One that has been overlooked is models. There is a shift in wealth management from individual stock fund selection to a whole portfolio-based approach, and that is accelerating demand for models. More importantly, BlackRock managed models are only a fraction of the opportunity. The biggest growth potential comes from other model managers using iShares and other index products as building blocks in very large size in their asset allocation. And then, of course, lastly, is Aladdin, because you know that, in periods of market volatility, it has historically increased the importance of Aladdin to our clients as we saw in our record net sales in 2022. So, all of these position us for continued growth in the years ahead.
Operator: Our next question comes from Alex Blostein with Goldman Sachs. Please go ahead.
Alex Blostein: Gary, congrats again on your next move. And maybe in the spirit of this being your last CFO earnings call, we’ll get an expense question in there. So, I heard you on the core G&A guide mid- to high single digits for 2023. Maybe help us frame sort of the market conditions that this guide contemplates. And I guess how are you thinking about the expense base, more broadly, including compensation, compensation rate, things like that for the year?
Gary Shedlin: Thanks, Alex. So maybe just some context, right, and I think we’ve spent the last couple of calls talking about our philosophy of really trying to drive organic growth because we know that, that is obviously a critical driver of our PE multiple. And I think we are also mindful that we come through these periods of volatility generally better positioned than our competitors because of our diversified model that gives us the ability to continue to invest going forward when others simply can’t do it. And I think as we’ve talked about this, there’s this conundrum, right, which is, on the one hand, we know that our PE multiple is driven by growth. And on the other hand, just understand that in the context of the overall market, our revenue run rate is down, and there is a little bit of a misalignment between our expense base and our revenue capture rate versus where it was a couple of years ago.
But I think as we saw coming out of the pandemic, we continued to invest in our business, and that resulted ultimately in the two best years in BlackRock’s history in 2021. And in 2022, we’ve once again delivered by generating over $300 billion of net inflows while most of the industry has been in outflow. So our challenge today really remains to ensure that we can continue to invest in our highest growth opportunities. And we’re obviously committed to doing that by trying to relentlessly reallocate resources across the organization. We obviously don’t go — we don’t go into a year predicated on any beta assumptions. We try to take beta out of it. I think Rob Kapito did an amazing job of explaining where we think most of the growth potential are on the revenue side.
And so it’s with that in mind that, in July, we really began to more aggressively manage the pace of our hiring and our discretionary spend and more recently determined to effect a broader restructuring of the size and the shape of the workforce to really free up that investment capacity to ensure that we can continue to basically drive our most important growth initiatives and obviously create opportunities for our talent to develop and prosper. So, I think you’ve seen that and we talked about that. For next year, we expect our head count will be broadly flat. We are going to continue to optimize our talent pyramid and grow our footprint in iHub innovation centers globally in the U.S., EMEA and APAC. And as I mentioned, we would expect a mid- to high single-digit increase in our core G&A expense.
