Kenneth Worthington

Kenneth Worthington asked for an update on the carry generation outlook for 2026, considering 2025 as a transition year and an improved M&A and realization environment. He also inquired about the developing outlook for realizations from Brookfield's balance sheet versus those from its managed funds for the intermediate term.

Answer

Nick Goodman, President of Brookfield Corporation, stated that the carry outlook remains unchanged, with expectations for a step-up in carried interest in 2026, followed by further increases in 2027 and a strong year in 2028, consistent with Investor Day projections. He noted a healthy transaction market supporting this activity. Regarding realizations, Mr. Goodman explained that fund monetizations operate independently across a globally diversified portfolio. For balance sheet assets, particularly U.S. office and retail, he highlighted strengthening capital markets, successful financings, and returning appetite for acquisition activity, expecting continued activity into next year.

Kenneth Worthington asked about the carry generation outlook for 2026, given the improved M&A and realization environment, and how it aligns with the 2030 outlook. He also inquired about the intermediate-term outlook for realizations on the balance sheet versus in Brookfield funds.

Answer

President and CFO Nick Goodman stated that the carry outlook hasn't changed, expecting a step-up in 2026, 2027, and a strong year in 2028, consistent with Investor Day, due to healthy transaction and capital markets. For realizations, funds operate independently with a diversified portfolio, while balance sheet assets (U.S. office/retail) are seeing stronger capital markets and returning acquisition appetite, expecting continued activity next year.

Kenneth Worthington from JPMorgan Chase & Co. asked if improving market conditions could accelerate carried interest realizations and real estate dispositions, and also requested details on the financing for the Just Group acquisition.

Answer

Nicholas Goodman, President & CFO, stated that while monetization progress is excellent ($55B YTD), the timing for a significant carried interest step-up remains on track for 2026, with 2025 being a 'bridge year.' He noted that conditions are now favorable for real estate transactions. Regarding the Just Group deal, he declined to provide specifics, citing strict UK takeover rules.

Kenneth Worthington from JPMorgan Chase & Co. asked if improving market conditions could accelerate carried interest realizations and real estate dispositions. He also inquired about the financing for the Just Group acquisition.

Answer

Nicholas Goodman, President & CFO, stated that while monetization progress is strong, the timing for a significant step-up in carried interest remains on track for 2026, with 2025 serving as a bridge year. He confirmed real estate fundamentals and capital markets are now supportive of increased transaction activity. Goodman declined to detail the Just Group financing, citing strict UK takeover regulations.

Kenneth Worthington inquired about the monetization pipeline for the second half of the year, asking for a comparison between the outlook for fund assets versus balance sheet assets. He also asked about the strategic benefit of acquiring another large annuity company, given current market consolidation and valuations.

Answer

Executive Nicholas Goodman stated the monetization pipeline is active and global, with the bulk of planned sales coming from fund assets, which will drive carried interest growth into the next year. Sachin Shah, CEO of Wealth Solutions, responded to the M&A question by emphasizing Brookfield's value-based approach, noting that current high valuations for annuity platforms (near 2x book) are unattractive. He affirmed that the company is well-positioned to rely on its strong organic growth capabilities instead of pursuing expensive acquisitions.

Kenneth Worthington inquired about Brookfield's capital management priorities, asking if a large insurance acquisition is still possible and whether the corporation sees more direct investment opportunities in infrastructure and renewables.

Answer

President Nick Goodman explained that Brookfield's insurance strategy combines strong organic growth with potential M&A for step-change expansion. For infrastructure and renewables, he noted the opportunity is enormous but stated that capital deployment will primarily be through its listed affiliates and client funds, not directly from the corporation's balance sheet.

Kenneth Worthington asked Hadley Peer Marshall to explain how Brookfield's current 58% operating margins, the temporarily depressed Oaktree margins, rising core margins, and lower-margin acquisitions combine to determine the overall margin level and its future trajectory, especially with recent and upcoming transactions.

Answer

Hadley Peer Marshall, CFO and Managing Partner of Infrastructure, stated that Brookfield is disciplined on costs and expects margins to improve over time due to growth initiatives, operating leverage, and efficiencies from Oaktree integration, noting they are ahead of their margin improvement plan. She explained that the consolidated margin is a blend: acquisitions of partner managers (like Oaktree) are accretive but have lower margins, Oaktree's margins are temporarily lower due to capital return cycles, and core business margins continue to expand, offsetting the first two dynamics. She emphasized managing for long-term FRE growth rather than a specific absolute margin level.

Kenneth Worthington asked Hadley Peer Marshall to clarify the current 58% operating margin, specifically how the interplay of Oaktree's temporarily depressed margins, rising core margins, and lower-margin acquisitions will affect the overall margin trajectory once all transactions are closed.

Answer

Hadley Peer Marshall, CFO and Managing Partner of Infrastructure, stated that Brookfield is disciplined on costs and expects margins to improve over time due to growth initiatives, operating leverage, and efficiencies from Oaktree integration, noting they are ahead of their margin improvement plan. She explained the consolidated margin is a blend: acquisitions of partner managers (like Oaktree) are highly accretive but have lower margins, Oaktree's margins are temporarily lower due to capital return cycles, and core business margins continue to expand, more than offsetting the first two factors. She emphasized managing for long-term FRE growth rather than a specific absolute margin level.

Ken Worthington of JPMorgan Chase & Co. asked for more detail on the 401(k) opportunity, questioning if Brookfield intends to pursue this channel specifically and what their strategic approach, including potential partnerships, might be.

Answer

President Connor Teskey confirmed that Brookfield will "absolutely expect to go after this opportunity" across all available channels. He reiterated that having the right products is the most critical factor for success and that Brookfield's leadership in suitable alternative asset classes positions them to capture this long-term opportunity, regardless of any non-exclusive partnerships formed in the industry.

Kenneth Worthington asked for the percentage of capital invested for several flagship funds (Infra 5, Transition 2, CAP VI) and questioned the stable fees from wealth solutions' private credit despite rising assets, asking about the equilibrium allocation.

Answer

An Unknown Executive provided the investment levels: Infra 5 is 50% committed, BGTF II is at $5.2 billion of its $17 billion target, and BCP VI is about 60% committed. They explained the wealth solutions fee dynamic is due to a deployment lag, with commitments at ~10% while deployed capital is lower. The firm is constantly deploying new annuity inflows, but the long-term target allocation to private strategies remains in the 25% to one-third range.

Kenneth Worthington from JPMorgan Chase & Co. questioned the relatively depressed infrastructure deployment in Q4 despite immense opportunity and asked for clarification on the credit segment's inflows and outflows, which resulted in flat fee-bearing capital for the quarter.

Answer

CEO James Flatt attributed the low Q4 infrastructure deployment to timing, stating the pipeline remains robust and noting that large power investments supporting AI are classified separately. President Connor Teskey explained the Q4 credit outflow was impacted by the planned reallocation of capital from the Brookfield Wealth Solutions portfolio and monetizations that immediately reduce fee-bearing capital, while newly raised capital only becomes fee-bearing upon deployment.

Kenneth Worthington inquired about the drivers behind the strong sales in the wealth infrastructure fund, the next steps for the wealth franchise, and the reason for the significant sequential jump in management fees from the property group (BPG).

Answer

President Connor Teskey attributed the wealth fund's growth to strong investor demand, noting future expansion will include new private equity and credit products for the wealth channel. He and CFO Hadley Peer Marshall explained the BPG fee increase was driven by catch-up fees on new capital raised in flagship funds and fees earned from moving assets to Brookfield Wealth Solutions.

Kenneth Worthington inquired about the dynamics driving the acceleration in MIAX's multi-listed market share gains, which reached a new record, and the impact of the recently launched Sapphire trading floor.

Answer

Thomas Gallagher, Chairman and CEO, MIAX Exchange Group, deferred to Shelly Brown, CSO, MIAX Exchange Group. Shelly Brown explained that while options remain a mature segment with room for growth due to secular tailwinds, the Sapphire trading floor contributed a fractional portion (0.35% of total multi-list volume in October) to the recent market share growth. She emphasized that MIAX is managing for long-term growth and is pleased with the market share trend.

Kenneth Worthington inquired about the dynamics driving MIAX's acceleration in multi-listed options market share gains over the last quarter, including the impact of the new Sapphire Trading Floor.

Answer

Shelly Brown, Chief Strategy Officer, explained that options remain a mature market segment with room for growth due to secular tailwinds like growing industry ADV, new optionable classes, and short-dated equity options. She clarified that the Sapphire Trading Floor contributed a fractional portion (0.35% of total multi-list volume in October) to the recent market share growth, emphasizing a long-term strategy and positive market share trend.

Ken Worthington inquired about the acquisition of BlueCove and Liquid Credit, specifically how it integrates with Ares Management's insurance capabilities and broader operations.

