All right. Good morning, everybody. Thank you for being here. Sorry, there were some elevator problems, as you all know. My name is Manav Patnaik, for those of you who don't know me. I'm Barclays' Information Services analyst, and I'm pleased to have today Martina Cheung from S&P, who is currently the head of S&P Global Ratings, but in about two months will be taking over as CEO. So congratulations, Martina.
Thank you, Manav. It's great to be here.
Maybe just the first point, you know, around that topic is just what, you know, your broad thoughts on being named as CEO of S&P. You know, you've been there fourteen years, and, you know, you've come to this point, so just was curious on your first thoughts there.
Yeah, thanks. Well, I'm incredibly excited. The company, as you know, is an incredible collection of some of the most, widely recognized and admired brands, with highly differentiated products and a really strong financial profile. Specifically, on my own trajectory with the company, I've run two of the largest businesses, Market Intelligence and Ratings, and I have a very good understanding of the growth drivers, for the business, the operations, our customers, segments, and a lot of our external stakeholders. I also had, pretty strong leadership roles in the SNL merger, as well as, S&P acquisition, as well as the IHS merger. So, really confident about our ability to continue to generate long-term profitable growth and balancing that with, strong shareholder returns, and I'm very excited to start on, first November.
Got it, and, you know, Martina, we've interacted when you were head of MI, when Sustainable1, now Ratings, but just, you know, those leadership roles you've had, just curious how that shaped your, you know, vision and leadership over the last 14 years?
Yeah, it's a great question. I think, some of these businesses are quite unique and quite different, and the drivers for performance and growth in the businesses can vary. And so I have, I would say, kind of a bird's-eye view, if you like, going into the CEO role on November first, for the different drivers of growth in a data and analytics business, a platform business such as market intelligence, versus some of the market factors that drive a business like ratings, some of which we may see reflected in the index business, also, for example. So I think, looking across all that, the diversity, the breadth and the strength of the products and businesses in the portfolio, I'm pretty excited about the opportunities going forward.
Come November one, we'll be able to give a bit more of an expansive response to the questions around how I think about this.
Got it. And just one last one on this topic, you know, I think when you first joined S&P, there was, like, a portfolio cleanup going on. And then, like you said, you were there for the SNL merger and now the IHS Markit merger. So just, you know, from your seat, like, the breadth of the portfolio, like, what are your views on the portfolio at S&P?
Yeah, we have, as I said, I think, an incredible portfolio. We are also very disciplined as a management team in terms of how we think about the portfolio, the assets within the portfolio, and how we optimize for that. So that's something that we're continuously looking at. I think to get into more specifics may be a little bit difficult, you know, right now, but certainly you've seen us make the announcement about Fincentric recently, for example, which is a key element of, or a key outcome, if you like, of the constant review that we're doing on the portfolio.
Got it. Moving on to the ratings side, you've been head of the business now for several years. So just curious, like, from when you took over to today, if you could give us a few examples on some of the changes you've made or any kind of, you know, different characteristics under your leadership there.
Yeah, thanks. Well, the ratings business is really a jewel. It's an incredible portfolio within, even within ratings, for the ways in which we serve the market. And when I started back in early 2022, having been in the business prior to that, when I first started at S&P, there were several areas that I looked at, and many of which would have been discussed at the Investor Day. So, for us, for example, structured finance, I viewed as an area of untapped growth opportunity in the business. We had the private markets really coming to the fore with direct lending growing gangbusters. We had an uptick in sustainability and infrastructure, driven both by aging infrastructure, but also by the needs around sustainability.
There were a variety of things that we worked on. We set out strategy at Investor Day. We highlighted making sure we were investing in the core business. We've done that by ensuring that we have the right level of capacity and expertise in the analytic bench. That has proven to be a very successful strategy for us, particularly in a year like this, when we've seen unusual outsized issuance in some sectors, for example.
