Hello, thank you for standing by. My name is Gary, I will be your conference operator today. At this time, all participants are in a listen-only mode. After the prepared remarks, management will conduct a question and answer session, conference participants will be given instructions at that time. As a reminder, this conference call is being recorded. At this time, I will turn the call over to Makela Taphorn, Director, Investor Relations for Artisan Partners Asset Management.
Thank you. Welcome to the Artisan Partners Asset Management business update and earnings call. Today's call will include remarks from Eric Colson, Chairman and CEO, and C.J. Daley, CFO. Our latest results and investor presentation are available on the investor relations section of our website. Following these remarks, we will open the line for questions.
Before we begin, I'd like to remind you that comments made on today's call, including responses to questions, may deal with forward-looking statements, which are subject to risks and uncertainties that are presented in the earnings release and detailed in our filings with the SEC.
We are not required to update or revise any of these statements following the call. Some of our remarks made today will include references to non-GAAP financial measures. You can find reconciliations of those measures to the most comparable GAAP measures in the earnings release.
I will now turn the call over to Eric Colson.
Thank you, Makela. Thank you everyone for joining the call or reading the transcript. Given the significant and ongoing change in the investment management industry, it's more important than ever that we at Artisan Partners know who we are, and that we understand our competitive edge.
It's also important that our clients and our shareholders understand this, so you know what to expect and what not to expect. Artisan Partners is an investment firm. We provide differentiated and high value-added investment opportunities to sophisticated clients.
We are not, nor do we aspire to be, a product manufacturer, engineering distribution-oriented strategies to build scale and compete solely on fees. Our edge is the combination of our talent and our operating model. We partner with talented investors to build and develop investment franchises that deliver for clients.
We provide our investment franchises with a unique combination of investment autonomy and operational and business support. Our platform is designed to serve our investment franchises. Their success equals client success, which equals our success. Everything we do is designed for investment talent to thrive.
We are a growth firm. Thoughtful growth is important to our people, our clients, and our shareholders. As an investment firm, our business growth has followed, and will follow, the success and development of our investment strategies and capabilities. As we mark our 25th anniversary,
We continue to believe that this business model and philosophy are right for our firm and for our future. They have driven the long-term results and growth I will discuss in a minute, and they will guide our operations and decision-making going forward. This is who we are. Turning to slide two.
We continue to position who we are as a firm within the framework of long-term asset allocation and manager structure. Since we do not engineer products or vehicles for short-term fads, we must be thoughtful about investment opportunities and talent for the long term. As we have stated in past calls, this will produce lumpy results.
Our first-generation strategies fit long-term demand for investment style, market cap, and geographically-oriented strategies. Our second-generation strategies have participated in the globalization of asset allocation and manager structure. With our third-generation strategies,
We are in the early innings of the current evolution, driving demand for low-cost exposure products on one end of the spectrum, and alternative and private asset classes on the other end. We have been clear about where we fit and where we don't. We have no edge in the passive business, which is about scale, packaging, and distribution.
On the other hand, alternative asset classes fit well with who we are. The space is talent-driven. Clients are looking for something different, and they're willing to partner with a trusted investment advisor to pursue high value-added results over longer time periods. We expect the current trends and our investment mindset to push us into deeper relationships with clients and business partners to deliver investment opportunities that compound wealth.
If we execute as we have in the past, we expect our business to continue to evolve away from the scaled asset management firms providing packaged products, and further towards an investment firm providing differentiated high-quality investment results. Slide three shows more specifically how we have reacted to the asset allocation trends.
Over the last 10 years, we have grown from five investment teams to nine, added Non-U.S. SMid capability to the Global Equity franchise, and expanded from 11 strategies to 17. The talent we have added and the strategies we have launched are all in the direction of greater degrees of investment freedom, greater ability to generate differentiated investment results, less likely to be replicated with exposure-oriented products.
