BlackRock, Inc. Presents at 2013 Credit Suisse Financial Services Forum, Feb-13-2013 08:00 AM

Seeking Alpha

BlackRock, Inc. (BLK)

February 13, 2013 8:00 am ET

Executives

Robert Steven Kapito - President, Member of The Board of Directors, Chairman of Operations Committee, Chairman of Other Committee and Member of Executive Committee

Analysts

Craig Siegenthaler - Crédit Suisse AG, Research Division

Craig Siegenthaler - Crédit Suisse AG, Research Division

All right. Good morning, everyone, and welcome to the 14th Annual Crédit Suisse Financial Services Forum down here in sunny Miami Florida. Up next we have BlackRock, the largest asset manager in the world with over $3.7 trillion in assets under management. BlackRock continues to be a leader in the rapidly growing global ETF market with its iShares business and also, BlackRock's wide and diverse product offering, also includes its' Solutions business and Aladdin platform, which now advises over $14 trillion in client assets.

Here to provide details on the company, we are pleased to introduce BlackRock's President, Rob Kapito. But before we hand it off, we actually have some survey questions for the audience in the asset management industry. So we'll just go to the first one here.

So the first question here is do you think January active equity inflows were more than just seasonality, represent an inflection point for retail investors? Second question, what do you view as the most likely final outcome of the S stock money market fund proposal? Third question, what do you view as BlackRock's first priority for capital management? And the final question, how do you think asset managers will perform against financials in 2013?

So I'll have the results to the survey after Rob's presentation. And, Rob, thank you very much.

Robert Steven Kapito

So good morning, everyone. Can you hear me? Okay? Good. Thank you for joining us relative to the other choices that you have today. I'm going to prepare -- talk more formally at first with a few slides and then afterwards we'll open it up for any questions that you might have.

So I am very honored to be here today to talk to you about BlackRock. As you know, I'm one of the founding partners of BlackRock, so it's been most of my business life. What I want to talk about is why we continue to feel that we are unique and how we deliver for our clients and our shareholders.

So we have the deepest and broadest set in the industry of products with $3.8 trillion in investments on behalf of our clients. And as noted by the chart on the left, 1/2 of our assets are in equities, over 1/3 in fixed income and about 11% in nontraditional sectors. And as noted by the chart on the right by client type, about 2/3 of our assets are with institutional clients. And we continue to grow a 22% base in iShares and a 12% base in retail. And finally by region, about 62% of our assets are from clients in the Americas, 30% from EMEA, and a growing 8% opportunity in the Asia Pac region.

And we are differentiated in the asset management business because of our ability to meet evolving client needs through this unparalleled mix of active and passive products, our ability to provide advice and outcome-oriented solutions, our unwavering focus on risk management and our commitment to innovation. And this differentiation has helped us to successfully drive financial performance despite a lot of market volatility over the past 3 years. And it's quite a dream for someone that was in the beginning of this company to report that our revenues in 2012 were $9.3 billion. But we will continue to grow our revenues by the mid-single digits year-over-year.

So even as we evolve, we remain committed to delivering to our clients and shareholders on the following key priorities: One is achieving superior top-quartile investment performance for our clients. As a true fiduciary, this is our primary focus, it's my primary focus and it's essential to gaining and retaining client assets. And I'll go into that in a little more detail in a minute.

Number two is driving and executing our strategy in our retail, our iShares and our institutional businesses. And we have a proven history of successfully developing and executing on the right set of priorities to assure we stay ahead of industry trends. And delivering revenue and organic growth with a target of 5% to 6%, attracting high, revenue-generating flows is driven by our client-centric focus and our outcome-oriented approach.

And finally our success on each of the above, coupled with management discipline, has in the past and will in the future, I believe, lead to generating strong operating results and returns for our shareholders and we're targeting a 40% plus operating margin.

So let me begin with achieving superior investment performance, which is certainly essential to gaining and retaining client assets. Clients expect us to execute on investment performance. I may tell a great story to our clients about BlackRock, all of the things that we can do. Most of our clients will listen politely, lean back, say "Congratulations, we're very proud of you and your success." And then they'll say, "What's my performance?" So clients expect us to keep our promise with investment performance. And across our active products now, we measure ourselves on how we measure ourselves comes down to either meeting or exceeding the stated goals, whether that's beating the benchmarks, outperforming our peers or achieving a specific outcome. So we have to continually find ways to improve by identifying opportunities to enhance performance.

