William Katz

William Katz asked for clarification on the $100 billion global wealth management AUM, specifically inquiring about the growth strategy and opportunities for the non-U.S. wealth segment beyond the U.S. wealth management platform.

Answer

CEO Jay Horgen stated that AMG is experiencing significant wealth growth, primarily in alternatives, but also supports long-only businesses, including ETFs. He noted increasing interest and inflows in liquid alternatives beyond U.S. wealth, driven by market volatility and strong performance. CFO Dava Ritchea clarified that wealth access encompasses both AMG's U.S. wealth distribution platform and the direct wealth distribution channels of affiliates like Pantheon and AQR, with AMG collaborating on product development across these spaces.

William Katz asked for a broader perspective on AMG's $100 billion global wealth management AUM, specifically how the company plans to drive growth beyond the U.S. wealth management platform and the combined opportunity for wealth going forward.

Answer

CEO Jay Horgen confirmed significant growth in wealth, primarily in alternatives, but also noted support for long-only businesses and ETF initiatives. CFO Dava Ritchea explained that wealth access is driven by both AMG's U.S. wealth distribution platform and the independent channels of large affiliates like Pantheon and AQR, with AMG collaborating on product development.

William Katz questioned AMG's portfolio strategy, asking if the company might accelerate its alternatives pivot by selling traditional managers and if there is a natural limit to its share repurchase program.

Answer

CEO Jay Horgen reiterated the strategy of evolving towards a two-thirds alternatives mix but emphasized the complementary and diversifying nature of their long-only affiliates. President & COO Thomas Wojcik stressed that AMG acts as a permanent partner and does not 'trade' affiliates, with any sales being affiliate-driven. CFO Dava Ritchea explained the balanced capital allocation approach, noting ample liquidity in the stock and viewing buybacks as a flexible tool for shareholder returns.

William Katz inquired about the equities business, seeking insights into investor allocation discussions and any shifts in demand between growth versus value or international versus domestic strategies.

Answer

Thomas Wojcik, COO, acknowledged ongoing industry headwinds for equities but highlighted that market volatility is creating opportunities for AMG's high-quality, defensively-oriented managers to outperform. He also noted that a weakening U.S. dollar has provided a market-driven lift to global and international strategies, positively influencing client allocation conversations in those areas.

William Katz of TD Cowen asked if AMG's go-forward M&A strategy would focus on the NorthBridge model—minority stakes in smaller firms to be scaled—or if larger, more needle-moving transactions were also being considered.

Answer

President and CEO Jay Horgen responded that the strategy encompasses both approaches. He explained that AMG's pipeline includes mid-sized firms they can help grow significantly, leveraging their distribution capabilities, particularly in the wealth channel. Horgen also confirmed that larger new investments are in the pipeline, fitting within their typical $250 million to $750 million enterprise value range, but noted they are open to even larger opportunities if the strategic fit and value proposition are compelling.

William Katz asked for a breakdown of the expected drivers for GCM Grosvenor's 2026 fundraising, differentiating between specialized funds and separate accounts, and across retail, global wealth, and institutional channels. He also inquired about the factors enabling the company to control expenses year-over-year and the outlook for carried interest realizations.

Answer

President Jonathan Levin indicated that 2026 fundraising is expected to continue broad-based trends across global geographies, client channels, and investment verticals, with a similar mix of separate accounts and specialized funds. He highlighted strong infrastructure growth and faster growth in the individual investor market. Chairman and CEO Michael Sacks added that the 2026 pipeline is currently larger and more diverse than a year ago. CFO Pam Bentley attributed expense control to continued management focus, investments in scalability and technology (including AI), and disciplined allocation to growth areas. Michael Sacks emphasized that the gross unrealized carried interest balance is a rapidly appreciating asset, expected to increase further, and that its realization is a matter of 'when,' not 'if,' with significant underlying carry yet to be recognized.

William Katz of TD Cowen asked for details on GCMG's differentiated origination in infrastructure, the fundraising outlook for the second half of the year, and the company's strategy and opportunities regarding artificial intelligence (AI).

Answer

President Jonathan Levin explained the infrastructure platform's flexible, open-architecture model, which leverages co-investments, secondaries, and direct deals for broad origination. CEO Michael Sacks confirmed a strong second-half fundraising pipeline, likely weighted to Q4, but cautioned it would not significantly impact 2025 revenue. Both executives highlighted AI as a key focus for enhancing efficiency, investment decisions, and operational scalability across the firm.

William Katz of TD Cowen inquired about several strategic topics, including the potential of the SuMi TRUST partnership beyond its stated capital-raising target and the possibility of an increased equity stake. He also questioned the cautious deployment commentary, given the firm's programmatic SMA business, and asked for details on the Absolute Return Strategies (ARS) pipeline and pro forma share count.

Answer

Chairman and CEO Michael Sacks clarified the SuMi TRUST capital target is a floor they aim to exceed, with no current plans for an increased equity stake. He attributed cautious deployment to short-term policy uncertainty around tariffs and taxes, not a structural business change. President Jon Levin described a strong ARS pipeline driven by client demand for liquid alpha, which converts to fee-paying AUM immediately. CFO Pam Bentley noted the SuMi transaction resulted in ~2% dilution, with overall dilution remaining modest.

William Katz asked about the realized carry opportunity, focusing on the payout ratio for realizations and how it might evolve. He also requested more detail on the retail strategy, including team size, distribution channels, and the growth roadmap.

Answer

Chairman and CEO Michael Sacks explained that the firm's share of carry revenue should increase over time as newer funds, where the firm owns a larger percentage, are realized. President Jonathan Levin clarified that the full-year incentive fee compensation ratio was at the high end of the 40-50% guided range. Regarding retail, Levin mentioned a dual strategy of using partners like CION while building internal capabilities, with a current investment focus on the individual investor channel.

William Katz of TD Cowen inquired about the drivers for doubling fee-related earnings (FRE) by 2028, specifically the balance between revenue growth and margin expansion. He also asked about the strategy and investment required for the individual investor channel.

Answer

Chairman and CEO Michael Sacks outlined a plan for 10%+ private market management fee growth combined with margin expansion. President Jon Levin added that investments for the individual investor channel are already factored into their financial targets. He highlighted that GCMG has already raised over $3 billion from this channel and is launching new registered products with partners like Axxes and CION Investments to accelerate growth.

William Katz (TD Cowen) inquired about the lower-than-expected AUM for Grandview Property Partners, seeking an explanation for the initial figure. He also asked for the timeline and expected size of Grandview's upcoming Fund IV, comparing it to the previous Fund III. Additionally, Katz probed Artisan Partners' M&A strategy, asking about current opportunities, areas of greatest receptivity, and the bid-ask spread in the market.

Answer

CJ Daley (CFO) explained that Grandview's initial AUM reflected realizations and distributions from Fund I, which is in its harvesting phase. Jason Gottlieb (CEO) added that Fund III was $150 million and Fund IV is expected to be significantly larger, with a first close anticipated in early to mid-summer 2026. Regarding M&A, Gottlieb highlighted focus areas like private credit, private equity secondaries, and idiosyncratic equity opportunities, emphasizing a preference for off-market transactions like Grandview, which was a fully functioning platform requiring less internal build-out.

William Katz (TD Cowen) inquired about the lower-than-anticipated AUM for Grandview Property Partners, seeking clarification on the reasons, the timeline, and expected size of its next flagship fund (Fund IV). He also asked for an update on Artisan Partners' M&A strategy, including areas of greatest receptivity, pipeline evolution, and bid-ask spread on purchase price expectations.