Answer

Mike Arougheti, Co-Founder, CEO, and Director, explained that Ares' partnership with BlueCove began in 2023 with a minority investment, leading to AUM growth from $1.8 billion to $5.5 billion. He noted that BlueCove's systematic IG capability is a meaningful value-add for Ares' affiliated insurance platform and third-party clients. The full acquisition is expected to close in Q1, with meaningful synergies anticipated as Ares introduces its global investor base to BlueCove's capabilities.

Ken Worthington asked about the acquisition of BlueCove and Liquid Credit, and how it integrates with Ares' insurance capabilities and broader operations.

Answer

Mike Arougheti, Co-Founder, CEO, and Director of Ares Management Corporation, explained that Ares partnered with BlueCove in 2023, making a minority investment and collaborating on insurance and quantitative research. He noted BlueCove's AUM growth from $1.8 billion to $5.5 billion and its systematic IG capability as a meaningful value-add for Ares' affiliated insurance platform and third-party clients. The full acquisition is expected to close in Q1, leading to significant synergies by introducing BlueCove's capabilities to Ares' global investor base.

Kenneth Worthington asked about the growing attractiveness of European private asset markets, seeking a comparison of the European and U.S. direct lending markets in terms of deployment and credit quality.

Answer

CEO Michael Arougheti confirmed that Europe's relative attractiveness has increased due to its rate trajectory and fiscal policies, driving investor demand and transaction activity. He emphasized that from a credit quality perspective, the U.S. and European portfolios are performing similarly, with strong metrics for LTV, interest coverage, and non-accruals in both regions.

Kenneth Worthington asked about the attractiveness of European private asset markets, requesting a comparison of the European and U.S. direct lending markets in terms of deployment and credit quality, and the outlook for European asset-backed finance.

Answer

Michael Arougheti, Co-Founder, CEO & Director, stated that Europe's relative attractiveness has increased due to favorable rate and fiscal dynamics, driving higher investment and investor demand. He noted that credit quality metrics like LTVs, interest coverage, and non-accruals are very similar and strong in both the U.S. and European direct lending portfolios, with pipelines indicating growth across direct lending, real estate, and asset-backed strategies in Europe.

Kenneth Worthington asked about the attractiveness of Europe as an investment market, specifically for private credit, and how the opportunity set and pipeline there compare to the U.S.

Answer

CEO Michael Arougheti noted that investor appetite for European products has marginally increased recently. He described the European market as more fragmented, which gives Ares a competitive advantage due to its scale and established relationships. He reported a modest acceleration in European deployment, with LTM deployment up 20% year-over-year, and expressed confidence that this positive trend will continue.

Kenneth Worthington asked about the trends in gross versus net deployment for the credit business, particularly comparing Q4 to earlier in the year, and the competitiveness of the refinance market.

Answer

CEO Michael Arougheti acknowledged that 2024 was a four-year low for the gross-to-net deployment ratio (37%) due to slow M&A. He noted an improvement in Q4 (42%) versus Q1 (22%) and expects a meaningful improvement in 2025 as transaction volumes are anticipated to increase.

Kenneth Worthington asked if distribution costs are a factor in resource allocation for wealth management and if the distribution landscape is becoming more sophisticated. He also inquired about the negative quarterly and LTM returns in the secondaries strategy, questioning the cause of the underperformance.

Answer

CEO Michael Arougheti stated that the wealth distribution landscape is becoming more sophisticated and concentrated, not an 'all-you-can-eat' environment. He noted that Ares's cost per dollar raised is decreasing due to scale. Regarding secondaries, he explained that returns lag by a quarter and that inception-to-date returns, which are a more relevant metric for such funds, are performing as expected.

Ken Worthington from JPMorgan Chase & Co. inquired about the ease of integrating AI benefits into ICE's MSP and Encompass mortgage platforms, the potential for AI to enhance client efficiency, and whether the promise of new technology might be extending sales cycles for large customers.

Answer

Ben Jackson, President of Intercontinental Exchange, explained that AI transforms their platforms from systems of record to systems of intelligence, orchestrating complex workflows with proprietary data and compliance databases. He highlighted strong sales success in Q3, including new MSP and Encompass clients, indicating a strong funnel and competitive positioning.

Ken Worthington asked about the impact of AI in ICE's mortgage origination and servicing business, specifically regarding the ease of integrating AI into MSP and Encompass, maximizing competitiveness, and whether AI's promise of efficiency might extend sales cycles for new, particularly large, ICE Mortgage Technology clients.

Answer

Ben Jackson, President of Intercontinental Exchange, explained that AI transforms MSP and Encompass from 'systems of record' to 'systems of intelligence' by orchestrating complex, highly regulated workflows and leveraging ICE's proprietary data, compliance databases, and extensive network. He highlighted the 'Aurora process' for automation, balancing probabilistic accuracy with regulatory rules, and noted strong Q3 sales for ICE Mortgage Technology, including two new MSP clients and 16 new Encompass clients.

Ken Worthington of JPMorgan Chase & Co. asked for a breakdown of the drivers behind the strong growth in Mortgage Technology's origination and closing solutions revenue, questioning the relative contributions from new client onboarding, higher industry activity, and seasonality.

Answer

President Benjamin Jackson explained the growth was a mix of all three elements. He highlighted the successful onboarding of new clients won since the Black Knight acquisition, including a large regional bank. He also noted strong performance in the MERS and Simplifyll businesses, which were aided by an improving market environment.

Ken Worthington of JPMorgan Chase & Co. sought clarity on the drivers behind the strong growth in Mortgage Technology's origination and closing solutions revenue, asking to what extent it was driven by new client onboarding versus higher industry activity or seasonality.

Answer

President Benjamin Jackson explained that the growth was a mix of all three factors. He highlighted the onboarding of new clients from a strong sales pipeline, including 23 new Encompass wins in Q2. Jackson also noted that an improving market backdrop boosted transaction-oriented parts of the business, such as closing solutions and MERS registrations.

Kenneth Worthington asked about the competitive implications of Rocket Mortgage's acquisition of Mr. Cooper, the potential business risk to ICE, and how recent client wins offset this.

Answer

President Benjamin Jackson stated the deal validates ICE's strategy of building a neutral, end-to-end platform, highlighting recent wins like United Wholesale Mortgage. CFO Warren Gardiner quantified the revenue exposure, noting Flagstar is ~1% of Mortgage Technology revenue and Rocket/Cooper is under 3%. He added that Rocket/Cooper recently signed a multi-year contract, so any transition would take years with no impact to 2025 guidance.

Kenneth Worthington of JPMorgan Chase & Co. asked about the implementation timeline for new Mortgage Technology client wins and their impact on 2025 revenue guidance.

Answer

President Benjamin Jackson stated that major clients signed after the Black Knight acquisition are now in the 12-18 month window to go live, with a build-up expected throughout 2025. CFO Warren Gardiner added that these wins are contributing to revenue stabilization and growth, but noted headwinds from the Flagstar attrition and some Encompass renewals will temper the overall growth rate.

Kenneth Worthington asked about the globalization of natural gas, noting that TTF and JKM volume growth is outpacing physical LNG capacity growth. He inquired about this 'multiplier' effect and the outlook for this relationship as LNG capacity is set to double.

Answer

COO Stuart Williams explained that the high volume-to-capacity ratio is driven by several factors. These include the long-dated nature of the futures curve, which allows for hedging up to 10 years of supply, and the market's modernization, where more physical contracts are indexed to benchmarks like TTF. This creates more hedging needs as cargoes are rerouted to capture the best price, increasing the number of transactions per molecule.

Ken Worthington asked about the role of opportunistic share buybacks in Virtu Financial's capital management, especially given recent stock price declines, and how the firm is positioned for an increase in tokenized assets moving on-chain, including potential infrastructure changes and incremental investment requirements.

Answer

Co-President and Co-COO Joseph Molluso reiterated that the highest and best use of incremental capital is currently growing the business, aiming to increase the stock price. While not ruling out buybacks for share creep neutralization, the clear direction is towards business growth. CEO Aaron Simon explained that Virtu Financial is well-positioned for tokenization, leveraging its active participation in crypto markets and adaptable technology, requiring no fundamental change to its infrastructure but rather continuous development.

Kenneth Worthington of JPMorgan Chase & Co. asked for an introduction to incoming CEO Aaron Simons, requesting color on his background, accomplishments at Virtu, and the details of the leadership transition over the next five to six months.

Answer

CEO Douglas Cifu provided a detailed history of Aaron Simons, whom he hired in 2008, describing him as the "smartest guy at Virtu" and a key member of the leadership team for the past six years. Cifu explained the transition has been a gradual, long-term process. Co-President & Co-COO Joseph Molluso added his full endorsement for Simons' appointment, stating it is the best move for the company's future.

Kenneth Worthington sought more color on the growth drivers within the core noncustomer Market Making business, asking if growth was coming from new symbols, exchanges, headcount, or capital, or if the focus should be on other business lines.