We expect the future new teams, strategies, and investments will continue in this vein. We also expect that we can and will maintain our recent pace of growth and diversification, provided we are able to identify and source the right investment talent. The data on slide four validate the business decisions shown on slide three. In less than six years, we have built the third generation strategies into $12.1 billion of AUM, including $9.1 billion of net inflows.
All seven third generation strategies have performed well for clients. Degrees of freedom have also worked in our second generation strategies, which include our three original Global Strategies. During the decade, the second generation strategies grew from $1.9 billion- $44.1 billion in AUM.
That growth was driven by strong investment returns, including excess returns, as well as more than $19 billion in net inflows. Lastly, our first generation strategies, on which this firm was built, generated approximately $56 billion of investment returns for clients, including approximately $8.8 billion of returns in excess of benchmarks.
Net outflows from these strategies more than offset the organic growth in the rest of our business. A significant portion of the net outflows represent successful profit-taking by our clients. The first generation strategies remain relevant for large portions of the market that retain more traditional asset allocations.
Putting it all together, during the decade, our AUM grew from $46.8 billion- $121 billion. We generated approximately $81.9 billion of investment returns for clients, including approximately $13.3 billion of returns in excess of benchmark indices. We expanded our Non-U.S. business primarily with the second generation strategies.
We deepened our reach into the wealth marketplace, especially with our third generation strategies. We maintained fee rates that reflect the high value-added, differentiated nature, and relatively limited capacity of our investment offerings. Slide five summarizes where we stand today. We have nine investment franchises with outstanding leadership, strong track records, and capacity for growth.
Recent investment performance has been particularly strong. Last year, on an asset-weighted basis, we generated 578 basis points of gross returns in excess of benchmarks, translating into approximately $4.8 billion of excess returns. 13 of our 17 strategies outperformed their broad-based benchmark after fees.
Our Developing World Fund beat the EM Index by 2,352 basis points and finished in the first percentile of its Morningstar peer group for the year. Five other Artisan funds finished the year in the top decile of their Morningstar peer groups, and 10 of 15 finished in the top quartile. In absolute, index relative, and peer relative terms, 2019 was an outstanding performance year for our firm.
Client demand and distribution was also stronger than indicated by the headline number firm-wide net outflows. 11 of 17 strategies had positive net inflows. Five of our strategies had net inflows in excess of $500 million, with our International Small-Mid strategy leading the way with $1.4 billion in net inflows. For the year, our third generation strategies had $3.9 billion in net inflows, an organic growth rate of 63%.
On the outflow side, a significant portion of the outflows from our more mature strategies were driven by client rebalancing, not terminations. That's particularly true in our Global Opportunities and Global Value strategies. Turning to slide six. We are well positioned for the future. Our platform and model are proven across generations of talent, multiple autonomous teams, different asset classes, and long time periods.
There's a good supply of talented and entrepreneurial investors looking for a home. Operational, distribution, and regulatory hurdles continue to drive demand for our model. We are excited to add additional talent to our platform and expand our investment capabilities.
Even more importantly, we continue to develop our existing franchises, deepening talent pools, expanding investment expertise, and laying the groundwork for future strategies and capabilities.
We plan to launch a second strategy for our Global Value team later this month, and we are actively working with other franchises to expand offerings in the relative near term. All of these ideas are talent-driven, with the goal of establishing our investment franchises as go-to resources for a range of compelling investment ideas.
We are also optimistic that our overall distribution outcome is improving. The third generation strategies are well positioned to continue to raise funds, aided by upcoming anniversaries and strong pipelines. In our more mature strategies, we expect continued rebalancing and headwinds consistent with recent experience.
Having said that, given strong track records and client demand, we believe several of the first and second generation strategies are poised to grow organically over the next year or so. On January 1st, Chris Krein started as Head of Global Distribution. Chris brings a wealth of experience to the job.