Answer

CFO C.J. Daley explained Grandview's AUM was lower due to realizations and distributions from Grandview Fund I, which is in its harvesting phase. CEO Jason A. Gottlieb detailed Fund III's $150 million committed assets, expecting Fund IV to be significantly larger with a first close targeted for early to mid-summer 2026. Regarding M&A, Mr. Gottlieb emphasized a talent-driven approach focusing on private credit, private equity secondaries, and idiosyncratic equity, favoring off-market transactions like Grandview, which is a fully functioning platform.

William Katz of TD Cowen inquired about the size of new institutional mandates, whether increased interest in emerging markets was a rotation from other equities, the potential net flow impact, and the operating expense outlook.

Answer

Executive Chair Eric Colson reiterated the growing interest in EM strategies, noting that lumpy rebalancing in large global equity products makes predicting the net effect difficult. CFO C.J. Daley stated there is no planned ramp-up in operating expenses, with fixed costs expected to grow in the mid-single digits and variable costs moving with revenue. He confirmed the firm is well-positioned for growth without additional expense initiatives.

William Katz of TD Cowen requested clarification on the new disclosure about intermediated wealth relationships and asked for an outlook on the institutional business. He also questioned if there was a strategic shift towards more aggressive organic growth with Jason Gottlieb's new role.

Answer

CEO Eric Colson explained the new disclosure highlights the significant progress and leverage achieved in the intermediated wealth channel, which aligns with the firm's high-value-add model. He stated the institutional business remains a strong area, with the firm adding fixed income and alternative strategies to meet rebalancing demand. Colson confirmed a definite focus on growth, evidenced by the evolution from being 'bought' to 'sold,' increased sales headcount, and a strategic focus on building strategies that fit the wealth channel.

William Katz asked about the relationship between organic growth and fee rates, particularly how the expansion of the fixed income platform might affect sub-advisory fees. He also questioned the firm's strategy for managing capacity in the successful International Value Fund. In a follow-up, he asked about the dividend payout ratio, the status of seed capital repatriation, and the outlook for the 2025 payout rate.

Answer

Executive Eric Colson explained that the International Value Fund's capacity is actively managed to prioritize long-term performance over asset gathering. He attributed the recent fee rate dip to large, lower-fee 'foundational assets' in new fixed income strategies, not just a simple mix shift. CFO Charles Daley added that the higher dividend payout resulted from realized seed capital gains, with more redemptions expected in 2025. He projected the 2025 payout ratio would remain in the mid-90% range, consistent with prior years.

William Katz posed a conceptual question about whether Artisan needs to build out deal origination capabilities for its alternative strategies, similar to other alt-managers. He also asked for clarification on fixed income fee rate dynamics and where the abatement of subsidies for new teams appears in the financial statements.

Answer

Executive Jason Gottlieb explained that Artisan's alpha generation relies on security selection and stock picking rather than building a separate origination function. CFO Charles Daley clarified that the recent fixed income fee rate decline was due to a mix shift, with outflows from higher-fee accounts and inflows to new, large institutional mandates at 'founder fee' rates. He specified that subsidies for new teams abate within the incentive compensation line as those teams begin to earn into their revenue share.

William Katz asked about the flexibility to reduce expenses if markets are under pressure and the timeline for realizing the remaining $200 million in cost savings.

Answer

Matthew Nicholls, Co-President and CFO, stated that at flat markets, expenses are expected to be in line with 2025, with key investments offset by savings. He provided guidance for Q2 expenses and projected margin expansion into the high twenties by Q3/Q4. He also confirmed 35-40% of expenses are variable, offering flexibility if markets decline.

William Katz asked for clarification on the variable expense against net asset value, an update on Western Asset Management (WAMCO) volumes and client conversations, and the pace of opportunity for Lexington and broad growth opportunities in fiscal 2026.

Answer

Matthew Nicholls, Co-President and CFO, stated that 35-40% of expenses are variable, providing flexibility if markets decline. Jennifer Johnson, President and CEO, addressed WAMCO, noting stabilization after the DOJ's decision, stable investment team, good performance, and successful integration of corporate/sales functions, with $6.6 billion in gross sales last quarter. For alternatives, she mentioned $9.5 billion in private market inflows across diverse areas, with over 33 vehicles contributing. Lexington's flagship Fund 11 is actively fundraising, targeting a first close this year, with secondaries remaining a strong space. The overall target for alternative fundraising for the year is $25-30 billion.

William Katz inquired about the long-term economic impact of tokenization on the business model and followed up on capital deployment, particularly in light of the ongoing regulatory situation with Western Asset Management (WAMCO).

Answer

President and CEO Jennifer Johnson detailed how tokenization will fundamentally change financial infrastructure, citing their Benji fund's efficiency as proof of concept for lowering costs and disintermediating 'toll takers.' Regarding capital, Johnson noted stabilizing trends at Western Asset, while CFO & COO Matthew Nicholls confirmed no new reserves and reiterated capital priorities: dividends, organic growth, share repurchases, and debt service.

William Katz of TD Cowen sought clarification on whether the $10 billion Western Asset outflow was a net number and asked about the firm's strategic view on forming alliances as public and private markets converge.

Answer

CEO Jennifer Johnson confirmed the $10 billion was a net outflow figure for Western Asset. Regarding partnerships, she expressed high confidence in Franklin Templeton's existing stable of acquired alternative managers, stating it would be difficult for peers to replicate. She highlighted the benefits of internal collaboration, such as a product developed between Benefit Street Partners and Clarion, arguing that having managers under one umbrella provides superior insights compared to sleeve-based alliances.

William Katz asked for further clarification on the fiscal 2026 expense guidance, confirming the baseline for the $200-$250 million reduction. He also questioned what level of revenue contribution from Western Asset Management (WAMCO) is assumed in the forward-looking plan.

Answer

CFO Matthew Nicholls confirmed the expense guidance interpretation was correct. Regarding WAMCO's revenue, he stated it would not be zero but declined to provide a specific forecast. Instead, he committed to providing monthly AUM updates for Western, allowing analysts to track its progress and calculate the revenue impact using the firm's effective fee rate.

William Katz of TD Cowen asked for more detail on the potential restructuring of the economic relationship with Western Asset Management (WAMCO) and questioned if the WAMCO overhang was negatively impacting gross sales in other business segments.

Answer

President and CEO Jennifer Johnson stated that WAMCO outflows are concentrated in specific strategies and have not significantly spilled over into other Franklin Templeton products. CFO and COO Matthew Nicholls added that WAMCO is the firm's fifth or sixth largest manager by revenue, not AUM, and that its economic arrangement will be adjusted to reflect its lower revenue base. Head of Global Distribution Adam Spector noted that, excluding Western, institutional net flows more than doubled year-over-year, indicating positive momentum elsewhere.

William Katz with TD Cowen inquired about Stifel's strategic approach to capital allocation, weighing potential M&A opportunities against returning capital to shareholders, especially given current market activity. He also asked about the drivers of incremental margin, distinguishing between investment banking and wealth management contributions, after accounting for the SIA sale and European restructuring. Additionally, Mr. Katz sought an update on client cash dynamics entering the new quarter.

