Executive Summary

Q2 2025 delivered record ending AUM at $2.00T (+8.5% QoQ, +16.6% YoY) on $15.6B net long-term inflows; adjusted operating margin improved YoY to 31.2%, while GAAP diluted EPS was $(0.03) driven by $159.3M preferred stock repurchase costs; adjusted EPS was $0.36 .
Consensus vs. actual: adjusted EPS of $0.36 missed Primary EPS consensus of ~~$0.40, while reported operating revenues of $1.515B were far above S&P revenue consensus (~~$1.102B; note potential net vs. gross revenue basis mismatch) and EBITDA (~~$271M) was below consensus (~~$384M) *.
Strategic catalysts: QQQ reclassification proposal (potential ~~4 bps net revenue and adjusted operating income uplift if approved), and continued deleveraging with potential term loan repayments in 2H 2025; common buybacks maintained (~~$25M/quarter) and preferred dividend run-rate falls to ~$44.4M per quarter starting Q3 .
Flow mix shows strong ETFs/Index (+$12.6B), China JV & India (+$5.6B), and Fundamental Fixed Income (+$2.8B), partially offset by Fundamental Equities (-$3.6B) and Private Markets (-$2.3B); APAC and EMEA strong, Americas modest outflows .

What Went Well and What Went Wrong

What Went Well

Record AUM ($2.001T) and resilient organic growth: $15.6B net long-term inflows (4.7% annualized) with broad-based strength in ETFs/Index, China JV & India, and Fixed Income; adjusted operating margin up YoY to 31.2% .
Strategic progress: Completed $1.0B preferred repurchase and upsized revolver to $2.5B; management expects ability to begin repaying term loans in 2H 2025 and maintain regular buybacks (~$25M) .
CEO tone on platform diversification and geographic breadth supporting resilience; highlighting APAC/EMEA contributions and strong SMA momentum in U.S. wealth (~$32B AUM, 15% annualized growth) .

What Went Wrong

EPS miss vs. consensus driven by $16.9M severance (fundamental equities re-org), $8.0M software impairment, and higher deferred compensation mark-to-market; adjusted tax rate rose to 26.5% vs. 24.4% in Q1 .
Fundamental Equities continued outflows (-$3.6B) and Private Markets (-$2.3B); Americas modest outflows (-$0.8B) despite APAC and EMEA strength .
Net revenue yield pressure persists (management cited 23.2 bps overall; toward stabilization but mix still shifting to lower-fee products), and performance fees subdued ($2.6M) .

Financial Results

Metric	Q2 2024	Q1 2025	Q2 2025
Operating Revenues ($USD Millions)	$1,483.3	$1,529.2	$1,515.5
Net Revenues ($USD Millions)	$1,085.8	$1,108.7	$1,104.6
Operating Income ($USD Millions)	$206.8	$277.3	$214.2
Operating Margin (%)	13.9%	18.1%	14.1%
Adjusted Operating Income ($USD Millions)	$335.3	$349.5	$344.4
Adjusted Operating Margin (%)	30.9%	31.5%	31.2%
Diluted EPS (GAAP) ($)	$0.29	$0.38	$(0.03)
Adjusted Diluted EPS ($)	$0.43	$0.44	$0.36
Ending AUM ($USD Billions)	$1,715.8	$1,844.8	$2,001.4
Net Long-Term Flows ($USD Billions)	$16.7	$17.6	$15.6

Segment/Capability Flows and AUM (Q2 2025):

Capability	Net Long-Term Flows ($B)	Ending AUM ($B)	Average AUM ($B)
ETFs & Index	12.6	546.9	509.7
Fundamental Fixed Income	2.8	301.6	297.5
Fundamental Equities	(3.6)	288.3	268.9
Private Markets	(2.3)	131.2	129.3
China JV & India	5.6	120.2	113.7
Multi-Asset/Other	0.5	64.1	61.5
Global Liquidity	—	196.4	197.6
QQQ	—	352.7	319.2

KPIs:

KPI	Q2 2024	Q1 2025	Q2 2025
Annualized LT Organic Growth (%)	5.6%	5.3%	4.7%
Average AUM ($USD Billions)	1,669.3	1,880.8	1,897.4
Headcount	8,536	8,495	8,407
Performance Fees ($USD Millions)	8.7	3.5	2.6
Net Revenue Yield (bps, mgmt)	—	23.5 (Q1)	23.2 (Q2)

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Non-GAAP Effective Tax Rate	Q3 2025	Q2 guide was 25–26%	~26% (ex-discretes)	Slight increase
Alpha/Aladdin Implementation Costs	Q3 2025	2025 guide ~$15M per quarter	$15–$20M in Q3; then $10–$15M in Q4 2025	Raised Q3, normalizing Q4
Preferred Dividend Run-Rate	Q3 onward	~$59.2M/quarter historically	~$44.4M/quarter; ~$14.8M reduction	Lowered
Common Share Repurchases	2025	Regular repurchases (Q1: $25M)	Continue ~$25M in Q2 and going forward	Maintained
Term Loan Repayment	2H 2025	N/A	May begin repayments in 2H 2025, magnitude depends on cash flow	New
Payout Ratio (Dividends + Buybacks)	2025	Move closer to 60% in 2025	Near 60% expected	Affirmed
QQQ Structure Conversion	Post-approval	N/A	Potential ~4 bps net revenue and adjusted operating income benefit; fee 18 bps IM, ~14 bps third-party costs	New proposal
Revolver Capacity	Current	$2.0B	$2.5B, maturity extended to May 2030	Increased

