Earnings Call: Q2 2019

Aug 8, 2019

Good day, ladies and gentlemen, and welcome to the Brookfield Asset Management Second Quarter 2019 Results Conference Call and Webcast. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Ms. Suzanne Fleming, Managing Partner. Ma'am, you may begin. Thank you, operator, and good morning. Welcome, everyone, to Brookfield's Q2 2019 conference call. On the call today are Bruce Flatt, our Chief Executive Officer and Brian Lawson, our Chief Financial Officer as well as Sachin Shah, Managing Partner and Head of our Renewables Business. Brian will start off by discussing the highlights of our financial and operating results for the quarter, followed by Bruce, who will give an update on our business. Finally, Sachin will give an update on our efforts to grow our solar power business. After our formal comments, we'll turn the call over to the operator and take analyst questions. In order to accommodate all those who want to ask questions, we ask that you refrain from multiple questions at one time in order to provide an opportunity for others in the queue. We'll be happy to respond to additional questions later in the call. We'd like to remind you that in responding to questions and in talking about new initiatives and our financial and operating performance, we may make forward looking statements, including forward looking statements within the meaning of applicable Canadian and U. S. Law. These statements reflect predictions of future events and trends and do not relate to events. They're subject to known and unknown risks, and future events may differ materially from such statements. For further information on these risks and their potential impacts on our company, please see our filings with the securities regulators in Canada and the U. S. And the information available on our website. Thank you, and I'll now turn the call over to Brian. Thank you, Suzanne, and good morning to all of you on the call. So let me start off by saying that we are very pleased with the results for the quarter. Our Asset Management business reported particularly strong results led by fundraising within our private funds, and this led to a 33% increase in fee related earnings prior to performance income. As well, acquisitions and organic growth contributed to strong operating performance within our underlying investments and our listed partnerships. Together, funds from operations, or FFO, totaled $1,100,000,000 or $1.09 per share and net income was $704,000,000 or $0.36 per share attributable to shareholders. Cash available for distribution and or reinvestment was $599,000,000 for the quarter, dollars 2,500,000,000 over the past 12 months. So first, I will touch on the results of our asset management business. This, as you know, includes our fee related earnings and carried interest. So those fee related earnings were $263,000,000 in the quarter. Before performance fees, as I mentioned, that's a 33% increase over the prior year quarter, and that reflects a similar increase in the amount of fee bearing capital. We did record some significant performance fees last year, so this growth is not evident in the total FRE, but does represent very strong growth. And this is pronounced by the or reinforced by the fact that our annualized fees and target carry have also increased by 33% from this time last year. So this positions us very well going forward. What was a big part of driving that was we added $35,000,000,000 to fee bearing capital over the past 12 months. This includes $27,000,000,000 of net private fund inflows as we are in the midst of raising our current vintage of flagship funds and as well we continue to build out newer product offerings. It also reflects the increase in the capitalization and the distributions at our listed partnerships. Going forward, we expect continued growth in fee related earnings. We will benefit from full period contributions from the latest round of flagship fundraising and subsequent closings as well as additional fee revenues from the capital issued last year by BPY in association with the privatization of its retail business in August of last year. These fees will turn on late in Q3, and we'll see a full quarter of contributions starting in Q4. With respect to carried interest, we recorded $190,000,000 of realized carry in our FFO this quarter. This is the amount that became no longer subject to clawback during the quarter, largely as a result of asset dispositions in our 4th flagship private equity fund as well as our 1st flagship real estate fund, which locked in these values. Over the past 12 months, we've recognized $536,000,000 of carried interest into income, and we expect to recognize additional carry from both these funds in the second half of twenty nineteen and the first half twenty twenty as we continue to complete asset realizations. Turning to invested capital, including disposition gains, FFO from this source in the quarter was $405,000,000 FFO growth across the listed partnerships was strong. We benefited from new investments within the businesses as well as same store growth and development within the existing businesses. This was partially offset by FFO reductions from some directly held investments that are more cyclical or variable in nature, so this was not entirely unexpected. Disposition gains in FFO totaled $303,000,000 in the quarter. This represents our share of gains on the sale of several investments across portfolios. Dispositions included the sale of our interest in a residential management services company, facilities management services business and our executive relocation services businesses. Over the past 12 months, we generated over $2,500,000,000 of cash available for distribution and or reinvestment, as I mentioned earlier. This cash flow supplements our core liquidity at the band level. Overall, liquidity stands at nearly $50,000,000,000 This includes $14,000,000,000 of core liquidity across Brookfield and the listed partnerships and $35,000,000,000 of uncalled private fund commitments. We continue to look for opportunities to deploy this capital, but at the same time, we continue to focus on maintaining elevated liquidity so that we can continue to invest opportunistically and across any point of a market cycle. So finally, and before closing, I was pleased to confirm that our Board of Directors has declared a $0.16 quarterly dividend per share, and that's payable at the end of September. And so with that, I will hand the call over to Bruce. Thank you very much. Thank you, Brian, and good morning, everyone. As Brian noted in his remarks, fundraising and deployment during the Q2 continued to build on the momentum that we saw at the start of 2019. And with interest rates globally heading lower over the last 6 months, we expect that this will continue to accelerate. This situation comes into our results in 2 ways. First, with the 10 year in the U. S. Now at 1.7% and negative out to 30 years in Europe and Japan. I'm going to say that one more time, negative out to 30 years in Europe and Japan. The value of assets should be rerated to higher values in that environment. 2nd, and in addition, our clients likely need our services even more. And if we have seen the high point in rates during this cycle. This should be very positive for our overall business. In May, we held the first close of our latest flagship infrastructure fund for $14,500,000,000 On the first close, this fund is now larger than its predecessor and we expect to close on additional funds later this month with more closes through the remainder of the year. We are confident that this will be the largest fund we've completed to date and one of the largest infrastructure funds globally raised. Our private equity flagship fund also closed on new commitments this quarter and today stands at over $8,000,000,000 twice the size of its predecessor. Together with our latest flagship real estate fund that closed this past January and co investment capital committed to date this year, we have raised over $40,000,000,000 in this round of flagship fundraising and it will end up being plusminus $50,000,000,000 by the time those funds are complete. In our non flagship fund strategies, we're also seeing significant traction. Last month, we held the first close of our special opportunities program, raising a total of $1,000,000,000 in capital. This program allows the flexibility to invest across a wide range of opportunities beyond the scope of existing mandates we have in funds. We expect the robust fundraising environment to continue to remain strong. As I stated, low interest rates in the U. S. And in other markets continue to make our real asset strategies one of the few places investors can look to earn a decent yield. Despite the record level of capital though flowing into funds of ours and others, we are finding no shortage of opportunities to continue to deploy this capital at attractive returns. The global business environment continues to be constructive despite many political distractions. Our businesses are doing well unlike what one would expect by merely reading the newspaper. The outlook for our business for the remainder of 2019 is strong. In fact, we have not seen a bigger disconnect between the organic level of activity going around going on around our businesses and the uncertainty and weariness that one sees in the media for a long period of time. Specifically on across the globe, the U. S. Economy is slowing, but is still good. Europe is decelerating, but has come far from where it was a few years ago. In the United Kingdom, we are seeing strong levels of activity around our GDP sensitive businesses. Brazil has stuttered a little, but with pension reform tailwinds, business investments should start to recover. Asia is being hit with export slowdown, but will grow at a very strong still grow at very strong rates on a relative basis. Finally, India's growth is strong. Meanwhile, corporations are severely constrained for capital with what's going on in the lending markets of the country. This is leading to opportunity for us. During the quarter, we were active in deploying capital across a number Our private equity business closed on the acquisition of Healthscope, one of the largest hospital groups in Australia. Our infrastructure business announced the acquisition of 1 of the 2 mobile phone and Internet providers in New Zealand, as well as the acquisition of a portfolio of 120 short line railroads predominantly in North America. In our power business, we announced the acquisition of a 50% interest in the solar development business in Spain. Despite good levels of investment, we still have nearly $50,000,000,000 of liquidity across the business available to deploy globally. We intend to maintain these levels of capital while continuing to judiciously invest capital as we find opportunity. It's important to note that over and above the capital raised in funds, we also generate significant internal liquidity on our balance sheets. Over the last 12 months, as Brian stated, we generated over $2,500,000,000 of free cash flow at BAM that is more than double what it was 5 years ago and it should double again over the next 5 years. Overall, combined with our partnership's free cash flow, we generate approximately $6,000,000,000 of cash flow annually from internal sources to be distributed or used in the operations and this number continues to grow. You have heard increasingly from us on the growing free cash flow at Brookfield Asset Management. This is a key measure in our business and of important focus to us as it is the cash that we can utilize for new investments or distribute back to shareholders in the form of dividends or share buybacks. If we execute on our