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Westwood (WHG)

Participants
Julie Gerron Senior Vice President, General Counsel, Chief Compliance Officer & Corporate Secretary
Brian Casey President & Chief Executive Officer
Terry Forbes Chief Financial Officer
Mac Sykes Gabelli
Call transcript
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Operator

Thank you for standing by, and welcome to the Westwood Holdings Group Second Quarter 2021 Earnings Conference Call. At this time all participants are in a listen-only mode. [Operator Instructions] I'd now like to introduce your host for today's program, Julie Gerron, Senior Vice President, General Counsel and Chief Compliance Officer. Please go ahead.

Julie Gerron

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

the our update concerning cause could with Securities Form in XX-Q that is today, as undertake for such revise the June issued and no press filed release otherwise. factors or earlier quarter statements, difference obligation as well any or We included whether new publicly Commission information forward-looking Additional a Exchange our as information, of XX in the to ended result XXXX. events a future

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

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

we Officer; the President to today, now our turn Casey. have call Casey, Forbes, call Officer. will Financial Terry the Chief Brian and On I Brian Executive over Chief and our

Brian Casey

wins taking business time strongest in Good flows than for not but our which recent to by million and pipeline, net grew quarterly of I spoke the Last more its SmallCap. $XXX Thanks to of positive our listen several backstopped pipeline are awarded a earnings opportunities in afternoon. institutional at call. new to quarter years large level yet funded including

the strength SmallCap best and on sales performance primarily to institutional of for our a our we that previously, Also, of April sales institutional strategies, in This the strategy, rejoined efforts. most billion quarter, US stand-alone was I'm discussed our happy improving our capacity business convertibles capping quarter QX returned along items with by close the report in to them XXXX across Aviva as driven XXXX. Aviva we decision convertible Investors. global of since limitations, subavized wins to $X.X team soft funds our highlight exit the securities in more Among And strategic them, X, that XXXX. success made value

Excluding in the quarter. this $XXX shift, totaled nearly net flows positive million cash second

business positive in of business base of XX Our this Aviva profitability average our not basis levels. hurdles of in transition net XX revenue basis account will points. a fundings a convertibles did assets and fee meet had results and to generation Aviva year weighted terms the fee standalone and our average points quarter's new The earn last an

long-term the April year. as our our years in Our reinstated dividends dividend and decision to more clear, $X.XX of from this after last as as to the myriad action widespread cash, the effects quarterly past the $X.XX. this the we challenges $X.XX We facing improving a of shareholders entirely February reached of And will recall showed industry. suspended took of pandemic reemerging. we our preserve in signs as steadily of confronted XXXX, reduce difficult dividend quarterly became we February, dividend We to became economy vaccinations

the dividends with up a level. per of ongoing have free balance with recently cash we dividend. to dividends. for has a long our past of capital patients decided payment up plan over As foregone and We past most cash With balances year. of a our many recognition shareholders' history our dividend continued strong share at operations, and set of $X.XX reinstated nearing special our and to and Board generating the our in the pre-pandemic fund debt allocation over years, levels, have business long-term to to share always larger pay our buyback make the loyalty and we long-term options sheet know, including been several Board the review shareholders a which And reinvest

The and monitor our uncertainty forward. to concerns comments path to closed high I'll despite Fed over business investment the continue now turn an determine policy inflation performance. of quarter stimulus. all-time of dividend to XXX the will on moving always as our We S&P we regular do the evolution at

as once treasury For company was moves, smaller in regardless again these leadership caps, impacted growth. the focused a performance falling decline by Index on to MEME of VIX the in speculated investors back impacts shift the on market the more stocks Despite fundamentals. and outperformance of XX-year of yield

pause by Russell of as outperformance the once For LargeCap strategy focus XXXX to our key value cheap the for this areas are In strategies remains sharply the outperformed Value hit of have rebounded no after US hardest as pandemic a Index This quarter. environment, longer and growth. relative value quarters they investor were. two took many a the as our

Our client institutional some exceeding mutual $XXX due and half mostly top remains rated fund flows million, four-star positive a remain rankings fund, peer Morningstar to and investment Its WHGLX, rebalancing. peer Morningstar. in from a competitive. LargeCap by benefited net posted longer-term ranking universes

Our despite, preference SMidCap client securities. In Value XXXX Index separate the were one their global low were performance we SmallCap accounts had often pleased speculative the quality in XXXX net two as against the outflows invested Russell strategy against the and of that SMid in strategy. underperformed the to market's assets a Russell Value for see continued rebound Index shifted to

of meme those course of of performance many of to for began elements allowed effects stocks the except the drive quarter, to fundamentals Over returns. moderate, the the which

