Invesco Ltd. (NYSE:IVZ) Q1 2023 Earnings Call Transcript

Invesco Ltd. (NYSE:IVZ) Q1 2023 Earnings Call Transcript April 25, 2023

Invesco Ltd. beats earnings expectations. Reported EPS is $0.38, expectations were $0.37.

Operator: Welcome to Invesco’s First Quarter Earnings Conference Call. All participants will be in a listen-only mode until the question-and-answer session. As a reminder, today’s call is being recorded. Now I’d like to turn the call over to Greg Ketron, Invesco’s Head of Investor Relations. Thank you, sir. You may begin.

Greg Ketron : Thanks, operator, and all of you joining us on the call today. In addition to the press release, we’ve provided a presentation that covers the topics we plan to address today. Press release and presentation are available on our website, invesco.com. This information can be found by going to the Investor Relations section of the website. Our presentation today will include forward-looking statements and certain non-GAAP financial measures. Please review the disclosures on Slide 2 of the presentation regarding these statements and measures as well as the appendix of the appropriate reconciliations to GAAP. Finally, Invesco’s net response before and does not edit or guarantee the accuracy of our earnings call transcripts provided by third parties.

The only authorized webcast are located on our website. Marty Flanagan, President and CEO; Andrew Schlossberg, Invesco’s Head of Americas and who will become President and CEO upon Martin’s retirement on June 30 of this year; and Allison Dukes, Chief Financial Officer will present our results this morning. After we complete the presentation, we will open up the call for questions. Now I’ll turn the call over to Martin.

Marty Flanagan : Thank you, Greg. And I’m going to start on Page 3, which is the highlights for the first quarter, if you want to follow along. The early part of 2023, provided investors and money managers reason for modest optimism as most major financial markets gain ground in that period partially offsetting the significant declines we saw last year. Inflationary pressures showed some sign of easing and the COVID-19 pandemic are all now behind us. That said, heightened level of volatility persists in the financial markets reacted with cash in March as we experienced several bank failures during that period. Investors once again, safety and risk-off assets and net flows across the industry were pressured again. Although organic growth remains lower across our industry, Invesco supersite platform generated $2.9 billion net inflows in the first quarter, margin return to organic growth.

This progress is especially significant considering the mix feature for the industry overall during the quarter. Growth this quarter was driven by areas in which we’ve invested for years and have been intentional in cultivating deep client relationships. Fixed income capabilities, the institutional channel, ETFs, all experienced strong net inflows during the quarter. Each of these areas has demonstrated Invesco’s ability to sustain growth throughout the full market cycle. Fixed income delivered net flows for the 17th straight quarter, while the institutional channel has now been in net flows for 14 straight quarters. As we’ll discuss later, our pipeline remains strong for telling well for future growth. Our solutions business helped drive the institutional business to net long-term inflows of $6.6 billion in the quarter.

Meanwhile, net long-term flows in ETF vehicles have now been positive 10 out of 11 last quarters. Growth in the ETF business is broad-based with net inflows this quarter, both equity and fixed income strategies. I’m confident that investor appetite at returns to risk assets have we will see significant growth in this area. Net flows in active equities remains a headwind but improved meaningfully compared to our experience in 2022. Net long-term outflows in global equities were $2.5 billion in the first quarter including $1.2 billion from our developing markets fund, while still a challenging environment. This was the best out flow before this quarter in the asset class since 2021, with net outflows being less than half the net outflows in the fourth quarter.

As we discussed on our last earnings call, the Chinese markets have continued to be unsteady for several months as the country is in the midst of transition period post COVID-19 policies and higher interest rates led to an uptick in fixed income redemptions industry-wide, consistent with that industry direction, our Greater China business experienced $2.9 billion of net outflows in the first quarter, primarily in the fixed income I just mentioned. Despite the near-term challenges, we remain extremely bullish on the opportunity in China over the long term. We ran 12 of 160 refund companies operated in China and remain the largest foreign known asset manager in the fastest-growing market in our industry. We expect to be in the market for new product launches during the second quarter, and we are optimistic for recovery inflows on the balance of 2023.

