Earnings Call: Q4 2014

Feb 13, 2015

Thank you for standing by. This is the Chorus Call conference operator. Welcome to the Brookfield Asset Management 2014 4th Quarter Results Conference Call and Webcast. As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. At this time, I would like to turn the conference over to Amar Jotar, Investor Relations for Brookfield Asset Management. Please go ahead. Thank you, and good morning, ladies and gentlemen. Thank you for joining us for our Q4 webcast and conference call. On the call with me today are Bruce Flat, our Chief Executive Officer and Brian Lawson, our Chief Financial Officer. Brian will start this morning discussing the highlights of our financial and operating results. Bruce will then discuss our views on the current investment and market environment as well as a number of our major growth initiatives in the quarter. At the end of our formal comments, we will turn the call over to the operator to open the call up for questions. We will be happy to respond to additional questions later in this conference call as time permits. I would at this time remind you that in responding to questions and in talking about our new initiatives and our financial and operating performance, we may make forward looking statements. These statements are subject to known and unknown risks and future results may differ materially. For further information for investors, I would encourage you to review our annual information form or our annual report, both of which are available on our website. Thank you. And I'd like to turn the call over to Brian. Thanks, Amar, and good morning. So we had a strong year in 2014 and we have a number of initiatives underway that have us well positioned for future growth. Funds from operations or FFO for the year was $2,200,000,000 and that was in line with our expectations and above last year on a comparable basis. We did record a particularly large number of carried interest and realized disposition gains in 2013, so total FFO in that year was higher, although we still did book $569,000,000 of gains in the current year. Excluding the gains in carry, FFO was $1,600,000,000 for the year compared to $1,500,000,000 in 20.13 and FFO for the Q4 on the same basis was $420,000,000 versus $406,000,000 Net income for the year was $5,200,000,000 on a consolidated basis, which is a record for the company and that compares to $3,800,000,000 in the previous year. A significant component of the income and the growth in income related to changes in the valuation of our assets, which were very favorable and totaled $3,700,000,000 in aggregate. We added $16,000,000,000 of fee bearing capital in 2014 and that brings our total to $89,000,000,000 The growth reflects a number of factors including $9,000,000,000 of capital issued by our flagship listed entities and our private funds and $4,000,000,000 of additional client investments into our public markets portfolios. We expect fee bearing capital in our private funds group will continue to grow as our 3 flagship private funds are now 80% committed in aggregate and that puts us in position to raise successor funds. In our experience, these follow on funds tend to be significantly larger than their predecessors. And so as a result, we are currently marketing $11,000,000,000 of private funds and expect to be in a position to launch a further $10,000,000,000 of fundraising during the latter part of 20 15. Our fee related earnings rose by 26% year over year to $378,000,000 Incentive distributions totaled $48,000,000 in 2014, which are an important component of that. Subsequent to year end, I would note that all our flagship entities announced increases in their distributions for 2015, reflecting the continued growth in their underlying cash flows. And this, of course, will in turn increase our future incentive distributions. In 2014, we committed $18,000,000,000 to new investments including commercial properties in India and China and $3,000,000,000 of renewable energy and infrastructure assets in Europe. Subsequent to year end, we announced that we had partnered with the Sovereign Wealth Fund to acquire the Canary Wharf development in London deploying a further $1,800,000,000 and Bruce will cover this further in his remarks. We disposed of 3.6 $1,000,000,000 of property and private equity investments as part of our ongoing effort to monetize mature assets to lock in gains for our clients and to reallocate capital to higher yielding opportunities. In the process, we realized $569,000,000 of disposition gains as I mentioned earlier. So I'll now turn to the financial results of our property, renewable energy, infrastructure and private equity operations and our investments in those and briefly highlight the performance last year in each of their underlying operations. Our commercial property investments, which are primarily held through Brookfield Property Partners, which of course was launched in 2013. And we've made enormous strides with this company over the past year, expanding the global office and industrial property portfolios in the process. FFO was nearly $900,000,000 during the year compared to 5 $50,000,000 in the previous year. And we had good performance in that from disposition gains. But we also experienced a good pickup in the underlying NOI and FFO as a result of strong leasing. In that regard, the business signed 11,000,000 square feet of new leases during the year, including agreements