Invesco Ltd. (IVZ) Earnings Call Transcript & Summary

All right. Good afternoon, everyone. My name is Patrick Davitt. I'm the U.S. Asset Manager Analyst here at Autonomous. [Operator Instructions] So it's my pleasure to welcome Invesco's CEO, Marty Flanagan. Invesco is a diversified global asset manager with $1.5 trillion in assets under management, has put up an impressive string of significantly positive organic growth. I think probably the most consistently high of all the public asset managers, even the perennial winner of BlackRock. But the environment has obviously become a little bit more -- a little less constructive, and I'm sure we'll get into that today. So thanks for coming, Marty.

Yes. Thank you.

Given the volatility this year, I've been starting all these discussions on some higher-level macro questions. First, on flows. Like I said, you guys have put up a remarkable string of net inflows, even through the first bit of volatility earlier this year. That streak obviously ended in April. It sounds like May is probably tracking worse, which Alison talked about yesterday. So to be fair, you're not alone in the spot by any stretch. But aside from the obvious kind of risk-off mentality, could you dig in a bit more on what you're seeing within the moving parts?

Yes. Yes, happy to. And look, even as you said, we had 6% organic growth in the first quarter, so that was still -- the environment has changed quite dramatically, right? And I think nothing new to anybody listening or in the room that it was risk off. It was risk off everything. Equities, fixed income, largely where you saw the bulk of the redemptions, I'd say, more retail activity than institutional activity. With the institutions right now, they're staying the course. The conversations in our mind that we're having is things like one, but not funded, will they be delayed? Yes or no. It's too early to know. I'd say, right now, people are still feeling their way. And where do you start to see the shift and thinking and some of the retail channels and the like, and you wouldn't be surprised with the inflationary environment, things like commodities, things like bank loans, those are starting to be areas where you're seeing interest where you would not have seen interest in commodities for a very, very long time. And I think you're right, through May, it continues to be a volatile environment. And our expectation is until things settle out some, it's going to be pretty quiet from a growth point of view.

Okay. I think Alison mentioned that the China lockdowns have been a headwind more recently. And I think when COVID first hit, you hadn't said, they were actually good for China flows. What do you think is different about this lockdown versus that one?

Yes. So you have a couple of things going on there right now. I think all of us are generally from the macro trend coming. We all coming into the year, recognized largely we'd be dealing with inflationary pressures and likely rate hike sounding. Anybody saw the work coming and this the magnitude of lockdown in China, and it has created a very negative sentiment, as you would imagine, just because it is so strong. It has gotten in the way of supply chain again. So that has been a negative macro factor. We continue to be in inflows in China, although less robust than what it is. I frankly look at this as temporary. And as they're starting to loosen up the lockdowns, I suspect sentiment will start to change.

Got it. So moving to the other side of the equation, fund performance. I sense a healthy mix of both hope and frustration out there from your community. Hope obviously that this breakdown in correlations, outperformance of value stocks, et cetera, could stem the long-standing active equity outflow problem. Frustration, obviously, that broad relative fund performance still appears to be quite middling to bad for most managers. I think probably because of growth creep funds. I don't think you're as guilty of that as others, but how would you frame these kind of competing feelings as you look at what's happening at the fund performance?

Look, I think you captured it really well. I think, from my perspective, almost since the financial crisis has been -- this central bank intervention that has created this, quite frankly, massive rise of -- to cap-weighted indexes, and it was a real challenge for asset management's value in particular, right, especially with the low rate environment. I think this doesn't probably feel like it at the moment, but the raising rate environment probably ultimately to normalization. I mean it's going to be very good for active managers, and -- but you're at this confluence of transition as you're pointing out right now, good for value managers, less good for growth managers at the same time. And the geopolitical elements are also negatively impacting things like emerging markets. That said, I personally -- we shall be long-term investors. If you're looking out 2, 3 years, greater exposure in emerging markets, and I'd say, it's a good time to be in the market. So I think it's good for active managers.