business plan as laid out at last year's Investor Day and in our recently filed prospectus, our free cash flow should double again by 5 years from now to more than $5,000,000,000 on an annual basis. If you look at where our market capitalization today is, that implies about 11% free cash yield. Lastly, and before turning it over to Sachin, on the topic of Oaktree, as you may have seen from various public filings, the deal continues to progress as expected. We continue to target a closing in the Q3 of 2019, which I would add is very soon from now. And we look forward to providing you a further up tree on Oaktree and our plans for that business at our upcoming Investor Day in New York on September 26. With that, I'll pass the call to Sachin, who will speak more about our solar power business. Thank you, Bruce, and good morning, everyone. Today, I'd like to speak to you about the growth of our solar business, which started 2 years ago with the acquisition of the TerraForm Companies and today represents approximately 9,000 megawatts of operating and development assets and over $5,000,000,000 of invested capital globally. Solar has undergone a significant transformation. A decade ago, we were at the start of the decarbonization of global power grids where environmental regulation was pushing out traditional forms of generation like coal in favor of new renewable technologies. However, during this time, solar and wind remained highly reliant on government subsidies to be economically viable. In turn, these subsidies drove an inflow of capital into the sector from financial investors who pushed valuations and corresponding leverage to excessive levels as the asset class was viewed as a proxy to government bonds. During this period, we remained patient and looked for an entry point into the sector that could leverage our operating capabilities and global presence rather than competing for low returns. In 2017, the bankruptcy of SunEdison, at the time the largest developer of solar globally, presented such an opportunity. By taking an active role in the restructuring of SunEdison, we were able to acquire for value 2 portfolios that included 1500 megawatts of recently constructed contracted solar assets. As part of the restructuring, we privatized the emerging markets portfolio, while keeping TerraForm Power publicly traded. At TerraForm Power, we have taken a number of steps to drive value from the existing portfolio. We stabilized the business by inserting our own operational teams, improved asset reliability and have driven over $30,000,000 in annualized cost savings. We've also been working to fix the balance sheet by reducing leverage, improving covenants and increasing liquidity. As a result, since our acquisition, TerraForm's credit rating has been upgraded by 3 notches. We have reduced corporate leverage by nearly $400,000,000 increased debt term by over 2 years and combined with growth, we have delivered a 34% annualized return to shareholders. Recently, we announced 2 initiatives that demonstrate the next avenues of growth for our business. In July, we formed a joint venture to own 1 of the largest solar developers globally with an operating and development pipeline of over 6,500 megawatts of utility scale solar. We believe development has hit an inflection point where declines in build costs have allowed subsidies to be almost entirely phased out. This environment should favor investors like ourselves who can surface value through efficient operations, scale procurement and capital efficiency. We also announced the acquisition of a 320 Megawatt distributed generation effectively rooftop solar business in the United States. We continue to believe that localized forms of generation such as rooftop solar and microgrids will offer customers meaningful optionality to service their electricity requirements in the future. We have now assembled 1 of the largest distributed businesses in the U. S. With over 250 creditworthy customers and 15 years of long term power purchase agreements. The opportunities for us to use our scale and provide additional energy related services to our clients should provide added growth as this sector evolves. Finally, as part of our global growth efforts, we have expanded the business into India and China and are actively building wind, solar, distributed generation and development capabilities in these markets as strong GDP growth is driving increased power demand and the need for new renewable supply. We have an active utility scale business in India with over 600 megawatts of wind and solar and believe that the significant support for renewables from the federal government and state utilities combined with distress in the banking sector will allow us to invest in that market on a value basis. In China, the country continues to industrialize while transitioning away from coal. Accordingly, we have over 400 megawatts of operating wind and solar and are advancing the build out of an additional 300 megawatts of distributed rooftop solar over the next 3 years. Over the last decade, decarbonization has emerged as a global theme and has resulted in significant disruption and opportunity in the power sector. We have used this period to build one of the largest renewable businesses in the world with investing and operating capabilities across multiple continents and technologies. Looking ahead, the transformation of Global Power Grids is still in its early stages and will require an enormous amount of capital over multiple decades. Solar will play an important role in this transformation and we are positioning ourselves to be able to meaningfully participate in that growth on a global basis. And with that, I'll turn the call back to Bruce. So operator, I think, we will take questions now if you could do you. Our first question comes from Cherilyn Radbourne with TD Securities. Your line