Benjamin Budish

Benjamin Budish at Barclays inquired about the drivers behind the fee rate compression observed in the fourth quarter, seeking clarification on underlying dynamics, Q1 guidance, and the anticipated full-year impact from the Keystone acquisition. He also asked about Virtus Investment Partners' strategic approach to future transactions, particularly regarding diversification into private markets or expanding its growth equity footprint, and requested an update on the current AUM split between growth and value-oriented strategies.

Answer

Chief Financial Officer Mike Angerthal explained that normalizing the Q4 fee rate for discrete expenses showed a flat profile quarter-over-quarter, guiding to 41-42 basis points for Q1 and 43-45 basis points beyond Q1, factoring in Keystone. President and CEO George Aylward discussed diversification strategies, including broadening offerings and distribution channels, and confirmed continued interest in traditional managers. He noted that while Virtus is currently overweight quality-oriented strategies, they are actively growing other areas like growth equity through managers like Silvant and new ETF/SMA launches.

Benjamin Budish inquired about the drivers behind Virtus Investment Partners' fee rate compression in the recent quarter, seeking clarification on underlying dynamics and the impact of Keystone National on future fee rate guidance. He also asked a strategic question regarding future transactions, diversification avenues, and the company's growth equity footprint, specifically the proportion of AUM in growth versus value-oriented strategies.

Answer

Michael Angerthal, Chief Financial Officer, explained that the fee rate compression was modest, normalizing to 40.9 basis points, and provided Q1 guidance of 41-42 basis points, anticipating 43-45 basis points beyond Q1 with Keystone National's impact. George Aylward, President and CEO, discussed diversification through client channels and distribution footprint, particularly outside the U.S. He noted continued focus on traditional managers and growth equity, citing Silvant ETFs/SMAs as an area of growth, and confirmed M&A evaluation for strategic value beyond just investment strategies.

Benjamin Budish of Barclays inquired about the forward-looking fee rate, the drivers behind recent changes in fee rates across different products, and the company's capital allocation strategy, particularly its appetite for share repurchases.

Answer

President and CEO George Aylward explained that the fee rate is influenced by market conditions and asset mix, but the previously guided range of 41-42 basis points remains appropriate for modeling. Regarding capital allocation, Mr. Aylward confirmed that the recent increase in share buybacks was a deliberate response to the stock's valuation and that returning capital to shareholders remains a key priority, supported by low leverage and strong cash flow.

Benjamin Budish from Barclays PLC inquired about Virtus's strategic positioning for 2025, asking which asset classes present the best opportunities, and questioned the company's capital allocation priorities for the year, including M&A, share repurchases, and dividends.

Answer

President and CEO George Aylward explained that Virtus's diversified offerings are designed to perform in various market conditions, with current strength seen in fixed income. He highlighted that new product development is focused on ETFs, global funds, and institutional offerings. Regarding capital, Aylward confirmed the company has the flexibility to return capital to shareholders and invest in growth, including seeding new products, and will only pursue M&A that offers high strategic value.

Benjamin Budish inquired about the ETF product pipeline for 2025 and distribution availability, and also asked how the company balances its dividend growth policy with a rising payout ratio and overall EPS growth.

Answer

President and CEO George Aylward expressed excitement for the ETF pipeline, highlighting new actively managed products from Seix, AlphaSimplex, and Kayne Anderson Rudnick. He noted that distribution access expands as ETFs grow in AUM. On capital return, Aylward affirmed that providing investors with an expectation of continued dividend growth is a core part of their strategy. He stated that while the level of increase is balanced against other capital uses like buybacks, the seven consecutive years of increases demonstrate their commitment to this policy.

Benjamin Budish asked for color on the Fee-Related Performance Revenue (FRPR) outlook for the year, including the potential ramp from REITs and open-ended credit vehicles. He also questioned the sequential decline in private equity net accrued performance income and the optimism for American-style realizations in the second half of 2026.

Answer

CFO Jarrod Phillips explained that FRPR growth is driven by increasing incentive-generating AUM in credit, credit spreads, interest rates, and the growing Nontraded Secondaries fund (PMF). He noted that the diversified non-traded REIT (AREIT) has surpassed its high-water mark, and the industrial non-traded REIT (AIREIT) is close. The sequential decline in private equity net accrued performance income was attributed to volatility in a liquid holding within the portfolio, with ACOF VI becoming the lion's share of carry.

Benjamin Budish asked a two-part question concerning the outlook for Fee-Related Performance Revenues (FRPR), particularly the potential ramp from REITs and open-ended credit vehicles, and the sequential decline in private equity net accrued performance income.

Answer

Jarrod Phillips, CFO of Ares Management Corporation, explained that FRPR growth is anticipated from REITs (AREIT having crossed its high-water mark, AIREIT close), incentive-generating AUM in credit, and the growing Nontraded Secondaries bond (PMF). He attributed the sequential decline in private equity net accrued performance income to volatility in a liquid holding within the portfolio, causing fair value movements, while ACOF VI is becoming the primary driver of carry.

Benjamin Budish asked about the resiliency of institutional allocations to private credit and the opportunity set in private investment-grade credit compared to high-yield.

Answer

CEO Michael Arougheti asserted that investor appetite for private credit remains very significant, driven by strong double-digit returns and a secular shift in allocation. Regarding private investment grade, he explained the theme is the same: investors are increasingly willing to allocate to less liquid markets to capture excess returns. He noted that Ares is a major participant in both investment-grade and sub-investment-grade asset-based finance, which enhances its value proposition and origination capabilities.

Benjamin Budish asked for insights into 2025 management fee growth drivers and the long-term outlook for the firm's tax rate, considering growing realizations and the corporate alternative minimum tax (AMT).

Answer

CFO Jarrod Phillips explained that management fee growth is driven by a mix of deployment for drawdown funds and fundraising for retail and equity-style funds. He projected a 2025 tax rate of 11-15%, noting that while realizations push the rate up, amortization from the GCP deal will provide a downward offset, and the AMT is likely still a year or two away.

Benjamin Budish asked for more details on Blue Owl's FRE margin outlook for 2026, including the significant step down in Q4 2025 FRE comp expense, and the key drivers of operating leverage, particularly in light of slower flows and elevated redemptions in non-traded BDCs.

Answer

CFO Alan Kirshenbaum explained that Blue Owl ended 2025 with FRE margins at 58.3%, slightly above guidance, due to disciplined expense management and year-end compensation decisions. For 2026, he targets a 58.5% FRE margin, contingent on revenue growth outpacing expense growth. He noted an encouraging general stabilization in daily flows for wealth products in early 2026 despite market uncertainties.

Benjamin Budish asked for more details on Blue Owl's FRE margin outlook for the year, specifically inquiring about the significant step down in Q4 FRE compensation expense and the key drivers of operating leverage for 2026, including cost controls and sensitivity to non-traded BDC flows and redemptions.

