Hamilton Lane Inc

NASDAQ:HLNE

Earnings Call Transcript 2019-Q4

[Operator]

Hello and welcome to the Hamilton Lane Fourth Quarter Earnings Call. Today, the call will be hosted by Erik Hirsch, Vice Chairman; Jackie Rantanen, Head of Product Management, Randy Stilman, CFO; and Mario Giannini, CEO.

Before the Hamilton Lane team discusses the quarter's results, we want to remind you that they will be making forward-looking statements based on their current expectations for the business. These statements are subject to risks and uncertainties that may cause the actual results to differ materially. For a discussion of these risks, please review the risk factors included in Hamilton Lane's fiscal 2018 10-K and subsequent reports the Company files with the SEC. Management will also be referring to non-GAAP measures that they view as important in assessing the performance of the business. Reconciliation of those non-GAAP measures to GAAP can be found in the earnings presentation materials, which are available on the IR section of the Hamilton Lane website.

Please note that nothing on this call represents an offer to sell or a solicitation to purchase interest in any of Hamilton Lane's products. The Company's detailed financial results will be made available when the 10-K is filed. Finally, for the call this morning, we will be referencing pages in the earnings release presentation available on the Hamilton Lane IR website and shown on the webcast version of this call.

With that, let me turn the call over to Erik Hirsch.

[Erik Hirsch, Vice Chairman]

Thank you, Kelly, and good morning. Beginning on Slide 3. It was another strong quarter for us. Let me go through some quick highlights and then I will provide some additional detail and color.

For the fiscal year, our revenue from management and advisory fees grew 12% versus the prior fiscal year. This resulted in non-GAAP EPS of $1.91 based on over $100 million of adjusted net income. Our GAAP net income was over $33 million, which translated into GAAP EPS of $1.40.

Lastly, our Board has approved a significant increase in our annual fiscal dividend to $1.10 per share or $0.275 per share per quarter. This represents a 29% increase versus prior fiscal year.

As we have stated in the past, we are not managing the dividend to a specific payout ratio beyond the 50% plus payout ratio we have previously stated. Rather, it is our intention to raise the payout along with the growth in the business and its related free cash flow. This increase reflects Management's and the Board's view that the business is growing well and remains strongly positioned.

Before I dig into our asset build, let me remind listeners that we have hosted our first Investor Meeting in New York City on April 2. That presentation is available on our website and we would really encourage shareholders to review those materials.

Now, the theme on Page 4 remains similar to what you have heard from us on prior calls. That being continued growth in AUM and AUA coming from diversified sources around the world. It's diversified by geography, type of investor, and size of investor.

Total asset footprint of approximately $484 billion was up 7% versus the prior year. This continued growth drives best-in-class deal flow, data and proprietary information and it increases our negotiating leverage across the asset class, all of which we believe are real benefits to our clients.

On Slide 5, we highlight our fee-earning AUM. This is a combination of our customized separate accounts and our specialized funds. Our total fee-earning AUM was up $2.9 billion or 9% versus the prior year, with solid growth across both our specialized products and our customized separate accounts for both the quarter and the year. As we have stated in the past, fee-earning AUM is the most significant driver of our business as it makes up over 80% of our management and advisory fees.

Our growth continues to be driven by three simple themes; one, re-ups from existing clients; two, us adding brand new client relationships; and three, raising new specialized funds and growing our existing funds. In the past 12 months, we have added net fee-earning AUM of over $1.2 billion to our customized separate accounts. And over the same time period, we have added nearly $1.7 billion of net fee-earning AUM across our specialized funds.

As you will hear later from Jackie, the specialized fund AUM growth came from our co-investment fund, which has reached approximately $1.6 billion as of May 15 and our fund-of-funds product, which has reached almost $250 million in commitments over the same time period.

Lastly, in addition to the solid growth, we continue to maintain steady and detracted fee rates across our fee-earning AUM as you can see here on Slide 5.

On Slide 6, we highlight the main driver of our customized separate account fee-earning AUM growth, re-ups. As you have heard from us on prior calls and as we covered during our Investor Day meeting, this is a crucial dynamic to understand in order to fully appreciate the power of our platform. The vast majority of our clients think about asset allocation to any sub sector, including the private markets as a percentage of their total investable assets.

