Ladies and gentlemen, thank you for standing by. Welcome to the OMAM Earnings Conference Call and Webcast for the First Quarter 2017. During the call, all participants will be in a listen-only mode. After the presentation, we will conduct a question-and-answer session. [Operator Instructions] Please note that this call is being recorded, today, May 4 at 10:00 a.m. Eastern Time. I'd now like to turn the call over to Brett Perryman, Head of Investor Relations. Please go ahead, Brett.

Thank you. Good morning, and welcome to OMAM's conference call to discuss our results for the first quarter of 2017. Before we get started, I'd like to note that certain comments made on this call may constitute forward-looking statements for the purposes of the safe harbor provision under the Private Securities Litigation Reform Act of 1995. Forward-looking statements are identified by words such as expect, anticipate, may, intends, believes, estimate, project and other similar expressions. Such statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from these forward-looking statements. These factors include, but are not limited to, the factors described in OMAM's filings made with the Securities and Exchange Commission, including our most recent annual report on Form 10-K filed with the SEC on February 22, 2017, under the heading Risk Factors. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events. We urge you not to place undue reliance on any forward-looking statements. During this call, we will discuss non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today's earnings press release, which is available in the Investor Relations section of our website, where you'll also find the slides that we will use as part of our discussion this morning. Today's call will be led by Peter Bain, our President and Chief Executive Officer; and Steve Belgrad, our Chief Financial Officer. I will now turn the call over to Peter.

Thank you, Brett. Good morning, everyone. Thanks for joining us on the call and taking the time to be with us today. We certainly appreciate it. I'll make a couple of opening observations and then turn it over to Steve, so that he can walk you through the results in a little more detail. And then, as always, we will look forward to Q&A with you and a conversation about the business. We are very happy with the quarter. We delivered ENI per share of $0.34, which is a 26% increase year-over-year for the business model. And I think to put these earnings in a broader context, what's also important to understand about this quarter is that it demonstrates the strong operating results our business model can deliver in the face of some overall challenging industry conditions, and I think likewise, it shows how our strategy has positioned us to succeed in managing through the challenges that confront so many of our peers. And we benefited from a good market quarter, and the business capitalized on that by generating substantial growth in our management fee revenue, which we combined with strong expense control and accretive stock buybacks as well as the ongoing contribution to the business by the Landmark acquisition, to deliver these results. Overall, when we look at it, what we see is that we grew our revenues and our earnings substantially. We increased our weighted average fees and we widened our margins. This is a strong operating quarter. And I think the results also reflect our business model's ability to generate organic revenue growth even in a quarter where we worked through net AUM outflow. What this reflects is, the $800,000 of organic revenue growth that we delivered even while dealing with $2.5 billion of net AUM outflow.…

Great. Thanks, Peter, and good morning. The first quarter of 2017 was a positive one for OMAM as the earnings power of the business and the growth potential for 2017 came clearly in the focus. This quarter benefited from 4 key factors. As average AUM increased, fee rates expanded, cost rose only modestly relative to revenue leading to margin enhancement and the accretion from Landmark continued as expected. We also saw the positive impact of our capital management from the fourth quarter of last year, which increased our first quarter EPS. This quarter also set us up for a strong year. As we saw market- and flow-driven growth in our higher fee global non-U. S. asset classes, the EAFE and emerging market indices increased 7.2% and 11.4%, respectively, in the quarter while lower-fee U.S. large-cap value indices went up 3.3%. In addition, our largest revenue-weighted products mostly outperformed our indices in the first quarter, with the top 10 benchmark products generating a weighted average outperformance of 125 basis points for the quarter. Finally, Landmark continues to raise attractive assets and generate cash flow, fee rate and earnings accretion. Given these trends, our expectation is that ENI earnings should continue to increase from here as the year progresses, assuming a stable investing and operating environment. Comparing Q1 2017 to Q1 2016, economic net income was up 21.6% quarter-over-quarter to $38.9 million or $0.34 per share, driven by $45.9 million or 30% increase in ENI revenue and an $11.3 million or 18% increase in ENI operating expenses. On a per-share basis, ENI EPS increased almost 26%, benefited by the $6 million share buyback in December of last year. On market-driven increases and the acquisition of Landmark, partially offset by outflows, resulted in an 18.8% increase in average assets from the year-ago quarter,…

[Operator Instructions] Your next question comes from the line of Craig Siegenthaler with Credit Suisse. Please go ahead.