Answer

CFO Alan Kirshenbaum explained that the Q4 expense reduction was due to year-end compensation decisions. He reaffirmed the management team's focus on FRE margin progress, achieving 58.3% in 2025 and targeting 58.5% in 2026. Alan noted a general stability in daily wealth product flows and stated that the key for 2026 is revenue growth outpacing expense growth, utilizing levers on both sides.

Benjamin Budish inquired about near-term deployment expectations, the pipeline, and any observable changes in loan documentation, specifically mentioning PIK (payment-in-kind) utilization.

Answer

Co-CEO Marc Lipschultz noted that while overall M&A is lower, Blue Owl is gaining market share from the inactive syndicated loan market. He detailed the high quality of the loan book, with non-accruals declining. He made a crucial distinction between 'PIK by design' in strong, low-LTV software credits (a positive sign) and 'PIK not by design' due to stress (a negative sign). He also highlighted excellent deployment in real assets, with the current fund showing the best metrics in the strategy's history.

Benjamin Budish inquired about recent trends at Global Atlantic, specifically asking about a potential shift in flow mix towards real estate, its drivers, and the impact on margins and ROE for the insurance business, while also seeking clarity on 2026 earnings expectations.

Answer

CFO Rob Lewin clarified that there was no significant change in Global Atlantic's flow mix. He explained that KKR strategically invested in core real estate in early to mid-2024 due to a lack of capital in that market and favorable valuations. These investments, while having lower running yields than liabilities and initially showing P&L losses under cash accounting, are expected to generate substantial accreted income and cash earnings in 2027-2028. He reiterated the expectation for Global Atlantic's operating earnings to be in the $250M+ range per quarter for the next four quarters, with accrued income projected to reach $300M-$350M in 2026.

Benjamin Budish asked for clarification on recent trends at Global Atlantic, specifically regarding its operating earnings exceeding the $250 million per quarter target, potential narrowing of net investment spread, lower G&A, and expectations for 2026.

Answer

CFO Rob Lewin advised modeling Global Atlantic at $250 million-plus per quarter for the next four quarters. He explained that accrued income, not recognized in the P&L due to cash accounting for alternatives, was in the mid-$90s in Q4 2025, with a run rate closer to $250 million, projected to reach $300 million-$350 million in 2026. This accrued income is expected to convert to cash earnings in 2027-2028, reinforcing confidence in the differentiated Insurance business.

Benjamin Budish from Barclays asked for the Q2 outlook on Capital Markets fees and the historical context for the debt-focused fee mix. He later followed up on management fee growth and the activation timing for the Americas fund.

Answer

CFO Rob Lewin stated that the two-thirds debt focus in Capital Markets fees is historically consistent. For Q2, he noted a solid pipeline but suggested revenue might be slightly shy of Q1's $229 million. On the follow-up, Lewin confirmed they still expect management fee growth to accelerate and that the North America XIV fund will activate in Q2 2025, beginning to contribute to fees.

Benjamin Budish inquired about the fundraising progress for the Americas private equity fund and the expected trajectory of management fee growth into 2025.

Answer

Executive Craig Larson confirmed the Americas PE fundraise is ahead of schedule, with a first close expected in Q1 2025. An executive, likely CFO Rob Lewin, added that management fee growth is expected to accelerate from the 14% rate in 2024, supported by the new fund and other initiatives, which is crucial for achieving the firm's 2026 FRE target of $4.50+ per share.

Benjamin Budish of Barclays questioned a recent sale from the Core Private Equity (Strategic Holdings) portfolio, asking about the circumstances, the likelihood of recurrence, and the impact on long-term dividend income targets.

Answer

Chief Financial Officer Rob Lewin clarified that the sale was a unique situation involving a fiber asset co-owned with Telecom Italia, which was cashed out during a broader transaction. He stressed that the long-term hold strategy for the portfolio is unchanged and that management's conviction in achieving its dividend income targets ($300M+ by 2026, $600M+ by 2028) has only increased.

Benjamin Budish inquired about potential AI disruptive fears in the Fixed Income and Data Services (FIDS) business, asking about the moats, proprietary data versus replicable software, and the overall defensibility of ICE's data and analytics offerings.

Answer

Chris Edmonds, President of Fixed Income and Data Services, emphasized ICE's position as a trusted source, highlighting three key components: proprietary, mission-critical content from exchange and clearing activities; data center opportunities for client proximity; and alpha generation through correlated data sets like the Reddit deal. He stressed the uniqueness and comprehensiveness of their data, particularly in fixed income pricing and reference data (PRD), which drives index growth and is built on extensive historical data.

Benjamin Budish inquired about potential AI disruption risks in ICE's Fixed Income and Data Services (FIDS) business, asking about the defensibility and proprietary moats of their data and analytics offerings against replicable software.

Answer

Chris Edmonds, President of Fixed Income and Data Services at Intercontinental Exchange, emphasized ICE's role as a trusted source. He outlined three key components of their data business: proprietary, mission-critical content from exchange and clearing activities; data center opportunities for client proximity; and alpha generation through correlated data sets, citing the Reddit deal. He highlighted the comprehensive, historical nature of their pricing and reference data and valuations as a significant moat.

Benjamin Budish asked for details on the Mortgage Technology guidance, questioning if underlying trends had shifted, and requested quantification of the onetime revenue in the quarter.

Answer

CFO Warren Gardiner quantified the onetime revenue as a 'few million dollars' and confirmed it was not expected to repeat. He stated that while there are always minor moving parts, nothing has changed significantly enough to alter the full-year guidance for the segment, which accommodates a range of market outcomes for origination volumes. He affirmed the company feels good about its position for the year.

Benjamin Budish from Barclays asked for more detail on the timing of Black Knight expense synergies, the benefit embedded in the 2025 OpEx guide, and the rollout of the newly increased synergy target.

Answer

CFO Warren Gardiner explained that many synergies were realized quickly in late 2023 and 2024, and are now in the run rate. He noted the increased synergy target of $230 million is related to longer-term items like systems and real estate, with no change to the 2028 achievement timeline. The current guidance reflects about $25 million in run-rate help, contributing to the modest 3% expense growth forecast.

Benjamin Budish asked for details on the Q4 ICE Mortgage Technology (IMT) guidance, which appears more conservative than MBA forecasts, and questioned the business's sensitivity to a transaction pickup given that many customers are below their volume minimums.

Answer

CFO Warren Gardiner explained the guidance reflects typical Q4 seasonality and the recent spike in mortgage rates, which may not be in the MBA forecast. He confirmed a significant portion of customers remain below their minimums, but this is improving quarterly. He noted that as customers are renewed at lower minimums, it becomes easier for them to exceed the threshold and generate per-transaction revenue, which is already contributing to growth.