Think about this as numerator and denominator. For a client who wants to maintain a steady state allocation as their total assets, the denominator grow, they must allocate more capital to the private markets, the numerator. Further, as their private market assets inevitably get harvested or liquidated, that capital is now cash and it returns to the denominator, requiring an additional allocation back up to the numerator. Those additional allocations are “re-ups.” The client is making a decision to provide more capital to us, thus both expanding and continuing the relationship.

The chart here on Page 6 shows it for clients who had a re-up last year how many total times they have re-upped with us. There are two important takeaways here. One, our organic growth is being driven by a lot of re-up activity across a wide range of clients that have been with the firm for some time. In this case, on average over six years. And two, as we add new clients, we are expanding the re-up base as shown in the amount of clients on their first or second re-up.

Slide 7 shows some additional detail on our AUM growth, which Jackie will touch on in a few minutes. One additional piece I would like to highlight is our advisory offering with AUA up almost $26 billion compared to the prior year. We've continued to expand both the number of advisory clients as well as the number of investors coming to us for back-office and analytical needs, all of which are represented in this revenue.

The important takeaway around our AUA is the size of the assets we touch, as it is directly correlated to our footprint and our influence in the private markets, along with our access to data reflecting hundreds of billions of dollars of investments. There is not, however, always a direct relationship between our AUA and advisory revenue growth. While the AUA number may shift quarter-to-quarter, we are simply focused on growing revenue associated with this service on an annual basis.

On the technology front, I'm pleased to announce that we have invested from our balance sheet in Intapp, a leading professional services firm. Intapp was the recent acquirer of one of our strategic technology relationships, DealCloud. Hamilton Lane remains both an important customer as well as a strategic partner.

For us, it is simply a continuation of our stated strategy to use a small portion of our balance sheet to invest alongside leading firms who we see as driving technological innovation and success in our industry.

Lastly, I wanted to provide a quick update on Abraaj. For any on the call unfamiliar with the topic, I would direct you to the replays of our prior earning presentations available on our website. The update is relatively minor. There is no change to our view around the materiality of the situation or our exposure. That being, this is not material for our firm and that the exposure is small.

We are continuing to work with the court-appointed administrators at Deloitte to achieve long-term management solutions for the assets in which our clients have an interest. We are now finalizing an agreement that will move a large portion of those assets over to Actis.

You also may have heard that three of the most senior partners of Abraaj have now been criminally charged by U.S. authorities. The indictments lay out a coordinated scheme to defraud investors. I expect we will learn more about the scheme as the cases progress. We are happy, however, to see the authorities taking this action to protect investors and to punish wrongdoings.

And with that, I will turn the call over to Jackie for an update on our specialized funds.

[Jackie Rantanen, Head of Product Management]

Thank you, Erik, and good morning, everyone. I am Jackie Rantanen, and as Erik mentioned, I lead our Product team. We provide Investor Relations services to our specialized product investors and we partner with our sales team in marketing our funds.

Let me start by walking through updates on our various specialized funds in market. First, our fourth co-investment fund has closed on approximately $1.6 billion of commitments as of May 15, including approximately $270 million raised during the fourth quarter.

This exceeds both our target as well as the size of our prior fund, which was $1.25 billion. We are appreciative of the support from our limited partners and are very proud of this result. And we believe it reflects our strong position in this space.

We had noted in the last call that our final close would take place in April. And while this was the expectation, we have been granted a short extension to June to allow for a small number of limited partners who are completing their work to close into the fund.

We believe the final amount of capital will be slightly in excess of the current amount of $1.6 billion. We have begun to deploy capital and had as of May 15 already committed approximately 49% of our total fund capital.

The second product coming to the end of its fundraising cycle is our fund-to-funds product. I am pleased to report that we have closed on $250 million in commitments as of May 15. We have until the end of June to complete this raise. And while the total will likely come in under our original target of $450 million, we'd point to what we see as a migration away from commingled fund-of-funds products towards customized separate accounts, as well as other white label relationships. We're a big driver of migration and so while it results in less capital in this product, it is contributor of growth in our separate account business.

Next, our annual credit series continues to raise capital. And as of May 15, we have secured $366 million in commitments. As we've noted before, this product is a relatively unique structure, whereby we are continually raising and deploying dollars simultaneously.

This inevitably will lead to some size variability fund-by-fund. So it's less about targeting a set amount like you traditionally see across funds with a multi-year deployment period. Given that we are paid on the assets during their life, every new dollar we raise continues to increase the total revenue driven by this business line.