Thanks good morning.

Hey, Craig.

My first question is that, can you remind us if the HNA transaction places any limits on OMAM's ability to repurchase stock either in the open markets or directly from Plc due ownership constraints?

No. There are no constraints in the deal.

Got it. Got it. And then also, you may have said this, but maybe I missed it earlier. But can you remind us how large Landmark's total fundraising targets are over the next year? And then, how much has already been raised and included in current AUM balances? It looks like there's about $3.6 billion of total all inflows over the last 2 quarters, but I wasn't sure how much that was actually from Landmark.

Yes, that's fair. I can do the first part. I can't do the second for you, Craig, because we're not allowed under Securities Laws and the Rules of Offerings of Securities to tell you their fundraising targets. However, in Q4 and Q1, which are the 2 quarters where we've been able to report AUM by Affiliate, the changes in Landmark's reported assets reflect their fundraising. So I think they're about $900 million in Q4, and this quarter, you'll see about $700 million of their AUM having increased, and that is their new flow. So that's what's gone into the financials so far.

Got it. Thank you very much for taking my questions.

Yes, sure.

Your next question comes from the line of Bill Katz with Citi. Please go ahead. Bill Katz with Citi. Your line is open.

We lost Bill. Maybe he comes back in sometime.

Your next question comes from the line of Michael Carrier with Bank of America. Please go ahead.

Hi, thanks guys.

Hi, Mike.

Maybe, I guess, two questions. Just on the pipeline and the flows, and then also on the fee rate. On the alternative side, I guess, we're just trying to figure out, given the increase that we've seen in the fee rate, in the funds that are coming online, is there some expectation that you have in terms of where that fee rate would maybe normalize? And then probably on the flip side, Barrow Hanley, I think, when we look at it, just the AUM in the flow trends, it seems like there's, obviously, been a little bit of pressure there. But I think they had a win in April. I just wanted to get some sense on what some of, maybe, the strategic things that you guys have been working on, like the international emerging market, if that stuff is starting to progress to offset some of the – like the industry headwinds there?

Right, I'll do the second one, first. Barrow, you're right, they did have a – it's been reported. So we can mention the fact that they had an important win in April. And in fact, Michael, it was a win in ACWI ex-U. S. mandate, which is exactly the asset class diversification collaborative organic initiatives we've been working on with Barrow Hanley. That component, the emerging markets capability of Barrow Hanley, those are all strategies that we really started working with them 3-plus years ago, because these required track records and seeding and seasoning. Those are all – I think, they're coming online kind of in real-time now, and I think the win in April reflects that. We would hope to see traction in emerging markets beginning this year as well. The investment performance results, the numbers are there, which is terrific. So it does reflect an important component of the strategy of diversifying Barrow into non-U. S. asset classes, which, a, our view is, have a little bit of more a tailwind, number 1. And frankly, number 2, there's a different fee basis for them. So that can cover a decent amount of attrition in very low fees sub-advisory, large-cap U.S. value equity. And that's playing out the way we had planned with Barrow to manage through it. And I think the other piece on that win that you just mentioned is, the product itself was a function of our collaborative engagement with Barrow Hanley. And the win itself was a result of our Global Distribution team's effort in working with them. So that's the plan, that's certainly the strategy and we'll – we're encouraged the way it's playing out, and we'll keep executing on it. In terms of the fee rates, I think, Steve can probably hit that one.

