AFFILIATED MANAGERS GROUP, INC.(MGRB)Q3 2024 法說會逐字稿

Greetings, and welcome to the AMG Third Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Patricia Figueroa, Head of Investor Relations for AMG. Thank you. You may begin.

Good morning, and thank you for joining us today to discuss AMG's results for the third quarter of 2024. Before we begin, I'd like to remind you that during this call, we may make a number of forward-looking statements which could differ from our actual results materially, and AMG assumes no obligation to update these statements. Also, please note that nothing on this call constitutes an offer of any products, investment vehicles, or services of any AMG affiliate. A replay of today's call will be available in the Investor Relations section of our website, along with a copy of our earnings release and a reconciliation of any non-GAAP financial measures, including any earnings guidance announced on this call. In addition, this morning, we posted an updated investor presentation to our website and encouraged investors to consult our site regularly for updated information. With us today to discuss the Company's results for the quarter are Jay Horgen, President and Chief Executive Officer; Tom Wojcik, Chief Operating Officer; and Dava Ritchea, Chief Financial Officer. With that, I'll turn the call over to Jay.

Thanks, Patricia, and good morning, everyone. AMG delivered another quarter of strong results with 18% growth in economic earnings per share, reflecting the ongoing momentum in our business and the positive impact of our capital allocation strategy. Our growth strategy continues to drive the evolution of our business mix towards secular growth areas, with alternative strategies meaningfully and increasingly contributing to AMG's earnings. The ongoing demand for our specialized private market strategies accelerated in the quarter, as evidenced by the $7 billion in new capital raised at Pantheon, Forbion, EIG, Peppertree, and Comvest. In addition, our liquid alternative strategies generated positive flows in the quarter, and we see opportunities for organic growth, particularly at AQR as demand for tax-aware alternative solutions in the US wealth channel continues to build. Stepping back, the growth investments we have strategically and deliberately made over the last several years have played a critical role in reshaping AMG's business profile.

Having invested our capital in firms and initiatives aligned with long-term growth trends, most notably in alternative firms operating in specialized areas where independent partner-owned firms thrive, AMG's affiliates now manage more than $265 billion in client assets and alternative strategies, where approximately one-third of our AUM split between private markets and liquid alternatives, which together generate approximately half of our EBITDA. As we further shift AMG's business profile towards alternatives, we believe we are not only improving our long-term organic growth prospects but also enhancing the stability of our cash flow. By increasing our private markets exposure, we expect that the quantum and duration of locked-up capital in our business will grow, and as we expand and diversify our footprint in liquid alternatives, we expect that AMG's earnings power will be even more resilient across all stages of a market cycle.

In total, our affiliates operate across private markets, liquid alternatives, and differentiated long-only strategies, and this diversified portfolio of high-quality independent partner-owned firms is not only a distinct competitive advantage, but it also supports our capacity to continue investing across our opportunity set in the areas of highest growth and return to benefit our shareholders. AMG continues to be a beneficiary of the broad and increasing client demand for alternative strategies, and I am especially excited about the democratization of alternative strategies in the wealth channel. AMG's US wealth platform is uniquely positioned to enable our affiliates to capitalize on this trend as wealth investors increase their allocations to both private markets and liquid alternatives. AMG has been a leader in product innovation, including through the seeding, packaging, and distribution of new private markets and liquid alternative solutions.

Throughout 2024, we have continued to build on our success in the wealth channel, including through the launches of a number of new alternative strategies in this attractive client segment. Today, we have more than $5 billion in assets from alternative products on AMG's US wealth platform, and looking ahead, we expect to continue to scale our excellent existing product lineup and introduce new innovative products while also accessing new clients and platforms outside the US through AMG's strategic relationships. More broadly, in addition to working with our affiliates on their product growth opportunities, AMG's ongoing strategic collaboration continues to position our affiliates for enhanced long-term success across a range of areas, including business development and strategic planning, capital formation, distribution, product development, succession planning, and incentive alignment. As we continue to deploy our capabilities to enhance our affiliates' long-term success, we will further distinguish AMG as a strategic partner to prospective new affiliates.

