Performance Overview - Approximately half of the funds outperformed their peer groups over various time periods, with 49%, 56%, 46%, and 61% outperforming over one, three, five, and ten years respectively [1] - Asset-weighted performance showed stronger results, with 72%, 54%, and 79% of fund assets beating their peer groups over three, five, and ten years [1] - In fixed income, over 75% of fund assets outperformed their peers across all time periods, with long-term performance in target date funds remaining strong [5] Financial Highlights - The company generated over $2 billion in free cash flow in 2025 and returned nearly $1.8 billion to shareholders, marking the thirty-ninth consecutive year of dividend increases since its IPO in 1986 [2] - The year ended with $1.78 trillion in assets under management, a 10% increase from the start of the year despite $56.9 billion in net outflows, primarily from equity and mutual funds [3] - Adjusted diluted earnings per share for Q4 2025 was $2.44, bringing the full-year adjusted diluted EPS to $9.72, a 4.2% increase from 2024 [14] Market Dynamics - 2025 saw strong global market returns, although the market was narrow, dominated by a few mega-cap stocks, which affected the environment for fundamental research and active management [4] - Despite elevated redemptions from legacy equity and mutual fund businesses, strong equity market returns offset net outflows, resulting in nearly $50 billion in additional equity assets under management by year-end [14][15] Strategic Initiatives - The company established a strategic collaboration with Goldman Sachs to pursue opportunities in wealth and retirement, launching co-branded model portfolios [6][12] - The alternatives business continued to expand, with a record fundraising year for OHA, raising over $16 billion, primarily in private lending strategies [10][49] - The company launched 13 ETFs in 2025, growing assets under management in ETFs to over $21 billion by year-end [9] Client Solutions and Innovations - The company introduced innovative tools like the Social Security Analyzer and expanded its active ETF business with new core strategies [8] - A new strategic partnership with First Abu Dhabi Bank aims to deliver tailored investment solutions across public and private markets in the Middle East [12] Target Date Funds and Market Position - The target date franchise ended the year with net inflows of $5.2 billion, although there were outflows in Q4 driven by M&A activity and market dynamics [15][38] - The company is positioned to mitigate headwinds in fully active target date funds by leveraging strong blend and hybrid offerings, which are growing faster than passive options [38]

Financial Data and Key Metrics Changes - The company closed 2025 with $1.78 trillion in assets under management, an increase of over 10% from the start of the year, despite experiencing $56.9 billion in net outflows [4][16] - Adjusted diluted earnings per share for Q4 2025 was $2.44, bringing full-year adjusted diluted EPS to $9.72, which is up 4.2% from 2024 [16] - Q4 adjusted net revenue was $1.9 billion, raising full-year adjusted net revenue to nearly $7.4 billion, an increase of 2.8% from 2024 [18] Business Line Data and Key Metrics Changes - Net outflows were concentrated in the equity and mutual fund business, with $75 billion of net outflows from equity and almost $64 billion from mutual funds in 2025 [5][16] - Fixed income and alternatives had positive net flows for the quarter, with fixed income delivering eight consecutive quarters of positive net flows [17] - The target date franchise ended the year with net inflows of $5.2 billion, while the ETF business had $1.8 billion in net inflows during Q4 [17] Market Data and Key Metrics Changes - The company noted a narrowing market dominated by a handful of mega-cap stocks, with riskier names outperforming quality and value [4] - The company experienced elevated redemptions from its legacy equity and mutual fund business, but strong equity market returns offset the net outflows [16] - The company maintained its position as an industry leader in active target date solutions, surpassing $560 billion in assets under management across a diverse suite of solutions [10] Company Strategy and Development Direction - The company established a strategic collaboration with Goldman Sachs to pursue opportunities in wealth and retirement through co-developed public-private offerings [9] - The company is focused on integrating digital capabilities and enhancing its strategic vision through organizational changes [13][14] - The company is investing in growth areas such as ETFs, SMAs, and alternatives, while maintaining a strong cash position for potential acquisitions [22][23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's