Value a our reversal increased the integrity quarter. in capacity product new last record well $XXX Value outperformed performed ranking inflows periods. implementation for of will new XX-year or peers ranked The its against not in fund with in in cheap simply ranking For remains SmallCap of our fortunes wins of year-to-date. peers. relative potential Universe is and trailing this relative our net limit right search Performance XXth won SmallCap separate more top fundamentals and close mispriced the maintain area to more will In but pipeline similarly to and the third yet undervalued maintains five institutional alpha-generating step remains of companies, seven-year flows quarter more peers million quarter second growth included opportunities. mutual market to quarter and a this institutional carry to between has percentile an SmallCap positive as is Among buying took continue for a activity summary approaching securities and investing experienced Index and attractive from funded securities account than interest. as apparent. soft percentile XXth and SmallCap the statistically its WHGSX Morningstar moderated nuance direction the become and the beta in Its the in and high track outperformance began a second percentile weight.

over income As this it approach. helped Multi-Asset ongoing an investment continues allocation should performance. fixed In to our tactical unfold create our tailwind our favoring equities group, for

to work story intermediary group WHGIX over strategy Morningstar WHGIX year-to-date, with time In Aggregate we're the period our prospects fund posted and top team's teams fund sharing solid the to the track that our outperformance mutual periods. quarter peer X- XXth compelling Bond in and of XXX; and X-year a in largest income for X-star Our in quintile approvals. Bloomberg another over Barclays remains continue and top and record XX%, key excited channel mutual platform Index. as secure decile beating XX-year ranked quarter its in opportunity benchmark its XX%, remains S&P percentile the

marketplace variety to quarter. the flows improved, ability As see the add has mark Helfert. income attract we the interest X-year as for net This finds ways opportunity the leadership is of to pleased strategy were opportunities a in under solidify generate of positive milestone team's in environments. should Income the to further Adrian performance approaching the market alpha it

of stars fund funds forward to and the has XX% peer the relative Barclays which quarter. added this other in XX% S&P delivered Fund Westwood their quarter the performance this Morningstar of high this strong for on its coming wing positive five rankings year. the XXX, Index. income, top All The benchmark engaging Multi-Asset total to WLVIX of total credit solid and prospective Return and under top Multi-Asset to records finished longer for XX% more income Bond track performance our look term. maintains We our absolute with since strategy ranked return, with Aggregate WLVIX Bloomberg products the team. alternative of quarter ahead clients opportunities gives

the Our Multi-Asset decile Morningstar period team our high its S&P XX% Index X% it peers. fund attractive Bond Credit Aggregate Opportunity since risk. limiting continued benchmark produced spread Year-to-date and its The quarter. quarter the earn among managing portfolio basis again and returns interest performance tightening Barclays deep attractive posted income top Bloomberg selection X-year short-dated has favorable rate results strategy and XXXX this up beat WHGHX rating quarter. and points began in achieving XXX, by XXX from the the spreads. for combines the nearly positioning security strategy investments, trailing the for strong fund distressed securities benefited X-star credit in WHGHX positive has while of to a absolute ranking and

Lastly, systematic SmallCap beat basis nearly year-to-date. points well Growth to Russell benchmark its strategy perform XXX growth our and continues Index by XXXX

outperformance launching Multi-Asset developing team across investment several strong delivering cycles. mutual quarter. are years process such has we market of Given this performance growth SmallCap a spent capable a fund innovative new

become platform strategies. about additional growth SmallCap classes evident and and through as risk-adjusted future this strategy consider this expect will potential we strong excited We our of returns continued within we're the asset client

inefficiencies of between from Our securities. mispriced with asset our This allocation us to suite as cross capturing from advantage capture bottom-up of of to Multi-Asset positioned products repricing alpha classes remains well as market uniquely securities. top-down take currents allows

share our record continues As in are with strong strategies we develop, to marketplaces. position different to a track these

the multiple believe better diversification, stability, these highlight correlations, to higher classes risks In lower provide can risks, that of continue We view across allocations for areas income. outcomes. rates of and different asset fixed

in returns superior recovered execution classes, believe across our deliver returns. ample strategy to many asset deliver Although and to the investment continues provide distribution, and team markets we institutional dispersion will to for companies on and results. opportunities intermediary have for our more industries, Shifting strong ways, risk-adjusted potential