that bring our flagship Brookfield Place, New York complex back to a 95% occupancy rate. These new leases kick in during 2015 2016 and will contribute nicely to FFO overall as that occurs. And overall as well, new rents in the portfolio were done at 33% 34% above the expiring leases. In the retail business retail property business, we recorded nearly 5% growth in same property NOI and signed a number of new leases in the malls at strong rental spreads 15% above the expiring leases. In the industrial and other property assets, the FFO there increased by 26 percent to $77,000,000 And over the past 2 years, we've made a number of acquisitions with value of nearly $5,000,000,000 to build this portfolio, primarily in North America and Europe. And while we've been successful at building our business through acquisitions, we've also had a number of other ways to grow. In particular, in the property portfolio, have approximately $7,000,000,000 of development opportunities with Canary Wharf accounting for an additional $2,000,000,000 Turning to the Renewable Power business. The FFO from this part of our business excluding gains was $313,000,000 in 2014 and that compares to $271,000,000 in the previous year. The increase was primarily due to higher realized prices on the electricity that we sold, particularly in the Q1, although this was offset in part by a return to more normal generation levels in the U. S. After an extremely strong year in 2013. We acquired or commissioned 1700 gigawatt hours of generation capacity in 2014, expanding the portfolio by 8% and now have a total of 23,000 gigawatt hours of generation overall. A significant part of that increase came from our expansion Europe with our Irish wind farm portfolio contributing 8.90 gigawatt hours. Our infrastructure group contributed FFO of $222,000,000 in 2014 as priority gains in line with the previous year. And on a same store basis, we experienced 11% growth in FFO. We benefited from capital projects throughout the business and the contribution from new investments such as toll roads and rail network in Brazil. And that offset prior year contribution from some assets that we sold in the previous year including timberlands and a utility in New Zealand. During the quarter, we committed to acquire a portfolio of 6,700 telecom towers in France and this launch is a new communications infrastructure platform for us in a sector where we believe there is excellent growth potential. Our Private Equity business contributed FFO of $446,000,000 for the year, again, prior to gains compared to $499,000,000 in 20 13. So that went down a bit, but that was primarily due to lower contribution from some of our industrial portfolio companies, which experienced relatively lower prices during the year compared to some pretty exceptional pricing, particularly in the first half of twenty thirteen. We're in the process of privatizing our residential housing businesses in both North America and Brazil within this group. We continue to believe that we are in the expansion phase of the housing cycle in the United States and look forward to increasing contributions from the business there. In Brazil, we're refocusing the residential business on the high end of the condominium market, which we believe has very strong fundamentals going forward. FFO from our residential businesses increased by $118,000,000 to 100 and $64,000,000 during the year and that reflects in particular strong pricing and better margins in the U. S. Housing market. So finally, the Board of Directors declared a quarterly dividend of $0.17 per share to be paid at the end of March. It's an increase from the $0.16 per share dividend paid last quarter. So that's a quick summary of our operating and financial results and I'll now turn the call over to Bruce. Thank you. Thank you, Brian, and good morning, everyone. As you've heard from Brian, we had a strong year in 2014. More importantly, we're working on a number of initiatives as usual, which hopefully will be positive for the organization going forward. I wanted to use the few minutes today that I was allocated to touch on 3 themes: 1st, the current business environment second, priorities for the year and third, just touch on our recent investment in Canary Wharf. The biggest business story in recent months was the decline in the price of oil. Of course, everyone was surprised how quickly the price of energy dropped. This is an unexpected move in a widely followed commodity. And it's one of the reasons we try not to we try to insulate ourselves from commodity movements within the different businesses that we operate. We generally find we're better off investing in backbone infrastructure of the global economy and at times like this be ready to invest around the commodity sector when we see opportunities caused by these type of events. As a general statement, lower energy prices are good for the global economy. There's always a bit of a shock that comes when prices move quickly, but experience shows us that markets adapt quickly and lower oil prices are generally good for the economy in many areas. The 2nd big story in business has been the rally in the U. S. Dollar against most other major currencies. This move was driven has been driven in part by relative strength of the American economic recovery, which we see in most of the businesses we have, but in part by relative weakness in other regions including Europe and many of the emerging markets. As we have extensive investments currently in the United States, we will do well as the economy continues to strengthen. This also presents us with significant opportunities to expand our business in Europe, as the governments and corporations continue to deleverage and require capital and for us to invest in emerging markets such as Brazil, India and China where capital remains scarce to a large degree. 