Our proven ability to magnify the competitive advantages of partner-owned firms while also preserving their independence continues to differentiate AMG's partnership model and is highly valued by prospective affiliates. Since the beginning of the year, we've advanced our new investment pipeline, including several opportunities that are now in the later stages of discussion, and our broader transaction pipeline of potential new investments remains strong. AMG's business profile is evolving and our opportunities to invest for growth are expanding. Given the strength of our balance sheet and significant ongoing liquidity, we have ample capital flexibility to both execute on these growth opportunities and continue to repurchase our shares, and as always, we will remain disciplined as we evaluate capital allocation decisions. As I reflect on the progress we've made over the past five years, each element of our growth strategy—investing in new affiliate partnerships, investing in our existing affiliates, and investing in AMG's capabilities to magnify our affiliate success—is driving the evolution of our distinctive business profile towards secular growth areas. And as we continue to execute on our strategy, we see increasing opportunities to create meaningful additional shareholder value over time. And with that, I'll turn it over to Tom.

Thank you, Jay, and good morning, everyone. AMG's business profile continues to evolve, driven by the strong organic growth of our affiliates managing alternative strategies, the increasing EBITDA contribution from new investments made over the past few years, and our enhanced strategic capabilities, including product development and capital formation. In the third quarter, our net client cash outflows of $3 billion were a significant improvement compared to the year-ago period. AMG's organic growth story continues to be bifurcated with strength in private markets fundraising and ongoing client demand for alternatives more broadly, offset by industry headwinds in active equities. We expect organic growth and alternatives to continue, and together with investments in both new and existing affiliates, especially through product development and distribution, we will continue to actively evolve our business mix towards secular growth areas, which will in turn further enhance our long-term organic growth profile over time.

Our private markets affiliates generated $7 billion in net inflows in the quarter, bringing year-to-date fundraising to $18 billion and representing an annualized organic growth rate of more than 20%. In the quarter, a number of our affiliates' strategies exceeded their fundraising targets, including some of our most recent partnerships like Peppertree in the digital communication infrastructure space and Forbion in biotech and life sciences. The fundraising momentum of AMG's dedicated private markets affiliates reflects investors' conviction in their specialist investment strategies and the positive fundamentals of their sectors. We also generated positive flows in liquid alternative strategies, an area where we are seeing increasing opportunities for organic growth. As clients continue to focus on portfolio construction to address the changing market environment and more fully recognize the value of these strategies in their portfolios, we expect increasing allocations to liquid alternatives.

Within differentiated long-only strategies, we saw net outflows of approximately $10 billion in equities and flat flows in multi-asset and fixed-income. Despite continued industry headwinds, our affiliates managing differentiated long-only strategies have built enduring franchises with specialized investment expertise and long-term track records across market cycles, and as client demand trends continue to evolve, we are collaborating with our affiliates on developing new vehicles, including active ETFs to optimize the delivery of their strategies to clients. Our long-term flow profile continues to improve. And given our ongoing focus and strategy to evolve our business mix, we expect stronger and more predictable organic growth trends to materialize over time. Over the last several years, AMG has broadened its strategic capabilities to magnify affiliates' efforts, most prominently in product development and capital formation, and we are seeing tangible results.

Our ongoing collaboration with affiliates on capital formation initiatives is driving a number of exciting developments that position our affiliates for long-term success and accelerate AMG's growing exposure to alternatives. We recently filed for the public offering of the AMG Comvest Senior Lending Fund, a BDC where the combination of Comvest's excellent direct lending track record and AMG's demonstrated success in scaling private markets products in US wealth facilitated raising more than $500 million in seed capital, which positions us to hit the ground running in the RIA channel early next year with a diversified scaled portfolio. The fund is expected to be the fourth evergreen alternative solution on AMG's US wealth platform, in addition to the select affiliate drawdown offerings represented by AMG Wealth. We also recently concluded a second successful seed round for the AMG Pantheon Credit Solutions Fund and are concurrently in the market helping Pantheon sell similar private credit secondaries focused solutions, including on a large wirehouse platform.

Our continued collaboration with affiliates to develop and support alternative products for the US wealth market drove more than $0.5 billion of net inflows in the quarter, including at the AMG Pantheon Fund, one of the largest and most established private markets products in the channel, which has grown its assets under management to more than $4 billion, nearly doubling over the last 12 months, and we continue to work with our affiliates to bring new products to market to capitalize on the multi-decade growth opportunity in alternatives in US wealth. AMG's growth strategy across new investments, investments in existing affiliates, and investments to enhance our capabilities, especially in capital formation, is driving the evolution of our business mix towards secular growth areas. Over the last five years, our EBITDA contribution from alternative strategies has grown from one-third to approximately half, and as we continue to execute on our strategy, we expect the contribution from alternatives to further increase.

