Greetings and welcome to the Federated Hermes Incorporated Second Quarter 2024 Analyst Call and webcast. At this time all participants are on a listen-only mode and a question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Mr. Richard Donahue, Vice President Financial Planning and Analysis. Sir, you may begin.

Thank you. Good morning. Leading today's call will be Chris Donahue, CEO and President, and Tom Donahue, Chief Financial Officer. Joining us for Q&A are Debbie Cunningham, Chief Investment Officer at Money Markets, and Saker Nusseibeh, CEO of Federated Hermes Limited. Ray Hanley is attending a family funeral and will not be with us today. During today's call we may make forward-looking statements and we want to note that Federated Hermes actual results may be materially different than the results implied by such statements. We invite you to review the risk disclosures in our SEC filing. No insurance can be given as to future results and Federated Hermes assumes no duty to update any of these forward-looking statements. Chris?

Thank you, Richard, and good morning all. I will review Federated Hermes' business performance and Tom will comment on our financial results. We ended the second quarter with record assets under management of $783 billion, driven by record Money Market assets of $587 billion. Looking first at equities, assets decreased by $2.3 billion from Q1, to $77.9 billion due to net redemptions of $3.3 billion, partially offset by market gains of $933 million. We did see Q2 positive net sales in 11 equity strategies, including MDT large-cap growth, MDT mid-cap growth, and International Leaders Fund. The MDT fund strategies have shown accelerated sales and net sales in 2024, particularly in the growth space. Year-to-date, through the end of the second quarter, MDT fund strategies have had about $1.8 billion in growth sales and $1.1 billion in net sales. Looking at our equity fund performance at the end of Q2 and using Morningstar data for the three years, 54% of our equity funds were beating peers and 38% were in the top quartile of their category. Now, for the first three weeks of Q3, combined equity funds and equity SMAs had net redemptions of $151 million. As my grandkids say, meaningfully less worse. Turning now to fixed income, assets decreased by about $1 billion in Q2 to $95.3 billion. Fixed income funds had Q2 net redemptions of $631 million, and fixed income separate accounts had net redemptions of $806 million. More on those numbers in a moment. We had 11 fixed income funds with positive net sales in Q2, including Total Return Bond Fund and Institutional Fixed Income. Regarding performance, at the end of Q2 and using Morningstar data for the trailing three years, 45% of our fixed income funds were beating peers and 21% were in the top quartile of…

Thanks, Chris. Total revenue for Q2 increased $6.2 million, or 2% from the prior quarter, due mainly to $3.4 million of higher carried interest revenue and $2.1 million of higher revenue from Money Markets assets, partially offset by lower revenue from equity assets and lower performance fees. Total Q2 carried interest and performance fees were $2.8 million, compared to $0.4 million in the first quarter. Q2 operating expenses increased by $64.1 million from the prior quarter, due mainly to the $66.3 million non-cash intangible asset impairment charge. All other operating expenses decreased by $2.2 million, or about 1% from the prior quarter. The impairment charge was from the change in fair value of one of the intangible assets from the 2018 Federated Hermes Limited acquisition due to changes in projected cash flows compared to the prior quarter. Advertising expense increased in Q2, due to the timing of our ad programs. The effective tax rate in Q2 reflects the impact of the valuation allowance on foreign deferred tax assets and the impairment charge. We expect the tax rate to be in the 27% to 29% over the rest of 2024. At the end of Q2, cash investments were $453 million. Cash investments excluding the portion attributable to non-controlling interest was $424 million. Olly, that completes our prepared remarks, and we'd like to open up the call for questions.

Thank you. At this time, we will be conducting our question-and-answer session. [Operator Instructions] Thank you. Our first question is coming from Patrick Davitt with Autonomous Research. Your line is live.

All right. Good morning, everyone. You've been pointing to a pickup in institutional money fund flows when the Fed starts cutting. You hinted at it again today. And now that bets on that happening soon are picking up. Could you speak to maybe the conversations you're having with those kind of accounts? Are you seeing the conversations pick up like you would expect that could point to, say, an early pipeline of more of those mandates coming in later this year? Thank you.

Patrick, it's very hard to detect that movement when it hasn't happened yet. Debbie will comment on what's going on exactly in the marketplace, but we remain confident about the long-term progress of this event, because of what happened every time they have begun to ease rates. And we've gone through that a number of times before in the Q3 of ’19, when they began to ease rates and how that worked out for us in terms of 22% or so percent increase in assets, industry also went up 14%. But I'll let Debbie comment on discussions with institutional clients and how they're looking at this.

