Marty Flanagan : Yeah. Let me make a couple of comments, Allison will chime in here. So let me talk about outside of the United States, as I mentioned, Andrew and I were just out in Asia. The client interactions in China are very strong. We continue to expect growth there institutionally. Japan, also, we look at that as a market fixed income market, in particular, actually the equity. There’s demand for equity in Japan, which has been a while since that’s been the case, global equity in particular. And Australia, the client interactions are very strong and that market, in particular, is very much along the line what Andrew just mentioned have been very barbell oriented probably the most extreme that sort we sort of run into and we’re positioned very strongly against that, whether it be in private credit is an area of more recent interest where historically it has been I believe real estate and you’ve heard of our success on the passive side in Australia.
And the same thing in the UK, it’s the institutional market continues to be an area for us, fixed income, in particular, actually . So it’s all heading to right way institutional but —
Andrew Schlossberg: I mean, we’re well positioned with the strategies that Marty was just alluding to, where we’re seeing more and more investor interest be it private markets or indexing fixed income, multi-asset, all sort of in demand. One thing I’d say is Allison can maybe share a couple of details definitely with dislocation that’s going on in the market over the last several quarters, we are seeing institutions sort of rethinking their allocations. It’s putting decisions in motion that we think are going to be opportunities for us to capture. At the same time though, it is delaying some of those decisions as they’re looking for more clarity. So it’s a bit of both ends of the spectrum story.
Allison Dukes: Yeah. Adam, I just add on the fee rate. And the fee rate does tend to run from — it ranges from mid-20s to mid-30s basis points. It has been actually holding up very nicely. If you think about the information that we shared on Page 7, you can see a large portion of the pipeline is comprised of active equities as well as alternatives and specifically, that would be private markets primarily. So it is running on the higher side. I was pleased to see the active equity component of it, recognizing we had some meaningful active equity fundings in the first quarter, and the pipeline is replenishing nicely in a really well-balanced way. It does reflect the barbelling that Andrew noted, but it’s holding up nicely in terms of fee composition.
Adam Beatty : Excellent. Thank you for all that detail. I appreciate that. And then just a quick follow-up on G&A, and you had a couple of callouts. But just in terms of the sort of third-party spend, I was wondering if that was unusually lower what the trajectory might be looking like for that in the future, just in terms of cost control, it sounds like you’ve got that pretty well in hand. But just curious on the outlook there? Thank you.
Allison Dukes: It was on the low side this quarter, and I would expect it to fluctuate more. I don’t expect that lower third-party spend would hold necessarily. But as we noted, the technology, foundational enhancements we’ve been making, you’re going to see that show up in G&A and property office and technology. So I think my comment earlier in response to Dan’s question around excluding the indirect tax benefit and excluding the retirement expense, I would expect expenses to be roughly flat for the next few quarters, all things being equal.
Adam Beatty : Got it. That’s great. Thank you, Allison.
Operator: Thank you. Our next question comes from Bill Katz with Credit Suisse. Your line is open.
Bill Katz : Okay, thank you very much. Marty, congratulations on your next phase of your career and Andrew as well. So just coming back to the private market, private credit opportunity. Could you maybe talk a little bit, go into the next layer down in terms of where you see the opportunity on direct lending? And then incrementally, where else you might sort of need to spend? And then, Andrew, you mentioned you’re seeing some reallocations by institutions. Can you talk about where they’re coming from to fund some of the new opportunities? Thanks.
Marty Flanagan : Let me have a couple of comments and I’ll say here. So first of all, Bill, thanks for your comments. The fundamental strength is bank loan CLOs, and that is the core of the franchise. We have been building out the same direct lending. We do see that as an opportunity. We also know some crowded space. But we have good capabilities for performance. So that is a focus for us in private credit also where we are certainly see a manager institutionally led. Frankly, Australia tends to be an area that’s focused on right now on our capabilities. So we’ll see where that goes. But again, those are two add-ons of our core capabilities there, and we think there’s opportunity.