3rd, I wanted to briefly comment on the U. S. The economy is growing at a slow, but a steady pace with few signs of inflation. This contrasts with governments in the rest of the world, which are attempting to start growth and avoid deflation. That combination leads us to conclude that interest rates should continue to remain relatively low for a while. Rates at these historically low levels are very good for our business and low rates make a compelling case for institutional investors to continue to shift from fixed income investments to higher yielding investments, which are our real asset strategies are tremendously valuable to them. With that backdrop, we wanted to highlight our priorities for the year and the next few years. As you know, we try to be flexible and global in our investment strategy. We see opportunities right now to be helpful to a number of the commodity businesses that need capital At this time, as commodity prices have fallen faster than their budgets anticipated and capital markets are generally not historic reasons. And we believe as in past and as we are today with many others that we can be useful partners to a great number of these. So we continue to see significant opportunities to put capital work in the coming period on the heels of as Brian said in 2014, we've put almost $18,000,000,000 to work in our different businesses. Our other major priority this year is launching a new round of flagship private funds. Our existing property infrastructure and private equity funds have excellent track records and are largely committed. We should close or launch over $20,000,000,000 of funds this year and we're finding that institutional investors continue to want to allocate an increasing proportion of their assets to alternative strategies and in particular to real asset strategies that we specialize in. Lastly, I wanted to explain what happened in recent months at Canary Wharf and there's some materials in our shareholder letter. But I'll say a couple of things. We first invested in Canary Wharf in 2,002. In 2,009, increased that investment when there was an opportunity and now we have doubled our investment again. To date, the returns have been excellent and we expect the future to be better. Over the past year after talking to a number of investors at Canary Wharf, we decided to partner with Qatar Investment Authority, who was another significant Canary Wharf shareholder and bid for control of the company. The bid was accepted a few weeks ago and we will shortly own 100 percent of Canary Wharf in a fifty-fifty partnership with QIA in BPY. This is an important step for our property business as we continue our efforts to remake BPY into the leading global property investor out there. Canary Wharf itself is one of the finest pieces of real estate in the world. It's approximately 120 acres of land with 35 major properties serving 100,000 people every day. Most importantly a new rail link will open in 20 18 and further link Canary Wharf to the rest of London and to Heathrow Airport dramatically cutting the commute for people that work there and for people coming to shop or people that live at Canary Wharf. The estate also has 11,000,000 square feet of commercial and residential development potential, which we intend to capitalize on and work with the management team to bring that online. To sum up, the economic outlook while volatile over the past while has generally in our view been good for our business. We see opportunities to both raise capital in this environment and to invest in opportunities. While some places in particular the United States have fair values in the marketplace, there are many other places in the world which are investor markets. That's good for our business and we continue to deploy most of our capital in these places. With that, operator, I'll turn it back to you and we would be glad to take any of your questions on the line. Thank you. We will now begin the question and answer first question is from Cherilyn Radbourne of TD Securities. Please go ahead. Thanks very much and good morning. My first question relates to the impact of lower energy prices on sovereign wealth funds. And I'm just curious whether you think that will have any meaningful impact on the level of competition for assets and or the fundraising environment? Thanks, Sheryl. It's Bruce. So I think I'll split the question into 2. And first, I'll deal with funding. And I'd just make a general comment. And I'd say that the amount of money that has been accumulating in Sovereign Plans around the world and large institutions around the world is very significant. And just by sheer compounding of the numbers, these wealth plans continue to get bigger every day. And there may have been an exceptional period of time where they compounded even greater because the inflows were very significant. But I firstly, I think the inflows are still positive. And secondly, the compounding of the wealth is an enormous number that they have to keep reinvesting. So I think that's important to note. Another