Answer

Chairman and CEO, Ronald J. Kruszewski, discussed Stifel's capital allocation strategy, noting the recent dividend increase and ongoing evaluation of stock buybacks versus acquisitions. He emphasized that while they observe many M&A opportunities, current market valuations often appear rich, and Stifel historically avoids acquisitions in strong markets to ensure accretive returns and client relevance. CFO, James M. Marischen, detailed that institutional margins were approximately 17% for the year, with European operations previously acting as a drag, while wealth management consistently delivers strong margins of 35-37%. Regarding client cash, Mr. Marischen reported stable sweep and smart rate balances, anticipating outflows during tax season followed by a build later in the year, and highlighted record Q4 growth in venture and other treasury deposits, projecting $750 million to $1 billion in incremental quarterly deposits.

William Katz asked about Stifel's strategic use of capital, particularly in light of M&A activity among peers, and the company's interest in acquisitions versus returning capital to investors. He also asked a two-part follow-up: first, how much of the incremental margin comes from investment banking versus wealth management, separating the impact of SIA and European footprint repositioning, and second, for an update on client cash dynamics into the new quarter.

Answer

Ronald J. Kruszewski (Chairman and CEO, Stifel Financial) noted the increased dividend and remaining capital after balance sheet growth, but expressed caution regarding richly valued M&A. He emphasized Stifel's conservative approach, focusing on deals that are accretive and build client relevance rather than just increasing size. Kruszewski estimated institutional margins around 17%, with potential for low 20s% after European optimization, and wealth management margins consistently at 35-37%. James M. Marischen (CFO, Stifel Financial) reported total sweep and Smart Rate balances were relatively steady, with expected outflows during tax season and a build later in the year. He highlighted record growth in venture and other treasury deposits in Q4, expecting $750 million-$1 billion incremental deposits quarterly.

William Katz of TD Cowen sought more detail on the specific drivers of the strong Net New Asset (NNA) growth and asked about the firm's current capital allocation priorities between share buybacks, bank growth, and M&A.

Answer

CEO Ronald Kruszewski attributed the NNA success to the strength of Stifel's overall platform and culture, which attracts and retains highly productive advisors, as validated by its J.D. Power ranking. On capital allocation, Kruszewski explained the approach is dynamic; with the stock price having recovered, the focus is shifting back toward bank growth, which is currently viewed as more accretive than buybacks.

William Katz of TD Cowen challenged the decision to maintain full-year guidance, noting that annualizing Q1 results would fall short. He also asked about the firm's broader M&A appetite and capital management strategy given market volatility.

Answer

CEO Ronald Kruszewski responded that annualizing the seasonally slower first quarter is not an accurate projection and that current guidance already accounts for market conditions, anticipating a delay, not cancellation, of activity. CFO James Marischen noted strength in the tech and industrials pipeline for the second half. Regarding M&A, Kruszewski stated that while they are always looking, high valuations make deals difficult, and return on investment remains the governing factor.

William Katz requested guidance on the normalized provision for 2025, the expected tax rate, and the primary focus for capital deployment, while also asking for color on the seasonality of client cash trends.

Answer

CFO Jim Marischen explained that the Q4 provision was elevated due to macroeconomic forecasts and is difficult to predict, but guided to a 20-21% effective tax rate for 2025. CEO Ron Kruszewski noted that capital deployment priorities include balance sheet growth, dividends, and buybacks, but the firm is still building excess capital for future opportunities. Marischen clarified that while sweep cash saw a typical January pullback, the underlying growth in commercial and venture deposits remains strong.

William Katz asked about the flat financial advisor headcount despite strong recruiting, the competitive backdrop, and the interest rate level that might cause cash to migrate from the Smart Rate product. He also asked a clarifying question on the Q4 tax rate.

Answer

CEO Ron Kruszewski explained that muted net headcount growth is due to balancing recruiting with retirements, but advisor productivity is increasing. He is optimistic about the recruiting pipeline. On cash migration, he stated that since a zero-rate environment is unlikely, the Smart Rate product will remain a distinct choice for savings cash. CFO James Marischen clarified the lower Q4 tax rate is a recurring seasonal benefit from stock compensation, magnified this year by the stock's performance.

William Katz (TD Cowen) followed up by asking about the expected timeline for the hybrid investment platform implementation costs to trend towards zero and how to think about the incremental spend on platform costs, particularly related to the equity book, looking into 2027.

Answer

Allison Dukes (CFO) confirmed that implementation costs are expected to trail off and disappear over the course of 2027, leading to additional savings from decommissioning existing systems. She noted that incremental spend on platform costs will be offset by the quantum of AUM moving onto the platforms, with further guidance to be provided as implementation progresses.

William Katz followed up on the expense outlook, specifically inquiring about the expected off-ramp for hybrid investment platform implementation costs, their trend towards zero, and the incremental spend on platform costs, particularly related to the equity book, for 2027.

Answer

CFO Allison Dukes confirmed that implementation costs are expected to trail off and disappear over the course of 2027, leading to additional savings from decommissioning existing systems. She noted that incremental spend on platform costs will continue as more AUM transitions to the hybrid platforms, with further guidance to be provided as implementation progresses.

William Katz of TD Cowen asked about the timing of the proposed QQQ structure change, the potential impact on flows from a reduced marketing spend, and how the incremental revenue would be allocated between profits and reinvestment.

Answer

President & CEO Andrew Schlossberg explained that the change is part of a broader effort to modernize fund structures, noting the QQQ's original 1999 framework. CFO L. Allison Dukes added that the marketing budget would be discretionary, estimated at $60-$100 million annually, and that the net revenue gain of approximately four basis points is expected to contribute directly to operating income without incremental expenses.

William Katz asked about Invesco's positioning for increased alternative allocations in the retirement market and whether institutional allocation dynamics are currently shifting.

Answer

CEO Andrew Schlossberg highlighted that as an investment-only manager, Invesco sees significant opportunities in the retirement space and is well-positioned with existing strategies and the new partnership. He noted that while institutional clients are actively consulting, it is too early to identify definitive shifts in asset allocation as they are currently pausing to assess the market.

William Katz pressed for details on the 'end state' of the Alpha platform, asking what percentage of assets would be migrated in 2025 and how to model normalized costs post-implementation. He also asked about the strategy to grow Private Markets and questioned if the 60% payout ratio was too low given the firm's balance sheet strength.

Answer

Chief Financial Officer Allison Dukes declined to provide a specific migration percentage for 2025 but reiterated that the vast majority of public market assets will eventually move to the platform, with cost benefits realized after 2026. President and CEO Andrew Schlossberg highlighted organic growth in Private Markets, such as the INCREF real estate debt fund, and noted a focus on partnerships. Dukes justified the payout ratio by citing the need for capital for organic growth initiatives and to maintain flexibility for a debt maturity in early 2026.

William Katz asked a big-picture question about Invesco's M&A positioning in alternatives and retail, and whether the firm can continue driving positive operating leverage given the mix shift towards lower-fee products.

Answer

President and CEO Andrew Schlossberg emphasized that the primary focus is on organic growth, particularly by extending private market capabilities to wealth management channels, though they remain open to inorganic opportunities. CFO Allison Dukes and Andrew Schlossberg affirmed that positive operating leverage is achievable through broad-based revenue growth and disciplined expense management, independent of fee rate mix.

William Katz of TD Cowen inquired about the timing and financial implications of the proposed QQQ structure change, including the rationale for the timing, the impact of reduced marketing spend on flows, and how the anticipated four basis point revenue benefit would affect margins and reinvestment.

Answer

President, CEO & Director Andrew Schlossberg explained the timing as part of a broader effort to modernize structures and enhance client and shareholder outcomes. Senior MD & CFO L. Allison Dukes addressed the financials, stating the marketing budget is discretionary but anticipated at $60-100M annually. She confirmed the net benefit of approximately four basis points is expected to contribute directly to net revenue and operating income without incremental operating expenses.