Several years ago, we had underperforming fixed income products. We revamped our fixed income area so we now have top-performing fixed income products, also scientific active equity. All of the changes that we made and those, if you follow our products, have paid off. And fundamental equity, I have replaced 4 of the 5 teams in the U.S. and have top-decile performance now in our European equity funds, which positions us well when Europe rerisks. So the message is that I will have less patience going forward with underperforming, active products and we will look to replace those teams quicker than we have replaced them in the past. Those teams are available to BlackRock and you can see that as we've done in the last year.

In multi-asset, we've had a mixed year in parts of our business. However, our largest flagship product, which is managed for unlevered, absolute return, posted an 11% return in 2012. I think we all would have been happy with an 11% return and that is very consistent with this long-term track record of 11% annually over the past 10 years. Alternatives also continue to build momentum with solid performance in a number of our single-strategy hedge funds. So across our passive products, and performance in passive products is also very important, 97% of our assets under management are above or within risk tolerance for the 3-year period. So to reiterate, excellent performance is the table stakes across active and passive, especially as clients look for holistic solutions.

So how will we grow Retail? Retail is an enormous growth opportunity for BlackRock. It represents only 12% of BlackRock's assets under management but it represents 34% of our base fees. And within the Retail channel, there is a change. Clients are no longer seeking to buy just one product. They're looking for combinations of products and the tools to get the outcomes that they need. This is why many financial advisors are becoming asset allocators and they're looking to provide comprehensive portfolio solutions to their clients through a combination of both active and passive products. And additionally, in Europe, regulatory policy is changing the business models of the distributors there. We are differentiated in Retail by our products, our tools and our ability to package these entire suites. So as seen on the table on the left, competing firms offer only 1/2 of these capabilities on average. So our growth strategy in Retail is focused on enhancing the distribution in the U.S. and internationally, combining active and passive on one platform and expanding our alternative capabilities.

Now BlackRock is still underpenetrated in the U.S. retail market. I exclude ETFs when I talk about that, especially in the open-end mutual funds space where we have less than the 2% market share of assets under management. So we continue to focus on our penetration of non-Merrill platforms. And for those of you who don't know, when we bought Merrill Lynch Investment Management (sic) [Managers], we had agreements and we were very prominent in that system and they're still the largest manufacturer for their distribution. But what was important to us and which was the strategy, was to fuel the growth outside of the Merrill Lynch channel. And so we have grown our assets under management on the non-Merrill platforms by a 16% compound annual growth rate over the last 2 years. So we are achieving that strategy.

Internationally, we have built a unique retail platform that enables us to capitalize on the changing regulatory landscape. As you know, Europe will be looking for more model portfolios and we have the ability to create those model portfolios and execute them ourselves for the clients or have them execute, the financial advisors execute them using our models. And we're excited also to support this with our global brand campaign, which continues to strengthen our connection with new and existing retail clients. And this has been a great success, something we had never done to the extent that we are doing it but we're seeing huge amount of hits and a huge amount of interest in our products now because of the branding.

So the combination of both our broad product offering and our innovation has enabled us to be the go-to solution provider for these distribution partners and we have also combined our Retail and iShares sales force. Now this is important. We have created now the largest retail sales force in the industry, which will enable us to cross sell our full range of active and passive products to our clients on one platform. So previously, we had a sales force that just delivered our iShares and we had a sales force that just delivered our mutual funds and by combining that, we're facing our clients whose portfolio has both. And because of that, we now have about 274 people that are out on the road. That is the largest sales force in the asset management business.

We are also expanding the alternatives platform for individuals. We launched 4 new products in the alternative space: commodities, a long/short fixed income fund and a couple of equity strategies. We've already raised just under $1 billion in 2012. I look to see significant growth in that in 2013. So our scale and global brand are increasingly important differentiators in expanding the retail industry and our current single-digit market share represents the beginning of a powerful growth opportunity for us.