We also really strengthened the levels of expertise, both in the analytical area as well as the commercial area, so that we were targeting with single points of contact, specific areas such as, for example, private credit, where we could now go and have, more focused and concentrated dialogue with sponsors to represent all of the ways in which we could help them with our credit rating, products. That's an area that's been very helpful for us. And we did some, reorganizations in the analytical organization so that we could actually be more focused on growth sectors, because we knew that that was where we were going to have capacity constraints, or capacity demands rather, and we want to make sure we manage that we don't have constraints. We're very pleased with the results.
You can see, for example, on structured financing, Q2 of this year, we had over 60% year-over-year revenue growth. In private markets for the first half of this year, we had 52% revenue growth. That's comparing to 59% overall revenue growth in transaction revenue. So these are ways in which we know that some of this strategic change that we've made over the last several years is working, and that's something we'll continue to do going forward.
Got it. Appreciate that. A few follow-ups to that, but first, maybe let's just talk about the current issuance environment. You know, the first half of the year was, I think, 50% plus. July, the latest numbers you could put out was, I think, 125%.
Yeah.
August, September looks to be pretty good. You know, can you just help us appreciate what's going on year to date so far? Like, why such robust issuance activity?
Yeah, absolutely. So it's kind of two stories really with issuance this year, and I would characterize it as not being a typical year for us. So on the one hand, refinancing has been an incredibly important part of the issuance story. Earlier in the year, we knew that we were gonna see pull forward from the second half into the first half. We were hearing that anecdotally. We had already seen that in some of the pipeline build that we saw in Q4 of last year, for example. So we had a set of expectations around that. We did see that pull forward from the second half into the first half, particularly in the investment grade area.
We also expected to see, I would say, strong issuance in the high yield and bank loan area, but this is where we were quite surprised with just how much issuance we saw. In a typical year, just to frame it, 25% to 50% of the issuance that we would see would be driven by refinancing. But this year, in the first half, for high yield and bank loans in particular, we saw that at around two-thirds of the issuance. And maybe just to put a finer point on it, for bank loan volumes, for example, the public data for year to date, August bank loan refinancing volumes is greater than the full year refinancing volumes for 2018 to 2023.
So definitely not a typical year for us from a refinancing standpoint. Now, on the other side, we also look at new issuance, and oftentimes that is driven by M&A, IPOs, demand for new asset classes, such as some of the ones we've seen in structured finance. We're not seeing a typical year for M&A and IPOs. I think this has been very well documented in the media and lots of conversations like this. For example, for us, we look and track deals announced and executed over $100 million, and the quarterly averages for Q1 and Q2 of this year are below the quarterly averages for the past five years. Now, we are hearing a lot of optimism, I would say, for M&A and IPOs, but it tends to be more skewed into twenty twenty-five.
So if I bring that back to the guidance that we gave in July, just to put the color around that, we already have the July data for the most part, and the guidance took into consideration the July data from an issuance standpoint. Throughout the rest of the year, we said we would see more optimism for Q3. As you said, we've seen that in some of the public numbers around market issuance, for example, continuing to be strong in certain areas. The big question will be Q4. We still expect a sequential slowdown in issuance from Q2 to Q3 to Q4. That's because we continue to hear that the issuers and rating advisors are nervous and contemplating potential for volatility in Q4.
Lots of time between now and the end of Q4 in a market like ours these days, when you can look and there can be changes in any given day. So we're watching it very, very closely, but that's I would say all the factors playing into the twenty-five guidance.
Got it.
Our 2024 guidance, excuse me.
Sorry. Yep. The Q4 volatility that the advisors are telling you, is that mainly tied to the election, or is there something else tied to that?