As noted in our prior call, we are continuing to add additional credit assets via our separate accounts as well. It's worth noting that when transactional type assets, such as secondaries and co-investments, come via separate accounts, they typically come with similar terms to those you see in the commingled funds and they continue to diversify our carried interest sources. We are excited about the activity we are seeing across our credit platform and look to continue our growth and our presence in that space.

Last, but certainly not least, we have begun fundraising for our fifth secondary fund. We are very early in the process and expect to be in market well into 2020. We have closed on over $700 million of capital through May 15. For competitive reasons, we will not be commenting on the total targeted amount for the fund.

With that, I will turn this over to our CFO, Randy Stilman.

[Randy Stilman, Chief Financial Officer]

Thank you, Jackie, and good morning. Slide 9 of our presentation shows the financial highlights for fiscal year 2019. We continue to see very solid growth in our business with management and advisory fees up 12% versus the prior year period, driven by strong results across each of our core products and services.

Revenue from our customized separate accounts offering increased over $6 million compared to the prior year due to the addition of several new accounts and additional allocations from existing accounts.

For our advisory and reporting offerings, we experienced 16% growth compared to the prior year, driven by new client adds in our advisory, back-office reporting and technology analytics offerings.

Our specialized funds revenue increased $9.9 million compared to the prior year, driven by over $1.4 billion raised through the end of fiscal 2019 for our co-investment fund currently in market. This fund had retro fees of $1.7 million for fiscal 2019.

As many of you are likely aware, investors that come into later closes of the fundraise for many of our products, they retroactive fees dating back to the fund's first close. Therefore, you typically see a spike in management fees related to that fund for the quarter in which subsequent closes occur.

The final component of our revenue is incentive fees. Incentive fees for fiscal 2019 were $34.4 million or approximately 14% of revenue. We also saw strong growth in our unrealized carry balance, which was up 7% from the prior year, even as we recognized $34.4 million of incentive fees between periods and saw the pullback in public equity markets in December reflected in our fiscal Q4 valuations.

Overall, we think the carry story continues to be a strong one. Significant diversification of carry dollars spread across over 50 investment vehicles and thousands of underlying investments coupled with strong investment performance continues to drive solid carry results.

Turning to Slide 10, which profiles our earnings. Our fee-related earnings were up 11% year-over-year as a result of the revenue growth we discussed earlier. In regards to our expenses, total expenses increased 22% compared with the prior year period, driven by incentive fee compensation and acquisition earn-out expense. The earn-out expense is related to our Real Assets acquisition in August 2017 and is based on the strong performance of that business through the first anniversary of the acquisition.

Total comp and benefits were up $14.9 million compared to the prior year due to an $11.1 million increase in incentive fee-related compensation and $1.7 million from the earn-out.

G&A was up $12 million with the biggest driver being $4.5 million of fund-related expenses recorded as expenses under the new revenue recognition standard, and the remainder being various legal, consulting and other expenses.

For the year, our fee-related earnings relative to our management fees remained consistent year-over-year. In the near-term, we expect this to be the case as we continue to invest in a business with significant growth opportunities.

Wrapping up with our balance sheet on Slide 11. Our investments, alongside clients and products, which is the largest part of our balance sheet, continues to grow reflecting the growth of the business and were up 12% for the year. In regards to our liabilities, our senior debt is our largest liability and we continue to be modestly levered at well less than 1x LTM adjusted EBITDA.

With that, we are happy to open up the call for questions. Thank you.

[Operator]

[Operator Instructions] Your first question comes from the line of Bill Cuddy from JPMorgan. Your line is open.

[William Cuddy, JPMorgan Chase & Co.]

Good morning. So first, on private credit. There have been industry concerns about private credit and the loosening of covenants. What are you seeing and what are you hearing from investors?

[Erik Hirsch, Vice Chairman]

Thanks, Will. It's Erik. I'll take that. So I think we certainly hear and see some – I think some more aggressive behavior in the credit market, but I think what's important to recognize for us is kind of back to our classic funnel that we showed people during Investor Day. We have an enormous amount of opportunities and we're choosing a very, very small number of those. And I think that's what's allowing us to confidently continue to deploy capital and specific opportunities that we see as being unique and appropriately risk-adjusted.

[William Cuddy, JPMorgan Chase & Co.]

Okay. Makes sense. So thank you for the additional perspective on the fundraising. For the co-investment specialized fund series, what are the contractual obligations for percentage of capital invested before the next vintage could be fundraised?