is now open. So obviously, the flagship fundraising has been very strong over the last 12 months, but you've also raised, I believe, dollars 3,000,000,000 for perpetual or long life strategies. So I was wondering if you could comment on how much perpetual capital the company is currently managing. And if you look out, how big do you think those long life strategies can become relative to the flagship strategies? Yes. It's about $5,000,000,000 sitting here today, Cherilyn. And Cherilyn, I would add just on the future that these are ideal strategies for owning long term assets, which may not otherwise have the upside to earn 15% or 20% returns, but can earn a solid 7%, 8%, 9%, 10%, 11% return over very long durations and not have a lot of risk with them. So I think these are we think these are ideal assets for institutional investors and therefore the long dated product is going to continue to grow significantly. And it I think we stated before that it could be $50,000,000,000 in each of our businesses. And I think that's probably an understatement in the longer term if we do our job right because they're these are some of these are great assets which you should hold for long periods of time. And maybe just as a quick follow-up, would you expect client appetite for those strategies to be particularly sensitive to the latest move in global interest rates? Look, I think we've always stated that the strategies that we deploy are fine, the way we're running them today as long as global interest rates are not the 10 year treasury isn't at 5% or 6%. If the global treasury, U. S. Treasury is at 5% or 6%, people may look to differentiate and invest just in the treasuries as opposed to some of the things they're doing with people like ourselves. I don't think people expected that interest rates were going to trend upwards from 2%. And now that they've trended downwards and it looks like globally, that's going to be going on for a while. I'm not sure that that's been factored into the marketplace yet. But I think it will come when if that if this phenomena is for real. And then last one for me. Just wonder if you could give us a bit more color on the new special opportunities fund and where that sits on the risk return spectrum and how its investment mandate compares to those of the flagships? So just for everyone's benefit, we created a program called Special Opportunities and it captures investments that lie outside the areas from which our funds invest into. So it most of our strategies are, for example, control investing. So there may be situations where it's not control, but we think it's an interesting opportunity and someone brought us in. And therefore, we may invest out of that. The funds could be deployed across the risk reward spectrum. So some returns could be in the low teens and some are opportunistic returns. They just don't fit the mandates of our flagship strategies. Thank you. That's all from me. Thank you. And our next question comes from Bill Katz with Citigroup. Your line is now open. Okay. Thank you very much for taking the question this morning as well. Maybe, Brian, just to start one with you, as you think about the base fee rate, I was wondering how that might look as you go out over the next 3 to 12 months. Maybe you could break down your comments between the asset management business and the listed partnerships? Sure. So, I think a big part of it will depend on the mix of where the growth comes from. And as you know, each of the different strategies has a different fee rate associated with it. In general, there's not a huge difference between overall the fee rates that we earn on the private funds and the fees that we earn on the listed issuers. But the fees that we would earn for certain core credit products will be a little bit less than that. And so really it's going to evolve the mix of it and the overall weighted depend on that. Having said that, I'd say that for the foreseeable future, the growth is going to be skewed more towards the private funds, like the flagship funds and the listed issuers because the as you know, we're building from a slightly smaller base on those core funds. We still see, as Bruce mentioned, a lot of growth in that over time. But the larger piece of it right now still is the listed issuers and the private funds. So it will be very much mix focused. So hopefully that's somewhat helpful to you. Okay. Thank you. And just as a follow-up, I think you had mentioned in prior calls that you're on pace for this year for about $1,000,000,000 worth of gross realization. I was just sort of wondering if you could give us an update. You had mentioned in your prepared comments that you sort of expect to continue to see that in the second half of the year. But is it still expected to be about $1,000,000,000 or so this year? And then appreciate you gave a little disclosure in terms of the array of timelines as you look over the next 5 years. But how do we think about the outlook for 2020 or even 2021 in terms of pace and realizations? Yes. So, I'm not sure we've really said that much publicly about 2020 2021, although I think you can glean from our supplemental where we do break out in terms of the carry that we've got accrued up to date and when the lifespan of those funds take place. And there's of the $2,500,000,000 there's $1,000,000,000 or so that's over the next 3 years and then $1,000,000,000 in years 4 to 7. So in terms of going back to the opening of your question in terms of the what we've originally mentioned earlier in the year, which is up to $1,000,000,000 this year, We've achieved a fair bit of that and we still expect to see more carry coming in over the balance of the year. Again, we're going to be disciplined and opportunistic in terms of the yield because it's driven by monetization events. And ideally, we'll get it done before the end of the year. If