Let me briefly touch on our private market capabilities. We experienced net long-term inflows of $600 million in the first quarter. We were very active in the CLO market and raised $1.5 billion from three new CLOs launched in that period. Real estate transactions slowed across the industry as markets were in turmoil and the banking sector and the higher interest rates made financing more difficult. However, our direct real estate portfolio has performed well. It is diversified across geographies, sectors and investment styles. Allison will get into great detail in just a few minutes. While we expect the growth may be more challenging real estate due to market conditions on our portfolio is well managed, and we continue to source new opportunities and are having constructive conversations with our clients, investing in growing our business, maintaining a strong balance sheet and providing a steady return capital to our shareholders, made as a top priority.

I’m pleased to note that our board had approved a 7% increase in quarterly common dividend to $0.20 per share effective this quarter, which reflects our strong cash position and stable cash flows despite the uncertain markets we’ve been facing. Long-term debt continues to run at the lowest levels in over a decade. And we’ve recently renewed and increased the size of our credit facility from $1.5 billion to $2 billion, providing us significant flexibility moving forward. Lastly, as you’re aware, last — in February, we announced that Andrew Schlossberg will take over’s President and CEO when I retire on June 30. Schlossberg has more than 20-year career at Invesco. Andrew has successfully led several large businesses and earn the respect of clients and employees, the Board of Directors and executive leadership team.

Andrew, our highly experienced executive leadership team are well placed to lead Invesco into the next chapter. I’m excited for the future of the firm as we build on our market-leading position to further accelerate growth on our Andrew’s leadership and that of the executive leadership team. This is the most talented experienced leadership team Invesco’s ever had, from Andrew, Alison and the rest of ELT. I could not be more excited. I will continue to work with Andrew and the team as Chairman Emeritus from June 30 through the end of 2024. Before we turn over the call to Allison, I’d like to introduce Andrew, invite him to say a few words. Andrew?

Andrew Schlossberg: Great. Thank you, Marty, and good morning to everyone. Let me start by saying how grateful I am to Marty for his tremendous leadership as Invesco’s CEO these past 18 years. Marty has truly been a visionary in the industry, and he’s positioned Invesco extremely well to win in a fast-changing environment. And during my 22 years at Invesco and working closely with Marty during his tenure as CEO, I’ve seen it have been a part of the evolution of our firm. And during this time, we have routinely updated our strategic priorities ahead of changing client needs, evolve the leadership and develop the talent of the firm. And I’m looking forward to the opportunity to build on this strong foundation and a legacy that Marty and our team have developed over many years of hard work and dedication for our clients, our shareholders and everyone at Invesco.

I know that we have the right capabilities. We have deep client relationships, strong talent and an experienced executive leadership team in place to be a force in the asset management industry for years to come. I’m also looking forward to assuming the CEO role at a time when, once again, our industry is going through a meaningful change with new technological developments, enhanced client delivery capabilities and a high bar for investment quality. As an organization, we’re committed to our growth strategy and the key capabilities that we’ve been discussing with all of you, including ETFs, Greater China, private markets, active fixed income and active global equities and our solutions offering. Our executive leadership team is focused on further enhancing these capabilities and evolving these strategic priorities, both at pace and with conviction.

And as Marty noted, we’re very well positioned to capture demand and develop even deeper relationships with our clients over time. I’m also committed to driving a high level of profitable growth and financial performance, continuing to further strengthen our balance sheet and return capital to shareholders. And finally, I’m excited to engage more deeply with the investment community, and I look forward to spending time and working with all of you in the quarters and years to come. And with that, I’m going to turn it over to Allison to provide a more detailed look at our results.

Allison Dukes: Thank you, Andrew. And good morning, everyone. I’ll start with Slide 4. Overall, investment performance improved in the first quarter with 64% of actively managed funds in the top half of peers or beating benchmark on both a three-year and a five-year basis, up from 61% and 63% in the fourth quarter. We have strong performance strength in fixed income and balanced strategies for their solid client demand. Performance lacked benchmark and certain U.S. equity strategies, but performance is trending positively and a number of global equity and alternative strategies. Turning to Slide 5. We ended the first quarter with $1.48 trillion in AUM, an increase of $74 billion as compared to the last quarter as most market indices posted gains despite continued volatility.

Market increases, foreign exchange movement and reinvested dividends increased assets under management by $65 billion. Total net inflows were $9 billion, inclusive of $8 billion into money market products. I’m pleased to note a return to organic growth as we generated $2.9 billion in net long-term inflows in the first quarter. The improvement in net flows, given the ongoing uncertainty in financial markets, further demonstrates the diverse nature of our business mix and should once again place Invesco among the best-performing asset managers in terms of organic growth. Asset capabilities generated net inflows of $5.4 billion while net redemptions and active strategies moderated with net long-term outflows of $2.5 billion in the first quarter as compared to $10.5 million in the fourth quarter of last year.

