Daniel Fannon

Daniel Fannon asked about the current health of StoneX's customer base post-quarter, inquiring about any changes in losses or activity levels, and whether the current market environment remains constructive despite underlying volatility. He also sought clarification on the most immediate cross-sale opportunities from the R.J. O'Brien acquisition and insights into the expense run rate following a full quarter with the R.J. O'Brien and Benchmark acquisitions.

Answer

CEO Philip Smith explained that while StoneX benefits from increased market volatility, extreme volatility can stress clients. He emphasized the importance of close client relationships, identifying concerns, and ensuring clients have sufficient liquidity to maintain their hedges. Regarding cross-sale opportunities from the R.J. O'Brien acquisition, CEO Philip Smith detailed that it's a dual approach tied to the integration process, highlighting foreign exchange as a 'simple win' for R.J. O'Brien clients and expressing optimism about gradual product introductions. CFO Bill Dunaway indicated that a slight tick-up in non-variable compensation is expected in Q2 due to annual merit increases and tax/benefit resets, with future downtrends in non-variable compensation and tech spend anticipated as synergies materialize.

Daniel Fannon inquired about the post-quarter environment, specifically the health of the customer base, any changes in losses, and whether the current market volatility is constructive or poses risks. He also asked for an update on the most near-term cross-sale opportunities from the R.J. O'Brien acquisition and what to expect in the next couple of quarters. Finally, he asked about the expense run rate post-acquisitions and any normalization or growth expectations for specific line items.

Answer

Philip Smith (CEO, StoneX Group Inc.) explained that while StoneX benefits from increased volatility, extreme volatility can stress clients, and the close relationship helps manage risks and ensure liquidity. He noted that the R.J. O'Brien cross-sale is a dual approach involving integration and education, with simple wins like introducing foreign exchange capabilities to RJO clients. Bill Dunaway (CFO, StoneX Group Inc.) mentioned that Q2 (start of the calendar year) will see a tick-up in non-variable compensation due to annual merit increases and benefits resets, with potential downtrends from synergies on non-variable comp and tech spend in the longer term.

Daniel Fannon inquired about the impact of recent market volatility on StoneX's business, the catalysts for returning the Payments segment to growth, and the reasons for the lower-than-expected rate per million in the Retail segment.

Answer

Executive Sean M. O'Connor stated that he anticipates higher, but not extreme, volatility going forward, which should be a net positive. He explained the Payments segment's recent underperformance was due to a technology capacity bottleneck that is now resolved with a new platform, leading to a strong rebound in volumes. Regarding the Retail segment, both O'Connor and Executive William Dunaway noted that revenue capture was normalizing from previous 'off the charts' highs and was also affected by product mix and a difficult trading environment early in the quarter.

Daniel Fannon asked about the key drivers and sustainability of the record results in the physical contracts business, the sustainability of record revenue per million (RPM) in the Self-Directed/Retail segment, and the dynamics behind the year-over-year rate contraction in the Payments business.

Answer

William Dunaway (Executive) attributed the physical contracts' strength to precious metals volatility and strong performance in the cotton and cocoa businesses, noting sustainability depends on market conditions. Sean O'Connor (Executive Vice Chairman) and Charles Martin Lyon (President) explained that retail RPM is near a high watermark due to technology improvements, and future growth will come from product expansion and new clients. Philip Smith (CEO) stated that Payments rates are influenced by unpredictable dollar scarcity in certain corridors, so the company's strategic focus is on controllably increasing transaction volumes and diversifying its client base.

Daniel Fannon of Jefferies inquired about the drivers behind lower capture rates in the Commercial and Institutional segments, the strategic outlook for the Payments business amid market softness and potential M&A, and the expected trajectory of fixed costs given the company's digitization initiatives.

Answer

CEO Sean O'Connor and CFO William Dunaway explained that the Commercial segment's capture rate normalized after an unusually strong prior quarter driven by LME volatility, with the current OTC market being a low watermark. In the Institutional segment, lower rates reflect a strategic shift to higher-volume, large institutional clients. For Payments, O'Connor noted that while market-wide spread compression is a headwind, the company is focused on internal growth levers and remains open to strategic M&A, like the discussed Cab Payments transaction, at the right valuation. Regarding expenses, management aims for flat to inflationary growth as efficiency gains from digitization begin to offset new investments.

Daniel Fannon asked about Brookfield Asset Management's outlook for wealth flows, its product roadmap for 2026 and beyond, and the continuation of its strong momentum in this channel.

Answer

Conor Teskey, CEO, stated that the wealth channel grew over 40% in 2025 and is expected to continue this momentum in 2026, supported by new credit and private equity products. He emphasized an incremental approach, focusing on placing the right products on the right platforms and raising prudent capital to ensure strong, consistent returns. Brookfield plans incremental steps in 2026 to boost brand awareness and expand its product offerings, particularly in credit.

Daniel Fannon from Jefferies asked about Brookfield Asset Management's outlook for wealth flows, its product roadmap for 2026 and beyond, and the continued momentum in its private wealth channel.

Answer

Conor Teskey, Chief Executive Officer of Brookfield Asset Management, projected continued growth in the wealth channel, building on over 40% growth in 2025, driven by new credit and private equity products. He emphasized a prudent, incremental approach to building the business, focusing on delivering strong, consistent returns and increasing brand awareness for Brookfield's distinct, stable, and long-term investment philosophy.

Daniel Fannon from Jefferies asked about the outlook for base management fee growth in the private equity and real estate segments for 2025. He also inquired about the firm's margin outlook given the fundraising momentum.

Answer

President Connor Teskey highlighted strong momentum in both segments. For real estate, the flagship BSREP fund's final close in H1 2025 will drive fee growth. For private equity, he noted a robust pipeline and expects to launch the next flagship fund vintage earlier than anticipated in 2025. Regarding margins, he stated that revenue growth from recent fundraising is driving improvement, which is expected to continue, counterbalanced only by investments in new, high-growth products.