He has served as a distribution leader at several other firms, and he has a deep understanding of Artisan's model, having spent the last four years successfully leading distribution for our Developing World team. Led by Chris, we're reviewing our distribution structure and strategy. We want to make sure we are appropriately matching resources with opportunities, optimizing both our service and sales efforts.
I regularly speak about the changing distribution landscape, the rise of the wealth channel, and relative decline of the traditional institutional market, the importance of reaching people digitally, globalization, a buyer's market in terms of fee structure and vehicle preference, demand for customization and tailored solutions.
Many of these trends have cemented in recent years. It's important that we objectively review how we manage and grow the business of each Artisan franchise and make adjustments to maximize client duration and accelerate growth where we have investment capacity.
In addition to reviewing our own structure and model, we continue our historical practice of exploring third-party distribution relationships. We focus on relationships that provide leveraged opportunities and access to different geographies and client types. We are excited about several of the opportunities we're currently working on. All of these distribution efforts will be consistent with who we are as a firm.
Our distribution must complement and enhance our edge as an investment firm, protecting investment team time, and finding the right clients on the right terms for what each franchise does. We have done a good job of that historically, and I have confidence we will do a good job going forward. I will now turn it over to C.J. to discuss our recent financial outcomes.
Thanks, Eric. I'll begin on slide seven. Assets under management ended the year at $121 billion, which was up $8.5 billion, or 8%, compared to the September 2019 quarter, and up $24.8 billion, or 26%, compared to the end of 2018. Growth in both the quarter and year were primarily due to rising global equity markets and strong excess performance, partially offset by net client cash outflows.
Net client cash outflows during the quarter and year included $470 million of outflows related to cash dividends paid, but not reinvested in our U.S. mutual funds. In the 12 months ended December 31st, 2019, excess returns added approximately $4.8 billion to AUM, and more than offset net client cash outflows of $3.3 billion. Eric discussed the 10-year history of our strategies by generation. Slide eight shows the progress we have made over the last year.
As stated, we now manage over $12 billion in seven third-generation strategies, almost double the AUM from a year ago. Now those strategies represent 10% of total AUM. Growth has been through both investment performance and net client cash inflows.
Our first and second generation strategies also generated strong excess returns for their clients, offset in part by continued outflows, driven in large part by client profit-taking and rebalances away from active equities.
Turning to our financial results. Slide nine highlights the changes in our AUM in 2019 and 2018. Given strong AUM growth in the Q4 of 2019, ending AUM at $121 billion, we begin the 2020 calendar year with a 9% head start over average AUM in 2019 of $111 billion.
This is a very different position than in 2019, when we began the calendar year at AUM of $96.2 billion as a result of the sharp decline in global equity markets in the Q4 of 2018. As always, I will focus the remainder of my comments on adjusted results, which we utilize to evaluate our business and operations. Our complete GAAP and adjusted results are presented in our earnings release.
Revenues, which are on slide 10, grew in the quarter 3% compared to the prior quarter, and 9% compared to the December 2018 quarter, reflecting higher average AUM and a slight decline in the effective fee rate year-over-year due to the mix of our AUM across vehicles. For the year, average AUM was 2% lower than in 2018, largely reflecting the lower levels of AUM at the beginning of the year.
Revenues were 4% lower in 2019 than they were in 2018, reflecting the lower average AUM and slightly lower effective average fee rate, partially offset by an increase in performance fees in 2019. The changes in operating expenses are on slide 11.
In the quarter and year, they were largely due to the variable expense components of our P&L adjusting to the level of revenues. These variable expense components primarily consist of incentive compensation and third-party distribution costs and make up almost 60% of our operating expenses.
Operating expenses were up 1% compared to the sequential quarter, primarily a result of higher incentive compensation expense due to increased revenues and increased travel costs, partially offset by lower equity-based comp expense.