circumstances demand it, we'll shift it into the Q1 if we think that'll get a better outcome overall. Thank you. Thank you. Our next question comes from Robert Lee with KBW. Your line is now open. Great. Good morning. Thanks for taking my questions. Maybe just following up on Bill's with thinking about incentives and carry realization. I mean, when you look at the accrued carry balance, I mean, obviously, you've had a bunch of realizations, so that it pulls out. But it feels like it's been kind of roughly flat for the last year or so, even though SENSE's underlying performance has been pretty good. So is it really just the phenomena that of the realization just come more or less offsetting kind of what's flowing in from performance? Or is there anything else we should be thinking about because the balance has been pretty flat considering all the capital you have at work and the underlying performance? Yes. So I'll make a couple of comments on that, Robert. So just in terms of your comment that it was sort of flat, I mean, rough numbers, we're standing about $2,500,000,000 We took $500,000,000 out. So and it stayed relatively the same. So that's about 20% growth if you factor in the drawdown there. The last quarter in terms of the actual amount generated was pretty flat. As we mentioned, we had some good progress in a couple of areas and that was offset with a little softness in another area. Overall, we still see ourselves on track in terms of hitting or exceeding the target returns across the board. The other comment I would say and you can see this with how we lay out carry evolving over the next 8 or 10 years, both in terms of how it's generated and how it's realized. As you know, there is a bit of a it's the J curve for lack of a better word. And given that a lot of the capital was raised quite recently, it does take time to put it to work and to get yourself into the upward slope of the J curve where it really starts to build in a meaningful way. And that does tend to be back ended even on the generation side, let alone on the realization side. So again, we still see everything tracking really nicely. And so I'd say, what you pointed out is not to be unexpected given the growth cycle and the stacking of the funds with the more recent raises. Okay, great. And then maybe going back to fundraising question, I mean, and I apologize if you had maybe touched on this earlier, but the as you come towards the end of this robust fundraising cycle, infrastructure nearing its end, PE pretty much at its end. How do you think of the fundraising capacity of the business when you're not out raising flagship funds? I mean, do you think of it that we're set up to currently current generation funds raise $10,000,000,000 annually, dollars 15,000,000 I mean, how do you think of kind of the ongoing fundraising capacity outside of flagship products? So, it's Bruce. And I would just make 2 comments and Brian may add something. But the first one is that our real estate fund is 50% invested and our infrastructure fund, while we're just closing it, is coming on 50% invested. So it's by the time you end, you're a large way through. So firstly, the follow on funds come relatively quickly afterwards. That's the first comment I would make. The second one is we have a lot of other products, which we offer our clients and the perpetual products, which are ideal in this rate environment, continue to be raised all the time. So we're always out talking to our clients with some form of product to be able to offer them. But there's no doubt during some years when a few of these funds all hit at once, fundraising is greater, in greater amounts than other years. Great. And then if I could just one last quick question, probably more of a reporting question. When you started to put a bit more focus on cash available for distribution, why not and if I look at many of the U. S. Peers who have all moved to a DE number, really essentially cash available for distribution. Why not make that kind of more of the central focus for BAM? And then kind of align you with at least with some of the public alternative manager peers are doing? Yes. Look, that's a great question, Rob. And it's something we're spending a whole lot of time thinking about given the shifts in how a number of our peers have moved their disclosure away from the E and I and more towards the DE. We started to talk about the cash the cash available for distribution a while back at our last Investor Day and a bit beforehand. And a lot of that goes to what Bruce was talking about because what that means for us is the amount of cash that's building up in BAM that's getting generated each year at the BAM level that's available for reinvestment or for distribution as the term suggests. So it's a really key metric for us. Having said that, we do also want to make sure that we're positioning ourselves well so that people can assess our performance in the broader context of our peers, but also make sure that it is the right metric that reflects our business as well. And we are a little bit different with the size of our balance sheet. And so we want to be mindful of that. Anyway, to wrap that up, sorry for a bit long winded there, but the it's something we're spending a lot of time on and we'll be thinking about our reporting metrics going forward probably after thinking about that more into Q4 and maybe into the New Year. Great. I appreciate you taking my question. Thank you. Thanks. Thank you. And our next question comes from Mario Saric with Scotiabank. Your line is now open. Hi, good morning. Just sorry, just up tilling on, I guess, Bruce, your comment on 2 of the flagship funds being 50% deployed already, one in particular before I believe you started fundraising in October of last year. So it's been a very, very quick pickup. How would the pace of deployment in those two funds compare