Daniel Fannon asked if the current management fee level from the property group (BPG) is a sustainable run rate and inquired about the expected cadence and momentum for scaling the third-party insurance SMA business.

Answer

President Connor Teskey confirmed the BPG fee level is a good run rate and should increase over time. Regarding the insurance SMA strategy, he explained that the platform is fully built out, enabling significant capacity to add new clients. He noted a strong pipeline of conversations and emphasized that the scale of the business allows for attractive margins despite lower fee rates.

Daniel Fannon questioned the target date business's Q4 outflows, seeking context on momentum and the 2026 outlook, including backlog, new win opportunities, and potential losses.

Answer

CEO Robert Sharps explained that Q4 flows were softer than anticipated, particularly in December, driven by equity outflows and target date fund losses. He noted that about a third of target date outflows were due to M&A activity, with other losses from lumpy mandates. Mr. Sharps highlighted a broader trend of fully active target date funds losing share to passive and blend strategies, but emphasized T. Rowe Price's strong position in the growing blend and hybrid categories. He also provided a current data point of $1.7 billion in target date inflows for January.

Daniel Fannon asked for color on the asset flow environment, including the dynamics between gross sales and redemptions, and the sales pipeline outlook for the remainder of the year by product, asset class, or channel.

Answer

CEO Robert Sharps reported that the full-year flow outlook is largely unchanged, with an expectation for improvement relative to 2024, though a return to positive flows in 2025 is unlikely. He noted a spike in retail outflows in early April that has since normalized and highlighted a favorable institutional pipeline. CFO Jen Dardis added that recent volatility drove a mix shift, with outflows from equities and inflows into fixed income. Sharps concluded that the firm's equity-heavy mix faced cyclical headwinds from market rebalancing and derisking.

Daniel Fannon asked for more context on the optimistic comments regarding gross sales trends, specifically seeking details on the backlog and pipeline for the Target Date and institutional businesses.

Answer

CEO Robert Sharps confirmed that 2024 was the best gross sales year since 2021, with improvement across nearly all channels. He noted the net pipeline ended the year stronger, driven by new opportunities and fewer assets at risk. While confident in further reducing outflows in 2025, he cautioned that a return to net inflows also depends on external factors like market breadth and investor risk appetite.

Daniel Fannon requested more context on the institutional backlog, asking about the types of products included, the typical sales cycle, and the expected funding timeline for new mandates.

Answer

CEO Rob Sharps explained that the weighted net pipeline, which grew quarter-over-quarter despite the VA termination, covers the entire business over a one-year horizon, not just institutional. He described it as broad-based, reflecting underlying business trends: less risk in active equity (particularly large growth), continued momentum in structured research and global equity, and a strong pipeline for fixed income and retirement date products. He noted the pipeline's growth indicates the VA loss is not indicative of the underlying business trajectory.

Daniel Fannon inquired about expense growth beyond the current year and whether additional cost savings programs are anticipated to help achieve long-term margin targets.

Answer

Matthew Nicholls, Co-President and CFO, expressed confidence that ongoing initiatives (AI, maximizing presence in India/Poland, integration) will help absorb additional expenses needed for growth, contributing to margin expansion towards 30%+ in fiscal 2027. Jennifer Johnson, President and CEO, identified product streamlining, ongoing integration of past acquisitions, and AI/technology as key areas for upside opportunity, noting that scaling growth areas like ETFs, Canvas, and Solutions will eventually lead to higher overall margins.

Daniel Fannon followed up on long-term margins and expenses, asking about expense growth beyond this year and whether additional cost savings programs are anticipated to achieve margin targets.

Answer

Matthew Nicholls, Co-President and CFO, discussed ongoing initiatives in AI, global operational capabilities (India, Poland), and firm-wide integration, expecting them to absorb additional expenses required for growth. Jennifer Johnson, President and CEO, identified three categories for margin upside: product streamlining, continued integration of acquisitions, and advancements in AI and technology.

Daniel Fannon of Jefferies requested an expansion on fixed income, asking which strategies are seeing success and for an update on Western Asset, including redemption trends and client conversations.

Answer

CEO Jennifer Johnson reported that Western Asset's performance has been good and the team is stable, despite an anticipated $10 billion in net outflows for April. She noted this was offset by strength elsewhere, such as in private credit and Franklin fixed income. Head of Global Distribution Adam Spector specified that successful strategies included munis (around $1 billion in flows), stable value, high yield, CLOs ($2 billion), and short-duration products. He also mentioned that fixed income constitutes about half of the firm's unfunded institutional pipeline.

Daniel Fannon sought clarification on the announced $200-$250 million in cost savings, asking if this was incremental to the fiscal 2025 expense outlook. He also inquired if other affiliates besides Western Asset could be integrated to drive further efficiencies.

Answer

CFO Matthew Nicholls confirmed the savings are incremental and will be fully realized in fiscal 2026. CEO Jennifer Johnson explained that alternatives managers are not suited for similar integration, and identified Royce as the last largely independent traditional manager. Nicholls added the firm is simplifying its structure into a single scaled operation for public markets and specialized operations for alternatives.

Daniel Fannon of Jefferies asked for the fiscal 2025 expense outlook, considering the dynamics at Western Asset, and sought to understand core expense growth and potential unknown legal costs. He also requested clarification on Putnam's quarterly expense contribution.

Answer

CFO and COO Matthew Nicholls stated that, after normalizing for a full year of Putnam and excluding performance fees and the Western situation, fiscal 2025 expenses are expected to be 'quite similar' to fiscal 2024. He noted that expense growth will remain in check through disciplined management and operational initiatives. He also clarified that one quarter of Putnam's expenses amounts to approximately $125 million.

Daniel Fannon (Jefferies) followed up on the hybrid investment platform, asking whether the costs rolling off in 2027 would primarily result in cost avoidance or actual savings compared to 2026.