Compared to the same quarter last year, operating expenses were also up 1%, primarily as higher incentive compensation expense was partially offset by lower equity-based comp expense and onboarding costs incurred in the December 2018 quarter related to the Non-U.S. Small-Mid Growth strategy.
For the year, operating expenses decreased primarily as a result of lower incentive compensation and third-party distribution expense due to decreased revenues and lower equity-based comp expense. 2018 also included the onboarding cost for the new SMid strategy.
These decreases were partially offset by increases in occupancy expense related to investment team relocations, higher compensation and benefits expenses on an increased number of full-time employees, and increased technology expenses.
Our operating margin in the quarter increased to 38.1% from 37.2% in the September 2019 quarter and 33.5% in the December 2018 quarter, primarily reflecting the impact of higher average AUM and revenues. For the year, our operating margin declined to 35.5% compared to 36.8% in 2018, primarily as a result of lower average AUM and revenues, partially offset by lower fixed expense items I explained earlier.
Adjusted net income was $58.5 million, $0.75 per adjusted share in the December 2019 quarter. This is up $0.05 compared to the September 2019 quarter and $0.14 compared to the December 2018 quarter. For the year, adjusted net income was $208 million, $2.67 per adjusted share. Looking forward to 2020, given our AUM position at the end of 2019 and so far into 2020, we have a strong forward lean into 2020.
In addition, we will realize in the Q1 of 2020 a performance fee of approximately $2.5 million from our Global Opportunities strategy. While client flows are difficult to predict, we are confident that our third generation strategies are positioned well for continued growth. We will continue to invest in people and technology to take advantage of these growth opportunities and expect salary and benefits costs to be approximately 10% higher in 2020.
Consistent with our historical practice, we granted equity awards this quarter, which will increase shares outstanding by approximately 920,000 shares or approximately 1.25%. We expect full year equity-based compensation expense will be down approximately $6 million in 2020 as we roll off the 2015 grant and roll our amortization of our 2020 grant.
Occupancy expense should be approximately $1 million lower in 2020 as 2019 included several investment team relocation expenses.
As a reminder, seasonal benefits costs, which include employer contributions to health and retirement plans and payroll taxes, typically increase compensation by expense by about $4 million in the Q1 of each year. Another $1 million of seasonal expense related to non-employee director compensation is also recorded in the Q1 . Capital management discussion begins on slide 13.
The company's board of directors declared a variable quarterly dividend of $0.68 per share of Class A common stock with respect to the December 2019 quarter and a special annual dividend of $0.60 per share, which represents the remainder of the cash generated in 2019. Total dividends paid on 2019 cash generation was $3.08 per share, which represents approximately a 9% yield based on current share price levels.
The process to determine the level of special dividend declared each year involves us assessing the current market environment and business conditions and any needs to retain cash for strategic investment or corporate purposes.
Absent retaining cash for any of those purposes, we would anticipate that cash generated each year will continue to be distributed to shareholders in the form of a special annual cash dividend. Before moving on to our balance sheet, just a reminder that in the Q1 of each year, a portion of our employees' partners' pre-IPO equity becomes eligible for sale.
In total, together with shares eligible for sale from former employee partners and shares that previously became eligible for sale, approximately 10 million shares held by current and former employee partners are eligible for sale in the Q1 of 2020.
Employee partners are not required to sell any shares, and we don't know how many shares they will choose to sell, if any. Depending on the level of employees' desire to sell, we may execute a coordinated sale for some portion of these shares. Our balance sheet summary is on the last slide. Our balance sheet position has remained relatively consistent in 2019.
Lower cash balance in 2019 primarily reflects the higher % of cash distributed through quarterly variable dividends in 2019 compared to 2018. Overall, our cash position is healthy and leverage remains modest. That concludes my comments, and we look forward to your questions. I will now turn the call back to the operator.
We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster.
Before we begin, please limit yourself to one question and one follow-up. If you have further questions, you may re-enter the question queue. Our first question comes from Mike Carrier with Bank of America. Please go ahead.