Benjamin Budish inquired about AllianceBernstein's strategy for growing its private markets AUM beyond the previously stated $90 billion-$100 billion target for 2027.

Answer

Seth Bernstein, CEO of AllianceBernstein, clarified that the current target does not include the over $10 billion in commercial mortgage lending assets to be onboarded in 2026. He stated that AB remains ambitious and sees further expansion opportunities, planning to revise the private markets AUM target with their second-quarter earnings.

Benjamin Budish sought clarification on the revised performance fee guidance, asking if the increase was driven by public or private markets. He also asked about the importance of investment-grade private credit and its role in the firm's growth strategy with third-party clients.

Answer

CFO Thomas Simeone clarified that the performance fee guidance was revised upward due to $19 million in realized fees from a public market strategy (International SMID) in Q1, while the private markets forecast remains unchanged. Onur Erzan, Head of Global Client Group, explained that investment-grade private credit is 'primarily an insurance story' and represents the highest growth area within that channel, making it a key part of their strategy to expand with third-party insurers.

Benjamin Budish asked for color on the institutional business, including any known Q1 redemptions or wins, and the outlook for improving the redemption rate.

Answer

Onur Erzan, Head of Global Client Group, responded that there are no massive, known mandate departures expected that would have a disproportionate impact compared to recent run rates. He highlighted a recent uptick in win rates within the insurance client segment for taxable fixed income and noted the firm continues to seek strategic relationships similar to its partnership with RGA, which should be additive to the institutional business.

Benjamin Budish inquired about the performance fees from AB Private Credit Investors (AB-PCI), asking about the key drivers, the outlook in a declining rate environment, and the largest potential future contributors to private markets performance fees.

Answer

Matthew Bass, Head of Private Alternatives, explained that AB-PCI performance fees are predictable and driven by AUM volume, base rates, and credit spreads. He acknowledged that falling rates would be a headwind but noted the business has a consistent growth trend. For future drivers, Bass highlighted scaling existing funds, launching new products for retail and insurance channels, and extending teams, noting that insurance-focused products would likely have a lower performance fee profile.

Benjamin Budish asked for clarification on CME Group's recent pricing changes, specifically regarding market data pricing implemented earlier in the year, and sought context on any other asset class impacts and the overall thought process for this year's adjustments.

Answer

Chief Commercial Officer Julie Winkler detailed the 3.5% rack rate increase for market data, highlighting its contribution to record revenue and balanced growth drivers. CFO Lynne Fitzpatrick explained that transaction fee changes primarily impacted metals, Micro complex, crude oil, and grains, noting a shift away from consolidated annual announcements.

Benjamin Budish of Barclays inquired about CME Group's recent pricing changes, specifically the market data pricing effective earlier in the year, and sought additional context on the thought process behind transaction fee adjustments across different asset classes for the current year.

Answer

Julie Winkler, Chief Commercial Officer, detailed a 3.5% rack rate increase across most market data products effective January 1st, attributing growth to new user expansion, product innovation, and pricing integrity, leading to a record $800 million in annual revenue. CFO Lynne Fitzpatrick explained that transaction fee changes primarily impacted metals, micro complex, crude oil, and grains, with incentive program revisions also affecting rates. She noted a shift from consolidated annual fee changes to more frequent, condition-warranted adjustments.

Benjamin Budish from Barclays followed up on margin questions, asking for any early indications on the client shift from non-cash to cash collateral following the pricing change that took effect in April.

Answer

Lynne Fitzpatrick, CFO, provided specific data, noting that the average cash balance increased from $79 billion in Q1 to $131 billion month-to-date in April. She cautioned that it's still early and advised monitoring the monthly volume tracker, but noted that the vast majority of participants are meeting the new 30% soft minimum in cash.

Inquired about retail product expectations, particularly for micro equity indices and competition, and also sought detailed clarification on the components of the announced pricing and fee changes.

Answer

The diversity of their product suite (equities, crypto, commodities) is a key differentiator for attracting retail clients. The announced 2% to 2.5% pretax income impact is an aggregate figure. The 1% to 1.5% transaction fee increase is net of incentive changes. The impact from the new cash collateral minimum will depend on customer behavior (paying a fee vs. posting more cash), which determines if it flows through other revenue or non-operating income.

Benjamin Budish asked about the P&L implications of rising retail trading activity, particularly the effect on rate per contract (RPC). He also questioned the drivers behind the sequential increase in licensing fees and the outlook for that line item.

Answer

CEO Terrence Duffy explained that retail activity does not automatically lead to a lower RPC, citing that micro contract pricing was not based on notional value. CFO Lynne Fitzpatrick added that the company's focus is on overall revenue and earnings growth, not specifically on the RPC metric. Fitzpatrick attributed the higher licensing fees to strong volume growth in the equity complex and an off-cycle measurement for certain OTC clearing programs, confirming no new fees were added for SOFR or Treasury products.

Benjamin Budish asked about the expected impact of recent market shocks, specifically AI disruption, on near-term equity flows, how advisors and retail customers typically respond, and the equity franchise's exposure to software and services.

Answer

CEO Robert Sharps stated that the impact on flows depends on client type, with the net effect over longer periods not being substantial, as some clients rebalance into equities during drawdowns. He added that T. Rowe Price's overall equity mix is no more exposed to software and services than the market. Head of Global Investments Eric Veiel elaborated that T. Rowe Price has deep research on AI opportunities and risks, positioning portfolios for such events, and is not surprised by potential AI disruption in the software industry.

Benjamin Budish inquired about the firm's AUM in direct lending and requested an update on the O-Credit fund, specifically regarding recent flows and investor appetite.

Answer

CEO Robert Sharps clarified that private market alternatives AUM is approximately $20 billion, consisting largely of private credit. He noted that while OHA has significant committed capital, deployment has been limited by a soft M&A environment. Sharps acknowledged that flows for the O-Credit fund ($54 million in Q1) have been slower than expected due to intense competition but are building as platform placements increase to eight. He expressed confidence that momentum will improve through 2025, aided by the fund's recent 'BDC of the Year' award.

Benjamin Budish inquired about the dynamics driving the firm's effective fee rate, asking for details on the exit rate from the quarter and the outlook for 2025 given the mix shift of sales and redemptions.

Answer

CFO Jen Dardis confirmed that fee compression was higher than average in 2024, driven by outflows from higher-fee equity products and inflows into lower-fee vehicles like CITs and ETFs. CEO Robert Sharps added that the firm does not manage to a specific fee rate, viewing lower fees as a way to enhance their value proposition and seeing a trade-off between fees and flows that can quicken the path back to positive net flows.

Benjamin Budish asked about the private credit business, specifically the exposure to senior direct lending and its positioning for a potential pickup in transaction activity. He also asked if the mentioned fixed income opportunities in insurance were related to private credit.