Thanks, Chris. As for the discussions that we're having, they're ongoing. We came into 2024 with the market, in our estimation, overdone but expecting 6.9, 7 rate cut, let's say, in 2024. We went down to a low of the market expecting no rate cuts in 2024. So it's been quite volatile. And so our conversations with customers have sort of had that same volatility. Everybody is discussing, all the clients are discussing extending duration, taking maybe some of their core cash or their strategic cash, moving it out the curve a little bit. They're questioning whether we're extending duration within our Money Markets funds themselves for their operating cash, which we have been. But in fact, what generally happens, and it's not any different so far this cycle, is that until the first rate cut happens, you don't see much of that movement in anticipation. Everybody likes to prepare. Everybody likes to discuss. But the actual movement doesn't generally start to occur until the first cut happens. So we are having those conversations. There is nothing different about them. They are healthy. They are what we would expect. But we're not really seeing that type of movement yet, if the Fed cuts in September or November or December, that's when that should occur in all likelihood.

Got it. Thanks. And just as a quick follow up, how are you thinking about second half repurchases? You still have a lot of cash. The share price is still around $35. Can we take that to mean that you could pick that up a fair amount at this point?

I would say that we would certainly expect to be active. You saw what we did this past quarter, and the price was a little lower than $35. But we still believe that the stock is undervalued.

Thank you.

Thank you. Our next question is coming from Adam Beatty with UBS. Your line is live.

Hi, thank you. Good morning. I just noticed among the top selling equity funds, there was a bit of a tilt this time toward smaller cap versus mid-cap. And that seems to coincide with a bit of a rotation out of maybe the MAG-7 or what have you, large cap growth, into more of that broader emphasis. Just wondering -- it's fairly recent, so I'm just wondering how you're seeing that and whether your clients are pointing their conversations in that direction. Thank you.

A hint of that, Adam, is that three weeks' worth of flow data. And it's only a hint, because three weeks, you go with three weeks, that's not the best thing to do. However, what's happened in the performance gives you maybe a reason for that. You take strategic value dividend, which was facing that headwind of the MAG-7, and that's been reversed, as we all know. So quarter to date, strategic value dividend is up 5.5%, and the S&P is down 0.5%. So if you look at July's numbers in the Morningstar, which we don't like, the fund is the number one percentile in its peers. And the ETF is doing well on those numbers, too. But as we always say, that's an odd peer group for this dividend fund. And you're touching on the fact that many of the dividend-oriented products in our category are leading the way right now. And if you tear into the portfolios, you will see that finance and bank holdings have helped that particular fund. And if you talk about other funds, you take the Kauffman Fund. This is another one that's been one of the leaders in the clubhouse with net redemptions. The fund is in the top quartile for the trailing one year and top 12% for the trailing three months. Again, three months is short. So that's a move. And just to expand on that a little bit, since I'm approaching this from the point of view of who are the leaders of our redemptions and what's going on, it's kind of a green shoots report. The GEMs product across the pond is in the 32nd percentile year-to-date and just about the top quartile in the preceding three months. And Asia ex-Japan is, as of the July 24, it's in the top 2% for the trailing three years and other good numbers. So yes, we're seeing the rotation and it's helping many of the small cap funds, especially on the MDT side. And Debbie mentioned that clients, both the institutional and the intermediaries, are all talking about both extending duration and then stepping out the risk curve and step -- and when are they going to join the rotation for the smaller stocks. So over the last three weeks, it has been a bit of a change in the marketplace.

Thank you. Appreciate the detail and the green shoots report there. Just turning to Money Market funds, one of the big topics of conversation in the wealth management channel has been the need to pay higher yields on client cash. And obviously, there are several different options that those firms have to do that, but I was just wondering if you see potential opportunity with that move. Thank you.

Yeah, we do. And here's one of the interesting one. Back in the stone age of the ‘70s when money market funds were just getting going and the bank saw that the funds had way higher yields the banks for the first time started advertising their yields. But guess what, their yields were way lower than the money fund. And when you start talking to people about yields -- and you say, I raised it from 0.1% to 1% or 2%, and they look around and they're taught about yields, all of a sudden, they say, it's 5% in the money fund that helps the retail trade in my opinion. And so that's what's going on. What we like about the whole move is that people and the marketplace do a lot better if they're getting marketplace returns for their cash. And so that's what we talk about. And I think if they're going to sell based on higher yields, and then they got to find out the money funds higher, that's going to work out well for us.