Hi, guys. This is actually Sean Kalman on for Mike. You mentioned you were reviewing the distribution structure and strategy and looking at some third-party distribution relationships. Can you just tell us what some of the areas of interest are in terms of channels and geography?
Yeah, sure, Sean. This is Eric. I think we've all seen a pretty progressive change in distribution partnerships moving to more captive distribution. A downtick over the last few years in open architecture to more captive distribution. There are partners that we want to look at from a regional standpoint to partner with. There are partners that we want to think about with regards to vehicle or holdings-based delivery, to help diversify how we distribute.
We're reviewing those groups which we think will help bring leverage to our model as opposed to us trying to replicate and become a vehicle-oriented firm. We continue to look for those opportunities, and as distribution has been changing and networks have been evolving, including technology, we're fairly optimistic in this year and next year of expanding how we distribute with various partners.
Okay. Got it. Then just as a follow-up on performance fees. You guys had strong performance this year, we typically see some fees in the Q4 . I know you mentioned a couple million next quarter, we're just wondering why you guys didn't realize any performance fees this quarter, how we should be thinking about them going forward in terms of seasonality.
Yeah. This is C.J., Sean. We have a number of handful of performance fee accounts, about $2 billion in AUM. Two of those have a December 31st performance measurement period. Based on the formula, we just didn't earn any in those two. It's quite a limited opportunity in each of the quarters. The one in next quarter had a January measurement date, that one's fairly locked in, which is why we indicated that we'd be realizing that.
Okay, thanks.
The next question is from Chris Shutler with William Blair. Please go ahead.
Hey, guys. Good afternoon. You mentioned private markets and alternatives. Maybe just provide a little more detail there on, I guess, where you think you'll be in a few years in that space? Is the Global Value team strategy in that area as well?
Hey, Chris. It's Eric. First, on the Global Value, it is not into the alternative space. It's leveraging off of their current core capabilities.
Okay.
With regards to the alternative and private market space, we clearly see that's where asset allocation is going. We think that our model fits quite nicely with the success of some of our newer strategies to fit into that space of asset allocation. We continue to see more teams externally that we're looking at, as well as more thoughts of how to develop that within our teams.
You're starting to see an uptick in how people create public-private strategies that have a crossover capability, which I would define as just another confirmation of our thesis of degrees of freedom. We believe that that should be the broad definition that dictates where we go going forward, as opposed to this loose definition of just what is an alternative space.
We continue to challenge our current teams on how to differentiate and use degrees of freedom. We continue to look at new investment professionals and strategies that would enhance the direction of the firm. The direction will be towards the alternative or private market space.
Got it. Makes sense. I guess secondly, any thoughts on the non-transparent active ETF space? I know it's super early days, at a high level, are you leaning more positive or more negative on the potential for that wrapper?
We are very indifferent on the wrapper. If the wrapper is something that clients request and start demanding, we're very open to packaging up our strategy and a more effective wrapper for clients. As that takes hold and it fits who we are, we'll move forward on that. We rarely get excited about a vehicle or a wrapper as opposed to investment talent.
Okay, thank you.
The next question is from Bill Katz with Citigroup. Please go ahead.
Okay. Thank you very much for taking the questions this morning. Appreciate your prepared comments. Just starting off with maybe that last sort of line of questioning. A two-part question, and then I'll ask my follow-up after that. First part of it is, do you have enough real-time capacity today to more meaningfully compete?
It seems like in the alternative space among the publicly-traded names, one of the themes is that as being global solution providers, they're able to sort of consolidate market share from LPs.
Secondly, just to sort of challenge you on not scaling the business a little bit more, those same companies are able to generate significant alpha on a quantum level of higher of AUM. Why not open yourself up to a little bit more growth and some of those more scalable opportunities?