William Katz questioned the wealth management opportunity, addressing concerns about potential rotation risk as demand for yield might decrease with falling rates, and sought more details on Apollo's roadmap for incremental growth in 2026.

Answer

CEO Marc Rowan explained that the rotation into private credit is fundamentally a shift from equity, driven by investors seeking long-run equity returns in first-lien debt amidst high prices and geopolitical risks. President Jim Zelter added that while direct lending spreads are compressed, the secular demand for evergreen compounding retirement income globally remains strong, overwhelming the tactical market shifts.

William Katz from TD Cowen asked about the drivers behind the recent step-function increase in origination volume and platform throughput, questioning what had changed in the last few quarters.

Answer

President Jim Zelter attributed the acceleration to the 'power of the ecosystem.' He explained that by offering an integrated 'toolbox' of financing solutions—rather than single products—Apollo has become a more compelling partner for corporates and sponsors. He cited unified global origination leadership and the successful strategic pivot of the Atlas platform as key contributing factors.

William Katz from TD Cowen posed questions about Apollo's strategy regarding partnerships with traditional asset managers, similar to those announced by peers, and its appetite for large-scale M&A.

Answer

CEO Marc Rowan confirmed that partnerships with traditional asset managers are a key focus, highlighting existing deals with State Street and Lord Abbett. He believes the opportunity is vast and that the primary constraint for the industry will be the ability to originate high-quality private assets to meet demand, not the number of partnerships formed. He stressed that Apollo is focused on scaling its origination capabilities to meet this future demand.

William Katz asked about Apollo's ability to expand its presence in retirement accounts without new legislation and inquired about the regulatory appetite in Washington D.C. for changes that could facilitate this.

Answer

CEO Marc Rowan explained that the current retirement system is inefficiently allocated and that private assets offer superior returns. He believes progress is possible even without new laws, suggesting that regulatory guidance clarifying the fiduciary goal as 'best net returns' rather than 'lowest fees' would be a significant catalyst. He also noted that broader regulatory trends, including addressing offshore capital flight to jurisdictions like the Cayman Islands, are favorable for Apollo's business model.

William Katz asked about the retail platform, seeking insight into how Apollo sees the opportunity evolving and where the firm stands in its expense cycle for building out its wealth management footprint.

Answer

CEO Marc Rowan outlined a pyramid strategy targeting family offices, high-net-worth, and mass affluent channels with a focus on yield-oriented, evergreen products. He asserted that the costs for this build-out were already contemplated in forecasts and are not a surprise. Co-President James Zelter added that the focus is shifting from a product dialogue to a more comprehensive portfolio solutions dialogue.

William Katz of TD Cowen asked about Marex's capital management priorities, specifically the potential for share buybacks, and requested quantification of the growth pipeline and margins for the Prime services business.

Answer

Group CEO Ian Lowitt acknowledged that with a larger public float, share buybacks are now a consideration, though value-accretive M&A remains a priority. Chief Strategist Paolo Tonucci detailed strong Prime client growth (~150 new accounts in H1) and projected continued low-double-digit growth. He noted Prime's margin profile is comparable to the high-margin Clearing business.

William Katz of TD Cowen asked for an update on the progress of introducing the CopyTrader feature in the U.S. and for guidance on the outlook for marketing spend.

Answer

CFO Meron Shani stated that marketing spend is typically managed around 20% of net contribution. CEO Yoni Assia followed up by confirming that eToro plans to launch CopyTrader for U.S. customers for both crypto and stocks later in the current year.

William Katz of TD Cowen asked for an update on the progress of introducing CopyTrader to the U.S. market and inquired about the future strategy for marketing spend, whether it would be managed in absolute terms or as a percentage of net contribution.

Answer

CFO Meron Shani clarified that marketing spend is managed as a percentage of net contribution, typically around the 20% mark. CEO Yoni Assia added that following the recent expansion to 100 crypto assets for U.S. users, the company plans to launch CopyTrader for both crypto and stocks in the U.S. later this year.

William Katz asked about the expected deployment pace for the $30 billion of AUM not yet paying fees and the potential incremental margin on the associated revenue.

Answer

CEO Jon Winkelried stated that deployment pipelines have been increasing and he expects the pace to accelerate in the second half of the year, driven by bespoke opportunities. CFO Jack Weingart added that the incremental margin on the revenue would vary by asset class.

William Katz of TD Cowen asked for details on the drivers behind the upgraded FRE growth guidance and inquired if Carlyle would consider providing a more intermediate-term outlook, such as for 2026.

Answer

CFO John Redett attributed the revised outlook to strong momentum across the platform, particularly organic growth in Alpinvest, robust capital markets revenue, and expansion in the wealth channel. CEO Harvey Schwartz acknowledged the feedback requesting longer-term metrics but did not commit to a multi-year forecast, citing the difficulty of long-range predictions.

William (Bill) Katz of TD Cowen inquired about the drivers for the upgraded full-year FRE growth guidance and asked if Carlyle would consider providing longer-term financial targets beyond the current annual outlook.

Answer

CEO Harvey Schwartz acknowledged stakeholder feedback requesting longer-term guidance but did not commit to providing it, noting the difficulty of five-year predictions. CFO John Redett attributed the upgraded FRE outlook to broad-based momentum, especially exceptional organic growth in Alpinvest, strong capital markets revenue, and growth in the wealth business. Redett noted there could be further upside if markets improve.

William Katz asked for details on the drivers of the strong transaction fee performance, the role of the capital markets business, and the expected growth trajectory for this revenue line.

Answer

CEO Harvey Schwartz explained that the growth is a result of a strategic initiative launched two years ago to monetize firm-wide activity without taking balance sheet risk. He stated the fees are activity-driven, stemming from deployment and portfolio company financing across private equity, credit, and infrastructure. He sees a multiyear growth path, noting the $150 million generated in the last two quarters alone surpassed any previous full year.

William Katz followed up on the fee-paying AUM dynamics, asking for a clearer explanation of why the $6 billion decline related to the Fortitude mark-to-market adjustment would not have a meaningful economic impact.

Answer

CFO John Redett reiterated that while Carlyle's fees are based on the level of assets, the actual financial impact of this specific AUM decline on 2025 earnings is 'literally a couple of million dollars,' which he characterized as immaterial to the firm's overall results.

William Katz inquired about the future trajectory of the FRE margin, asking how much more improvement is possible. He also asked about the interplay between fee-paying AUM growth and the base management fee rate amid asset realizations.

Answer

CFO John Redett expressed satisfaction with the current 47% FRE margin, a 1,000 basis point year-over-year improvement. He stated that the management team's focus is now shifting from efficiency gains to driving FRE dollar growth through organic, top-line expansion. He expects the margin will continue to improve over time as the business grows. CEO Harvey Schwartz praised the team for the foundational work on compensation and expenses that enabled this progress.

William Katz asked about the potential inclusion of alternative investments in 401(k) plans, Ares's current conversations with potential partners, and the overall opportunity set for the firm in this area.

Answer

CEO Michael Arougheti expressed strong belief in the trend but tempered expectations, noting that regulatory steps are still needed. He confirmed Ares is prepared with products and is in discussions with retirement services partners, but stressed that the firm's primary focus remains on quality deployment and investment opportunities, not just AUM growth from new channels.

William Katz asked for an update on the potential inclusion of alternative investments in 401(k) plans, inquiring about Ares's conversations with potential partners and the perceived opportunity set.

