WHG Westwood

Julie Gerron General Counsel and CCO
Brian Casey President and CEO
Terry Forbes Chief Financial Officer
Macrae Sykes Gabelli
Call transcript
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Ladies and gentlemen, thank you for standing by. And welcome to the Third Quarter 2019 Westwood Holdings Group Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. [Operator Instructions]

program recorded. today’s reminder, a may be As And for Counsel today’s like to and your host introduce to program, Compliance now, Officer. I’d Chief Julie Gerron, General Please ahead. go

Julie Gerron

statements. XXXX Welcome Thank actual good statements, results may different uncertainties which known materially discussion to and earnings to forward-looking conference from subject to by unknown our will you be include call. afternoon. the those cause third and and are other following The which forward-looking quarter contemplated risks, factors,

concerning that press difference issued as factors information XX, is with Securities included for earlier well XXXX, a Additional cause such September the XX-Q and the could as quarter Form in release on Exchange ended filed the Commission. our our today,

forward-looking future a of We undertake no or obligation events to any whether new result statements publicly information, revise update otherwise. as or

not You place on forward-looking reliance statements. undue are cautioned to

SEC in GAAP today. end economic reconciliation press earnings earlier our accordance economic with addition, release of to In most concerning share the the measures, at issued non-GAAP the of is included per the our financial and our rules earnings measures comparable

call Terry the Financial our we On President Casey, Officer. Forbes, Chief Officer; Executive have and Chief our today, and Brian

the call now Brian will to I turn Casey. over

Brian Casey

our call. taking for time Good thank afternoon. And you to quarterly listen the to earnings

on As teams comments I comments always, will and business. start the investment on environment market with and our finish with

for quarter business to XXX twice, uncertainties, and worldwide September. the in fell muted cut cut and markets August as citing third fed realized rally decision officially rationale as U.S. In the in rates inflation, rates. in once the to expectations as slowing international the more Volatility fed their continued only pivot investments were became

uncertainty Presidential inquiry. of cycle. the at level to the of end in the over from the invest added quarter the to the and reprehension U.S.-China impeachment in indicators the aggregate declines concerns key dispute. trade with U.S. persisted markets launch At The economic global leading economic the Thanks direction of

volatility favorable to in curve quality U.S. the a an investors an Increased positioned turn economic and companies weather high created for as environment to inverted yield investments slowdown.

and deliver strong History Companies a can inversion generation quality quarters. has high for factors post more performed such several cash yield better with the alpha balance curve solid shown quarter. during that sheets

third a markets the result equity As of for global quarter. a volatility, positive, ended while slight U.S. the with quarter’s the were markets decline

each markets. to supportive of easing the election set to rhetoric With heat our further further XXXX policy approaching constraints anticipate the we for continues the assess Presidential the monetary up interest The policy candidate’s support are economy towards to shift impact financial to uncertainty markets. as its rate and remain election fed potential markets global equity expectations

in will of no remain vigilant portfolios and volatility protecting absolute client abatement. in We market sign as shows assessing capital client risk

move is with clients’ risk, this to in goal do first resonate well to clients businesses, we Our continue downside as that our capital limited high and protect by investing later particularly and clients. business later which into the believe our prospective served have We we have principles quality cycle.

approach and an value, well volatile of showed a high during once emphasized which Our products quarter quality during U.S. outperformance value equity sell-off. notable and August again fared

the in during strong XXXX. over of Value and basis sell-off particularly quarter SmallCap Russell third August ahead points delivered the quarter, another XXX is during of the XXXX

year year the basis X September WHGSX basis XXXX. funds one top a trailing on and mutual through three five XX, year, year-to-date quartile and SmallCap and in at in star and rated trailing the year XX Our a Morningstar top decile is

in investment great the SmallCap about are This analysts, and for ahead. excited the its portfolio strategy. team high research management our team remains provide in the opportunity ideas Interest years is and strategy a we accomplishment entire of our for who