Thank you, Tom, and good morning, everyone. We continue to see strong momentum in our business given increasing average assets under management, the continued evolution of our business mix towards areas of secular demand, and the strength of our balance sheet. Taken together, these factors provide us with the continued capacity to execute on investments in growth areas and return capital to shareholders. In the third quarter, we had adjusted EBITDA of $214 million, up 3% year-over-year, which included $5 million in net performance fee earnings. These results primarily reflect higher earnings driven by growth in average AUM for the period and recent new investments that contributed to our results. This was offset by lower net performance fees and private market catch-up fees in the quarter compared to Q3 2023. Economic earnings per share of $4.82 further benefited from the impact of share repurchases and grew 18% year-over-year.

Now moving to fourth quarter guidance, where a reconciliation slide has been posted to the Investor Relations section of our website, where you can find detailed modeling items for the fourth quarter. We expect adjusted EBITDA to be in the range of $260 million and $270 million. This is based on current AUM levels reflecting our market blend, which was down 1% quarter-to-date as of Friday, and it includes net performance fee earnings of approximately $50 million. We expect fourth quarter economic earnings per share to be between $5.94 and $6.17, assuming an adjusted weighted-average share count of 31.3 million shares for the quarter. Stepping back, let's put fourth quarter guidance in the context of our expected full-year results and go-forward expectations. Our full-year performance fees are anticipated to be below our historical average of $150 million due to the underperformance at certain absolute return strategies.

However, we remain confident that performance fees will continue to meaningfully contribute to our earnings over the long term, especially since we expect a growing contribution from carried interest from private market strategies in the future. Additionally, the core foundational drivers of our business continue to improve. Our approximately $730 billion in AUM is at the highest level we've seen in more than two years. Our Q3 economic earnings per share, excluding performance fees, grew at nearly 25% year-over-year. Our balance sheet and capacity to execute on our growth strategy are as strong as they've ever been, and these factors have set us up for continued momentum and growth in earnings and are a direct result of the strategy we have been executing in shifting our business towards areas of secular growth. Finally, turning to the balance sheet and capital allocation. In the third quarter, we repurchased $103 million in shares, and on a year-to-date basis, we have now repurchased approximately $580 million, or 10% of our shares outstanding.

For the full year 2024, we expect to repurchase approximately $700 million in shares, subject to market conditions and new investment activity. In the quarter, we continued to strengthen our balance sheet and extend the duration of our debt maturities by issuing a 10-year $400 million institutional bond and using the majority of the proceeds to pay down our floating-rate term loan. Our debt profile is in an excellent position with an average duration of more than 20 years. And given our current cash and investment portfolio, we have the ability to repay all debt maturities through 2034. With the recurring annual cash flow generated by our business, the strength of our balance sheet and long-dated capital structure, and our current leverage position, we have ample capital flexibility to not only make growth investments in new and existing affiliates but also continue to return capital to shareholders.

Looking ahead, given our disciplined capital allocation framework and distinct competitive advantages, we remain well-positioned to execute on our growth strategy and generate shareholder value over time. Now we are happy to take your questions.

Thank you. At this time, we'll be conducting a question-and-answer session. Our first question comes from the line of Bill Katz with TD Cowen. Please proceed with your question.

Okay. Thank you very much. I appreciate the updated commentary. So just trying to triangulate between Jay, your commentary around the pipeline starting further seasoning. And Dava, it sounds like you're now sort of at $700 million of buyback versus maybe something a bit higher than that. How do we think about capital deployment from here? There's been a ton of transactions around you, and AMG has not been as visible. So just trying to understand where we are in terms of the pipeline and maybe the capital allocation as we look out to 2025. Thank you.

Thank you, Bill, and good morning. I'll address the new investment aspect, and then I'll invite Dava to discuss our capital deployment and repurchases. Regarding your question on the pipeline and its development, as I mentioned earlier, we have been actively advancing our pipeline this year. We currently have several opportunities progressing to the later stages, and the quality of those prospects is quite high. We are focusing on potential partnerships in both private markets and liquid alternatives, aiming to increase our exposure to long-term growth trends, which is reflected in our current pipeline. The timing for these opportunities varies, as it depends on the individual circumstances of each case. Overall, the pipeline remains strong, and we continue to see potential for new affiliate transactions at all stages. Our competitive position is notably robust, primarily because businesses today require a more engaged partner who can provide strategic guidance while allowing them to maintain their independence.