Answer

Michael Arougheti, Co-Founder, CEO & Director, affirmed that Ares is a strong proponent of democratizing alternatives and feels closer than ever to 401(k) inclusion. However, he cautioned that the process will likely be gradual, pending regulatory rulemaking and adoption by plan sponsors. Arougheti confirmed that Ares has a product ready and is actively engaging with retirement services partners, while emphasizing a continued focus on quality deployment over simple AUM growth.

William Katz inquired about the incremental growth drivers for the Wealth Management business, from both a product and distribution perspective, and asked how inflows performed during the market turbulence in April.

Answer

CEO Michael Arougheti described the wealth channel as a 'real bright spot,' citing record Q1 inflows of $5 billion. He identified growth drivers as geographic expansion into Europe and Asia and the launch of new products, including a tax-advantaged infrastructure fund and a sports media and entertainment offering. He confirmed that April inflows remained strong at $1.2 billion and that redemptions did not increase during the volatility, suggesting the low-volatility nature of private assets is proving attractive to investors.

William Katz asked if the T. Rowe/OHA partnership offers a new path to the mass affluent market without fee compromise and questioned how accelerating European waterfall income might impact the FRE margin outlook via compensation flexibility.

Answer

CEO Michael Arougheti said it's too early to tell on the partnership's market impact, emphasizing that any product must be client-led and differentiated. CFO Jarrod Phillips explained that while European waterfall income provides compensation flexibility over time, it would likely take a year or two of established performance to materially impact the FRE structure.

William Katz asked for details on the drivers behind the mid-$80 billion gross inflow guidance for the year and the fundraising building blocks for 2025. He also inquired about the wealth management channel, asking if distribution economics are deteriorating and if Ares is emerging as a disproportionate winner.

Answer

CFO Jarrod Phillips explained that future fundraising will be broad-based across approximately 35 funds, including strategies in special opportunities, climate infrastructure, and secondaries, supported by a higher fundraising floor from the retail channel. CEO Michael Arougheti added that while market share in wealth management is concentrating among top players, Ares is a leader due to its investments in product, distribution, and brand, and is not seeing a deterioration in economics.

William Katz from TD Cowen requested guidance on the exit pace for expenses, specifically for compensation and the 'other expense' line, considering the firm's currency hedging. He also asked about capital return priorities, contrasting the recent large share buyback with the potential for more significant M&A to accelerate growth.

Answer

CFO Thomas Donahue projected that Q3 compensation would be up by a couple of million dollars and that distribution expenses would rise with AUM. He also guided the 'other expense' line to be around $6.5 million, excluding unpredictable items like FX. CEO J. Christopher Donahue reiterated that acquisitions, particularly in private markets, remain the highest and best use of cash. He stated that while the company is actively pursuing deals, it will continue to return capital to shareholders via buybacks until an acquisition is ready to be announced.

William Katz from TD Cowen asked for guidance on the exit run-rate for expenses, breaking down compensation and non-comp lines, given recent currency hedging. He also questioned the company's capital return priorities, specifically M&A versus share buybacks, in the context of industry consolidation.

Answer

Thomas Donahue, CFO, projected that compensation would likely increase by a couple of million dollars in the next quarter, with distribution costs also rising due to asset growth. He guided the 'other' expense line, excluding unpredictable FX and one-time items, to be around $6.5 million. J. Christopher Donahue, Chairman, President, & CEO, reiterated that acquisitions, particularly in private markets, remain the 'highest and best use of cash' and that the company is actively exploring opportunities, though he did not provide a specific timeline.

William Katz asked about the firm's capital allocation priorities following a significant ramp in share repurchases, the M&A pipeline for the alternatives platform, and current institutional investor sentiment and allocation trends.

Answer

CFO Thomas Donahue stated the accelerated Q1 buybacks were driven by the stock's valuation and that they will remain active. On M&A, he noted a pipeline of various-sized deals. CEO John Donahue highlighted a strong institutional pipeline of $3.9 billion yet to fund, with significant interest in MDT strategies, private equity, and direct lending, particularly from U.S. and Asian clients.

William Katz asked for a big-picture view on money markets, questioning when sideline cash might robustly migrate to risk assets and how the retail versus institutional dynamic would play out. He also questioned Saker Nusseibeh about the outlook for the alternatives business, given recent AUM trends and future distributions.

Answer

CIO for Money Markets, Deborah Cunningham, explained that the retail shift from deposits to money funds will continue, while sideline cash (10-15% of recent inflows) is beginning to move into risk assets. She expects institutional flows to increase as the Fed cuts rates. Executive Raymond Hanley quantified the current mix as 60% institutional and 40% retail. Saker Nusseibeh, CEO of Federated Hermes Limited, addressed the alternatives question by noting that clients are re-upping in new fund vintages at higher levels and that new product innovation will drive continued growth.

William Katz of TD Cowen asked for two points of clarification: the split of cash within Commonwealth's AUM and whether aggressive competition from private equity firms is inflating deal multiples for LPL's Liquidity & Succession acquisitions.

Answer

President & CFO Matt Audette stated that cash as a percentage of AUM at Commonwealth is slightly below LPL's, in the 1.5% to 2.0% range. On the second point, he responded with a definitive 'no,' asserting that competition has not impacted the multiples LPL pays for Liquidity & Succession deals, attributing this to the strength of LPL's unique value proposition for selling advisors.

William Katz from TD Cowen asked about the strategic response from smaller competitors to the Commonwealth transaction and whether the combined entity could unlock more strategic consolidation opportunities.

Answer

Executive Richard Steinmeier expressed confidence that few credible alternatives exist for Commonwealth advisers, given LPL's commitment to preserving the Commonwealth brand, service, and culture while adding its scale and technology. He argued that the seamless, non-repapering transition makes the combined offering difficult for any competitor, small or large, to match. Steinmeier concluded that while unique niches may exist, it is becoming increasingly challenging for firms without scale to compete effectively against LPL's flexible, yet powerful, model.

William Katz from TD Cowen inquired about LPL's strategy for managing its Insured Cash Account (ICA) portfolio, specifically whether the 50% to 75% fixed-rate target or duration might be adjusted given the 'higher for longer' interest rate outlook.

Answer

Executive Matthew Audette stated that the firm's strategy will not change, and they will continue to target the 50% to 75% fixed-rate mix. He emphasized that the goal is to maintain a steady, rolling 3-to-5-year portfolio rather than trying to time interest rate movements, and they will likely move back toward the midpoint of the range in Q1.

William Katz of TD Cowen asked for an update on direct lending activity, including trends during the quarter, exit velocity, the outlook for Q3, and current spreads on incremental capital deployment.

Answer

Co-CEO Marc Lipschultz described the direct lending environment as 'extremely good' with exceptional credit quality and portfolio company EBITDA growth over 10%. While Q2 originations were moderate, he noted a 'meaningful pickup in activity' in recent weeks. He expressed cautious optimism that a more stable economic backdrop is beginning to unlock sponsor dry powder, potentially signaling a recovery in market volume.

William Katz asked for details on the expected acceleration of the institutional business later in the year and an explanation for the sequential drop in transaction fees despite durable origination activity.

Answer

Chief Financial Officer Alan Kirshenbaum explained that transaction fees naturally fluctuate and that institutional fundraising is expected to strengthen in the latter half of the year due to the timing of flagship fund launches like GP Stakes VI and Real Estate VII. Co-CEO Marc Lipschultz added that gross originations, which drive transaction fees, were lower, and emphasized that these fees are a very small, unpredictable part of their business. He also noted strong momentum in winning new institutional LPs and penetrating new geographies like the Middle East.

