George Aylward: Yes, no, great question. I think in terms of utilization of ETFs, our perspective is there continuous to be further refinement on the utilization by specific financial advisors and how they want to access investment strategies. And I think that is leading to more of an evolution in terms of not purely utilizing the ETF as sort of lower cost beta, but instead using it as a vehicle of choice for certain actively managed strategies. I think you particularly see that in fixed income. I think, we and others have been introducing, fixed income ETFs. So the reason that it’s become a more preferred vehicle for that. I think that is continuing. I think most of our recent product introductions have been on the ETF side, and a lot of the things that we currently have in development will be to expand those ETF offerings.
And again, it’s really because our goal has always been to make our managers and strategies available and allowing potential clients to access it through different vehicles. So we increasingly see the opportunity said that some people may still want to access it via the traditional open-end fund. We’ve obviously seen the growth in the demand on the retail separate account side, and you see that more on the actively managed side for ETFs, little more so for fixed income right now than maybe equity, and also on the less correlated, noncorrelated types of strategies. So we continue to see that as an area for growth. In terms of your questions around conversions, and I think as you know, there’s also activity around people considering the opportunity to utilize the share cash structure.
We keep our mind open to those. Again, we have the ability to open-end funds, and we have the ability to ETFs. Theoretically, we also have the ability to do conversions. I think in terms of the conversions, and I think there was some recent archive I remember seeing where a lot of the success in the conversions has really been limited to one or two firms in that. So again, if that’s something that we think is an opportunity for us, we would consider it, but we don’t have anything in filing related to that.
Michael Cyprys: Just on that point, if I could follow up on the conversions, just curious what you think drive success where that is happening at the marketplace, and what would sort of lead you to evolve your views on that point, or sort of what holds you back from stepping into that.
George Aylward: Well, I think it gets to ultimately, I think there’s logical reasons for people to make the decisions to do the conversions in terms of what they think is the right connection between the ultimate client and the vehicle that they’re trying to access, right. So the choice is to either convert or to just introduce through a different wrapper. So I think it’s very specific. I think it’s specific to the nature of the type of financial advisors that utilize your vehicles as well as the channel that you sell them in. So in some of the firms that have made those conversions, they would align very easily with the specific advisor group that utilizes their strategy or to the channel in which they’re available. So all of those things would be things that we would kind of factor in if we were to make that decision.
Operator: And our next question comes from Bradley Hays of TD Cowen.
Bradley Hays: Hi. Good morning. It’s Bradley Hay in for Bill Katz. Starting on the balance sheet, how should we think about the cadence of rebuilding the cash balance and related to that, how should we think about the priorities for deployment between buyback, get pay down, M&A, et cetera?
Mike Angerthal: Yes. Hey, Bradley. Good morning. It’s Mike Angerthal. I think the cash balance, just as we cited, the first quarter is the highest use period for us for cash with the payment of annual incentives. And we had our third revenue participation payment of $24 million occur in the first quarter. But just the cadence of those payments, you’ll see typically the Q1 of the lowest part of the year, and then you’ll naturally rebuild cash as it’s generated from the business through the remainder of the year. So as you saw in the fourth quarter last year, that was the highest point of capital in cash for the year. It’s just the typical seasonal cash build for the business. I think in terms of capital priorities, we talked about our balanced approach to capital management.
I think 2023 is a good depiction of that. We used capital in connection with the strategic acquisition during the year that closed in April of 2023, raised our dividend for the sixth consecutive year in the third quarter, and bought back a meaningful amount of shares while continuing to invest in the business, which included seeding new strategies. And we supported one of our affiliates with a launch of a CLO. So investing in the business and paying down debt for strategic investments in the business, and then returning meaningful capital to shareholders are all priorities and representative of our approach to capital management.
Bradley Hays: Okay. Thank you very much. I know you probably saw the strategic partnership announcement from one of your peers. Is there any appetite to explore something similar?
George Aylward: Yes. We don’t comment on other specific types of transactions, but again, our view is we evaluate any way that we believe could potentially create long-term value for shareholders. And in terms of partnering, and in my earlier comments, I kind of made reference to I think there continues to be sort of an evolution in the ways that people approach partnering. I do think that would be a good example of other less traditional ways of doing that. So again, we would evaluate any different type of structure if we thought that there was a strategic fit and it was a value creator for shareholders.
Bradley Hays: Okay. And then if there’s time for one more, looking at fixed income, how are you thinking about your various strategies in sub asset classes given the higher for longer environment we’re increasingly seeing ourselves in? Is there a greater focus to develop or push more active strategies? Anything opportunistic there?