Yeah. You know, it's interesting because at the beginning of the year, I would say it was, it was global, in the sense that, we were hearing nervousness, beginning of the year around Q3, and then it sort of like really honing in on Q4. It tended to be, didn't matter if it was Europe, you know, US, I mean, a little bit also in, in APAC, but I think it's become more acute based on the pipeline activity that we're seeing. It's definitely become more acute for the US and the feedback we're hearing from issuers in the US, right now. You know, look, I can assume or presume that it is, you know, geopolitical factors, you know, could also be connected to, you know, expectations on the rate environment.
But I think what we've been hearing anecdotally suggests maybe a little bit more around the geopolitical uncertainty.
Got it. And, you know, can you talk a little bit about the refi walls? And also tied to that, like, let's just say spreads and the stability in the market today maintain, why wouldn't this elevated level of refi not continue?
It's a great question, a great point, and it certainly could. We have seen, look, the 2023 starting in 2023 and into 2024, we've seen what we would characterize as very favorable financing conditions, and that's a large part of the story around the pull forward. You know, I think two quarters ago, I was asked a question on, it doesn't make any sense if the rates haven't come down, et cetera. And so that's when we said, "Well, actually, this is kind of more of a story about, you know, certainty of execution and go to market, and something is not going to disrupt your issuance in a given day or a given week," but also the spreads, and you know, fueled in some part or in large part by the demand from fixed income investors.
You know, I talked a lot in the last two years about the outflows in 2022 from fixed income funds. We've seen a lot of that come back in, and that's a key factor here as well. If that were to continue, yeah, it's certainly possible that we could see that. What we're hearing anecdotally is that there's gonna be an avoidance because of the certainty question and the potential for, you know, deals to get disrupted in any given day or any given week. And so, you know, that's what we're looking at. That's what's informing some of the views that we have around, you know, around the potential softness in Q4.
But you're right, it could be that, you know, depending on macroeconomic, geopolitical outcomes, it could be that we see that the condition continue. It's just something we're watching day by day right now.
Got it. How do you think about what an eventual rate cut or a rate cutting cycle, if it begins? Should that accelerate the pace of issuance, or how do you view rates and the dynamic of what we've already seen?
Yeah, it could certainly accelerate. We think of rate cuts on the refinancing side as being one that sort of impacts timing, potentially. On the new issuance side, can certainly impact volume just simply because of cost of capital and you know, that being more favorable. So, you know, that could play in. Our own base case now is for 25 basis points in before December, and then starting Q4 in this year through Q4 of next year another 125 basis points with you know, kind of a skew towards earlier rather than later. So, you know, we've become a little bit more, I would say, optimistic on the rate cut base case ourselves.
And again, that's been taken into consideration in the guidance that we've given for bond issuance. But I think you have to see, as all the other factors playing in favor also. It can't just be rates on their own. The real correlation, or the highest correlation, if you like, from a new issuance standpoint over long term, is actually just GDP growth. And we would expect that correlation to remain as strong a factor going forward. And so, you know, all these factors have to be in place for us to be able to see, you know, the story play out around new issuance, refinancing, et cetera.
Got it. Outside of refi, I mean, in terms of new issuance, I think you've mentioned there's, like, the M&A component and there's opportunistic issuance. So maybe just quickly on the M&A side, you know, I think we all know it's you know, way below averages, et cetera. But, I believe you guys have the Ratings Evaluation Service, right? So, and that fits in the non-transaction side of the line. So any insights from activity there that could suggest that, you know, that M&A activity could start coming back?
Yeah. It's interesting because the Ratings Evaluation Service , we call it shorthand, the RES, has actually been increasingly used for more diverse use cases in the past couple of years. And so we've seen it being used for a lot of scenario analysis, for example, as you know, as firms are looking at their overall capital structures in the last couple of years in particular. I wouldn't say that we've seen anything unusual there that would lead us to believe there is, you know, either a massive wall of refi coming. This is gonna be a question of timing and, you know, the degree to which we have issuers who are willing to come to market either...
for different reasons, whether it's, you know, they see a degree of certainty, asset prices, are increasing, rates are coming down, et cetera. So very hard to pinpoint right now, what, what might be coming around M&A. And, you know, it's always helpful to note as well, you can have, you know, a couple of blockbuster deals that influence the numbers, you know, heavily one way or the other. Which is why we try to look at, you know, the overall stock of deal flow, over a hundred million as we think about, the opportunities going forward.