William Katz asked for clarification on the drivers behind the implied 2025 FRE margin of ~57-58% and whether this reflects a strategic focus on top-line growth over margin expansion.

Answer

Chief Financial Officer Alan Kirshenbaum confirmed the 57-58% FRE margin guidance for 2025 (gross of NCI), down from ~59% in 2024. He explained that while the firm is focused on margins and sees a path back to 60%, it prioritizes overall earnings growth and will execute accretive, lower-margin acquisitions like Atalaya. Co-CEO Marc Lipschultz added that their job is to make short-term trade-offs to drive exceptional long-term DE growth.

William Katz from TD Cowen addressed the pushback that private credit scalability may dilute returns and asked for an update on KKR's origination platform and its ability to generate differentiated alpha.

Answer

Craig Larson, Partner & Head of IR, and Scott Nuttall, Co-CEO, responded. Larson highlighted KKR's 35 origination platforms across ABF and real estate. Nuttall drew a parallel to private equity 20 years ago, arguing that scale, moving upmarket, and building adjacent capabilities are key to continued growth. He noted that KKR's 7,500-person sourcing network and new platform additions like HCR provide a significant and scalable origination engine, countering the idea that returns will diminish.

William Katz asked about the greatest opportunities within wealth management by product, geography, or channel, and the corresponding impact on the firm's expense line.

Answer

Executive Craig Larson highlighted the growth in K-Series products, now at $18 billion AUM. Co-CEO Scott Nuttall emphasized the significant opportunity with the Capital Group partnership targeting the mass affluent. CFO Robert Lewin noted that while distribution costs increase 'other operating expenses,' the ROI is clear, and the firm still expects margin expansion as revenue outpaces expense growth.

William Katz of TD Cowen asked about the Capital Markets business, specifically the revenue split between deployment and exit activity, and whether the high FRE margin implies that incremental revenue drops to the bottom line.

Answer

Chief Financial Officer Rob Lewin explained that deployment is the largest driver of Capital Markets revenue. On margins, he stated that while the mid-60% FRE margin is a sustainable base, it is not a cap. He expects revenue to grow faster than operating complexity, leading to additional operating leverage and margin expansion over time, as demonstrated by the flow-through in the strong Q3.

William Katz of TD Cowen asked for clarification on the compensation expense guidance, its variability, and the potential for 'catch-up' spending. He also inquired about July net flow trends and institutional client conversations.

Answer

EVP & CFO Michael Angerthal confirmed the employment expense guidance of 49-51% of revenues and does not foresee catch-up spending, expecting incremental margins of 50-55%. President & CEO George Aylward noted that compensation is highly variable and that the positive flow momentum from June continued into July, particularly for fixed income and ETFs. He added that institutional inflows were seen in emerging market debt and REITs.

William Katz of TD Cowen asked for details on the soft-closed Separately Managed Account (SMA) vehicle, including its size and impact on flows, and whether other strategies face capacity constraints. He also questioned the company's thinking on changing its reporting of the deferred tax asset to better reflect its value in adjusted EPS.

Answer

President and CEO George Aylward and CFO Michael Angerthal addressed the SMA question, stating the soft-closure was a prudent measure to protect a successful strategy's future returns. They emphasized that significant capacity remains in other strategies, particularly mid-cap, which is expected to be a future growth contributor. On the tax asset, Mr. Aylward clarified it is a reporting consideration, not a monetization issue, as the economic benefit is already being realized. He quantified the NPV at approximately $16 per share and stated the company continues to evaluate its reporting for maximum transparency.

William Katz asked for details on the affiliate ownership step-up and its impact on NCI, questioned if the M&A 'arms race' changes their strategic urgency, and inquired about the gating issues for improving institutional flows.

Answer

CFO Michael Angerthal explained the affiliate step-up was a pre-planned, multi-year increase in ownership of a majority-owned affiliate, raising their stake to about 80% and consequently lowering future NCI. President and CEO George Aylward addressed M&A by acknowledging the trend of converging public and private markets, stating they are active in those discussions. Regarding institutional flows, Aylward noted that recent outflows were primarily from client rebalancing after strong performance, not mandate terminations, and that the new business pipeline remains strong despite being competitive and lumpy.

William Katz from TD Cowen inquired about the potential structural impact of accelerating advisor growth on the compensation ratio and client cash levels. He also requested an update on the M&A environment and the firm's strategic focus.

Answer

CEO Paul Shoukry stated that due to the firm's large scale, any impact from new advisors on firm-wide ratios would be a gradual 'glide path' rather than a sudden shift. On M&A, he reiterated the firm's disciplined three-part criteria (cultural fit, strategic fit, valuation) and noted the primary focus remains on the Private Client Group, though opportunities are evaluated across all businesses.

William Katz of TD Cowen inquired about the potential structural impact of accelerating advisor growth on the compensation ratio and client cash levels, and also requested an update on the M&A environment.

Answer

CEO Paul Shoukry stated that due to the firm's large scale, any impact from new advisors on firm-wide ratios would be a gradual 'glide path.' On M&A, he reiterated the firm's disciplined three-part criteria (cultural fit, strategic fit, valuation) and noted that while the Private Client Group is a primary focus, the firm remains active in seeking opportunities across all its businesses.

William Katz of TD Cowen questioned the interest-earning asset dynamics, asking for the intermediate-term outlook for growth. He also inquired about the nature of M&A deals the firm recently passed on and whether the 10% Tier 1 leverage ratio remains the appropriate target.

Answer

CFO Jonathan Oorlog explained that maturing securities are being redeployed to fund loan growth, a trend he expects to continue. CEO Paul Shoukry confirmed the 10% Tier 1 leverage ratio is still the target, which is a key reason for increasing share buybacks, but declined to detail the specific M&A opportunities.

William Katz asked about the interest-earning asset dynamic, the intermediate-term outlook for growth, the nature of recently evaluated M&A deals, and whether the 10% Tier 1 leverage ratio remains the target.

Answer

CFO Jonathan Oorlog explained that maturing securities were redeployed to fund loan growth, a trend expected to continue. CEO Paul Shoukry added that SBL growth is ongoing while corporate loan demand is tepid. Shoukry confirmed the 10% Tier 1 leverage ratio is still the target and stated the firm would be more consistent with buybacks to manage capital while preserving capacity for growth.

William Katz asked for clarification on the 'front-footed' M&A commentary, seeking to understand the firm's priorities by business segment or geography. He also questioned the flexibility within the $2.1 billion non-compensation expense guidance and inquired about a sustainable operating margin for the business.

Answer

President Paul Shoukry identified the Private Client Group as the top M&A priority, followed by M&A advisory firms and asset managers with strong organic growth profiles. Chair and CEO Paul Reilly added that geographically, the Northeast and West Coast offer significant market share opportunities, with Canada and the U.K. also being of interest. Regarding expenses, Shoukry explained that much of the non-comp expense growth is tied to revenue growth (e.g., sub-advisory fees, FDIC premiums), so while there is flex, it's not desirable. He affirmed the firm's commitment to long-term investment over short-term expense management.

William Katz of TD Cowen questioned the operating margin outlook, given the firm is ahead of its 2027 target. He also asked about the private wealth organic growth reporting methodology and the scalability and competitive landscape for hiring financial advisors. In a follow-up, he inquired about the potential impact of growing alternative assets on the compensation ratio.

