Acadian (AAMI) Q3 2026 Earnings Call Transcript

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DATE

Thursday, Oct. 29, 2026

CALL PARTICIPANTS

• Senior Vice President, Director of Finance and Investor Relations - Melody Huang
• President and Chief Executive Officer - Kelly Young
• Scott Hynes

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TAKEAWAYS

• Assets Under Management -- $239.6 billion, representing a 44% increase from $166.4 billion in the third quarter of 2025.
• Net Client Cash Flows -- $2.6 billion for the quarter, marking the 11th consecutive quarter of positive net inflows for the firm.
• Economic Net Income EPS -- $1.36, representing a 79% increase and the highest per-share result in the firm's history.
• ENI Operating Margin -- 42.6%, reflecting expansion of 9 percentage points from 33.2% in the prior year.
• GAAP Diluted EPS -- $1.00, an increase of 138% compared to $0.42 in the third quarter of 2025.
• Recurring Management Fees -- $187.8 million, up 38% year over year reflecting higher average assets under management and market appreciation.
• Year-to-Date Net Inflows -- $28.3 billion, representing 21% annualized organic growth for the first nine months of 2026.
• Annualized Organic Growth -- 4% for the quarter, reflecting a moderation from 21% year to date due to institutional client rebalancing.
• Revenue-Weighted Strategy Outperformance -- 96% of strategies, exceeding benchmarks over 3, 5, and 10-year periods as of Sept. 30, 2026.
• Trailing One-Year Performance -- 95% of revenue-weighted strategies outperforming, representing an increase from 73% a year ago.
• Enhanced Equity AUM -- $75.1 billion, representing more than 30% of total assets under management.
• Extension Strategies AUM -- $13 billion, up from approximately $5 billion one year ago and accounting for approximately 5% of total AUM.
• ENI Operating Expenses -- $69.7 million, an 18% year-over-year increase driven by technology investment, infrastructure, and higher servicing costs.
• Operating Expense Ratio -- 37.1%, representing a 6 percentage point decline from 43.3% in the prior year.
• Variable Compensation Ratio -- 32.6%, a decrease from 41.5% in the prior year driven by higher profit before variable compensation.
• Adjusted EBITDA -- $75.1 million, a 67% increase from $45.1 million in the third quarter of 2025.
• Capital Returned -- $1.5 billion since the end of 2019, distributed to stockholders through share repurchases and dividends.
• Diluted Shares Outstanding -- 35.6 million, representing a 59% reduction from 86 million in the fourth quarter of 2019.
• Interim Dividend -- $0.10 per share, scheduled for payment on Dec. 23, 2026, to shareholders of record as of Dec. 11.
• Net Debt to Adjusted EBITDA -- 0.2 times, reflecting improved cash generation compared to 0.5 times at the end of 2025.
• Cash and Seed Investments -- $150 million in cash and $112.6 million in seed investments as of Sept. 30, 2026.

SUMMARY

Acadian Asset Management Inc. (NYSE:AAMI) reported record financial results for the third quarter, driven by expanded assets under management and positive client inflows. Management noted that the firm's systematic investment approach has generated strong alpha across major strategies, contributing to 11 consecutive quarters of positive net flows. The company indicated that it is expanding its product footprint through new initiatives in Systematic Credit and Tax-Aware strategies while leveraging partnerships to increase penetration in the global wealth channel. Management stated that operating margins reached record levels due to disciplined expense management and improved operating leverage across the quantitative platform.

• CEO Young stated, "Assets under management have more than doubled since the end of 2024, and we're seeing the benefits of that growth translate into our financial results."
• The firm expanded its wealth management reach through a new partnership with UBS Global Wealth Management in Asia.
• Management expects to receive the first external institutional funding for its Systematic Credit strategy later this year from a prominent U.S. asset owner.
• CFO Hynes indicated that the full-year operating margin may reach the aspirational target of 38% to 40% earlier than previously anticipated.
• Extension strategies reached $13 billion in assets, representing a nearly 170% increase from $5 billion one year ago.
• CEO Young noted that while net flows moderated to 4% annualized in the quarter, the majority of outflows were driven by institutional clients rebalancing portfolios following market appreciation.