Allison Dukes: I don’t know if I’d add anything there. I’ll say this, and I’ll let Andrew chime in because I think you actually interacted that last part of the question there. In terms of where we expect to — how we expect to continue to fund growth in the key capabilities, I would just say that’s exactly what we’ve been doing for the last two years. And so as you think about the fact that we’ve been managing expenses lower for the last 18 months. Obviously, that’s been against a very challenging market backdrop. We’ve been investing throughout and we have been reallocating ever since we did our strategic review a couple of years ago, consistently reallocating expenses to fund these key growth capabilities. So the growth of China, the growth of private markets, the growth of our fixed income business, our ETF franchise, we have been investing all along the way and really holding expenses very tightly managed, well maintained alongside that.
So I just want to make sure it’s clear that’s not a new strategy. That’s exactly what we’ve been focused on as a team.
Andrew Schlossberg: And Bill, thanks for the question. What I would add to Allison’s last point and then to pick up on Marty’s is just to emphasize what Allison said that reallocation is going to continue. And it’s going to continue towards private markets, both our real estate equity and debt and our private credit, which comprises the bank loan strategies that Marty was talking about as well as direct lending and distress that. We see demand over the long run continuing to grow there. In terms of your question about where we’re seeing money come from, it’s a little early to pinpoint it exactly. But a couple of things we’re seeing. One, we’re actually seeing people moving beyond their passive cap-weighted benchmarks and actually moving out to other forms of indexing, but also into active strategies, both on the equity and fixed income side, which we think is a real positive thing.
We’re also seeing them kind of reallocate across their private markets and alternative portfolios leaning more towards some of the things that we were emphasizing in credit. But again, that’s early days as people are working through their private portfolio is taking a little bit longer. So those are some of the areas where we’re seeing movement.
Bill Katz : Okay. Thank you. And then just as a follow-up, you mentioned that to continue to build the balance sheet as you go through this year in anticipation of sort of paying down the debt in January of next year. Looking beyond that, could you talk a little bit about capital management priorities and how you think about M&A, what you might need versus capital return? Thank you.
Marty Flanagan : Yeah. Let me make comments and turn it over. So — just at a high level, our priorities don’t change. It has not changed, and Andrew and Allison can talk about it, is really reinvesting in the business. And I think we’ve probably done the best job that we’ve done as a management team of reallocating into areas of growth and sort of squeezing cost out of areas that are less an opportunity as you go forward. We’ve always looked at M&A as fueling a strategic gap if we can do it organically, and that really has not changed. But Andrew, why don’t you pick up with your thoughts there?
Andrew Schlossberg: Yeah. I mean just to absolutely emphasize what Marty said, the commitment to our balance sheet and improving it remains a significant focus for me and the executive leadership team moving forward. We’ll continue the priorities that Allison and Marty have described. With regard to M&A, just as Marty said, we feel really good about the portfolio of businesses we have, the geographies, the position to our clients, and we feel like we have scale and strength to move forward with the business we have today. We’ll continue to pay attention to the M&A environment, but it’s not the priority at the moment.
Allison Dukes: I think the only thing I would add to all of that is our strategy is to put our balance sheet in a position where we can be opportunistic. We feel very good about the capabilities we have, but we’re very focused on improving the balance sheet. I’m very pleased that we were able to raise the $2 billion in the midst of this environment over the last six weeks. We’ve got a terrific, very supportive group of lenders. I think it puts us in a great position to be able to continue to manage our leverage profile down both at the upcoming ’24 to be able to pay that off of a combination of cash and usage of the revolver. And beyond that, our next maturity is in 2026, it’s $500 million. I think we’ll be in a terrific position to continue to manage our capital structure down from there. So I think if anything, we feel like we’re on our front foot, and we continue to put ourselves in a position to operate on our front foot.
Bill Katz : Thank you.
Marty Flanagan : Thanks, Bill.