Sounds good. Thank you for taking my questions.

Thank you. Our next question is coming from Dan Fannon with Jefferies. Your line is live.

Thanks, good morning. Just question on the fee rate. In the quarter itself, it came in a little bit better. So curious on the -- within money market funds or certain products that may be there are some underlying trends that maybe you're getting a little bit better. Then also, prospectively, as you think about that on a longer-term basis, how are you thinking about kind of the fee rate in the context of both where demand sits but also in terms of your products competitively in the market?

Well, the fee rate comes from the mix of all the assets, as you know, and we don't track that closely and think about that on a total basis. But we do look at each product and we have a monthly expense meeting at a fairly high level, looking at each product, not every product, every month, but we certainly cover all the products, analyzing where they fit in, what our prospects are, where is our performance, where does sales think we can generate more and more activity. So we are attentive to that very regularly and I think we have our products priced pretty well for success.

Okay. And then just on expenses, just as you think about the back half of the year, you've seen some growth in various of the sub-buckets, but curious if there's anything to call out as you think about the budget or the outlook in the second half versus kind of what's been run rating here in the first half?

Okay. Well, you see the comp number was down kind of like what we expected. And Chris is talking about green shoots and performance, I would anticipate that our comp numbers would probably go up on the incentive comp side based on performance expectations. And of course, that's not answering whether we're going to get carried interest or performance and I'm not giving a forecast on that. But without that, I would expect the comp numbers to go up. And we expect to get higher money market assets through the second half of the year, and that will drive the distribution line up. Advertising and promotion, the second half is usually a little heavier than the first half. Systems in communications, we just continue to eat more investments in there. So that would be kind of slightly up professional service fees. I don't have much to comment on office and occupancy. I don't see much changes there. Travel and related, we do a little more of that, call it, prospecting in the second half of the year versus the first half of the year. And one other point, which is not on the expense side, but it really is expenses, we are going to have a proxy to elect our fund directors, which we have to do every 10 or 15 years, and that's going to come in the second half of the year. It comes as a reduction in revenue, and we expect that to be about a $6 million line item. And the reason why it's a reduction in revenue is because of waivers. And so it doesn't show up on the expense lines, but we'll get lower revenue over the second half of the year, and we estimate that's a $6 million cost to get all the directors elected progress.

Okay, thank you.

Thank you. Our next question is coming from Ken Worthington with JPMorgan. Your line is live.

Hi, good morning. Thanks for taking the questions. So I'd love to get more color on the impairment charge for Hermes. Since the deal was announced, the markets are up quite a bit since you acquired at least the first tranche in -- I think it was '18, I know there was aspirations to launch Hermes and ESG products in the U.S. and leverage that brand to grow. So what happened here? What didn't work out why the impairment?

Okay, Ken. We have to -- when we did the acquisition, we had to value the assets and the assets that we impaired this time and the assets that we impaired last time was the pooled assets, i.e., the funds. And so what happened really versus last quarter from where we were valuing things, we had the GEMs product. We had the Asia ex-Japan product the GEM pad performance thing, which Chris just said, has turned around, but there were significant redemptions in there. It has Asia ex Japan product, which has always had good performance, but has a significant China ownership, and we had significant redemptions in there. And then Chris mentioned in his comments, the $1.5 billion of redemptions on the fixed side because of the PM departure. And so when you add all of those negative flows up in there and look at the forecast, it runs right into how we have to value the things. And we had to take the impairment. In terms of excitement for what's going on, which we still have. First of all, we're still and will remain a global entity, and it's because of the acquisition that we were able to do that. And I think Saker ought to give -- he's here and he ought to give a few comments on the rest of the business and why we still are highly, highly excited about it.