Answer

CEO Rob Sharps clarified that insurance opportunities span the entire fixed income business, including investment-grade credit and private credit strategies from OHA, as insurers seek higher yields. He noted that OHA historically did not offer dedicated senior private lending but recently had the first close for its new fund in this space, raising $2 billion. This was part of a record $5.5 billion quarter for OHA capital commitments, which he expects will boost alternatives flows into 2025 as capital is deployed.

Benjamin Budish inquired about the particularly strong equity flows in the quarter, asking if there were any unusual or one-time factors, and for an outlook on the rest of the fiscal year.

Answer

Jennifer Johnson, President and CEO, noted that strong reinvested dividends contributed to the flows. She highlighted Putnam's excellent performance and strong flows, which have continued into January. Daniel Gamba, Co-President and Chief Commercial Officer, added that the strength came from Putnam (large cap value, research), institutional flows from Templeton Emerging Markets, and excellent results from the ETF franchise, especially active ETFs (75% of total ETF flows), driven by Boston affiliate and ClearBridge funds.

Benjamin Budish asked about the particularly strong equity flows in the quarter, inquiring if there was anything unusual or one-time to call out, and for thoughts on how the rest of the fiscal year might unfold.

Answer

Jennifer Johnson, President and CEO, attributed strong equity flows partly to reinvested dividends and excellent performance and flows from Putnam, noting continued positive momentum into January. Daniel Gamba, Co-President and Chief Commercial Officer, added contributions from Templeton Emerging Markets and strong results from active ETFs, particularly from the Boston affiliate and ClearBridge funds.

Benjamin Budish from Barclays asked for an update on the fiscal year expense guidance, considering recent market movements and the resulting pressure on assets under management (AUM).

Answer

CFO and COO Matthew Nicholls provided quarterly guidance, expecting the effective fee rate to hold around 38 basis points and compensation to decrease to around $810 million. He reaffirmed that full-year 2025 expenses are expected to be roughly flat to 2024, adjusted for the Putnam acquisition and performance fees. Nicholls also reiterated the plan to achieve a $200 million to $250 million run-rate of cost savings entering fiscal 2026, noting that strategic investments are being funded by savings elsewhere in the business.

Benjamin Budish inquired about the alternatives business, specifically the strategy to grow wealth channel fundraising to 20-30% of total capital raises. He asked about the expected cadence and product mix driving this growth, such as semi-liquid versus drawdown funds.

Answer

CEO Jennifer Johnson highlighted existing success, noting Lexington's last fund sourced 20% from wealth channels. She emphasized the strong demand for new perpetual, semi-liquid products, citing a recent fund launch that was capped at $900 million. Head of Global Distribution Adam Spector added that both perpetual and drawdown funds are key, and the firm is co-developing products with major distributors and investing heavily in adviser education to support this growth.

Benjamin Budish from Barclays requested an unpacking of the five-year, $100 billion private markets fundraising target, asking about the expected contributions from cross-selling, future M&A, and the retail versus wealth channels.

Answer

President and CEO Jennifer Johnson clarified that the $100 billion target is based on organic growth from existing managers like BSP, Clarion, and Lexington, not future M&A. She projected $13 billion to $20 billion in gross sales for fiscal 2025, driven by new offerings like real estate debt funds and perpetual vehicles for the wealth channel. The wide range for 2025 depends on the timing of Lexington's next flagship fund and a recovery in real estate markets.

Benjamin Budish asked about the long-term benefits to Nasdaq if a significant portion of the market migrates to tokenized trading, specifically inquiring about potential uplift in trading activity due to capital efficiencies or round-the-clock trading, internal cost savings, or if it ultimately comes down to the same competitive factors like liquidity and market depth.

Answer

Adena Friedman, Chair and CEO, explained that driving more capital efficiency, particularly in collateral movement, can increase participation. She noted that 24/5 trading could expand the addressable market by providing access during investors' waking hours globally. Friedman also sees opportunities for Nasdaq to provide more fintech services, such as surveillance, trade operations, and regulatory reporting, as institutional engagement grows.

Benjamin Elliot Budish inquired about Nasdaq's 2026 OpEx outlook, noting the implied slower year-over-year growth in Q4 and the 3% gap between solutions and OpEx growth, asking about the pace of spend for initiatives like tokenized equities and 24/5 exchange operations.

Answer

Sarah Youngwood, CFO, stated that the OpEx trajectory is consistent with the medium-term outlook, with strong double-digit solutions revenue growth leading to volume-related expenses. She confirmed that all mentioned initiatives are funded within the current full-year guidance. Adena Friedman, Chair and CEO, added that Nasdaq maintains a consistent approach to platform investments, with robust product roadmaps and 24/5 trading embedded in the 2026 outlook. She emphasized driving efficiency into the core enterprise to fund Horizon 1 and Horizon 2 investments.

Benjamin Budish asked for early thoughts on Nasdaq's 2026 OpEx outlook, specifically regarding the implied slower year-over-year growth in Q4, the 3% gap between solutions and OpEx growth, and the pace of spend for initiatives like tokenized equities and 24/5 exchange operations.

Answer

Sarah Youngwood, CFO of Nasdaq, described the OpEx trajectory as consistent with the medium-term outlook, noting strong revenue growth leading to volume-related expenses and continued funding for investments. Adena Friedman, Chair and CEO, added that ongoing investments in platform modernization, including 24/5 trading, are embedded in current guidance, with efficiency programs helping to fund Horizon 1 and Horizon 2 investments.

Benjamin Budish asked for details on Verafin's growth drivers, including the role of AI features, pricing, the mix of SMB versus upmarket sales, and the progress of its European expansion.

Answer

CEO Adena Friedman explained that AI features are embedded to enhance value and ROI, which supports pricing power during renewals, rather than being sold separately. She identified strong SMB sales and increasing traction with Tier 1 and Tier 2 clients via a 'land and expand' strategy as key growth drivers. Regarding Europe, she noted constructive client engagements and active proofs-of-concept, but set expectations for meaningful revenue contributions to begin next year due to long sales cycles.

Benjamin Budish followed up on Workflow & Insights, asking about the conversion timing for newly listed companies to become software clients and the potential impact of a negative political tone on ESG on Nasdaq's related solutions.

Answer

Adena Friedman, Chair and CEO, clarified that the Corporate Solutions business is a lagging indicator to the IPO market, as new listings receive a complimentary period before converting to paying clients. Regarding ESG, she noted that while it's a small part of the business, demand has shifted more toward Europe and global companies due to new disclosure requirements there.

Benjamin Budish followed up on Adenza, noting Q4 is a key bookings quarter and 2025 is expected to be a big upgrade cycle. He asked whether to expect an acceleration in professional services or ARR.

