Allison Dukes: Yeah. I would say — it’s largely their general account and where they would want to make sure they’ve got exposure as well across various capabilities. So I mean, they are invested in everything from Enrique, which we’ve been public on that strategy to things like municipals and CLOs and some of our private credit capabilities it’s really kind of the breadth of those types of capabilities where you would see them really both invested.
Andrew Schlossberg: And aside from the capital, which is clearly important, I think the signaling and showing up at these wealth management platforms in particular, not with new investment capabilities, but there are new packages that we’re putting things together in. And I think that’s really critical in terms of credibility that we show up at these platforms with.
Craig Siegenthaler: Andrew, thank you.
Operator: Thank you. The next question comes from Alex Blostein with Goldman Sachs. Your line is open.
Unidentified Analyst: Hey, guys. This is Luke on for Alex. I appreciate some of the color on expenses and revenues in 2024, and I appreciate that it’s not easy to forecast going out so far. But do you have any high-level goalposts for margins over the longer period into 2025, especially as some of the State Street Alpha costs coming down? Thanks.
Allison Dukes: I would say, high-level goalposts and this is going to — longer term, and it’s going to take us some time to get there. But getting back into the mid-30s is absolutely our high-level kind of goalpost. I hope everybody here is loud and clear. We are in no way satisfied with where our margins are today and getting them back on a quarterly basis, north of 30% and starting to climb back into the low 30s and mid-30s from there, absolutely the goal over the next handful of years. Our focus coming into 2024 is absolutely around expense discipline. We’ve done a lot of work on our expense base. We’ve got a lot of headwinds and things we have to make our way through at the implementation being the most notable and sizable of that — but despite that, our expectation is to really try to hold our expense base relatively flat.
And as you know, and thank you for giving us a little bit of grace on that one, that it is hard to predict it quarter-to-quarter, especially with the impact of revenue in market. So it’s really about being very disciplined on everything we can control and where we can continue to take expenses out in places where it’s not necessary and evaluate opportunities to eliminate those expenses or reinvest them in areas that will help facilitate and fuel further growth.
Unidentified Analyst: Awesome. Thanks for the color. Just for my follow-up. You guys highlighted the plans to continue to shift from institutional to wealth and some of the strategies that you’re looking to build on. Do you have any upcoming product launches in the wealth space that you guys are either working on or are free to talk about at this point? Thanks.
Andrew Schlossberg: Yeah. Look, I think the — I’ll just speak generally about them because getting specific is difficult. The real estate debt strategy, we were seeing a lot of demand and interest for that, and you should expect to more of that in the market, and we should be talking more about that going forward. And then private credit strategies, whether they’re distressed or direct lending, how we can position and factor those into the wealth channels and just to be clear, this isn’t just in the US. It’s in Europe and Asia Pacific as well.
Greg Ketron: Operator, we have time for one more question.
Operator: Okay. And our last question comes from Michael Cyprys with Morgan Stanley. Your line is open.
Michael Cyprys: Hey good morning. Thanks for squeezing me in here. Just a follow-up question on expenses. I was hoping you could maybe elaborate on some of the steps you guys are taking to drive greater operational efficiency in the business, additional steps you might look to take over the next couple of years? And how is the variable nature of the expense base evolve? And how should we think about the sort of sensitivity of expenses if markets are up, say, in 2024? I know you guided to around flattish expenses adjusted for things, but that was assuming flat markets if markets are up 10%, how do we think about the impact on expenses?
Allison Dukes: Thanks Mike. I would say, what the relationship our expense base being about a third variable is still a reasonable relationship and expectation to think about as you think about the potential growth in revenue. So, I would start with that, certainly, as we’ve seen some of the real revenue pressure. It has made it difficult because there is some element of our expense base that’s fixed. But I think as we anticipate starting to climb out from a revenue perspective, I think the one-third relationship is still a reasonable expectation. In terms of what we will do and how we will continue to think about streamlining, I mean, look, it’s a continuation of so much of what we’ve done and a lot of what I just said, which is — we are going to continue to evaluate our expense base everywhere.
We’re looking at our margins at a granular level on where we can really unlock some costs and evaluate some of what’s been done in the past and perhaps where it doesn’t need to be done that way in the future. We have been on a multiyear effort as it relates to facilities and rationalization of office space. And I would say — I’d call out some usual suspects that you would expect us to be focused on elements like that, that’s going to continue. That takes many years to really make it dent in, and we will continue to do things like that. But it’s broader than that and really thinking about how we streamline our business, how do we really think about operating more holistically and a lot of the work that started almost a year ago now. I mean maybe with that, Andrew, if you want to kind of close on some of our thoughts there.
Andrew Schlossberg: Yes. And Mike thanks for the question. Look, the simplification efforts in 2023, we believe were some of the most impactful things that we did that will bear fruit as we go forward here. I think bringing together elements of the investment platform and investment areas, the distribution areas, marketing and product, and then allowing our enterprise and operational areas to match off against a much more simplified platform was the goal. I think the areas and investments where we started to bring some things together — it also gives us an opportunity to think about the margins in those businesses and the way that we make money and how to run those strategies and disciplines, not from the investment side, but from the platform side at scale where scale is needed at quality enhancement or quality enhancements needed, et cetera. So, the simplified organization helps us in those ways.
Michael Cyprys: Great. Thanks so much.
Andrew Schlossberg: So, maybe just to wrap up here in closing. As we enter 2024, hopefully, as you can tell, we feel well-positioned to help clients navigate the impact of the evolving market dynamics and subsequent changes to their portfolio that we expect. I had the pleasure of meeting with many of our clients around the globe this past year and hearing directly from them as assured me that we really are well positioned across a range of outcomes. And when and as the market sentiment improves, we believe this should translate to even greater scale, performance and improve profitability. And finally, I’d like to thank my colleagues around the world, the executive leadership team, our Board of Directors for their efforts in 2023, they’re focused on our clients and our shareholders and their support for a smooth transition during the year.