Got it. I mean, you mentioned one third of investment grade was refi, two thirds of high yield. But I guess my question is: what are the other categories, like, the new issuance part of it? Like, what are some of the reasons for that new issuance or categories?
Yeah. So we've seen an interesting uptick in demand for what we characterize as maybe new assets underpinning new asset classes. A lot of you won't be surprised to hear that data center issuance and structured finance is up, obviously driven by this intense demand for data centers, driven by the generative AI excitement and momentum that we see out there right now. There are a lot of other areas where we're seeing demand for new assets that are supporting some of this growth as well. So infrastructure was one that we had identified a couple of years ago. Inflows into infrastructure funds have been very strong in the last couple of years.
We believe that some of that is driven just by function of aging infrastructure, but also by the sustainability and climate risks that we're seeing in physical infrastructure. And we saw that, for example, in recent times over the last few months in U.S. public finance, for example, but in other areas also. A couple of other areas has been very interesting. CLOs has been a fascinating asset class to watch in terms of new issuance, new CLOs being created this year. We believe that's because of both favorable conditions and loan supply. Just to put a specific view on that, the actual volume of new CLO issuance in the first half of this year was double the volume of new CLO issuance in the first half of 2023.
So those are some of the other areas where we would see a lot of demand from a new issuance standpoint.
Got it. One of the other areas that we've seen some outperformance from you guys this year has been on the structured finance side. And I think under your leadership, you've made a concerted effort to, I guess, gain back your position. So maybe just take a step back, help us appreciate why you were underperforming in the structured side and what you've done to pick up the pace here.
Yeah, I Well, look, I mean, the first thing, comments I would make is, we don't compete based on analytical outcomes. We're very much, independent, from an analytical standpoint. What I focused on in the last couple of years was factors outside of the analytical outcome that were within our control. And so, we benchmarked immediately after I started in 2022, the amount of time it takes us to release a structured finance rating. And we've actually went back and broke that down into more specific steps and realized that we had some challenges just in basic areas, like when we get a complex deal in that could potentially cross multiple teams, how quickly are we actually getting back to the issuer and whether or not we can even rate that deal?
And so we resolved a lot of that in a couple different ways, introduced new metrics. We actually restructured and reorganized the analytical team so that we had the ability to have one point of contact on a complex deal, who was actually tracking the time that it was taking us to both get back to the issuer, as well as if we were gonna rate it, the time that it was gonna take us to rate it and release it into market. And that's proven to be very positive. We've had a lot of feedback in our issuer NPS scores on how much more quickly we're moving. We've been making analysts.
Much more available to be out in the market, educating issuers and investors on our ratings methodologies, particularly where we see growth in some of these esoteric asset classes and new assets that are being demanded by investors and issuers. And I think all of that has played into the results that we have. You know, last but not least, I was very vocal in the last two years about the decision not to release analysts in the slowdown. Well, more than the slowdown, in 2022. And the reason is because you can't just release an analyst and then have somebody come back in and be productive on day one.
It takes twelve to twenty-four months, depending on the level of analyst and the sophistication of the asset class, for an analyst to actually be productive, and so you have to be very, very mindful about managing analyst capacity. That proved to be a good answer for us. We were able to jump right back in when CLOs came back very strong in 2023, and we've continued that in 2024, so these are all things that we've seen. We've had really great growth in structured finance in Q2, for example, well over 60%. We're very pleased with it. We're continuing to be very focused on the asset class and engaged with the market very proactively.