Answer

CEO Adena Friedman confirmed strong demand and sales should lead to a recovery in professional services fees in the coming year. She reminded investors that for AxiomSL, the move to ratable accounting makes ARR and revenue more consistent, while for Calypso, focusing on ARR is best due to the upfront recognition of license fees, which creates revenue variability.

Benjamin Budish followed up on the Canadian strategic partnership, asking about any cash flow implications or proceeds from the sale, and whether that information has been disclosed.

Answer

CFO Allison Dukes stated that the cash flow implications and proceeds from the sale are 'pretty negligible relative to the cost that we will incur with some of the repositioning,' making them immaterial.

Benjamin Budish (Barclays) followed up by asking about any cash flow implications or proceeds from the sale of the Canadian business.

Answer

Allison Dukes (CFO) stated that any proceeds from the sale would be 'pretty negligible' relative to the costs incurred for repositioning, making the overall cash flow impact immaterial.

Benjamin Budish asked about Invesco's outlook on variable expenses for 2026-2027 and opportunities for operating leverage. He also asked for feedback on the new MassMutual partnership fund, its direct lending component, and distribution rollout.

Answer

CFO Allison Dukes stated variable expenses run about 25% and the focus is on managing the fixed expense base through simplification. President and CEO Andrew Schlossberg noted the new fund is targeting U.S. wealth management clients, leveraging Barings and Invesco strengths, and is well-priced and relatively liquid.

Benjamin Budish inquired about Invesco's approach to managing variable expenses and driving operating leverage into 2026-2027, given a healthy revenue backdrop. He also asked for specific feedback on the new MassMutual fund, its direct lending component, and its distribution rollout.

Answer

CFO Allison Dukes explained that variable expenses run about 25% and fluctuate with revenue, while the focus is on managing the fixed expense base through simplification and reducing redundancies. President and CEO Andrew Schlossberg added that the new MassMutual fund, repurposed from a legacy fund with a decent asset base and MassMutual infusion, targets U.S. wealth management clients (FAs, RIAs) with a dynamic, multi-credit solution, but it's too early for specific feedback on its couple of weeks in market.

Benjamin Budish asked about the distribution timeline for the new Barings partnership products and the level of investment required for adviser education and placement.

Answer

CEO Andrew Schlossberg stated that the necessary distribution infrastructure, including specialists and relationships, is already in place, so significant new investment is not required. He indicated that the timeline for product launches should be thought of in terms of 'quarters from now' and that an update would be provided on the next earnings call.

Benjamin Budish inquired about the drivers behind the narrowing and lowering of fee rate ranges across Invesco's product categories, including specific pressures on ETF fees in China. He also asked for more detail on the $2.5 billion custom ETF launched for a Finnish pension insurer and the pipeline for similar large-scale custom opportunities.

Answer

Chief Financial Officer Allison Dukes attributed the fee rate trends primarily to mix shift within categories, such as high demand for lower-fee products like QQQM, rather than broad competitive pressure. She noted China's mandated fee cuts were already reflected in results. President and CEO Andrew Schlossberg described the large institutional custom ETF launch as more episodic but stated that demand for custom indexing in general is growing for both institutional and wealth platform clients.

Benjamin Budish asked about the competitive dynamics in fixed income, specifically whether strong flows were from market share gains or just money in motion. He also inquired about the firm's private wealth distribution capabilities for alternative products.

Answer

President and CEO Andrew Schlossberg stated that while it's hard to parse, the strong fixed income flows are largely from money in motion in a competitive global market. He noted that Invesco has already made the necessary investments in its generalist-specialist distribution model for private markets in the wealth channel and is now focused on execution and growing volume.

Benjamin Budish followed up on the 5% net new asset (NNA) expectation, seeking an update on the legacy Ameritrade customer base's inflow trends and any anticipated shifts or accelerations between Investor Services and Advisor Services.

Answer

President and CEO Rick Wurster reported that Ameritrade clients are now behaving as desired, with meaningfully positive net new assets and increased engagement with Schwab's wealth and lending solutions, aligning with expectations for Schwab clients. He reiterated bullishness on NNA growth, driven by investments in Workplace, crypto, retail relationships, and wealth, emphasizing the equal focus on deepening relationships with existing clients to diversify growth and build stickier relationships.

Benjamin Budish followed up on the 5% NNA expectation, asking for an update on the legacy Ameritrade customer base's inflow trends compared to legacy Schwab, and any expected shifts or acceleration between Investor Services and Advisory Services.

Answer

President and CEO Rick Wurster reported that Ameritrade clients have accelerated meaningfully in net new assets and engagement, now contributing between a third and 40% of flows into wealth and lending solutions. He noted that after a challenging transition period, Ameritrade clients are now positive in NNA and in line with Schwab clients. Wurster expressed bullishness on overall NNA growth, driven by investments in workplace, crypto, retail relationships, and wealth, alongside a focus on deepening relationships with existing clients.

Benjamin Budish from RBC referenced a European bank peer's U.S. litigation loss related to financing a sanctioned nation and asked for reassurance regarding potential future litigation risk for Barclays, given its 2010 settlement with U.S. regulators. He also inquired about the extent to which the strong organic growth trend in Private Bank & Wealth Management's AUM and AUS is expected to continue over the next 12 months.

Answer

Anna Cross, Group Finance Director, Barclays, stated there was nothing specific to call out regarding potential litigation risk, offering to follow up with more details on historic cases. For Private Bank & Wealth Management, she noted good progress with £0.7 billion of net new money in the quarter and ROTE remaining above its target. She indicated that the significant opportunity for this business lies in accessing mass affluent and wealth markets in the future, but did not provide specific growth projections for the next 12 months.

Benjamin Budish referenced a European bank peer's recent US litigation loss related to sanctioned nation finance, and Barclays' own 2010 settlement, asking for reassurance that this does not pose a future litigation risk. He also inquired about the Private Bank & Wealth Management's AUM and AUS growth in Q3, and the expectation for this organic growth trend to continue over the next 12 months.

Answer

Anna Cross, Group Finance Director, Barclays, stated there was nothing specific to call out regarding the litigation risk, offering to follow up with more details on historic cases. For Private Bank & Wealth Management, she noted good progress with GBP 0.7 billion of net new money in Q3, and ROTE remaining above its target of greater than 25%. She highlighted the future opportunity in accessing mass affluent and wealth markets, suggesting more information would be provided later.

Benjamin Budish inquired about the increased interest rate sensitivity to non-U.S. balances, specific trends impacting this, and provided an update on forecast contracts, including potential sports contracts, product traction, and the pace of future rollouts.