INDUSTRY GLOSSARY

• Alpha: The excess return of an investment relative to the return of a benchmark index.
• AUM: Assets Under Management; the total market value of the investments that an entity manages on behalf of clients.
• ENI: Economic Net Income; a non-GAAP measure used by management to represent underlying economic earnings by excluding certain non-cash or non-recurring items.
• Enhanced Equity: Strategies that use quantitative models to seek alpha while maintaining a risk profile similar to a benchmark index.
• Extension Strategies: Investment strategies that allow for both long and short positions, such as 130/30 or 160/60 structures, to provide higher conviction implementations.
• NCCF: Net Client Cash Flows; the net amount of capital invested in or withdrawn from a firm's products by clients during a specific period.
• Systematic Credit: An investment approach that applies quantitative, data-driven processes to credit markets.
• UCITS: Undertakings for Collective Investment in Transferable Securities; a regulatory framework that allows for the sale of mutual funds across the European Union.

Full Conference Call Transcript

Operator: Ladies and gentlemen, thank you for standing by and welcome to the Acadian Asset Management, Inc. earnings conference call and webcast for the third quarter 2026. During the call, all participants will be in listen-only mode. After the presentation, we will conduct a question and answer session. To be added to the queue, please press the star followed by one at any time during the call. If you need to reach an operator, please press the star followed by zero. Please note that this call is being recorded today, Thursday, October 29th, 2026, at 11:00 A.M. Eastern Time. I would now like to turn the meeting over to Melody Huang, Senior Vice President, Director of Finance and Investor Relations.

Please go ahead, Melody.

Melody Huang: Good morning and welcome to Acadian Asset Management, Inc.'s conference call to discuss our results for the third quarter ended September 30th, 2026. Before we begin the presentation, 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 this risk and uncertainties appears in our SEC filings, including the Form 8-K filed today containing the earnings release, our 2025 Form 10-K, and our Form 10-Q for the first and second quarter of 2026.

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 referenced, 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 as an offer or solicitation to buy any investment products. Kelly Young, our President and Chief Executive Officer, will lead the call. Now I'm pleased to turn the call over to Kelly.

Kelly Young: Thanks, Melody. Good morning, everyone, and thanks for joining us today. I'm pleased to report another strong quarter for Acadian with outstanding investment performance, continued positive client flows, record assets under management, and record profitability. As we mark Acadian's 40th anniversary, our business continues to build significant momentum. Assets under management have more than doubled since the end of 2024, and we're seeing the benefits of that growth translate into our financial results. Before turning to the quarter, I'd like to offer some broader perspective on the progress we're making across the business. First, on client flows. We've now delivered 11 consecutive quarters of positive net client flows.

Following organic growth of more than 20% in 2025, we've generated $28.3 billion of net inflows in the first nine months of 2026, representing 21% annualized organic growth. These are exceptional levels of growth and reflect sustained demand for our investment capabilities. Institutional funding will naturally vary from quarter to quarter, but our pipeline continues to replenish, and we're encouraged by the level of client activity and the opportunities ahead of us. Enhanced Equity remains an important growth engine, now representing more than 30% of our assets under management. Our Extension strategies also continue to attract strong institutional interest and now represent approximately 5% of AUM. Second, our investment performance remains exceptional.

Across the firm, 96% of our revenue-weighted strategies are outperforming their benchmarks over three, five, and 10-year periods. Our shorter-term performance has strengthened considerably with the proportion of revenue represented by outperforming strategies over the trailing one-year period increasing to 95% from 73% a year ago. We believe this combination of strong long-term track records and improving recent performance reinforces our competitive position and provides a solid foundation for continued client demand. Third, we're making progress in expanding our growth opportunities. In Systematic Credit, we expect to receive our first external institutional funding later this year from a prominent U.S. asset owner, an important milestone.

