Alexander Blostein

Alexander Blostein of Goldman Sachs questioned Tradeweb's strategy regarding annual expense growth and margin expansion for 2026, particularly how operating leverage would be maintained if revenue growth moderates.

Answer

CFO Sara Furber stated that Tradeweb's top priority is investing for revenue growth, with an expense base designed to deliver positive operating leverage across various revenue environments. She explained that approximately 55% of expenses are fixed, while 45% are variable or discretionary, allowing flexibility to adjust spending. Furber cited past performance, including 43 basis points of EBITDA margin expansion in H1 2023 despite 5% revenue growth, and 90 basis points in 2024 with 29% revenue growth, as evidence of this flexibility.

Alexander Blostein asked CFO Sara Furber about the relationship between Tradeweb's annual expense growth and margins, particularly how the company plans to achieve positive operating leverage in 2026 if revenue growth moderates.

Answer

CFO Sara Furber stated that Tradeweb's top priority is investing for revenue growth, with an expense base designed for positive operating leverage across various revenue environments. She explained that roughly 55% of expenses are fixed, while 45% are variable or discretionary, allowing flexibility to adjust spending. She cited past examples of maintaining margin expansion even during periods of lower revenue growth.

Alex Blostein of Goldman Sachs asked for the structural outlook on fee per million for swaps over the next one to two years, excluding the impact of mix shifts like compression trading.

Answer

CFO Sara Furber stated that, absent mix changes, Tradeweb feels confident it can maintain or modestly grow the fee per million in swaps from current levels. She identified faster growth in higher-priced products, such as emerging markets and RFM protocols, as a key structural tailwind. While acknowledging that dealers moving to fixed plans can be a natural offset, she said the net outlook is constructive. Furber also highlighted the opportunity to grow absolute revenue by electronifying the bilateral swaps market.

Alexander Blostein asked about the implications of Citadel Securities' initiative to handle bond trades for banks and whether Tradeweb's shift to fixed fees in credit could cap its long-term revenue growth potential.

Answer

CEO William Hult stated that Citadel's expansion is good for Tradeweb's business, as it increases market velocity and liquidity, and Tradeweb maintains a strong partnership with them. CFO Sara Furber addressed the growth question, asserting that with over 85% of credit fees remaining variable, there is no constraint on revenue growth. She outlined the growth algorithm for credit, focusing on driving market share, introducing new protocols for voice-oriented flows, and adding new clients through technology and sales investments.

Alexander Blostein of The Goldman Sachs Group, Inc. asked about the 2025 expense guidance and the company's ability to adjust spending to maintain positive operating leverage in a potentially weaker revenue environment.

Answer

CFO Sara Furber affirmed that Tradeweb has significant operating leverage, with about 50% of its expense base being variable or discretionary. She explained that costs like performance-linked compensation and marketing can be calibrated dynamically based on market opportunities and the revenue environment. Furber pointed to H1 2023 as an example where the company maintained margins despite weaker revenue, demonstrating a track record of being nimble while investing for the long term.

Alexander Blostein from Goldman Sachs asked about the trajectory of fee per million in the interest rate swaps business, considering factors like strong volume, duration shifts, and compression trading, and the broader revenue growth outlook for the next one to two years.

Answer

CEO Billy Hult expressed high confidence in the long-term growth of the swaps business, noting the market is only 30% electronified. He highlighted growth in higher-fee emerging markets and the RFM protocol. CFO Sara Furber quantified the potential upside, stating a one-year increase in duration could boost fee per million by 9%, and a 100-basis-point drop in rates could add 5-6%. Hult also noted that swaps revenue growth was trending over 40% year-over-year in October.

Alexander Blostein from Goldman Sachs asked for clarification on Brookfield Asset Management's 2026 growth outlook, specifically regarding the 'at or above long-term targets' statement for Fee-Related Earnings (FRE), including the impact of Oaktree, and the expected organic FRE growth.

Answer

Conor Teskey, Chief Executive Officer of Brookfield Asset Management, confirmed that the 2026 outlook for FRE growth is expected to exceed the mid-to-high teens long-term targets. He highlighted that three initiatives (Oaktree acquisition, Just Group closing, and Q4 acquisitions) are projected to add $200 million to FRE, alongside an anticipated step change in fundraising across credit, private equity, and infrastructure platforms.

Alexander Blostein inquired about Brookfield Asset Management's 2026 growth outlook, specifically clarifying if the 'at or above long-term targets' statement refers to the 17% FRE growth target and if it includes the impact of Oaktree and other acquisitions, seeking insight into the organic FRE growth.

Answer

Conor Teskey, CEO, confirmed that the 2026 outlook for fee-related earnings (FRE) growth is expected to exceed the mid-to-high teens long-term target. He highlighted that $200 million of incremental annualized FRE growth is already secured from the Oaktree acquisition, Just Group, and Q4 acquisitions. He also anticipates a significant step change in fundraising across credit, private equity, and infrastructure, and a market step up in deal activity for 2026.

Alex Blostein asked about Brookfield Asset Management's fundraising momentum heading into 2026, the picking up monetization outlook, and what these trends could mean for management fee growth in the upcoming year.

Answer

Connor Teskey, President, expressed excitement for 2026, guiding that fundraising would exceed 2025 levels, driven by infrastructure and private equity flagships, the closing of Just Group, and growth in partner managers. He anticipates maintaining or exceeding the five-year plan for FRE growth, boosted by nearly $200 million from Oaktree, Just Group, and Angel Oak acquisitions, plus organic growth.

Alex Blostein inquired about Brookfield Asset Management's fundraising momentum heading into 2026, the outlook for monetizations, and the potential implications for management fee growth in the upcoming year.

Answer

Connor Teskey, President, highlighted strong fundraising in 2025, exceeding targets, and projected 2026 to be even stronger with infrastructure and private equity flagships in the market. He expects FRE growth to meet or exceed the five-year plan, driven by acquisitions like Oaktree, Just Group, and Angel Oak, adding nearly $200 million to run-rate FRE, plus organic growth.

Alexander Blostein of Goldman Sachs posed a two-part question on the insurance business: first, on growth prospects in the competitive U.S. retail channel, and second, on the company's ambitions in the UK market following the Just Group acquisition.

Answer

President Connor Teskey noted the Just Group deal highlights the underappreciated upside of managing assets for Brookfield Wealth Solutions (BWS) globally. CFO Hadley Peer Marshall added that their credit strategy avoids commoditized areas, focusing on asset-backed finance and real assets where they see strong, risk-adjusted returns, which is attractive for insurance portfolios.

Alexander Blostein requested an update on the full-year fundraising outlook following a strong Q1 and asked about the firm's long-term leverage philosophy and whether share repurchases are now an ongoing part of capital allocation.

Answer

An Unknown Executive confirmed that the firm's full-year fundraising forecast remains unchanged, as market uncertainty tends to drive capital to large, established managers. CFO Hadley Peer Marshall added that the firm has ample debt capacity under its new investment-grade ratings and will be a repeat issuer to support growth. She also confirmed that the strong balance sheet allows for opportunistic share repurchases when they see value.

Alexander Blostein of Goldman Sachs asked for an expanded outlook on 2025 organic fundraising relative to 2024's $87 billion, seeking details on the largest drivers. He also inquired about the opportunity in investment-grade private credit, focusing on origination capabilities and the potential to internalize deal flow.

Answer

CEO James Flatt confirmed that 2025 fundraising is expected to surpass 2024, citing the final closes for two flagship funds, a record year anticipated for complementary strategies, and growth in insurance and high-net-worth channels. CFO Hadley Peer Marshall added that the firm is actively expanding its investment-grade credit capabilities, leveraging its infrastructure and real estate foundation, Oaktree's expertise, and growing corporate direct lending to meet insurance client demand.

Alexander Blostein inquired about the slower fundraising pace for the second Global Transition Fund (BGTF II) and sought clarification on the potential for S&P 500 index inclusion following the corporate structure change.

Answer

CEO James Flatt described the fundraising situation as a 'high-class problem,' noting that BGTF II fees were paused temporarily and that capital was simultaneously raised for other transition strategies. He expressed high confidence in hitting the fund's target. CFO Hadley Peer Marshall stated the primary goal of the restructuring is to enhance liquidity and that S&P 500 inclusion would be a 'nice upside' but was not the sole driver of the decision.

Alexander Blostein inquired about T. Rowe Price's operating plan for 2026, including the ability to adjust expenses if equity markets are flat, and the company's medium-term margin outlook given current organic growth challenges.

Answer

CFO Jen Dardis and CEO Rob Sharps explained that equity market returns are the biggest factor for operating margin, with about a third of expenses being variable. They highlighted ongoing expense management, investment in growth areas like ETFs and partnerships, and the impact of market-driven expenses such as distribution fees and year-end compensation on the 2026 expense guide.

Alexander Blostein asked about T. Rowe Price's operating perspective for 2026, including the ability to flex expenses in a flat equity market, and the medium-term outlook for overall margins.

Answer

CFO Jennifer Dardis explained that equity market returns are the biggest factor for operating margin, noting that about a third of the expense base is variable. CEO Robert Sharps emphasized balancing long-term investment with efficiency and cost savings initiatives. Ms. Dardis further detailed that 2026 expense guidance includes managing controllable expenses for low single-digit growth, funding investments in growth areas like ETFs and alternatives, and accounting for market-driven expenses such as distribution fees and year-end compensation.

Alex Blostein from Goldman Sachs asked for an update on T. Rowe Price's M&A strategy, specifically regarding opportunities in the 401(k) channel and for accelerating overall growth, and whether the OHA acquisition was sufficient for its private market ambitions.

Answer

President, CEO & Chair Robert Sharps reiterated the firm has a very high bar for M&A, focusing on deals that are culturally aligned and add new capabilities or client reach. He mentioned retirement and advice capabilities as areas of interest. CFO Jennifer Dardis added that the range of options has expanded beyond full acquisitions to include partnerships and minority investments. Sharps concluded by stating the firm will consider partnering, acquiring, or building capabilities organically.

Alexander Blostein asked for details on the revised 2025 expense guidance, including the drivers of the change and the market assumptions incorporated into the new forecast.

Answer

CFO Jen Dardis stated that the updated 2025 adjusted operating expense growth guidance of 1% to 3% (down from 4% to 6%) incorporates the market volatility observed in April. She explained the reduction reflects both a natural decrease in market-driven expenses and intentional management of controllable costs, such as slowing the pace of hiring and reducing travel. Dardis also reiterated that the firm continues to evaluate more structural cost-saving opportunities for 2026 and beyond.

Alexander Blostein asked about the medium-term expense management strategy, questioning if there is room to lower the growth rate of the non-variable expense base to better align with organic revenue growth, which is pressured by lower fee rates.

Answer

CEO Robert Sharps agreed with the premise, stating that if fee pressure persists, the firm must think differently about controllable expense growth and is evaluating structural changes for 2026 and beyond. CFO Jen Dardis added that the firm has been targeting 2% to 3% in structural savings annually to self-fund new strategic investments, shifting away from episodic cost reductions to more sustainable, multi-year projects.

Alexander Blostein asked for perspective on T. Rowe Price's organic growth, questioning the drivers behind the expected Q4 outflows beyond the VA sub-advisory termination and seeking an outlook for 2025.

Answer

CEO Rob Sharps explained that Q4 outflows, excluding the VA loss, are consistent with typical seasonal patterns. He stated that while 2024 outflows will be less than half of 2023's, he expects further sizable improvement in 2025, driven by better performance in large-cap growth, continued strength in target-date funds, and growing contributions from alternatives, ETFs, and SMAs. While not guaranteeing a return to positive flows in 2025, he affirmed the company is on the right path. CFO Jen Dardis had no further comment.

Alexander Blostein sought a longer-term discussion on operating margins, comparing Franklin's mid-20s to high-20s margins with peers in the 30s, and clarified the 2026 margin guidance.