So with that mind, I think all of us are finding it increasingly difficult to use history as a guide for how this could play out. Maybe the 70s is where I'll kind of try to look at, but what you're seeing from your client conversations, is there a sense that this period of volatility and outperformance could actually probably be the push that moves the pendulum back to active flows?

There will definitely be an improvement. But let me -- a couple of things I'd say. I do think -- again, I do think there's going to be good tractive management. I think active management within the totality of portfolio is really important. That is how you get excess returns. During this past 10-year period, though, the barbell has largely been -- I'm making extreme comments here, cap-weighted index and alternatives, right? And it is definitely going to open up this sort of active sleeve, but you have to be a good active manager. And that's how you're going to generate the returns you need. So I do think that is something that's going to be helpful here. I don't think the mindset of going all the way from cap-weighted indexes through alternative is going to go away, but I think you'll get some growth in the active category again.

So the other side is obviously bond fund performance and bond funds had until recently been one of the bright spots for active flows. We've seen a lot of money dislodged. Looks like in May, some of that money is just coming back into ETFs. So are you concerned that what's happening on the bond side could actually accelerate the pacification there, the ETFacation there as kind of this money that's probably been locked in bonds fund for years rotates back into ETF.

Not necessarily. So I break it down into a couple of areas. What did we see? You basically saw with this volatility people getting quite scared to the rising rate environment. Everybody out of long duration going short end of the curve. That's starting to change a little bit here for different reasons, but I think you also have to separate institutional versus retail. The institutional money managers will stay the course. They will continue to use the totality of the fixed income market. I think the reaction of the retail investors was one of a -- and not long-dated -- I mean the money funds. That said, I do think you're going to see greater passive portfolios in fixed income. It's just I think an outgrowth of what's happened in the equity market. So I don't think it's necessarily a result of this, I think it's a natural progression, but this has probably pushed that way too.

On that topic, you are a leader in kind of smart beta and more sector targeted ETFs, which appeared to at least be somewhat the cause of the recent negative shift in flows, and there's been a lot of negative reporting about those kind of ETFs as well. How would you frame the performance of those kind of ETFs through this volatility relative to more traditional broader market index ETFs?

Yes. Look, I think it's a result of exactly the design of the ETFs. You get the net return, right? So you're trying to get that exposure. So I don't think it should be a surprise. And I think making decisions over 1 month, 2 months and 3 months is probably a mistake, and so I still think you're going to continue to see institutions and individuals use sector ETFs to build out the totality of their portfolio as they're thinking of strategic and tactical type moves from a personal perspective.

There's been, I think, a long -- I think since you kind of started building your -- I think you're probably the industry leader there, position that just like what's happened in kind of the traditional ETFs, you'll start to see the significant fee compression as other step in at much lower fee rates. Not really seen that yet, but is that something you're concerned about in the long run?

Look, I think you just follow the industry. I mean over time, what's happened is with scale, consolidation of the industry. The strong getting stronger. They manage more money. There's more capacity there to have lower fees. I think you could anticipate that. I don't foresee the fee war that you saw in cap-weighted indexes because it was simply a commodity product, right? And the differentiator was, I'll save you 2 basis points, and I just don't see that. If you're adding value, I just don't see the same magnitude of the fee wars there.

We touched on this a bit earlier. Another place you've really shined is China. And I think you're probably well ahead of any other at least pure-play U.S. asset manager at this point. Could you kind of frame where that business stands? Where you see it going away from the lockdown issues, obviously? And to what extent do you think these increasing tensions between the China and the U.S. could change or derail that opportunity or impact that opportunity?