Answer

CEO Douglas Cifu and Co-President/Co-COO Joseph Molluso affirmed that the core noncustomer businesses are vibrant and growing. Cifu explained that growth is driven by heavy investment in technology, improved connectivity to a growing number of exchanges and ATSs, and enhanced internalization across the firm. Molluso added that nearly all of the company's described organic growth initiatives, such as in options, ETF block, and digital assets, fall within this non-retail, noncustomer category, underscoring its importance.

Kenneth Worthington of JPMorgan Chase & Co. questioned Virtu's potential to participate in listed betting markets and asked to what extent the U.S. election impacted the strong Q4 results.

Answer

CEO Douglas Cifu stated that while Virtu looks at every opportunity, participation in betting markets would require credible venues and index-like products with sufficient volume, similar to futures. Regarding the election, he explained the impact wasn't a single-day event but rather a sustained buildup of market exuberance, confidence, and participation that began in November and has continued, driven by a more positive market outlook.

Kenneth Worthington of JPMorgan Chase & Co. asked about the impact of retail brokers expanding into options and futures, and separately questioned the drivers behind the high brokerage costs observed in the quarter.

Answer

CEO Douglas Cifu explained that the expansion of retail offerings into futures is a complementary opportunity that leverages Virtu's long-standing relationships with retail brokers and is unlikely to cannibalize the cash equities business. Regarding brokerage costs, he attributed the increase to the lumpy nature of Section 31 transaction taxes, which are measured in arrears, and the recent introduction of some cash fees.

Ken Worthington asked about the success and shortcomings of consolidation in the asset management industry and whether Invesco's strong balance sheet and fundamentals make it a good time to consider M&A to accelerate strategic priorities.

Answer

President and CEO Andrew Schlossberg emphasized Invesco's focus on organic opportunities and continued progress. He reiterated capital priorities of investing in the business and improving the balance sheet, while keeping an eye on M&A, particularly in private markets.

Ken Worthington asked about Invesco's perspective on the M&A landscape, where consolidation has succeeded or fallen short, and whether it's a good time for Invesco to pursue M&A to accelerate strategic priorities, given its strong balance sheet and fundamentals.

Answer

President and CEO Andrew Schlossberg emphasized Invesco's focus on organic growth opportunities, highlighting the company's global, diverse business and strong organic progress. He reiterated capital priorities of investing in the company and improving the balance sheet, stating that while M&A will be monitored, particularly in private markets, it doesn't change the current focus on organic dedication.

Kenneth Worthington from JPMorgan Chase & Co. asked about Invesco's role in cash management in a future with digital dollars and stablecoins. He also questioned the cause of the significant drop in compensation in the China JV and whether it represents a new run rate.

Answer

President & CEO Andrew Schlossberg confirmed Invesco is actively exploring digital assets like tokenized money market funds but noted significant developments are still needed. CFO L. Allison Dukes explained the China JV compensation decline was due to lower performance fees, driven by regulatory changes, and some discrete items. She indicated that long-term operating margins for the JV will likely be 'a bit diminished' compared to historical levels.

Kenneth Worthington asked for details on making expenses more variable and how Invesco's new wealth management products will succeed where other traditional managers have struggled.

Answer

CFO Allison Dukes explained that with management action, expense variability can increase from 25% to 30-35%, and steps like slowing hiring are already underway. CEO Andrew Schlossberg stated that Invesco will leverage its existing success as a $130 billion private markets player, utilizing its strong distribution, product structuring, and educational platforms to differentiate its offerings in the wealth channel.

Kenneth Worthington asked for a broader overview of Invesco's institutional business, seeking to understand where the firm is successfully building its pipeline and winning new business beyond Alternatives. He also inquired about the nature of the business that Invesco is losing on the institutional side.

Answer

Chief Financial Officer Allison Dukes noted the institutional pipeline is expanding in both size and quality, with fee rates on the higher end of the historical range. President and CEO Andrew Schlossberg highlighted fixed income as a key area of institutional demand and momentum, along with select global and Asian equities. Dukes identified recent outflows as being concentrated in balanced risk strategies and stable value, with the latter being a cyclical trend due to the interest rate environment.

Kenneth Worthington of JPMorgan Chase & Co. asked about Invesco's role in the future of cash management with the rise of digital dollars and inquired about a significant drop in compensation within the China JV, questioning if it represents a new run rate.

Answer

President, CEO & Director Andrew Schlossberg stated that Invesco is a major cash manager and is actively exploring innovations like tokenized money market funds, though regulatory developments are needed. Senior MD & CFO L. Allison Dukes explained the China JV compensation decline was linked to lower performance fees due to regulatory changes and some discrete items. She indicated that while margins were elevated this quarter, she expects them to be "a bit diminished overall" in the long term.

Ken Worthington inquired about Blackstone's increased focus on the RIA channel for wealth, its current RIA AUM versus the broker wirehouse channel, and whether this focus requires new sales personnel or product adjustments.

Answer

President and COO Jon Gray stated that the RIA channel is a large but harder-to-access market. He mentioned bringing in a new senior person to lead concentrated outreach and noted that while underlying product pricing doesn't change, it requires significant effort. He highlighted the launch of an interval product in multi-asset credit specifically for the RIA channel.

Ken Worthington asked about Blackstone's increased focus on the RIA channel for wealth, seeking to understand the current RIA AUM versus wirehouse, and whether this focus involves new personnel or product adjustments.

Answer

Jon Gray, President and Chief Operating Officer, stated that specific RIA AUM is not disclosed but acknowledged the channel's size and accessibility challenges. He confirmed a concentrated outreach with new senior personnel, noting that while underlying product pricing remains consistent, Blackstone launched its first interval product (multi-asset credit) specifically for the RIA channel, viewing it as a major opportunity.

Ken Worthington requested more details on the Legal & General partnership, including the nature of the $20 billion target, and asked for an update on product development with Wellington and Vanguard.

Answer

President & COO Jonathan Gray explained the Legal & General partnership is an aspiration to manage up to $20 billion over five years, primarily by providing investment-grade private credit for L&G's pension risk transfer and annuities businesses. It also includes joint product development for the UK wealth and retirement markets. Regarding Vanguard and Wellington, Gray stated he was legally limited but confirmed Wellington has filed for the first joint product, which now awaits SEC approval. He expressed excitement about combining Blackstone's private market skills with their public market expertise.

Kenneth Worthington asked for an assessment of the 'golden moment' for private credit, questioning if it persists and what the normalization of the credit outlook implies for the segment's growth.

Answer

President and COO Jonathan Gray clarified that the 'golden moment' of high absolute returns has evolved into a 'golden arrow' of a durable spread premium over liquid markets. He attributed this to the 'farm-to-table' model connecting investors directly to borrowers. He sees a long runway for growth, driven by structural tailwinds like bank optimization and financing needs for data centers and energy transition, especially in the early-days area of investment-grade private credit.

Kenneth Worthington requested a deeper analysis of the "Big 4" insurance relationships, including the AUM they represent, their contractual commitments, and the impact of the Resolution/Nippon Life transaction.

Answer

Michael Chae, CFO, specified that the "Big 4" relationships accounted for $156 billion in AUM at year-end 2024. Jonathan Gray, President & COO, added that relationships are "rock solid" and capital has often been allocated faster than contractually required. He views the Nippon Life acquisition of Resolution as a positive development that will accelerate growth, reinforcing the success of Blackstone's capital-light, third-party asset manager model.

Kenneth Worthington questioned the lagging performance in Blackstone's secondaries business, citing recent IRR declines in specific funds, and asked about the path to improvement.

Answer

President & COO Jonathan Gray and CFO Michael Chae defended the business's strong long-term track record. Chae explained the recent lag is due to cyclical factors: lower volumes of new discounted deals, which is now accelerating, and the underperformance of more mature funds that comprise the portfolios. They view these as temporary issues, not structural problems.

Ken Worthington asked about the outlook for energy volumes, which were down this quarter after a period of strong growth, and the factors driving share shifts in oil and gas markets.

Answer

Derek Sammann, Senior Managing Director, CME Group, noted that WTI has traded in a narrow range, with growth in options and crude scrape contracts. He highlighted double-digit growth in crude from Europe and Asia, and WTI futures share shifting back to CME Group (76% in Q3). The natural gas complex grew 2% in Q3, driven by LNG exports. He emphasized energy, particularly natural gas, as a fuel for the future. Terry Duffy, Chairman and CEO, CME Group, added that the company continues to innovate and meet customer needs globally.

Ken Worthington asked about the outlook for energy volume growth, particularly after a decline this quarter, considering geopolitical risks and recent share shifts in oil and gas markets.

Answer

Derek Sammann, Senior Managing Director, noted that WTI has traded in a narrow range, but CME has successfully grown options and crude scrape contracts. He highlighted double-digit growth in crude oil in Europe and Asia, and a shift of WTI futures share back to CME. He also emphasized strong growth in natural gas, particularly NACAS options, driven by increasing U.S. LNG exports.

