Specific to parametric and across the entire franchise, overlay and long-term net flows in the quarter were almost $7 billion, underscoring strong trends in this business. Asset management and related fees were $1.3 billion, up 3% year-over-year on higher average AUM. Performance-based income and other revenues were $24 million, supported by the diversification of our balance sheet light platform. Results were driven by gains in U.S. private equity, offset by weakness in Asia private equity and real estate. Our strategic focus on secular growth areas and the expansion of our global footprint remains in place. Ongoing investments in our businesses, including our market-leading parametric franchise, as well as our continued growth and innovation in private markets, position us well to best serve our clients.
Turning to the balance sheet, our CET-1 ratio stands at 15.5%, roughly flat versus last quarter. Standardized RWA has declined sequentially to $445 billion, reflecting our ongoing prudent resource management and market movements at the end of the quarter. We continue to deliver on our commitment to return capital to our shareholders, buying back $1.5 billion of common stock during the quarter. Taken in the context of the mixed environment, we are pleased with the firm’s resiliency and our competitive positioning. As clients gain more conviction, we expect our institutional business to capture more opportunities, particularly in investment banking. This increased client conviction will also further support asset growth and wealth and investment management.
We will continue to press our advantages and execute on our growth strategies all while currently managing our capital profile. With that, we will now open the line up to questions.
Operator: We are now ready to take any questions. [Operator Instructions] We’ll go first to Christian Bolu with Autonomous Research.
Christian Bolu: Good morning, James and Sharon. I wanted to just touch on wealth management, a bit of a longer-term question here. As you mentioned, you’ve enjoyed really strong organic growth in that segment over the last few years. But it doesn’t appear to be translating to revenue growth. If I look at the wealth management revenues excluding NII, it hasn’t really grown in three years, despite gathering significant amount of assets? So curious how you’re thinking about the flow through from AUM or asset growth to revenues? And then maybe more broadly how you’re thinking about the unit economics of your asset gathering strategy?
Sharon Yeshaya: Sure, actually I think that interestingly enough Christian I’m pretty impressed with the resiliency that we’ve seen in the business. This is literally the explanation of the funnel that we’ve talked about. If you look back over the course of the last year alone $260 billion or $235 billion of assets that we’ve captured. Then look at the fee-based flows, right? We continue to see increased fee-based flows. This past year, if you exclude the asset acquisitions that we had over the last couple of years, we are basically at some of the historical highs of seeing fee-based growth as we move forward. You’re looking at times since COVID, where we obviously had very high retail engagement, and you’ve been able to offset, even with a decline in NII, offset those growths to asset-based, asset management revenues as you move forward.
It’s that, that we are trying to grow. We’re trying to continue to grow our asset management fees over time and make sure that we have the right solutions in place to offer our clients. Now let’s take that forward. We have this mixed environment. You have 23% of our retail client assets sitting in cash, that is 5% higher, right, from the 18% on historical averages. We’ve begun to see retail investors put their cash into markets. The last four months — in consecutively, we’ve seen that movement into the market. This quarter alone, we began to see alternative growth in the new products, the growth in transactional revenues. We haven’t seen that since the first quarter of 2022 before you started this rate hike cycle. So in my mind, actually the strategy is working pretty darn well, especially if you think about how we’ve been able to aggregate assets, migrate them into fee-based flows, look at transactional and see that growth — and see growth in these new products and deliver them to our clients, all while these clients have dry powder to invest as these markets turn.
Christian Bolu: Okay, thanks, Sharon. Maybe my follow-up is just thinking about your ROTCE targets over time of 20%. You know, the quarter is fine, 14% is nothing to sniff at, but it is some ways off that 20%. How should we think about the bridge from here? I know you’ve mentioned investment banking, but it seems like a fairly small part of your business. So what’s the bridge to 20%? How much of it is macro? How much of it is self-help? And for what is macro, what sort of operating backdrop are you looking for? Thank you.
James Gorman: Well, Christian, maybe I take that given Sharon just pummeled you and I want to give you a little bit of a break here. By the way, the only thing I’d add to what Sharon said is when people have a choice of making a 4%, 5% return by doing nothing, they’re not going to be trading in the other market. So the actual secondary lines in the revenues of the lowest I’ve seen for years in the last couple of years as rates do eventually come down, they will come down, I don’t think next year, but they’ll come down after that. You’ll see more activity in that regard and actually you’ll see more money go up in the sweep. So interestingly, there’s kind of an optimal point where rates are attractive for investors, but not so high they keep them out of the market and not so high that there isn’t money kept on sweep.
So very different from the checking account phenomenon you see at some of the commercial banks. But back to the 20%, I mean, I just say, as you know, we actually, we were at 20%. So it’s not — this is not a — this would not be a remarkable achievement. It’s a bit like when I first came to Morgan Stanley and people asked me if the wealth management business could generate, in those days 15% margins. And I said, well, there are two people already doing it, so it’s pretty obvious it can be done. So we’ve done it and nothing structural has changed. If anything, the firm’s got stronger, we’ve been investing a lot. I mean, this E-Trade deal was, you know, it was a lot of investment to get that integration done. We decided to keep investing through the cycle on the funnel and wealth, because we think over the next 10-years that’s going to pay monster dividends.
The integration across all the Eaton Vance platforms, they were never really integrated as one platform across the different, you know, Atlanta, Calvert, Parametric and Eaton Vance and now sorting through all of that, which Dan has done a great job of doing. And then frankly, banking has been really weak. I mean, under a billion dollars is evidence of a very weak calendar and very weak M&A. And the pipeline we saw this quarter was really strong. So I don’t think the announcements won’t translate into revenues in Q4, but they will in Q1, Q2 next year. So just on the math, I think if we’re running about $2.2 billion we’d have to generate about another $700 million net a quarter. Just on the expense management, we could do things on expenses easily, more than we’ve done.
And you could get a couple of hundred million from that. And then on the revenue side, as banking recovers, some of the transaction stuff we just talked about and Sharon pointed out, these assets moving into a pneumatized product. And then I think Fed will move up from this point. You pretty easily get to the 20%. So I appreciate the question and I’m not concerned about that long-term outlook. I think it’s — as it has happened and will happen again and frankly won’t be that long.
Operator: We’ll go Next to Glenn Schorr with Evercore ISI.
Glenn Schorr: Hi, thank you. Sharon, first one on wealth management and NII. I mean, the trends I think are in the range of what’s been happening across the industry. So not overly surprising. But I’m curious if you could break down even qualitatively how much of that sweep movement is coming in historical mortgage family versus E-Trade? I’m just trying to see what type of client is moving? And then to go back, you piqued my interest, James, in the comment you just made about not next year, but maybe after that. What conditions do you think we need to see for wealth management NII to stable and grow?