In our view, AMG is the ideal partner for that, embodying the advantages of a large consolidator while ensuring that firms remain independent and aligned. This competitive edge is likely why firms are choosing us, and we maintain a positive outlook on our pipeline. I should also note that this is relevant to our repurchase activities, which we are keeping an eye on as our pipeline remains strong. Now, I'll allow Dava to elaborate further.

Great. Thanks, Jay. So as we've been consistently buying back our shares over the last several years, averaging roughly $500 million and about 10% per year. This year, given a combination of factors that compelled us to take a more opportunistic view on repurchases, we significantly increased both the pace and amount of our repurchases. Through the third quarter, we repurchased $580 million in shares and are on track to repurchase about $700 million in 2024, which will be the largest share repurchase year in our history. We have a disciplined capital allocation strategy to deploy capital to the areas of highest growth in return, and as Jay just mentioned, we feel really good about our new investment prospects in the near term. So we are incorporating the potential need for capital to execute on our growth strategy with share repurchases in the near term. In addition, any share repurchases will be subject to market and price consideration. We'll provide some more color on 2025 expectations on our Q4 call, but what I can say is that as we're closing the year, we're in a very strong capital position and have ample flexibility to continue to execute on our growth strategy and to continue to repurchase shares. Thanks for the question, Bill.

Thank you. Our next question comes from the line of Alex Blostein with Goldman Sachs. Please proceed with your question.

Hey, good morning. Thanks for the question. I was hoping we could double-click into the performance fee guidance and just kind of maybe flesh out a little bit on what specific absolute return strategies have struggled this year. Any implication for a high watermark as we sort of start to think about 2025? And the flip side of that, I guess you talked about private markets contributing more to the bottom line in terms of carry over time. I was wondering if you could help us frame what that accrued carry balances are in terms of the flow through to AMG's bottom line. Thanks.

Sure. Thanks, Alex. I'll take this one. So as I said in my prepared remarks, we currently expect to be below our five-year average of about $150 million of performance fees, given more challenged investment performance at some of those absolute return strategies, specifically within our trend-following strategies. We continue to think $150 million is a good through-a-cycle expectation of our annual performance fees, but we could see some softness in this number in 2025 given some of the performance challenges within some of these absolute return strategies this period. But as there's a lot of time between now and when these strategies would crystallize the 2025 performance fees. Let me just take a minute to step back on performance fees in general. So we do have a highly diversified and complementary set of performance fee-generating assets totaling about $200 billion across a dozen affiliates across beta-sensitive absolute return and private market strategies.

And performance fee earnings are an important part of our business and all of those performance fee earnings for us are reported on a realized basis. So that's a real cash task that we can use to execute on our growth strategy. And in a year like 2024 where performance fees are expected to come in a bit lower, our core business fundamentals continue to improve, which highlights the diversification and complementary nature of these performance fees to our overall business. Of course, there are still a couple of months left in the year, and there are a number of significant macro events on the horizon that could impact markets in different ways. So things overall could change, but we remain confident in our ability to drive those performance fee earnings to contribute to earnings power over the long term. With regard to carried interest, typically when we purchase our private market affiliates, we don't buy in-the-ground carry when we're making these new investments, and so it tends to be a longer-term opportunity for us to start to play into that carry, and we expect their contributions to performance fees to increase naturally a bit over time for us.

Thank you. Our next question comes from the line of Dan Fannon with Jefferies. Please proceed with your question.

Good morning. I would like to follow up on the previous question. Specifically, what are your expectations for carried interest in 2024? What range or contribution do you foresee, considering you think it will scale going forward? I'm also interested in your comments about the liquid strategy and the increased demand, which could lead to better flows for some of the AQR tax advantage products. Can you provide more details on the current assets under management in that area? Are there performance fees associated with these products, or are there liquid strategies you’re observing that have demand but may not correlate in the same way to your existing business?

Good morning, Dan. Thank you for your question. I'll begin by continuing from where Dava left off and try to provide some additional insights, and then Tom can assist with the second part of your question. Regarding carry, Dava is correct that we generally do not purchase in-the-ground carry. However, due to the maturation of our private markets investments, which include Comvest, Forbion, OCP in Asia, and most recently Ara, we are beginning to see returns from the next fund raised after those investments. We do have some carry this year and a bit from last year, and we anticipate it will increase as time goes on. While it's challenging to predict exactly due to factors like exits and fund structures, we expect carry to represent a larger portion of our performance fee opportunities in the future. In any given year, our performance reflects a mix of absolute returns and beta sensitivity.