[Erik Hirsch, Vice Chairman]

This is Erik, again, Will. There's a little bit of discretion left to us on that. I would say general rule of thumb is that across most of our specialized funds, including the co-investment one, we generally start to get active at around sort of 70%-ish invested and begin to start spooling up for the fund raise. I think it's important for us as an investor to never be out of capital that would be counterproductive. And so, we want to make sure that we begin with enough lead time that we begin to have a first close prior to the finish of deploying that prior fund.

[William Cuddy, JPMorgan Chase & Co.]

Okay, great. Thank you, Erik.

[Operator]

Your next question comes from the line of Michael Cyprys from Morgan Stanley. Your line is open.

[Michael Cyprys, Morgan Stanley]

Hey, good morning. Thanks for taking the question. I just wanted to get a little bit more color around the equity investment income. That's below the line reflecting the stakes you guys have in your own funds. That was marked down a bit in the quarter. And I think you guys have a one quarter lag, if I'm not mistaken on that. I was just curious if you could maybe talk a little bit more about the magnitude there, it was a little bit better than I think what we were looking for in terms of the marks around the investment stakes.

[Erik Hirsch, Vice Chairman]

Sure. Sure, Mike, it's Erik. You're absolutely correct. So the marks you're seeing on the Q4 are really the December ended marks. And so what you see in our industry and our assets are really no different than the rest of the industry. A lot of the fund managers are following valuation standards that heavily rely on public market comparables.

And so, as you see those marks in the public markets move, obviously, you see a high correlation of that in the private markets. That's really what is reflected here. Obviously, we have pretty significant visibility at this point on sort of the Q1 marks and we've already seen across the market, given strong public market rebounds that you're beginning to see the private markets drift upwards for the Q1, again, as you'd expect given what's happening on the public side.

[Michael Cyprys, Morgan Stanley]

And just given the recovery in markets, public markets year-to-date, is it fair to assume that the markdown that we saw this past quarter has been fully recovered or how much of that has been recouped would you say already?

[Erik Hirsch, Vice Chairman]

Yes. So I think it's a little hard for us to speculate because all of those marks aren't coming through. And as you know, we're basically a pass-through on those. So for our fund positions, which is a huge portion of our exposure, we're taking the valuations done by the fund managers and then again moving those through.

And so we will need to get sort of total clarity, hard for us to speculate on what's going to happen on a go-forward basis. What I can tell you is that if history has – kind of remains to be consistent, as you see an uplift in the public markets, you tend to see high correlation of uplift in the private markets.

[Michael Cyprys, Morgan Stanley]

Got it, thanks. And just a follow-up question, I saw in one of the slides, you had given a little bit of color around the accrued carry balance, $326 million. I think you guys mentioned it was diversified across 3,000 assets over 50 funds. I was just curious, what portion was represented by, say, the top three or top five funds? Just curious, if there are certain funds that are – to some degree, a little bit larger contributor of that $326 million?

[Erik Hirsch, Vice Chairman]

Yes. So it’s Erik again, Mike. I think it would be exactly as you'd expect, the bigger the specialized product, the bigger the driver that is of carry. So, if you think back to our specialized products, the biggest funds that we currently manage are focused on co-investments and secondaries. And since they're bigger assets and have a carry component, they tend to be a directly bigger driver of that. None of our separate account carry positions are bigger than any of those individual specialized funds. And so while they're important drivers and they're also very important diversifiers, they're not larger than the specialized funds.

[Michael Cyprys, Morgan Stanley]

And just to clarify, the 50 funds that you were referencing, I think on that slide, were those your funds? Or were those the underlying funds that your funds were making investments in?

[Erik Hirsch, Vice Chairman]

It's Erik, again, Mike. Those are what we're saying is, we have 50 different Hamilton Lane vehicles that are having – that have a carry generative component to that. So one of those would be one of the co-investment funds and one of those would be one of the secondary funds and another secondary fund and you'd also see a number of separate accounts in there as well.

[Michael Cyprys, Morgan Stanley]

Great. Thanks so much.

[Operator]

Your next question comes from the line of Robert Lee from KBW. Your line is open.

[Robert Lee, Keefe, Bruyette & Woods, Inc.]