of quarter and ahead first for this better finished have are returns this also year XXth three look XXth benchmark over strategy the strategy basis through September three years We and September to quarters ahead. begun in SMidCap to The Our to for it’s year. through is points Value the forward trailing growing the ahead benchmark the peer than XXXX improve rankings. XXX Russell relative

the LargeCap Value quarter top has a Value a third mutual XXXX outperformance protection Large quarter. category the against in downside the trailing top added Russell Blend ranking quarter through Morningstar’s LargeCap fund basis during sell-off. is on year WHGLX with the intra and one of a strong The third in quartile

three the rankings Our institutional investment and the strong top year-to-date one five manager year, year year strategy also periods. with trailing for in has rankings and universe quartile

its alpha also team LargeCap product second among Select universe five more maintained peers investment five-year over the This the than September the has in Value percentile the track over top managed LargeCap to Value ended XXth ranking LargeCap period further by outperformed year years. last and in its three record. is adding the

spectrum array return strategies of for are Within risk client-specific objective. across our profile our investment an product and holds a the aligned lineup Multi-Asset and that risk tailored strategies, now

produced help active opportunity downside, and selection very returns. longer relative provide of allocation Income a and strong maturity delivering strong while a absolute Good fixed and performance. strong quarter income securities,

one XX% It five-year The in ranked XX% a for the XXth. ranked through the over trailing September XX% top year-to-date top mutual and three the and rated Star also XXth. is basis at quartile September fund years, in the years is XX trailing for WHGIX in equity of the X decile as decile the Morningstar quarter top over top to on Morningstar universe

managing income with investment term income, We deliver active can higher than we would alone equities, fixed in provide. expect provide point help or volatility the equity to fixed income a in less strategy the allocation and an and are at cycle, the both

global respective U.S. both the and strategies were long-only Convertible Our quarter. their of strategies, for ahead long-only benchmarks

to the While to our market income build on excellent continued its strategy year. neutral start

the Fund XXth Market U.S. for basis a in Income the is percentile top universe. the Neutral the at on Market quarter one-year of among September X ranked WMNIX Neutral through year-to-date percentile and The Morningstar is it XX% and Mutual trailing peers

With perform stocks. equity positions should equity convertibles well global convertible asymmetric a low to low with volatility to correlation likely this in the persist, that investors well in and returns lower of markets, volatility environment. steady proxy relative gives nature markets the bonds coupled risk The

Our confidence is volatility in excited markets, for future more our create uncertain will the as the that of extremely strategies. convertible prospects

was the India. the best In domestic Korea, strong with and with region Emerging Markets, as deepening Asia-Pacific another Taiwan a unimpressive posted performed tepid from the quarter, loss performance response slowdown yet only in policymakers. met China with

down cuts. rate following Although, three quarter, in the form implemented monetary the further America fiscal at September stimulus strong in massive rally central and banks Latin easing largest in Brazil, a still Mexico fell form of in saw India markets the corporate tax the rate cuts. a Chile in of

strategies a the in Index out Emerging quarter remained is first XXX quarter Our their points by all and emerging and Markets ahead performed the XXX three basis of Markets well benchmarks over ahead year-to-date. in the market the quarters. MSCI outperformed over Emerging third for points basis

the EM through in index September. and year-to-date the Plus quarter also outperformed

September in beat over is EM basis While XXX SMidCap EM third year-to-date points the ahead by points over MSCI the XXth. through SMidCap XXX and quarter Index basis

often Markets developments. global and to regional irrationally and remain react the volatile swiftly and

very holdings overreactions taking developments focused markets be around constantly the irrational of and impact advantage on our the We where continue evaluating by to the of appropriate.