Additionally, some of our long-only businesses generate performance fees. We estimate our typical year to average around $150 million, though this might change depending on the macroeconomic conditions. I want to mention that as we consider the flow profile of private markets and liquid alternatives, the capital we have attracted in these sectors indicates that our potential for performance fees will increase along with our assets under management. Now, I'll let Tom elaborate on some of our liquid alternative strategies, particularly regarding AQR, but as those assets are integrated, our opportunities will expand moving forward.

Yes. Thanks, Jay, and thanks for your question, Dan. I think to get to your specific question on some of the tax advantage product that shows up in alternatives and shows up in our high-net-worth channel from a client-type perspective. We have seen really nice growth there. You've seen some press around what AQR has been doing as well as some others in the industry, and I think that there's a lot of focus on after-tax returns with respect to wealth management generally. So I think this plays into a really important overall macro theme. So that's been an excellent growth opportunity in the last couple of years. We expect to continue to see a lot of growth as well as a lot of innovation coming from firms like AQR as they continue to think about delivering those types of outcomes for end clients.

Yes. And let me just say one other thing on AQR. The overall investment performance there is significantly improved and is strong, and that obviously bodes well for flows. Liquid alternatives have become a greater percentage of their business so that plays out in their business mix and their average fee rates and the opportunity for performance fees. And then, as Tom said, the tax-aware business is very innovative, and the reality is putting tax-aware into a liquid alternatives strategy, it sort of makes them more interesting, more maybe slightly more sophisticated than the first generation of tax-aware products. So that innovation is paying off for them, and we're seeing significant growth in the assets. So we're pretty excited about what's happening at AQR, and we're pretty excited about the liquid alternatives business generally. Thanks. Thanks a lot for your question.

Thank you. Our next question comes from the line of Brian Bedell with Deutsche Bank. Please proceed with your question.

Great. Thanks. Good morning, folks. If I can ask about a little bit more detail on the democratization pipeline for new products being launched across your private affiliates. Maybe if you can talk about maybe how much you think you can scale that. I think you mentioned $5 billion on the wealth platform, and in terms of potentially like for perpetual products, maybe if you can talk about the idea of raising performance fees from or getting performance fees from perpetual products, maybe to what extent are they contributing now, and then to what extent do you think that can become a very meaningful part of your performance fee pipeline going forward.

Thanks, Brian. So look, as you know, we're really excited about the US wealth opportunity. Our main strategy at AMG is to partner with independent firms and magnify their advantages. And this is right in the sweet spot of a way that we can do that and really do it in a way that no one else in the industry can. And as part of our strategy, we're collaborating with our affiliates on a number of growth opportunities, investing capital and resources into new strategies, creating new products, and trying to connect them more directly with clients in US wealth. We have a vertically integrated US wealth platform. I think that's really important. Everything from product development through to touching end clients and then having the underlying risk management and operating platform to be able to support that ecosystem, and that enables our affiliates to access the large and growing wealth market in a way that would be extremely difficult for any independent firm to do on its own given just the scale and resources that are required to be effective in that channel.

We've been very successful in bringing affiliate strategies to market through this platform, and a lot of that success is based on having launched one of the first-ever Evergreen funds in the private equity space several years ago, the AMG Pantheon Fund, which, as we mentioned, is now north of $4 billion in AUM and roughly doubled over the course of the past 12 months. Just this year alone in 2024, we've also invested alongside our affiliates to bring several new products to the market. That includes seeding a new Pantheon private equity fund for the non-US wealth market in a CCAV wrapper, partnering with Pantheon to launch seed and distribute the first private credit secondaries fund in the US wealth space, and that's called the AMG Pantheon Credit Solutions Fund, and there we recently completed a successful second seed round, and we'll see more momentum in that product going forward into 2025.

We partnered with Systematica to launch and seed a new trend-following fund to be able to extend their reach into US wealth, and as I mentioned in my prepared remarks, we also filed for the public offering of the AMG Comvest Senior Lending Fund, which is a BDC where the combination of Comvest's excellent direct lending track record and AMG's demonstrated success in scaling private markets products in US wealth allowed us to raise more than $500 million in seed capital to get that product started. You mentioned the $5 billion number. I think what's important too is thinking about where we've come from. You go back two to three years, that number was about $1 billion. So we've seen substantial growth in scaling in the platform, and we think that we can see that growth in scaling continue. One, through the growth of those products that I just listed, but two, with our product development team continuing to bring new products to market.