Great, thanks. Good morning, everyone. I guess my first question would be, Erik on the re-ups. Just kind of curious, if we think of the 20 existing clients who re-upped – I mean, is there any kind of proportion? Like, was it that 90% of the clients that kind of could have re-upped it or – and then – I'm just trying to get some sense of kind of stickiness, so to speak. And then also on that average size, I mean are you seeing the – when clients re-up, is that $130 million kind of an upsizing of their re-up commitment?

[Erik Hirsch, Vice Chairman]

Sure. Thanks, Rob. It's Erik. So I think what you see when you look across that, we would sort of point to the fact that there is not commonality as a very positive thing because it's sort of showing you that we have lots of different clients who are solving for different problems. But the aggregate theme is that they're trying to deploy more money into the asset class.

So if you look in that a little bit further, what you would see is that most of our clients tend to be on a time period basis for re-ups. So they would say to us tranche A, we would like to sort of see that committed over a 12-month, 18-month, 24-month time period. And once we've reached the end of that time period having done our job, they're then back at the table making another capital allocation decision.

The magnitude of that capital allocation decision is multifaceted in terms of the variables that go into it for them. One is kind of my numerator-denominator. So what's happening with their total assets and what are they trying to accomplish with their private market assets?

And across our client base, you see very different things. You see some clients who have been in the asset class for 30 plus years who are at a steady state. And so while their denominator is growing and thus the numerator has to grow in proportion, they're trying to maintain a current allocation because they're at target.

You contrast that with a whole number of other clients who are brand new to the asset class or have been in the asset class only for a very short period of time, and so they would count themselves as being significantly under allocated.

And so there, they might be seeing growth in plan assets, the denominator, as well as trying to move the numerator from, say, a 1% allocation to what ultimately might be a 5% or 6% or 10% allocation. So each client very, very different, each client is starting off at a different size because that denominator is obviously different by client and what they're trying to accomplish in the numerator also varies.

We like this because again it's very reflective of the fact that we're covering large parts of the market, servicing very different clients who have very different needs, but we're able to help all of them try to achieve their goals.

[Robert Lee, Keefe, Bruyette & Woods, Inc.]

Okay, thanks. And maybe as a follow-up, just broadly, if we think of the secondaries market, I mean you're raising your next fund and there's been bunch of competitors out there raising large secondaries funds and it seems as a asset class, I'll call it, certainly continue to grow in size. Is that at all changing kind of the competitive dynamics?

And I mean, this in the sense of as more money comes into secondaries and – is that kind of changing the pricing? Is it making it harder to deploy? Is it our returns getting tougher because there's this more money chasing a growing, but still some of them may be more limited supply secondaries. I mean, how do you kind of see the growth of that business affecting industry-wide kind of return expectations?

[Mario Giannini, Chief Executive Officer]

Hey, Rob, it's Mario. Interestingly, in the secondary market, you're right, there is a fair amount of capital being raised, there are some very, very large secondary players. But what you've seen in that market is both the supply and demand growing. I think we've talked in earlier calls about the secondary market used to be, you're a distressed seller and you needed to get rid of a fund. It's no longer that, it is now a portfolio balancing tool. And so you see a number of, if you will, deals coming into market that really are not reflective of someone being desperate or trying to get out. And that's grown the market quite a bit.

The other thing in the secondary market that is changing quite a bit is just the nature of secondaries. As you get general partner restructurings, that market, we would argue is one of the more interesting market in terms of how capital is being deployed and how people are using the secondary market in some very creative ways to create liquidity for both general partners and limited partners. So at least right now, there is an enormous amount of deal flow, largely reflecting again the more common use in that market for portfolio re-balancing and the different kinds of transactions that are occurring.

[Robert Lee, Keefe, Bruyette & Woods, Inc.]

And that's – maybe to follow-up, but – I mean, with a lot of capital being raised, but are there – would you think of there as being barriers to entry in the secondaries market because ultimately in most cases you need a GP to agree to the transfer, I assume, of an interest? So does that kind of create barriers to entry, if someone – if you have new competitors?

[Mario Giannini, Chief Executive Officer]

I would say, there is obviously some of that in the sense of general partners for certain buyers over others and we think obviously that's to our advantage. But I think the barriers to entry are really more around the ability to bring capital to a transaction, the certainty around that, the reputation around that. I think the barriers to entry are somewhat brand.

So as you think about that, you look at it and go, why are some players better than others. The data is a big advantage. I mean, if you're able almost instantly to know what you think a fund is worth or what you think a set of assets are worth. So yes, barriers, but not in the sense you may be thinking about them.