Answer

Matthew Nicholls, Co-President and CFO, clarified that the high-20s margin for 2026 assumes flat markets. He reiterated the 5-year plan target of exceeding 30% by fiscal 2027, potentially reaching 30-35% if markets remain stable, noting the impact of Western Asset support on current margins.

Alexander Blostein sought clarification on the long-term operating margin outlook, the firm's profitability goalpost, and whether the high-20s margin guidance for year-end 2026 assumes flat markets.

Answer

Matthew Nicholls, Co-President and CFO, confirmed that the high-20s margin exiting 2026 assumes flat markets. He reiterated the 5-year plan target of exceeding 30% margin, expecting to reach it in fiscal 2027, and potentially 30-35% in future years if markets remain stable. He also noted that support provided to Western Asset Management's expense structure has impacted overall margins by several points.

Alex Blostein asked for an outlook on private markets growth, seeking updates on both the wealth channel's traction and the institutional pipeline, including the upcoming Lexington flagship fund. He also requested updated expense guidance.

Answer

President and CEO Jennifer Johnson noted the Lexington fund's first close is delayed but expects strong full-year alts fundraising of around $18.5B, with 25% from the growing wealth channel. CFO & COO Matthew Nicholls provided detailed expense guidance for fiscal 2025 and reiterated the plan for at least $200 million in run-rate cost savings entering fiscal 2026, with potential offsets from growth initiatives and the Apira acquisition.

Alexander Blostein from Goldman Sachs asked for more details on private markets, specifically how retail products performed during April's volatility and the fundraising outlook for Lexington Partners' next large flagship secondary fund.

Answer

CEO Jennifer Johnson stated that the firm is on track with its private markets fundraising goals, having raised $10.4 billion year-to-date. She emphasized the significant opportunity in the wealth channel, where Franklin Templeton has three perpetual products over $1 billion each. While Lexington's next flagship fund close is likely pushed to late 2025 or early 2026, the current market is highly attractive for secondaries. Head of Global Distribution Adam Spector added that the success of perpetual funds is creating momentum for their drawdown fund offerings as well.

Alexander Blostein asked for an update on Western Asset Management, inquiring about its current operating income contribution, the long-term strategic vision for the unit given recent outflows, and the expected financial savings from integrating its corporate functions.

Answer

CEO Jennifer Johnson affirmed the strategy to integrate Western's non-investment functions to gain scale while preserving investment team autonomy. CFO Matthew Nicholls provided financial details, noting the outflows' revenue impact and outlining a plan that will temporarily reduce margins but lead to $200 million to $250 million in run-rate expense reductions by fiscal 2026, reaffirming the company's 30% medium-term margin target.

Alexander Blostein asked for clarification on why the estimated run-rate EBITDA contribution from Commonwealth Financial Network remained at $425 million, despite reported asset growth and reaffirmed retention targets.

Answer

President and CFO Matt Audette explained that while assets have grown due to market performance, this was largely offset by an additional interest rate cut and the subsequent movement of cash sweep balances back into the marketplace.

Alexander Blostein questioned why the estimated run-rate EBITDA contribution for Commonwealth remains at $425 million, despite asset growth due to market performance and the reaffirmed 90% retention target.

Answer

CEO Rich Steinmeier explained that while assets have increased, this was offset by another interest rate cut and the subsequent movement of cash sweep balances back into the marketplace, leading to the consistent $425 million estimate.

Alex Blostein of Goldman Sachs asked for an update on the Commonwealth acquisition, seeking color on management's confidence in the 90% advisor retention target and the financial reasoning for the run-rate EBITDA remaining at $120 million despite higher asset levels since the deal's announcement.

Answer

CEO Rich Steinmeier expressed strong confidence in the 90% retention target, citing deep engagement with Commonwealth advisors, a commitment to preserving their culture, and the upcoming integration of Commonwealth's CEO into LPL's management. President & CFO Matt Audette clarified that while assets under management (AUM) are higher, a slight decrease in cash balances has resulted in a roughly offsetting effect, keeping the initial run-rate EBITDA forecast stable.

Alexander Blostein from Goldman Sachs asked about same-store sales dynamics during recent market volatility and requested an update on client cash balances.

Answer

Executive Richard Steinmeier explained that LPL has been strengthening same-store sales by providing advisers with enhanced tools for growth coaching, financial planning, and high-net-worth client support. He noted that market volatility often drives a 'flight to quality,' with investors moving from self-directed solutions to professional advisers. Executive Matthew Audette then provided a detailed cash update, noting that April balances decreased to $51.8 billion, a better-than-expected result given seasonal tax payments and advisory fees.

Alexander Blostein from Goldman Sachs inquired about organic revenue growth, asking for a breakdown of the drivers for centrally managed assets beyond the Prudential onboarding and other key areas for improving return on client assets.

Answer

Executive Matthew Audette clarified that excluding Prudential, core growth in centrally managed assets hit a record, driven by investments in tools and capabilities. Executive Richard Steinmeier added that future opportunities for improving asset monetization include the continued shift from brokerage to advisory, expansion into banking and lending, enhanced asset management partnerships, and strategic pricing adjustments.

Alexander Blostein asked new CEO Rich Steinmeier to outline his key priorities for the next one to two years and followed up with CFO Matt Audette about the recent growth in client cash balances and the durability of that trend.

Answer

CEO Rich Steinmeier detailed three top priorities: maintaining client-centricity, empowering employees, and driving operating leverage, while affirming the company's core long-term strategy remains unchanged. President and CFO Matthew Audette explained that client cash balances have stabilized at operational levels, and with continued strong organic growth, these balances could begin to grow again from current levels.

Alexander Blostein expanded on the M&A discussion, asking how Nasdaq views M&A broadly given developments in new markets (digital assets, AI) and its progress in integrating AxiomSL and Calypso. He questioned if organic growth remains the primary focus for the next few years, especially with improved balance sheet capacity.

Answer

Adena Friedman, Chair and CEO, reiterated that Nasdaq is primarily focused on organic growth, innovation, and client engagement. She acknowledged the company's strong capital generation and confirmed that while bolt-on acquisitions are evaluated with a build-versus-buy approach, the team remains focused on the tremendous organic growth opportunities ahead.

Alexander Blostein sought to conclude the discussion on tokenization by asking about the long-term benefits to Nasdaq, assuming a significant market migration to tokenized trading within five years. He questioned whether this would lead to a material uplift in trading activity due to capital efficiencies or round-the-clock trading, internal cost savings, or if competitive factors like liquidity and market depth would remain paramount.

Answer

Adena Friedman, Chair and Chief Executive Officer of Nasdaq, stated that driving capital efficiency through new technologies opens up broader market participation, though the exact mechanism for tokenized equities is still evolving. She highlighted collateral movement as a key area for efficiency gains, noting the friction in traditional payment rails for 24/5 trading. Friedman views 24/5 trading as a long-term bet to increase the addressable market by providing access during global waking hours. She also anticipates opportunities to offer more fintech services, such as surveillance, trade operations, and regulatory reporting, as institutional engagement expands globally.

Alexander Blostein posed a broader question on AI, asking about potential areas of risk to Nasdaq's revenue model, incremental revenue opportunities, and how AI could drive expense efficiencies relative to the 5-8% expense growth.

Answer

Adena Friedman, Chair and CEO, stated that Nasdaq feels protected from AI risks and sees it as a significant opportunity. She outlined two programs: AI in products and AI in business operations. Product development focuses on automation for repetitive tasks to free up resources for Horizon 1 and 2 opportunities. Client experience and implementations leverage AI for efficiency and improved outcomes. Friedman emphasized Nasdaq's product suite differentiation through expertise, custom solutions, and highly differentiated data. She highlighted modernizing solutions with AI, citing Verafin's agentic AI reducing workflow time by 80%, and seeing similar opportunities across anti-financial crime, surveillance, regulatory reporting (AxiomSL), and Calypso.

Alex Blostein posed a broader question on AI's impact on Nasdaq, asking about potential risks to the revenue model, incremental revenue opportunities, and areas for expense efficiencies relative to the company's 5%-8% expense growth.

Answer

Adena Friedman, Chair and CEO of Nasdaq, expressed confidence in the business's protection from AI risks, viewing it as a significant opportunity. She detailed two programs: AI in products (driving efficiency in product development and freeing up resources) and AI on the business (automating client experience and implementations). She emphasized Nasdaq's differentiated expertise, proprietary data, and modernization efforts with AI-enabled solutions like Agentic AI in Verafin, which significantly reduces workflow time.

Alexander Blostein from Goldman Sachs asked for more detail on the accelerating sales momentum in FinTech, particularly what the commentary on Q4 dynamics for on-prem and Financial Crime onboarding implies for revenue and momentum into 2026.

Answer

Chair & CEO Adena Friedman confirmed a healthy and maturing global pipeline across FinTech. She highlighted that for Financial Crime Management, enterprise deal signings have already doubled the total for all of 2024, with revenue contribution from these larger clients expected to ramp up in Q4 2025 and into 2026 as implementations are completed.

Alexander Blostein asked about Nasdaq's M&A priorities, noting the rapid deleveraging post-Adenza and whether the company was becoming more open to inorganic growth.

Answer

CEO Adena Friedman stated unequivocally that Nasdaq is not currently evaluating M&A deals. She emphasized that the company is 'laser-focused' on organic growth and delivering on the commitments made with the Adenza acquisition, which include deleveraging, share repurchases, and increasing the dividend.

Alexander Blostein asked for an explanation of the slower growth in Nasdaq's Workflow and Insights business and the strategy to bridge the gap back to its medium-term growth targets.

Answer

Adena Friedman, Chair and CEO, explained that the Corporate Solutions business is affected by the slow issuance and delisting environment. She noted the company is focused on product innovation to capitalize on a market rebound. Friedman also highlighted strong high-single-digit growth in the Analytics part of the business, particularly the 'Invest' product, which is expected to help drive overall growth in the coming years.

Alexander Blostein requested a high-level, near-term outlook for the Adenza business (AxiomSL and Calypso) into 2025, considering sales momentum and recent accounting changes.

Answer

CEO Adena Friedman reiterated that the business is performing in line with expectations. She stated that the current momentum and performance are consistent with the medium-term outlook of mid-teens ARR growth and low-to-mid-teens revenue growth for the combined Adenza businesses.

Alexander Blostein (Goldman Sachs) asked whether Invesco still identifies subscale parts of the business that might be exited or JVs, or if future strategic moves are more likely to be growth-related partnerships, following the significant foundational work done in the past year.

Answer

Andrew Schlossberg (CEO) acknowledged the significant foundational work completed in 2025, which has clarified execution and resource alignment for organic growth initiatives (ETFs, SMAs, models, private market partnerships, Asia/EMEA growth). He stated that while the company remains open to partnerships or JVs, much of the foundational work is done. Allison Dukes (CFO) added that while there aren't many obviously subscale areas, there's still significant opportunity for overall performance improvement, with a focus on execution and bringing existing strategic initiatives to life in 2026.

Alex Blostein asked for details on the intelliflo and India JV divestitures, including the use of proceeds, capital return priorities for the next 12-18 months, and implications for expense growth in 2026.

Answer

CFO Allison Dukes detailed expected proceeds of $140M-$150M from India and $100M from intelliflo. She reiterated balanced capital priorities: balance sheet improvement, 60% capital return, and growth investment. She expects expenses to remain well-managed, with India's operating income moving below the line.

Alex Blostein inquired about the details of the IntelliFlow and India JV divestitures, including the use of proceeds, Invesco's capital return priorities for the next 12-18 months, and the implications for expense growth looking into 2026.