How will we grow in iShares? This is an exciting product. Similar to our retail business, our iShares business represents a small portion of our assets under management, 22%, but is a significant contributor to the base fees at 32%. Our growth strategy in iShares is going to be focused on opportunities within new client segments, expanding our global market presence and innovation and product extension.

As the shift from active to passive continues and ETFs become the building blocks for asset allocation strategies, we continue to witness broad-based adoption of ETFs among both the institutional and retail clients alike. In capturing opportunities within new client segments, we launched a new series, the iShares Core Series in October of last year and I'm sure you read all about the hoopla, geared towards buy-and-hold investors. And this was to face Vanguard and what we thought was their buy-and-hold segment. And since that launch, we've raised over $5 billion of net inflows to this set of products and that's through January 31. We've also backed this up with a major brand campaign to further differentiate iShares in the marketplace. So we are focused on expanding the iShares category outside the United States as well, by driving broader adoption of ETFs globally and growing BlackRock's geographic footprint. And we were serious about this and this is our mission. We hold the #1 market share now in Latin America and Canada with 85% and a 70% share of assets under management respectively and as evidenced by the chart on the right, iShares gained $85 billion in net inflows in 2012. This is a product that's here to stay because it's transparent, it's liquid, it solves a lot of the needs of a lot of our clients. And we have a 33% share of global ETF market flows and we remain in the #1 position in market share versus competitors, very exciting.

In addition to flows, we continue to supplement organic growth with acquisitions for unique products or market access. And most recently, we announced plans to acquire the Crédit Suisse ETF business, representing a major new commitment for BlackRock in the Swiss market.

So finally, we are constantly innovating, and fixed income is one of the areas in which we see enormous opportunities. And if you're looking for the hook as to why BlackRock can grow, this is really it. Fixed income ETFs, they currently represent only 0.3% of the $98 trillion global bond market. And this offers a huge opportunity for institutional investors. So iShares continues to actively promote adoption of fixed income ETFs. We have already captured 41% of the flows in 2012 and we represent 58% of the global fixed income ETFs in assets under management. So we have the #1 market share in both versus our competitors.

Now growth in the fixed income is going to come through new product launches, innovative ideas, addressing client needs. We have so many ideas I can spend an hour telling you about some of the new products that we are about to launch, that will solve a lot of investors' needs for fixed income. One idea that we are very excited about, that you're going to hear about in just days, is about an ETF that will have all of the benefits of an equity but the attributes of a bond. With the struggle to find diversification in the bond market, we think this will be a very liquid and transparent way to get into the market. We have tested this already with some of the largest fixed income clients in the world. They are very excited about this and this is a little bit technical, but many of these clients have had thousands and thousands of line items of corporate bonds, for example. And they don't have access and they can't get the allocation because of all the buying that's being done in the marketplace because they can't buy treasuries or treasuries are at low rates. We have a way that's very liquid, very transparent, to use an index versus iShares, that's going to solve a lot of these particular problems. I think this will be the biggest product that's ever hit the fixed income market. We're uniquely positioned to do this. So it's not just coming up with the innovation of the product. It's figuring out how to use that product on behalf of your clients and also have the technology to make sure that you can report on these so that these products that live forever and become a stable part of our clients' portfolios.

How will we grow institutionally? Institution is one of the more mature businesses at BlackRock, representing 66% of assets under management and 34% of our base fees. So our growth strategy in Institutional is focused on growing market share in the key client segments, continually building on our outcome-oriented approach. So a lot of our competitors are thinking about income, we're thinking about outcome. And deepening existing client relationships. So when people say to me, "why don't you sell more of this to an institution or sell more of that?" We're a fiduciary, we don't just go out and bring products. We have to understand and have -- understand the clients' strategy, what they're trying to do and improve their portfolio results. And what falls out of that is the type of products that they might need and that's how we grow, by understanding their strategy and working closer with them.