Kenneth Worthington of JPMorgan Chase & Co. asked about the financial impact of the new cash collateral requirements implemented in Q2, including any contribution from surcharges and the average collateral balances.

Answer

Lynne Fitzpatrick, President & CFO, explained that total collateral averaged $316 billion in Q2, up from $290 billion in Q1. Of this, $133 billion was in cash, representing about 48% of required collateral, well above the new 30% soft minimum. She noted that higher market volatility contributed to the increased cash postings. Suzanne Sprague, COO, added that firms tend to hold more cash in uncertain environments.

Kenneth Worthington from JPMorgan Chase & Co. asked about the impact of the new cash collateral requirements implemented in Q2, including any contribution from the 10 basis point charge, and requested the average collateral balances for the quarter.

Answer

President & CFO Lynne Fitzpatrick reported that average total collateral rose to $316 billion in Q2, up from $290 billion in Q1. Of this, $133 billion was in cash, representing nearly 48% of the required amount, well above the 30% soft minimum. She and COO Suzanne Sprague noted that higher market volatility during the quarter also likely contributed to the increased cash holdings as firms tend to stay more liquid in uncertain environments.

Kenneth Worthington of JPMorgan Chase & Co. asked for the rationale behind the decision to sell the OSTTRA joint venture and inquired about CME's strategic outlook on the post-trade business following the sale.

Answer

Terrence Duffy, Chairman and CEO, explained that the joint venture became very lucrative after partnering with S&P Global, and management saw a good opportunity to monetize the asset for shareholders. He stated that CME would not be at a competitive disadvantage by selling, as they can still use the services if needed, calling it a "very smart business decision."

Kenneth Worthington asked about the impact of spot Bitcoin and Ether ETFs on CME's futures business and whether the larger perpetual swaps market presents a future growth opportunity.

Answer

Tim McCourt, Global Head of Financial & OTC Products, confirmed that the launch of crypto ETFs has helped grow the futures complex, with crypto futures ADV up 285% to a record 102,000 contracts in the quarter. He explained that futures are central to the ETF ecosystem for hedging and inventory management. Regarding perpetuals, McCourt noted they exist on unregulated platforms, and CME's focus remains on offering trusted, regulated products while continuing to engage with customers on their needs.

Kenneth Worthington asked about the growth drivers for Bullish's liquidity and subscription services, inquiring about the number of tokens at the beginning and end of Q2, the expected growth in Q3, and the future pipeline mix between stablecoin and non-stablecoin token issuers.

Answer

CEO Tom Farley explained that regulatory clarity is accelerating growth in this business, with customers paying significant annual subscriptions for listing, liquidity, visibility, and research. CFO David Bonanno highlighted the impact of the Solana contract and IPO proceeds on Q3 guidance, noting the line item's rapid compounding and its role as a bedrock for cross-sell efforts. Farley added that the current pipeline is heavier on non-stablecoin token issuers, though new stablecoin entrants continue to emerge.

Ken Worthington inquired about the growth trajectory of Bullish's liquidity and subscription services, specifically asking about the number of tokens supported, the pipeline for stablecoin versus non-stablecoin token issuers, and the impact of the GENIUS Act on client acquisition.

Answer

Tom Farley, CEO and Chairman, explained that regulatory clarity is accelerating growth in this segment, with customers committing seven-figure annual subscriptions. David Bonanno, CFO, highlighted the Q3 guidance includes the large Solana contract and IPO proceeds, noting the segment's rapid compounding and cross-sell benefits. Farley added that while they have substantially all challenger stablecoins, new entrants appear daily, and the current pipeline is heavier on non-stablecoin token issuers.

Ken Worthington asked about the growth drivers for Bullish's liquidity and subscription services, inquiring about the number of tokens at the beginning and end of Q2, the expected growth into Q3, and the future pipeline mix between stablecoins and non-stablecoin tokens following the GENIUS Act.

Answer

Tom Farley, CEO and Chairman, explained that regulatory clarity is accelerating growth, with long-term commitments from issuers paying significant annual subscriptions. David Bonanno, CFO, noted that Q3 guidance includes the large Solana contract and IPO proceeds, emphasizing the compounding nature of this revenue line and its role in cross-sell efforts. Farley added that while they had substantially all challenger stablecoins, new entrants appear daily, and the current pipeline is heavier on non-stablecoin token issuers.

Ken Worthington from JPMorgan Chase & Co. asked about the competitive dynamics between Circle's CPN and other payment networks like Coinbase/Shopify, and inquired about the company's strategy for using its stock for M&A post-IPO.

Answer

Chairman, CEO & Co-Founder Jeremy Allaire stated that Circle maintains a market-neutral "big tent" approach, viewing integrations like Shopify using USDC via Coinbase as positive for the entire network's utility. On M&A, he noted Circle prefers organic growth but will selectively acquire teams and IP that fit its integrated platform strategy, citing recent small acquisitions related to ARC and blockchain privacy.

Ken Worthington of JPMorgan Chase & Co. asked about Coinbase's long-term payments strategy, specifically how it views competition with networks like Visa and Mastercard, whether the focus is on building an open network or creating closed-loop use cases, and how it plans to monetize payments through transaction fees versus USDC revenue.

Answer

CEO Brian Armstrong clarified that while Coinbase partners with Visa and Mastercard, he sees open, decentralized protocols as the true competitors to traditional payment networks. He explained the strategy is to build a two-sided network of consumers seeking rewards and merchants wanting lower fees, citing the Shopify partnership as an example. President & COO Emilie Choi added that traditional networks can adapt by participating in the new ecosystem, such as by running nodes.

Ken Worthington of JPMorgan Chase & Co. asked about Coinbase's long-term payments strategy, questioning whether the company aims to build an open alternative to Visa and Mastercard or focus on proprietary use cases, and how it plans to monetize through transaction fees versus USDC revenue.

Answer

CEO Brian Armstrong clarified that while Coinbase partners with Visa and Mastercard, he sees open, decentralized protocols as the true long-term competitors. He explained the strategy is to serve both consumers and merchants, using the fee savings from crypto rails to offer rewards, as seen in the Shopify partnership. President & COO Emilie Choi added that traditional networks can adapt by participating in the new ecosystem, such as by running nodes.

Kenneth Worthington from JPMorgan Chase & Co. asked about the Deribit acquisition, inquiring about the cross-selling opportunities and whether the company's statement that it 'immediately enhances profitability' means the deal is immediately accretive.

Answer

President and COO Emilie Choi outlined the strategic benefits, including commanding greater trading volume from shared customers and providing greater capital efficiency. CFO Alesia Haas confirmed the deal is expected to be accretive on an adjusted EBITDA basis, pending final purchase accounting. CEO Brian Armstrong added that enabling traders to hedge futures with options on a single platform improves efficiency and should drive volume.

Kenneth Worthington of JPMorgan Chase & Co. asked what key legislative and regulatory items are most important for the new administration and Congress to address to create a constructive market.

Answer

CEO Brian Armstrong identified two top priorities: passing market structure legislation to clarify token classification (i.e., which assets are securities vs. commodities) and establishing a clear legislative framework for stablecoins. Chief Legal Officer Paul Grewal supported this, underscoring the need for a functional 'bill of rights' for crypto users and noting the promising early work of the new SEC crypto task force.

Kenneth Worthington asked about the tangible benefits of a more crypto-friendly regulatory environment in the U.S., beyond a less litigious SEC, and how federal clarity might impact state-level oversight.

Answer

Chief Legal Officer Paul Grewal stated that the goal is 'clarity,' not 'accommodation,' which would unlock innovation, accelerate asset listings, benefit stablecoin payments, and potentially reactivate staking services in certain states. He noted that states often take their cue from federal regulators, so federal clarity would create positive follow-on effects and consistency for consumers.

Ken Worthington asked about the success of StepStone's evergreen products, specifically seeking reasons for the strong performance of the 'Spring' venture and growth fund, the progress of the 'Credex' BDC, and the future product roadmap for the private wealth channel.

Answer

Jason Ment, President & Co-COO, attributed Spring's success to its unique market position and the team's leading reputation in the innovation economy. He stated that Credex's organic growth is tracking in line with previous fund launches and is expanding its platform presence. For the future, Ment mentioned a pure-play private equity fund is in registration and the firm is focused on refining product packaging, such as removing accredited investor requirements from certain funds to broaden access.

Kenneth Worthington of JPMorgan Chase & Co. asked for clarification on onetime advisory fees, the resulting core FRE margin, and the outlook for the new business pipeline given recent market volatility and strong prior fundraising.

Answer

David Park, Chief Financial Officer, confirmed approximately $4 million in onetime advisory fees and stated that the normalized core FRE margin of 37% is a fair starting point for fiscal 2026, though quarterly results will vary. Scott Hart, Chief Executive Officer, added that the pipeline for new opportunities remains positive, particularly with new allocators outside the U.S., and that while the re-up pipeline is healthy, it is not as large as the prior year's.