to expectations kind of going into the fundraising? And would anything out there change the historical target of commencing another fund when the previous one is, call it, 75%, 80% committed? Yes. Answering that question first, I'd say that the documents are documents like most funds allow for us to start fundraising when you're 75% invested and we would have all we would expect to do that. I guess our pace of how we invest sometimes is just because we find opportunities that come along and meet our thresholds and partly, we're watching what the environment is. And I'd say the last 6 to 12 months, even despite the environment that's been out there, where a lot of people would say, and it probably is true, is that there is that valuations are high in many places. There seem to be misvaluation in other places if you have the right capabilities. And so we've been able to find a number of opportunities to put money to work. Okay. And my second question is somewhat related, is a bigger picture one. We've talked about, I'd say it's safe to say for the past couple of years, Brookfield has talked about why rising interest rates are good for business, which I've interpreted to mean that a good economy is good for your underlying FFO or cash flow in the business that you operate with a 10 year down almost 100 basis points year to date and the Fed potentially embarking on an easing cycle for the first time in a very long time. How does that shift in monetary policy, if at all, impact your near to medium term capital deployment and operational kind of focus and strategies within the organization? Look, I would just say the following. Interest rates being low are very good for long term streams of cash flow, especially ones that continue to adjust going forward, with some form of GDP sensitivity or some rate increase over time. And generally, that's what we own. The only caveat to that is if a recession comes along because of that and that's why interest rates are going down and if that changes the cash flow significantly, then you have capital destruction, along with lower interest rates. And I would say we've always focused on high quality assets with long term streams of cash. And therefore, I would say we should outpace that environment, going forward and have higher quality streams of cash flow. But your point is very valid in this situation. Okay. Thank you. Thank you. Our next question comes from Andrew Kuske with Credit Suisse. Your line is now open. Thank you. Good morning. I think in the supplemental disclosures, you highlighted your client base is 700 institutional investors, and I think that's up from 630 in the prior quarter. How do you think about your client penetration right now? And then when you think about closing off Oaktree very shortly, how much overlap do you have with their client base versus how much is unique and distinct? So, first thing I'd say is given the competition issues that we're under with the Oaktree transaction, we don't have access to their client relationships. So I won't make any specific reference to their actual relationships that they have. What I would say broadly is, of course, because they're a large global manager and we're a large global manager, I'm sure there are many relationships that are similar. I would note though, our Middle Eastern, Asian franchise has always been very large. We've for a long time been quite global and they're they've had a much I believe a much broader U. S. Business. I think the real benefit of that we should see out of the being together is that we can offer multiple products to our clients and have one tailored opportunity and there's very little overlap between the products. So that's really the benefit out of it. And even if they are some institutions that we both deal with. Okay. That's helpful. And then just as a follow-up, could you provide any incremental color on just your high net worth channels? And I think one of the last comments that was made publicly was probably around 2,000,000,000 dollars or so of AUM. Where are you now? And how has that grown over the last few years? Yes. So it's we're still continuing if the target was to have about 10% of the funds flows coming out of those channels. We are still tracking along that. Gosh, I'm trying to recall what the exact or roughly what the number would be in terms of the total that we're at now. I think it's probably around $3,000,000,000 And again, remember, this is through a couple of different channels. Some of it is where we would place, I'll say, a block with a large institution that would then distribute that within their high net worth channels and that's probably where we're more advanced. And then the other side is working more through individual RIAs and TIN. And that's a little bit of a slower build because it takes time to get those channels up and fully operating and there's a bit of technology involved there as well. But it's still progressing quite nicely overall. Okay. Thank you. One final question, if I may, and Brian, it would be for you. Just on the carried interest, and this is pitch 21 on the supplemental. There's a comment about a revised valuation assumption on the 2nd real estate flagship fund. Is there any color you can provide on that? What was the revised valuation assumption? Yes. I wouldn't there's not really a whole lot to read into that. As you know, we did there was a bit of a step back in some of the retail valuations really across the board, I'll say, and some of that would sit within the fund. It's nothing that we think should impede the overall performance of the funds or the business for that matter. Okay, that's great. Thank you. Thank you. And I am not showing any further questions at this time. I would now like to turn the call back over to Suzanne Fleming for any closing remarks. Thank you, operator. And with that, we will end the call.