point I make is that virtually all of these institutions are continuing to allocate greater percentages of their portfolio to real assets. So even if the compounding wasn't happening, which it is, you will see a greater amount of allocations to real assets. And that's largely because fixed income as you know earns 1% or 2% globally or 0 or negative. And real assets can earn a much significant greater amount. So I think irrespective of all of that, the percentages allocation continues to go towards real assets. And I guess all that I'd conclude with just saying bottom line the trend continues unabated that people are putting money into real assets. Although there's no doubt admittedly that lower oil prices will slow the inflows and therefore there may be less money on the margin for everything they do. On the asset side, I would say most global investors continue to look to invest in real assets and this may slow competition again on around the edges. But our we don't see a lot of competition for the types of things we do from most of the global institutional investors. Most of them were working for them bringing them transactions. So I don't really think that it's that much of effect, but it could be on again on the margins. Okay. Thank you for that. Second question is just on the target carried interest, which is now GBP375,000,000 dollars versus 350,000,000 last year. And I guess I was just a bit surprised that it didn't increase by more given the substantial increase in your fee bearing capital. So maybe you can help me out with what I'm missing there? Sure, Cherilyn. So I think okay, so first of all, just stepping back in terms of how we look at target carry and what it is intended to be is a it's really it's basically a mechanical calculation. But it's what level should the carry be accruing at for our funds over time. And so I'll just give the if it's a fund that has a to use easy numbers, if it's a fund that has a 20% target return and a 20% carry, then you should be getting 400 basis points of carry. You'll reduce it a bit for base fees. But that's generally the how it works. And so it should track smoothly along. Now it didn't step up quite as much as you might think during the year in part because we had some capital that rolled off that did have some higher carry on it. So that was probably one of the bigger factors. And it's still a little bit overall on a blended basis because we have some core funds and lower yielding funds. But the I think if you look at the type of capital that we would be sourcing and bringing on board in the coming years and this year in particular, these are more value add and increasingly opportunistic return type funds. And so we would expect to see some pretty significant pickups, because these funds are going to be more in the nature of 15% to 20 percent target returns and 15% to 20% carry. So if you do the math on that, we should be seeing target carry 300 basis points to 3 40 basis points on that capital. So before any expenses. So we would expect to see a pretty good step up in that going forward. Okay, perfect. That's all my questions. Thanks. The next question is from Mario Saric of Scotiabank. Please go ahead. Hi. Thank you and good morning. My first question is just more of a 2 part question on oil. The first part being, Bruce, I think you mentioned a couple of positives with respect to a lower oil price in terms of better U. S. Retail sales on the infrastructure platform, maybe people drive more, so your toll roads will be a bit busier. When we think about your overall portfolio at a prolonged period of $50 oil versus $100 should we think about valuation for the assets as being higher versus lower on a net basis? And how should we think about that if oil stays where it does for the next 2, 3 years? I would I'm this is a guesstimate. I would say generally if you take our portfolio given its scale and size, it's around the margins that it will affect us that oil if oil stays at these numbers. There's no doubt it will affect anything we have in oil markets. Some of real estate we have in Houston and Calgary will be affected. But given the scale of our business, it's not significant. Some of the private equity investments we have currently that are in and around the oil business will be therefore, the amount of incremental capital that we can put to work given the opportunities that have come about will be far more meaningful to us than any amount of capital that is deteriorated by what has occurred. So I'd say it's a we're not an oil and gas company and those companies have their issues with these this pricing significantly. But we think the opportunities will be much more significant than any losses we'll take. Okay. And just on the back of that last comment, this type of market dislocation has really treated Brookfield well. Historically, you've bought really well. It brought you DGP back in 2008, 2009 during the financial crisis. But at the same time, a couple of years back, there's a lot of euphoria about Europe and potential large opportunities in Europe given this kind of valuations and limited access to that capital. So when you look at this potential opportunity, how do you think about it in terms or in relation to what happened in the global financial crisis in 2009 versus perhaps maybe seeing a little less opportunity in Europe than you thought you would coming out of the correction there? Yes. I'd start off by saying we while we