Kenneth Worthington of JPMorgan Chase & Co. inquired about StepStone's recent accomplishments in expanding its private wealth distribution footprint and the key opportunities for the business over the next 12 months. He also asked for an update on the secondary market, specifically regarding activity levels and current pricing discounts compared to the previous 6-12 months.

Answer

Jason Ment, President and Co-Chief Operating Officer, highlighted that StepStone now has over 450 platforms globally, with 40% offering multiple funds, and noted that nearly 70% of flows now come through ticker-eligible funds. He expressed excitement about a recent $600 million secondary transaction for the CRDEX fund, which enhances its scale and marketability. Scott Hart, CEO, addressed the secondaries market, noting 2024 was a record year. He stated buyout secondaries are pricing in the low-to-mid 90s as a percentage of NAV, while venture is lower at 70-80%. Hart emphasized that the significant growth in unrealized NAV industry-wide signals a massive future opportunity for secondaries.

Kenneth Worthington asked about the growing undeployed fee-earning capital (UFEC) pipeline, inquiring if its characteristics have changed and what the timeline is for its conversion to fee-paying AUM. He also asked about the future strategy for the successful wealth management business, specifically regarding product and distribution priorities.

Answer

CEO Scott Hart clarified that the UFEC's characteristics are largely unchanged, though account sizes have grown. He noted a recent $4 billion activation and reiterated the typical 3-to-5-year deployment timeline for the remaining capital. Head of Strategy Mike McCabe outlined future growth priorities, stating that other asset classes like infrastructure, real estate, and credit are reaching inflection points. He emphasized continued investment in global business development and the private wealth channel to support this growth.

Ken Worthington of JPMorgan Chase & Co. asked whether the strong Q2 results for the Absolute Return Strategies (ARS) business represented a sustainable turning point and questioned the drivers behind a slight dip in the ARS fee rate.

Answer

CEO Michael Sacks stated that while sentiment has clearly improved and the pipeline is building after strong performance, the firm has not changed its internal forecast of flat net flows for the ARS business. President Jonathan Levin described the fee rate dip as idiosyncratic and not indicative of systemic pricing pressure, noting that demand for the strategy is more relevant now than it has been in the recent past.

Kenneth Worthington of JPMorgan Chase & Co. asked if GCMG sees an opportunity to capitalize on endowments potentially reducing their private equity holdings. He also pointed to the earnings supplement, questioning the divergence between strong fee growth in specialized funds and flat fee growth in separate accounts, and asked for the outlook.

Answer

Chairman and CEO Michael Sacks stated that while GCMG has low direct exposure to endowments, it can capitalize on the trend through its secondaries business, which benefits from increased LP-led sales, and its ARS business, which could attract capital seeking more liquid alternatives. President Jon Levin explained the fee dynamic is expected, as specialized funds are concentrated in higher-fee direct strategies, while separate accounts have a broader mix and are subject to volume discounts. He anticipates fee rates will remain stable for both.

Kenneth Worthington inquired about the conversion pace of the contracted not-yet-fee-paying AUM pipeline into fee-paying AUM for 2025. He also asked if the strong performance in Absolute Return Strategies (ARS) has changed client dialogues and reception.

Answer

Chairman and CEO Michael Sacks explained that the conversion pace depends on a mix of fund structures and hasn't fundamentally changed. President Jonathan Levin noted that the 2024 conversion rate was consistent with expectations. Regarding ARS, Michael Sacks confirmed that strong performance has improved client conversations and the business outlook is the best it has been in a long time, with a solid pipeline.

Kenneth Worthington of JPMorgan Chase & Co. asked about the economic structure of GCMG's new wealth management partnerships and requested specifics on the timing of closes for its specialized funds.

Answer

President Jon Levin explained that partnership economics are comparable to internal distribution at scale, with structures varying from sub-advisory models to revenue-sharing joint ventures. Chairman and CEO Michael Sacks stated that Q4 closes for the Elevate and IAF funds would be key determinants for the full-year private markets fee growth and that most funds would continue fundraising into the next year.

Ken Worthington of JPMorgan Chase & Co. asked about the new Evergreen Fund at Enhanced Capital, its target audience, and the future product roadmap for the wealth channel. He also questioned the sustainability of the high capital deployment in credit, particularly at HARC, and its remaining dry powder.

Answer

Sarita Narson Jairath, EVP of Global Client Solutions, and Luke Sarsfield, Chairman & CEO, addressed the questions. They confirmed the Evergreen Fund targets both institutional and high-net-worth segments, leveraging partnerships rather than building a direct retail force. On deployment, Mr. Sarsfield explained the Q2 strength was a mix of HARC's NAV lending and committed capital from other credit funds. He noted HARC has ample capacity and a successor fund, HARC five, is planned for later in the year.

Kenneth Worthington of JPMorgan Chase & Co. inquired about P10's 2025 sales focus, asking which of the 19 funds in market are the most critical for achieving the $4 billion gross fundraising target.

Answer

Luke A. Sarsfield, Chairman and CEO, responded that the focus is diversified across the platform. He highlighted momentum in RCP strategies (co-investment, secondary, primary fund-of-funds), TrueBridge's blockchain and seed funds, a new credit strategy from Five Points, and upcoming news from Bonaccord later in the year. He emphasized the platform's diversification as a key strength.

Kenneth Worthington inquired about TPG's insurance strategy, specifically its view on balance-sheet-heavy versus balance-sheet-light models and what factors might make a balance-sheet-heavy acquisition attractive.

Answer

CEO Jon Winkelried emphasized that TPG's strategy remains 'FRE centric' and that the firm is cautious about assuming insurance liabilities where it lacks expertise. He noted that while they would use their balance sheet, they are exploring partnerships to acquire distribution capabilities without taking on the associated business risk.

Kenneth Worthington inquired about the significant increase in transaction and other fees, asking if the capital markets capabilities are now fully built out and what specific factors drove the strong performance in Q1 2025.

Answer

CFO Jack Weingart explained that the capital markets team is about three-quarters of the way built out with significant upside remaining, particularly in credit. CEO Jon Winkelried added that the Q1 strength was not due to any single event but rather a broad-based, deeper integration of the capital markets team across all of TPG's transaction and refinancing activities, reflecting growing adoption by deal teams.

Kenneth Worthington asked for details on TPG's goal to double its Assets Under Management (AUM), inquiring about the priority of insurance among other growth drivers and key themes from the firm's recent global partner meeting.

Answer

CEO Jon Winkelried outlined five core growth drivers: growing core funds, organic innovation, inorganic additions, private wealth penetration, and insurance. He described insurance as a distinct inorganic strategy, emphasizing that TPG is seeking the right partner for a hybrid, balance-sheet-light model and is actively building its insurance capital base through various partnerships.

Kenneth Worthington inquired about the financial impact of the Dish transaction on fee-related revenue in upcoming quarters and asked about the potential frequency of similar large, bespoke deals in the future.

Answer

CFO Jack Weingart stated that the Dish deal's capital markets fees were recognized in Q3, while management fees from the deployment will begin in Q4. CEO Jon Winkelried noted that such bespoke financing opportunities constitute the bulk of the current pipeline and represent a multi-year opportunity. President Todd Sisitsky added that TPG's culture actively fosters these cross-platform collaborations.

Ken Worthington of JPMorgan asked for more detail on the path forward for the wealth business, including the ongoing vision beyond the current product ramp-up.

Answer

CEO Harvey Schwartz described the vision as being centered on Carlyle's powerful brand recognition, the diversification of its investment platform, and a focus on solving specific client needs. He emphasized that success comes from leveraging their global reach and history of trust to build solutions that advisors want, rather than just proliferating products. He highlighted the flexibility provided by platforms like Carlyle Alpinvest.

Ken Worthington of JPMorgan Chase & Co. asked for more detail on the path forward for the wealth business, inquiring about the ongoing vision and next steps for the successful platform.

Answer

CEO Harvey Schwartz outlined the key pillars for success in wealth: strong brand recognition built on trust since 1987, a diversified global platform that allows for creating tailored solutions, and a deep understanding of advisor needs. He emphasized that Carlyle's ability to combine platforms like Alpinvest and traditional buyout provides unique flexibility. Schwartz reiterated that it is still 'early days' in the global wealth trend and the firm is well-positioned on multiple platforms in multiple geographies.

Kenneth Worthington asked about the potential risk from stress in the endowment sector reducing private market allocations, and conversely, the opportunity this could create for Carlyle's AlpInvest secondaries and wealth businesses.

Answer

CEO Harvey Schwartz stated that he does not view a potential shift by endowments as a broad-based or material risk to the industry or Carlyle's fundraising. He acknowledged that such a trend would create a short-term opportunity for the AlpInvest secondaries platform to deploy capital, as its brand and scale ensure it would see all related deal flow, but he does not see it as a significant overhang.