Key capability areas, including ETFs, fixed income and the institutional channel, all contributed to our growth this quarter. Invesco ETF generated $2.8 billion of net long-term inflows in the first quarter, equivalent to a 4% annualized organic growth rate. Volumes have been down across the ETF industry from the record highs experienced in the first quarter of 2021 through the first quarter of 2022. But as Marty noted, our ETF business has now been in net inflows for 10 out of the past 11 quarters. The NASDAQ 100 QQQM was one of our top-selling ETFs this quarter and has now grown to over $8 billion in AUM since its launch in late 2020. We also saw strong flows into our S&P 500 Equal Weight and BulletShares corporate bond ETF. Partially offsetting growth in equity and fixed income ETFs were $2.5 billion of net outflows and currency and commodity ETFs, which are included in our alternative asset class.

We experienced net outflows of $3.7 billion in the retail channel during the first quarter. Net flows were roughly breakeven in EMEA, while Asia-Pacific and the Americas were both in net outflows. As Marty highlighted at the top of the call, the institutional channel garnered net inflows for the 14th straight quarter to $6.6 billion. We were net inflows in all three of our global regions and growth accelerated to 7% on an annualized basis. After several quarters of strength in institutional fixed income, equity mandates were responsible for our largest fundings in the first quarter. Advancing to Slide 6, net flows by geography improved as compared to last quarter and turned positive for the quarter in both Americas and EMEA. This was mainly due to slower redemptions in the retail channel as well as the funding of several institutional mandates.

Net flows were breakeven in Asia-Pacific and net outflows in our China joint venture were offset by growth in Japan and our Hong Kong institutional business. Looking at flows by asset class, net outflows and active equity strategies improved in the first quarter, led by moderating of redemptions in our global equity capabilities. Net outflows in global equity strategies were $2.5 billion in the first quarter, including $1.2 billion from our developing markets funds, compares to $6 billion of net long-term outflows in the fourth quarter, which included $3.1 billion of outflows from developing markets. Fixed income capabilities garner $2.5 billion in net long-term inflows despite higher redemptions in Chinese fixed income products that Marty spoke of earlier.

Growth in fixed income this quarter spanned both taxable and tax exempt offerings as well as the full range of vehicle types, including mutual funds, ETFs and SMA. This reflects the breadth and depth of our global fixed income franchise, and we see opportunity in this asset class over the remainder of this year. Alternatives experienced net outflows of $3 billion in the first quarter. Private markets net inflows were $600 million, driven by the launch of three CLOs that raised $1.5 billion in aggregate and direct real estate net inflows of $600 million. Offsetting growth in these areas of private markets were net outflows in bank loan strategies. Currency and commodity ETF net outflows, as I mentioned earlier, were the primary driver of alternative net outflow.

I’d like to take a moment to highlight our direct real estate portfolio, which had $73 billion of assets under management as of March 31. Through our real estate business, we offer the full range of investment styles across the risk-return spectrum, and we invest primarily in real estate equity. We also invest in real estate debt, which comprises less than 10% of our global real estate portfolio. Our direct real estate holdings are well diversified by property type. Commercial office properties comprise about one third of our assets under management. Apartment and other residential properties account for nearly one quarter and industrial properties about one fiffth. The remaining 20% of our properties span retail and specialty sectors, including mixed-use development, self-storage and medical.

Finally, we are diversified by geography within each property type. By total asset value, 40% of our office holdings are in EMEA and Asia-Pacific where the market dynamics affecting demand for office space are significantly different than those in the United States and because the adoption of remote working model is much lower outside the U.S. Several of our direct real estate funds use leverage but were measured in our approach and the average loan-to-value across our direct real estate funds was approximately 30% as of December 31. These figures may fluctuate over time, and they vary across specific funds. As Marty mentioned earlier, real estate transaction activity slowed during the first quarter and we would expect activity to be muted over the balance of the year until markets find more stable footing.

Longer term, we expect private markets and more specifically, direct real estate and private credit to be a driver of growth and we are in a strong position to capture that demand. And now moving to Slide 7. Our institutional pipeline was $22.1 billion at quarter end, a decrease from $30 billion last quarter. We had good pull through from our pipeline in the first quarter, which contributed to $6.6 billion of net long-term input. Our pipeline has been running in the mid-20 to mid-$30 billion range dating back to late 2019. So this is on the lower end of that range, but we view this pipeline as strong given the market environment and the significant fundings that took place in the first quarter. As we’ve noted previously, market volatility is causing some mandates to take longer to fund, and we would estimate the funding cycle of our pipeline is running in the three to four quarter range versus the two to three quarters prior to the market downturn.