Answer

CFO Tom Simeone affirmed the 33% operating margin guidance for 2025 but deferred on 2026 projections. Onur Erzan, Head of Global Client Group, explained that reporting net new assets for private wealth provides a comparable metric to peers and confirmed the platform can scale significantly. CEO Seth Bernstein and CFO Tom Simeone addressed the compensation question, stating that while performance fee rev-share is favorable to teams, it's not a large part of the business, and they see leverage in private alts as they scale.

William Katz asked for clarification on the expense outlook, seeking to understand if Q1's lower non-comp spend was temporary and what flexibility exists. He also inquired about the current and potential future allocation to alternatives within Private Wealth and the key drivers of third-party alternatives growth.

Answer

CFO Thomas Simeone confirmed the full-year non-comp expense guide of $600M-$625M remains, noting Q1 was low but that they have 'levers to pull' if the revenue environment deteriorates. Onur Erzan, Head of Global Client Group, stated that Private Wealth's alt allocation is around 10% with a target of 20%+ for UHNW clients. He identified the insurance channel and retail interval funds as key third-party growth drivers, particularly in private credit and asset-based finance.

William Katz questioned the rationale for not converting to a C-Corp, asked about the potential for selling the firm, inquired about recent net flow trends, and asked about M&A focus and cost flexibility.

Answer

CFO Jacqueline Marks noted a C-Corp conversion would require a significant multiple expansion to offset the tax impact. CEO Seth Bernstein affirmed no interest in selling the business, citing the strength of the Equitable partnership. Onur Erzan, Head of Global Client Group, described a positive start to the year in flows, particularly in U.S. retail and Japan. Mr. Bernstein added that M&A focus is on Alts and Wealth Management. Ms. Marks confirmed they have levers to control costs if markets decline but are currently focused on growth investments.

William Katz asked for insights into the outlook for the Fee-Related Earnings (FRE) margin and the expected payout rate on performance fees during the anticipated realization upcycle.

Answer

Vice Chairman & CFO Michael Chae stated that while the firm is tracking favorably against its initial full-year margin guidance, the second half is subject to variables like fee-related performance revenues and seasonally higher operating expenses. He reiterated a low-double-digit OpEx growth view for 2025. Regarding performance fees, Chae expects broad stability in compensation ratios, noting that the mix of funds realizing gains can cause quarterly variations. He also mentioned the ability to manage the mix of compensation, which could directionally benefit FRE margins.

William Katz asked about the growth opportunities in the global wealth management business, specifically requesting more details on the new strategic alliance with Wellington and Vanguard.

Answer

President and COO Jonathan Gray described the wealth channel as a very large growth opportunity, highlighting Blackstone's early-mover advantage and extensive distribution team. He explained the alliance with Wellington and Vanguard aims to create simplified, holistic public-private investment solutions for individuals, leveraging the partners' leadership in liquid assets and Blackstone's leadership in private markets. He did not comment on specific distributor platforms.

William Katz inquired about the evolution of the retirement and defined contribution opportunity, particularly regarding conversations with regulators amid a potentially more favorable backdrop.

Answer

Jonathan Gray, President & COO, argued that the current 401(k) system's focus on low fees over performance is a disadvantage for most workers. He believes it is logical for private assets to eventually be included in retirement vehicles like target-date funds. Gray asserted that should regulations change, Blackstone is "uniquely positioned" to capitalize on the opportunity due to its brand, performance, and product breadth, viewing it as a matter of "when, not if."

William Katz asked about the evolution of the private wealth platform, considering rising competition and shifting investor demand due to changing interest rate expectations.

Answer

Chairman & CEO Stephen Schwarzman highlighted Blackstone's significant first-mover advantage, scale, brand, and performance as durable competitive strengths. President & COO Jonathan Gray added that as base rates fall, the relative attractiveness of their products compared to cash will increase, which should accelerate momentum in the private wealth channel, a market that remains highly underpenetrated.

William Katz from TD Cowen asked for Nasdaq's latest thinking on leveraging the digital asset ecosystem, including stablecoins and tokenization, and where the greatest opportunities for volume and platform efficiency lie.

Answer

Chair & CEO Adena Friedman explained that stablecoins could enhance the efficiency of payment rails and collateral movement, benefiting their Calypso business. For the broader crypto space, she noted that market structure is still evolving and Nasdaq is engaged with regulators to promote an 'investor-first' framework, viewing institutionalization as a positive long-term trend.

William Katz asked a two-part question regarding the implications of the SEC's new tick size rule and the factors that would determine the high versus low end of the Q4 non-GAAP expense guidance.

Answer

CEO Adena Friedman stated the tick rule will not have a material financial impact but expressed concern that the deep cut to access fees could harm lit market liquidity. CFO Sarah Youngwood explained the expense guidance range is driven by variability in revenue-related spending and the timing of marketing and other investments.

William Katz of TD Cowen asked about the outlook for the average rate per contract (RPC), considering the competing effects of rising international volumes and growing retail activity.

Answer

President & CFO Lynne Fitzpatrick acknowledged the two competing factors: higher-RPC international activity versus lower-RPC retail activity in micro contracts. She stated that CME's primary focus is on growing overall revenue and providing trading opportunities for clients, rather than specifically managing or targeting RPC growth.

William Katz from TD Cowen asked about the outlook for the average rate per contract (RPC), considering the competing effects of growing international business and rising retail participation.

Answer

Lynne Fitzpatrick, President & CFO, acknowledged the two opposing trends: higher-RPC international volume and lower-RPC retail volume from micro contracts. She clarified that the company's primary focus is on growing overall revenue and providing trading opportunities, not on managing the RPC metric itself.

William Katz of TD Cowen asked for an analysis of the drivers behind the strong growth in CME's non-U.S. business, specifically regarding new user onboarding versus deeper penetration of the existing user base.

Answer

Julie Winkler, Chief Commercial Officer, detailed that the record 8.8 million ADV in Q1 was driven by double-digit growth across all asset classes and every international customer segment, led by commercial participants. She highlighted record non-U.S. options growth and strong activity from the buy-side community, particularly quant funds in APAC.

William Katz asked about the drivers of the expected Q4 expense increase and the forward-looking philosophy on the company's high operating margin. He also inquired about the typical volume uplift from retail clients after they have been on the platform for some time.

Answer

CFO Lynne Fitzpatrick explained the Q4 expense increase is seasonal and consistent with prior years, driven by large marketing events and support for new retail partners. She stated that CME does not target a specific margin level but focuses on driving earnings growth. Chief Commercial Officer Julie Winkler addressed the retail question by stating it's difficult to generalize volume uplift due to the diverse models of their distribution partners; the focus is on education and leveraging CME's broad product suite to match trader interest with market volatility.

William Katz from TD Cowen inquired about BlackRock's capital return strategy, including the interplay between dividends and buybacks, given strong free cash flow and a more prudent stance on large-scale M&A.

Answer

CFO Martin S. Small reiterated the capital management policy: invest first in the business, then return excess cash. He confirmed the plan to repurchase at least $375 million in shares per quarter for the rest of 2025. For dividends, he reaffirmed the 40-50% payout ratio target, noting it will be adjusted for non-cash amortization from acquisitions, and projected high-single to low-double-digit dividend growth aligned with the firm's 2030 strategy.

William Katz from TD Cowen inquired about BlackRock's capital return strategy, specifically the interplay between dividends and share buybacks, given the recent M&A consolidation and significant free cash flow generation.