Answer

CFO Allison Dukes detailed the expected proceeds ($140-150M from India, ~$100M from IntelliFlow) and their minimal operating income impact. She reiterated balanced capital priorities: balance sheet improvement, ~60% capital return to shareholders, and investing in growth. She noted that proceeds offer flexibility for new products and debt reduction, and expenses are expected to remain well-managed into 2026.

Alex Blostein of Goldman Sachs asked about the durability of the 8 basis point licensing fee associated with the QQQ and whether there is potential for it to be renegotiated lower in the future.

Answer

President & CEO Andrew Schlossberg responded that he was limited to the information disclosed in the preliminary proxy statement but emphasized that Invesco has outstanding partners for the fund and the proposed structure maintains the current arrangement.

Alexander Blostein asked about the development timeline for the new MassMutual and Barings partnership and what prompted MassMutual to agree to the preferred stock repurchase.

Answer

CEO Andrew Schlossberg stated the partnership's initial phase will focus on private credit, with a few capabilities launching relatively quickly, accelerated by MassMutual's $650 million seed capital commitment. CFO Allison Dukes explained the stock repurchase reflects a strong, multifaceted partnership, noting MassMutual is an 18% common shareholder invested in the company's success. Future repurchases will depend on cash flows and the rate environment.

Alexander Blostein asked for details on the long-term financial impact of the Alpha platform implementation, specifically the expected run-rate expenses paid to State Street and when legacy cost savings would materialize. He also inquired about the business momentum, product pipeline, and flow expectations for Invesco's China joint venture.

Answer

Chief Financial Officer Allison Dukes explained that implementation costs of $10-$15 million per quarter will continue through 2025, but the ultimate net expense benefit from decommissioning legacy systems will not be realized until after the full transition in 2026 or 2027. President and CEO Andrew Schlossberg noted that recent flows in China of $2.5 billion were driven by demand for equity ETFs and 'fixed income plus' strategies, and while government stimulus is helping, market sentiment remains modest.

Alexander Blostein requested details on private real estate flows, questioning if they were from a one-time platform addition, and asked for an update on the institutional redemption queue. He also questioned the decline in service fees relative to rising distribution expenses.

Answer

President and CEO Andrew Schlossberg clarified that the new platform addition is a future opportunity and Q3 flows were driven by their real estate debt strategy and SMAs. CFO Allison Dukes added that redemption pressures are moderating. She explained the fee dynamic is due to a product mix shift towards ETFs, which have lower service fee revenue but still incur third-party distribution costs.

Alex Blostein from Goldman Sachs questioned the long-term durability of the 8 basis point licensing fee associated with the QQQ and inquired about the potential for future renegotiation.

Answer

President, CEO & Director Andrew Schlossberg responded that he was limited to what was in the proxy filing but characterized their partners as "outstanding" and stated the proposed structure maintains the current setup.

Alex Blostein questioned the progression of BlackRock's 45% operating margin (excluding performance fees) for 2026, assuming normal markets, and sought clarification on the appropriate base for mid-single-digit G&A growth.

Answer

CFO Martin Small reiterated the target of 45%+ adjusted operating margin, with recurring fee-related earnings (FRE) margin running higher at 45.5% (ex-performance fees), noting GIP and HPS's accretive 50%+ FRE margins. He clarified that after annualizing HPS and Preqin, 2026 G&A growth is expected to be mid-single digits, with future years seeing controllable expenses within organic base fee growth.

Alex Blostein inquired about the expected progression of BlackRock's 45% operating margin (excluding performance fees) over 2026, assuming normal market conditions, and requested specifics from CFO Martin Small regarding the G&A base for the projected mid-single-digit increase.

Answer

CFO Martin Small reiterated BlackRock's target of 45% or greater adjusted operating margin, noting that the margin on recurring fee-related earnings (FRE) was higher at 45.5% in Q4, up 30 basis points year-over-year. He explained that FRE growth in private markets and scaled strategies like active ETFs and systematic equities would drive margins upwards, potentially towards 50%+. Martin confirmed a mid-single-digit percentage increase in G&A for 2026, based on annualizing the second-half 2025 G&A results which fully incorporate HPS and Preqin.

Alexander Blostein of Goldman Sachs questioned BlackRock's profitability outlook, focusing on the adjusted operating margin for the second half of the year and the path to achieving the firm's 45%+ target given recent acquisitions.

Answer

CFO Martin S. Small clarified that the Q2 margin of 43.3% was primarily impacted by lower performance fees. He reaffirmed the long-term target of 45% or greater, stating that controllable expenses remain aligned with organic revenue growth. Small guided for a low-teens percentage increase in 2025 core G&A due to acquisitions but noted a strong base fee entry rate into Q3, up approximately 10% including HPS, which will support profitability.

Alexander Blostein of Goldman Sachs questioned the firm's profitability outlook, asking about the adjusted operating margin for the second half of the year and the path to achieving the 45%-plus target following recent acquisitions.

Answer

CFO Martin S. Small clarified that the Q2 margin of 43.3% was primarily impacted by lower performance fees. He reaffirmed a clear path to a 45% or greater margin over the cycle by aligning controllable expenses with organic growth. Small noted that while acquisitions will increase G&A expense in the near term, these deals are self-funding with strong growth profiles. He pointed to a strong base fee entry rate into Q3, which provides a sound foundation for profitability in the back half of the year.

Alexander Blostein asked if the current period of market disruption might prompt BlackRock to make another monumental strategic move, such as large acquisitions outside the U.S.

Answer

Chairman and CEO Laurence Fink responded 'no' to large international acquisitions, stating the focus is on organic growth and strategic partnerships, citing examples in India and Latin America. He emphasized leveraging their existing 'hyper-local' footprint, which is expanding to new countries, and the strength of their European iShares business. Executive Martin Small added that BlackRock has positive financial leverage to growing non-U.S. stock markets, which is accretive to the firm's fee rate.

Alexander Blostein inquired about the 2025 outlook for 'money in motion,' the impact of recent interest rate movements, and which asset classes are expected to benefit the most.

Answer

Martin Small, an executive, highlighted the strong momentum entering 2025, with Q4 organic base fee growth at 7%, driven by ETFs, private markets, and fixed income. He noted that while GIP's contribution was modest, it signals future potential from a growing infrastructure business. Laurence Fink, an executive, added that a steepening yield curve will encourage investors to move capital from cash into fixed income and income-oriented private market products like private credit and infrastructure to capture higher returns.

Alexander Blostein requested a mark-to-market on the financial impact of the GIP acquisition, asking about the management fee outlook for 2025, fund flow dynamics, and the business's operating margin.

Answer

Executive Martin Small stated the GIP deal is a revenue growth story, doubling private markets run-rate management fees. He projected GIP would add approximately $250 million in management fees in Q4 2024 and guided to roughly $1 billion in fees for 2025 with a fund-related earnings (FRE) margin north of 50%.

Alex Blostein asked about the near-term dynamics and trajectory of the insurance business, specifically the 165 basis points spread in annuities this quarter. He also inquired about the progress towards closing the Just Group acquisition, its potential spread-related earnings contribution, and strategic acceleration of growth in U.K. and European PRT markets.

Answer

President and CFO Nick Goodman explained that the spread is due to disciplined, patient capital deployment, waiting for the right real asset investment opportunities, with a focus on long-term ROE. Regarding Just Group, Goodman noted limitations on public statements due to regulatory approvals but highlighted Just Group's track record of issuing GBP 5 billion of origination annually, which Brookfield expects to scale.

Alex Blostein inquired about the near-term dynamics and trajectory of the insurance business, specifically the 165 basis points annuity spread reported this quarter, and how it is expected to evolve over the next 12-24 months towards the company's targets. He also asked for an update on the progress towards closing the Just Group acquisition, its potential financial impact on spread-related earnings, and its strategic role in accelerating growth in U.K. and European PRT markets.

Answer

Nick Goodman, President of Brookfield Corporation, explained that the 165 basis point spread reflects disciplined and patient capital deployment, prioritizing long-term strategy and a strong return on equity (ROE). He anticipates the spread will widen as capital is put to work. Regarding the Just Group acquisition, Mr. Goodman noted that while limited in what could be disclosed due to regulatory approvals, the shareholder vote had occurred, and the company was working with regulators. He highlighted Just Group's track record of approximately GBP 5 billion in annual origination, which Brookfield expects to scale with its capital, but deferred pro forma financial details until further along in the process.

Alex Blostein asked for a breakdown of the building blocks supporting KKR's $4.50+ Fee-Related Earnings (FRE) per share target for 2026, including fundraising dynamics and operating leverage opportunities.

Answer

Rob Lewin, Chief Financial Officer, expressed confidence in exceeding the $4.50+ FRE target, citing strong management fees driven by fundraising. He noted KKR is well ahead of its $300 billion+ fundraising target for 2024-2026. Lewin also highlighted the significant outcomes from the capital markets business, the scaling of fee-related performance revenue, and the management team's ability to keep operating costs below revenue growth.

Alex Blostein asked for a breakdown of the key building blocks supporting KKR's $4.50+ FRE per share target for 2026, including current fundraising dynamics, opportunities for operating leverage, and other contributing factors.

Answer

CFO Rob Lewin expressed strong confidence in exceeding the $4.50+ FRE target, citing management fee growth driven by fundraising (over 70% achieved on the $300 billion+ 2024-2026 target in seven quarters). He highlighted the significant potential of the capital markets business in an increasing deployment environment and the material scaling trajectory of fee-related performance revenue. Lewin also noted the management team's proven ability to keep operating costs below revenue growth while expanding the business.

Alex Blostein from Goldman Sachs asked about the institutional fundraising environment, questioning if the previously mentioned 'barbelled approach' still applies given the improved market outlook and healthier equity markets.

Answer

Co-CEO Scott Nuttall stated that fundraising has remained very active, with $109 billion raised in the last twelve months. He noted that KKR is ahead of pace to meet its 2024-2026 target of over $300 billion. Nuttall observed that institutional investors are getting back to 'business as usual,' with strong interest in infrastructure and private credit. He also highlighted a trend of institutions consolidating relationships with fewer, larger partners, which benefits KKR's diversified platform.

Alexander Blostein from Goldman Sachs questioned why KKR wasn't increasing its share buyback activity given the perceived resilience of its business, and asked about plans for the proceeds from the recent $2 billion-plus convertible note.

Answer

CFO Rob Lewin explained KKR's consistent capital allocation policy, which balances share buybacks with core private equity, strategic M&A, and insurance investments. He stated that while buybacks will remain a core part of the strategy, the goal is to deploy every dollar to generate the highest long-term, durable earnings per share, without pre-allocating to specific buckets. He also highlighted management's 30% ownership as a key alignment with shareholders.

Alexander Blostein asked about the rationale for the timing of the new strategic holdings investment and what percentage of the underlying companies KKR now owns.

Answer

CFO Robert Lewin explained that Strategic Holdings owns roughly 20% of the core private equity businesses and the investment was a highly accretive opportunity. Co-CEO Scott Nuttall added that the timing was opportune as partners sought liquidity and the portfolio companies are maturing and getting closer to paying meaningful dividends.

Alexander Blostein of Goldman Sachs inquired about fundraising momentum in the real assets segment, asking about the potential size of flagships beyond Global Infra, such as Climate and Real Estate, and current client demand for real estate products.

Answer

Executive Craig Larson noted that both infrastructure and real estate are now $80 billion businesses for KKR, with significant room to scale as over 80% of strategies are not yet at mature scale. Co-CEO Scott Nuttall added that while real estate equity fundraising has been slower, market sentiment is shifting positively as valuations have bottomed, and KKR has leaned into this by increasing deployment.

Alex Blostein asked about Victory Capital's preferred partnership forms in the private markets and alternatives space, exploring options like explicit M&A, equity staking, or investment outsourcing agreements. He also sought clarification on the go-forward fee rate for modeling purposes, considering the impact of performance fees and business mix relative to the mid to high 40s range.