Got it. You know, in ratings, you know, the revenue growth always tends to be better than the transaction activity, and part of that is due to pricing. So I just wanted to ask you, you know, your philosophy around pricing in the ratings business, and also since you took it over, have you changed any of the dynamics when those rate cards go out?
In answer to your second question, we're pretty, I would say, rigorous and structured around the rate cards themselves. So we have a process of, you know, governance, sign off, all that sort of stuff. So no changes to the actual process itself. What I focused on was how we create value for the customers and where there may be opportunities to align our economics with that value. So there were a few areas that maybe we hadn't paid as much attention to in the past. One important area is the surveillance and annual surveillance fees that we charge for monitoring the ratings post new issuance.
We had spent an incredible amount of investment in offering new services to existing issuers, scenario tracking, additional deep dives in different sectors, peer comps, peer reviews, et cetera, all available in Ratings360, which is the platform that we use to engage issuers for which we don't charge. In a lot of that, in addition to making analysts more available for education sessions, engagement, et cetera, the value there, we felt was quite substantial, and so we've been able to align the economics there with the value. That's one example of, I would say, maybe a kind of a newer area of focus, call it, from prior years. And that philosophy around aligning value with, you know, with the economics for us, we carried that through to.
You know, on the new issue side, we've carried it through to products like the Ratings Evaluation Service and seen good results there. And it's something that we'll continue to do, but it always has to start for us with a question of value for the customer.
Got it. One kind of open-ended question for ratings is the margins. You know, you have already pretty impressive margins, and they, I guess, they can ebb and flow based on transaction activity. But your philosophy on how you think about margins and, you know, how high or how low, you know, at what point do you start laying off teams, I guess, you know, if you have to maintain margins? Just any broad thoughts around there.
Yeah, I would say, there's not a hard and fast rule around establishing the point at which to lay off teams. That will be very much also a question of the asset class itself and the sector itself and you know, how that is expected to you know, to perform over a period of time. What I would say is this, we are constantly looking to manage this business rigorously to generate the returns to generate the long-term growth, and to be able to actually serve the market and the clients where the issuance is coming.
And so we've been able to do things like move analysts between teams, to reduce, let's say, capacity in one area that may not be seeing as much volume, but deploy it to other areas where we do see volume. And I think going forward, we're gonna be focused on ways in which we can generate efficiency, that would allow us to boost our capacity without adding additional heads. Obviously, some of that efficiency we'll see drop to the bottom line as well. And, you know, this is something that we're trying to do as a core objective through the deployment of generative AI also.
The margins for the business, I think going forward, very much consistent with what we've been saying around, you know, certainly the Investor Day range that we had, and we'll continue to be very, very disciplined on this. We're always taking into consideration balancing long-term growth and shareholder returns.
Got it. I was gonna ask later, but since you brought it up, GenAI.
Yeah.
You know, you guys have had Kensho in the organization for a while. From your perspective on what's happening internally, maybe just an update on, you know, the activity going on in there and whether, you know, is it a hype? Or, you know, just your perspective on GenAI and what we should expect from you guys.
Yeah, we're excited about this. I was chief strategy officer when we took our first investment stake in Kensho, and its capability, business, the team that I've been excited about. When I ran Market Intelligence, we co-launched with Kensho a number of the marquee products that are actually driving demand from customers right now, especially customers who are looking to get their data organized, for example, for generative AI purposes. The capabilities that we have, we've been able to. I would say, call it share the wealth, maybe a little bit more across the divisions. We've been both hiring domain experts and GenAI and data scientists across the divisions, but then also finding those ways to really scale and leverage Kensho's capabilities.
Ratings, for example, now is working with Kensho on a couple of different use cases for the ratings division as well. More broadly on generative AI, I would say that we as a company, we've talked about ChatIQ, for example, which is the interface that has been launched on Capital IQ Pro. We've talked about ChatAI, which is a similar sort of interface that's been launched within Commodity Insights. We're excited about S&P Spark Assist, which has just been launched in the past several months.