We're also seeing encouraging early traction in our Tax-Aware strategy, which launched in May and has received initial client funding. We're continuing to expand our reach in the wealth channel. During the quarter, Acadian was selected as an inaugural investment manager for UBS Global Wealth Management's new exclusive manager access fund program in Asia, creating another opportunity to bring our institutional investment capabilities to wealth clients. These initiatives are still at different stages of development, but they represent additional avenues for growth alongside our established strategies. Finally, the growth in our business is translating into strong financial performance. Recurring management fees increased 38% year-over-year, while our ENI operating margin expanded to 42.6%, reflecting the operating leverage in our business model.

Taken together, I believe these results demonstrate the strength of our investment franchise, the consistency of client demand, and the opportunities we have to continue growing the business. With that context, let me turn to our third quarter results. As seen on slide 2, we continue to deliver outstanding results across key metrics in the third quarter. Our U.S. GAAP net income attributable to controlling interests was up 135%, and EPS was up 138% compared to the prior year, driven by increased management fees and partially offset by non-cash expenses representing changes in the value of Acadian LLC equity and profit interests.

ENI up 78% to $48.3 million, and our ENI diluted EPS of $1.36 was up 79%, driven by revenue growth, the highest-ever EPS in the firm's history. Our Adjusted EBITDA was up 67%. We realized $2.6 billion of positive net client cash flows in Q3 2026, representing a 4% annualized organic growth rate driven by Enhanced and Extension strategies. Finally, AUM grew 44% from Q3 2025 to $239.6 billion as of September 30, 2026, marking another record high for Acadian. Turning to slide 3, Acadian's investment performance track record remains strong. Five major implementations comprise the majority of our assets.

As of September 30, 2026, Global Equity, Emerging Markets Equity, Non-US Equity, Small-Cap Equity, and Enhanced Equity have 100% of assets outperforming benchmarks across three, five, and 10-year periods. Global equity markets advanced modestly in Q3 2026. Impacts from resilient economic growth and continued AI-driven investment more than offset elevated geopolitical tensions as well as higher energy prices. Developed markets outperformed emerging markets, while value and quality significantly outperformed growth and momentum factors in general. AAMI generated strong alpha in the third quarter across most major strategies, driven primarily by the strength of Acadian's factor model, with particularly strong contributions from EM, Small-Cap Equity, and Extension strategies. Our short-term performance continued to post meaningful improvement in the quarter.

95% of assets outperformed over the trailing one-year period. We believe these exceptional performance results reinforce the consistency and resilience of our disciplined, systematic investment process, which has been built and refined over Acadian's 40-year history. Slide four details how our investment process has generated meaningful long-term alpha for our clients. Our revenue-weighted five-year annualized return in excess of benchmark was 4.8% as of the end of Q3 2026 on a consolidated firm-wide basis. Our asset-weighted five-year annualized return in excess of benchmark was 3.9% as of the end of Q3 2026. By revenue weight, 96% of Acadian strategies outperformed their respective benchmarks across three, five, and 10-year periods as of September 30, 2026.

By asset weight, at least 94% of Acadian strategies outperformed their respective benchmarks across three, five, and 10-year periods. Turning to net flows, we continue to see positive momentum across the business. We generated $2.6 billion of net inflows in Q3 2026, representing a 4% annualized organic growth rate and bringing year-to-date net inflows to $28.3 billion or 21% annualized organic growth. This marks our 11th consecutive quarter of positive net flows. Gross inflows remained healthy and diversified across products and client types, led by our Enhanced Equity and Extension strategies. Our Extension strategies, which provide clients with a higher conviction approach to systematic investing, now represent approximately $13 billion of AUM, reflecting continued strong demand.

While net flows moderated this quarter, this largely reflected certain clients rebalancing portfolios following strong equity market appreciation. With that, I'll turn it over to Scott to review our financial results and capital allocation priorities.

Scott Hynes: Thanks, Kelly. Turning to slide seven, our key GAAP and ENI performance metrics are summarized here on a quarterly basis. As previously noted, we manage the business using ENI metrics, which better reflect our underlying operating performance. You can find complete GAAP to ENI reconciliations in the appendix. Let me now turn to our core business results. Starting on slide eight, total ENI revenue of $189 million increased 39% year-over-year, primarily driven by growth in recurring management fees. Management fees of $188 million increased 38% year-over-year, reflecting higher average AUM driven by market appreciation and continued positive net client cash flows.