didn't buy GGP in Europe, we have done a lot of smaller transactions and put a lot of capital over the last 24 or 36 months into Europe and we think we'll continue to do that. So our business is as you know about once in a while finding some big, but hitting singles every quarter. And we've done a lot of transactions in Europe just as a first comment. Look the oil business going down is not the global financial crisis. This is a single industry that it's large and it seems to attract a lot of attention because it affects every individual and every corporation. But it's not the global financial crisis. It's a single industry that's going to go through some distress. There will be some people that lose some money and there will be others that will make a lot. We believe that we're positioned to capitalize on a number of opportunities to assist companies with their capital needs. And that probably affect it could be in all of our businesses, but most specifically it will be in the infrastructure business and in our private equity business. And but it's and there could be large opportunities and I think there will be. But on a more I'd say on a positive note, it's a single industry situation not the global financial crisis if you were thinking about that. Okay. That's helpful. And my second question just relates to capital allocation and there's a comment in the shareholder letter with respect to accumulation of cash on the balance and the intention to maybe find opportunities to buy back stock in more meaningful ways. I'm just curious whether anything's changed with respect to your policy in terms of share buybacks and whether there's a positive correlation between the 2. And that if you do see more cash on the balance sheet, are you going to be more incentivized to buy back stock all else equal? Yes. I think it's fair as the amount of cash that we have at our disposal increases, we broadens the range of opportunities. We're definitely committed to executing stock buybacks when they make the most sense from a capital allocation perspective. So nothing's changed in that regard. The reality is last year we had a lot of great opportunities to put our capital to work in building the business, especially in the property side. There's a lot of activity there. And frankly, the stock was appreciating and we weren't chasing it in that regard. So but it's something that will continue to be firmly in our sights and is a highly ranked use of capital going forward. Okay. Thank you. The next question is from Blaine Heck of Wells Fargo Securities. Please go ahead. Great. Thanks. Can you talk a little bit more about the development opportunity at Canary Wharf? Kind of what projects would you look to start earlier than later? And what do you think the timing and costs would be like for commencing some of that? I don't think I'm going to get into the specifics of when projects are going to start. All I'd say is that the management team at Canary Wharf has an incredible background in developing buildings. There are a number of office sites under construction today. There's a big residential portfolio that can get built out longer term. And we're going to we and our partner have the intention of supporting them to build out all of those all of that development given what's going on in London. And the London market as you know for residential is extremely strong and the east end of the city is becoming more attractive all the time. So it will this is a development portfolio though that will build out over the next 10 years. Sure. That's helpful. And then for my second question, can you just talk about what effect the appreciation in the U. S. Dollar has had or will have on your investment decision process and future investments or on the other side dispositions? So on the investment side, I guess I would just say that as the U. S. Dollar we're a U. S. Dollar security and as the U. S. Dollar appreciates, what it does is essentially it creates scarcity of capital in other places because more money comes to the United States. And whether that's caused by the U. S. Dollar going up or it's caused by the duress in other countries relative to the U. S. Dollar. It's the scarcity of capital in other markets that creates opportunity. And what it I guess our the biggest focus for us is not in the United States for deployment of capital today. It's in the markets where there is scarcity of capital. And that's where our focus is today. And I don't think it's really caused by the U. S. Dollar being strong, but that's an outcome of that. Great. Thanks for the color. The next question is from Alex Avery of CIBC. Please go ahead. Thank you. Could you just give us a little bit more color or an update on where you stand with Energy Future at Oleks? Yes. There's not much update. There's Energy Future Holdings as you know is a very large for everyone is a very large bankruptcy in the United States. It continues through. We're one of the large bondholders working on the committee to assist and reorganize separate out assets and bring it out of bankruptcy and that will continue over the next 12 months. And towards the end of this year or next year, it will be out of bankruptcy, we hope. But there's not really much else I can say. Sorry, did you say towards the end of this year or next year? Could be either. It's I don't really have a specific date for you. Okay. And then in the introductory remarks, Brian, you noted that your successor