Answer

CFO Martin S. Small reiterated the firm's capital management strategy: first invest in the business, then return excess cash to shareholders. He confirmed the plan to repurchase at least $375 million in shares per quarter for the rest of 2025, noting buybacks are an 'output' of the strategy. For dividends, the firm targets a 40-50% payout ratio of GAAP net income and expects the 2030 strategy to drive high-single to low-double-digit dividend growth.

William Katz asked how BlackRock's capital return philosophy might evolve as its earnings become more diversified and durable, specifically regarding the payout ratio and the mix of dividends versus buybacks.

Answer

Martin Small, an executive, reiterated that BlackRock's capital allocation strategy remains consistent. The first priority is investing in the business to drive organic growth, followed by a commitment to the dividend. Share repurchases are treated as an output to return excess cash after other priorities are met. He noted that the size of future buybacks depends on factors like cash flow and investment needs, highlighting the $4.7 billion returned to shareholders in 2024 as evidence of their commitment to being an attractive compounder.

William Katz asked for an expansion on the statement about 'revolutionizing the wealth management opportunity,' particularly regarding the potential of whole portfolio solutions and the go-to-market strategy.

Answer

Executive Martin Small highlighted the strategy to integrate private markets into their $300B+ model portfolio business. CEO Laurence Fink added a broader vision, comparing the potential to the rise of ETFs. He stressed that the acquisition of Preqin is key, as enhanced data and analytics will be crucial to making private markets more transparent and accessible for wealth clients.

William Katz of TD Cowen inquired about the primary growth opportunities from the Guardian Life Insurance Company partnership, including its distribution platform, and asked for an update on the M&A environment and the bid-ask spread for potential deals.

Answer

CEO Ali Dibadj expressed excitement for the Guardian partnership, noting it positions Janus Henderson as a top 15 unaffiliated insurance asset manager with over $100 billion in global insurance AUM. He highlighted growth vectors including amplifying relationships with other insurers, leveraging the $400 million seed capital commitment, and co-developing solutions for Guardian's Park Avenue Securities broker-dealer. On M&A, Dibadj described the environment as 'very, very active' and noted that while the bid-ask spread has narrowed, there has not been 'capitulation' from potential sellers.

William Katz asked for a deeper analysis of the drivers behind the accelerating growth in the intermediary and institutional channels. He also inquired about the M&A outlook and the potential for Janus Henderson to increase its ownership stake in the Privacore joint venture.

Answer

CEO Ali Dibadj detailed a multi-pronged strategy for intermediary success, including talent management, data-driven sales, marketing, and performance-linked compensation. For institutional, he noted a growing pipeline and positive consultant ratings. On M&A, he described the pipeline as robust but stressed a disciplined, culture-focused approach. CFO Roger Thompson added that for Privacore, the firm is actively exploring strategic options for its 49% stake, which could include extending the window to acquire the remaining 51%.

William Katz asked for details on the drivers behind the positive Q4 performance fee guidance and inquired about the firm's capital deployment priorities, given the increased share buyback authorization.

Answer

Executive Ali Dibadj attributed the expected Q4 performance fee strength to both significant improvement in U.S. mutual fund fees and strong performance in hedge funds. CFO Roger Thompson stated the board authorized an additional $50 million for share repurchases, which they expect to execute by the next AGM, while maintaining flexibility for strategic M&A or seed capital needs.

William Katz asked about the new strategic partnership with Ares and Aspida, the broader opportunity in the insurance channel, and how it connects to T. Rowe Price's strategy for alternatives in retirement products and potential M&A.

Answer

CEO Robert Sharps expressed excitement about the Aspida partnership, noting it will help refine their insurance asset management offering and could lead to co-developed products. He emphasized that insurance is a key growth area with momentum building in 2024. Head of Global Investments Eric Veiel added that while there are hurdles, the firm is deeply researching the use of alternatives like private credit in defined contribution plans to improve client outcomes.

William Katz from TD Cowen asked for a preliminary view on 2025 core expense growth, given the focus on investment spending. He also noted a recent dip in the EBITDA margin and questioned if the business was approaching a peak.

Answer

CFO Jill Griebenow deferred specific 2025 guidance but stressed the company's focus on disciplined expense management and margin stabilization. She contextualized the Q3 expense figure, noting it was impacted by a tough prior-year comparison and that the year-to-date expense growth rate is significantly lower than the previous year. She reiterated that managing operating expenses remains a key component of their margin strategy.

William Katz of TD Cowen sought clarification on the potential incremental impact on fee per million from duration and yield curve changes. He also asked about the competitive threat from the MarketAxess/ICE partnership and the long-term impact of the growing private credit market.

Answer

CFO Sara Furber confirmed the fee per million calculations were heard correctly. CEO Billy Hult addressed the competitive landscape, stating he doesn't have a major comment on the MarketAxess/ICE deal and feels confident in Tradeweb's own client focus and retail business advantages. Regarding private credit, Hult noted they are closely watching its convergence with public markets, viewing it as an opportunity that aligns with Tradeweb's expertise in electronifying new markets.

William Katz of TD Cowen asked for a framework on the fundraising opportunity for Bridge's various vehicles and sought more specific details on the Newbury secondaries platform's traction. He also requested an update on the retail accredited investor strategy, including AUM, product offerings, and distribution progress.

Answer

Executive Chairman Robert Morse highlighted fundraising momentum in the Workforce & Affordable Housing and Debt strategies. For Newbury, he acknowledged a slower start but noted a first close was complete and momentum is building through re-ups and new interest from Bridge's client base. On the retail front, he discussed the single triple-net lease product and the expansion of distribution to RIAs and independent broker-dealers, citing over 1,200 retail investor dialogues this year.

William Katz from TD Cowen inquired about the potential size of the fundraising opportunity for the '4 horsemen' strategies and whether headwinds were macro-related or due to brand perception from the office fund issues. He also asked what actions management is taking to drive shareholder value beyond waiting for a market recovery.

Answer

Executive Chairman Robert Morse stated the macro environment is improving and investor interest is strong, emphasizing that the financial impact from the Office Fund I was contained and is a de minimis part of AUM. To drive value, Morse highlighted the firm's focus on transaction execution and growth from newer initiatives like Logistics, Secondaries, and renewable energy, which build upon their established foundation.

William Katz of TD Cowen inquired about the potential size of the "4 horsemen" fundraising strategies and whether headwinds were from macro conditions or brand perception after the office fund issue. He also asked what actions management is taking to drive shareholder value beyond waiting for a market recovery.

Answer

Executive Chairman Robert Morse stated that the macro environment is improving and investor interest is strong, driven by the appeal of a new entry point for real estate. He asserted that the financial impact of the Office Fund I was contained in year-end earnings and that the firm is driving value by leaning into transactions, launching new initiatives like Logistics and Secondaries, and growing successor funds.

Asked about the maximum balance sheet risk from loans to troubled funds, potential impacts on compensation, the company's debt covenants, and the new dividend payout policy.

Answer

The primary balance sheet risk is a $15M loan to Office Fund I being monitored for impairment. Compensation philosophy is not expected to change. The company is in compliance with its 3.75x leverage ratio covenant (currently at ~3.0x). The dividend payout has been moderated to a ~70% ratio to retain cash and strengthen the balance sheet, a policy expected to continue in the near term.

William Katz from Citigroup revisited the CEO change, asking if the differing views with the Board were about pursuing an independent path versus consolidation and what profile the Board seeks in a successor.

Answer

President, CEO & Director Timothy Hockey declined to comment on confidential Board discussions but reiterated the company's long-standing position that it will always evaluate M&A opportunities that make strategic and financial sense.