Answer

David Brown, Chairman, CEO, and Director, stated that Victory Capital is not interested in investment outsourcing but is actively exploring ownership, investment, and acquisition scenarios in the alternatives space, having extensively studied client desires and market dynamics. Michael Policarpo, President, CFO, and Chief Administrative Officer, reiterated the expectation for the fee rate to remain in the 46-47 basis point range long-term, anticipating no significant fee pressures. He clarified that performance fees are generally immaterial to the overall business, with the firm's focus remaining on maintaining strong margins.

Alex Blostein asked about Victory Capital's preferred partnership forms for private markets and alternative investment opportunities, considering various structures like explicit M&A, equity staking, or investment outsourcing agreements.

Answer

David Brown, Chairman, CEO, and Director, stated that Victory Capital is not interested in investment outsourcing but is exploring ownership, investment, and acquisition scenarios, having extensively studied the space and client demand for alternatives in intermediary and retirement markets.

Alex Blostein of Goldman Sachs inquired about Victory Capital's aspirational organic growth target post-Pioneer integration and requested the specific dollar impact of the seasonal fee realization event.

Answer

CEO David Brown stated the goal is to achieve consistent positive organic growth, driven by expanded distribution, new products, and the Amundi partnership. CFO Michael Policarpo declined to quantify the one-time fee impact, attributing the higher fee rate to a combination of positive asset mix, client mix, and the realization event, while reiterating the 46-47 basis point forward guidance.

Alexander Blostein requested details on the composition of the institutional pipeline, which was described as the strongest in years, and asked if it could drive positive organic growth in 2025. He also sought an update on Amundi U.S.'s current revenue and expense levels.

Answer

David Brown, Chairman and CEO, described the pipeline as spanning multiple franchises with larger mandates and fee rates that adhere to the company's margin requirements. He expressed optimism for 2025 organic growth, citing the expanded sales force post-Amundi. Michael Policarpo, President and CFO, added that the combined AUM will approach $300 billion, with Amundi's fee rates in the high-40s, and reiterated the 49% long-term margin target post-synergies. Brown also noted Amundi's business has outperformed their expectations.

Alexander Blostein from Goldman Sachs requested a strategic and financial update on the Amundi transaction, including progress on revenue synergies and a mark-to-market on Amundi U.S.'s key metrics. He also asked about the drivers for potential organic growth acceleration at Victory Capital, excluding the Amundi deal.

Answer

CEO David Brown and President & CFO Michael Policarpo provided an update. Brown reaffirmed the $100 million expense synergy target and noted Amundi U.S. is having a strong year with positive flows. Policarpo provided current metrics for Amundi U.S.: AUM of $104B-$106B, revenue realization in the high-40s basis points, and mid-20s EBITDA margins, reaffirming the 49% post-synergy margin target. On organic growth, Brown highlighted expected pickups in institutional fundings and continued momentum in ETFs and fixed income, which are well-positioned for a potential market rotation.

Alex Blostein asked about Apollo's strong wealth market performance, specifically the $5 billion in Q3 flows, and sought insights into the future trajectory, the impact of new products, and the potential evolution of asset management partnerships.

Answer

President Jim Zelter highlighted the progress towards the $150 billion five-year target and the expanding product suite. CEO Marc Rowan elaborated on the strategy to reach broader client segments through traditional asset manager partnerships, emphasizing the need for daily NAV, transparency, and liquidity to make private assets accessible.

Alex Blostein of Goldman Sachs inquired about the dynamics of credit spreads and their potential impact on Apollo's insurance business beyond 2025, considering product flexibility and increasing competition.

Answer

CEO Marc Rowan explained that while spreads on commoditized products like CLOs have tightened, Apollo's origination platform has successfully pivoted to maintain attractive new business spreads of around 130 basis points. He noted that current SRE is impacted by the runoff of highly profitable COVID-era business and pointed to future product innovation. CFO Martin Kelly added that spreads widened in Q2 and again in July, supporting the firm's long-term growth outlook for the business.

Alexander Blostein of Goldman Sachs asked about the institutional fundraising outlook, questioning how institutional clients are responding to market volatility and the durability of demand from that channel.

Answer

President James Zelter stated that Apollo is gaining market share from institutional clients, as its 'purchase price matters' philosophy resonates in the current environment. CEO Marc Rowan added that after years of Athene consuming most of its origination, Apollo now has significantly more capacity to serve third-party institutions, particularly in insurance, and is now 'origination constrained' rather than 'client constrained'.

Alexander Blostein requested details on the 2025 origination outlook, specifically the expected mix between ATLAS, lender finance, and direct lending, and also inquired about potential inorganic growth opportunities.

Answer

President Jim Zelter detailed that growth would come from geographic expansion for ATLAS (Europe, Japan, Australia), scaling high-grade capital solutions, and a major focus on hybrid origination. He emphasized that bank partnerships remain a key expansion area, countering the narrative of competition. CEO Marc Rowan added that any M&A would be small, origination-focused deals similar to the Argo acquisition.

Alexander Blostein asked for an update on third-party fundraising within the insurance channel, inquiring about year-to-date flows, fee rates, the addressable market, and the types of liabilities being targeted.

Answer

CEO Marc Rowan explained that Apollo's strategy is an open architecture model focused on partnership, not direct competition, with other insurers in the vast private investment-grade market. He noted partners gain access to both assets and Athene's efficient cost structure. Co-President James Zelter added that this 'flywheel' is centered on investment-grade activity and the dispersion of credit risk, emphasizing that the opportunity is still in its early stages.

Alex Blohstein asked about the positioning of Ares' real estate and broader real assets franchise, anticipating how it will perform as LP appetite normalizes and resumes in the real estate channel for both institutional and wealth clients.

Answer

Mike Arougheti, Co-Founder, CEO, and Director of Ares Management Corporation, highlighted Ares' global real estate business as the third-largest institutional manager, benefiting from scale, origination, portfolio management, and a vertically integrated platform. He noted positive tailwinds from supply constraints, declining rates, and increasing transaction volumes, with real estate deployment up 51% quarter-over-quarter and 78% year-over-year.

Alex Blohstein asked about Ares Management's real estate and real assets franchise positioning, anticipating normalized LP appetite across institutional and wealth clients, and the potential for increased transaction volumes.

Answer

Mike Arougheti, Co-Founder, CEO, and Director, explained that Ares' global real estate business, now the third-largest institutional manager, benefits from scale, vertical integration, and concentration in high-conviction sectors like industrials and multifamily. He noted that declining rates are constructive for real estate transaction volumes, with Q3 deployment up 51% quarter-over-quarter and 78% year-over-year, indicating green shoots.

Alex Blostein inquired about institutional private credit demand, focusing on how U.S. direct lending spread compression is affecting demand and fee rates, and the forward dynamics for the alternative credit market.

Answer

CEO Michael Arougheti explained that while the broader market has seen fundraising declines, Ares continues to grow due to market consolidation and its strong track record. He stated that Ares has not experienced significant fee pressure and that the attractive spread premium over liquid markets, for both direct lending and asset-based finance, continues to drive institutional demand.

Alex Blostein inquired about institutional demand for private credit, focusing on how spread compression in U.S. direct lending affects demand and fee rates, and the forward dynamics for the alternative credit business.

Answer

Michael Arougheti, Co-Founder, CEO & Director, explained that while the broader private credit market has seen fundraising slow, Ares continues to grow due to market consolidation and its strong track record. He stated that Ares has not experienced significant fee pressure and resists requests for fee reductions. Arougheti highlighted that both direct lending and alternative credit still offer attractive return premiums over liquid markets, which continues to attract capital.

Alexander Blostein asked about the forward M&A pipeline and which areas of deployment would likely remain active if the M&A backdrop stays subdued, as well as the amount of dry powder available for those strategies.

Answer

CEO Michael Arougheti highlighted the firm's proven ability to grow AUM even in slow M&A environments, noting that net deployment is often stronger due to fewer refinancings. He identified opportunistic credit, secondaries (both GP and LP-led), and asset-based strategies as key areas for deployment in a subdued market. He also mentioned that primary strategies can pivot to be more opportunistic. He concluded that the firm's record $142 billion of available capital is well-positioned for this type of investing.

Alexander Blostein asked about the evolving LP base for investment-grade private credit and requested a level-set on GCP's management fee base and growth expectations.

Answer

CEO Michael Arougheti noted the LP base for high-grade credit is predominantly insurance-focused. CFO Jarrod Phillips stated GCP is expected to generate ~$200M of FRE in the first 12 months, growing to ~$245M in 2026. Michael Arougheti added that significant fundraising for GCP's data center and real estate funds is already in flight.

Alexander Blostein asked about the asset-backed finance opportunity, questioning if new partnerships are needed to accelerate origination. He also inquired if FRE margins, excluding FRPR, could return to ~100 basis points of annual expansion in 2025 despite pressures from retail distribution costs.

Answer

CEO Michael Arougheti stated that no new partnerships are necessary for asset-backed finance, as the existing team of over 70 professionals has ample scale to continue its growth trajectory. CFO Jarrod Phillips affirmed that while the firm is investing in growth, they expect year-over-year FRE margin expansion to continue into 2025, within the previously guided 0-150 basis point range. Michael Arougheti added that excluding supplemental distribution fees, the margin would have already expanded by over 100 basis points.

Alex Blostein asked about the bank's securities portfolio reinvestment yields and their implications for Net Interest Margin (NIM). He also inquired about the certificates business balances, which have been declining, and where they are expected to ultimately stabilize.

Answer

EVP and CFO Walter Berman expects reinvestment yields in the high 4%s to low 5%s, allowing the bank to maintain its net interest income for the next three quarters, with the longer-term outlook dependent on Fed rates. Chairman and CEO Jim Cracchiolo and Walter Berman stated that certificate balances would directionally come down but not precipitously, stabilizing at a level dependent on rates, potentially around the $5-$6 billion range seen before 2023.

Alex Blostein asked about the roll-on/roll-off yield dynamics in the Ameriprise Bank securities portfolio and questioned how the company plans to fund its future loan growth given the current deposit levels.

Answer

EVP & CFO Walter Berman explained that as the securities portfolio matures, they are reinvesting at higher spreads, which is contributing to net interest income growth. He stated that the bank is launching new liability products, such as CDs, to fund the planned loan growth and is comfortable with its ability to diversify its funding sources.

Alex Blostein from Goldman Sachs inquired about the roll-on/roll-off yield dynamics in the Ameriprise Bank securities portfolio and the funding strategy for the bank's planned loan growth.

Answer

Walter Berman, EVP & CFO, explained that as the bank's securities portfolio turns over, they are seeing a spread increase, which contributes to net interest income growth. He also stated that the bank is launching new liability products, such as high-yield savings and CDs, to comfortably fund its asset and loan growth strategy.

Alexander Blostein sought clarification on management's comments about being 'opportunistic' with its strong capital position, asking if it hinted at specific M&A. He also asked about the outlook for all cash-related revenues and how the new CD product would interact with the existing certificates business.

Answer

Chairman and CEO Jim Cracchiolo clarified that the 'opportunistic' comment was a general statement about having flexibility to act on market opportunities and utilize the newly approved, larger share buyback program. CFO Walter Berman added that the new CD offering is viewed as incremental and is not expected to materially cannibalize the certificates business. He noted the bank's earnings are positioned for stability to navigate potential rate changes.

An analyst on behalf of Alex Blostein of Goldman Sachs asked about Ameriprise's capital strategy regarding inorganic growth in wealth management and questioned the path to achieving neutral organic growth in the Asset Management division.

Answer

Executive Jim Cracchiolo stated that while the M&A market is pricey, Ameriprise focuses on recruiting advisers and investing in new channels rather than large inorganic deals. For Asset Management, he outlined a path to improved flows through business transformation, efficiency gains, and expanding into formats like model delivery, SMAs, and active ETFs.