funds are usually larger than their predecessors and marketing larger funds today. You've certainly got a lot of momentum in your fundraising and you're also known for having a very long term strategy for corporate strategy. So when you're looking a little further out, how far do you think you can grow your AUM on your existing platform? And then I guess once you reach whatever level that might be, what kind of strategic options do you think you might explore at that point in terms of the evolution of the business? Sure. So, I'll make a couple of introductory comments on that and Bruce may want to add something to it as well. I would say, Alex, at this stage of the evolution, that's not really something we need to get too definitive on. If we look at the scale and breadth that we have within our organization whether it's fundraising folks, investment professionals, operating professionals. It's a very large platform and we're pretty well everywhere where we want to be. And it's at a scale where it's pretty manageable for us to grow it incrementally from the operating side, but manage a much more substantial amount of capital and assets and achieve great returns. And if we look at some of the other folks in the similar businesses, we look at the size of capital that they are effectively managing as well. So we think we've got lots of room to grow. And without putting any strain on the system, In any business at some point in time you have to step back and figure out whether you want to be continuing to grow in exactly the same thing or whether there are other things that you want to add on. And there certainly are other products and asset classes that would be natural complements to what we do today. And we've done some you'll notice we launched a credit hedge fund this year. And so we can do more on that front as well. So there are logical ways for us to expand out in that regard as well. So I think we've got to put it this way. We've got to we think we've got a lot of runway for the foreseeable future. I would only add just one thing to that and that's that the broad general generalization I would comment on in the industry is that the big are getting bigger and it's tougher to raise money for smaller funds. And it's what's going on is a consolidation in the industry where institutional clients and sovereign funds want to have less managers and more things done with those managers. Thankfully, we're in the category of large. And therefore, we and others like us continue to have large dialogues with the leading institutions be able to do many more things for them. So what that means is that there's more products being offered to those institutions and larger scale coming from those each of them. And I think that trend will continue as the industry A consolidates and B matures over the next 10 years. So would that suggest that you're confident that you can continue to grow your AUM at the same rate as you have been? Or does that actually suggest that you might actually see an acceleration? Well, I think okay, maybe to fall back, I think at our last Investor Day, we spoke about a 10% to 12% annualized growth in AUM and fee bearing capital over the next 5 years. And I would say we feel extremely comfortable in our ability to manage effectively of that. And if you think about some of the comments that Bruce as well and also just the desirability of the type of investment strategies and asset classes we can provide to our clients, There's I think it's pretty safe to say that there's a good chance we could outperform that quite handsomely. But those are the numbers we've put out there as an example of how we could see the business unfolding, so people can understand what that growth means when you come dial it back into FFO and share values. Okay. That's great. Thank you. The next question is from Bert Powell of BMO Capital Markets. Please go ahead. Thanks. Just a question on fundraising. The $10,000,000,000 how much of that is contemplated to be Brookfield Capital, the second after the 11? Yes. So that would be about I would say about 30% plus or minus is it would be coming off of from Brookfield. Okay. And of the $20,000,000,000 that you probably raised, what how much of that's going to go into Cyrus' business, the private equity business? I know that was a focus in the past was to try to get that business into broader fund exposure. Just help us think about what's going into kind of the real asset strategy not that Cyrus' isn't, but it's a little bit of a different business? Yes. So Bert, we're getting into an area where we're not really at liberty to provide that degree of granularity about a specific strategy or a specific fund. Although, I think if you look back at what the predecessor funds are in those areas and we do think we can grow successor funds, you could probably get some sense of it. Okay. Okay. Appreciate that, Brian. And then just in terms of the asset management business now, for planning, I think you guys are using 50% gross margin or better, but you've built that business out as you grow. What could the margins look like with the scalability that's in the business? Yes. So I think we've suggested that we could take that 50% up to sort of 65% in terms of the retained margin, because there is definitely some opportunities for scaling that out particularly there's certain parts of the business that are definitely higher margin than others and certain elements of the compensation