Yes. If you look, obviously, on Table 12 of the press release – Page 14, you can see the sequential period-over-period increases in the fee rates. And obviously, what is driving that is, on the alternative side, primarily, Landmark, as you can see from December to March, the weighted average fee rate for alternatives went from 50 to 54, to the extent that there's continued fundraising there. We would expect that average fee rate on alternatives to continue to increase. I think where it ultimately gets to and how that drives down to the fees overall is really going to depend on the ultimate fundraising of Landmark. But is it possible that the number of – that's 37.7 now to end up a couple of basis points more? Yes, you know, it certainly is possible.

And Michael, look the other piece. This is a multi-variable matrix, as you know. The other piece that meaningfully affects what happens to our fee rates is, what the Affiliates are doing with respect to their own asset class fundraising. And the move and the contribution that Landmark is making is important and it's positive. But our fees would have gone up this quarter without that. And so again, we continue to build a business that's focused on asset classes that will be in favor and asset classes that have relatively positive or attractive fee characteristics themselves.

We obviously, as well benefited this quarter as emerging markets and non-U. S. and EAFE, which would be the higher fee asset classes as well, got a boost from market – higher market appreciation than large-cap value, which would have been a relatively lower fee rate. So it's that combination, as Peter said, of what's happening in the fee mix of new assets coming in and assets going out as well as the market. The key thing that we focus on is not just the fee rate but, obviously, the absolute dollar amounts. Because look, you can – you don't want to lose your way to higher fee rate. So look, even though you would expect on the margin to have more outflows coming from the lower fee asset classes, we'd much rather have slightly lower fee rate but have higher revenue. That's what we're looking at. That's our objective.

Makes sense. And then one, maybe just quick follow-up. Just on Landmark. I know you can't project what their fundraising is going to be. But any sense on historically, like when they went through the last fundraising cycle, like any rough estimate of what they raised in the legacy funds, I mean, the funds that are already being invested?

Maybe the best way to get at that to give you a sense of the process to-date, and this – we have to be really careful in this discussion as you understand. But we are obviously tracking it closely. I would tell you that, if you took this fundraising cycle in terms of momentum and time and progress, and compared it to their last round of fundraising cycles in terms of the percentage assets that have been raised of the target on where they are and the timeline, they're very consistent with past processes. So I think that's sort of maybe the best way to be able to respond to the question, Michael.

Okay. Thanks a lot.

Yes.

Your next question comes from the line of Bill Katz from Citi. Your line is open. Please go ahead.

Hi, this is actually Ryan filling in for Bill.

Hey, Ryan.

How are you? I had a quick question about the pipeline. If you could maybe describe a little bit about the nature of the pipeline there, and maybe the impact on fee rates going forward? And if you could give us any sense of asset class mix, that would be great as well.

Actually, the best way to respond to that is, the pipeline in terms of order of magnitude is consistent with where it's been over the last year, couple of years. So that's solid. And in terms of asset class breakdown of targeted mandates, it's consistent with our stated objectives of building the business in a diversified way, but also focusing on classes that have positive fee characteristics. So the pipeline probably breaks down, not all that inconsistently with the asset class breakdown on Slide 3, or wherever it is. When you look at the mandates.

Got it, okay. And then...

The other thing usually – I'll add one more piece actually, Ryan. The other thing is, the mandate at – for which the competition is being held in asset classes like large-cap U.S. value equity and/or long-duration fixed income, they tend to be larger amounts. They tend to be larger mandates that you're competing for. So it can move in a lumpier number.

Got it. Okay. And then, I guess, usually on a kind of on a quarterly basis, you give us little bit of an update about what sort of boutique [ph] Affiliates you're having conversations with or what you might be interested in. I was just wondering if you could give us an update there as well?

Yes. I think, we continue to believe that the landscape that makes the most strategic and economic sense for us is the illiquid strategy landscape. I think that we continue to think there's real value there. I think we think that the economics of the business is good. And I think that we think that the value delivered to clients is good, and we think that the institutional demand will be solid. So as we've been out having meetings this quarter, we've tended to focus our energy and attention on illiquid strategies across the board.

Great. Thank you very much.

Sure.

Your next question comes from the line of Glenn Schorr with Evercore. Your line is open.