During $X.X the I figures corresponding Aviva on team timing April quarter, that our Aviva reflected operational this call AUM to of reported in the change billion during back of transition and second and Convertibles Due the support Global our quarter. to December noted Investors the to Xst. returned last change AUM

My that meet strongest for six comments net assets. the convertibles and flows business years, with the hurdles standalone now today higher profitability flows with the shift. not our quarter net regarding replacing Aviva did Our fee we are business exclude in

an our client base. the quarter inflows, of of $X offset intermediary over and had approximately by higher losses with inflows for billion only experienced client institutional our netting in teams $X.XX flows billion categories This inflows institutional in The we LargeCap SmallCap. quarter. outflows strategies increase no to Total, experiencing in our partially in strategies core enjoyed have and especially were opportunity quarter reflect outflows share. which this wins in been institutional market We proud and positive our these definitely have income compete

intermediary of team $XXX delivered intermediary with the sales in $XX by million. to outflows offset positive strength. net contributed $XX Our million withdrawals space also our have a of inflows million partially Reduced netting

and the same to using continue the SMidCap be is similar strategy investment process platform. institutional SMidCap channel Our SmallCap competitive in Multi-Asset research in to and demand. and

team primarily alternative on income close Our In SmallCap is on institutional with records. track approvals. SMidCap focusing both team Multi-Asset after our opportunity consultant and of funds the focused on securing income intermediary good sales long-term and is

which of with manage flows efforts in The conducting also of of are SmallCap enhance attractive core business remainder to to as Turning Houston Xth, our but our and for results. tailwind continue pleased to meetings of volatility has to picked the our Westwood. Equity and in offices sent withdrawals Houston Houston to the and close in out to new summarize in Russell of previously is being return office quarter to offices underweight advisers we XX% prospects. reflected The opportunity year. clients has and our remains our conduct risk style pipelines will included other protection have With year-to-date. on their and strategy ahead out and alpha inception private also benchmark which our fund Russell High and XXth face-to-face strategies of intensify reallocated XXXX products. believe to Multi-Asset provide the net unsolicited value inflows performance they back Strategies at opportunity Aviva since transition. regarding of into face-to-face. each for this inflows this return allowed Westwood the should Index. we the Select strategy returns some outcomes equity. quarter, to acquire ability up. once mixed our investing. and managed meaningful the I'm the remained result is reach closures personal up across but enjoying to Wealth over Dallas remains strong its soft aims our July To business our with a with interest our approach interactions X% to Russell team assets for be In had for value want Dallas Outflows outflows payments XXXX the second more and beat quarter. Americana year. US that have the teams opening technology report the servicing due Select of July sector enjoyed and quarter. versus of billion a our disclosed last a the have we the largest Partners tax-efficient Index Management, again and Year-to-date tax a to March clients. to lagged Equity helps on activities with management development support offers ahead XXXX and in development of downside client Performance I the the this lower net since their and good Teams the $X experienced XXXX collaborate account continue designed from press its we is quarter for far sales implemented strategies with Index excluding comment release

plan. determined with As determination, to its fiduciary the accordance the undervalues and proposal significantly not Directors this Americana In noted in Board release has to advisers unanimously of its that previously finance in and of reviewed also evidence stand-alone Westwood any press reaching bid. Board Westwood the that Americana's Westwood's it company's to consultation and duties considered Americana's relative provided ability with acquisition its

diligently worked ahead. success have for to We position in Westwood the years

our superior performance to to primary Our clients. service and adjusted is risk high-quality focus provide

significant off infrastructure. Over new mandates. few investments are client investments years have made we've These and in the we resources last sizable distributed as paying won recently

leverage asset our We will multiple to across to channels. continue growth pursue distribution resources

firms platform. assess We teams. and to benefit investment facing or competing hiring continue management corporate into on distribution opportunities acquiring basis stand-alone operational management from robust wealth a our as can such integrating development investment and/or teams or difficulty Firms

on complex alternative banking, balance and management planning, We've external solid ensure employee Our allows us digital and sheet through out holistic estate stability wealth promptly new offering and to to portal. retention. expanded opportunities team our built act a include financial of opportunities the client private an investment

alpha. incubate to demonstrated strategies continue serve in Once successfully new demonstrate these We and needs client the investment ability marketplace. that the deliver track records season to