Moving to slide nine, ENI operating expenses increased 18%, primarily driven by higher G&A expenses, including continued investment in technology and infrastructure, AUM-driven servicing costs, and higher compensation expenses. Variable compensation increased 21% year-over-year, primarily driven by higher profit before variable compensation. Our ENI operating margin expanded nearly nine percentage points to 42.6%, primarily driven by higher recurring management fees. Our operating expense ratio fell six percentage points year-over-year to 37.1%, reflecting improved operating leverage. The variable compensation ratio decreased approximately nine percentage points year-over-year to 32.6%. The full year 2026 variable compensation ratio is now expected to be approximately 34%-38%, with the realized ratio informed by the level and timing of performance fees and deferred compensation.

Turning to slide 10 on capital resources and our strong balance sheet. As of September 30th, 2026, we had $150 million of cash and $113 million of seed investments on the balance sheet, with a $200 million balance on our term loan credit facility and no outstanding balance on our revolving credit facility. As of September 30th, 2026 period end, our gross debt to Adjusted EBITDA ratio was 0.7 times and our net debt to Adjusted EBITDA ratio was 0.2 times. Note that our leverage ratios have improved from year-end 2025, supported by greater last 12 months Adjusted EBITDA and our gross leverage now well below the 1.5 times through-the-cycle target detailed at our May investor forum.

Moving to slide 11. We have a track record of creating significant value through share buybacks in recent years. Outstanding diluted shares have decreased 59% from 86 million in Q4 2019 to 35.6 million shares in Q3 2026. Over the same period, $1.5 billion in excess capital has been returned to stockholders through share buybacks and dividends. AAMI's board has declared an interim dividend of $0.10 per share to be paid on December 23rd, 2026, to shareholders of record as of the close of business on December 11th, 2026. There were no share repurchases in Q3 2026.

Going forward, we expect to continue generating strong free cash flow, prioritizing organic growth and balance sheet flexibility, and then returning excess capital through dividends and share repurchases. I'll now turn the call back over to Kelly.

Kelly Young: Before moving to Q&A, let me recap some key points on slide 12. Acadian is competitively positioned as the only pure-play, publicly traded, systematic manager with a 40-year track record and competitive edge in systematic investing. Our investment performance track record remained strong this quarter, with more than 96% of strategies by revenue outperforming over three, five, and 10-year periods. Business momentum continued apace in Q3 2026, with net inflows of $2.6 billion for Q3, a 4% annualized organic growth rate, and reflecting 11 consecutive quarters of positive net flows, and achieving AUM of $239.6 billion, up 44% from Q3 of 2025, the highest in the firm's history.

Q3 2026 financial results included record management fees of $188 million, up 38% from Q3 2025. ENI EPS of $1.36, up 79% from Q3 of 2025. An operating margin expansion to 42.6%, up nine percentage points from 33.2% in Q3 of 2025. Finally, capital management remained a focus in the quarter as we strengthened our balance sheet with conservative leverage ratios and continued to invest in organic growth and return excess capital to shareholders. Pleased with our third quarter results, we remain focused on disciplined execution going forward. This concludes my prepared remarks.

Operator: At this time, those with questions should lift their phone receiver and press star, followed by the number one on their telephone keypad. To cancel a question, please press star one again. Please hold for a brief moment while we compile the Q&A roster. Your first question comes from Kenneth Lee with RBC Capital Markets. Please go ahead.

Kenneth Lee: Hey, good morning, and thanks for taking my question. Just curious whether you could talk a little bit more about your institutional pipeline, what you're seeing within their composition, and any color around that. Thanks.

Kelly Young: Of course. Hi, Ken. Nice to talk to you again. The pipeline remains very robust across strategies and client geographies. We have continued to replenish it following some very sizable mandate fundings in recent quarters. I would say demand for Enhanced Equity remains strong, and we are seeing particularly good momentum in our extension strategies. I think extensions is an area that I would highlight. Assets have grown there from approximately $5 billion a year ago to over $13 billion today, so an increase of nearly 170%. Those strategies are offering clients higher conviction in implementations of our approach. I think as you know, we offer those in 130/30 and 160/60 flavors.