Internally, we already have 14,000 users on that platform, and one of the things that we're extremely excited about is that we took a pretty efficient and lean approach to that, and didn't. Instead of essentially buying a vendor solution off the shelf, we're using open source with appropriate guardrails. So, you know, instead of paying a lot of money per user, per month for an off-the-shelf LLM, we're paying less than $1 per user per month, and that's been something that has allowed us to move very, very quickly with S&P Spark Assist.
I actually had an employee who came to a roundtable last week with me and said, "Oh, I asked Spark Assist to generate the question to ask the incoming CEO." So we know it's being used quite broadly across the organization. And then, you know, we're gonna focus where we can create the most value. So we just announced with Accenture a partnership to train everybody, including the executive team, through the Accenture Training Academy on generative AI. And that allows us to not have to focus our own resources on doing the training. We can focus our own resources on building and deploying capabilities. Maybe within ratings, more specifically, we're pretty excited about it. We have many use cases moving quite fast.
I would characterize the approach that we've taken as pragmatic. We did not want to be out there making claims that we couldn't back up, and we all know the pitfalls with some of these large language models. If I was to get into maybe a bit of more discrete detail on this, just to tell you how complex some of this can be when you're applying it to something that's quite specific and not just a general use case of, you know, chat AI, ask it a question. We ran after the CLO use case quickly, because I never wanted to be in a situation again, where we were turning down business and CLOs because of capacity, and if we could use generative AI to boost capacity even more, that would be a great outcome for us.
The learning that we found there was, we tried multiple LLMs with the CLO use case. It's a pretty complex asset class, as you know. Different LLMs answer different questions on CLOs with different degrees of accuracy. So we actually have to chain multiple LLMs together to get the best outcome. That takes a minute, right? Because you can't deploy something that's 80% correct to the CLO analyst, and so that's the kind of really rigorous activity we're going through. Now that we've figured out some of these challenges, we've got a solution that has successfully chained multiple LLMs, that we're deploying to our CLO team. I think we can move a little bit quicker, and hopefully there we'll be able to see some productivity gains, time to market gains, quality gains.
A lot of that will fall to the bottom line over, you know, three- to five-year time period. Not all of it will fall to the bottom line. That's something that, you know, we'll take a look at in terms of redeploying for capacity back into the business as well, but overall, very optimistic.
Got it. I have to ask a private credit question.
Yeah.
Just, you know, I think most of the investment communities appreciated that, you know, it's not necessarily direct competition, but it is a big asset class out there. And you talked about investing more in your private credit teams and efforts. Can you just talk about what you're doing there, how you think about private credit as an asset class competitively, and what we should expect?
Yeah, absolutely. So, you know, look, I mean, two years ago it was a question of, "Oh, my goodness, public markets closed, bank on the market went private." You know, that was certainly a characteristic of twenty twenty-two. It really shifted, quite significantly last year, and that, that shift, I would say, accelerated into this year as well, and it's characterized in a couple of different ways. The first is that the banks themselves have accepted private credit as a feature, and we're seeing a lot of announcements around partnerships between the banks and the sponsors. And that allows us, with the investments that we've put into private credit, to be there and actually serve these complementary demands between the banks and sponsors.
I would say that's a very positive shift, I think, in the last couple of years, and how private credit has established itself as complementary with the banks. The second point I would make is the impact of private credit is quite wide. A lot of people will think that it's just the rating of the portfolio company itself. In fact, our exposure is probably in six or seven areas. You know, BDCs, fund financing vehicles, asset-backed private deals, the portcos themselves, alternative investment funds. There are a number of areas in which we actually serve both the sponsors, and now, as the banks are working with the sponsors, the banks also, who are providing financing in some cases to the sponsors.