Let's see. A couple of things. So just where we are right now. So we've been an investor in China for 30 years. The joint venture started in 2003. We've owned 49% of it since that time it's called Invesco Great Wall. The important thing and the key differentiator, and I think one of the key reasons why we've been so successful outside of -- we've had management control from the beginning. So we've operated as Invesco, not just through the joint venture which is the retail market, managing money for local Chinese with Chinese equity fixed income and balanced capabilities, but also through our inbound management for the institutional business there. So it's north of $114 billion. It's less obviously with the market. It has been a hugely important part of our growth over the last 3 years. As I mentioned, it slowed down recently, which is no surprise, just the environment there. Now let me take a step up. By any handful of estimates that you see out there, if you look at the asset management industry and where is the growth going to come from over the next 3 to 5 years, you can find them say, about 40% of all the flows will come from China. So we think the biggest risk is not to be in China right now, and it's a highly competitive market. The local Chinese firms are very, very strong, very talented. And so those coming in, it's -- you're not going to be successful just by being there, and it will take time. Now moving on to the tensions between the U.S. and China, they're real. And in my mind, it's the 2 largest economies in the world are going to compete, and that's fine and that's healthy. It would, I think, be healthier for the world if that was what was driving it and some of the less geopolitical tensions and that's more -- that's uncontrollable from our point of view. We just continue to look at it as an opportunity and the bigger risk is going to be not to be in China.

Yes, makes sense. And I guess on that point, it seems everyone is still kind of getting approved to have licenses, which would suggest at least the powers to be on that part of China are, don't care. But that does introduce a competitive issue, and a lot of these are pretty big brand names, at least in the U.S. Do you think because you've been there so long, you have pretty good moats around this business?

Yes. So let me come back to the one of your first points there, and I'll come to the second. So China is committed to continuing to open up capital markets, developing the marketplace for savings, for retirement. They need to do that for their population, and so that's why I think financial services firms are still being welcomed in and helping to develop in that market. And -- so I think that's an important point. Secondly, as I said, the competition there is already very, very strong. Even though the firms coming in, as you say, with strong reputations, it's going to be a lot of work. It's very competitive already, and I'm sure some of them will be successful and quite frankly, some won't.

Right. So solutions and model portfolios are kind of the buzzwords in the industry, and I think a part of the reason Invesco has become one of the best inflows in the group. Could you walk us through the evolution of that product? I think a lot of investors have a hard time getting their head around exactly what it is, and why it's been suddenly so powerful for your growth?

Yes, I think you're right. As soon something becomes a buzzword in the industry, it's very confusing. So I'm fine what we've done and others can determine if it's similar or not to what others have done. What we realize, as we built out a full set of investment capabilities over quite a period of time, we did that because we were responding to what we saw as client demand, client need. What we then realized was clients were wanting more from us throughout the world and also consistent with what we've talked about in the past. That clients around the world are using fewer money managers, and they expect more of us. That's where this for us, we developed the solutions capability. So what is it? It is a group of PhDs, CFAs with an analytical tool, proprietary interval tool that we built, and it engages with large institutions, corner offices of wealth management firms to analyze the totality of their portfolio and have a discussion about what are they doing with their asset allocation wide. This team utilizes our existing different investment capabilities. It does not compete with our teams. It's the utilizer, and that has helped us an awful lot. And when we began this journey, I would not have envisioned that we would have had the level of engagements we have with very sophisticated institutions because they have the wherewithal to do this. They have their own capabilities, but it's just really turned into a exchange of what is possible in the world of asset allocation and how best to get there, and it's been a very important part of our growth.

So if I'm an adviser seeing all these solutions or model portfolios on my desktop for multiple providers, how do I know Invesco is the right one for me? So I guess, in other words, how do you increase the probability that your portfolios are the ones getting picked up when I imagine they're seeing a lot of other people's portfolio.

Yes, that's a good question. I'd say, first of all, it's -- there's fewer than you would imagine just because of the way wealth management channels are introducing capabilities into the platforms. They tend to be complementary, not duplicative, right? And so they each have a purpose. So it's very different than the days going by where -- here's 150 value phones, pick one, right? So it's a lot easier. And I'd say, it's -- for us, what we do is a combination of our financial advisers that match off with theirs going through what are they trying to accomplish. That's obviously nothing new. We also have the solutions team that also works with what have become these now super teams within these platforms to work through that decision-making process, will it be the model portfolios or how they're thinking about building their practice.

Okay. Fair enough. And the cynics I talk to, and I'll admit, sometimes I am one that sits at that -- these are a novel way to say, repackage active funds and help improve the flows to active funds by kind of putting it in a new wrapper. Is that fair?