First through our existing affiliates and the existing investment IP that they have, but also a lot of what Jay talked about in terms of the strength of our new investment pipeline and the attractiveness of the AMG model, lots of opportunities that we see on the horizon to bring in new affiliates where we see that one plus one equals three type opportunity where AMG can really help to create a next leg of the stool for a new affiliate by getting them into the US wealth business in a really meaningful way. You asked about perpetual products and about performance fees. Of course, with respect to perpetual products, I just walked through a number of different wrappers that we're using from tender funds to interval funds to BDCs, and we have a lot of expertise within our team to think about all of the innovation that we're seeing in wrappers. Certain of those products are eligible to generate performance fees.

It really depends on the nature of the product and the nature of the returns that come out of that product and ultimately the end client that they're associated with. But we do see that as being a future further diversifier and contributor to our performance fee stream. And then lastly, I'd say, when you just think about why AMG and our affiliates are so well-positioned to do this, having a 30-year-plus track record of being in the US wealth space, obviously starting in the mutual fund space and now over time evolving into one of the leading players in private markets, having a big balance sheet and being able to put our balance sheet behind and seed some of these new products, having a product development capability that really understands the market and is front and center in some of the new innovation that we're seeing, and then, most importantly, having this unique investment capabilities that exist at our affiliates puts us in a very special place in the ecosystem. We're seeing a lot of growth today and we see this platform scaling tremendously over the course of the next five to ten years.

Thank you. Our next question comes from the line of Patrick Davitt with Autonomous Research. Please proceed with your question.

Hey, good morning, everyone. Is there any reason that the 4Q flow seasonality and/or annual rebalancing would be different than what we usually see at AMG and in the industry? And in that vein, given market highs and most people's view that alternative realizations are going to pick up, do you think we should be modeling more of an AUM headwind from alternative distributions from here? Thank you.

Thanks for your question, Patrick. I believe it's a bit early to consider year-end seasonality. Up to now, our discussions with affiliates and clients haven't indicated any significant changes from prior years. As you know, the seasonality in the fourth quarter at AMG is relatively subdued and not a major factor. We'll certainly keep you informed of any observations we make. However, particularly as our business increasingly shifts towards alternatives over time, I wouldn't anticipate the same level of seasonality that is often seen in mutual fund-heavy businesses, such as those in the industry, or even how AMG may have appeared a decade ago. Regarding the overall opportunity in alternatives and realizations, as I mentioned earlier, we are experiencing remarkable strength in fundraising. We've recorded over 20% annualized organic growth in affiliate fundraising so far. As market conditions improve and realizations become more favorable, our affiliates will undoubtedly seek to capitalize on that. Still, I don't see this as a significant obstacle to the long-term growth we are experiencing, particularly in the private markets segment of our business.

To build on that last point, it's important to note that when we see some realizations from AMG, it can be more complex because many of those are from older funds that didn't generate any carry for us. Therefore, most of our future opportunities for both net management fee earnings and performance fee earnings will come from the new flows we are currently raising, indicating that our earnings potential is increasing. Additionally, I want to emphasize something we've stated multiple times: the liquid alternatives sector is particularly distinctive for us. During periods of volatility and uncertainty, this segment of our business typically performs well. For instance, in past bull markets leading up to market corrections, like the pullback in 2022, that was actually one of our best years in terms of performance fee earnings. We value the diversified nature of our business, especially the aspect of certain strategies being less correlated or even inversely correlated to market conditions.

And Pat, maybe just one quick additional point with respect to realizations. We have talked about just the differentiated nature of AMG's private market exposures, things like life sciences, decarbonization, private equity, multi-family real estate. So we have less of a concentration to regular way private equity and leveraged buyouts, which is where a lot of the slowdown in realizations has taken place. Given the fact that we've had these more specialized exposures, we've continued to see pretty good DPIs, pretty good realizations through the cycle, which is in part been contributing to why our fundraising has remained so strong. So I agree with your point that we will likely see more realizations in the industry, but maybe less of a rate of change for AMG given we've already seen pretty strong performance here.

Thank you. Ladies and gentlemen, this concludes our Q&A session and thus concludes our call today. We thank you for your interest and participation. You may now disconnect your lines.