We continue to build out capabilities we’re the third largest MPF and we have significant client base there that we think we can leverage. And we’ve been building out our access to the Mainland Chinese individuals coming into Hong Kong to purchase both insurance and health products. And I would say that while there is some equity exposure, particularly in the MPS business, I think the broader fundamentals of the distribution capabilities that we’re building out more than offset that, and you see that during the quarter.
Doug Young: I appreciate it. And then just second, maybe on SLC, I don’t have Steve is there, but I did see a bit of a step-up in outflows quarter-over-quarter. And I guess more — what I’m looking for is what mandates — because obviously, the capital generation was strong and net inflows were good, but you are seeing a bit of a step-up in outflows. But just trying to get a sense of where you’re seeing like what mandates are you seeing net inflows? What mandates are you seeing some net outflows, just to get a broad sense of that? Thanks.
Stephen Peacher: Yes, Doug, it’s Steve Peacher. Thanks for the question. A lot of our products, especially in real estate and infrastructure and private credit aren’t closed in funds where you really don’t see outflows. So when you — when we’ve seen outflows, it’s really been from our fixed income clients who normally take money out or give us back money based on their own operating needs. And we, I would say on our outflows, we really haven’t seen any unusual spikes, and we’ve — knock on wood really have seen very low outflows due to investment performance. It’s usually due to the operating needs of the client. In terms of where we’ve seen inflows, one aspect of the SoC platform now is a pretty diversified across asset classes.
So 2023 was a tough year to raise money in real estate, as you might expect, given the rise in interest rates. But it was a good time to raise money in fixed income. So we raised over $5 billion this year in our fixed income asset, investment-grade fixed income. We raised money at Crescent Capital in private credit which is an area that people are very interested in. And so I think that the diversity of the platform helps us there. And I just point out, we ended the year on a strong quarter. I think we had $5.6 billion of fundraising. And for the full year, if you look at fee earning AUM, our net inflows were about $14 billion.
Operator: And that will come from the line of Mario Mendonca with TD Securities.
Mario Mendonca: Good morning. I just want to go through a couple of questions that already asked. First on Asia, how would you characterize the spending? The additional spending? Would you characterize it as spending in support of new like better sales and better earnings going forward? Or is this — would you say it’s more related to like regulatory spending, infrastructure, compliance controls. How would you describe that increased spending?
Kevin Strain: There’s a mixture of both, Mario. There is part of it to do with we increased our brand spend, and we think that, that will pay dividends over the long-term brand is an important factor in Asia, as you would know. And there were other things that were some IFRS 17 costs in the quarter and some of those types of things. I’d say most of it, though, is related to trying to position ourselves for growth.
Mario Mendonca: Well quickly on the buyback. I think, Kevin, you referred to — you said a number of factors could drive your feelings about buybacks. But you specifically referred to M&A as one thing. So maybe do you — is there anything more you want to highlight there? And then secondarily, does valuation, like given where the stock trades right now, does that enter into your thinking about the pace of buyback?
Kevin Strain: So there’s a few things that we would look at. Obviously, if we’re looking at a big M&A and it’s material that would exclude us. We also look at M&A just from the factor of what do we have in our pipeline and what do we expect to be — to need in terms of driving the M&A aspirations that we have. So I think M&A is pretty evident. We’ve sort of run with this across multiple quarters and over a long period of time, we look at that M&A pipeline and where we’re at and also it would impact if there was a material M&A that we were looking at. So I think that we also — of course, price is one of the factors that we would consider and look at. We look at sort of the expectations and some of those types of things. That’s also one of the factors that goes into our calculation.
Mario Mendonca: All right. Just real quickly on yes, please. Was someone there?
Kevin Strain: Where you cut out, Mario?
Mario Mendonca: Sorry. How about now? Can you hear me, okay?
Kevin Strain: Yes, you’re fine. No.
Mario Mendonca: Yes. Let’s go back to MFS for a moment. So the outflows, obviously accelerated. I was a little surprised considering how strong market condition were. But I mean, there was a comment there that the environment remains challenging for all U.S. asset managers. Just given where the market did in the quarter and the direction of interest rates, I would have thought there’d be some flows into MFS. And then secondarily, on MFS, we’ve now seen 4 consecutive quarters of negative operating leverage. Is there something you can do on the expense side given this new environment?
Michael Roberge: Hey, good morning, Mario. It’s Michael Roberge. On flows, it just continues to be — if you look at what’s happening in the industry, clients continue to be comfortable sitting on cash. Our biggest competition currently is cash. And irrespective of what the market has done to date, historically, what gets the cash off the sideline is central banks in the U.S., the Fed beginning to cut rates and cash yields come down and clients tend to then migrate to broader investment products. And so we would expect that to happen. The market’s got the Fed price for second quarter of this year. And hopefully, that’s when you’ll see industry flows turn. Our share of active outflows last year for the year was actually less than our share of assets under management.
So as painful as it was, we actually picked up share last year. And as Kevin mentioned earlier, we actually moved from 10th to 9th largest player in the industry last year. And so I think we’re like everybody else, we’re waiting for investors to migrate back into the markets broadly. In terms of operating leverage, assets given where ANA has been over the last couple of years, there’s going to be some negative leverage as part of that. I would say as we’re thinking about the business last year, we actually selectively took up head count in areas where we’re trying to grow. We’ve talked about growth in fixed income, growth in non-U.S. retail. We took up our technology spending. We think that is an opportunity to differentiate our client offering and our ability to — because we’re at scale to invest in the business to differentiate over the next few years.
And we think it would be wrong not to overreact to shorter-term sort of headwinds in the marketplace and focus on those things that we think will drive flows over the next three and five years. We recently announced that we’re going to launch active ETFs in the U.S. And so we’re trying to identify areas of the market where we think we can grow. We think we can invest we think we can differentiate and ultimately build a lot of brand loyalty with clients.
Operator: And that will come from the line of Paul Holden with CIBC.
Paul Holden: Thank you. Good morning. First question is for Dan. A number of moving pieces going on with the U.S. group business, maybe an update on your expectations for redetermination impacts over the next couple of quarters. And when should the strong sales results start to overwhelm that, i.e., when should that go earnings inflect higher?
Daniel Fishbein: Hey, thanks Paul. This is Dan Fishbein. Yes, great question about the Medicaid redeterminations. As I’m sure you’ve noted from our comments, Medicaid redeterminations have been both faster and more significant than I think anybody anticipated. As of the end of the year, we’ve had about 12% of our dental Medicaid membership move off the rolls due to the redeterminations. Our latest prediction is that this will be completed by July by definition. And by that time, about 17% of the starting Medicaid membership will have been disenrolled. This has happened obviously over a fairly lengthy period of time. It started last May. And during that time, we’ve also had quite a significant amount of sales, both in Medicaid and other parts of the dental business.