Kenneth Worthington asked about specific fund performance, inquiring about management's confidence that Carlyle Partners VII (CP 7) will collect its accrued carry and the reasons for the IRR decline in Carlyle Asia Partners V (CAP 5) and Carlyle Europe Partners V (SEP 5).

Answer

CFO John Redett expressed high confidence that CP 7 will hit its carry hurdle, citing its dramatic performance improvement. For the Asia fund (CAP), he attributed the performance decline primarily to volatility in its public equity holdings, particularly those in China.

Kenneth Worthington asked for clarification on buyout fund performance, noting that the net IRR for CP VII remained flat despite a jump in accrued carry, while CEP V's IRR declined. He questioned the outlook for these metrics and their potential impact on fundraising.

Answer

CFO John Redett acknowledged the firm's focus on improving private equity performance and highlighted strong appreciation in U.S. and Asia funds driven by operational improvements. For CP VII, he explained the fund is still in its catch-up phase, which is why the net IRR has not yet materially changed, though the gross IRR increased by 100 basis points in the quarter. For the newer CP VIII fund, he advised focusing on the gross IRR since it is not yet fully deployed.

Ken Worthington inquired about the strategic details of the new DBS private banking relationship in Asia, questioning if it represents a different distribution model and if it includes technology or data solutions beyond asset management. He also asked for an update on the investment progress of Secondary Fund VI and the marketing timeline for the subsequent Fund VII.

Answer

Co-CEO Erik Hirsch explained that the DBS partnership is an extension of their strategy to meet diverse client needs across various channels, confirming it is a differentiated, customized platform and that more such partnerships are expected. Regarding the funds, Hirsch stated that Secondary Fund VI is over halfway invested and that while deal flow is strong, active marketing for Fund VII has not yet begun but is anticipated in the near future.

Ken Worthington inquired about the strategic nature of the new DBS private banking relationship in Asia, asking if it represents a new distribution model and includes technology solutions. He also asked for an update on the investment progress of Secondary Fund VI and the marketing timeline for Fund VII.

Answer

Co-CEO Erik Hirsch clarified that the DBS partnership is an extension of their strategy to meet diverse customer needs across various channels, confirming it is a differentiated, customized platform with potential for further expansion. Regarding the fund, Mr. Hirsch stated that Secondary Fund VI is over halfway invested and they have not yet begun actively marketing Fund VII, though it is planned for the near future.

Ken Worthington asked about the new DBS private banking relationship in Asia, questioning if it represents a different distribution strategy and whether it includes technology or data solutions. He also inquired about the investment progress of Secondary Fund Six and the marketing timeline for its successor, Fund Seven.

Answer

Erik Hirsch, Co-CEO, explained that the DBS partnership is an extension of their existing strategy to form diverse strategic relationships and meet customers where they are, using various channels including technology and tokenization. He confirmed the relationship is differentiated and customized for the client base, with plans for further expansion. Regarding the secondary fund, Hirsch stated that Fund Six is more than halfway invested, but they have not yet started actively marketing the next fund, noting strong deal flow across multiple vehicles.

Ken Worthington from JPMorgan Chase & Co. asked about the margin outlook following reporting changes and the nature of distribution fees within G&A for new products.

Answer

Co-CEO Erik Hirsch explained that the overall margin outlook remains stable despite the reporting changes, as the company continues to invest heavily in growth. He clarified that distribution fees are primarily upfront costs associated with US wirehouse channels and that this structure has not fundamentally changed.

Kenneth Worthington of JPMorgan Chase & Co. asked about the drivers behind Separately Managed Account (SMA) clients increasingly adopting specialized funds and Evergreen products, and inquired about the associated fee structures.

Answer

Co-Chief Executive Officer Erik Hirsch explained that the trend is driven by clients' growing awareness of the benefits of secondaries and co-investments for J-curve mitigation and diversification. He noted that while institutional clients currently pay higher rates for Evergreen funds, some fee compression is expected over time as the market matures. The firm's strategy focuses on offering more choice and achieving massive scale.

Kenneth Worthington inquired about the growth opportunities for Hamilton Lane in new distribution channels offering alternative products to mass affluent clients for the first time, and whether these new platforms have different requirements than existing ones.

Answer

Co-Chief Executive Officer Erik Hirsch described the expansion into the mass affluent market as a long-term 'marathon,' noting the vast potential as individual investor portfolios begin to mirror institutional ones. He stated that client needs are consistent across all platforms, focusing on education, transparency, and high-quality, accessible products. Hirsch emphasized that Hamilton Lane's success is driven by its strong client service DNA and its advanced data and technology capabilities, which help differentiate the firm.

Kenneth Worthington from JPMorgan Chase & Co. asked about the GeoWealth partnership and Apollo's strategic aspirations for the collaboration.

Answer

President Jim Zelter described the partnership as a key part of their innovation and technology strategy. He explained that GeoWealth, a TAMP, provides the technological framework to deliver Apollo's products with greater transparency and educational resources. This aligns with their vision of using open architecture and technology to enhance client experience and broaden distribution.

Kenneth Worthington from JPMorgan asked how Apollo sees tokenization driving greater access to and growth for private assets in the future.

Answer

President James Zelter described tokenization as part of a broader 'open architecture' strategy. He suggested that as digital finance platforms and stablecoin issuers seek yield beyond treasuries, they will turn to other assets. He noted that interval funds are particularly attractive to these platforms due to their daily NAV and subscription features, referencing a prior instance of a digital platform investing in one of Apollo's debt funds as an early example of this trend.

Kenneth Worthington asked about the impact of the 'higher for longer' interest rate sentiment on Apollo's outlook and balance sheet positioning for 2025.

Answer

President Jim Zelter stated that Apollo runs a duration-matched business and is well-positioned for the current environment, without making short-term tactical bets on rates. CEO Marc Rowan added that 'higher for longer' has been Apollo's house view, and a higher rate environment is generally beneficial for its credit-oriented businesses, making its solutions more attractive in absolute terms.

Ken Worthington asked about the impact of the recent backup in interest rates on Apollo's hedges, its strategy for fixing floating-rate assets, and whether the move could affect spreads in the fourth quarter.

Answer

CFO Martin Kelly confirmed there is no change to their hedging posture or outlook. He stated that the plan to maintain a net floating rate position of around $15 billion remains intact and that their financial model already incorporated the equivalent of six rate cuts, a scenario that now looks more realistic.

Kenneth Worthington asked how Franklin Templeton plans to translate its early leadership in blockchain and digital asset technology into tangible economic success that investors can track.

Answer

President and CEO Jennifer Johnson outlined a multi-pronged strategy for monetization. This includes white-labeling their patented, multi-chain wallet and platform for other distributors, a service for which they are already in discussions. She also highlighted existing revenue from managing reserves for four stablecoin providers and being selected by the first state to issue its own stablecoin, positioning them as a key partner as regulatory clarity increases.

Kenneth Worthington of JPMorgan Chase & Co. asked about the potential impact of significant growth in stablecoins on the money market fund industry, particularly concerning the supply of T-bills. He also questioned whether there are capacity constraints for the highly successful MDT mid and small-cap equity products given their strong inflows.

Answer

CIO of Global Liquidity Markets Deborah Cunningham stated that the math works for money markets, explaining that the increased U.S. debt ceiling provides additional Treasury supply to meet demand from a growing stablecoin market. CEO J. Christopher Donahue added that since stablecoins cannot pay interest, they primarily compete with low-yield bank deposits, not money market funds. Regarding MDT, Mr. Donahue confirmed that they do not anticipate any capacity issues for the funds at this time.

Kenneth Worthington of JPMorgan Chase & Co. inquired about the potential impact of stablecoin growth on the money market fund industry, particularly concerning the supply of T-bills, and also asked about the investment capacity of the successful MDT mid- and small-cap products.

Answer

Deborah Cunningham, EVP & CIO of Global Liquidity Markets, stated that the T-bill supply, supported by the debt ceiling renewal, is sufficient to meet the expected demand from a growing stablecoin market. J. Christopher Donahue, Chairman, President, & CEO, added that since stablecoins cannot pay interest, they compete more with low-yield bank deposits than with money funds. Regarding MDT, Mr. Donahue confirmed that they do not currently foresee any capacity issues with those funds despite strong inflows.

Kenneth Worthington asked about the competitive dynamics in the money market fund business, questioning why Federated Hermes' AUM growth appeared to lag the industry in Q1, and also inquired about the drivers of elevated fixed income outflows in April.

Answer

Chief Investment Officer for Money Markets, Deborah Cunningham, explained that Q1 inflows were tempered by seasonal corporate tax payments and institutional margin calls due to market volatility. CFO Thomas Donahue clarified that average money market assets grew substantially quarter-over-quarter. CEO John Donahue attributed the fixed income outflows primarily to the Total Return Bond and High Yield funds, noting that the Total Return Fund's defensive positioning is beginning to improve its relative performance.

Kenneth Worthington inquired about the impact of the final SEC money market fund reform rules that took effect in October, specifically on investor interest in prime funds. He also asked for details on the Q3 proxy costs, including the dollar amount and its accounting treatment.