Answer

Allison Dukes (CFO) confirmed that Invesco expects to see actual savings in 2027 relative to 2026, as implementation costs taper off and systems are decommissioned. She explained that the long-term goal of the platform, initiated five years ago, was to simplify the operating system and create future cost avoidance, leveraging scale benefits. Dukes emphasized the current focus on completing implementation in 2026 before driving down the cost curve in 2027 and beyond.

Daniel Fannon followed up on the hybrid investment platform expenses, asking for clarification on whether the initiative is primarily about cost avoidance or if actual savings are expected in 2027.

Answer

CFO Allison Dukes confirmed that savings are expected in 2027 relative to 2026, as implementation costs taper off and existing systems are decommissioned. She explained that the long-term goal of the initiative was cost avoidance and simplifying the operating system to leverage benefits of scale. She stated that the focus for 2026 is completing implementation, with a deeper focus on driving down the cost curve in 2027 and beyond.

Daniel Fannon asked for more detail on April flow trends across regions, whether the funding backlog was slowing, and for clarification on Q1 seasonal compensation and one-time expense benefits.

Answer

CEO Andrew Schlossberg noted that April flows showed a defensive investor stance, with Europe and Asia flows mitigating U.S. headwinds, and confirmed institutional fundings remained resilient. CFO Allison Dukes specified the one-time expense benefit was $7 million and that seasonal compensation is typically about $15 million higher in the first quarter.

Daniel Fannon inquired about the 2025 expense outlook, seeking clarification on the year-over-year increase in Alpha-related costs and the expected sequential expense build for the first quarter. He also asked about the evolution of Invesco's capital management and M&A strategy given its improved liquidity position.

Answer

Chief Financial Officer Allison Dukes clarified that total Alpha-related costs in 2025 are expected to be $20-$25 million higher than the approximate $50 million spent in 2024. She projected a ~1% increase in total 2025 operating expenses over 2024, assuming flat markets, and noted typical Q1 seasonality for payroll taxes. On capital management, Dukes stated that priorities remain focused on organic growth, particularly in private credit, and that while the firm keeps an eye on inorganic opportunities, the space is currently expensive.

Daniel Fannon asked about the future financial benefit of the recent accounting change for retirement awards and for an update on the fixed income business, including client dialogue, opportunities, and the unfunded mandate pipeline.

Answer

CFO Allison Dukes stated the accounting change will reduce compensation expense volatility by better aligning with market practices, rather than incentivizing retirements. President and CEO Andrew Schlossberg and CFO Allison Dukes added that fixed income flows are strong, driven by institutional mandates and retail demand for municipals and SMAs. The unfunded pipeline remains stable at around $15 billion.

Daniel Fannon asked about Bullish's customer concentration, how pricing adjustments have evolved, and whether further tweaking of the pricing strategy is anticipated.

Answer

CEO Tom Farley acknowledged that customer concentration is common in markets and is an ongoing area of optimization. CFO David Bonanno stated that the recent pricing changes have diversified the customer base and spread fees across activity levels and customer types, making them comfortable with the current framework, even if some customers remain heavy in volume. He indicated that while some tweaking may continue, the significant changes have been made.

Daniel Fannon of Jefferies requested an update on the insurance opportunity, including the longer-term growth outlook and expected contribution from that segment.

Answer

CFO John Redett explained that after a deliberately quiet 2024 for integrating the Lincoln transaction, activity at Fortitude Re has ramped up significantly in 2025. He cited a $4B deal in Q1 and the closing of the Unum transaction in July, noting the pipeline is the busiest it has been in years, particularly in Japan. He also highlighted the strategic flexibility Fortitude provides for pursuing flow insurance business.

Daniel Fannon of Jefferies requested an update on the insurance opportunity, asking about the outlook for the second half of the year and the long-term growth and contribution from that segment.

Answer

CFO John Redett explained that 2024 was a deliberately quiet year for Fortitude Re to absorb the large Lincoln transaction, but activity ramped up late in the year. He noted the recent closing of the Unum transaction and a busy pipeline, particularly in Japan. Redett also highlighted the strategic flexibility of the Fortitude structure, which allows Carlyle to pursue flow insurance business both inside and outside of the platform, stating the firm is 'very pleased' with Fortitude's growth.

Daniel Fannon asked about the Global Credit segment, questioning the reason for the sequential decline in management fees in Q4 and seeking commentary on the sustainability and outlook for the segment's large transaction fees.

Answer

CFO John Redett clarified that the capital markets transaction fees are reported within the Global Credit segment but are generated across the entire firm, including private equity and infrastructure, making the revenue stream highly diversified. He noted the sequential management fee decline was immaterial and that all other parts of the credit business are growing.

Daniel Fannon from Jefferies requested specifics on recent flow trends for the newly closed HPS Investment Partners acquisition and asked about the fundraising pipeline for HPS products for the remainder of the year.

Answer

CFO Martin S. Small did not provide specific HPS flow numbers but confirmed a robust product roadmap for 2025. He detailed that fundraising is active across infrastructure, various credit strategies, and real estate. He reiterated the firm's target to raise $400 billion in gross private market capital by 2030, emphasizing that this would be a ramp-up over time and is contingent on delivering strong investment performance.

Daniel Fannon from Jefferies requested details on the recently closed HPS acquisition, asking for specifics on recent flow trends, the product pipeline, and the fundraising outlook for the remainder of the year.

Answer

CFO Martin S. Small outlined a robust product roadmap for 2025 and beyond, with current fundraising efforts across mid-cap infrastructure, various credit strategies, and real estate. He reiterated the firm's target of $400 billion in gross private market fundraising through 2030, cautioning that it would likely be a ramp-up rather than a straight-line average. Small emphasized that consistent investment performance is the key prerequisite for achieving these fundraising goals.

Daniel Fannon asked for an outlook on BlackRock's fee rate and for commentary on the competitive ETF landscape, particularly in light of recent fee cuts by competitors like Vanguard.