Thank you. A question on the outflows in U.S. equity. Is most of it on the sub-advisory side, and is it just a continuation of product preference, active to passive? And where I'm getting at with this is, I'm curious if you have any thoughts on how much, either in the past or to go forward, we should focus on Vanguard getting left out of some of the major wire houses distributions?

That's interesting. I saw that Morgan Stanley announcement this morning, Glenn. I think that, certainly, the U.S. large-cap value equity sub-advisory outflow, which, as you all know, is principally the Windsor II fund at Vanguard, that order of magnitude has been relatively consistent. So that hasn't moved meaningfully. We did see some allocation away from large-cap value, separate account. And I'm not sure I can draw any meaningful trend conclusions. Part of it is because Q1 in the institutional world and in our business tends to actually stand apart from Qs 2, 3 and 4 if you look back historically. And that's principally because when we look at it, you tend to see if you're going to have reallocation decisions. You tend to see them in the first quarter as institutional businesses and pension funds, and consultants are reviewing year-end portfolio construction and allocation and tend to make those decisions and move things. And that's actually what we saw this quarter. If you look at Q1 2016 versus Q1 this year, we actually held up pretty well on the sales front, north of $8 billion coming in. The real difference was in what went out. And Q1 2016, we actually fared really well on the allocation front, in the sense that we didn't have much allocated away. This quarter, if you look at the outflow, we had some substantial separate account fixed income allocations away, which is why that number is larger than it historically has been. One of them was just frankly $0.5 billion mandate that was in a pension fund that got merged in a corporate transaction and then got reallocated. Those things happen. So I'm not sure we're going to draw any trends on where that heads. I mean, we do think U.S. large-cap value equity retail sub-advisory will continue to come under pressure and have outflow. Where it ends, where it reaches new equilibrium, we really don't have a feel.

Appreciate all that. Steve, maybe a question on timing of Landmark's expenses. They're in fundraising cycle, higher expenses upfront. When in the year do they start to fade out? And any order of magnitude you can help us with?

I think their expenses were primarily put on over the last year or so, leading up to the fundraising. I think what's really going to happen is not so much that their expenses will – their expense will increase. Obviously, they contributed to our consolidated increase when you look at Q1 2016 to Q1 2017, because they all came on during that period in August. In terms of growth, just looking at that affiliate, obviously, wouldn't expect their expenses to grow any more than any other Affiliates, maybe even a little less. What's really going to happen there is, obviously, the extent they raise additional funds, their revenue is going to be increasing much faster than the expense side there.

Fair enough. All right, thank you very much.

Yes.

Your next question comes from the line of Robert Lee with KBW. Please go ahead.

Thanks good morning guys.

Hey, Rob.

I just have two questions. First one is, can you just remind us with HNA, when the first tranche of that transaction closes? And once that's done there, if I remember correctly, there should be nothing precluding Old Mutual if they chose to, to sell down their stake some more?

That's right, yes. I think – I mean, look, obviously, that's the first tranche is, an HNA London deal. Our understanding is they're working towards that first tranche closing in the next couple of weeks. So that seems to be moving exactly the way it should. And then the way the transaction is structured, Plc absolutely can go into the market and sell down between tranche 1 and tranche 2. And then tranche 2 automatically adjusts the number of shares, so that HNA ends at 24.9%. So Plc has that ability to do that, yes.

Just because there's not a limit for them to go into the market before...

No, they could go in – they can go in anytime.

Okay, great. And just maybe as a follow up for Steve. I guess, if we look out next year, maybe even into 2019, and assuming Landmark is successful in all its fundraisings, there's some, I guess, reasonably meaningful earn-outs or contingent payments, I guess, for them. Can you just remind us on what some of those are? And as part of that, if you make those payments, which I'm sure you hope you do, would that generate some incremental tax benefits as part of that as well?

Yes. The incremental payments that we would make would get treated exactly the same way as the initial payment would. So you would be able to amortize the intangibles, assuming tax law still allows you to do that, which we'll assume – for purposes of your question, we'll assume that nothing has changed.

