the charges. And how should we think about — are you able to keep that flat? Or is that going to be having some positive pressure here through 2024?
Allison Dukes : Good morning. Brennan, good question. Yes. If you look at the expense base and 2023 adjusted for the severance and retirement expenses that we incurred in 2023, which we aren’t anticipating at this point, more of at 2024. When I look at our 2024 expectations relative to where the markets are, where we ended the year in AUM, the usual caveat of all things being equal, I would say we expect the expense base to be flat to 23% to just relatively very, very modestly, perhaps higher. But I’m going to call it just flat plus and that, importantly, in 2023 — excuse me, in 2024 is inclusive of a full year of all four quarters, no TIR. So it is a four quarter no TIR year as compared to a three-quarter year last year, inclusive of some of the inflationary pressures, merit increases and the like.
So we did a lot of work on our expense base last year. We’ve got a lot going on as it relates to output implementation costs in the $10 million per quarter guide we put out there. All those things taken into account, we’re expecting relatively flat this year.
Brennan Hawken: Okay. Thanks for that color. I appreciate it.
Allison Dukes : And I’ll note with that, with some of where we are in the market, some of what we’ve seen in terms of the appreciation and average AUM exiting the fourth quarter and coming into this year. We are optimistic that we start to see modest improvement in operating margin from here.
Brennan Hawken: Thanks for taking my questions.
Allison Dukes : Thanks, Brennan.
Operator: And our next question comes from Brian Bedell with Deutsche Bank. Your line is open.
Brian Bedell : Hi. Great. Thanks. Good morning folks. Thanks for taking my questions. Switch the conversation to the QQQ franchise. I guess as you — obviously, there’s the earning products, but do you think about monetizing that whole franchise. Can you talk about how you think you might be able to monetize that asset base? I think obviously, QQQM is, I think, $20 billion in AUM and QQQs more than 10x that. First of all, the 15 bps on QQQM is that also the asset management revenue yield? Or is that just the extent ratio — and then how do you think about potentially — are there opportunities to effectively try to cannibalize the QQQ in favor of developing a more sort of fee-bearing QQQ franchise at the Invesco level?
Allison Dukes : Great questions. And precisely, the topic we spend a lot of time talking about thinking about and really working on as a team. That the QQQ is a tremendous asset for us and the brand awareness that that creates can’t be underestimated. The opportunity that creates for us in terms of the marketing budget that comes from that. All of our sort of ad campaigns, the brand work we do is really fueled by the QQQ. And so it’s it is a tremendous asset to us. And it is certainly unique in nature and that’s the value it creates. So we have to be very thoughtful about how do we optimize the value that is created from that capability. The QQQM, as you note, is approaching $20 billion and has been a cannibalization strategy and a very successful one, given it’s only about three years old, and it has grown that quickly and assuming there is continued demand in the underlying or interest in the underlying exposure there, we expect the growth in that capability to continue.