Thank you very much, Tom. So if you look at our business that's in the London office, you can look at it in thee ways. The first one is we have a large income stream that comes traditionally from our equity funds. Our equity funds are primarily not totally, but primarily I want to think about it quality growth. And investors have held off investing in quality growth until the rotation that the previous speaker mentioned earlier. And we've begun to see green choose with inflows, for example, into our U.S. small cap funds run out of London out of both places. If you look at specifically our GEMs product, which was a large revenue generator for us, and our Asia ex-Japan, we've seen the flow slowed down substantially. And given the valuation levels and the performance levels of the funds, you have to think that clients at some stage are going to look positively at those as we go forward. So that's the first thing. The second element you've got to think about is the fixed income. As Tom mentioned, we lost one senior PM, I will note, that's the only loss of any senior investment active PM that we've had since the acquisition in '18. And not surprisingly, with something like that, you will see outflows that follow with that as the consulting community puts you on either hold or redemption. So that's what tells us back there. Now we've been bringing together the two teams across the pond between London and between Pittsburgh, and we see good things coming through that. The third element that helps us back slightly is, again, interest rates. You know that we have a large and private markets, a large real estate business, particularly development business. Now to be able to harvest…

If I can add -- Ken, let me just add a couple of other things. I would do it again with enthusiasm, the whole deal, okay? So we started -- we are now a global company for real, which we weren't before. We have an engagement activity with statistics, with data that enables us to have what we think is an edge in looking at companies and understanding where they're going, where they've been. And this sets us up especially well in terms of gaining mandates in Europe. We were able to get a hold of a whole variety of private markets, enterprises, which the cost of creating or buying would be just enormous. And what's really happened in the U.S. is that some people who were leaders in the investment industry decided to make all the ESG Jazz political and that never works out. So we are not political, we are not moral. We are trying to evaluate risk and come up with excellent performance, as Saker mentioned. And we would happily do the whole Hermes things again. Go ahead.

Yeah. Thank you. And I'll just keep digging here. If you look at the multi-asset and the alternative business, the assets aren't growing. We're in the head of private market investing. I think those alternative assets have been sort of stagnant for three or so years. And on the multi-asset side, assets are down, I think, 40% since the acquisition was first announced. So you mentioned real estate is one of the factors. Are there other factors on the alternative side that are sort of weighing on the growth there? And I know the multi-asset business is really tiny, but the fact that the assets are down so much sort of warrants the question what's going on there as well.

So if you look at -- this is Saker again. If you look at the private markets business, we're seeing really good traction in part of the private markets but not as much good traction in other bots. Now in the really strong part of the traction we're seeing in our direct lending business. Chris mentioned earlier on that we're in the process of closing Direct Lending III fund, which we've launched, and we expect that to close to a higher level than 1 or 2. And that's been a strong growth story pushed by very good performance and a very unique way of approaching the market. So that's been doing what we talked about our private equity business, and that's done while other parts have been more difficult. If you look at the infrastructure business, that is more difficult because of the regulators, particularly we're talking about the United Kingdom and the way that they've directed with that. So I think that the rotation into private market assets does happen and people can raise money, but it's a matter of investing in them. And our approach tends to be more cautious and more client-oriented. And that would explain our positioning in general in the private markets. I'm not commenting about the multi-strategy specifically.

Ken, this is Tom. From acquisition and look at the company point of view, when we got the private markets business, and we've talked about this many times before. It was a business for one, which was the parent. And we have taken a significant amount of time, effort and money and investment making that an institutional salable product, and we are still in the process of that. And it just has taken a long time to get other claims to get it built up and to work successfully along with having a great investment team and continuing to get performed out of it. The other thing on a treadmill that we're on, there's a really good part of that treadmill whereas we raise assets and the funds that we're investing in generate return and send money back to the investors. So the investor, particularly BTPS has been happy with the treadmill, although it doesn't look like we grow, we are getting new assets as we sell, we need to sell something and distribute out to the product. So it's still a great business, and we do hope to get off the treadmill and go faster than the redemptions that and returns to the clients that we're delivering.

Okay, great. Thanks for the color.

Thank you. Our next question is coming from Bill Katz with TD Cowen. Your line is live.

Okay, thank you very much for taking the question. Good morning, everybody. Just sort of scratching my head trying to figure out the path forward here in terms of organic growth. The redemptions that you mentioned in fixed income sort of quarterized out to just over $1 billion again. And you sort of step back for a moment, if rates start to go lower, the expectation for most of your peers is that money that's sitting in money market is going to migrate out and go into longer duration. When I look at relatively weak performance based on what you just disclosed, how do I think about the organic growth rate for the fixed income business versus money market and then the implication for revenue growth? Thank you.