Answer

CEO John Donahue stated that, unlike past reforms, clients have remained in prime funds, with FHI's assets in the category growing 25% over the year, outpacing the industry. CIO for Money Markets, Deborah Cunningham, confirmed no shareholders left due to the new rules and described the new daily monitoring process as having a very low probability of resulting in fees. CFO Thomas Donahue clarified that the entire $5.9 million in proxy costs was recognized as a contra-revenue in Q3 and will not recur in Q4.

Ken Worthington from JPMorgan Chase & Co. asked whether achieving positive organic growth is a necessity for T. Rowe Price over the long term, especially after five consecutive years of net outflows.

Answer

President, CEO & Chair Robert Sharps stated that, over time, organic growth is necessary for the firm to be successful, dynamic, and drive value for shareholders. He explained that it's essential for creating associate opportunities and funding investments in client-facing capabilities. He concluded that philosophically, the leadership team would not be satisfied with a multi-year outlook that did not include a path back to organic growth.

Kenneth Worthington asked for more detail on the expansion of T. Rowe Price's retirement business outside the U.S., questioning what specific products are being sold and if customization is a key theme internationally.

Answer

CEO Robert Sharps explained that the approach is bespoke for each country, as international DC markets are at different stages of development. He cited partnerships with local managers in Korea and Japan for target-date series, a partnership with a life insurer in Canada, and a custom target allocation product with a private bank for distribution in Asia, the U.K., and the Middle East. Head of Global Investments Eric Veiel added that the strategy is increasingly focused on providing capabilities, such as strategic and tactical asset allocation expertise, rather than just products.

Kenneth Worthington asked if improving investment performance is sufficient to reverse equity outflows, or what other innovations in product structure and distribution are most likely to drive a turnaround in equity sales.

Answer

Head of Global Investments Eric Veiel described strong performance as necessary but not solely sufficient, emphasizing the need to meet clients with the right vehicles, price points, and tax efficiency, such as ETFs and SMAs. CEO Robert Sharps added that strong 3- and 5-year performance is highly influential on flows and noted that strategies with good performance, like Capital Appreciation, have maintained positive flows.

Kenneth Worthington asked about the ETF franchise, questioning whether it is expanding customer reach into new channels or primarily cannibalizing existing mutual fund assets. He also inquired if ETF distribution costs differ from those for mutual funds.

Answer

CEO Rob Sharps stated it's a mix of both expansion and cannibalization. He believes a substantial portion of ETF flows are incremental, as they are reaching new ETF-exclusive advisors and offering strategies not available in mutual funds. He noted that tax implications with embedded gains deter many existing mutual fund clients from switching. Regarding costs, he said distribution economics are largely the same for ETFs and mutual funds, varying by platform, with the main difference being the absence of certain non-management fee structures in ETFs.

Ken Worthington inquired about the sustainability of positive net flows in the institutional channel and the strategy for addressing persistent outflows in the retail active equity business.

Answer

CEO Ali Dibadj expressed confidence in the institutional pipeline, highlighting broader client engagement and the impact of the new branding campaign. He affirmed the firm's commitment to its core equities franchise, believing the complex market environment favors active management. CFO Roger Thompson added that several specific equity strategies, both new and existing, are already experiencing positive net flows.

Kenneth Worthington of JPMorgan Chase & Co. asked about the capacity and liquidity management of Janus Henderson's CLO ETF franchise during market stress and inquired about the next strategic steps for driving growth in the institutional channel.

Answer

CEO Ali Dibadj explained that the CLO ETF franchise, which constitutes about 80% of the market, has shown resilience with redemptions being absorbed as expected during recent volatility. He noted that the underlying assets are liquid and the in-kind ETF structure functions well. Regarding the institutional channel, Dibadj highlighted a building pipeline, a 100% quarter-over-quarter increase in U.S. RFP activity, improved consultant relations, and broad-based demand across strategies like technology, healthcare, small-cap equities, and securitized products.

Kenneth Worthington asked about the outlook for the firm's net management fee rate in 2025, questioning if it could remain stable in a more normal market environment. He also inquired about the strategic rationale for partnering on the Anemoy tokenized treasury fund.

Answer

CFO Roger Thompson stated that while positive equity markets are a tailwind, the fee rate has been broadly flattish, declining only one basis point in two years, and will depend on the future mix of business. CEO Ali Dibadj explained the Anemoy partnership is a core part of their innovation strategy, allowing them to be at the forefront of blockchain and tokenization to meet an emerging client need for yield-bearing digital assets. He sees it as a low-cost way to gain critical experience in what he believes will be a transformative technology for asset management.

Kenneth Worthington asked about the progress in rebuilding the institutional pipeline, inquiring about the geographies and product types showing the greatest demand.

Answer

Executive Ali Dibadj explained that while the pipeline is still being rebuilt, leading indicators like RFP activity are up over 30% in the U.S., EMEA, and LATAM. He highlighted strong interest in hedge funds, small/mid-cap equities, and global fixed income, while stressing a disciplined focus on profitable AUM rather than pursuing low-margin mandates.

Ken Worthington of JPMorgan Chase & Co. asked about the build-out of the active trader base, how its ranks are growing, and whether the positive transfer of assets (TOA) against competitors also applies specifically to this client segment.

Answer

CEO Vlad Tenev stated that while they don't break down TOA by segment, they remain positive against all major competitors and track active trader progress via market share, which is growing nicely across all assets. CFO Jason Warnick added that Net Promoter Score (NPS) for active traders is at a four-year high, which they see as a leading indicator for future market share gains.

Kenneth Worthington of JPMorgan asked for better insights into the prediction market business, including the customer profile, expected penetration, and trading velocity compared to other products.

Answer

CEO Vladimir Tenev explained that the appeal of prediction markets is broad, with different customer groups engaging with different types of contracts (e.g., economic vs. sports). He noted that unlike options traders who might focus on one product, these customers engage across a wide spectrum of assets on the platform, with varied trading activity. This wide dispersion is a key characteristic of the user base.

Kenneth Worthington asked for details on the credit card's economics, specifically regarding the differences between on- and off-balance sheet balances and how credit risk is managed between them.

Answer

CFO Jason Warnick stated that the credit risk is 'very similar' for both on- and off-balance sheet holdings and that Robinhood retains this risk. He also noted that the economics are similar and that the team is continuously evaluating the structure to optimize it over time.

Speaking on behalf of Ken Worthington, Madeline Delden asked about the strategy for listing election-related event contracts, their fit within the product roadmap, and if Robinhood plans to expand into sports betting-type products.

Answer

CEO Vlad Tenev explained that the company's philosophy is to make all product categories, especially those used by institutions, available to retail customers. He positioned the event contracts as regulated instruments that provide hedging utility and serve as a reliable data source for market predictions. He emphasized the goal of being at the frontier of innovation for active traders but did not directly address any plans for sports betting products.

Ken Worthington of JPMorgan Chase & Co. asked about the potential impact of stablecoins and tokenized money market funds on the treasury market and Tradeweb, and inquired about the company's current investment focus in the digital asset space.

Answer

CEO Billy Hult and CFO Sara Furber expressed a bullish view, calling stablecoins "game changers" amid an improving regulatory landscape. They stated Tradeweb is exploring tokenized funds and building an interoperable digital fixed income ecosystem, starting with post-trade workflows. Current investments and partnerships include the Canton Network, Digital Asset (alongside Goldman Sachs and Citadel), and Securitize (with BlackRock), positioning Tradeweb at the forefront of this evolution.

Kenneth Worthington asked for thoughts on how a potential deterioration in the perception of 'U.S. exceptionalism,' evidenced by the treasury selloff and dollar depreciation, could influence Tradeweb's business across its asset classes.

Answer

CEO William Hult acknowledged the 'unprecedented' market moves but stated his inclination is that no long-term damage has been done to the 'U.S. brand.' However, he stressed the importance of Tradeweb's business diversity as a key strength in such an environment. He highlighted that international business now represents 38% of revenues, up from less than 30% in 2016, and that emerging markets revenues grew nearly 55% year-over-year. This global, multi-asset footprint provides resilience regardless of conditions in a single market.

Kenneth Worthington of JPMorgan asked about the 2025 outlook for activity levels across rates and credit. He sought to understand where management has the most conviction for industry volume growth and where market share gains could offset potential market weakness.

Answer

CFO Sara Furber emphasized that a large portion of Tradeweb's growth comes from market share gains, not just market volumes, citing that 60% of swaps growth and 40% of credit growth were from non-market factors. CEO Billy Hult expressed confidence in continued volume growth in mortgages and identified interest rate swaps (due to low electronification) and treasuries (via the r8fin integration) as key areas for market share gains. Furber added emerging markets as another area of high conviction for growth.