Answer

Executive Martin Small highlighted the firm's strong 6% organic base fee growth, which is above target for the third consecutive quarter. He noted the fee rate has increased sequentially, driven by private markets, and will be further boosted by the HPS acquisition. Regarding ETF pricing, Small stated the strategy is unchanged: make targeted price investments in high-growth areas. He mentioned that recent investments have been below historical levels and that strong Q1 flows of $107 billion validate their current competitive positioning without needing reactive cuts.

Daniel Fannon asked about BlackRock's appetite for additional M&A and the management team's capacity to integrate the recent GIP and pending Preqin transactions.

Answer

Executive Martin Small emphasized that the immediate priority is integrating GIP and closing Preqin successfully. He stated that while BlackRock evaluates inorganic opportunities, it does not need M&A to achieve its 5% organic base fee growth target, pointing to the significant organic growth potential within its existing private credit business with insurance clients.

Daniel Fannon of Jefferies requested an update on the integration and onboarding of Atria Wealth Solutions, asking how the process is tracking against the original estimates and expectations.

Answer

Executive Matthew Audette confirmed that the Atria integration is on track, with expectations to meet the 80% retention target and achieve a $150 million run-rate EBITDA benefit by year-end. He reported that the first two of seven conversion events went 'really well,' demonstrating the strength of LPL's onboarding capabilities. Audette also noted that the Prudential onboarding was complete and performing better than expected, with the run-rate EBITDA forecast increased from $70 million to $80 million.

Daniel Fannon of Jefferies requested an update on client cash behavior, asking about the drivers of the strong December build and the latest trends for both cash balances and Net New Assets (NNA) in January.

Answer

Executive Matthew Audette provided detailed January figures. He noted that after accounting for seasonal factors, January NNA was expected to be in the 3-4% range before the Prudential and Wintrust onboardings, which could lift Q1 growth to the mid-teens. For cash, he explained the seasonal outflows and redeployment of December's build resulted in January balances just under $51.5 billion, but noted underlying stability with a $1.5 billion net increase over the past four months.

Daniel Fannon requested more detail on the record-setting liquid alternative flows, asking about the diversity of the strategies, the nature of client conversations, and the outlook for the institutional products driving this growth.

Answer

Thomas Wojcik, COO, attributed the record $10 billion in liquid alternative inflows primarily to tax-aware solutions, which have gained significant traction in the wealth channel. He noted these flows are attractive due to their stickiness and fee rates. Wojcik connected the trend to increased market volatility, which enhances the appeal of high-quality liquid alts for delivering risk-adjusted returns, a theme further supported by the recent investment in Verition.

Daniel Fannon from Jefferies inquired about the specific contribution from carried interest in 2024 and sought more detail on the demand drivers for liquid alternative strategies, such as AQR's tax-advantaged products.

Answer

President and CEO Jay Horgen explained that while small, some carried interest is materializing from funds raised after AMG's initial investments and is expected to grow. COO Tom Wojcik highlighted strong growth in tax-advantaged products, driven by a broader wealth management focus on after-tax returns. Horgen added that AQR's strong overall performance and product innovation are driving significant asset growth in this area.

Daniel Fannon of Jefferies Financial Group Inc. inquired about the investment portfolio's performance since the end of the quarter, specifically the mark-to-market value of the funds, CVI, and UAN.

Answer

Based on a likely misattributed line in the transcript, an executive clarified that the public portfolio, including the funds and publicly marked investments CVI and UAN, was modestly positive for the quarter-to-date period as of the week prior to the call.

Daniel Fannon of Jefferies inquired about Icahn Enterprises' strategy for managing liquidity in relation to its dividend policy, the timing and expected impact of the restructuring in the automotive business, potential portfolio adjustments following the recent election, and the forward-looking sustainability of the newly reduced dividend.

Answer

CEO Andrew Teno emphasized the company's significant liquidity, citing a "war chest" of $1.6 billion in cash at the holding company and $800 million at the funds, supplemented by undervalued assets like a Nashville property. He noted that management changes in the auto business occurred around quarter-end and are already showing trend improvements, though not yet positive growth. Teno also suggested a new administration could be more favorable for M&A and the refining business. Regarding the dividend, he stated it is evaluated quarterly and future decisions depend on the performance of the company's undervalued assets.

Daniel Fannon of Jefferies inquired about Icahn Enterprises' strategy for managing liquidity in relation to its dividend policy and the CVR Energy tender offer. He also asked about the timing and expected impact of the restructuring in the automotive business, potential portfolio adjustments following the recent election, and the forward-looking sustainability of the newly adjusted dividend.

Answer

CEO Andrew Teno emphasized the company's significant liquidity, citing $1.6 billion in cash at the holding company and $800 million at the funds, which he described as a "war chest." He explained the CVR tender is an attractive long-term investment and highlighted undervalued assets like the Nashville property as additional liquidity sources. Teno noted that management changes in the auto business occurred around quarter-end, leading to an immediate improvement in performance trends. He also suggested a new political administration could be more favorable for M&A and refining. Regarding the dividend, he stated it is evaluated quarterly based on the performance and value of the company's assets.

Daniel Fannon asked for details on Cboe's investment level in the Asia Pacific region, its sales presence, and the opportunity for further platform expansion there.

Answer

Global President David Howson highlighted strong data consumption from APAC as a leading indicator, with 55% of new data sales coming from international markets. He confirmed investments in local salespeople, digital marketing, and education, noting successful client onboarding in Korea and Taiwan. He expressed optimism, citing both direct and indirect demand for Cboe's products in the region.

Daniel Fannon of Jefferies sought clarification on guidance, asking to confirm that the new Data Vantage outlook is consistent with the old range and requesting details on 2024 below-the-line items to establish a go-forward run rate.