Yeah. Part of the real-time capacity to compete for what we're trying to achieve. We review capacities for consistent and long-term alpha generation. Our team in the middle works with each of the investment franchises to discuss capacity. We make joint decisions. As we see alpha waning or if it's difficult to put dollars to work, we will review capacity on a very frequent basis.
My mindset, and I think the firm's mindset, it's all about excess return delivery. If capacity gets in the way of that, we'll shut the strategy down. If that doesn't generate the level that the market anticipates for stock price, the client comes first, and so is alpha delivery. The fact that others can significantly scale up, that is always something we're looking at how firms can compete and scale up and consistently deliver alpha.
We will learn from those firms. We'll stay true to who we are and deliver the alpha first and foremost. The compounding of that wealth and the consistency of those clients and the present value that creates with long duration clients, I think is the most powerful thing in this business as opposed to just pure capacity and asset gathering.
Okay, that's helpful. Just to follow up, maybe stay on the same line of thinking. I think in your prepared comments, you talked about a number of products out there that you sort of feel good about as you look into 2020.
You also mentioned the pipeline. Do you have any sort of color on what's coming in the door for Gen 3 versus any kind of potential rebalancing you might see, and how that might compare to maybe the last year or two or last couple of quarters, just in terms of relative impact?
I mean, the signaling is what we stated, which I think our model, given the results we've produced in 2019 and the consistency and longevity of our strategies and professionals, speaks for itself in the marketplace. That output is highly differentiated versus going to a large hedge fund that's multi-strategy and manages risk at the center of the firm and allocates dollars out, versus the risk of going to start your own firm.
The model is picking up in the industry, so we're seeing more and more talent and revealing that talent. The direction is a continued degrees of freedom. What we've always preferred and like to do is to take those steps of degrees of freedom that doesn't tax the operational infrastructure at a heavy load. We've tried to incrementally step out in degrees of freedom that links to the operational footprint we have.
We've developed into the alternative as well as to the credit space. We have a lot of operational capacity there. We will be mindful not to get too extreme.
Thanks. I'll hop back in the queue. Thank you.
The next question is from Kenneth Lee with RBC Capital Markets. Please go ahead.
Hi. Thanks for taking my question. You touched upon, within your prepared remarks, that you could potentially see some growth within the first generation, the second generation, over the next year. Just wondering if you could just highlight which specific strategies you had in mind, ones that could be poised for growth. Thanks.
The strategies we're optimistic about is. There's been a few strategies that there's been some rebalancing around that have picked up capacity as well as have extremely strong performance. The comment there revolves around those three points, that we do think rebalancing ebbs and flows. As long as you have a healthy relationship with clients, you can expect that money can come back in the strategies.
Coupled with we've opened up some of our strategies, so there's some available capacity, as well as strategies such as our Global Equity has quite a bit of overall capacity to grow. Given the performance that we've experienced last year and now over longer periods, we have decided to make a more optimistic statement on some first- and second-generation strategies.
Okay. Very helpful. Just one follow-up, if I may. In the past, you mentioned in regard to third-generation strategies, there could be some potential opportunity to expand further into the institutional channel. Wondering if there's been any progress updates on that front? Thanks.
It's helped us in the marketing and distribution to open some doors that we haven't seen in a while. The institutional marketplace, more specifically the endowment and foundation space, given our newer strategies, fits with that segment.
Those third generation has done well in the intermediary space, but the blending of intermediary and institutional fits in that family office endowment and foundation space. We haven't seen an enormous amount of wins in that space, but we continue to see strong interest.
Got you. Very helpful. Thanks again.
The next question is from Robert Lee with KBW. Please go ahead.
Great. Thanks for taking my questions. Maybe one for you, C.J., just a little bit of a modeling question, but I just wanted to make sure I understood your comments around comp expense for 2020. I think you said up about 10%. I want to make sure I have that right. Is that assuming static asset levels?