That growth, I think, has really been supported by very strong investment performance. So we continue to see real significant interest coming through in the pipeline there. I think importantly, we have meaningful capacity to support further growth, and attractive fee economics make Extension strategies particularly interesting for our business. The Tax-Aware capability is also building on those established Extension capabilities. I think that is providing another avenue for growth for us. Beyond Enhanced Equity and Extension strategies, we are seeing some really healthy demand across our core equity strategies as well, and that has been quite diverse in nature, but particularly Global Equity, Emerging Markets Equity in a number of our Non-US Equity and international strategies.

So, very encouraged to see that, as well as an uptick in our Systematic Credit pipeline over the past quarter. I think importantly, we are continuing to convert opportunities into mandate wins. We have a meaningful amount of awarded business that is awaiting funding, again, across those Extension and Enhanced dimensions and several of the core strategies that I mentioned. The timing of institutional fundings is obviously ultimately client-driven, but I remain very encouraged by the breadth of those opportunities and by the mandates we are winning and the continued strength of investment performance, which is supporting that pipeline growth.

Kenneth Lee: Great, very helpful there. Just one follow-up, if I may, just in terms of capital management. You did not repurchase any shares in the quarter, but just wondering if there is any kind of updated outlook around capital returns, more specifically repurchases. Thanks.

Scott Hynes: Yeah, Ken, it is Scott, and thanks for your time this morning. No real update, particularly since the May investor forum, which I know you joined with us. The priorities remain unchanged in this regard, in that we are primarily focused on organic growth, maintaining a strong balance sheet, and then returning excess capital from there. So buybacks continue to be an important piece of that framework. I have used the word athletic before, I will use it again. We just want to remain athletic, look for particular opportunities when there is real efficiencies in buying back, and that continues to be the posture today. So looking forward, no changes.

I would say that on the balance sheet, we are conservatively levered. But for all intents and purposes, I think Kelly and I inherited some senior debt, which has now been refinanced into a term loan. I think we could still have an opportunity to chip away at that in an accretive way to EPS. No urgency there, and particularly given that we're conservatively levered today. No real change in the priorities. Like I said, we literally look at it every day and actively manage it, and it continues to be a priority going forward. It's just balanced, again, like I said, against organic growth, and maintaining a robust balance sheet, which again, we have today. Hopefully, that's of help.

Kenneth Lee: Great. Very helpful there. Thanks again.

Operator: Your next question comes from John Dunn with Evercore. Please go ahead.

John Dunn: Thanks. It was good to see the fee rate stable quarter-over-quarter. Maybe beyond Extension strategies, could you go through some of the puts and takes there, and maybe the outlook for the next stretch?

Scott Hynes: Yeah, John, it's Scott, and I'll start. In all candor, I think it's in complete sympathy with what Kelly just said on the first question there. I think Extension strategies was an important driver. I've continued to be impressed, and you see it in the fee rate. We've talked with you about this before, that it is very dynamic, that we did have a bit of a step change or reset, if you will, as we saw those very large institutional-driven Enhanced Equity wins. Those have pulled through, the very large chunky ones.

But make no mistake, the AUM mix from Enhanced Equity, as you know, has grown substantially in the last two years, up to now about 30% of AUM. So that's important. But again, I think that's pulled through and why it continues to be a source of growth going forward. It is dynamic each quarter. As Kelly said, there are other strategies, there are other products that are top of mind and increasingly so from our clients, and Extension strategies is there.

I would note, and that was obviously a large driver of the stability in the fee rate we saw quarter-on-quarter, was that the basis points fee rate all in on our inflows this quarter was higher than the outflows. That's not something we had seen, in all candor, when inflows was predominantly weighted on Enhanced Equity, which as you know typically would come in on a blended basis in that 30, mid 30-ish, lower 30-ish blended basis. We've been running often lower than that given the size and their intentions. But as we've said, each quarter is dynamic. It's not just one way.

I think in this quarter, as I said, you had the dynamic go the other way driven by Extension strategies. I would also add in that regard that Extension strategies with that also helps inform performance fees going forward. The relative amount of our performance fee eligible AUM remains roughly unchanged, call it around 12%. But within that, it's populated more and more by Extension strategies. So that's a nice opportunity there. So long story short, it is a dynamic situation. That blended fee rate we print every quarter is subject to market conditions and various puts and takes, and inflows and outflows that we're not completely in control of.

But like I said, we are heartened to see the stability of the blended rate quarter-on-quarter. Like I said, it can go in various ways, and it did this quarter. Like I said, the inflows fee rate being higher than the outflows, again, largely driven by the very good news from Extension strategies, and we continue to see demand there. So we'll wait and see, but like I said, it is not a one-sided story in regards to the direction of the travel of the fee rate per se. It is dynamic. Again, that's why I think we saw it hold in the way that it did flattish this quarter.

John Dunn: Got it. Then on the lowered range for variable expenses, is there something kind of a one-time nature about that for the fourth quarter, or has something changed, and that could be more of a sustainable range going forward?

Scott Hynes: John, if I heard you right, I think you are talking about the variable compensation ratio. That was the question?

John Dunn: Yep.

Scott Hynes: Yeah. It is noisy. Look, I think stepping back, our compensation structure, I think as you know, is largely formulaic. However, having said that, in any given quarter, you also see that ratio being formed by not only the relative level of earnings before the variable compensation. That, of course, includes management fees and performance fees. But also some deferral dynamics, right, incurred in regards to prior deferral awards, particularly from prior performance fees, and awards associated with those performance fees. So there is some recognition timing that comes through in any given quarter. Now, we do look ahead and try to provide a steer for our investors on where we think that ratio lands on a full-year basis.

I would remind people, again, that there is, for all intents and purposes, some real noise given those deferral dynamics I suggested or referenced earlier in any given quarter. I think the full year is the right way to look about it. There is some seasonality there, particularly given where performance fees land. So that is the ratio we have provided that range of 34%-38%, in part informed by an outlook on performance fees. But to be clear, we feel very well positioned today.

I think you may have noticed, and we referenced it in our prepared remarks, that the trailing 1-year percentage of our strategies outperforming benchmarks increased materially year-over-year from something like mid-70s a year ago, outperforming to closer to 95% trailing 12 months as of this most recent past quarter. So we feel like standing where we are here at the end of October, we are well positioned for a solid performance fee year. All else equal, that would push, if you will, the variable compensation ratio down. But it is very dynamic in any given year.

Short answer to your question is, I would not necessarily at all pencil in a 34%-38% range necessarily going forward for each and every year. It is where we think we land right now, recognizing there is a lot of variability with two months to go in the performance fee picture, but we feel good about it. But it is our best estimate of where we land for this particular year. Hopefully, that is of help.

John Dunn: Yes, great. Thank you.

Operator: Your next question comes from Joe Tumillo with Morgan Stanley. Please go ahead.

Joe Tumillo: Hey, good morning, everyone. Joe Tumillo on Mike Cyprys. I just want to talk about the private wealth opportunity and the scope to extend your IP to distribute more through the wealth channel, especially in light of the UBS partnership you just listed. I guess first, when should we start seeing or start to expect a flow dynamic to be impacted by that partnership? Then secondly, is there any scope for other organic or inorganic partnerships to help accelerate more penetration to that channel? Then can you also talk about the resources you have in place to capture that opportunity? Thank you.

Kelly Young: Sure. Hi, Joe. Nice to speak to you again, and thanks for the question. Global wealth is an important growth opportunity for us. It is an area that we see as continuing to expand our presence. I think, as you know, we already have established business in the channel, so we see considerable opportunity to really build on that foundation over time. The approach is very much to leverage existing investment capabilities and the infrastructure that we already have developed for institutional clients versus going direct to retail, for example, and making them available to a broader investment base through partnerships. In recent quarters, we have obviously announced the partnership with St. James's Place.