Answer

Paul Brody, CFO, attributed the increased sensitivity to overall platform growth and higher interest-rate-sensitive balances, noting a more normal environment this quarter compared to previous non-linearity in low-rate currencies. Thomas Peterffy, Founder and Chairman, clarified that Interactive Brokers is not currently contemplating sports betting directly but is focusing on election, economic, and climate indicators globally, and expanding broker partnerships for forecast contracts.

Benjamin Budish sought clarification on the timing of the 12% decline in margin balances. He also asked about the accounting impact of the SEC fee reduction on commissions and expenses, and questioned the reason for a sequential dip in market data fees.

Answer

CEO Milan Galik clarified that the drop in margin loans happened quickly and then stabilized. CFO Paul Brody explained that the $27 million in SEC fees are passed through and are part of the 'Execution, clearing and distribution' cost line. Brody also noted that market data fees were fairly even with the prior quarter and up slightly from the year-ago quarter.

Benjamin Budish asked for an outlook on account growth for 2025, questioning the key drivers and the impact of advertising spend. He also requested guidance on modeling employee compensation expense following a Q4 capitalization adjustment.

Answer

CEO Milan Galik expressed bullishness on continued account growth, citing market enthusiasm and a pro-business sentiment driving new investors. He noted marketing spend would increase slowly. CFO Paul Brody advised that for modeling compensation, the full-year 2024 quarterly average of $143 million is the best starting point, as capitalization adjustments are periodic.

Benjamin Budish inquired about the path to making ForecastEx contracts available internationally and the potential for offering localized versions. He also asked about the strategic plans for the new office in Dubai and the target client segments in the region.

Answer

Chairman Thomas Peterffy explained that they are working with European and UK regulators to approve economic and climate contracts, emphasizing the need for a state-regulated arbiter for data integrity. President and CEO Milan Galik stated the Dubai office aims to attract sophisticated clients, including hedge funds and high-net-worth investors, to capitalize on the region's growth.

Benjamin Budish of Barclays asked about the trend of LPL's declining gross profit ROA, questioning the drivers and the medium-term outlook for this metric, particularly excluding the impact of client cash.

Answer

President & CFO Matt Audette explained that gross profit ROA is becoming a less effective metric as LPL's revenue diversifies into non-AUM-driven streams, such as service and fee revenue. He suggested that the decline is partly a function of this mix shift and rapid AUM growth in the denominator. He pointed to EBITDA ROA as a more holistic measure that captures both revenue growth and the company's successful efficiency initiatives.

Benjamin Budish of Barclays asked about the strategy behind the Elmtree acquisition, questioning if it signals a new phase of M&A or if the firm is now focused on integrating its existing assets.

Answer

CFO Martin S. Small described Elmtree as a smaller, tactical acquisition to add capabilities in triple-net lease real estate, which is attractive to insurance and wealth clients. He stressed the main focus is integrating the larger HPS, GIP, and Preqin deals. CEO Laurence D. Fink added that beyond tuck-ins, a key future growth driver is organic expansion into developing capital markets, citing initiatives in India and the Middle East.

Benjamin Budish of Barclays asked about the strategic rationale for the smaller, tuck-in acquisition of Elmtree and whether this signals the firm's future M&A approach.

Answer

CFO Martin S. Small described the main focus as integrating the large GIP and HPS acquisitions and stated that M&A is not needed to meet growth targets. He positioned Elmtree as a selective, tactical deal to add triple-net lease capabilities for insurance and wealth clients. CEO Laurence D. Fink added that a primary driver of future growth will be organic, by helping countries like India and Saudi Arabia expand their domestic capital markets, though compelling tuck-in deals in private markets or technology remain a possibility.

Benjamin Budish asked about BlackRock's ambitions in digital assets and what opportunities a potentially more crypto-friendly political environment could unlock beyond the current ETF business.

Answer

CEO Laurence Fink stated that the growth of digital assets depends more on liquidity, transparency, and analytics rather than a specific political administration. He positioned Bitcoin as an asset class akin to gold and emphasized the potential of blockchain technology. He believes building out better data will broaden market acceptance, similar to how other markets matured historically.

Benjamin Budish from Barclays inquired about the fundraising dynamics for flagship funds, specifically whether a 'barbell shape' with large first and final closes is expected. He also asked for details on the core fee rate for commingled funds.

Answer

Scott Hart, Chief Executive Officer, confirmed that the 'barbell' fundraising shape aligns with their recent experiences, citing the private equity and real estate secondaries funds. He noted the PE co-investment fund is in the market without a first close yet, while the global venture capital fund had a close subsequent to quarter-end. David Park, Chief Financial Officer, clarified that after excluding retroactive fees, the commingled fund fee rate for the last twelve months was in the low 90s basis points.

Benjamin Budish from Barclays asked for clarification on the sequential increase in non-controlling interests (NCI), questioning if the outperformance of the legacy Greenspring venture capital assets was the primary driver. He also asked for a high-level overview of the key investment areas within StepStone's infrastructure business, particularly in light of the growing focus on data centers.

Answer

David Park, CFO, clarified that the largest driver of the NCI increase was retroactive fees from the real estate secondaries fund, not the venture capital business. CEO Scott Hart added that since StepStone acquired 100% of the VC business's fee-related earnings, it does not flow through NCI. Regarding infrastructure, Hart explained that the business is highly diversified, with the top three sectors in their latest co-investment fund being power and renewables, transportation, and communications, which includes data centers.

Benjamin Budish asked about the potential for a pickup in carried interest, what a normal realization rate might look like next year, and how StepStone would deploy the proceeds from higher carry. He also questioned how LPs are thinking about private equity allocations and if a pickup in distributions would lead to higher commitments.

Answer

CEO Scott Hart explained that while realizations have recovered from their lows, the pace has not returned to long-term averages, and he pointed to the company's historical quarterly performance fees as a guide for a more normalized level. Head of Strategy Mike McCabe added that any pickup in performance fees would likely be distributed via a supplemental dividend, similar to the prior year. Scott Hart also confirmed that LPs' long-term commitment to private equity remains strong, with target allocations holding steady or growing.

Benjamin Budish from Barclays PLC inquired about the drivers behind the recent growth in Marex's prime services business, its future run rate, and the sustainability of margin expansion in the Agency and Execution segment. He also asked about the expected financial contribution from the recently closed Aarna acquisition and the timeline for realizing cross-selling opportunities.

Answer

Executive Ian Lowitt explained that while the prime services integration was initially slow, it has now captured significant unmet demand, leading to a higher run rate, though future growth will likely be more modest. He credited Paolo Tonucci and his team for successfully restructuring and improving margins in the Agency and Execution segment. Paolo Tonucci added that new synthetic product offerings, which came online in late Q3 and Q4, were key drivers of the growth. Regarding Aarna, Ian Lowitt confirmed it had almost no Q1 contribution but is performing as expected and already attracting new clients in Abu Dhabi. Executive Crispin Robert Irvin specified Aarna's results will be reported within the Clearing segment.