plan and people, noting improvements in investment performance across several key strategies [7] - The company anticipates continued pressure in equity flows, but expects to offset this with inflows in target-date funds and growth in fixed income and alternatives [45] - Management highlighted the importance of equity market returns on operating margins and the need to balance investments for long-term success [26][27] Other Important Information - The company returned nearly $1.8 billion of cash to stockholders and extended its regular dividend for the 39th consecutive year [6][23] - The company launched 13 ETFs in 2025, bringing its total to 30, with assets under management growing to over $21 billion [11] Q&A Session Summary Question: Operating perspective for 2026 and margin outlook - Management indicated that equity market returns are the biggest factor affecting operating margins and that a portion of expenses is variable [25][26] Question: Tokenization and blockchain experimentation - The company is investing in digitization capabilities and exploring efficiency, product, and distribution opportunities related to tokenization [32][33] Question: Migration of privates into the 401(k) channel - Management noted that the investment case for including private market alternatives in defined contribution solutions is strong, but there is mixed sentiment among plan sponsors [36][37] Question: Target date business outlook - Management acknowledged softer flows in Q4, driven by equities, but noted that the blend category is growing faster than passive, which could help mitigate headwinds [41][43] Question: AI disruption exposure - Management stated that the company has been studying AI disruption risks and opportunities, and is positioned to adapt to changing market environments [49][52]

Financial Data and Key Metrics Changes - The company closed 2025 with $1.78 trillion in assets under management, an increase of over 10% from the start of the year, despite experiencing $56.9 billion in net outflows [4][15] - Adjusted diluted earnings per share for Q4 2025 was $2.44, bringing full-year adjusted diluted EPS to $9.72, which is up 4.2% from 2024 [15] - Q4 adjusted net revenue was $1.9 billion, raising full-year adjusted net revenue to nearly $7.4 billion, an increase of 2.8% from 2024 [17] Business Line Data and Key Metrics Changes - Net outflows were concentrated in the equity and mutual fund business, with $75 billion of net outflows from equity and almost $64 billion from mutual funds in 2025 [5] - Fixed income and alternatives had positive net flows for the quarter, with fixed income delivering eight consecutive quarters of positive net flows [16] - The ETF business saw $1.8 billion in net inflows during Q4, bringing 2025 net inflows to nearly $10.5 billion [16] Market Data and Key Metrics Changes - The company noted a narrowing market dominated by a few mega-cap stocks, with riskier names outperforming quality and value [4] - The fourth quarter showed signs of market broadening, which could benefit fundamental, research-driven, active management [4] Company Strategy and Development Direction - The company established a strategic collaboration with Goldman Sachs to pursue opportunities in wealth and retirement through co-developed public-private offerings [9] - The company is focusing on integrating digital capabilities and enhancing its strategic vision through organizational changes [13] - The company plans to launch an active crypto ETF in 2026, indicating a move towards digitization and innovation in investment products [33] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in their plan and people, noting improvements in investment performance across several key strategies [7] - The company anticipates continued pressure in equity outflows but expects to see positive flows in target-date funds and steady growth in fixed income and alternatives [44] - Management acknowledged the challenges posed by elevated redemptions from legacy equity and mutual fund businesses but highlighted strong equity market returns offsetting these outflows [15][16] Other Important Information - The company returned nearly $1.8 billion of cash to stockholders and extended its history of increasing regular dividends, marking the 39th consecutive year of increases since its IPO in 1986 [6][22] - The company launched 13 ETFs in 2025, bringing the total to 30, and grew assets under management in this segment to over $21 billion [11] Q&A Session Summary Question: Operating perspective for 2026 and margin outlook - Management indicated that equity market returns are the biggest factor affecting operating margins and that a portion of expenses is variable [25][26] Question: Tokenization and blockchain experimentation - The