Well, assume there's still taxes, Rob.

Unfortunately, yes.

Yes. In terms of the earn-out, the maximum earn-out is $225 million, which would get – whatever it ultimately is, would get paid out probably sometime in the first quarter of 2019, because you'd be calculating at the end of 2018. So we'll see how that plays out.

Maybe just a follow up. And I know you didn't specifically disclose some of the metrics and stuff. But with the earn-outs structured in a way that the multiple, so to speak, on the incremental revenues or earnings that come on is pretty similar to what you'd paid in the initial deal price?

Yes. Rob, I think, that is a fair statement. And it is a very much a function of ultimately how much they deliver. And so it's keyed to that. And look, the most important thing to us is, the way the math works, and we and Landmark are perfectly aligned on this, as we should be. The higher the – the greater the amount of the earn-out, the greater the amount of accretion to our shareholders.

But even at the maximum level, the multiple would actually be a little bit lower than if you just looked at the first down payment.

That's accurate. That's right. That's true.

I think what we've said is before financing costs, what we're expecting is sort of 8x to 10x all-in cost of the transaction with obviously the more assets are raised and all that and the higher the earn-out, you get towards the top end of that range.

And the 8 to 10 multiples Steve's talking about is an EBITDA multiple, Rob.

Earnings.

Yes, actually earnings before, pre-tax. Before finance...

Great. That’s all for me, guys.

Yes, you bet.

Your next question comes from the line of Patrick Davitt with Autonomous. Your line is open.

Good morning, guys. Thanks. On the Barrow win, it looks like that is a sub-advised win with 6 others. To the extent you can, is it fair to assume the size is, kind of, split evenly there, so something in the $1 billion to $2 billion range?

That's fair, it's not disclosed. So I don't want to put them in an awkward position, and frankly. But we'll get at that probably when we do Q2 results for what's that worth, Patrick. But yes, that's not – it's probably not a crazy assumption.

And you hinted that, even though some of the sub-advisory outflows have been low fee, this might be a little bit higher fee than the ones we've seen going out?

I think that it's consistent with the sub-advisory overall weighted fee. It, you know...

For that type of – for that type of a product, obviously, a ACWI ex-U. S. product, non-U. S. product would have higher sub-advisory fees than domestic.

Than Windsor II. It certainly...

And certainly a lot more than Windsor II.

That's correct.

Okay, cool. And then finally, the – could we expect you to resume market repurchases in 2Q? Or do you probably need to get through the cash outlays to Old Mutual first?

I don't think it's a function of the cash outlays to Old Mutual first, as much as it is, Patrick, a function of the best use of a buyback. And we value the public float. There's real value. So to go into the market and reduce our public float when we are in the process of working with London to enable it to exit its ownership, there may be opportunities to engage in buyback activity, but in a way that does not produce the public float, and in fact, on a relative proportion, increases it.

We just think it's a – I think as we indicated, the best source of buyback shares most likely are going to be Old Mutual.

Yes. That makes the most sense to us.

Make sense. Thank you.

Okay, good thanks.

Your next question comes from Chris Harris with Wells Fargo. Please go ahead.

Thanks. So you guys are clearly having a lot of success in global equity. And I assume Acadian is playing a pretty big role in that. So I guess the question is, what's resonating so well at that Affiliate right now? And we've seen some other of your peers had pretty good performance in global equity and just cannot produce the flows. So it seems like it's something beyond performance. So if you guys can maybe comment a little on that, that would be great.

I guess, the only comment I'll make, Chris, on that is, it's important to understand what a very well diversified business Acadian really is. I mean, number 1, their investment performance is very good. Number 2, it's good across a number of different strategies. So Acadian isn't a global equity firm, Acadian is a manager of multiple strategies including global, including emerging markets, including U.S. They're going to be working through with the market, rolling out a multi-asset class capability, which is going to be important. And there's a layering on top of all of those different strategies that they've very successfully built out, which is a series of managed-volatility capabilities. And I think that the market really – in my view, they're clearly 1 of the absolute leaders in that space. So Acadian isn't a global story, it's a much broader case than that. And that's probably the reason you're seeing – I guess, to the extent you're hearing, their penetration's success in the market. It's really that.

