Ladies and gentlemen, thank you for standing by. Welcome to BrightSphere Investment Group Earnings Conference Call and Webcast for the Fourth Quarter 2022. 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] Note, this call is being recorded today, Thursday, February 2, 2023, at 11 a.m. Eastern Time. I would now like to turn the call over to Elie Sugarman, Head of Strategy and Corporate Development. Please go ahead.

Good morning, and welcome to BrightSphere's conference call to discuss our results for the fourth quarter ended December 31, 2022. Before we get started, please note that we may make forward-looking statements about our business and financial performance. Each forward-looking statement is subject to risks and uncertainties that could cause actual results to differ materially from those projected. Additional information regarding these risks and uncertainties appears in our SEC filings, including the Form 8-K filed today containing the earnings release, our 2021 Form 10-K and our Form 10-Q for each of the first, second and third quarters of 2022. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update them as a result of new information or future events. We may also reference certain non-GAAP financial measures. Information about any non-GAAP measures reflected, including a reconciliation of those measures to GAAP measures, can be found on our website along with the slides that we will use as part of today's discussion. Finally, nothing herein shall be deemed to be an offer or solicitation to buy any investment products. Suren Rana, our President and Chief Executive Officer, will lead the call. And now, I'm pleased to turn the call over to Suren. Suren?

Thanks, Elie. Good morning, everyone. Thank you for joining us today. As usual, I'll start off with the financial highlights on Slide 5 of the deck. For Q4 '22, we reported our highest ever quarterly ENI per share of $0.67, 26.4% higher than $0.53 that we reported for Q4 of 2021. Our sizable share buyback in Q4 of '21 and Q1 of '22, more than offset the drop in our earnings from the significant equity market decline in 2022 and the resulting impact on our AUM. We are pleased that throughout this volatile market environment, our investment performance has continued to be strong. As of December 31, '22, 88%, 87%, 87% and 90% of our strategies by revenue, beat their benchmarks over the prior one, three, five and 10-year periods, respectively. We also reported second straight quarter of positive net client cash flow with $1.3 billion of net inflows as we saw robust sales across a few different strategies. Our sales pipeline remains healthy with ongoing searches across a range of strategies. Turning to capital management. We had a cash balance of $108 million as of December 31, '22, after funding $15 million of seed capital for Acadian's Equity Alternatives platform and fully paying off Acadian's seasonal credit facility. Acadian generally draws on this facility in the first quarter for 1Q seasonal need, and they fully paid off over the course of the year. As our business continues to generate strong free cash flow, we expect to continue deploying capital to support our organic growth and to buy back shares whenever opportunities come up. Turning to some highlights for Acadian on Slide 7. Acadian generated $50.9 million of adjusted EBITDA in the fourth quarter of '22 compared to $87.6 million in the fourth quarter of '21. The drop in EBITDA…

[Operator Instructions] Our first question comes from Glenn Schorr with Evercore.

Hi. Thanks very much. So I'm very curious on some of the new build-outs. You talked about the team mostly being paid since systematic credit. So one is, is that the case for Equity Alternatives as well? And then at the highest level, I'm curious of what you see the differences between systematic equity and systematic credit from a process standpoint? And why would Acadian just be getting around to it now? It does seem like a big opportunity. It's just -- it's not as big in the marketplace. So curious if you could talk to those two things. Thanks.

Yeah. Hi, Glenn. Thanks. Yeah. You're right. The team -- the core team at least in both these areas is mostly in place. They're about eight to 10 people in both strategies. There will be more people added as we go in select areas in data, et cetera, but the core team is mostly in place. And what's happening now is we continue to add more infrastructure, more trading infrastructure, more data infrastructure, particularly in credit. The Equity Alternatives is a little bit ahead, as I mentioned earlier, we've already seeded it, and the seed capital is being invested, and we're building a track record here. Credit, you're right. It is a big opportunity, at least as large as equity is, and it is a market -- that is -- it is quant driven. And so our unique quant capabilities would have an advantage here. What's come along over the past few years, clearly, this market was a voice market, over the phone market, not as much electronic trading. That's changed a lot. So there's more and more electrification of trading here. And that is also, in turn, like more data being available. So that made this market, I would say, more for the taking now for Acadian. And secondly, it's also as our data has built up, we can leverage a lot of that for credit, it is similar kind of analysis, as you know. So we can leverage a lot of that data. But there was also -- we have been on the lookout for a good team for a while and that's critical. That's the right fit. People who are -- who have the same systematic quant mindset but also have credit experience. So we were fortunate to really find as we announced a few quarters ago and Scott Richardson, really one of the pioneers in quant credit, who brought on more people with deep experience in the area. So it's really just a lot of things coming together at the right time, which is a bit of a coup.