Answer

Chief Financial Officer Jill Griebenow confirmed the Data Vantage guidance is consistent with the prior 7% to 10% range. Regarding below-the-line items, she explained that income from maturing minority investments is tapering off, while dividend income is growing. She noted that full granularity would be provided in the upcoming Form 10-K filing.

Daniel Fannon of Jefferies questioned the apparent shift in strategy from a year ago, when the focus was on narrowing M&A and improving margins, to the current discussion of inorganic growth, asking for clarity on capital allocation priorities.

Answer

CEO Frederic Tomczyk clarified that the initial slowdown in M&A was to halt numerous small acquisitions and establish a core organic growth strategy. With the balance sheet now strong, leverage low, and margins stabilized, he stated that strategic M&A that supplements the core strategy is once again a consideration, citing the Japannext investment as an example. He affirmed that the primary capital allocation priorities remain dividends, share repurchases, and organic investments.

Daniel Fannon asked for clarification on the Data and Access Solutions (DnA) business, questioning why it's tracking to the low end of guidance and seeking details on the transitory factors that softened Q2 growth.

Answer

Global President Dave Howson attributed the softer Q2 results to the timing of enterprise sales, longer sales cycles, and a difficult year-over-year comparison. He expressed confidence in hitting the guidance based on a strong new sales pipeline, new product bundles, and pricing actions. COO Christopher Isaacson added that recent technology enhancements, like Dedicated Cores, are just beginning to contribute to revenue and will support growth in the second half of the year.

Daniel Fannon requested more context on the two new index business wins in the Fixed Income & Data segment, asking about their size and the long-term opportunity.

Answer

President of Fixed Income & Data Services, Christopher Edmonds, attributed the wins to investments in the ability to rapidly customize indices for clients. He specified that one of the new licensing deals involves moving approximately $10 billion in assets under management (AUM) to an ICE index family.

Daniel Fannon of Jefferies inquired about the drivers behind the mid-single-digit growth forecast for Fixed Income Data & Services, including the roles of pricing, new customers, and demand trends.

Answer

President of Fixed Income & Data Services, Chris Edmonds, highlighted a trend of buy-side clients consolidating vendors to those with robust catalogs and predictable costs, creating opportunities for ICE. CFO Warren Gardiner added that the 5.4% exit ASV supports the outlook and expects a potential pickup in the 'other data and network services' business due to datacenter investments.

Daniel Fannon asked about the drivers behind the Q4 expense increase, the framework for 2025 expenses, and the expected incremental margin of the mortgage business should transaction volumes recover.

Answer

CFO Warren Gardiner clarified the Q4 expense guidance includes $10-15 million in one-time items and the core run rate is a good starting point for 2025 planning. He confirmed that as mortgage origination volumes recover, the transaction revenues carry very high incremental margins, similar to the futures and exchange businesses, which would benefit segment and overall company margins.

Daniel Fannon from Jefferies asked about the nature of conversations with LPs and the general health of the institutional client base amid recent market volatility.

Answer

Co-CEO Scott Nuttall described significant client engagement, characterizing the mood as 'cautious greed.' He said clients are liquid and actively looking for opportunities to lean into the dislocation, not wanting to repeat the mistake of being too cautious post-GFC or COVID. While discussions are macro-focused, he has not seen any abrupt changes in allocation strategies.

Daniel Fannon asked for an outlook on the monetization environment for 2025 and the factors driving confidence in increased activity.

Answer

CFO Robert Lewin stated that KKR expects monetizations to be up 'pretty comfortably' in 2025, citing conducive equity markets, high credit availability, and tight spreads. He added that the firm's strong investment returns and a near-record $16 billion in embedded gains on its balance sheet provide a strong foundation for an uptick in realizations.

Daniel Fannon of Jefferies followed up on the Capital Markets and Global Atlantic opportunity, asking how much GA contributed to the record third-quarter Capital Markets revenue.

Answer

Chief Financial Officer Rob Lewin responded that while Global Atlantic was a "solid contributor" during the quarter, its contribution was "not all that material" in the context of the total $424 million in revenue. He reiterated that the long-term opportunity from the GA partnership is expected to be in the hundreds of millions of dollars over time.

Daniel Fannon asked about the progress of transitioning credit pricing from variable to fixed models with dealers and sought more detail on the timing and rationale for these changes.

Answer

CEO William Hult explained the strategy is to balance the ecosystem, emphasizing that dealers are crucial partners. As Tradeweb's credit business has scaled, a mixed pricing model becomes mutually beneficial. CFO Sara Furber added that the shift increases recurring revenues, noting that credit fixed revenue was less than 7% of total credit revenue in Q1 2024 and is expected to trend closer to 13% by the end of Q2 2025. She clarified this shift is revenue-neutral for Q2 and still leaves over 85% of credit revenue as variable, allowing for significant volume-driven growth.

Daniel Fannon of Jefferies Financial Group Inc. questioned whether potential looser bank regulations could slow electronification trends by encouraging banks to hold more risk internally.

Answer

CEO William Hult asserted that the 'onward march of electronification is not a pendulum' and will continue regardless of regulation. He argued that healthy banks with strong flow trading operations are very good for Tradeweb's business, as the company acts as a trusted electronic intermediary. Hult believes the need for efficiency is here to stay and that Tradeweb benefits when banks are both strong and efficient.

Daniel Fannon of Jefferies LLC questioned the potential for pricing pressure in portfolio trading over time, given increasing competition and instances of competitors offering the service for free.

Answer

CEO Billy Hult stated that competition is beneficial and that Tradeweb's brand is built on value and innovation, not just price. He views fee holidays as a short-term tactic and believes clients are willing to pay for unique functionality like net spotting and superior technology. Hult expects the competitive landscape to eventually rationalize pricing and feels confident in Tradeweb's position, as the overall portfolio trading market is poised for significant growth.

Daniel Fannon inquired about the fee rate of the successful MDT strategies relative to the broader equity franchise, their performance during recent volatility, their total AUM, and the outlook for operating expenses for the remainder of the year.