Benjamin Budish inquired about the drivers for the Q4 increase in collateral balances and the significant revenue growth in the Agency and Execution segment, particularly regarding the legacy Cowen prime brokerage business.

Answer

CEO Ian Lowitt explained that the rise in collateral balances was a function of both steady new client onboarding, including larger mandates, and increased client activity with higher margin requirements. Regarding the securities revenue, management noted it reflected growing momentum and scale benefits from the Cowen acquisition, with the second half of the year seeing the full impact of an expanded product suite and new client wins. Mr. Lowitt emphasized this aligns with Marex's strategy of enhancing acquired businesses by integrating them into the broader platform.

Benjamin Budish of Barclays asked for guidance on a normalized 'launching off point' for 2025 forecasts, considering factors like elevated metals activity, rate sensitivity, and a softer Q4. He also inquired about the flexibility of Marex's cost base.

Answer

CEO Ian Lowitt suggested using the updated full-year guidance as a sensible starting point for 2025, acknowledging rate headwinds but highlighting underlying business momentum and acquisition contributions. He cautioned against assuming a repeat of 2024's favorable metals conditions. CFO Rob Irvin added that over 50% of the cost base is variable, primarily from performance-related bonuses, which provides significant flexibility with market conditions.

Benjamin Budish from Barclays asked for more detail on the crypto options market in light of the Deribit acquisition, questioning why one exchange has such dominant market share and what the user base of Deribit looks like.

Answer

CFO Alesia Haas explained that crypto options are a relatively new product and Deribit achieved its market leadership by focusing and building deep product expertise. She described the user base as prosumers and a diverse mix of institutional and retail traders outside the U.S. CEO Brian Armstrong added that professional traders prioritize a trusted counterparty, which is a key competitive advantage for Coinbase.

Benjamin Budish of Barclays Capital Inc. asked for more detail on the activity trends of new and resurrected customers, as well as the engagement levels of Coinbase One subscribers.

Answer

CFO Alesia Haas stated that new users are typically drawn by new asset listings or are first-time crypto buyers, while resurrected users re-engage during periods of high market volatility. She noted Coinbase One members are generally more active traders and are more deeply engaged across the entire platform. CEO Brian Armstrong added that every time a user returns, it creates an opportunity to cross-sell other products like staking or loans.

Benjamin Budish asked about Coinbase's capital allocation strategy, specifically its thoughts on holding more Bitcoin on its balance sheet to potentially benefit its market capitalization, similar to other companies.

Answer

CFO Alesia Haas responded that while Coinbase holds a significant amount of crypto (about 25% of its net cash), it is an operating company, not an investment company. She stressed the need to maintain a strong cash position to fund operations, product development, and M&A, rather than primarily holding assets for investment purposes.

Benjamin Budish from Barclays asked for details on credit performance, expectations for credit loss provisions, and behavior of Gold Card users, such as whether they are accruing balances or maximizing points.

Answer

CFO Jason Warnick stated that delinquency and write-off rates are very low and in line with expectations, supported by tight underwriting standards. He clarified that the Q1 step-up in provision for credit losses was primarily from brokerage-related fraud, not the credit card. He noted a nice ramp in revolve rates on the card and confirmed customers are enjoying the 3% rewards, with plans to continue adding cardholders throughout the year.

Benjamin Budish requested more detail on new Gold members, asking how many are new to the platform and what activities, such as higher balances or deposits, are associated with adopting the Gold Card.

Answer

CEO Vladimir Tenev explained that Gold members exhibit faster growth in assets and deposits, with over 30% of new Q4 funded accounts adopting Gold. He highlighted a 'Gold flywheel' effect, where card usage drives engagement with the core brokerage. CFO Jason Warnick added that a significant portion of the card waitlist are not yet Gold members, representing a large growth opportunity.

Benjamin Budish asked about Robinhood's general approach to product launch velocity, noting the cautious rollout of the credit card versus faster launches, and how this informs future product development.

Answer

CEO Vlad Tenev explained that the approach varies by product. He contrasted the rapid, multi-day rollout of the election market with the Gold Card. He clarified the card's slower pace is not a technological constraint but a deliberate risk management strategy to prudently scale and understand credit behavior, given the massive 2 million person waitlist, which is in line with other successful card launches.

Benjamin Budish asked about the impact of recent trade policies and tariffs on Carlyle's global investment activity and deployment, and how these macroeconomic factors are influencing discussions with Limited Partners (LPs).

Answer

CEO Harvey Schwartz explained that while initial trade policy announcements created uncertainty, subsequent clarification has helped sentiment. He characterized the current environment as 'cautiously opportunistic,' with LPs remaining open for business but proceeding thoughtfully. Schwartz identified the U.S.-China trade dialogue as the most significant remaining question for the global economic outlook.

Benjamin Budish requested more clarity on the compensation ratio target of '35% or less,' asking about the key factors and timing, and what assumptions are embedded in the 6% FRE growth guidance.

Answer

CFO John Redett explained that reaching the 35% compensation ratio target is heavily dependent on the timing of net realized performance revenues. He expressed confidence that as funds hit their carry hurdles, this will naturally drive the ratio down. He emphasized the firm will 'grow into' the number rather than cutting expenses, as the primary focus remains on growth.

Benjamin Budish inquired about the 2025 outlook for Carlyle's credit business, specifically regarding fundraising activity and strategic plans for growth and development, given that major private equity and solutions fundraising cycles are concluding.

Answer

CEO Harvey Schwartz stated that momentum across credit and insurance is "quite significant." He highlighted growth opportunities across the entire capital stack, particularly in asset-backed finance, where the firm's partnership with Fortitude provides an intelligence edge. He also noted that CLO activity is expected to remain high due to attractive market spreads.

Benjamin Budish from Barclays inquired about liquidity in private markets, asking about Apollo's activities in providing liquidity for its originated assets, particularly in the context of its ETF partnership with State Street.

Answer

CEO Marc Rowan explained that Apollo is actively making a market in private credit to catalyze its acceptance and tradability, similar to how the loan market evolved. He believes this transparency will increase the use cases for private assets, shifting the source of value from an 'illiquidity premium' to superior origination and structuring. He sees the capital required as a worthwhile investment for achieving broader market acceptance, starting with investment-grade credit.

Benjamin Budish asked for an explanation of the better-than-expected Spread-Related Earnings (SRE) in Q3 and why the full-year guidance remained unchanged, implying a potential timing difference in Q4.

Answer

CFO Martin Kelly attributed the Q3 outperformance to very strong organic inflows of $20 billion and better-than-expected investment spreads at the margin. He clarified that no reversal is expected, as Q4 SRE is projected to be similar to Q3, which aligns perfectly with the full-year guidance provided at Investor Day.