our Client teams over to Houston group and Dallas retention continue up remains posted and nearly results. in produce Shifting great high at flows now year-over-year. business XX% our new again to Houston that Management, Wealth were XXX% strong

fact In and high in a new gained. Houston has set watermark new assets

booming existing relationships that several clients. providing nice have with clients close and private job effective with significant We maintaining a been Texas and client our with our is wealth prospective tailwind in for towards pipeline. creation held building trust events wealth creation Business

controls the XXXX Equity Select Index is a Houston for office out tax to downside for efficient protection. outperformed high-quality, portfolio, Equity low Our Russell designed Select the tax managed strong efficient with turnover, provide the strategy quarter. risk

full management September, market in XX% this strategy risk saw remained when downside Year-to-date and X% on capture on our through has fell down August, days was We markets X%. our nearly and than the below tariff action the strategy when its benchmark. in more concerns in outperformed metrics

Select Equity look a began in record to impressive forward we end. Houston a three-year million. product for is year offices both management start surpassing and assets $XXX of our at gained XXXX and Dallas that under assets completing in This with an

Westwood in attendance. banking opening clients and held last to concept clients. grand resonating The lend its portfolio is paying with services our XX over Concierge’s Private week having private in prospective and Bank clients and one existing extremely against everything combined we the of had ability with bill well an with place,

to in work the As intend we we Houston extend Bank perfect Dallas, Private at with to Westwood model brand regulatory approval. pending the to

Outflows offset were income businesses retail inflows net intermediary $XXX million, million outflows our primarily quarter the that $XXX by strategy. $XXX sales, and and of in institutional were outflows the In of million. had producing approximately third of institutional opportunity

LargeCap Emerging SMidCap and also including outflows. other However, strategies, had Markets,

Breaking level, the to down most activity front. strategy successful year-to-date and momentum on our and on the SmallCap is terms franchise both in net strategy with institutional SmallCap searches our inquiries inbound gain retail of continues flows.

with intermediary institutional strategy new and opportunity in service our groups growing the significant approvals key reorganized fully Both place. and our in space. and pipeline, groups generating sales expanded Our business activity SmallCap meeting are are platform intermediary advancing

to attracting have in managers visibility portfolio rating tandem star several attempt with an in recently increase Our five interviews interest. done our greater

to the top search three at firms approved see we been recently beginning activity. have of consulting We are one and

SMidCap able the lost are quarter move to new due assets Market manager income we we consolidation, and strategy. additional to new Investors several gainer as partner the In largest our Aviva into our now searches. the assets to but performance with in was client allocated during of offense are improved net participating neutral

our Income to parties Opportunity quality continue our our that to ensure on the producing the teams service and path clients all expect. working our work forward and clearly sales results managers are portfolio understand In

the past have have consultants investment all in our not However, as on team we approach discussed changes. expanded embraced

consultant move there to result, this year some As a away recommendations recommending earlier income a from opportunity. clients were

income expected and in less However, clients those opportunity been than quarter. some in the third to slow were have act of outflows

decile on sales Performance capitalizing road-show all campaign in and a across the rating in are the with new rankings and five and peer star We a income top retail Investment opportunities year-to-date, fourth space Morningstar quarter. territories

the in due despite strategy. a performance. large class, the the in management, demand LargeCap strategy our to Recent third rebound, clients challenging in in over cap for necessitating active strategy rise outflows lack of which resulted asset quarter the to Sales remain weighted outperformance has some for gave strong

with We are has to strengthen steps grow. have intermediaries, of many to we continue relationship consultants. Performance in to and strategies optimistic take and ability our our clients taken across our and strengthened

and the held in previously lifting particularly Our on uncovered the ground the on sales with quarter. sales during teams client XXX is engagement, our activity focused territories are meetings service targeted and over wholesaling

our funds investors and and into widely positive make our to are is flows activity, sales several We approvals more available funds pursuing to different see increased across platform in more mutual our we healthy strategies. hope to With XXXX. spread pipeline

active to this We early expect approach opportunities some decisions the of XXXX. year in later or

and properly for Our our can teams together and investment to ensure commercial management value where in success to product aligned under product add areas work we that are management. grow focused continue offerings assets closely and

most the of the getting and our year spent this We completing investment on right distribution, in field. talent and