Yeah. I was specifically referring to the salary and benefits line. Obviously, incentive comp is going to fluctuate with revenues. Equity-based comp, I think we've given some guidance there that should be down over next year as well, in total, by about $6 million. My 10% was really focused on the salary line, just due to some hiring plans that we'll move forward with for the most part, despite what the markets do.
Okay, great. Maybe just a broader question, Eric. This is part of the distribution review you're going through, but can you talk a little bit about your Non-U.S. initiatives, or what were you thinking there? For many years, that had been an incremental contributor to growth. It's certainly been a key driver.
If I look over the last year, the market share of assets from outside the U.S. has been pretty flat, had a little bit of outflow, probably for similar reasons to hear from rebalancing. How do you feel about your Non-U.S. footprint? Do you see that as a particular opportunity for growth and investment there going forward?
Yes, we do. We really attacked the Non-U.S. space over the last 10 years from our institutional reputation and institutional relationships. We're broadening the breadth of channels we're looking at. Continue to think about how to expand into the intermediary and family office space outside the U.S.
We also believe that some of the strategies, such as Developing World and Emerging Markets, the Sustainable Emerging Markets and the Developing World strategy both have good opportunities outside the U.S. that we think look promising in this year and next year.
As well as the Global Discovery strategy establishes their record. The early alpha generation has been very strong. That'll spark another growth phase outside the U.S. It's a combination of having the right strategies and broadening out our distribution footprint.
If I could, maybe one last quick question? Maybe it's a little bit more near term, but clearly, given the run-up in markets the past year, or past decade, I guess, but the past year, you talked about obviously there being some rebalancing, and we'll call it profit-taking.
As we look ahead to this year, do you have any sense that a lot of that action's happened already, or would you just expect normally as we get into the new year, you could see some more of that, at least over the first part of the year?
Those are always hard to predict. I'd have to be looking into a crystal ball if I answered that. Far through January, there tends to be some rebalancing, but most are looking at their asset allocation and resetting their capital market assumptions. Throughout the quarter you'll see some rebalancing and as the quarter progresses, we'll get a feel for that.
Clearly with the current market environment, with regards to the rates and where equity markets are at, I think you would see some continued rebalancing away from equities. Everybody is at a fairly low allocation, so I'm not sure how much lower they'll go.
Great. Thanks for taking my questions.
The next question is a follow-up from Bill Katz with Citigroup. Please go ahead.
Okay. Thanks, taking the extra question. Just coming back, maybe C.J., for you, just on capital allocation, as you think about 2020. Given your commentary around the potential unlocking of shares that could be sold by employees and the size of it, what is your thought or how are you thinking about the sort of capital management policy between the dividend payout?
I appreciate your prepared comments saying this year will look like 2019 strategically, but any sort of subtlety to that, flexibility to that to potentially absorb some of the secondary pressure that could be in front of you?
Yeah. Bill, there really hasn't been any change to our thoughts around allocation of capital or repurchasing shares to offset the public. The number of shares that have been available really haven't changed dramatically, available for sale, haven't really changed dramatically.
We do have each year another tranche becomes eligible, but that number's been seven, eight million for the last two years. Up to now, people have opted not generally to sell. The short answer is no, we haven't changed our thinking there.
Just one last qualifier, and I'm sorry to beat a dead horse here. Eric, just in terms of rebalancing, maybe you can answer the question this way, since you're through the month of January. How does this January look from a rebalancing perspective versus a year ago? Obviously a lot going on, the market levels as well.
That's a dramatic change year-over-year. You're talking a Q4 of 2018 that was down significantly. I think there was a little bit of people and clients a little frozen by the major decline, and then to compare that after this Q4 and coming into this year. I think there's more optimism coming into this year. I would say we see more opportunity after this January than last January.
Okay. Thank you very much for taking all the questions today.
This concludes our question and answer session, and the conference has also now concluded. Thank you for attending today's presentation. You may now disconnect.