Answer

Executive Raymond Hanley clarified that MDT's fee rate is slightly below the average equity fee rate and that AUM for the strategies is about $15 billion. CEO John Donahue confirmed MDT performance has weathered volatility well. CFO Thomas Donahue provided expense guidance, noting Q1 compensation was seasonally high and that modest increases are expected in advertising, travel, and systems.

Daniel Fannon inquired about the $3.7 million in severance costs, asking if it was part of a broader restructuring at Hermes or a one-off event. He also asked for the total AUM in sub-advised accounts and whether that business was a source of growth.

Answer

CFO Thomas Donahue confirmed the $3.7 million severance was primarily from the London office and part of a broader effort to ensure the business operates sustainably. Saker Nusseibeh, CEO of Federated Hermes Limited, added that these efficiencies are being pursued alongside growth initiatives in Europe and Asia. Executive Raymond Hanley stated that sub-advised AUM was about $37 billion, with the money market component growing and the institutional side remaining relatively stable.

Daniel Fannon asked for clarification on the performance fee outlook for public markets and inquired about the drivers of adviser productivity within the Private Wealth channel, specifically the mix between new and existing advisers.

Answer

CFO Thomas Simeone confirmed that public market performance fees are generally not forecasted because they must be crystallized first. Onur Erzan, Head of Global Client Group and Private Wealth, described the adviser productivity improvement as 'broad-based,' attributing it to strong retention of tenured advisers and a recruiting model that skews toward developing younger advisers in-house.

Daniel Fannon inquired about the prospective growth strategy for the Private Wealth business, particularly regarding adviser recruitment and inorganic opportunities.

Answer

Onur Erzan, Head of Global Client Group, outlined a multi-pronged growth strategy for Private Wealth. This includes accelerating traditional adviser recruiting, a new program to hire experienced advisers from other firms, and pursuing tuck-in M&A of smaller RIAs in underpenetrated markets. He also mentioned a new CMO is focused on generating new client leads for the existing adviser force.

Daniel Fannon asked for the rationale behind raising the low end of the full-year expense guidance, especially after a strong first quarter.

Answer

CFO Sarah Youngwood explained that the adjustment was a direct result of the strong revenue performance in the first quarter. While maintaining rigorous expense discipline, the company allocated a small portion of the revenue outperformance toward investments, which prompted the narrowing of the guidance range by raising the lower bound.

Daniel Fannon requested details on the size of professional services fees within the FinTech segment and the outlook for this revenue stream in 2025, particularly given new implementations in RegTech.

Answer

Adena Friedman, Chair and CEO, stated that while specific breakouts are not provided, professional services fees were about 20% of Adenza's revenue and just over 10% of total FinTech revenue. She explained that after downward pressure in 2024, she expects an upward trajectory for professional services revenue in 2025, driven by strong 2024 sales in Market Tech and AxiomSL.

Daniel Fannon asked for more context on the Market Technology business, seeking to reconcile building sales momentum with the tough year-over-year comparison from a large client's professional services fees rolling off.

Answer

CEO Adena Friedman explained that the difficult comparison from a $27 million professional services fee in 2023 will abate in Q4. She highlighted strong current momentum, with 13 upsells in the quarter, driven by client modernization. This strong sales year is expected to fuel a recovery in professional services revenue and better overall growth in 2025.

Daniel Fannon asked if lower NNA was due to attrition or onboarding timing and inquired about industry-wide adviser movement during volatility. He also requested clarification on cash balance movements related to fee billings and tax payments.

Answer

CEO Paul Shoukry confirmed no significant adviser attrition occurred and noted that volatility has historically been a strong recruiting catalyst for Raymond James. CFO Jonathan Oorlog clarified that client cash balances fell by an amount equivalent to the $1.5 billion in April fee billings, a result Paul Shoukry called positive given simultaneous tax payment outflows.

Daniel Fannon from Jefferies asked if the lower Net New Assets (NNA) were due to attrition or onboarding timing and questioned how industry-wide adviser movement might trend in the current volatile environment. He also requested clarification on cash balance movements related to fee billing and tax payments.

Answer

CEO Paul Shoukry confirmed that there was no notable adviser attrition and expressed optimism for NNA in the second half of fiscal '25, noting that volatility often benefits Raymond James due to its stable balance sheet. CFO Jonathan Oorlog clarified that cash balances were down since quarter-end by an amount roughly equivalent to the $1.5 billion in fee billings.

Daniel Fannon followed up on non-compensation expenses, asking if the projected 10% growth for fiscal 2025 is a reasonable multi-year run rate or if it's currently elevated. He also asked for a characterization of the current adviser recruiting backlog compared to prior periods and inquired about any other known attrition headwinds for 2025.

Answer

President Paul Shoukry clarified that the 10% non-comp growth is reasonable given recent revenue growth, as key expense lines like investment sub-advisory fees are directly correlated to rising fee-based assets. He suggested this growth rate would naturally decelerate if revenue drivers slow. Chair and CEO Paul Reilly addressed recruiting, stating the pipeline is 'as strong as it's been,' with teams up to $20 billion in assets. He confirmed the previously discussed large branch departure is now behind them and sees no other significant attrition events on the horizon.

Daniel Fannon of Jefferies requested historical context on how trading volumes have historically responded after CME raised margin requirements, and asked for an update on current collateral challenges.

Answer

Terrence Duffy, Chairman and CEO, explained that historical comparisons are difficult because the underlying market drivers for margin changes differ greatly (e.g., the 2008 crisis vs. current geopolitical events). He emphasized CME's proactive approach aims to avoid market disruption. Suzanne Sprague, Senior Managing Director and Global Head of Clearing & Post-Trade, added that clients value the safety of central clearing in volatile periods, and record margin levels are consistent with record activity.

Asked for the company's outlook on trading activity for 2025, the M&A framework, and whether that framework has changed with the current administration.