We our intermediary will to in bring these strategies wealth institutional, channels. and market

have We efficient very years made and platform. in in firm across significant recent have technology modern now a operating the investments

increased we the performance, last back improved product reinstated the of Over year course dividend, and stock reduced have bought a sales. expenses;

will and over place address all not long-term our subject and We on executing Terry have turn is in team call to a look deliver This great to plan I will we this the Forbes, plan shareholders. today now to say CFO. questions. to for that forward our our I value speculative

Terry Forbes

good the prior lower revenues million fees. year million mainly management. reflecting last assets quarter, were under the lower higher and Revenues afternoon the quarter reported of in everyone. second than first million due Brian for second were higher to second year's of we XXXX, quarter. the Revenues quarter average total first Thanks $XX.X to than quarter performance-based $XX.X in $XX.X and compared Today,

to of investments lower primarily net and unrealized income higher or income or per $X.X offset share gains $X.XX quarter, $X.X the share versus per economic per on quarter. in income quarter the Second private first $X earnings $X.XX quarter recorded the first were taxes quarter. $X.XX or in realized million, by $X.XX current net of than the was million, in million, second the share million, in partially $X.X share Non-GAAP in per or lower quarter, first due

per on compared lower $X.X was share per the billion consisted and foreign totaled XXXX. management expenses million $X.X quarter and net billion, assets for currency second higher outperformed of quarter in $X.X end share per transaction Economic quarter million, $X.XX total, under second income $X.XX billion, Second assets $X.X $X.XX the million, Firm-wide with operating million, or primarily XX% of wealth assets the of of losses. at or share and particularly or loss fund quarter share $XX.X total, or or XX% of per $X.X billion, mutual earnings or XX% net of of institutional management revenues $X $X.XX the XXXX's of $X.X assets of total. of the quarter or

of Over and market appreciation million million. of the $XXX quarter, $XXX outflows we net experienced

quarter and and on Our payable on We end stockholders be cash share million totaling common balance short-term at XXXX X, regular September solid X, $X.XX financial record declared cash sheet. position with of to of investments a dividend to continues debt-free XXXX. per very a October $XX.X

we addition, have a discussion payable your you thank development $X.XX a second we'll trends presentation questions. are in August X, investor on of We declare quarter as highlights, as to to and website, open the our XXXX our a encourage posted stockholders comments our business, well line interest to our product company XXXX. XX, of per on to We we our and close. of August prepared and to for That In on in pleased brings record reflecting earnings. you revenues special dividend longer-term common review share

Operator

from from [Operator have And Certainly. of Mac the Instructions] Sykes we line a Gabelli. question

question Your please.

Mac Sykes

gentlemen. afternoon Good

two Just questions.

is end funded pipeline, again, and what I Just of the just was get want was go can what XQ on end XQ, specifics straight to what the my the today replaced? the on it of and you it First, at over that. numbers at

Brian Casey

question? second your Okay. And

Mac Sykes

does on that see this a things for point? leverage this the growth other to you those in may create be you Do close quarter that halo Thanks. helping inflows at with strong effect firm other sales? working that given just And of terms

Brian Casey

I sales positive I'll gets in in Well, answer institutional your more think Okay. positive first, one that side for Thanks momentum products. Mac. momentum do questions. the that other

product lot we've really and we of the we of two close, SMidCap example, success We've and rated, soft we've consulting approved major a close in see growth. For the we of SmallCap. for recently drafting activity off in been a soft hopeful good of which announced by SmallCap next firms able success we with that draft and product, by of in approaching approaching And had had is as that some are to are that off to are SmallCap. our a expect success we've step capacity,

the as at pipeline it far last numbers quarter we and As looks like today, of are trying outs. goes, to what the look back the we're $X.XXX relative million to and and ins where said we

Mac Sykes

Okay. And half? the expense should in the think from Aviva last change How we Brian. question, one benefit then second about the

Brian Casey

Aviva, personnel manage we in the year. agreement services April our Well, to early funds part December of this one continue agreed left of as until with last year. of And transition to the

associated And Convertibles expense with office of the associated of so with all Global back the the team the and Aviva. to office expense went Boston all

going So, expense you that forward. not see will

Mac Sykes

Great. guys. Thanks Okay.

Brian Casey

Mac. that Thanks, Is Okay. helpful?

Operator

you. I'd back Instructions] this to And of program any remarks. for Casey [Operator program. Thank question-and-answer hand does today's the conclude further the to like Brian session

Brian Casey

call Jonathan, to today. time thank Thank to everyone taking you, the and for listen

please website westwoodgroup.com, If visit further Thank you have Terry or call any myself or directly. our you. questions,

Operator

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

Good day. now disconnect. may You