I don't know if I -- Trojan Horse. That's a fine thing actually. So [indiscernible] yes, I wouldn't think about it that way. I think what's -- what are the wealth management platforms trying to do? They are trying to build capabilities so they can make the financial advisers more successful, and -- which I think is in meeting client needs. And if you look through these, the ones that were involved in, it's any combination of capabilities through ETF mutual funds. So it's wrapper independent, quite frankly, and some of them are going to SMAs. And you can start to get some more alternative types of exposure. You're not fully there yet. I don't want to overdo that one from liquidity point of view and the like, but I think it's a really good development for the end client of the wealth management platforms, quite frankly.

So the other big buzzword increasingly, in a negative light, is ESG. So how would you say Invesco's position for that trend? Is there a way to differentiate yourself on this trend? As it feels like everyone kind of now says they're doing it, even if they're not, which gets into another discussion.

That's another discussion, for sure.

So...

Look, it's an evolving space. There's no question about it, right? And it's a pervasive conversation. It's higher pitched in different parts of the world. It means different things to different clients and in different parts of the world. And I think that's part of where the confusion comes. There is an effort to sort of standardize what this is and what it's meant to do, we're not there yet. So where are we right now? We have about $90 billion of assets under management that you would say would qualify for ESG. A subset of that almost $20 billion is an ETF. So it's probably one of the broadest ETF platforms around the ESG. So what have we done with it, and what's differentiated? So when we think about it, it's investor-led and responding to clients. And what does that mean? The decision around ESG and proxy voting is in the hands of the portfolio manager. We have an ESG team highly qualified people that do all the work that you would imagine, but they're supporting the investment teams. Other firms would have that ESG team do the overlay to make the decision within the portfolio. We think it should enhance the portfolio manager, and that's a differentiator. The other thing that we've done with our ETFs is, we have echo boating. So the ETF holding would get assigned to the holding of a portfolio -- active portfolio manager, and they would be making that decision. For us, we think that's how we get better outcomes. And I think the other thing that's important here, and I think that's where you're going, what you're hearing, the loud noise, all clients don't want the same thing. So not everything is ESG for some clients. You go, you leave the United States -- and this is by regulation, you have to respond to the regulation. And there's just different desires in different parts of the world right now, and that's just a fundamental reality. And I think that's where the road to wherever the end game is, is going to be pretty windy, but I think you can start to see what might be happening on the other side of the storm here.

So how have your ESG strategies held up relative to others given what's happened this year, given what's happened with energy?

So it's hard to, quite frankly, separate the impact of embedded ESG in portfolio management decision and what it has done for returns or not. So I actually can't answer that. Yes, what you are seeing, though -- so if you want to look at like ETFs, dedicated ETF ESG portfolios, they're not dissimilar to the returns that you'll see in non-ESG portfolios, but it is ESG considerations embedded within those ETFs.

Do you think what's happened this year changes kind of the long-term market share gains of the strategy?

Look, I think this is what part of the confusion is. So we're -- right now about 85% of our investment teams are embedding ESG principles and how they work through their portfolios. And when I think through it, it is how are my clients better off by the decisions that I make around ESG. And I think that's here to stay, right? I think where you start to see some of the greater tension right now is probably around climate and the debate of exclusionary portfolio. So if I'm not going to own oil and gas in my portfolios, and the reality is this is going to be a transition over decades to get there. So it's just a reality. And the other thing that money managers are struggling with and companies from ESG or climate is the production of information to make an informed decision of what is your transition plan around energy and how are you going to get there. We're still early stages of that. So it's really hard to draw conclusions of, is there progress? Yes or no. But I do think the reality of -- I'm a believer. You should -- around climate, the exclusion of our portfolios don't make much sense. So where is the money, where is this technology, where it really is through companies like oil and gas companies to get there.

Yes. So DWS was raided yesterday on this greenwashing claims. It seems to me it would be hard to make similar claims with a U.S. manager because we don't have as kind of defined rules. But what are your views on this kind of increasing focus on greenwashing? To what extent do you think it's an issue for the U.S. managers?