When you're saying global, I think, you're talking about global in a broader sense as opposed to specific global product, right? Is that true?

Yes, right. Exactly.

Exactly. Okay, Yes.

Yes.

All right. The other question I had was more of a market oriented-type question. I guess, we have decent visibility into how passive is sort of affecting the retail channel, but what's a little less clear to us is, how disruptive or not it is in institutional channel. I know you guys have a really good line of sight into that. So I guess, what I want to ask is, how penetrated do you think passive is in institutional? Do you think it has the potential to be as disruptive as it is in retail or not? Any comment there would be great.

Yes. Look, I do have a view on this. And it's – I hope it's the right balanced one, because you can see it reflected in our strategy. I think you need to be cognizant of the potential impact of passive in the institutional space, but you need to be really thoughtful about where it might have an impact. And I think we've reached a couple of following conclusions: number 1, to the extent you're going to have that be a relevant competitive factor in institutional, it's likely to be in the largest and most commoditizable investment classes. And I think that's why you see it in very large-cap U.S. equity strategies, and we are aware and thoughtful about that and we are concerned. And therefore, it goes to our strategy of having worked with our Affiliates to build out non-U. S., nontraditional asset class capabilities, so that you are diversifying into the asset classes where we really do not believe passive is going to become much of a force. And I think we've seen that to be true. Certainly, that is reflected in our movement into illiquid strategies and the Landmark acquisition, and we'll continue to move in that direction. But I also do not believe as a macro matter, passive is going to be anywhere like the force it's been in retail. And in fact, we did some work and Casey Quirk did some decent work on this. They did some analysis, which we actually looked at and presented last October over in London, where they asked investors both in the retail space and the institutional space, what their forward-looking intentions were with respect to allocating as between passive and active. And in the retail space, investors were saying they still intended to allocate more of their portfolio to passive. And I think it was about a 10% to 11% forward-looking shift. In the institutional space, the response Casey Quirk got from the institutional world was, to the extent institutional investors had determined that a component of the portfolio construction was going to be passive, they had reached the target level. And in fact, the intention of the institutional space going into 2017 was to either maintain their existing passive level or look at opportunities to redeploy more into active. And we think, to the extent there's redeployment into active, it's going to be toward the non-U. S. and illiquid strategies that we're building out and focusing on.

That’s interesting. Thank you.

Yes.

Your next question comes from the line of Andrew Disdier with Sandler O'Neill. Please go ahead.

Hello, everyone.

Good morning, Andrew.

So first on the buyback. Just between the time the first and the second tranche closes, it sounds like you can repurchase. But then after that, assuming HNA does not participate, is it probably limited, just given the 25% threshold? And just kind of thinking about the buyback on a go-forward basis.

Yes, I think that's right. I think when they're at 24.9%, we'd want them to go ahead and participate pro-rata in buybacks just to maintain that position, sure.

And look, you'd also have, as you continue to make acquisitions, I would think at some point down the road, we'd be equity issuers as well. So I think we're always going to look at the various options to return capital to shareholders to the extent appropriate.

Understood. And then, as far as HNA goes, can you just update us on some of the feedback coming from whether it be current Affiliates, prospective partners and current clients? And then, obviously it's still early, but how are you thinking about working with some of their portfolio of companies abroad?

All right. Let's see, Andrew, you've got a few constituencies there. I'll start with the Affiliates. I think the Affiliates seem fine with it, because it provides a break in that logjam that we had at with London for a while in terms of exiting the stock. I think that provides clarity. It certainly provides clarity to the consultant and client community, that we will be a publicly-traded, independent asset management multi-boutique that will have a passive minority investor. So the Affiliates, the clients, the consultants, they all seem fine. Year 1 of the next constituencies or at least some of your clients are, but our shareholders seem to view it as a positive because, again, it breaks that overhang logjam. With respect to working with HNA's portfolio companies, I don't know, maybe we'll get preferred pricing on airlines. Other than that, I think our position is they are a supportive minority passive investor. We're going to let it close. We're going to let them come to a board meeting and we'll start exploring opportunities there. But – and we certainly think it's – if anything, it'll be a net positive, but let's get all this other stuff done first.