[Robert Lee, Keefe, Bruyette & Woods, Inc.]

Great. And maybe one last quick follow-up, maybe question for Randy. Little bit of a modeling question. But given the – you had a bunch of fund closings so far this quarter, is it possible to kind of size the catch-up to your expectations for the current quarter?

[Randy Stilman, Chief Financial Officer]

Sure. Hi, Rob. It's Randy.

[Robert Lee, Keefe, Bruyette & Woods, Inc.]

Hi.

[Randy Stilman, Chief Financial Officer]

One thing to just – I'll explain how the retro fees work. The retro fees are really dependent on the time since an initial closing of a fund. So if I use our co-investment fund that's in the market, we're at the end of the period, so that would have the largest amount of time since the first closing. So that would result in retro fees.

Depending on how much we close subsequently, that dollar would go up or down. With our new secondary funds that's currently being raised, since it just had its first close, next quarter there really won't be much in retro fees because we only have a quarter time period. Where we'll see a lot of retro fees will be at the end of this fiscal year and into next fiscal year. Does that answer your question?

[Robert Lee, Keefe, Bruyette & Woods, Inc.]

Yes. That's helpful. Thank you.

[Randy Stilman, Chief Financial Officer]

You're welcome.

[Operator]

[Operator Instructions] Your next question comes from the line of Chris Harris from Wells Fargo. Your line is open.

[Christopher Harris, Wells Fargo Securities, LLC]

Thanks. Hey, guys. Are you doing anything differently with respect to how you're allocating client assets, given we seem to be, I don't know, fairly late cycle or do you guys not really manage the business that way?

[Erik Hirsch, Vice Chairman]

Sure, Chris, it's Erik. I think it's important to recognize it. Again, a lot of our assets, huge portion of our assets, are in these customized separate accounts and those are coming with customized strategic plans based on the client feedback. So again, most of the cases are set up, where the client is directing us to target either, a particular opportunity set, a particular geography or a typical style of investing.

All that said, I think everyone is kind of keenly aware that we're probably closer to a later cycle than a beginning cycle. And so I think our value orientation is very much on and we're making sure that we're looking for opportunities and managers that we think will perform well or as well as can be expected in those market environments. So I wouldn't – I would think of it as kind of more tactical by account and not kind of a wholesale change of an asset allocation model across every asset that we manage.

[Christopher Harris, Wells Fargo Securities, LLC]

Okay, got it. Thanks for all the discussion about opportunities for new clients and re-ups and so on. But one of the things I was wondering about is how your relationships with the various fund managers you guys use changed. And one of the things I was thinking about is as you guys are growing, are you utilizing more managers or is that not necessarily the case, you're calling relationships? Just a little bit of color there would be great.

[Erik Hirsch, Vice Chairman]

Sure, Chris, it's Erik again. I think what you see there is that if you take a look at managers, you get – we get growth opportunities in a couple of different ways. So, one is that there are simply more managers in existence today than there were, say, 10 years ago.

So one of the slides we showed at Investor Day was showing you kind of what that fund funnel looks like for us. And last year, it was a little under 1,000 unique fund managers that we have the opportunity in which to invest. So that's a growth engine.

The second growth engine is that a lot of managers, particularly, again the successful ones are getting bigger. So fund two was say $500 million and fund three is $1 billion. And so even if we were to keep a static kind of total percentage – their fund is growing, obviously, the capital available to us can also grow.

The third growth engine is that partly what's driving growth number one, more managers, is that you're seeing a number of managers kind of increasing their fund families. So maybe 10 years ago, they just managed buyout fund.

And today, they manage a buyout fund and the credit fund and a growth equity fund to the extent that that was again a core relationship for us and to the extent that we believe that their talent transfers across other asset classes, we already have kind of an advantaged position because that's a pre-existing relationship.

So I would say, if you take a look at the individual customer experience, what we're not seeing is a significant increase in the number of funds any one of our customers is doing in a particular year. They just simply have more opportunity in front of them and we're taking advantage of that.

[Christopher Harris, Wells Fargo Securities, LLC]

Okay, thank you.

[Operator]

And there are no further questions at this time.

[Erik Hirsch, Vice Chairman]

Great. We want to thank everyone for their time and support, and have a good day.

[Operator]

And this concludes today's conference call. You may now disconnect.