Benjamin Budish requested an update on retail investor engagement, particularly through Robinhood, and how retail behavior compared to institutional during April's volatility.

Answer

Global President David Howson noted that Robinhood's adoption of index options was faster and larger than expected. He characterized retail behavior as "remarkably disciplined," with most trades being capital-risk defined. He observed that while retail participation lessens during extreme volatility spikes, they remain engaged and return quickly, supporting a constructive outlook.

Benjamin Budish from Barclays asked about Cboe's long-term strategy for expanding its retail options business, questioning whether the focus is on adding new brokers or on educating the existing, underpenetrated customer bases at current partners.

Answer

Global President David Howson confirmed the strategy is 'both.' He highlighted ongoing efforts to onboard new brokers, especially in Asia Pacific, while also focusing on deeper penetration of existing platforms like Robinhood, where user adoption is still in its 'early innings.' He emphasized that Cboe is investing in education and marketing to showcase the benefits of its differentiated, cash-settled index option products to this growing user base.

Benjamin Budish asked for an analysis of the strong trading activity in July, specifically regarding the customer mix and whether new types of clients were driving the increased volumes.

Answer

Global President Dave Howson clarified the strength was driven by increased engagement from existing customers using the product suite differently, rather than a shift to new client types. COO Christopher Isaacson added that VIX options are on a record annual pace and noted a rotation into small-cap options. CEO Frederic Tomczyk attributed the activity to broad market volatility from political, geopolitical, and sector rotation catalysts.

Benjamin Budish inquired about the recent launch of portfolio trading for European government bonds, asking how its use case compares to credit, its potential in the U.S. market, and any fee rate implications.

Answer

CEO William Hult explained that the launch is an example of scaling successful technology from one asset class (U.S. credit) to another. He noted that in Europe, clients trade relative value across different sovereign curves, a workflow that was previously difficult to execute electronically. Hult confirmed they are exploring applications for U.S. spread-based products like specified mortgage pools. He framed it as a pragmatic innovation strategy: find what works and apply it to other markets to solve client problems.

Benjamin Budish of Barclays PLC inquired about Tradeweb's strategy for digital assets, blockchain technology, and recent partnerships in the space.

Answer

CEO William Hult stated that Tradeweb's approach is about adding value and removing friction, not creating headlines. He highlighted the company's focus on trusted data, smart contracts, and tokenization. Hult mentioned key partnerships with Securitize, Alphaledger, and the Canton Network as part of a strategy to stay front-footed and partner with smart players in the evolving digital asset ecosystem.

Benjamin Budish from Barclays inquired about the mortgage business, asking what is driving recent activity, the importance of falling rates for future growth, and other key drivers for the segment.

Answer

CEO Billy Hult explained that a drop in interest rates is expected to drive growth in two ways: first, by increasing straightforward mortgage origination volume, and second, by boosting convexity hedging activity, which in turn drives volumes in the swaps market. He also identified specified pools as a key opportunity for future growth, noting that its market structure has parallels to credit trading, which Tradeweb can leverage.

Benjamin Budish requested an update on Blackstone's financial targets, specifically asking for the outlook on management fee growth for the remainder of the year and the forecast for margins.

Answer

CFO Michael Chae confirmed Q1's 10% management fee growth was in line with expectations. While not providing full-year guidance, he pointed to positive drivers like the activation of flagship funds and growth in perpetual strategies. For margins, he reiterated the full-year guidepost of 'margin stability,' acknowledging the uncertain operating environment but expressing confidence in the firm's underlying cost position.

Benjamin Budish asked for more detail on the potential trajectory for BIP's fee-related performance revenue (FRPR), which is expected to resume in Q2, and any nuances around its margin.

Answer

Jonathan Gray, President & COO, first highlighted the "extraordinary" momentum in the BIP infrastructure business, driven by its 17% net annual returns. Michael Chae, CFO, then clarified the FRPR sequence for 2025: no infrastructure FRPR in Q1 and Q4, but a "modest but material" amount will be realized in Q2 and Q3. He confirmed the FRPR margin for this business was slightly lower than the firm average, as previously guided, due to its ongoing development and investment phase.

Benjamin Budish asked about the 2025 FRE outlook, specifically regarding Blackstone's appetite to adjust the compensation ratio between management and performance fees to smooth earnings.

Answer

CFO Michael Chae explained that the firm's compensation model has multiple levers that are managed in an integrated way. He noted that while they have the flexibility to allocate more performance-based compensation and have used it selectively, there are no plans for a large-scale, programmatic change. He expressed confidence in the firm's ability to manage its overall compensation ratio and margin trajectory.

Benjamin Budish asked about the remaining opportunities for market electronification beyond blocks and whether competition or increased electronification is the more critical growth driver.

Answer

CEO Christopher Concannon identified the block market, which is still dominated by phone and IDB, as the largest opportunity. He also highlighted the retail space, targeted by their Access IQ platform, and emerging markets, which have very low electronic penetration. He stressed that data is the most critical ingredient for successful electronification. Global Head of Trading Solutions Richard Schiffman added that even in smaller trade sizes, electronic volume will continue to grow due to systematic strategies and increased turnover.

Benjamin Budish asked about the potential fee-per-million (FPM) impact of gaining share in block trading and the expected trade-off between volume and revenue capture.

Answer

CEO Christopher Concannon explained that while standard block trades would use the regular fee schedule, certain high-touch workflows like single-dealer or processed trades would have reduced or zero fees to encourage adoption from phone and chat. Executive Chairman Richard McVey added that fee capture exists on a spectrum; simple processing has the lowest fee, while using tools like Adaptive Auto-X to break up blocks commands higher fees due to greater value-add.

Benjamin Budish asked about the specific drivers of net outflows in fixed income, given the strength of Victory Income Investors, and questioned Victory Capital's operational readiness for another acquisition in 2025 following the Amundi deal.

Answer

David Brown, Chairman and CEO, responded that recent fixed income outflows were due to a few one-off events and that the company remains bullish on the franchise's outlook, citing strong performance and a favorable macro environment. Regarding M&A, he asserted that Victory is "superiorly positioned" for industry consolidation with a strong post-Amundi balance sheet and a proven, operationally ready platform built for onboarding acquisitions.

Benjamin Budish inquired about the M&A strategy, specifically the integration and cross-sell expectations for Qualitas Funds, and asked how P10 is positioned to benefit from a potential market recovery.

Answer

Chairman & CEO Luke A. Sarsfield expressed high excitement for the Qualitas Funds acquisition, which closes in Q1 2025, citing strong strategic alignment with RCP and Hark and significant cross-border opportunities. He stated that P10's 'all-weather' business mix in the lower middle market provides resilience, but a broader market recovery would be a 'rising tide' that lifts all ships, particularly benefiting their private equity and venture strategies.