Kenneth Worthington asked incoming CEO Naved Mahmoodzadegan to outline his priorities and vision for Moelis's next phase of growth. He also questioned whether the firm plans to accelerate its pace of investment and hiring or leverage its recent investments.

Answer

Co-President Navid Mahmoodzadegan detailed his focus on investing in large total addressable markets (TAMs), hiring 'difference-making' elite talent, and maintaining a collaborative culture with a strong internal talent pipeline. CEO Kenneth Moelis indicated the overall hiring pace would feel similar, though with aggressive acceleration in specific areas like PCA. Mahmoodzadegan added that hiring is opportunistic, driven by talent availability rather than market timing, and enabled by a strong balance sheet.

Kenneth Worthington inquired about the impact of recent market volatility on M&A activity, asking for a breakdown of resilience versus vulnerability across geographies, client types (sponsor vs. strategic), and deal sizes.

Answer

Chairman and CEO Kenneth Moelis suggested that Europe's M&A market may be more resilient as it is less directly affected by the recent policy-driven volatility. He believes the primary factor determining a deal's viability is not client type or size, but its exposure to supply chain disruptions. Moelis noted that larger companies are inherently more likely to have complex supply chains, potentially making their transactions more vulnerable to being put on hold.

Kenneth Worthington asked for guidance on how to model the compensation ratio for the beginning of 2025, noting that the first quarter figure is often a placeholder before being trued up over the year.

Answer

CFO Joe Simon advised using the full-year 2024 comp ratio as a starting point for Q1 2025. He acknowledged that the first quarter typically sees a higher ratio due to the accounting for annual equity grants and retirement-eligible accelerations, combined with seasonal revenue patterns.

Kenneth Worthington asked a high-level question about the M&A outlook for 2025, probing what factors, aside from interest rates or unforeseen events, could lead to a 'so-so' recovery rather than a great one, despite record-high pipelines.

Answer

CEO Ken Moelis identified the primary factor that could temper the M&A recovery in 2025 as the health of the LP capital market. He stated that the ability of private equity firms to successfully raise their next fund is a critical leading indicator, suggesting that a slow fundraising environment would likely result in a more mediocre M&A recovery, as it impacts firms' capacity to deploy capital for new deals.

Kenneth Worthington asked for an explanation of the factors driving the significant step-up in the Financial and Valuation Advisory (FVA) business in the fourth quarter. He also posed a bigger-picture question about whether potential policy changes under a new U.S. administration would act as a tailwind or headwind for the advisory business.

Answer

CEO Scott Adelson attributed the strong FVA performance to a convergence of factors. He highlighted the steady growth in the less-cyclical portfolio valuation business, solid performance from the opinion business, and a ramp-up in the more cyclical transaction advisory services as M&A activity begins to recover.

Kenneth Worthington of JPMorgan Chase & Co. inquired about Houlihan Lokey's position as an acquirer given its strong stock price and favorable funding environment, and also asked if client engagement differs by geography.

Answer

CEO Scott Adelson acknowledged the favorable conditions but emphasized that acquisition timing is driven more by the individuals involved than market factors, stating the firm now has 'better sonar' in its acquisition approach. Regarding geographic trends, Adelson confirmed the pickup in M&A sentiment is broad-based across all regions, with both private equity and strategic clients showing increased activity.

An associate for Kenneth Worthington asked about open interest trends in the VIX franchise following early April's volatility and any noticeable changes in investor behavior.

Answer

Global President David Howson described a dynamic process where investors used VIX calendar spreads for positioning in Q1, followed by monetization and rolling of those hedges in April. He emphasized the fluid movement of activity between VIX products and the SPX complex based on the market environment, rather than providing specific open interest figures.

On behalf of Ken Worthington at JPMorgan, Madeline Daleiden asked about the apparent reacceleration of market share loss in multi-listed options during Q3 and what actions Cboe is taking to combat this trend.

Answer

Global President David Howson explained that Cboe focuses on optimizing revenue by balancing market share with capture, noting that RPC increased 15% year-over-year. COO Chris Isaacson added that Cboe is competing aggressively on technology, highlighting a new options access architecture rolled out in August that is showing encouraging early results. He also mentioned investments in talent and data analytics to enhance competitiveness.

Kenneth Worthington asked about the European index options strategy, inquiring about its launch date, current trading volumes, and management's conviction in the 'build it and they will come' approach.

Answer

Global President Dave Howson reaffirmed that the European derivatives initiative is a long-term, patient investment to bring U.S.-style market structure to the region. He cited recent milestones, like the onboarding of Interactive Brokers and IMC, as validation of the strategy. He noted that June ADV was around 850 contracts and that the initiative is an incremental investment built upon Cboe's existing scaled infrastructure in Europe, giving them confidence to continue the course.

Kenneth Worthington asked about the potential for global expansion of the franchise, noting that Blue Owl's business has been predominantly focused on the U.S. market.

Answer

Co-CEO Marc Lipschultz clarified that while the firm raises capital globally and deploys internationally in select strategies like digital infrastructure and European real estate, they are strategically committed to the U.S. for the majority of deployment. He emphasized the safety and downside protection of being inside 'fortress USA,' stating that approximately 90% of the firm's capital is deployed domestically. He concluded that they have no ambition to expand globally simply for the sake of it, preferring to avoid unnecessary risk.

Kenneth Worthington asked for the outlook on fixed income flows, including current investor positioning and how allocations are expected to evolve over the next 12 months.

Answer

Martin Small, an executive, predicted continued strong demand for fixed income, stating that investors are generally under-allocated. He anticipates that capital from the nearly $10 trillion in cash will shift to intermediate and longer-duration fixed income to capture yield. He also noted that the 2024 equity market run-up has left many investors overallocated to stocks, necessitating a rebalancing into fixed income. Strong 2024 flows of $164 billion were driven by demand across ETFs, index, and active strategies.

Asked for details on the expected Q4 fundraising improvement and questioned the rationale behind the increase in compensation expense, asking if it was pre-paying for future performance.

Answer

The company expects a 'notable increase' in Q4 fundraising driven by logistics and contributions from their other key strategies. The higher compensation is a strategic investment in their teams to maintain morale and prepare for an anticipated increase in business volume, reflecting confidence in future growth.

Kenneth Worthington asked for the expected magnitude of the Q4 fundraising improvement and its primary drivers. He also questioned the rationale behind the step-up in compensation, asking if the company was paying in advance of performance based on expected 'green shoots'.

Answer

Vice Chairman Dean Allara provided directional guidance, stating that a notable increase in logistics fundraising would make Q4 stronger than Q3. He mentioned that all four key strategies (debt, workforce, logistics, and Newbury) are in the market and will contribute. Regarding compensation, CEO Jonathan Slager explained the increase is a strategic investment to maintain morale and ensure teams are motivated and staffed for an anticipated upswing in business volume. CFO Katherine Elsnab reinforced this, stating, 'our employees are our greatest asset and now is the time to invest in them.'

Kenneth Worthington of JPMorgan Chase & Co. inquired about the outlook for capital deployment in H2 2024, asking if market conditions are attractive enough to increase activity or if caution persists. He also asked about the Sun Belt multifamily market, specifically regarding concerns of oversupply and what Bridge is observing in its portfolio.

Answer

CEO Jonathan Slager responded that the deal pipeline is moderately picking up and expects transaction volumes to improve as the market adjusts to interest rates. Executive Chairman Robert Morse added that Bridge will remain selective. Regarding the Sun Belt, Slager noted that while new supply is peaking, strong demand has allowed for continued rent growth and stable occupancy in their portfolio.

Kenneth Worthington of JPMorgan Chase & Co. asked for details on Bridge's new wealth channel product and for a clarification on how performance fee revenue flows to the bottom line following the collapse of the profit interest structure.

Answer

Executive Chairman Robert Morse explained the new product is an accredited investor-compliant private REIT, differing from past qualified purchaser vehicles, and is in its early launch phase. CFO Katie Elsnab clarified that the profit interest collapse only impacted fee-related earnings, not performance allocations, and detailed how realized performance revenue flows to the Operating Company.

Kenneth Worthington from JPMorgan Chase & Co. asked for more details on Bridge's new wealth channel product and for a modeling clarification on how performance fee revenue flows to the bottom line following the collapse of the profit interest structure.

Answer

Executive Chairman Robert Morse explained that the new product is an accredited investor-compliant private REIT, building on their success with qualified purchasers, and is in the early launch stages. Chief Financial Officer Katie Elsnab clarified that the profit interest collapse only impacted fee-related earnings, and the calculation for performance allocations dropping to the Operating Company remains unchanged.

Asked about the recovery path for the struggling Multifamily Fund V and whether performance issues in office and multifamily are damaging the Bridge brand and future fundraising efforts.

Answer

The company is confident Multifamily Fund V will recover to be a solid performer due to expected cap rate compression, outperformance on operating income, and the ability to deploy remaining capital at attractive prices. Management believes the brand remains strong due to transparent communication and strong relative performance, which continues to attract investors and expand distribution.