So the biggest challenge and opportunity in the institutional marketplace is obviously this evolving retirement landscape. So while defined benefit makes up 46% of our institutional assets under management and investing in this segment is certainly going to be slower, it's important to recognize our Institutional business is really a composite of several client segments that is noted by this chart on the left, 3 of which are really firing and experiencing strong growth. These segments represent 34% of our assets under management. One is defined contribution as people go from DB to DC, huge movement, of which we are capitalizing and I'll tell you why in a second; official institutions, which as you can understand, require years and years to develop their relationships and work their strategies; and of course, financial institutions. So all 3 segments have long-term client relationships and strong client teams in place with deep expertise to capture other opportunities, especially in DC where we are capturing significant flows in multi-asset target date products. So for example, in 2012 our target date life path, which we developed the target date product, has over $13 billion in net flows, represent 30% year-on-year organic growth.

Now we're committed to building our outcome-oriented approach and this is a novel concept I think in the market where people are so focused on income but what they really should be focused on in this segment is the outcome. What will they need? Institutional clients are taking a more holistic approach, focusing on achieving that specific investment objective. And this is an area where we are differentiated from our peers. We have an unmatched range of capabilities to help our clients achieve these financial outcomes they desire.

So the 3 growth segment I mentioned earlier are great examples of outcome-oriented investors. The financial institution is focused on managing their liabilities. We do that well. The official institution segment have to manage their balance sheets. We understand the balance sheets. And the DC plan, as defined contribution, are using the target date funds. We develop the target date funds. So with our existing clients, we are focused on maintaining and deepening these relationships and the breadth and depth of the diverse platform provides us the opportunity to cross sell.

Now this is really interesting stuff. As noted on the chart on the right, 60% of our top 50 clients currently own 5 or more products and that's how I'm judging our client relationship managers, deeper relationships, owning more of those products with those top relationships. But you, as a shareholder, may want to look at that in reverse because our opportunity and strategy to deep relationships is beyond the 50 clients. So approximately 60% of our overall institutional client base only have one product with the firm. So when we talk about opportunities in Institutional, why don't they own 2 products or 3 products? And as you deepen those relationships and if you keep your promises and perform, then they will want more than one product from BlackRock.

BlackRock Solutions. This is a key differentiator and growth driver. This is our technology platform. People have heard about it. Some people sort of know what it is, other people think it's this -- some guy sitting in a laboratory. But this really drives our investment and risk management capabilities. It's also a great revenue generator for the firm. BlackRock Solutions is combined of 2 main businesses. We have Aladdin, and that's our industry-leading technology platform, including risk analysis, portfolio tools. I cannot tell you how many institutions over the last 5 years have called us in. They want to know what they own, what it's worth and how soon you can get me the hell out of this stuff. So we have worked endlessly on putting these people on the platform. We have over 200 clients already on this platform and there's a waiting list. FMA, which is our Financial Markets Advisory business, that continues to grow as well. We have assignments every week. It's just a matter of having the people to do these.

And in 2012, to give you an idea, we generated $518 million in revenue from this. There are not that many firms that generate revenue from their technology. Technology's usually a big cost. We generate revenue and have figured out a way to do that. As shown in the chart on the left, $374 million of that revenue came from the Aladdin business and that's growing at a compound rate of 17% since 2007. These clients have long-term contracts and as a result, revenues from these are sticky and recurring. And we think revenue growth in BlackRock Solutions are going to continue to come from an increasingly set -- global set now, of Aladdin clients, expanding the relationships across the asset classes, and continued innovation and growth of the capabilities that Aladdin has. So we currently have $13.7 trillion of assets that are under risk management in Aladdin. I don't manage that money. We manage the analytics of it. And as you can see from the chart on the right, $1.7 trillion of this are global ex-U.S. clients, which grew from $430 billion in 2009. And we're going to be very excited to turn on our first Aladdin client from Japan, which is included in those assets. It's just the beginning of the march of Aladdin outside the U.S. So we continue to innovate and expand upon the Aladdin capabilities across the asset class. We expect the revenue to grow as a result of these relationships and also, we expect it to grow because of our global reach.