Well, it's hard to know. I'd say, any false claims regardless of what you do is not a good thing, right? Period. Full stop. It should be stopped. And by the way, it's bad for the industry where it happens. I think you're hitting on a point where the road maps of definitions are coming out there that will set the pick for what the reality is. And my personal belief is, the vast, vast, vast majority of the money managers engaging in ESG are doing it with a positive constructive wins trying to do what they should be doing.

That's good to hear. Moving to the earnings model. One of the big takeaways from the last couple of earnings reports for the industry really is a sense that there's just not that much wiggle room for asset managers to pull back on investment spending right now. So as we have yet another quarter in 2Q with a negative AUM mark outflows, the resulting lower revenue baseline, how should we think about your ability to pull back on expenses from here?

It's the right question, but it's also the reality of all of us being in the industry. When the market drops 15%, there's not much you can do, right? And then you have to think about being thoughtful about what are you trying to do? How are you going to continue to advance the business for the benefit of the clients and for the shareholders. That's the balance that you have. And in a very competitive industry, you really need to continue to invest against the things that are making a difference again for clients and shareholders. We'll continue to do that. We will -- about 1/3 of our expense base is variable. That's not going to close the gap by such a dramatic market pull down for any organization. But we'll be very prudent as you would hope we'd be. Things that are important, but can be delayed a quarter or two because they're not going to make an impact, those are things that we'll do. But this is the time in downturns to be thoughtful to differentiate yourself when the market turns again to make a difference. And I think the other thing, as you've seen over the last number of years from the Oppenheimer combination, some work we did after that, there's not a whole lot of well hanging fruit anymore, right? And we've effectively -- if you want to use a proxy, if you look at Q1 2020 margins were 36%. Q1 '22 margins were 39.5%. And we're not dissimilar from the beginning of that turn down. So the work that we've done is effectively added. You're starting with 300 basis points additional margins and what the company would have looked like a couple of years ago from these other efforts previously.

Got it. We're on the model point, there's a question in the room. I think you guys have addressed this well, but since it's here, the -- on the revenue yield, it tends to trend lower over time. What are the key drivers of that? Where do you -- how do you see that tracking over time? Is there any hope for it ever kind of stabilizing and going back up because I think all of us have kind of resigned the fact that it's just going to go down.

Yes. So look, it's been topical, and we continue to point out there's effective fee rate and margin, right? And again, you can look at some previous things that we looked at is our margin -- as our fee rate has gone down, our margin has expanded. And in our case, it literally is the mix shift. And so there's 2 things -- a couple of things happening there, if not more. But the rapid increase in our ETF business, which is very profitable, but it also has -- if you look at Invesco vis-a-vis other ETF providers, our effective fee rate is 33 basis points, excluding the Qs of our ETF business, which should be very different than most, which again, we keep coming back to. And you're also in an environment where when it goes to sort of this risk off more into fixed income, they are lower fee capabilities, it doesn't mean they're lower profitability.

And you're getting -- I imagine you're getting to the point with a lot of these ETFs that the incremental margin is getting quite high, right, which is what we've seen at the BlackRock with some of the ETFs.

Scale does that.

Yes. Yes. Yes. Got it. I guess alternatives is probably one place that could help the fee rate.

Yes.

We do have a couple of questions on that. Maybe you could walk us through what you have kind of in development where you see that business growing from here?

Yes. It's probably an area we've probably not done a great job of communicating as well as we should have to everybody. So let me hit on a couple of things right now. So overall, when you look at alternatives, we have about $211 billion in alternatives, and that's a combination of private alternatives and public. And let me stay on that. So if you look at public alternatives -- let me start with private. It's $118 billion, of which $74 billion is direct real estate, $44 billion is private credit and continue to build. It's been growing quite rapidly. The public alternatives is $93 billion. And so I think commodities, real assets, REITs, MLPs, listed infrastructure. It just continues to be a very important part of our business, continuing to grow very rapidly in the private markets, actually, in particular. And again, institutionally, that's where you're seeing just a lot of our success is coming from the private asset piece in particular.

And how does that business compete with kind of the pure play large alternative managers on this the same menu?