Our solutions capability enabled 14% of the global institutional pipeline as of the first quarter as well as several of the mandates that funded recently. We embed solutions into our client interactions, and we have ongoing engagement about new opportunities. The pipeline reflects a diverse business mix but has helped Invesco sustain organic growth in institutional for more than three years now. Turning to Slide 8. Net revenue of $1.08 billion in the first quarter was $32 million or 3% lower than the fourth quarter and $176 million or 14% lower than the first quarter of last year. The decline from last quarter was mainly attributable to a seasonal decrease in performance fees which were $50 million lower and two fewer days in the first quarter, which accounted for nearly $25 million in lower net revenue.

This was partially offset by higher investment management fees of $25 million. The decline from the first quarter of last year was due largely to lower investment management fees driven by lower AUM levels. Total adjusted operating expenses in the first quarter were $749 million, $20 million lower than the prior quarter and $9 million lower than the first quarter of 2022. Compensation expense increased by $12 million as compared to the fourth quarter as seasonally higher payroll taxes and benefits were largely offset by the lower incentive compensation paid on performance fees. Included in compensation expense this quarter is $13 million of costs related to executive retirements and other organizational changes. We expect to recognize approximately $20 million of additional costs related to executive retirement in the second quarter.

As we discussed, we managed variable compensation to a full year outcome in line with company performance and competitive industry practices. Historically, our compensation to net revenue ratio has been in the 38% to 42% range, trending towards the upper end of that range and periods of revenue decline. At current AUM levels, we would expect the ratio to continue to trend towards the higher end of that range for 2023 when excluding the cost pertaining to executive retirement. Marketing expenses of $28 million were $6 million lower than the prior quarter, coming off the seasonal highs we typically see in fourth quarter. Marketing expenses were modestly higher than the same quarter last year by $2 million. Property, office and technology expenses were $5 million lower than last quarter, primarily due to lower software costs and $2 million of property decommissioning associated with our Atlanta move that did not occur.

On that note, I’m happy to share that we are speaking to you from our new global headquarters in Midtown Atlanta as we completed our move earlier this month. G&A expenses of $95 million were $21 million lower than the prior quarter partly due to lower third-party spend on technology projects. As we discussed previously, we continue to invest in foundational technology programs that will enable future scale. These expenses span G&A and property office and technology expenses and spend may fluctuate from period to period. In the first quarter, we also benefited from $10 million in indirect tax credits. We do not anticipate these tax credits will recur at these levels going forward. We maintain an extremely disciplined approach to expense management and are focusing hiring and investment in the key capability areas that are driving our growth.

As Marty and I have discussed previously, optimizing resource allocation to efficiently drive growth has and will continue to be a top priority for the organization. Now moving to Slide 9. Adjusted operating income was $327 million in the first quarter, $12 million lower than the prior quarter due to lower net revenue, partially offset by lower operating expenses. Adjusted operating margin was 30.4% broadly in line with 30.6% in the fourth quarter, but lower than the 39.5% a year ago prior to significant market declines. Excluding $13 million of costs related to retirement and other organizational changes, first quarter operating margin would have been 31.6%, an increase of 100 basis points as compared to last quarter. Earnings per share of $0.38 was $0.01 lower than prior quarter and $0.18 lower than the first quarter of ’22.

Excluding these expenses related to executive retirements and other organizational changes in the first quarter would add $0.02 to earnings per share. The effective tax rate was 24.1% in the first quarter, lower than 26.9% in the prior quarter, primarily due to nonoperating gains on seed money investments and lower tax jurisdictions. We estimate our non-GAAP effective tax rate to be between 23% and 25% for the second quarter of this year. The actual effective rate may vary from this estimate due to the impact of non-recurring items on pretax income and discrete tax items. I’ll wrap up on Slide 10. As you heard earlier from Marty and Andrew, building balance sheet strength remains a critical priority. We’re making steady progress and total debt of $1.5 billion is at its lowest level in more than a decade.