Answer

The outlook for 2025 activity remains strong, driven by global economic uncertainty, high debt levels, and geopolitical tensions that necessitate risk management. The M&A framework is unchanged: they remain conservative, focused on core competencies, and prepared to act on the right opportunity. It is too early to determine how the regulatory environment for M&A might change.

Daniel Fannon asked for updated thoughts on CME's capital return policy, including buybacks versus dividends, and potential M&A in light of record performance and a compressing valuation. He also requested an update on customer capital efficiencies, specifically the dollar savings and customer count for the FICC cross-margining program.

Answer

Executive Chairman and CEO Terrence Duffy stated that the company constantly monitors its capital return policy with the board but made no commitment to changes. On M&A, he noted CME is in a strong position and open to sensible opportunities. Suzanne Sprague, Global Head of Clearing & Post-Trade Services, reported that the portfolio margining program delivers average daily savings of about $7 billion, while the FICC cross-margining program has 12 clearing members and achieves upwards of $1 billion in daily savings.

Daniel Fannon asked for the drivers behind management's confidence in achieving a $2 million per day run rate for the Virtu Execution Services (VES) business and questioned if there were any signs of a potential slowdown in retail activity.

Answer

CEO Douglas Cifu detailed several factors supporting the VES target, including the rollout of the Virtu Technology Services (VTS) platform, significant cross-selling opportunities, and key product enhancements like the switcher algo and an agency fixed income RFQ platform. He also credited strategic hires and improved customer service. Regarding retail, Cifu stated that the data provided in their supplemental materials shows a sustained, elevated baseline of engagement, refuting the narrative of a slowdown and noting that long-term trends remain positive.

Daniel Fannon of Jefferies Financial Group Inc. asked about the drivers behind the growing momentum in Execution Services and inquired about the outlook for expense growth in 2025.

Answer

CEO Douglas Cifu attributed the success of Execution Services to a multi-year effort to create a truly multi-asset, global, and integrated platform, a significant culture shift post-acquisitions, and key senior hires. Co-President Joseph Molluso stated that operating expense growth is expected to remain in the low-to-mid-single-digit range, consistent with prior guidance, though they have modeled slightly higher compensation and interest expenses for 2025.

Daniel Fannon from Jefferies inquired about the share buyback strategy, asking if it is valuation-sensitive, and also asked for color on the expense outlook, specifically the cash compensation ratio for Q4.

Answer

Co-President Joseph Molluso explained that the buyback strategy is based on a dollar-cost averaging approach tied to net trading income levels, viewing it as a value creation exercise that will continue unless a superior investment opportunity arises. On expenses, he stated that compensation is accrued consistently and is not seasonal, and that the firm expects to remain within its historical guidance for both the comp ratio and non-comp expenses.

Daniel Fannon asked about the long-term outlook for the fee rate within Asset and Wealth Management given the business mix, and whether placement fees were a factor in the quarter.

Answer

Executive Denis Coleman confirmed that placement fees were down sequentially. He explained that the firm does not manage to an average effective fee but rather builds multiple strategies for different client demands, which results in a blended rate that can fluctuate based on mix.

Daniel Fannon inquired about the specific asset classes driving future alternative fundraising and their associated fees, and also asked about the expected growth divergence between Asset Management and Wealth Management fees.

Answer

CFO Denis Coleman stated that future fundraising in alternatives will remain diversified across their broad platform and that they are not seeing significant fee compression. Regarding AWM fees, he noted that while there are different factors affecting each subsegment, the firm re-underwrites its expectation for overall AWM management and other fees to grow at a high single-digit rate over the next several years, despite recent outperformance.

Daniel Fannon of Jefferies asked for clarity on the timeline to reach the $1 billion annual performance fee target and inquired about the growth strategy for the adviser base within wealth management.

Answer

CFO Denis Coleman stated that realizing the $4 billion in unrecognized incentive fees depends on market conditions, expecting to move towards the $1 billion run-rate target over the next several years. On wealth management, he confirmed a strategic, sustained, multi-year investment program in hiring advisers, viewing it as an attractive area for growth.

Daniel Fannon asked for an update on the growth outlook for TPG's credit platform, specifically inquiring about the progress in maximizing integration synergies one year after the Angelo Gordon acquisition.

Answer

CEO Jon Winkelried stated that it is 'still early days' in maximizing the combination's potential. He highlighted that the firm is now deep in dialogues with its largest capital partners, introducing them to the credit platform, which is creating a significant pipeline for new allocations. He also noted there is substantial 'white space' for growth in the private wealth channel by leveraging the combined TPG and Angelo Gordon brand.

Daniel Fannon inquired about the source of management's confidence in growing U.S. high-grade market share in 2025 and which protocols would be the primary drivers.

Answer

CEO Christopher Concannon cited favorable macro conditions, high market turnover, and a robust new issue market as tailwinds. He stated that while low volatility challenges the all-to-all model, MarketAxess's confidence stems from its multi-protocol strategy. This includes completing its portfolio trading solution, launching its block trading tool to capture the large unelectronified segment, and enhancing its dealer-to-dealer offerings, all with a disciplined delivery schedule for 2025.

Daniel Fannon inquired about the 'deferred fixed investments' impacting expense guidance and how a change in the White House could affect the pace of electronification.

Answer

CFO Ilene Bieler explained that while some planned fixed costs are shifting out of 2024, higher variable costs from strong volumes are offsetting this, keeping the full-year guidance intact. CEO Christopher Concannon addressed the political question, stating that electronification is driven by commercial demands for efficiency, not regulation, making the business well-positioned regardless of the political climate.

Daniel Fannon inquired about the outlook for performance fees in 2025, given improving investment results, and how this is factored into the firm's expense guidance. He also sought confirmation that the expected improvement in U.S. mutual fund fees was included in the guidance.