Now one of the things about our Aladdin and FMA business is that we have reorganized a team of professionals who have very deep expertise in what's called LDI, liability-driven investments and [indiscernible] outsourcing mandates into something we call Client Solutions. That's what clients are looking for. They're looking for an overall solution. And this team provides support for some of our most complex institutional client needs and inquiries, particularly in situations requiring outcome-oriented solutions. We are getting 35 to 40 assignments every year. This requires an intense focus. It requires people who can connect the dots within the organization and its requiring people to talk to the higher level of people in the organization because these projects are CEO-, CFO-type projects.

My issue today is I have a lot of projects coming down the path. I don't have the people that can connect the dots. So you may have read this morning in the paper that we have reassigned Ann Marie Petach, who has incredible experience. Before BlackRock actually she was, of course, our CFO, if you don't know, and she was at Ford and worked with Ford through a very stressful period and she has command of connecting the dots because of her role as CFO. And I believe in mobility in our firm and she's going to take a very active role now with the leader of our FMA product, Craig Phillips, and work together in BlackRock Solutions and Client Solutions and focus on developing these critical client relationships and business initiatives with special emphasis on our solutions offerings with public and private pension funds. And there's no one better that I think can do that with Ann Marie. Now in order to get Ann Marie to do that, I have to have another CFO and this morning, we named Gary Shedlin. Gary Shedlin has been part of the, you could say, extended BlackRock family for many years. He's been a strategic and financial advisor to BlackRock. Most recently, he was at Morgan Stanley, before at Citi. He's going to join us and become our new CFO starting in late March. He'll be working with Ann Marie through the next earnings call and then he'll become the CFO.

Now one thing I want to be very clear about, because of his background of being our financial advisor for the last many transactions, this does not signal that we are getting into the M&A business and looking for M&A opportunities. So I am not Maria Bartiromo. This is not CNBC. This is not that exciting. Gary is coming in to be the CFO. And Larry has made it very clear to everyone that we're not looking for big wholesale M&A transactions. That being said, I don't want you to think that we're not going to bring on some additional teams where we don't have. We may look, as we did in the ETF business, to put on some pieces here and there, but we are not looking for any wholesale M&A opportunities, and bringing Gary on does not signal anything except I have an open spot and Gary would be a good player for that. So I wanted to be very upfront and I'll answer any questions afterwards about that. But we're very excited about the ability to handle now some of these big projects that we have.

So talk is cheap. Let's talk about our operating results. The strength and stability of our BlackRock business model and financial results are attributed to our diverse platform and also a very disciplined expense management. We run a very tight shop and as noted by the chart in the left, we delivered a 19% compound annual growth rate in our adjusted operating income since 2007 and a 2012 operating margin of 40.4%. And we remain committed to maintaining consistent operating margin in the 40% and up range. Now as shown on the chart on the right, we've maintained our operating margin around 40% in a really difficult year. And this is where we absorbed substantial investment in the new brand campaign, which a lot of people were wondering how we're going to pay for this and the portfolio management teams that we brought on an unprecedented level, which does not stop a regulatory cost related to new technology builds and reporting and transparency requirements. And we were still able to generate above 40%. So this margin, of course, can go a bit higher during periods of rising markets but our margin is also consistently above our peer median. We watch it, which is yet another differentiator for us in the asset management industry.

And as part of the survey that Craig took, we believe a strong and consistent cash flow model also differentiates us within the financial services industry and allows us to continue to follow a robust capital management strategy. So returning cash to our shareholders through both dividends and share repurchases is a priority of the firm. We have a very deliberate capital management strategy that targets a dividend payout in the 40% to 50% range, while maintaining a consistent share repurchase [indiscernible]. In 2012, we generated adjusted operating cash flow of about $3 billion, a 27% compound annual growth rate from 2007 and in connection with our ongoing buyback program, we delivered an overall payout ratio of 63%. So, including our May 2012 repurchase related to the secondary offer of the Barclays stake, we repurchased 9.1 million shares in 2012. So really our total payout ratio is about 104%. So most recently our Board of Directors approved an increase in our quarterly dividend to $1.68 per share and raised our repurchase authority by 7.5 million shares. That, when you add it to the remaining authority, gives us the ability to purchase about 10.2 million shares. So we continue to invest in both organic growth and tactical acquisitions where we believe we have some opportunities. We are excited to continue to deliver this yield to our shareholders as we move forward in 2013.