Alexander Blostein asked for the 2025 outlook for total cash revenues within Advice & Wealth Management (AWM), including the bank and certificates business, and questioned the sustainability of the high margins and G&A expense trajectory in the Asset Management segment.

Answer

CFO Walter Berman stated that bank net interest income is expected to be stable to increasing, though certificate and sweep earnings may soften with rate cuts. He projected Asset Management margins could remain in the 35% to 39% range in 2025, supported by ongoing transformation initiatives. CEO Jim Cracchiolo added that new bank products like CDs, HELOCs, and checking accounts will help attract more client cash.

Alex Blostein asked about the overarching goal of ICE's AI workflow automation initiatives, the expected savings and timeframe for these benefits, and how these savings would be reinvested or impact the firm's profitability over time.

Answer

Ben Jackson, President of Intercontinental Exchange, explained that the ICE Aurora platform aims to break down internal business processes and customer solutions to apply automation where appropriate, balancing probabilistic outcomes with regulatory compliance. He stated that the current expectation is to 'do more with the same' headcount, accelerate speed to market for new offerings, and meet increasing customer demands without increasing historical headcount.

Alex Blostein from Goldman Sachs asked about the overarching goal of ICE's AI workflow automation initiatives, including expected savings, timeframe for realization, and how these savings might be reinvested or impact the firm's long-term profitability.

Answer

Ben Jackson, President, explained that the ICE Aurora platform aims to break down business processes to apply automation where appropriate, balancing probabilistic outcomes with regulatory and compliance requirements. He stated that the primary goal is to 'do more with the same' headcount, accelerate speed to market for new offerings, and meet increasing customer demands without necessarily reducing current staff.

Alex Blostein of Goldman Sachs inquired about ICE's data center expansion, seeking to understand how this capacity build-out could translate into new or improved revenue opportunities for the company.

Answer

Christopher Edmonds, President of Fixed Income & Data Services, explained that ICE is methodically expanding its proprietary network capacity in line with client demand, with a development runway through the early 2030s. He emphasized that controlling the network experience is key, as it securely connects participants to over 750 data sources and 150 trading venues.

Alex Blostein from Goldman Sachs asked about ICE's ongoing data center capacity build-out and how this strategic investment is expected to translate into new or improved revenue opportunities for the company as a whole.

Answer

President of Fixed Income & Data Services, Christopher Edmonds, responded that the investment in its proprietary network is crucial for controlling the client experience. He noted that about half of the planned capacity is built, with a clear development roadmap through the early 2030s based on client demand. This network provides secure connectivity to over 750 data sources and 150 trading venues.

Alexander Blostein asked about the durability of ICE's energy franchise, questioning how a potential macroeconomic slowdown and lower oil prices might impact hedging activity.

Answer

President Benjamin Jackson explained that numerous persistent risks—including trade tensions, supply security, and the energy transition—drive hedging demand regardless of price levels. He highlighted that record volumes are being accompanied by rising open interest (up 8% YoY), which he described as the key barometer for market health and a leading indicator of future activity, demonstrating that clients are increasing their risk management, not leaving the market.

Alexander Blostein from Goldman Sachs inquired about the drivers behind ICE's market share gains in WTI, the durability of these trends, and the expected evolution of the WTI ecosystem.

Answer

President Benjamin Jackson attributed the success to innovations like the Midland WTI HOU contract, which has seen over 200% year-over-year growth and significant physical deliveries. He explained that the ability for clients to efficiently trade a package of related contracts—including Brent, WTI HOU, and WTI—is a key factor driving growth in their WTI contract.

Alexander Blostein asked a broader strategic question about when the integration efforts in the mortgage business will translate to better revenue growth, and whether this is dependent on an industry volume recovery or can be achieved independently.

Answer

Chair and CEO Jeffrey Sprecher emphasized that ICE has shifted from selling software to operating a mortgage network. He explained that value is created by adding participants and driving efficiency, which is not volume-dependent, and ICE expects to share in the cost savings this creates for clients. He noted that a separate, future benefit will come from a 'mean reversion' in transaction volumes, but the network strategy is designed to drive value regardless.

Alex Blostein inquired about the timing and rationale behind Virtu Financial's strategic pivot to growth, asking what prevented similar opportunities in the past and if there's potential to accelerate market share gains in traditional market-making businesses. He also asked about the anticipated OpEx lift for this growth strategy.

Answer

CEO Aaron Simon attributed the timing to a confluence of factors, including completed integrations and an uptick in external opportunities, confirming room for growth in core businesses by leveraging their scaled platform. Co-President and Co-COO Joseph Molluso added that the growth focus includes options, crypto, ETF block trading, and rates, and that strong positive operating leverage is expected, though attracting and retaining top talent will be a focus.

Alex Blostein of Goldman Sachs asked about Virtu's M&A appetite, noting the company's strengthening balance sheet and the evolving ecosystem, particularly in crypto, and where acquisitions rank on the priority list.

Answer

Co-President & Co-COO Joseph Molluso responded that while the company continuously evaluates all opportunities, its most accretive capital allocation in the past five years has been its $1.4 billion share repurchase program. He stated that any potential acquisition must offer a better return than buying back their own stock. While not ruling out M&A, Molluso emphasized that the bar remains high but acknowledged that future opportunities may arise.

Alexander Blostein of Goldman Sachs Group, Inc. asked which business areas, aside from crypto, were suppressed by the previous regulatory regime and could now recover. He also inquired about capital management priorities, particularly the balance between buybacks and debt reduction.

Answer

CEO Douglas Cifu identified the IPO market as an area suppressed by prior regulations, suggesting that a less burdensome environment could lead to more public listings, creating new products for Virtu. Co-President Joseph Molluso addressed capital management, confirming that share buybacks remain the primary method for capital return, as the program is "tailor-made" for the company's volatile cash flows. He added that while they continuously look for opportunities to cheapen the debt stack, the buyback is the "front priority."

Alex Blostein asked about the importance of the 10% gross return for BCRED to the retail channel, the response to BCRED's recent dividend cut, and details on upcoming multi-asset product launches.

Answer

President and COO Jon Gray stated that relative returns are key, and while lower base rates impact yield, the premium over liquid credit endures. He noted healthy gross sales and no elevated redemptions for BCRED. He added that multi-asset offerings, potentially involving multiple Blackstone products, will be unique solutions as the industry matures.

Alex Blostein followed up on the wealth discussion, asking about the importance of BCRED's 10% gross return to retail investors, the impact of its recent dividend cut on sales and redemptions, and details on Blackstone's planned multi-asset product launches for next year.

Answer

Jon Gray, President and Chief Operating Officer, stated that relative returns are key, and investors evaluate BCRED against other fixed income options, with the relative premium enduring. He noted healthy gross sales and no elevated redemptions for BCRED. Regarding multi-asset products, he mentioned collaborations with Wellington and Vanguard to offer unique combinations and comprehensive solutions as the industry matures.

Alex Blostein inquired about the private credit market, asking how spread compression is affecting client demand and conversations, and what the long-term implications are for fee rates.

Answer

President & COO Jonathan Gray responded that demand for private credit remains extraordinarily robust across investment grades and geographies. He emphasized that while absolute returns may moderate, clients are focused on the enduring premium private credit offers over liquid markets, which was approximately 190 basis points for A-rated credits recently. Gray expressed confidence that this relative value, combined with private credit's unique ability to provide bespoke solutions for large corporate and infrastructure deals, will continue to fuel growth.

Alexander Blostein asked for a deeper analysis of the investment-grade (IG) private credit opportunity, particularly in light of potential changes to bank capital requirements, and questioned what Blackstone's pitch is to IG borrowers.

Answer

President and COO Jonathan Gray highlighted that the pitch to borrowers is the flexibility and certainty of bespoke capital solutions, as seen in recent large deals. For investors, the key is generating superior returns, offering nearly 200 basis points of excess spread over liquid credits. He framed this as a structural shift where Blackstone partners with banks, which are seeking to optimize their ROE, rather than simply competing against them.

Alexander Blostein asked for the amount of capital on the credit platform that is not yet earning fees and for the outlook on credit deployment over the next year, including corporate partnerships.

Answer

Jonathan Gray, President & COO, anticipates that credit deployment will grow in line with capital inflows, driven by expansion into asset-based finance and corporate solutions like the recent EQT transaction. Michael Chae, CFO, provided a specific figure, stating that approximately $40 billion in the credit segment (BXE) is eligible for management fees but not yet earning them, with another $9 billion in the real estate credit business.

Alexander Blostein asked for Blackstone's outlook on being a net buyer versus a net seller of real estate over the next 12-18 months and which asset classes would be most active.

Answer

Chairman & CEO Stephen Schwarzman confirmed that Blackstone has recently been a net buyer but expects activity to balance out as the market recovers, leading to more realizations later in the year. He identified logistics, rental housing, and data centers as key areas for deployment, while also seeing selective opportunities in high-quality office and grocery-anchored retail.

Alex Blostein with Goldman Sachs asked John Woods for his initial observations on State Street's balance sheet management, operating dynamics, capital management, expense management, and net interest income (NII) strategies. He also inquired about the specific drivers for the expected NII improvement in the fourth quarter.

Answer

CFO John Woods expressed excitement about State Street's innovation and momentum, highlighting optimization opportunities in the balance sheet and productivity space. He noted solid balance sheet trends, stable net interest margin, and expected NII growth in Q4 driven by investment portfolio reinvestment at higher yields and the run-down of negative drag from terminated interest rate risk management hedges.

Alex Blostein of Goldman Sachs inquired about the sustainability of strong sales in Institutional Servicing, asking if any notable redemptions were on the horizon. He also asked about strategies to mitigate NII pressure from lower rates beyond 2025.

Answer

CEO Ronald O'Hanley confirmed strong sales momentum and high client retention rates, driven by investments in service quality and the Alpha platform, with no elevated losses anticipated. Interim CFO Mark Keating added that the sales success is the result of a multi-year strategic effort. Regarding future NII, Keating acknowledged they are working on mitigation strategies but refrained from providing a 2026 outlook.

Asked for a breakdown of deposit trends between interest-bearing and noninterest-bearing, and questioned what business areas are providing strength to maintain the full-year fee guide despite market headwinds.

Answer

Management noted that noninterest-bearing deposits are holding up well despite some expected seasonal moderation, and overall client deposits are trending towards the high end of their guided range ($240B). The fee guidance is maintained due to strong core business momentum, a record backlog of to-be-installed revenue ($356M), and a robust new business pipeline driven by platform investments and sales effectiveness.

Alexander Blostein from Goldman Sachs inquired about the trends in noninterest-bearing versus interest-bearing deposits and asked what business strengths are offsetting market headwinds to support the firm's full-year fee guidance.

Answer

Interim CFO Mark Keating noted that while noninterest-bearing (NIB) deposits declined as expected from a seasonal Q4 high, overall client deposits are trending toward the high end of their $230-$240 billion guided range. Both Keating and CEO Ronald O'Hanley explained the fee guide is supported by a record high $356 million in to-be-installed revenue, accelerated installation timelines, and continued momentum from investments in sales effectiveness and platform capabilities.

Alexander Blostein from Goldman Sachs Group, Inc. inquired about the drivers behind State Street's 2025 servicing fee growth outlook, seeking details on client retention, pricing, and sales targets. He also questioned the feasibility of the 80% capital return payout target given the recent dip in Tier 1 leverage.

Answer

Incoming Interim CFO Mark Keating detailed the multi-year strategy that increased servicing fee sales, highlighting a $350M-$400M target, 97% client retention, and a growing backlog. CEO Ronald O’Hanley reinforced the sustainability of this growth, attributing it to service quality, capability enhancements like Alpha, and improved sales execution. Regarding capital, O'Hanley confirmed the 80% payout target for 2025, explaining it would follow a seasonal pattern similar to the prior year, starting modestly.

Alex Blostein inquired about BNY Mellon's long-term outlook for firm-wide margin and operating leverage, considering efficiency gains from platforms and AI, and whether the Q4 NII guidance is a reasonable base for 2026.

Answer

CFO Dermot McDonogh highlighted consistent positive operating leverage over the past three years, exceeding peer averages, and expressed optimism for continued returns given early stages of transformation and AI opportunities. He confirmed that Q4 NII is a good jumping-off point as a base case for 2026, citing proactive balance sheet repositioning.

Alex Blostein asked about BNY's long-term outlook for firm-wide margin and operating leverage, considering future efficiency gains from platforms (expected late 2027/2028) and AI. He also sought confirmation on whether the Q4 NII guide serves as a reasonable starting point for 2026 NII.

Answer

CFO Dermot McDonogh emphasized BNY's consistent positive operating leverage over the past three years, often exceeding peer averages. He sees BNY as being in the 'early innings' of its decade-long strategy, with significant future opportunities from maturing commercial and platform operating models, new product/innovation leadership, and AI efficiencies, expressing optimism for continued strong returns. Dermot confirmed that BNY has proactively repositioned its balance sheet for 2026, and Q4 NII is a good jumping-off point as a base case for 2026.

Alex Blostein from Goldman Sachs asked for more detail on the opportunities and risks BNY Mellon sees in the evolving digital assets and tokenization landscape. He also inquired about the recent dynamics and forward trajectory for the firm's non-interest-bearing deposits.

Answer

CEO & Director Robin Vince stated that BNY Mellon sees more opportunities than risks in digital assets, positioning itself as a key partner for firms in the space by providing traditional banking, custody (including for Bitcoin), and on/off-ramp services. CFO Dermot McDonough added that while core businesses are growing, the firm is active in the stablecoin market. On deposits, McDonough noted that Q2 non-interest-bearing balances were strong, driven by Corporate Trust activity, but he expects them to moderate in Q3 before a potential pickup in Q4.

Alexander Blostein of Goldman Sachs asked about BNY Mellon's appetite for inorganic growth and M&A, particularly in a dislocated market. He also followed up on the deposit mix, questioning the outlook for noninterest-bearing deposits as a percentage of the total.

Answer

CEO Robin Vince stated that BNY Mellon is carefully evaluating M&A opportunities, emphasizing the need for strategic alignment, cultural fit, and attractive financial returns. He noted the Archer acquisition provided valuable integration experience. CFO Dermot McDonogh addressed deposits, expressing confidence in the full-year NII guidance, supported by actions taken last year to immunize the portfolio and a stable outlook on the deposit mix.

Alexander Blostein from Goldman Sachs asked about the importance of fee-based operating leverage versus total operating leverage and the firm's flexibility on expenses. He also inquired about the sustainability of strong performance in the repo business.

Answer

CFO Dermot McDonogh confirmed that while total operating leverage is the 'north star,' the firm is also focused on delivering positive fee operating leverage through the cycle and has multiple levers to manage inputs. Regarding repo, he noted its strong performance but contextualized it as only about 5% of overall NII, expecting it to grow but not be a meaningful driver of the total.

Alexander Blostein asked about the sustainable organic fee growth rate the enterprise can generate over time, given its various growth initiatives. He also sought to quantify the contribution from elevated repo activity and assess its sustainability.

Answer

CFO Dermot McDonogh declined to give a specific fee growth target but pointed to underlying growth across all segments and a 'flywheel of innovation.' CEO Robin Vince added that their North Star is positive operating leverage. On repo, Dermot noted it contributed to Q3 NII outperformance but has since moderated, supporting the ~$1B Q4 NII guide. He stated repo contributes roughly 5% to NII annually and expects activity to remain strong, a sentiment Robin Vince echoed by highlighting BNY's multiple touchpoints in the repo ecosystem.

Alexander Blostein from Goldman Sachs inquired about the future trajectory of Net Interest Income (NII), funding plans for the Winterflood acquisition, and the composition of the M&A pipeline for the next 6-12 months.

Answer

Group CFO Rob Irvin projected that interest expense has likely peaked and that balance growth would broadly offset rate cut impacts on interest income. Group CEO Ian Lowitt confirmed the Winterflood deal would be funded with existing liquidity. Chief Strategist Paolo Tonucci described the M&A pipeline as 6-7 live deals, all smaller than Winterflood, primarily in the UK/European financials space with some smaller opportunities in Asia.

On behalf of Alexander Blostein, an analyst asked about Marex's view on the current volatile market environment and its expectations for the pace of M&A in 2025, including the potential for larger-scale deals.

Answer

CEO Ian Lowitt characterized the current environment as 'attractive,' with elevated volatility and client activity creating opportunities for Marex. Management added that market share growth is also driven by structural factors like adding new clients and capabilities. Regarding M&A, management expects a cadence of around 4-5 transactions a year, weighted towards bolt-on deals, but confirmed they are also assessing larger, more transformative opportunities, which are less predictable.

Alexander Blostein of Goldman Sachs requested a deeper analysis of the Cowen acquisition's performance, including its current earnings contribution and 2025 outlook. He also sought clarification on whether the firm's NII sensitivity is firm-wide and if reinvestment benefits are fully realized.

Answer

CEO Ian Lowitt described Cowen as a critical long-term strategic asset whose full impact is mostly in the future, with a modest contribution to 2024 growth. An executive, Paolo, noted the business's run rate is improving due to completed integration and cross-selling. Ian Lowitt confirmed the NII sensitivity is firm-wide and that most fixed-rate reinvestment benefits are already in the current run rate.

Alex Blostein inquired about the financial dynamics of the private wealth platform, asking for its current profitability contribution net of non-controlling interests and whether StepStone would consider reclassifying its fee-related performance revenues, similar to industry peers.

Answer

CFO David Park confirmed the private wealth business is a meaningful and profitable contributor, representing nearly 8% of total fee-earning AUM, and directed investors to the press release for NCI details. Park stated there are no current plans to reclassify fee-related performance revenue. CEO Scott Hart added that for funds like Spring that do have incentive fees, the current plan is to maintain the existing reporting structure.

On behalf of Alex Blostein from Goldman Sachs, a representative asked about the growth drivers behind the increase in private wealth distribution platforms from 300 to 500. They also questioned if the competitive advantage of the ticker feature is diminishing as new entrants launch similar interval funds.

Answer

Jason Ment, President and Co-COO, stated that the allocation across distribution channels (wires, RIAs, broker-dealers) has remained consistent and that despite a more crowded field, StepStone's growth continues due to a growing overall market. He asserted that the ticker feature's advantage is not diminishing because StepStone's products (SPRIM, SPRING, STRUT, CRED) are differentiated, and more competitors help educate investors on private markets, which has been beneficial.

Alexander Blostein of Goldman Sachs inquired about the drivers of the strong deployment activity in the quarter, asking if it was broad-based or concentrated in a few large opportunities, and what the deployment pipeline looks like for calendar 2025. He also asked for a modeling clarification on how the Greenspring acquisition earnout will be paid out (cash, stock, etc.).

Answer

CEO Scott Hart confirmed the deployment activity was broad-based and diversified across asset classes and strategies, highlighting a particularly active calendar 2024 in secondaries, PE co-investments, and private credit. He expects the momentum to continue due to StepStone's diversified sourcing capabilities. CFO David Park addressed the earnout, stating the $75 million target was fully accrued and will be paid entirely in cash.

Alexander Blostein inquired about the private equity secondaries business, asking how increased M&A and IPO activity might affect secondary market volumes and capital deployment. He also asked for the outlook on FRE margins, excluding retroactive fees, and whether consistent margin expansion is now achievable.

Answer

CEO Scott Hart addressed the secondaries market, stating that 2024 is on track for record activity driven by both LP and GP-led transactions, and StepStone is well-positioned for growth. Head of Strategy Mike McCabe and CFO David Park discussed profitability, noting that the 34% core FRE margin is a reasonable baseline. They affirmed that while operating leverage is increasing, the firm's priority remains investing for growth, and they expect additional retroactive fees for the remainder of the fiscal year.

Alexander Blostein asked about the potential ultimate size of the TPG Capital X and Healthcare Partners III funds, given the strong $9 billion first close, and requested details on the P&L impact from management fees in Q3.

Answer

CFO Jack Weingart noted that existing LPs increased commitments by over 20% on average in the first close. He expects fund size growth to be at least in line with prior vintages. He clarified that TPG Capital X was activated in July, but Healthcare Partners III would likely activate in Q1 2026, which will dictate the timing of management fee step-downs.

Alexander Blostein asked about TPG's confidence in its private equity fundraising for TPG Capital and Healthcare Partners, inquiring about the composition of the LP base and whether any fee incentives were being offered.

Answer

CEO Jon Winkelried and President Todd Sisitsky emphasized that TPG is differentiated by its strong performance and consistent return of capital (DPI), which resonates with LPs. Sisitsky highlighted the unique portfolio construction, strong portfolio company revenue growth, and team continuity. Winkelried added that TPG is creating strategic partnerships with key clients across multiple products, which provides benefits and creates capital duration, rather than offering simple fee discounts.

Alexander Blostein inquired about TPG's commitment to a capital-light balance sheet when evaluating insurance opportunities and asked about the importance of forming strategic partnerships or JVs with larger traditional firms.

Answer

CEO Jon Winkelried reiterated TPG's preference for a 'hybrid structure' rather than a 'balance-sheet-heavy model' for any potential insurance partnership, stressing the importance of finding the right partner. He also noted that TPG is actively engaged in dialogues with traditional firms about partnerships, acknowledging that these relationships are evolving and will not be 'one size fits all'.

Alexander Blostein inquired about the management fee growth outlook for 2025, seeking clarity beyond the Q4 guidance given the numerous funds TPG is launching.

Answer

Chief Financial Officer Jack Weingart explained that while TPG is not providing specific guidance, the company anticipates significant management fee growth in 2025. He noted this growth will be driven by the 'building blocks' established in 2024 and is expected to begin in Q1 2025, following the fee step-downs in Q4 2024.

Alex Blostein of Goldman Sachs asked for a multi-year outlook on the credit business, specifically focusing on the growth capabilities in asset-based finance and private investment grade credit.

Answer

CEO Harvey Schwartz highlighted the convergence of insurance and private credit as a key opportunity. He explained Carlyle's strategy involves establishing collaborative partnerships to generate unique asset flow, referencing the Discover transaction. He sees continued global growth as asset-based finance becomes more mainstream for institutional investors seeking improved risk-adjusted returns.

Alex Blostein of Goldman Sachs asked for a deeper look into the multi-year growth outlook for the credit business, specifically focusing on capabilities in asset-backed finance and private investment grade credit.

Answer

CEO Harvey Schwartz highlighted the convergence of insurance and private credit as a key driver, noting Carlyle's strategy of forming collaborative origination partnerships. He emphasized the firm's early start and strong capabilities built from its partnership with Fortitude Re. Schwartz sees the market for asset-based finance growing globally beyond insurance to sovereign wealth funds and other institutions, positioning Carlyle's franchise for continued growth.

Alexander Blostein inquired about the outlook for Carlyle's corporate Private Equity franchise over the next 12-18 months, focusing on DPI performance, sales cycles, and the anticipated timing and sizing of the next flagship fund, CP IX.

Answer

CEO Harvey Schwartz stated there are no major adjustments to the timing for launching CP IX, which will be driven by deployment pace. He highlighted significant recent realizations like Hexaware and StandardAero as evidence of the team's ability to navigate the market. CFO John Redett added that the two latest U.S. Buyout vintages appreciated around 18% over the past year, with performance tracking to expectations.

Alexander Blostein asked for more detail on the 2025 Fee-Related Earnings (FRE) growth guidance, specifically the key drivers in the Global Credit and Global Investment Solutions segments, and the expected timing for the next U.S. buyout fund.

Answer

John Redett, CFO, described the 6% FRE growth guidance as a 'base case' that incorporates aggressive investments in growth areas like Wealth, Credit, and Solutions. He noted potential upside from capital markets fees and insurance flows. Key drivers for credit include the asset-backed business, a larger opportunistic credit fund, and the CTech retail product.

Alexander Blostein inquired about the potential impact of the incoming Trump administration on the alternative asset industry, focusing on both macroeconomic activity and specific regulatory items Carlyle is monitoring.

Answer

CEO Harvey Schwartz explained that the certainty of the election outcome is a significant positive for markets, as it boosts CEO and board confidence for capital deployment. He anticipates that policies like tax cuts and lighter regulation will further catalyze M&A and IPO activity. Schwartz described the combination of election certainty and normalizing Fed policy as a "powerful 1-2 punch" for Carlyle's business. CFO John Redett added that portfolio company CEOs have echoed this sentiment, feeling that reduced uncertainty will elevate confidence levels, benefiting capital markets.

Alex Blostein requested a deeper analysis of the Evergreen fund platform, specifically asking about the proportion of institutional demand and whether these inflows represent new market expansion or a shift from existing clients. He also sought clarity on the G&A expense outlook, noting a one-time benefit in the quarter and elevated costs in the previous one.

Answer

Co-CEO Erik Hirsch stated that institutional investors comprise about 15% of Evergreen flows and use the products for both accessing diversified private markets (smaller institutions) and as a tactical portfolio management tool (larger institutions), viewing it as market expansion rather than cannibalization. CFO Jeffrey Armbrister clarified that the firm targets G&A around $33 million per quarter, with the current quarter benefiting from a ~$2 million one-time item, and reminded that expenses include variable revenue-related commissions.

Alex Blostein asked for more detail on the Evergreen funds, specifically the mix of institutional versus retail demand and whether it represents new market expansion. He also requested clarification on the G&A expense outlook following a quarter that included a one-time benefit.

Answer

Co-CEO Erik Hirsch explained that institutional investors comprise about 15% of Evergreen flows, using the products for both access (smaller institutions) and tactical portfolio management (larger institutions), viewing it as market expansion rather than cannibalization. CFO Jeffrey Armbrister provided a G&A expense target of approximately $33 million per quarter, noting the current quarter included a ~$2 million one-time benefit and that costs are well-managed despite variable revenue-linked commissions.

Alex Blostein asked for details on the institutional demand within the Evergreen funds, including the proportion of AUM from smaller institutions and whether this growth is incremental or cannibalizing other products. He also requested a framework for the G&A expense outlook, given the mention of a one-time benefit in the quarter.

Answer

Erik Hirsch, Co-CEO, stated that institutional investors comprise about 15% of Evergreen flows, consistent with the prior quarter. He explained this includes smaller institutions that previously used fund-of-funds and larger institutions using the product as a tactical portfolio management tool, viewing it as market expansion rather than cannibalization. CFO Jeffrey Armbrister addressed G&A, stating their internal target is around $33 million per quarter, though they have been outperforming that. He noted the one-time benefit was a couple of million dollars and expects G&A to increase as revenue-tied wirehouse commissions grow.

Alex Blostein of The Goldman Sachs Group, Inc. questioned the underlying FRE margin for the quarter, excluding one-time items, and asked about catalysts for the range-bound separate accounts business.

Answer

CFO Jeff Armbrister clarified the FRE margin calculation, guiding to a high 40% range annually going forward. Co-CEO Erik Hirsch added that while the separate accounts business has been impacted by macro conditions, a strong pipeline of contracted capital is expected to drive growth as markets normalize and noted a strategic focus on evergreen products.

Alexander Blostein from Goldman Sachs inquired about the wealth management business, asking for a breakdown of gross sales versus redemptions in Evergreen funds and for insights into the evolving competitive landscape.

Answer

Co-CEO Erik Hirsch stated that management focuses on strong net inflows and considers minor redemptions normal for rebalancing. He acknowledged rising competition but highlighted Hamilton Lane's competitive advantages in scale, brand, and technology, particularly its strategic partnerships in tokenization. Hirsch emphasized focusing on long-term growth trends over month-to-month variability.

Alexander Blostein asked for an outlook on the fundraising pipeline for specialized funds over the next 12 to 18 months, excluding evergreen vehicles, and requested clarification on the future trajectory of equity-based compensation.

Answer

Co-Chief Executive Officer Erik Hirsch highlighted a diverse product pipeline, noting the direct equity fund is poised to be the largest currently in market, the impact fund is scaling successfully, and the new venture fund has strong initial market appeal with over $500 million raised. Chief Financial Officer Jeff Armbrister clarified that equity-based compensation is expected to be approximately $30 million per year, structured over a five-year award period.

Alex Blostein asked for details on AQR's tax-advantaged strategies, focusing on potential capacity constraints given its rapid growth and the firm's sustainable competitive advantages.

Answer

CEO Jay Horgen described AQR's competitive moat, citing its long history of innovation, robust trading and risk systems, and a significant first-mover advantage in after-tax solutions for wealth clients. President & COO Thomas Wojcik added that there is a 'tremendous amount of runway' for growth, as AQR is actively building out investment, operational, and distribution capacity to meet strong client demand.

Alexander Blostein asked about the strategic rationale for selling stakes in private market affiliates, such as Peppertree, and inquired about the potential for future sales of either minority or majority-owned firms.

Answer

Jay Horgen, President and CEO, explained that AMG's core strategy is to support the long-term independence of its affiliates. However, he noted that partnerships evolve, and sometimes a sale becomes a mutually agreed-upon optimal path. Horgen emphasized that these transactions, like the Peppertree sale, highlight the value created during the partnership, generate significant returns on invested capital for AMG shareholders, and align with the affiliate's own strategic goals.

Alexander Blostein from Goldman Sachs asked for details on the performance fee guidance, specifically which absolute return strategies underperformed, the potential impact on 2025 high-water marks, and the size of the accrued carried interest balance.

Answer

CFO Dava Ritchea identified trend-following strategies as the primary source of underperformance, noting this could cause 2025 performance fees to be soft relative to the ~$150 million historical average. She clarified that AMG does not typically acquire 'in-the-ground' carry on new investments, so carried interest is a longer-term opportunity that is expected to grow over time as new funds season.

Alex Blostein of Goldman Sachs requested a breakdown of the significant increase in AUM not yet earning fees, asking about the main contributors and the expected timeline for deployment and fee realization.

Answer

CFO Alan Kirshenbaum explained that the nearly $100 million increase in potential future management fees was driven by the record fundraising quarter, with the first close of the OREF VII net lease fund being a primary contributor. He noted this capital, once deployed at a blended 130 bps fee rate, would boost LTM management fees by over 15%. He expressed confidence in the 18-24 month deployment trajectory, which could accelerate with improving market conditions.

Alexander Blostein requested more detail on retail flow trends, specifically how April was shaping up, and asked for Blue Owl's strategic view on forming joint ventures with large traditional asset managers.

Answer

Chief Financial Officer Alan Kirshenbaum stated that April flows for the May 1 close were tracking down about 20% from the prior month, which he considered a strong result given market conditions. Co-CEO Marc Lipschultz addressed the partnership question, viewing peers' current JVs as 'seedlings' that are not yet transformative. He confirmed Blue Owl is actively engaged in discussions to form more meaningful partnerships focused on delivering 'true private solutions' to the channel.

Alexander Blostein of The Goldman Sachs Group, Inc. asked about near-term deployment pipelines, underlying M&A activity, and recent underwriting spreads for new loans.

Answer

Co-Chief Executive Officer Marc S. Lipschultz stated that while they are optimistic about 2025 M&A activity, they have not yet observed a material uptick in their pipeline. He noted that their financial planning is not predicated on a market rally. Regarding spreads, he described them as relatively stable after coming down in 2024, maintaining a steady premium to the broader market.

In a follow-up, Alexander Blostein sought to clarify if the mid-20s FRE growth target for 2025 was an all-in dollar figure, inclusive of the pending IPI acquisition.

Answer

Chief Financial Officer Alan Kirshenbaum gave a direct confirmation, stating, 'It's the first thing you said, that's right. It's a dollar amount,' and affirmed that the guidance is all-in, including the impact of the IPI deal.

Alex Blostein of Goldman Sachs inquired about the expected incremental margins from a recovery in investment banking and how the firm plans to measure the profitability and efficiency gains from its AI initiatives.

Answer

CEO Ronald Kruszewski explained that AI will be an "amplifier" for productivity across the firm, driving efficiency rather than replacing staff. He also noted a clear path to improving institutional margins, especially in equities, through the European restructuring. CFO James Marischen added that institutional pretax margins, currently below 15%, should be above 20% in a normalized environment, highlighting significant operating leverage.

Alexander Blostein of Goldman Sachs questioned which market segment is most receptive to Stifel's adjusted recruiting strategy and whether the focus is on the employee or independent channel. He also asked for the outlook on Net Interest Income (NII) and an update on client cash balances in April post-tax season.

Answer

CEO Ronald Kruszewski clarified the primary focus is on the employee channel, targeting higher-productivity teams with a holistic approach to compete with the RIA space. CFO James Marischen provided Q2 NII guidance of $260M-$270M, dependent on loan growth, and noted cash outflows in April were typical for tax season. Kruszewski added that share repurchases are becoming more attractive relative to loan growth in the current environment.

Alexander Blostein asked about the peak revenue potential for the investment banking business in the current cycle versus 2021 and sought a framework for how Stifel could improve its non-compensation expense growth rate.

Answer

CEO Ron Kruszewski highlighted that the firm has greater M&A capabilities now than in 2021, which was heavily skewed by SPACs. CFO Jim Marischen added that the announced M&A pipeline in financials is three times larger than a year ago. Regarding expenses, Kruszewski explained that variable non-comp costs are tied to revenue generation and are not an area to cut. Marischen noted that excluding episodic legal costs, the core operating expense ratio was at the low end of the guidance range in Q4.

Speaking on behalf of Alex Blostein, an analyst from Goldman Sachs asked for details on the funding rate of the $3 billion in third-party deposits and inquired about the potential for operating leverage on the compensation ratio in 2025.

Answer

CFO James Marischen detailed that the deposits consist of sweep accounts at tiered rates (with Smart Rate at 4.5%) and treasury deposits priced slightly below Smart Rate. CEO Ron Kruszewski addressed the compensation ratio, stating that they have been accruing conservatively and expect the 58% level to be at the high end of the 2025 range. He anticipates operating leverage as net interest income grows and the Institutional business normalizes.

Alexander Blostein of Goldman Sachs asked about the path to achieving the 20% pre-tax margin target, given the current capital markets environment, and explored opportunities to better monetize the wealth platform through alternative products.

Answer

CFO Butch Oorlog expressed confidence that an improvement in capital markets would enable the firm to reach its 20% margin target. CEO Paul Shoukry added that while there is significant headroom to grow in alternative products, expansion will be driven by organic client and advisor demand, not by pushing products with quotas, in keeping with the firm's culture.

Alexander Blostein from Goldman Sachs asked how the investment banking pipeline could help the firm achieve its 20%+ pre-tax margin target and about opportunities to monetize alternative products on the wealth platform.

Answer

CFO Butch Oorlog expressed confidence that an improving capital markets environment would help the firm reach its 20% adjusted pre-tax margin target. CEO Paul Shoukry added that while there is significant headroom for growth in alternative products, the firm's culture is to meet organic client demand rather than pushing products with quotas or incentives.

Alexander Blostein of Goldman Sachs asked a high-level question about the firm's path back to a 5%+ Net New Asset (NNA) growth rate. He also requested more detail on the strategy for the private investment platform, including manufacturing versus distribution capabilities.

Answer

CEO Paul Shoukry expressed strong optimism about returning to best-in-class NNA growth, citing a strong recruiting pipeline and noting the prior quarter's rate was higher. Regarding the private investment platform, he described it as a significant growth opportunity with an open-architecture model designed to serve high-net-worth clients with a wide range of products.

Alexander Blostein asked a big-picture question about NNA, noting the recent 3% run rate versus a historical 5%+ target, and inquired about the private investment platform's capabilities and strategy.

Answer

CEO Paul Shoukry countered that last quarter's NNA was 4% (mid-5% adjusted) and expressed optimism about future growth. Regarding the private investment platform, Shoukry described it as an open-architecture model with significant upside, focused on providing best-in-class third-party products while also building internal capabilities to create synergies.

Alexander Blostein pressed further on capital management, asking for a realistic timeline to reach the 10% Tier 1 leverage target and which types of M&A deals are most likely. He also asked about Investment Banking advisory revenues, questioning how much the business has expanded and how high revenues could reach in a new M&A cycle.

Answer

Chair and CEO Paul Reilly and President Paul Shoukry reiterated their commitment to the 10% target but declined to give a specific timeline, emphasizing prudence. Shoukry noted it was only two years ago that the firm did six acquisitions in two years, asking for patience as they remain disciplined. On advisory revenues, Reilly cautioned against extrapolating the strong results of the last two quarters, noting Q1 benefited from two large fees, including one over $40 million. He described the performance as an 'early recovery' and stated that while the pipeline is strong, the recent run rate would be challenging to maintain.

Alex Blostein of Goldman Sachs asked about AllianceBernstein's capital allocation strategy, particularly its appetite for mergers and acquisitions.

Answer

CEO Seth Bernstein confirmed active evaluation of opportunities like insurance sidecars, leveraging Equitable's underwriting skills, while remaining asset-light. Onur Erzan, Head of Global Client Group, added that they are also active in wealth management M&A, focusing on small to midsize businesses to gain operating leverage and scale, but remain disciplined on culture, platform fit, and price.

Alexander Blostein asked about asset allocation trends for the second quarter amid market volatility, particularly in the retail fixed income channel, and inquired about the future of the relationship with Equitable following its recent tender offer.

Answer

Onur Erzan, Head of Global Client Group and Private Wealth, acknowledged short-term retail fixed income outflows due to rate uncertainty but expressed long-term confidence, citing the strength of the U.S. muni franchise and growth in Japan's retirement market. Seth Bernstein, President and CEO, added that the fixed income value proposition remains intact. Regarding Equitable, Mr. Bernstein described the tender offer as a vote of confidence and affirmed that Equitable understands the strategic benefits of maintaining AB's independence for employee alignment, as an acquisition currency, and for tax purposes, with no change anticipated in the relationship.

Alexander Blostein asked about the durability of the firm's organic base fee growth and inquired about alternative methods to unlock shareholder value if a C-Corp conversion is off the table.

Answer

Onur Erzan, Head of Global Client Group, stated that while the fee rate is mix-dependent, positive indicators include the high fee rate of the institutional pipeline and a lower at-risk asset base in institutional equities. CEO Seth Bernstein addressed capital allocation, explaining that the partnership structure requires distributing all earnings, making share repurchases difficult as they would require borrowing, and he prefers maintaining a conservative balance sheet.

Alex Blostein asked about the expected timeline to achieve the 30%+ pretax margin target and the underlying market assumptions, as well as how the company plans to manage its Net Interest Income (NII) trajectory amid potential rate cuts.

Answer

Chairman and CEO Michael O'Grady projected the 30%+ margin target is likely achievable around 2026-2027, assuming a normalized yield curve. EVP & CFO David Fox addressed NII, stating that the firm can reinvest the ~$1.5 billion of securities that mature each quarter at higher yields and is opportunistically extending duration to protect future earnings from rate cuts.

Alexander Blostein asked for an update on deposit levels and mix so far in April, given market volatility. He also inquired about what percentage of the company's expense base is truly variable and flexes directly with asset levels and fee revenue.

Answer

CFO David Fox stated that deposit levels were 'hanging in there' in April as clients maintain a risk-off posture, which supports the NII guidance. He also explained that a very small portion of the expense base, less than 0.5%, is directly variable with revenue, noting that a 10% market change impacts trust fees by about 3% but has a much smaller corresponding benefit on expenses on the way down.

Alexander Blostein questioned the flexibility of the expense base, asking if the 'at or below 5%' growth target for 2025 is a firm commitment even in a stronger revenue environment. He also pressed for a more specific target for the expense-to-trust fee ratio for 2025.

Answer

Chairman and CEO Michael O'Grady acknowledged that some expenses naturally flex with revenue but stated the company is actively working to reduce this correlation, as demonstrated by the significant operating leverage in Q4. While declining to provide a specific 2025 target for the expense-to-fee ratio, he reiterated the goal is continued progress toward the medium-term range of 105-110%, highlighting the improvement to 113% in the current quarter.

Alexander Blostein sought clarification on the $10-15 million of elevated transactional activity within NII and inquired about the firm's longer-term expense growth algorithm following recent organizational changes.

Answer

Then-CFO Jason Tyler clarified the NII elevation was from a basket of items like FX swaps and FHLB dividends, which will normalize but not fully disappear. CEO Mike O'Grady addressed expenses, stating the goal is to lower the absolute expense growth rate in 2025 to achieve positive operating leverage and bring the expense-to-trust-fee ratio into its target range of 105-110%.

Alex Blostein from Goldman Sachs inquired about the potential impact on CME's ecosystem from anticipated changes to bank capital requirements, such as the Supplementary Leverage Ratio (SLR).

Answer

Terrence Duffy, Chairman & CEO, stated that any relief from what he termed "onerous" requirements would be a "net positive" for CME. He believes freeing up bank balance sheets would enable more risk management activity. Mike Dennis, Senior MD, added that while the final impact depends on the final rule, SLR relief could provide valuable balance sheet flexibility for bank clients.

Alex Blostein of Goldman Sachs asked how potential changes to bank capital requirements, such as the Supplementary Leverage Ratio (SLR), could impact CME's business and ecosystem.

Answer

Chairman & CEO Terrence Duffy stated that he was pleased with potential changes, viewing current rules as onerous and believing any relief would be a "net positive" for CME by freeing up bank balance sheets for more risk management. Senior MD Mike Dennis added that while no rule is final, SLR relief could provide balance sheet flexibility for banks, though the ultimate impact will depend on the final calibration.

Alexander Blostein of Goldman Sachs requested a breakdown of the retail segment's revenue contribution from trading and market data, and asked for perspective on the durability of retail engagement, especially in April's volatile market.

Answer

Terrence Duffy, Chairman and CEO, stated that CME does not break down revenue by participant type. He attributed the durability and growth of the retail segment to improved access and tools, citing new distribution partnerships with retail brokers that did not exist a few years ago. He believes this trend will continue due to technology enabling broader participation.

Alexander Blostein requested a breakdown of portfolio trading (PT) ADV between single-dealer and in-competition trades, and also asked for the current fee per million for both the PT and dealer RFQ protocols.

Answer

CFO Ilene Sazel Bieler and CEO Christopher Concannon explained that while they don't disclose the fee per million for specific protocols, single-dealer PT has no fee and can cause share volatility. Bieler provided April PT market share figures, noting a total share of ~21.8%, with single-dealer accounting for ~1.3%. Concannon reiterated that while PT and dealer-to-dealer growth pressures overall fee capture, their core client-to-dealer RFQ pricing remains very stable.

Alexander Blostein asked how MarketAxess defines success for 2025 market share, which protocols are most critical, and what the implications are for fee per million.

Answer

CEO Christopher Concannon outlined how different protocols contribute to growth: portfolio trading impacts share, block trading offers attractive revenue, all-to-all thrives on volatility, and automation sees high demand. CFO Ilene Bieler addressed fee capture, noting puts and takes from product mix (e.g., lower-fee PT vs. higher-fee Open Trading). She emphasized that the primary driver of high-grade fee per million is duration, which can fluctuate significantly with market conditions, but average fees have been broadly stable over time.

Alexander Blostein requested an update on the trading partnership with ICE, asking about its progress, benefits, and potential for future collaboration.

Answer

Global Head of Trading Solutions Richard McVey reported the ICE partnership is off to a 'great start,' providing valuable, complementary liquidity in munis and small-size high-yield trades. CEO Christopher Concannon praised the rapid technical integration and noted they will remain close to ICE on future opportunities, including potential treasury clearing initiatives.

Alex Blostein's team at Goldman Sachs asked about the SPX franchise, seeking insight on customer trends that could reaccelerate growth and the expected volume contribution from the Robinhood partnership.

Answer

Global President David Howson highlighted a strong start to the year for the SPX complex, driven by market uncertainty that increased demand for hedging. He pointed to record volumes in January for SPX and VIX options. He also reiterated that the Robinhood launch has been successful and is expected to be additive, contributing to a positive outlook based on cyclical and secular trends like retail and international growth.

Speaking for Alex Blostein of Goldman Sachs, an analyst asked about the contribution of pricing to the acceleration in DnA revenue, seeking the typical percentage increase and expectations for 2025.

Answer

Global President David Howson clarified that there is no single blanket percentage increase due to the vast array of products. However, he provided a key data point: pricing contributed about one-third of the DnA segment's growth in Q3. He expects a similar contribution in 2025, stressing that the primary growth strategy is expanding distribution and sales, not just relying on price increases.

Alexander Blostein followed up on the VIX product line expansion, asking for early feedback on the planned options on VIX futures, their potential uptake, and whether they might cannibalize existing products.

Answer

Global President Dave Howson positioned the new product as a tool to open up a broader market rather than a source of cannibalization. He explained that its primary appeal is to a new customer base, particularly international institutions, that cannot currently access U.S. security-based options. He also noted the product would allow for shorter-dated tenors, meeting a key secular demand trend in the options market.

Alexander Blostein began to ask a broader question concerning global, international, and emerging markets equity strategies amidst market volatility, but the transcript was cut off before the full question could be heard.

Answer

The transcript does not contain an answer as the question was incomplete due to an audio gap.

Alexander Blostein inquired about Artisan's expense outlook and margin profile, particularly how the strategy of adding capabilities to existing teams versus launching new teams impacts margins. He also asked about the drivers behind the slowdown in gross sales for the International Value strategy.

Answer

CFO Charles Daley explained that the firm's high variable expense model supports margin expansion with revenue growth and that a period of heavy investment has likely paused. He noted improving compensation ratios and potential for Q4 performance fees. CEO Eric Colson added that enhancing existing teams creates significant operational leverage. Regarding the International Value strategy, Mr. Colson stated that the firm prioritizes performance compounding over absolute flow growth, leading to cautious capacity management and lumpier inflows.

Alexander Blostein asked about the economics of the European ETF market relative to the U.S., specifically on distribution costs and fee sharing. He also pressed for details on the M&A pipeline, asking which areas are most likely to result in a transaction.

Answer

CEO Ali Dibadj responded that the European ETF market is nascent but growing, and he does not see significant economic differences on a per-unit cost basis for active strategies compared to the U.S. He emphasized the Tabula acquisition was key for accessing distribution. Regarding M&A, he reiterated that the pipeline is active and varied across geographies and products but declined to specify likely targets, stressing the firm's disciplined, client-led, and culture-focused approach.

Luke on behalf of Alexander Blostein asked about the near-term growth drivers for the newly acquired Victory Park Capital (VPC) and its unique strategic value proposition for Janus Henderson.

Answer

Executive Ali Dibadj explained that VPC addresses client demand for differentiated, asset-backed private credit. The primary growth driver is leveraging Janus Henderson's capital and distribution to fund VPC's strong deal origination, which was previously capital-constrained. He highlighted VPC's four key business lines—opportunistic credit, legal finance, insurance services, and structured finance—as distinct growth avenues that can be scaled globally.