Yes. Look, the credit capabilities and direct real estate, I mean very, very successful business. And the real estate, it's a global real estate business. It's one of very few in the world. It's a 30-year track record. All the people that you would mention you would want to be clients are clients, and same thing at the bank loan business. It's where that started.

For sure. Okay. Moving on to the MassMutual relationship, which I think dovetails with the alternatives business.

Yes.

Last year, you came here virtually with the CEO of MassMutual, which I think was a helpful statement about their commitment to the relationship, obviously. Could you update us on the state of play there? How much AUM you're managing? And any update on things you're working on together?

Yes, happy to. So it continues to be a really important relationship. So a reminder that I mean about 17% of the company, 2 Board seats. We continue to work with each other on a very regular basis. Right now, there's about $10 billion in assets for management. Half of that $5 billion in the broker-dealer. We're #2 on the platform -- in the broker-dealer platform. Another $5 billion in sub-advised variable annuity capabilities. So the combination of that continues to grow. There's another $3 billion that we manage or commitments to. So north of $1.5 billion is commitments to alternative capabilities. About $1.1 billion has been funded already. That's really, really important to us -- so which we've been talking about. They are the anchor investors, $400 million. So it's not just $400 million of an anchor, but it's also the reputation that comes along with MassMutual. They've done that for the nation real estate capability also, and we continue to talk in other areas that are consistent with what they're trying to accomplish with their general account. So it's -- which is, again, continues to be not just a good relationship, but also very strategic. It's in their best interest for us to be successful and vice versa. So again, I can say more to come as time progresses.

There's probably not much you can say on this, but I'm curious, is there more the two of you could do together through the lens of like what's happening with these big types between the large alternative managers and insurance platforms? I mean you talked about your alternatives business.

Well, look, hopefully, I was addressing that there. Yes. So look, we're -- Roger Crandall and the team there and us, it's a very open mind on both parts. And if there is -- if it makes sense, we're going to do it together. So I wish I could be more specific than that, but that's the reality of the situation.

Another one. You probably can't say much. Could you update us on the relationship with Trian now that their focus appears to have shifted much more to another position?

Yes. No, it continues to be very strong. Ed and Nelson were very constructive Board members. We continue to keep a very open dialogue. As you can tell, they're very positive in the company. People are worried that they're going to sell their position out when they left. In fact, they bought more. So again, very constructive. They know the space well, very good thought partners and it continues to be a strong relation.

So is it fair to assume that the position has evolved more to one of -- we just think this is a very cheap company to away from more activism.

Not just cheap, but they actually think we're good, by the way. So not going to frustrate themselves.

Sure. Cheap and good.

Cheap and good. Yes. So yes, and look, I mean, the they've made a lot of money. They're in the stock at $9, something like that.

On the valuation point, MassMutual has this $4 billion preferred that I think is viewed as a bit of a overtrust from some investors and the reason why you trade where you trade. Is there anything that can be done to kind of restructure that or...

Look, it's a very valuable piece of paper to MassMutual, and in the context of an insurance company, the cash flow that matches off against our liabilities. It was part of the enabler to get the transaction done at the time. I don't think anyone saw the market that we were going to head into, which I think highlight...

Bad timing.

Yes. Bad timing. It gets resolved by our continued growth and everything else we're doing around the balance sheet, which I think most people looked at, there's been quite a bit of strength, greater liquidity, deleveraging in the balance sheet, we'll continue to build that over time. But there's nothing immediate, I would say that would change that. And by the way, it's not getting in the way of our success, which I think is evident with how we've been -- the results you've seen over the last few years.

Agree. A question from the audience. We kind of touched on this, but maybe we can package it differently. How is the kind of one, but not yet funded institutional pipeline tracking since last quarter, our conversations evolving, are you still seeing engagement?

Yes. And so that would be the open question, right? So when you get in these volatile markets, how our client is going to react. And so historically, during a very volatile period like this, you pay attention to one, but non funded is going to slow down fundings. It's too early to make that determination, I'd say, right now, but history would suggest that could be an area of slower fundings with market uncertainty. But again, on the other side, institutions tend to be pretty committed to what they're trying to accomplish in their portfolios. So we'll just have to see over the next couple of quarters.