We line. product assessing evolution viability product time have spent considerable of commercial on the and our

closed and our with an towards have clear the evolved continuum, and others four We vision core competencies. a multi-asset non-core along products on focus eye

November. be oriented formally We will now outcomes, return, absolute announced across income return investors positioned serve and are which in to early total

conditional Also client of fess funds, our the announce as SEC’s align to mission structure expect part better sensible a approval, three with on in outcomes. mutual we to fees new

brand we it markets that invest our the distribution, As intermediary equity we critical of multi-asset retail emphasized marketplace is in and in emerging the expanded building for high-quality in franchise value expertise. positioning

on invested to positioned people clients’ that in right opportunities return our support have to so technology are take to the we new get needs a We trajectory. and growth and place, heavily to Westwood

levels Our introducing capabilities new reinvigorating teams new our at time. and relationships, sales and are but resources and strategies, the activity relationships history, takes building longstanding highest in point

can as management track looking are and experience take for our an returns are outcomes. strategies Clients of active ability deliver deliver to we have mispriced demonstrated share well-positioned securities client strategies results and records. specific high strong with in and advantage areas active by evidenced Westwood’s differentiated equity a where excess differentiated

costs. there has reached point a the for than of passive active With and management more ripe driving all XX% cutting, same is consolidation in data is which asset management a ahead. technology industry price taking share, years market less appears and firms overcapacity while the are at rising The experiencing to time opportunity,

or teams firms to small We of for a are acquire distribution. seeing opportunities number stranded looking enhanced

ideal and business with manufacturing an candidate firm wealth attractive would profile. a with a expertise, private Our demographic income equity be fixed differentiated

be our opportunities shareholder for will look capital. disciplined always accretive to and continue We with

ourselves the we While industry disappointing, adversity the been near-term over are face few results clearly transforming and of last and have building headwinds. years in

waiting in active are and many industry reinvent investments focused of management a major firm. the less steps While the comeback, more to made a for ourselves to are become simply taking have we oriented and of firm solutions bold product

reduced younger or to underperforming and partnered planning planning, generations, headcount, to viable built with commercially in including transformative largest a sales connecting have our web platform cut history, technology, Charis and with digitally Private private funds, the create financial added private added We Bank. equity, estate dedicated Westwood force

believe levels We is and the only a place allow but that to we the or a the firms teams ahead, and industry join. us have leader not to will will to to be years made likely investments strong will consolidate, pricing to survive. the only want new compensation In survive, adjust

see our and are shareholders with have patience is we We institutional for retail that Westwood our and believe all array We of traditional firmly excited appreciate sales products. our and gain bright regaining the to future ahead, the traction created momentum while stakeholders. the years solutions in

turn now CFO. the Forbes, to I will call Terry over our

Terry Forbes

and from fees. to the compared reported management The outflows. decrease net The prior resulting due resulting million third quarter primarily management $XX.X due average we quarter the the everyone. total year’s million second prior from third of Today partially Thanks, Brian, revenues quarter for million lower performance XXXX, from under $XX.X year’s in by offset to third in and from based primarily to the of average decrease good assets assets outflows, quarter. lower the second $XX.X was net under was quarter higher afternoon,

total per net gain per or $X.X in million share a Economic partially in current currency million quarter. $X.X $X.X $X.XX was net per or second Third share, decrease the the metric $X.X of in current $X.XX quarter. second the share compared related lower quarter. tax revenues, $X.XX income of per the offset million primarily a by or in foreign non-GAAP versus earnings to share quarter quarter $X.XX or million The million to $X.X