So key takeaways and our conclusion. We are a differentiated asset manager. We have a history of strong performance and delivering returns to our shareholders and I hope that I leave you here today with the following messages: One, that after years of continuous innovation and focused investments in our people, products, technology, and brand, our results validate the benefits of our scale and having a diversified business model. We're not done and we are going to continue to reinvent ourselves to be the leader in the market globally. We reiterate, an organic base fee growth target of approximately 5% to 6% and a 40% operating margin. Our continued differentiation from peers through our breadth and depths of products, scale, distribution, technology and a culture of innovation, is going to drive performance and momentum in 2013.

So I could stand here and tell you that I've never been more excited about the future of BlackRock. We very much appreciate your interest in the firm. Our interests are aligned, and it's an honor and a privilege to speak in front of you. So thank you very much and with that, Craig, if I can open it up to questions?

Question-and-Answer Session

Craig Siegenthaler - Crédit Suisse AG, Research Division

Sure. Actually, before questions, could we quickly see the [indiscernible] survey results for the crowd. And for those of you on the line, I'll be verbally saying them here, too.

The survey says, so question 1, is the active equity flows we're seeing the beginning of the great rerisking. And 25% say yes, and 25%, no and about 1/2 say too early to tell. Question...

Robert Steven Kapito

Okay. Well, that's a little weak. Can't make money that way, by the way.

Craig Siegenthaler - Crédit Suisse AG, Research Division

Question 2. What do you view as the most likely outcome of the S stocks money market fund proposal? The most likely outcome, the crowd says is a 1% NAB buffer and a 3% minimum balance at risk, but it's actually pretty spread across the options here.

Question 3. What do you view as BlackRock's first priority for capital management? The vast majority, 56%, say dividends, share repurchases #2 at 31%.

Robert Steven Kapito

We seem to be aligned on that.

Craig Siegenthaler - Crédit Suisse AG, Research Division

And then, does the audience think the asset managers will outperform the financial sector? 42% say it will outperform, yes, and 42% say in line.

With that, we'll open it up to Q&A and maybe Rob, if I can just start it off here. After you merged the sales force in the Retail channel, so iShares and individuals selling the active equity and bond and multi-asset products, where would you say was the most difficulty? Was it on the high-performing fund manager trying to get more attention there? Or be more on the distribution side saying, "I have too many products to sell." What do you think -- which part of that was a little more difficult?

Robert Steven Kapito

The hardest part is education. So you have a sales force that is knowledgeable on certain products and they've also, in a sense, been selling against another product, and now you have a sales force that's educated in the other product that's been selling against the other. And that's crazy because that is not serving the need of the advisor or the client. So I've described it to internally as, why am I bringing up the Coca-Cola truck and then why am I bringing up the Fanta truck? Why can't I bring one truck that has Coca-Cola and Fanta and face the client and what his needs are because he's going to own both and should own both. So this is giving us much more throughput. It saves me money but it has required me to upgrade the sales force because they have to be able to face the client and talk about their portfolio, not a product. Clients don't want to hear as much about the individual product. They want help on their portfolio because over the last several years, they may have had 7 outperforming products and 1 bad one that took away all the results. So now they're looking at asset allocation and in their asset allocation, they should have both active and passive and our people have to talk to them for the solution of their portfolio, rather than individual product pressures. So the hardest part was the education part and finding the right people that could talk holistically about the products. So we've some turnover in that and it's a turnover that I wanted to have because I need a different type of person to do that.

But so far, it's been very successful because it's exactly what the client wants to hear and it really also differentiates us because they want the BlackRock person to come in because they're helping them manage the entire clients' portfolio. It also opens up opportunities, gets you a closer relationship so you know what they're doing, and then we can bring them holistic solutions rather than just being product pushers.

Other questions? Let me -- if you don't have a lot of questions, let me just pose one thing that may answer that last question about asset managers and performance. Obviously, a lot of financial institutions in the stock market have been pressed down because of their inability to be in business that were large revenue producers. So maybe those equities have been pushed down further than the asset managers. But I want you to not underestimate one thing in the asset management industry: you have to stay within the context of what the market is. