Virtus Investment Partners(VRTS) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a total assets under management (AUM) increase of 6% to $183.7 billion, driven by market performance and positive net flows [6][12] - The operating margin improved to 34.4%, up from 32.5% in the previous quarter, marking the highest level in two years [10][19] - Adjusted earnings per share increased by 6% to$ 6.92, the highest since Q1 2022 [10][20] Business Line Data and Key Metrics Changes - Retail separate accounts generated positive net flows of $0.4 billion, with a 5% organic growth rate over the past year [8][16] - Global funds AUM increased by 29% year-over-year, with 7% organic growth [13] - ETF AUM grew by 88% year-over-year, with 65% organic growth [13] Market Data and Key Metrics Changes - Institutional net outflows improved to$ 1.1 billion from $1.7 billion sequentially, primarily driven by redemptions of lower fee mandates [7][16] - Open-end fund net outflows improved to$ 1 billion from $1.3 billion in the previous quarter, mainly due to positive flows in fixed income strategies [8][16] Company Strategy and Development Direction - The company continues to focus on organic growth opportunities in retail separate accounts, ETFs, and global funds, while also exploring M&A opportunities to add capabilities [27][28] - New product introductions include actively managed ETFs and private credit CLO ETFs, reflecting a strategy to meet growing demand in these areas [5][29] Management Comments on Operating Environment and Future Outlook - Management noted that the fourth quarter could experience volatility due to tax considerations and the election cycle, making it difficult to predict flows [23] - Positive trends in retail separate accounts, global funds, and ETFs are expected to continue, with a strong pipeline for institutional flows despite current known redemptions exceeding known wins [9][23] Other Important Information - The company has maintained a disciplined approach to capital management, increasing share buybacks and dividends while investing in business growth [11][22] - The average fee rate remained stable at 41.9 basis points, reflecting solid investment performance and differentiated product offerings [17] Q&A Session Summary Question: Insights on fourth quarter flows - Management indicated that October trends are positive, but volatility is expected in November and December due to various factors [23] Question: Adjusted operating expenses outlook - Management confirmed that the current level of operating expenses is appropriate for modeling, with ongoing efforts to streamline costs [24] Question: Inorganic growth and M&A conversations - Management emphasized that while organic growth is prioritized, they are exploring M&A opportunities to enhance capabilities, particularly in private markets [27] Question: Capital allocation and new product opportunities - Management expressed confidence in the ongoing development of new products, particularly in ETFs and global funds, to meet market demand [29] Question: Affiliate ownership increase impact - Management explained that ownership in an affiliate increased to approximately 80%, which will impact non-controlling interests moving forward [33] Question: Institutional pipeline and flow outlook - Management noted that outflows are primarily due to reallocations rather than terminations, and they remain optimistic about the institutional pipeline [37]