Third or prior million million compensation gain net revenues, of partially and in decrease to Economic net tax per $X.X in a the lower currency lower quarter year’s third $X.XX of share, in current $X.X $X.XX quarter quarter. The $X.X $X.X third $X.XX or per quarter. share, of incentive million for related the compared expense foreign share per earnings $X.XX were XXXX. primarily income or by the share $X.X the or million total to compared to per million quarter offset

total. total $X.X or of $XX management or billion the wealth of at quarter the of and billion fund the and mutual of XX% of $X.X Firm-wide $X.X totaled end assets assets institutional total, management of assets billion consisted XX% of or under assets XX% billion

we billion market $X.X experienced year, net the and $X.X of billion. appreciation have Over of outflows

continues with very and sheet. cash free million quarter $XXX.X solid, Our balance at end debt short-term to and be investments totaling a financial position

payable Our per Board of approved X, closing an of on record This X, to the January annualized October a dividend of Directors December of $X.XX dividend as on stockholders yield XXth. cash XX% quarterly price of XXXX. XXXX on share represents

revenues, review to we quarter our discussion third posted in dividends. a comments well product our term and encourage our as business, have and website, on reflecting of longer brings investor prepared a We earnings our development you to as close. That presentation trends highlights,

open interest thank to will in lines company the and We questions. your our for you we


question from Gabelli. And the comes of Instructions] from line Sykes our Macrae first [Operator Certainly.

Your question please.

Macrae Sykes

afternoon, Good everyone.

Brian Casey

Mac. Good afternoon,

Terry Forbes

Mac. Hey,

Macrae Sykes

for performances those that fundraising the outlook market of the about improved seeing in now are year, comment EM for this strategies, for what you terms products? you Could end demand

Brian Casey

windows the asset is has back. EM class Well, that certainly one

I one EM asset is produce world known the the alpha, think for various look certainly investors when that and at around to look classes them. they likely being of are

chats had of that to We next the some firms on EM to performance. quarter with good hope the one improved are with have something announce in strategy. We recently larger we the have with activity

So we talk are at about excited future you a that to to date.

Macrae Sykes

in my high growing management, about sheet, should of follow-up strong we And increased potentially of your is payout feedback terms capital balance how ratio and Okay. about organically? now think

Brian Casey

as goes. our far I Well, think, as sheet balance

balance a We valued strong having have sheet. always

have We debt. never for had we that any find that’s us And long-term it’s, as important a something shareholder.

the As I really that sales had to had growth, the we part far that, unprecedented. country, meetings they had if That’s say as wholesalers that quarter. second your worked before around have with in organic respect to to question over add have during that the we like a build a the sales team, we hard meetings addition and had X,XXX meetings in of we advisors the platform with never our team would

the And ever had Westwood. met with most these meetings of were they first anybody the advisors from time that

a So lot opportunity. of we have greenfield

We a in profile of about our really and in we lot good have to sold territories going never feel we that have XXXX.

progress number next had announced a products to we are we have and addition, when shrinking it’s shelf and In days. a made have live three have as But platforms I conversations hope platform get and a these know, something really onto of you quarter. opportunities with and very have talk lot you their difficult to of platforms, to

Macrae Sykes

your keep growth to question I a capacity to just cash against investments wealth understand And desire high Okay. balance to the wanted desirability of your terms more potentially like your is to using for perhaps, keep clarify more at in those to management. sheet? the and bit organic fund income, little about and last fixed also just about payout

Brian Casey

I see.


misunderstood… Sorry, I

Macrae Sykes

Yeah. I sorry. am

Brian Casey

us thought high very quality balance sheet over in with to firms around flexibility to I certainly, million talk allows strong would growth. was a interest Westwood. question. Well, organic that in $XXX have an cash your the it joining … having

we As we again that’s it next far about as will dividend talk goes, quarter. talk quarter and about something the every

Macrae Sykes

Thank very you much. Okay.

Brian Casey

Mac. Thanks,


Thank further you. the remarks. [Operator questions any hand in back the time. any like Instructions] for to further program And I at queue am I’d not to this showing management

Brian Casey

thank you. Appreciate Well, listening Great. in today’s everybody’s to time call.

if If website our information, you have visit like you further at please --

myself free great Forbes, specific Have you. our feel Thank afternoon. have or call any you CFO. a to If questions, Terry


This you, participation in today’s conference. Thank and ladies for the program. conclude gentlemen, your does

You day. may disconnect. Good now