that are higher margin? Yes. So not including the carry. I'm just talking about the base fee business. That's right. Yes. In terms of the fee related earnings and everything that's included in their base fees, private funds, listed funds, IDRs, public securities. Yes, there's definitely some scale there. Okay. And then if I could just one last one. Just on the energy marketing business, I just noticed the value in the balance sheet is up. Round number is kind of $300,000,000 from last quarter. Seems a little odd given what's going on with energy pricing. Maybe help us understand what's behind driving that increase in the value for that business? Yes. Sure. So keep in mind that a fair chunk of that value is still predicated on the long term view of renewables. And while there's been perhaps a little bit of dislocation in the very short term, there are that part of it hasn't changed a whole heck of a lot. What you did see over the past little while though is definitely getting a benefit from discount rates and yet on that front and also improvement in the capacity markets. So those would have been positive factors. You would have had a little bit of a shift down in terms of some of the shorter term pricing, but we still have we're still seeing a lot of strong fundamentals longer term. Okay. So rates were a component of that? Yes. Okay. Thanks, Brian. Thank you. The next question is from Andrew Kuske of Credit Suisse. Please go ahead. Thank you. Good morning. I guess the question is for Bruce and it just really relates to the distribution function of your asset management business really the sales function. And if you could just give us some color and commentary on the evolution of your client base? And really do you see an evolution towards just bigger tickets from the larger clients around the world? Or is there a bit more of a move into the down market as some of your other competitors have done and gone to individual high net worth effectively ultrahighnetworthretailinvestors? Yes. So our funds are generally larger institutional clients, which write bigger checks in general, if you look at our funds compared to others. We continue to diversify that out with smaller institutions and each many of the smaller U. S. And Canadian pension plans endowments and other institutional investors are adding alternatives into their portfolios and I guess watching the larger institutions and adding it in. So we continue to I'd say that's diversification number 1 that's been happening over the last 5 years and will continue over the next 5 is moving to the medium the small and medium sized institutional investors. So that's I guess diversification number 1. And that's a very significant amount. That's not to say that there won't be the same emphasis on the larger institutions globally. The third part is marketing our funds to smaller investors or high net worth investors. And we've tried a little bit. It takes a lot of distribution. It takes a lot of effort. And so far we haven't needed it. We continue to experiment with it to learn about it. But it's costly firstly to distribute. And second, it takes a lot of effort. So, so far we haven't spent a lot of time at it, but we continue our in our groups we continue to look at it to assess it. Okay. That's helpful. And then just a somewhat related question as your sales model continues to evolve and you're putting bigger funds over the goal line. I'm just curious on how you think about the interplay with the large public LPs and the private funds. Is there in your mind is there some kind of size limitation on the public LPs on how big they can effectively get? And ask the question just in part if we think of the Kinder example that happened back in the summer where they rolled in all their underlying entities back into the corporate structure? Yes. It's an interesting question. And obviously, we think about it a lot because all we're all we do for our investors is invest their money and try to earn them a good return for the risk we take. In the public LPs, really they're just a large institutional client that we manage on behalf of a bunch of small shareholders. They're an accumulation vehicle And we put their money to work just like we do for global sovereign plans and institutional clients. And if we can't grow those entities profitably, they won't grow. I don't think that will be the case for a long period of time and these can become very large entities. And I think actually the value of the entities will become more they will become more valuable as they become bigger because the ability to allocate capital and write larger checks take more risks on a relative basis will be even more important to them. So I think what we've found in this business is the Real Asset Business globally requires enormous amounts of capital. And if we can be one of those large players that can write large checks, there is there are many more opportunities for us than what you would have seen before. So the scale of those vehicles is important. And so we think in fact the opposite to what you might think is the larger they get the more maybe the better returns that will come out of them. Okay. Thank you. This concludes the question and answer session. I will now hand the call back over to Bruce Black. That concludes our Q4 webcast and conference call. We thank you for your time and we look forward to updating you in the Q1. Thank you. This concludes today's conference call.