Got it. I was talking more of the – some of their insurance portfolio companies. But understood.

You got it. If there are opportunities, we'll identify them thoughtfully, carefully and then approach them the correct way.

Thank you.

Yes.

Your next question comes from the line of Michael Cyprys with Morgan Stanley. Please go ahead.

Good morning, thanks for taking the question. Just wanted to circle back to the margin. You had nice fee rate accretion in the quarter. I'm just thinking, out over the next 3 to 5 years, how we should be thinking about the impact, if we continue to see the fee rate accretion just impacting the bottom line, the margin. 29%, I think you had or so after Affiliate distribution. So how high could that rise over the next couple of years? Or is that – are there offsets elsewhere?

Frankly, Michael, I don't even really think of that after Affiliate distributions, because that's 100% a function of how much of an Affiliate we own. I mean, if we bought – so it's like, if we had just one affiliate and no holding company expenses and that affiliate had a 40% margin, the margin that we calculate before affiliate distributions, which we have a 40% margin, which judges how well is that business run, whereas, the number before after the distributions would be 20%, if we own half of it. So the 29% is entirely just sort of a falls out of the amount of ownership we have at each Affiliate. So the way I think about it tends to be the number of where could you be in terms of 37%, 38% type of margin. And I think if you didn't, I'd break that up into making – if you did not have any additional acquisitions and then if you did. So if you didn't have any additional acquisitions, I think that number could clearly get to 40-ish percent or so. I think as you begin to think about a margin much above 40%, I think, we really need to be asking ourselves whether we're reinvesting enough money back into the business. We think we have tremendous opportunities with our Affiliates to reinvest money into their businesses, and we want to make sure that we are doing that appropriately. And you would have to – we'd really have to make sure we were reinvesting before I'd want to see the margin go much above 40%. To the extent that you add a number of new Affiliates, I don't see our cost structure at the holding company changing much, were we to do that, and so therefore, you get additional sources of leverage of the holding company in Global Distribution expenses, and that would probably allow you to increase by a 1% or 2% into the '40s. But that's the way I sort of think about it. [Indiscernible] on the new Affiliates being at the same sort of rate as the existing Affiliates in terms of margin themselves.

Just a follow-up question. I just want to come back to the seed DTA purchase commitment that you have coming up, I think that's $110 million commitment in June of this year, if I'm not mistaken. I think you had mentioned you'd predominantly fund that from internal cash. If I look at your cash balance, it's about $117 million. So I guess, how comfortable are your running low on the cash level? And how much flexibility do you have on the investment portfolio at the $190 million?

I think it's about $93 million from DTA plus 65% for the seed. So that's like a 158-or-so. That's – when we look it what cash is going to be coming through to the holding company over the remainder of the year, we can fund that and fund all of our other obligations, maybe we have a tiny draw into the facility, maybe not. But we certainly have enough coming in. There's the $117 million again, a lot of that belong to the Affiliates anyway. I think it's 65% that sort of belongs to us. But we're going to be generating distributions from the Affiliates to us over the remaining months of the year as well.

Okay. So it sounds like you wouldn't necessarily need to go into the markets to raise debt. You also have the flexibility with the revolver.

Not at all. So we can fund those obligations along with the coinvestments we need to do and all that, call it without any drawdown of meaning on the revolver. So you would really only have to go into the revolver to the extent that you're buying back shares or making an acquisition. And depending on the size of the acquisition, you would look at how much of that you fund with debt, either short or long-term, versus some form of equity or equity-linked security.

Okay. Great. Thanks for the color.

Sure.

This concludes our question-and-answer session. I'd like to turn the conference call back over to Peter Bain.