We ended the quarter with $889 million of cash and cash equivalents and 0 borrowing on our credit facility. The first quarter is typically a period of seasonally higher cash fees, and we anticipate building cash in the coming quarters. Our leverage ratio, as defined under our credit facility agreement was 0.8 times at the end of the first quarter, in line with both last quarter and the first quarter of 2022. If preferred stock is included, our fourth quarter leverage ratio was 3.4 times. As highlighted earlier, we’re pleased to note that our board approved a 7% increase in our quarterly common dividend to $0.20 per share, effective this quarter. This reflects the strength of our balance sheet, cash position and stable cash flows despite the uncertain markets we have been facing.

We also renewed our credit facility for another five years with favorable terms as well as increasing the capacity of the facility from $1.5 billion to $2 billion. This builds additional flexibility for managing our balance sheet as we prepare to redeem the $600 million senior note maturing in January of 2024. Markets have remained volatile thus far in ’23. There have also been signs that a modest recovery could be on the horizon. Overall, I’m pleased with the progress we made this quarter, returning to organic growth, tightly managing expenses and methodically building balance sheet strength. Our firm has successfully navigated market volatility in the past. We’re poised to emerge stronger in a market recovery and capitalize on future growth opportunities where they emerge.

There’s a lot of hard work ahead of us, and I’m excited to partner with Marty, Andrew and the executive team as we lead Invesco into a new era. And with that, we’ll ask the operator to open up the line to Q&A.

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Q&A Session

Operator: Thank you. Our first question comes from Craig Siegenthaler with Bank of America. Your line is open.

Craig Siegenthaler : Thanks, good morning everyone.

Allison Dukes: Hey, Craig.

Craig Siegenthaler : So my question is on China. So you’re seeing bond flows improve really throughout much of the world, but not in China. And I’m guessing the comparatively low interest rate backdrop in China versus the U.S. could be one factor. But can you talk about what’s driving the net redemptions in China, not just in your Great Wall JV but across the industry? And also any perspective you have on a rebound, especially given pretty strong long-term dynamics, including aging populations and retirement?

Marty Flanagan : Yeah. I’ll make a couple of comments and Allison, Andrew can chime in. So as I said, our view has not changed. It’s the single greatest opportunity in asset management, and we have a very, very strong position there. You’re right. What’s really happening is really coming out of this COVID period and frankly, Andrew and I, with the leadership, we were just in China two weeks ago, and I feel they’re absolutely focused on economic growth. You can actually feel it as the energy is very, very high. I anticipate the markets will start to follow that in investor behavior behind that. And for sure, by the second half of the year, if not before. And we do look at this first quarter and early December last year is really a transitional period and the redemptions that you saw in fixed income there.

But again, we’re starting to see behavioral change and frankly, starting to look towards some more balanced equity products to — in China. So we continue to be bullish about the long term.

Allison Dukes: Yeah. I would just say specifically, Craig, I mean, what you saw is the yields really increased in the fourth quarter, and that obviously drove prices lower. And that caused a bit of a spook and it really set investors to redeem and drive redemptions higher industry-wide. So I think to your point around what are we seeing in the industry, and that was really an industry phenomenon that drove that behavior. It was very pronounced coming into the first quarter. We’ve definitely seen it begin to moderate the first quarter unfolded and feel better as we’re starting the second quarter for sure as we see what’s happening there. That also drove product launches lower. And as you know, product launches drive a lot of the flow activity in China.

And so in the first quarter, we only launched four products, and they were relatively low in terms of the flow capture there. And again, that was consistent with a lot of the industry dynamics. We’re optimistic to see more in the second quarter. We have a pretty strong pipeline of product launches, and we’re optimistic that market sentiment is improving modestly and a lot of the dynamics in that phenomenon should have played itself out.

Craig Siegenthaler : Great. Thank you, Allison. And just as a follow-up, I really appreciate those details behind the real estate business. But as you take a step back, how much of that $73 billion of AUM is in vehicles that can be redeemed versus vehicles that are more permanent or long term and can’t be redeemed? And then is there any high-level data you can give us to give us some comfort around especially the office portfolio? I’m thinking loan-to-value, interest coverage, ratios like that.

Allison Dukes: Sure. Let me take a stab. I’m not sure if I could answer exactly what percentage could be redeemed. I think what I would say is, in general, through cycles we see on average about 5% to 6% of our AUM and a redemption queue. You would expect it to be a little bit higher than that in times of market stress. You’d expect it to be a little bit lower in better markets. And I’d say we’re probably running a little bit higher than that 5% to 6% at the moment, but it’s not in a disconcerting way. It usually takes a few quarters to fully fulfill some of those redemption requests. And then we also see that in times of equity market recovery, some of those redemption requests actually get canceled. So you manage through, and we’ll see where it goes, but we don’t feel any sort discomfort with where it is now nor is it unusual relative to past cycles as we think about coming into COVID.