company is investing in digitization capabilities and sees opportunities in efficiency, product development, and distribution through tokenization [32] Question: Migration of privates into the 401(k) channel - Management noted that there is a mixed view among plan sponsors regarding fiduciary risk and liquidity, and they are working on product design for the Goldman Sachs partnership [36] Question: Target date business outlook - Management acknowledged outflows in the target date business due to M&A activity and noted that fully active target date funds are losing share to passive and blend strategies [42][43] Question: Impact of recent market disruptions on equity flows - Management stated that client reactions to market disruptions vary, with some clients inclined to rebalance and add to equities despite short-term market shocks [48]

Financial Data and Key Metrics Changes - The company closed 2025 with $1.78 trillion in assets under management, up over 10% from the start of the year, despite $56.9 billion in net outflows [4] - Adjusted diluted earnings per share for Q4 2025 was $2.44, bringing full-year adjusted diluted EPS to $9.72, which is up 4.2% from 2024 [16] - Q4 adjusted net revenue was $1.9 billion, raising full-year adjusted net revenue to nearly $7.4 billion, an increase of 2.8% from 2024 [18] - Adjusted operating expenses for Q4 were $1.2 billion, bringing full-year adjusted operating expenses to $4.6 billion, which is up 3.4% from 2024 [21] Business Line Data and Key Metrics Changes - Net outflows were concentrated in the equity and mutual fund business, with $75 billion of net outflows from equity and almost $64 billion from mutual funds in 2025 [5] - Fixed income and alternatives had positive net flows for the quarter, with fixed income delivering eight consecutive quarters of positive net flows [17] - The target date franchise ended the year with net inflows of $5.2 billion, while the ETF business had $1.8 billion in net inflows during the quarter [17] Market Data and Key Metrics Changes - The company experienced elevated redemptions from its legacy equity and mutual fund business, but strong equity market returns offset the net outflows [16] - The average effective fee rate for Q4 was 38.8 basis points, down from 39.1 basis points in Q3 2025, driven by changes in asset and vehicle mix [19] Company Strategy and Development Direction - The company established a strategic collaboration with Goldman Sachs to pursue opportunities in wealth and retirement through co-developed public-private offerings [9] - The company is focused on integrating digital capabilities and enhancing its strategic vision through organizational changes [13] - The company plans to launch an active crypto ETF in 2026, utilizing a blend of fundamental and quantitative analysis [34] Management's Comments on Operating Environment and Future Outlook - Management noted that the biggest factor affecting operating margins is equity market returns, with a portion of the expense base being variable [26] - The company anticipates continued pressure in equities but expects to offset this with inflows in target-date funds and growth in fixed income and alternatives [45] - Management expressed confidence in the company's strategic initiatives and the ability to navigate changing market cycles [22] Other Important Information - The company returned nearly $1.8 billion of cash to stockholders and extended its regular dividend for the 39th consecutive year [5] - The company launched 13 ETFs in 2025, bringing the total to 30, with assets under management growing to over $21 billion at year-end [11] Q&A Session Summary Question: How is the company planning for 2026 in terms of operating expenses? - Management indicated that a third of the expense base is variable and that they are balancing cost savings with investments in growth areas [26][28] Question: What is the company's approach to tokenization and blockchain? - The company is exploring efficiency opportunities, product opportunities, and distribution opportunities related to tokenization and blockchain [33] Question: What is the outlook for the target date business given recent outflows? - Management noted that outflows were driven by M&A activity and that the company is well-positioned to mitigate headwinds with strong blend and hybrid offerings [43][44] Question: How does the company expect to respond to recent market disruptions? - Management stated that client reactions vary, but the overall impact on flows is not expected to be substantial in the long term [48] Question: What is the company's exposure to investments potentially disrupted by AI? - Management emphasized that they have a rigorous credit process and are well-positioned to navigate potential disruptions in the market [53]