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4’24 and Q1’25)	Current Period (Q2’25)	Trend
Capital Management & Deleveraging	Q4: zero net debt; margin expansion; strong inflows	Preferred repurchase completed; revolver upsized; potential term loan repayments; payout near 60%	Positive balance sheet flexibility
QQQ Reclassification	Not discussed in Q4; Q1: focus on growth initiatives	Preliminary proxy filed; ~4 bps benefit if approved; 18 bps fee; marketing 2–3 bps	New structural catalyst
Flow Mix & Geography	Q4: ETFs/APAC led; Q1: ETFs + Fixed Income; APAC/EMEA strong	APAC (+$9.8B) & EMEA (+$6.6B) strong; ETFs/Index +$12.6B; China JV & India +$5.6B; Americas -$0.8B	Mix toward passive, APAC/EMEA resilience
Net Revenue Yield	Q4/Q1: yield pressure acknowledged	23.2 bps; closer to stabilization, dependent on mix	Stabilizing
Fundamental Equities	Q4/Q1: pressure; improving performance in EMEA/APAC	Continued outflows (-$3.6B); team reorg; severance	Under pressure, remediation underway
Private Markets	Q4: positive; Q1: partnership with Barings	Negative flows early (risk-off); recovery late; CLO activity; Barings partnership progressing	Mixed near-term, strategic build
Technology Platforms	Q1: Alpha costs $10–$15M/qtr; hybrid approach (State Street + BlackRock)	Q3 costs $15–$20M; completion by end-2026	Execution ongoing
China JV Dynamics	Q1: Positive inflows; performance fees historically strong	Record JV AUM; performance fee regulatory changes dampen fees; compensation dynamics	Strong flows; fee structure evolving
SMA Growth	Q1: ~$30B, strong growth	~$32B; 15% annualized growth	Continued momentum

Management Commentary

“We generated $16 billion in net long-term inflows… and reached a record $2 trillion in assets under management… expenses remained well controlled, resulting in positive operating leverage” – Andrew Schlossberg, CEO .
“Given our cash position… we may be in position to begin repaying a portion of the term loans during the second half of this year… and continue repurchasing common shares” – Allison Dukes, CFO .
“Our overall net revenue yield was 23.2 basis points… a smaller decline than prior quarters and may be a sign that we’re closer to reaching stabilization” – Allison Dukes .
“We completed the repurchase of $1,000,000,000 of preferred stock… strengthening our balance sheet flexibility” – Andrew Schlossberg .
On QQQ proposal: “Net revenues and adjusted operating income would benefit by approximately four basis points” – Allison Dukes .

Q&A Highlights

QQQ conversion economics: ~4 bps uplift to net revenue and adjusted operating income; anticipated marketing budget $60–$100M (~2–3 bps); licensing/admin fees in third-party expense (~14 bps) .
Capital allocation balance: Management pursues both growth (private markets, ETFs/active ETFs, SMAs) and deleveraging; not a binary choice .
Securities lending from QQQ conversion: Potential but expected to be immaterial; primary motive is modernization .
M&A/private markets: Focus on partnerships (Barings/MassMutual) first; high bar for acquisitions; leverage flexibility increased .
Retirement/DC alternatives: Potential over time; trust/collective trust wrappers; public/private multi-asset solutions envisioned .
Digital cash/stablecoins: Exploring tokenized money market fund potential; requires regulatory steps .
China JV performance fees: Regulatory changes reduce performance fee recognition; margins elevated near term but likely lower longer term .

Estimates Context

Metric	Q2 2024	Q1 2025	Q2 2025
Primary EPS Consensus Mean ($)	0.398*	0.386*	0.403*
Primary EPS Actual (Adj. Diluted) ($)	0.43	0.44	0.36
Revenue Consensus Mean ($USD Millions)	1,089*	1,113*	1,102*
Operating Revenues Actual ($USD Millions)	1,483.3	1,529.2	1,515.5
EBITDA Consensus Mean ($USD Millions)	348*	360*	384*
EBITDA Actual ($USD Millions)	303*	319*	271*

Values with asterisks retrieved from S&P Global.
Interpretation: Adjusted EPS of $0.36 missed consensus ($0.40), driven by severance ($16.9M), software impairment ($8.0M), higher deferred comp mark-to-market and higher tax rate (26.5%). Reported operating revenues far exceeded S&P consensus; note analysts may model net revenues ($1.105B actual), which were broadly in line QoQ and modestly above YoY .

Key Takeaways for Investors

Flow/scale resilience: Broad-based inflows and record AUM support top-line durability; ETFs/Index, APAC/EMEA, and China JV & India are key growth levers, while Fundamental Equities remains a remediation area .
Near-term EPS headwinds largely transitory: Severance and software impairment are non-recurring; adjusted tax rate higher near term; underlying adjusted margin trajectory remains constructive YoY .
Structural catalyst: QQQ reclassification could add ~4 bps to net revenue and adjusted operating income and modestly reduce expense ratio; monitor SEC and shareholder approvals (earliest vote Q4) .
Deleveraging path: Preferred dividend run-rate reduction and potential term loan repayment in 2H 2025 enhance equity cash flows; balance sheet flexibility improved with $2.5B revolver .
Estimate resets: Expect EPS estimates to nudge lower near term given Q2 miss and higher implementation/tax rates; revenue (on a net basis) appears broadly aligned; watch mix-driven yield stabilization .
Strategic execution: Private markets partnership with Barings/MassMutual and SMA expansion in wealth channels underpin medium-term fee growth and diversification .
Trading lens: Near-term stock drivers include QQQ proxy milestones, flow momentum in ETFs/fixed income, and updates on term loan repayments; tone remains confident on profitable growth and capital returns .

Citations: All figures and commentary sourced from the company’s Q2 2025 8-K and press release –, the Q2 2025 earnings call transcript –, prior quarter materials – –, and Q4 2024 8-K –. Values with asterisks retrieved from S&P Global.

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