So let's attack this a little differently. What we see in the money market fund side is that, that money market asset continues to grow. If you ask Debbie or me or somebody else would say the whole thing is going to $7 trillion, and we're going to maintain, if not expand our market share. And even though people will move out the yield curve, is very difficult for us to, a, see the money move from one part to the other money funds to fixed income. But there's so much more money coming into the system that you just continue this March growth up and you have a cash management service. So I would not look for the money market part of our business declining because rates rise, I look at it on the opposite. Now if you go into the performance of fixed income, the reason that total return bond funds performance isn't where it has been as they are a little reticent on the high-yield side and have been so, and that's their call. And we've seen them make that call before. And when that snaps back, it snaps back. And it's a very strong franchise with strong people in it. And then on the yield curve, there is excellent performance straight through. That's why I mentioned all those wins in the institutional side on short duration government bonds and things like that. So the path forward for organic growth is continued money market funds and continued activity on the fixed income side across the yield curve.

The only thing I'd add -- this is Debbie, to embellish that is the flows that we had since the cycle began into liquidity products have been 80% driven by retail flows versus deposit products, which will still continue to be in the favor of the money market fund. The institutional flows have been minor in comparison. Our expectation would be that when rates start to go lower, you'll see that makeup of flows be about 50-50, 50% retail, 50% institutional. So the retail will continue. It's just the institutional pickup. So that's just a little embellishment to what Chris has already confirmed.

Okay. Thank you. And just a follow-up. In terms of just sort of strategic positioning here, there's a lot of either bigger players scaling instead of retail democratization opportunity on the sort of the pure-play side. There's the beginning of some alliances that you're seeing between the KKR Capital Group and others that are trying to figure out co-branded ways to invest publicly and privately. Can you talk about, a, your ability to do this on a de novo basis? And b, how open are you to either selling the franchise to a larger player or doing an alliance to potentially catalyze organic growth? Thank you.

So I'll take the last part and let Tom comment on the first one. As we've said, and you remember this from way back in the old days, Bill. If there is a big hairy deal that is available, then we would consider a full transaction. And the way we talked about that, and we have talked about that on these calls for many years, is that the succeeding enterprise would be a public company called Federated Hermes or some other name that comes up because of a big Harry player. But if we run as a public company run by us as investment managers, even though it might have more assets. And then we would divide up the equity as appropriate with said partner. In terms of doing a deal such as others have talked about, we would be open to do those kinds of things in terms of democratization of private equity and things like that. I'll just give you one little hint that the tough guys at Kaufmann always felt they were the first at democratizing in effect, hedge funds. And that's how they felt they were running their funds. And if you look at their record over 38 years, it's quite impressive, maybe recent to the contrary notwithstanding. Tom?

Yeah, I don't think there's much to have to follow up with you on that, Chris. The only comment I'd make is we have almost $8 billion in private equity and infrastructure, and we have great teams. And we are looking at the thing that you're talking about, how can we do that to enhance our business. And the private equity people look at the distribution in the U.S. and say, can we figure out how to get attest to that to get funds out there that would be readily available to an investor class that can get in them that can't get in the bigger funds because they have smaller asset sizes. So it is absolutely interesting thing to consider.

Thank you.

Thank you. Our next question is coming from Brian Bedell with Deutsche Bank. Your line is live.

Great, thanks very much for taking my question. Good morning, everyone. Most of my questions have been asked and -- have asked, but maybe just to come back to the money market funds. Going back to an earlier question on the potential benefit from some of these concerns around sweep deposits. Can you talk about your -- I guess, your asset exposure or your asset size in those particular channels where if someone were to make that move into a money fund from a sweep deposit in terms of what kind of -- how would you size that potential benefit from that actual action and your presence in that channel?

That would be hard for me to do. Maybe Debbie has a magic wand to figure that one out. But what I was saying before is if they start advertising yield, that's going to help us. You obviously heard that. I think it would be very difficult for us to go chapter and verse on clients and say, well, if Wirehouse A increases their yield from x to y, what does that do to us? I'm looking at it like it helps us. And I don't know -- we could go through and see we know how much money are these clients. But those moves, I don't look at it as negatively impacting or potentially negatively impacting us at all. Debbie, do you have any wisdom on that?

