The other areas that are also growing, DC is growing, and it’s been growing for a while. Share has continued to grow there in the DC investment only, and that’s been very much product and product innovation-driven. SSGA was one of the first to figure out how to put an annuity product into a target date fund. Did it actually before it got the broad regulatory go-ahead to do that, and that’s actually now a source of real growth. So we see that as a growth area, as the defined benefit just goes away and people realize that longevity protection is something that people need. I think that combination of a target date fund with some kind of an insurance longevity product will be important and we’ve got real distinctive expertise in that. In terms of the growth areas, I mean there is — we are really, for the most part, an institutional shop.
We’ve built out the product capabilities in the retail and the intermediary space. Yie-Hsin Hung, who joined us as CEO late last year, she’s got a lot of expertise there too. So some of it will be just moving and expanding share in the retail intermediary space. And then there’s a real move into the — into blending the line between public and private markets and the belief that those lines really don’t make sense. And that blended products where you get sufficient liquidity would enable those that don’t need the liquidity to take advantage of the illiquidity premium. So some of this will be in product design, whether that’s organic or inorganic, I mean, we think there are opportunities in both. And there is — the team has got lots of product development going on.
So we’re fully committed to that business. We see lots of growth in that business and are excited about the prospects there.
Michael Brown: Okay. Great. Thank you. I’ll leave it there.
Operator: Thank you. The next question comes from Mike Mayo of Wells Fargo Securities. Your line is already open.
Michael Mayo: Hi. Well, it’s been a long journey for you guys to get the Front to Back solutions and Alpha. And I’m just trying to figure out how much traction that has and where we’re seeing that in the financial results. I hear your excitement, and you have alternatives now as part of that program, and you’re guiding for positive 2024 fee operating leverage, and you have all these new mandates. On the other hand, I look at the fee growth this quarter and it wasn’t that great, right? And so, are we seeing evidence of the Front to Back momentum in the results? Is it something that you expect to see, or is it simply such a long sales cycle that we should be thinking two, three, four years out? Thanks.
Ronald P. O’Hanley: Mike, let me just start and maybe address the journey here, because this was not something that you bought off the shelf. It was actually something that nobody had ever done before. So there was an awful lot of development that we need to do, and I think we signaled that at the beginning. I mean, Charles River was an important acquisition. But to be clear, that was the front, and it itself needed some investment, particularly in the fixed-income area. So, much of what we’ve been doing over the last several years is selling and developing. Many of the early — particularly some of the early large ones were explicit development partners. We targeted them, they targeted us and came in as development partners with the idea that they would help us to build this out.
They’ve been purposely taken longer because they’re the ones that are actually helping to shape what the overall thing will look like. This has been a very big year. Eric alluded to it in terms of some of the features and functionality, particularly around fixed income, and getting up to not just par, but to a market-leading position in terms of fixed income capability. So in terms of just getting the program up and running, we’re actually quite pleased with where we are. I don’t think we would have thought back in 2018, 2019 when we launched this, that we’d have the number of clients that we do now. The other thing that we were convinced of, but we had to prove it to ourselves, was that this could be a tool to actually generate new clients, that it wasn’t just a way to solidify existing relationships, but it was a way to actually grow share and shift share.
And that’s what we’re starting to see now. Vontobel was one, there’s others in the pipeline. So it’s a journey that we believe will see revenue growth at accelerating. And maybe I’ll leave it there.
Eric Aboaf: And Mike, it’s Eric. On the financials, it’s a very fair question. I just remind you the context for the current year, because there are some other large movements on servicing fees. So if you think about it, we recorded a 1% growth in overall servicing fees, but there were tailwinds and headwinds away from the kind of organic new business creation — that — that’s important that we need to demonstrate year after year. The market tailwind for year-on-year for this quarter was about 4 percentage points of servicing fees. So you’d say, hey, where is that? Part of that was about 3 percentage points of headwind came from lower client volumes and activity, right? A little bit of what we described as, we’ve seen less trading activity out there, which comes and goes, and tends to be cyclical.
And then the other thing we did see this year and this quarter is that previously disclosed client exit was worth almost 2 percentage points as well. So there are — I think, some larger headwinds and tailwinds in particular flowing through the financials, net new business, right? If we just want to take a look at that, was a positive 2 percentage points, year-on-year this quarter and that’s where we’d like to see the value of Alpha, the value of traditional servicing fee sales, the value of private servicing fee sales. And part of the reason why we’re adding to our disclosure is to make that more apparent to everyone over time.
Michael Mayo: And then just one follow-up, Eric, and then Ron, just the exit of that large client, what inning are you in as far as that’s concerned? And then Ron, as relates to accelerating revenue growth from the long journey of Alpha timing, are we thinking quarter here or several years?
Eric Aboaf: Yeah, on the previously disclosed client, we’re about 30% through that very roughly. The bulk of that will come through next year and then there’s another — there is just because of how year-on-year comparisons work, you’ll get a tail into 2025.
Ronald P. O’Hanley: And Mike, just — can you clarify your question? I just want to make sure [Multiple Speakers]
Michael Mayo: Yeah, my initial question was fees aren’t growing that much and Eric identified some headwinds to that. But you talked about the financial benefits from Alpha, the increased activity to result in accelerating revenue growth. I was just wondering a timeframe around that statement that revenue growth should accelerate due to the benefits of Alpha?
Ronald P. O’Hanley: Yeah, so, I mean, as we signalled I think at the beginning, I think probably — I think it was out — my answer to Alex. We’re telling you that we believe we’re going to achieve positive fee operating leverage. There’s revenues there and there’s expenses there. On the revenue side, we believe we’ve got a program in place that includes Alpha, that’s going to enable us to do that. Some of that’s driven by Alpha, some of that’s driven by actions that we’re taking, some of which have been implemented, others that will be implemented this quarter and into next in terms of strengthening sales and revenue-related capabilities. So what you should be hearing from us is confidence around our revenue growth generating capability.
Michael Mayo: Okay. Thank you.