Great. Appreciate all that. Thanks.

Our next question comes from Kenneth Lee with RBC Capital Markets.

Hi. Good morning. Thanks for taking my question. It doesn't sound like you repurchased any shares in the quarter. So wondering, if you could just comment on any discussions you may have had around potential value enhancing transactions. Thanks.

Hi, Ken. That is correct that we haven't purchased any shares in the quarter. We, of course, don't specifically comment on any conversations. But, yes, from time to time, we are in blackout windows, either, as Elie mentioned, during earnings blackout windows that also if we have any non-public material conversations.

Got you. And one follow-up, if I may. Wonder if you could talk a little bit more about the key drivers for the performance fees you saw in the quarter. I think in the past, you mentioned that some products were above their high watermarks and then it could have been a favorable setup. Just wondering if that was a factor as well as from any other drivers there? Thanks.

Yeah, I can. Yeah. Last year was definitely, as you alluded, it was a bit of a loaded base. And so that was unusual that things were set up correctly. And this year, also, the performance in many of the accounts was good and we ended up at, I think, at a decent place. What we got last year is that was clearly very high in record. Hopefully, we can get that again at some point, but it is up there. This year, we had good performance, and we got performance fee from the -- from some of the accounts that were eligible. But clearly, the set of last year was favorable than this year. And we're happy with what we got this year.

Got you. Very helpful there. Thanks.

Our final question comes from Michael Cyprys with Morgan Stanley.

Great. Thanks. Good morning. I was hoping you might be able to elaborate a bit more on the sales pipeline. How does that look today versus a year ago? And if you could maybe comment on some of the strategies you're seeing strength as well as the customer channels as well, where you're seeing more strength and maybe even from a geographic standpoint too? Thank you.

Yeah. Thanks, Michael. We are seeing -- generally, it's a very healthy pipeline in terms of comparing historically -- compared to historical levels, it's at a healthy level. We're seeing searches across a range of strategies, including our flagship strategies like global equity, emerging markets, even managed volatility, which we talked about maybe a year ago, who was out of favor. We're seeing searches there and in our newer strategies like the multi-asset class, all country, non-U.S. as well. So that's -- it's a pretty good broad -- broadly diversified pipeline. And we're seeing maybe about a fourth of the strategy have some kind of sustainability angle to them as well. So we're seeing more and more ESG type of searches as well. So that's all encouraging to see. Geographically, is not much as far as you know, a lot of our -- even currently is within the U.S. and non-U.S. clients represent a growth area for us, and we are trying to do more of that, but it is in line with our -- the current search pipeline is in line with historical levels. Does that cover your question, Mike?

Yes. Thank you. Maybe just a follow-up, if I could, just on expenses. Hoping you could maybe elaborate a bit around your expectations for expense growth next year, So you put out the guidance on the variable comp and the affiliate distributions and the operating expense guidance. So maybe you could just elaborate a bit on kind of what went into those ranges, how you thought about that? Kind of what's sort of underpinning it around market performance expectations? Are you baking in a strong start to the year that's already been playing out in equity markets or would that be sort of upside?

Yeah. In our guidance, I guess, no, we put this together relatively recently. So it does factor in all that, that we know currently. And it reflects essentially where the market is today, what our -- we are going to invest more in these new initiatives that we touched on earlier on people as well as data and infrastructure on credit, equity alternatives, multi-asset class, ESG, all of these areas. So it reflects the investment in addition to P&L there reflects some inflation as well. So assuming, of course, the ratios can change depending on if the markets were to change significantly. But in the normal range, we should be -- we should end up within our guidance.

Great. Thank you.

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

Thank you, operator. Thank you, everyone for joining us this morning. We appreciate it. Thanks.