As you noted, I referenced the partnership with UBS Global Wealth Management. We have already seen funding starting to come in from that partnership. We are really excited about the dynamics there. Again, it is the opportunity to bring our Extension strategies capabilities to private wealth clients. Again, another channel for Extension strategies, again, where we, as you know, we have long-standing track records there, but opening that new avenue of growth. We are also expanding access through our UCITS platform. That has been established for well over 20 years at this point. But particularly in international markets, we are seeing real interest there, and again, continuing to build out that range.

Then obviously Tax-Aware, which is addressing specific needs of U.S. wealth clients. So, our focus is very much continuing on establishing either working with established relationships, whether that be St. James's, UBS, establishing new relationships so that we can reach more clients through our partners. But again, it is not about building out a new distribution infrastructure. It is an attractive opportunity, in large part because we see a way of increasing our client base, but also because we think we need fairly limited additional resourcing versus where we are today. Again, that may change over the next 12, 18, 24 months as some of these partnerships develop.

But again, we feel very comfortable with the distribution team, the sales team we have today, certainly with the investment capabilities that we have today and some of those very deep institutional quality partnerships that we have been able to establish.

Joe Tumillo: Okay, great. Thank you for that color. As for my follow-up, you guys delivered a really strong operating margin for the quarter, over 42%. I think this is a little bit above the aspirational guide you guys laid out at your investor forum. I guess, how should we think about the margin profile going forward? Is this kind of result repeatable on a more sustained basis? I guess if you could unpack some of the moving pieces here.

Scott Hynes: Yeah. Hey, Joe, it's Scott. Thank you for that. We feel good, but in sympathy with what I said in a different way about the variable compensation ratio, I think it's important that we gear ourselves around full-year results. Again, I think we feel very good. As you rightly point out, in May, we identified a near-term aspirational target of 38%-40%. Standing here at the end of October, we feel like we're really well positioned, knock on wood, literally, to realize that perhaps a little earlier than expected for the full year, if things go as we're looking at today. Now, if that happens, might we revisit the aspirations? We might, because the business continues to scale awfully well.

Again, there is some noise and puts and takes about compensation, and obviously, it is important in this regards of, again, where we land on performance fees and reading that across for any year. Again, I think we're very well-positioned this year for the full year. I know we printed just a little bit above 42% for the quarter, so that feels good. Now the onus is on us to realize it for the full year within or above that target range. Again, think we're well-positioned to do so.

I think unpacking a little bit, like I said earlier in regards to the variable compensation ratio, that's largely a formulaic dynamic, and the puts and takes are laid out in our quarterly filings. So largely symmetrical with earnings and sharing with the employees in an appropriate way. In regards to opex, it's behaving in a good way. As you'd expect, we continue to see some growth that effectively scales with our higher levels of AUM. So those fund servicing costs, including also sales-related costs. You've seen those come up, but that's as expected and in no way surprising, given really a step change in size of the AUM just in the last 12 to 18 months.

Alongside of that, we continue to invest, but it's in a disciplined way and it's in the areas that you might expect. So where are we seeing growth and expenses? It's not only talent, which obviously continues very important. But as a systematic manager, as you would expect, technology, data, and obviously ongoing, like I said, on the distribution side and people in that regard. So we continue to invest there, but feel like we're well-positioned to do so. None of that adds up to a step change in our expenses. Again, feel good for the year to realize that full year aspirational target of 38%-40%, and then we'll take it from there.

But I think we remain optimistic as a management team, as I'm looking at my CEO here, that we can continue to invest, deliver what we need to our clients, and invest in the business, and continue to realize some ongoing margin expansion. Because it feels very good right now. Again, hopefully, if we have the opportunity to revisit that target, we'll do so. But let's print the full year first. Again, it feels good right now. Hopefully, that's of help.

Joe Tumillo: Great. Thank you.

Operator: This concludes our question and answer session. I would like to turn the conference call back to Kelly Young.

Kelly Young: Thank you, everyone, for joining us today, and I wish you all a great day.

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