The only thing I'd say, Chris, is that we do have a lot of sweep account products through intermediaries. And when they advertise something like an increase in their deposit sweeps to maybe 2%. As you mentioned, Chris, they then look at where their sweep is with the money fund and see it coming in at over 5%. And it's more of an advertisement as to the realization of where true yields are in the market today and I think beneficial to us. As far as sweep products into our money funds, we have many, many relationships along those lines. Prior to the reforms that took place in 2016 when institutional prime funds became floating NAV. The sweep products went into prime institutional products. For the most part, now the sweep products go into our government products. And those continue to be stable net asset value and very viable. And with a yield even with the increased deposit rates at more than double those rates. So I think the benefit of just knowledge that there or higher rates out there is good from our business standpoint and would agree just any kind of sort of socialization of the yields is a positive in our regard.

And I meant it as a positive switch potentially if advisers were decided to move to money funds instead of taking on even higher sweep rates in those channels. And then just maybe just a follow-up. I think you mentioned Debbie earlier about extending duration in the money market funds. Can you talk a little bit more about that how much has that extended across the franchise in the last, I don't know, a month or two? And what are your thoughts about if the Fed is going to start cutting, how you might -- how much more you might extend in the money funds?

Sure. Product by product is a little bit different, but we are probably extended somewhere in the neighborhood of five to eight days over the course of the last month or so. And that is a reflection of number one, getting some what we think was good relative value in the curve early on in that time period. Not so much today, it would be more difficult extending today. So today, we're happy to be able to just maintain where we are. And most of our products are in what I call the 40 -- low 40 to low 50-day rated average maturity target range. The cap for our product is at 60 days. So those that are in the low 40s have room to extend those that in the low 50s probably won't extend very much. But honestly, with where the yield curve is right now, we think it's overdone with the expectation of rate cuts coming as soon as July, which we don't agree with at all. And even those that are contemplating, there's been discussion around 50 basis points in September, that just makes no sense to us at this point. So our current expectation would be for two rate cuts, it really hasn't changed too much. Some in the group expecting a September start with then a December follow-on. My own expectation would be more like November. I don't think there's any reason to do anything ahead of the election. Certainly with the GDP print that we just had the first quarter -- the second quarter continues to be, I think, the type of growth environment that's acceptable to the Fed. And why contemplate or bring about the contemplation of pre-election sort of discussions about the Fed if you don't have to. So that's my reasoning behind why a November start. But again, with the two rate cuts in 2024, which would take the target rate down into that 4.75% level rather than the 5.25% where it is today.

That’s great color. Thank you.

Thank you. Our final question today is coming from John Dunn with Evercore ISI. Your line is live.

Thank you. Could you maybe talk a little bit about the time to funding for the institutional pipeline in the second half? And maybe based on the conversations you're having, the prospects of it kind of leveling up.

Sure. This is Richard Donahue here. A lot of the funding in the private market will be over the next year or two years as we build into those. Some of the other stuff is going to be shorter and quicker, obviously, if it's an equity or a fixed income stuff. But the way to think about that is if you break it out by product, it takes a couple of years or at least a couple of quarters for some of these direct lending and some of these private equity stuff to actually fund the wins that we have going into there. So kind of a mishmash of longer on the private market stuff and then shorter quarter, next quarter, next two quarters on the other stuff.

Got it. And then you guys talked about a rotation going on in the market. But can you focus a little bit and talk on the outlook for demand for non-U.S. and emerging market strategies?

So it's clear to us that the valuation, it's interesting to go back on. We run two strategies that are exposed to emerging markets. One is Asia ex-Japan which you call a value strategy and one is the GEM strategy, where effectively is a quality growth tilted strategy. What's interesting is both of these strategies not only have good strong performance, but both of them are seeing very high values in stocks that they buy. Remember, we're active managers, we buy stocks. And at some stage, I'm a fund manager by background at some stage, the reality of the valuation will attract people in. It just takes time. Over the last year and half, most clients in Europe, which are sitting on their hands because of the narrowness of the market because of the uncertainty of interest rate rises. Without commenting about our particular fund because I don't want to make specific predictions. But in general, I'd say if you have a declining interest rate environment, you have huge value in parts of the world. That means that, that becomes attractive to institutional and retail clients’ outlook year after again. And as I said, there are indications of that rotation is beginning to happen because the flows we've seen in equity in the London business have come into the small-cap U.S. for. And that's been really interesting because people can begin to see that the returns are quite attractive and allocate assets.

Thank you.

Thank you. As we have no further questions at this time, I will hand it back over to Mr. Donahue and management for any closing remarks.

Thank you. That concludes our call.

Thank you very much, ladies and gentlemen. This does conclude today's call. And you may disconnect your lines at this time. And we thank you for your participation.