Answer

CFO Roger Thompson explained that while he cannot predict future performance, the main known variable is an expected significant improvement in U.S. mutual fund fulcrum fees, from a negative $39 million in 2024 to a negative high-single-digit figure in 2025. He noted that performance fees on the other $40 billion of eligible AUM are variable but are accretive to the operating margin. He confirmed that the expected improvement in mutual fund fees is already embedded in the 2025 expense guidance.

Daniel Fannon inquired about the sustainability of strong ETF flows amid rising competition and a changing rate environment, and also asked about the expected pace of investment in 2025.

Answer

Executive Ali Dibadj stated that ETF flows remained strong as rates fell, highlighting the competitive advantage of having four active fixed income ETFs with over $1 billion in AUM. He noted expansion into new U.S. ETFs and a European franchise. Regarding 2025, he confirmed investments would continue to support growth areas, with costs likely rising due to inflation and strategic initiatives.

Daniel Fannon inquired about the fundamental drivers of Blackstone's confidence in a real estate market recovery and the anticipated pace of this recovery throughout 2025.

Answer

Jonathan Gray, President & COO, outlined several positive indicators for a real estate recovery. He cited strong U.S. economic growth boosting demand, a two-thirds decline in new supply starts for logistics and rental housing, and significantly improved capital availability and costs, with borrowing spreads tightening. Gray stated that while the near-term was impacted by a rise in Treasury yields, the overall path to recovery is clear, prompting Blackstone to continue deploying capital into the sector.

Daniel Fannon asked for the amount of AUM that came off fee holidays in Q3 and how elevated deployment levels are affecting fundraising timelines for 2025.

Answer

CFO Michael Chae quantified that foregone fees from funds exiting holidays were about $40 million in Q3. President & COO Jonathan Gray added that while institutional investor dialogue is improving, an increase in realizations (DPI) is crucial for freeing up capital for new funds. He confirmed several successor funds, including for Asia PE and Life Sciences, are launching soon.

Daniel Fannon inquired about the key areas of investment and product development for the individual client segment in 2025. He also asked for an update on the company's thoughts regarding M&A and inorganic growth opportunities.

Answer

CEO Milan Galik explained that investments are continuous and focus on both client-facing improvements based on feedback and significant back-end work to ensure system reliability and scalability. On M&A, he stated that the company remains open to opportunities, noting they had looked at a significant competitor in the prior quarter but did not complete a transaction.

Daniel Fannon sought clarification on the characteristics of new accounts, which were noted as bringing in more cash. He also asked for the outlook on expenses, particularly discretionary marketing spend, given the strong account growth.

Answer

CFO Paul Brody clarified the comment on new accounts was general, while Chairman Thomas Peterffy added that prop traders, a lucrative and growing segment, bring in more cash. President and CEO Milan Galik stated the company aims for a roughly 20% annual increase in marketing spend, with allocations adjusted based on channel performance.

Daniel Fannon asked for an update on adviser retention and recruitment in the Wealth Management division. He also inquired about the progress of the 'companion accounts' initiative within the Wealth and Workplace channels.

Answer

Executive Sharon Yeshaya clarified that the firm is now more focused on 'channel migration' rather than the original 'companion accounts' concept. She highlighted that since 2020, approximately $300 billion in assets have initiated in the Workplace channel and subsequently moved to the advisor-led channel. This migration from Workplace to transactional and then to fee-based accounts is a key metric the firm uses to track the success of its client acquisition funnel.

Daniel Fannon asked for an expansion on the strength of international activity and its role in the investment banking recovery. He also questioned how Morgan Stanley plans to improve profitability in Investment Management given the mix shift to lower-fee products.

Answer

Co-President Ted Pick highlighted strong revenue growth in EMEA and Asia, attributing it to a long-term strategy of having a committed local presence that pays off as global M&A recovers. CFO Sharon Yeshaya explained that the Investment Management strategy is focused on asset aggregation in secular growth areas like alternatives and parametrics. While this involves a mix shift, the goal is long-term leadership and asset growth, which requires upfront investment.

Daniel Fannon asked about financial adviser recruitment and retention trends in the current volatile market and whether the appetite for fee-based flows has changed. He also inquired about the opportunity to grow proprietary alternative products within the wealth channel.

Answer

CEO Ted Pick confirmed that adviser interest in the platform is high, driven by the firm's integrated model that funnels clients from its workplace and self-directed channels. CFO Sharon Yeshaya noted a significant growth opportunity in alternatives, with private alts representing only 5% of qualified assets versus a firm recommendation of 15%, indicating a focus on developing more products to fill this gap.

Daniel Fannon of Jefferies asked about the current operating environment and client activity levels, questioning the implied Q4 slowdown in guidance given healthy October volumes. He also inquired about the future cadence of acquisitions following the recent flurry of deals post-IPO.

Answer

CEO Ian Lowitt explained that the updated guidance reflects a stronger-than-expected Q3 while maintaining a seasonally softer Q4 forecast. He confirmed the current environment remains positive with robust volumes. Regarding M&A, he noted the recent activity was partly a post-IPO catch-up and expects a more normalized pace of three to four deals per year, consistent with Marex's historical average.

Daniel Fannon asked if the repositioning of the retirement services' alternative allocation is complete and whether an 11% normalized return is the correct expectation now that AAA represents 80% of the portfolio.

Answer

CFO Martin Kelly confirmed that the repositioning is complete. The new portfolio consists of approximately 80% AAA, 10% retained platforms like Athora, and 10% other hybrid investments. He affirmed that this new, simplified structure supports a sustained return expectation of circa 11% over time.

Daniel Fannon of Jefferies asked about the trend in declining commission rates, questioning the role of promotions and what might lead to stabilization.

Answer

EVP & CFO Stephen Boyle stated that the rate of decline slowed this quarter. He attributed the ongoing pressure to intense competition for top-tier clients, which the company is actively defending. He expects the decline to continue, but at a slower pace.