I would note, we’ve been managing our office exposure down since COVID began in March of 2020. So when you look at where our office exposure was coming into 2020, it made up about 45% of our total portfolio. Today, that’s down to about 35%. And as we noted, that’s going to be even lower in the United States, and we’ve been managing it down more aggressively in the U.S. It’s going to trend quite a bit higher in places like APAC, where you just have not seen an impact to the office enviroment. In terms of loan-to-value, I would say, generally speaking, it’s about a 30% loan to value, it’s not running a whole lot higher than that. I will also say in terms of our lenders and the sources of that leverage, it’s very well diversified. No concerning exposures anywhere and we feel like we have a lot of diverse good sources of funding, and those have held up really nicely.

Craig Siegenthaler : Great. Thank you very much.

Operator: Thank you. Our next question comes from Daniel Fannon with Jefferies. Your line is open.

Daniel Fannon : Thanks, good morning. Andrew, I was hoping if you could expand upon the areas of growth, ETF, active fixed income, China solutions, all the areas that have been listed in the presentation and you talked about — Marty and team have talked about for some time. Curious about how you’re thinking about on the margin changing those areas of increased focus or less given the market backdrop today is much different than probably when these were outlined initially a couple of years ago?

Andrew Schlossberg: Yeah. Thanks, Dan. Look, like I said at the beginning, over the whole course of my career, the last 20-plus years at Invesco, we’ve been continuously updating our strategic priorities and adjusting and changing where client needs are going and where we anticipate them going. And I’ve been a part of putting together those strategic priorities that Allison and Marty have been talking to you all about over the last year or two, and I frankly don’t see any of those really changing in terms of our priorities at all. But what I would say is how do we come up with them. And they’re really a function of where we believe client demand will grow and where we think we have competitive strength to build on. And so the areas that I would highlight will sound similar to what you’ve heard before.

I’d really emphasize the barbelling of client needs between also private markets, and ETFs and indexing is a huge part of the growth and where we have strong franchises. We’ve talked about China as a growth market for us, and we believe in that regardless of geopolitics and ebbs and flows and cycles. We have strong franchises and active fixed income and solutions and we’re going to continue to scale those. And we’re going to ensure we have quality and differentiation in our active equity with an emphasis on global in particular. And we’re going to continue to build scale through the back and middle office transformations we’ve been talking about with investments in both foundational technologies and innovation for enhancements. And I guess what I’d say is we’ll continue to look at those and evolve them.

The team is highly focused on executing — we’re going to continue to accelerate the pace with regard to that and continue to get sharper on our strategic execution to deliver. So that’s pretty much where we are right now, and we’ll continue to keep you updated.

Daniel Fannon : That’s helpful. And then, Allison, just wanted to clarify some of the expense numbers you gave for the quarter. I think you said there was a $10 million onetime benefit. I think that was in G&A. But maybe if you could talk about what the kind of right run rate as we think about the rest of the year based upon what we got here in the first quarter in terms of expense levels?

Allison Dukes: Sure. So yes, I noted that there was a $9 million indirect tax credit that was in G&A, and that would not recur. So you shouldn’t expect that. I also noted that inside of comp expense, we have an unusual $13 million of retirement expense related to our executive changes. And we expect to incur another $20 million related to the same in the second quarter of this year. And so when you think about the $9 million that won’t recur plus the next $20 million of retirement expense, I would say beyond those, we would expect we can hold expenses roughly flat for the next few quarters, adjusting for variable comp, of course, and that’s roughly flat as all things being equal, but we would adjust variable comp in line with market changes.

Daniel Fannon : Understood. Thank you.

Operator: Thank you. Our next question comes from Brennan Hawken with UBS. Your line is open.

Adam Beatty : Thank you. And good morning. This is Adam Beatty in for Brennan. Just wanted to ask about the institutional pipeline and maybe the pipeline to the pipeline, if you will, how discussions are going there, products or areas of interest. And I think in the past, you’ve also said that the blended fee rate on the institutional pipeline is roughly the same as the firm-wide blend. Wondering if that’s still true after all the 1Q fundings? Thank you.