And so there's both a direct effect as well as an indirect benefit to us having developed these capabilities. To do that, we looked at our methodologies. There have been a couple of areas where we have new methodologies to serve some of the new demands in sub-asset classes. We added expertise on the commercial front. We're having a very proactive dialogue with the sponsors, and some of the strength that we have in S&P overall has, you know, helped us with that. Obviously, we have iLevel, which is a marquee product in the private market space overall, and we've had sponsors be very proactive in engaging with us to have broad conversations around how we can work with them. So it's an area that we will continue to prioritize.
Our growth there, as I said earlier, has been very favorable, about 52% revenue growth in the first half, and we're quite optimistic long term for the growth in that asset class. And we feel that we are making the investments and have made the investments that help us serve the business, whether it comes in the public markets or the private markets.
Do you anticipate private credit to be like a separate line item at some point, in terms of, you know, like right now we do investment grade, high yield, et cetera. Like, will that be a big enough opportunity for you guys to be its own revenue line item?
I think it depends. I mean, it depends on how it evolves, I would say. Today, it is more of a different issuer type-
Okay
T han it is a different product, because you think, for example, there are some large sponsors for whom we rate all their investment grade companies. We would call that investment grade issuance. We track it as part of our private credit, you know, growth reporting. But it's a I think it depends on how it evolves, both in the, you know, call it the unique growth and maybe new asset classes within private credit, as well as the directions the sponsors take themselves and how the banks work with them. So-
Yeah
N ot sure yet.
Okay.
Yeah.
This might have taken you back to a little bit of when you were running MI, but on the topic of private credit, I think there's been a lot of talk on how ratings is obviously one opportunity, but the data analytical approach, or the opportunity in private credit is even bigger. I don't know if you have any thoughts on, you know, the capabilities S&P has there today.
Yeah, we believe that we are extremely well positioned. We do have incredible strength, I would say. I mentioned iLevel, but increasingly, private equity sponsors, whether it's for on the equity side, on the credit side, have been using our capabilities, which are, you know, very comprehensive in market intelligence, product side, credit analytics, for example, and market intelligence has been quite appealing to the sponsors. I would say the level of interaction we're having is quite strategic with sponsors. I had a sponsor call me recently and say: "Look, can you...
Is there any way you can help us to figure out how we should be benefiting from S&P Dow Jones Index, for example?" And so I was able to make that introduction there, and those, you know, those conversations are happening right now. And, you know, I think this is an area where we're incredibly well positioned. We're optimistic about the growth in alternatives as a bucket, which, you know, including private equity, private credit, infrastructure, real estate, et cetera. And we've been making investments across, you know, the spectrum of those asset classes, and we think we're very well positioned to serve the sponsors.
Got it. Maybe one last question around capital allocation. You know, with private credit, generally, we've seen a lot of deal activity going on there. So, two parts, maybe specifically, do you feel like there's a lot of capabilities you need to acquire broadly in private credit, whether that's ratings or the broader franchise? And then just, you know, within ratings as well, like, I guess there's not a lot of deals to do, so, you know, how do you think about how you allocate the capital with such, you know, high margins and good free cash flow there?
Yeah, I would say we're always looking at the market, what's evolving in the market. If there are capabilities that are available that are additive to the areas of strategic prioritization, whether it's private markets, energy transition, for example, we're always going to take a look at those. I think more specifically in ratings, the strategy that we've laid out has been one that's dominated by organic opportunities because we believe there is such great continued runway there from an organic standpoint. To the extent that there may be something again, that could, you know, be additive for us, either in, you know, private markets, you know, maybe in some of the additional areas that we've highlighted, like decentralized finance, sustainability, et cetera.
We'll always take a look, but our focus is very much on, you know, the core business, the new organic product generation that we have, where we see high growth and making sure that we can run our surveillance at the highest quality as possible.
Got it. Well, I think we'll end it there since we're just about out of time. Thank you again, Martina. Congratulations, and hopefully we'll have you back next year as CEO, so.
Thank you so much. Thank you.
Thank you.
Sorry about being late.