So is it fair to assume it could actually go up because people are kind of delaying things?

So it could end up stagnant, right? So what -- it could go up, assuming people are -- you're continuing to win mandates, which is still the case right now. It's also the case, too, when you're in a search. Searches get halted in moments like this with uncertainty, which could slow down sort of the finals presentations. We don't quite go into the one that's not funded.

Okay. Another one from the audience. You mentioned the real estate business, and a lot of the kind of pure-play alternative managers are talking a lot about the democratization of vaults and packaging things better for retail and obviously, BREIT in real estate is the big one there. Where are you guys in trying to build stuff like that and get on platforms? Because it's obviously a huge flow opportunity from what we've seen.

Yes, no question. So we're lucky to be in this crossroads of having the capabilities that are needed to be successful in this democratization of access to alternatives. I'll back up with what's the macro opportunity if you go to the wealth management platforms that you think the asset allocation for many of their clients and say most of their clients should be alternative exposure anywhere from 15% to 20%, they're probably low single digits right now because trying to get access -- enough capabilities that can work within these massive platforms to be successful. So as I said, our direct real estate capability is very, very strong. We've in REIT is not dissimilar to BREIT. That's what's been funded by MassMutual. It is being onboarded right now through the industry. It takes a long time to get these onboarded done, I'd say, for the next quarter or two in the U.S. is our expectation where we'll...

And you're talking about like major wire house...

Major wire houses, yes. And again, I should be careful on the timing. So we're in the process and -- but what has been a good development is with UBS outside of the United States took some version of this direct real estate capability that would look like in REIT to BREIT. And just last fall, raised -- introduced last fall, first close is about $650 million. So it's starting to happen. And we do look at it as quite an opportunity, not just from our perspective, but also need through these very important wire houses.

And are you developing similar products around the credit strategy?

Yes, exactly. That's what's following behind.

And you already have the bank on ETFs, but...

Yes.

Great. Capital, Trian obviously used to believe that the M&A should be a top priority for you. I don't know where that stands, but -- and you've historically been active on that front. Do you think you're pretty close to having all the pieces in place at this point? Has the M&A kind of started to move down the latter? And if not, what kind of targets are you still looking at?

Yes. So let me -- perspective. Our first protocol right now is reinvestment in the business and into the areas we've been talking about, and that's proven to be successful. We have had a history of acquiring and how we think about it is, it has to be strategic. It has to be filling a client need. It has to be financially attractive, as you would hope. And then the part that most people think is fuzzy, but it's actually a reality is, there has to be cultural alignment, if there's not, bad things happen. And also importantly, this element of being complementary matters because they're hard to do. And when there's overlap, there's so much breakage, right? It's not good for clients, not good for employees and ultimately, not good for shareholders. So that sort of narrows your playing field, if you want to be successful. We continue to pay attention to what's in the marketplace to see if there's any opportunistic thing that could help. There's no alarm bells ringing at all here. We don't see any obvious opportunity right now, and we feel we're on a very good path at the moment.

Maybe to finish, notwithstanding the macro environment, which I know can be tough as an asset management CEO. But I think we've made it clear that it feels like the stock is probably undervalued relative to the long-term growth opportunities. So what's your elevator pitch to people that don't own the stock around why they should have stock?

When you look at -- so the elevator pitch first of all is, $100 billion industry going to continue to grow. It is going to consolidate the stronger, get stronger. It's a global business, multichannel, broad range of capabilities. We're meeting needs of clients and where you look at the growth opportunities, whether it be private market alternatives, ETFs, China, the solutions capabilities that we built, the exposure in the active space, in particular, the Global Equities merger markets, international, pretty well positioned business. And I think what's also important, very few firms have had the organic growth rate that we've had on a consistent basis so broadly. And it will continue. Will it slow and dip here for a quarter or 2? Surely good. I mean it's inherent, but that's not a permanent state at all. And by the way, even in that, it's a much better result than what we're seeing from our competitors.

We'll leave it there.

That might be more in elevator pitch, but I tried. So buy the stock.

Thank you, Marty.

Thank you very much.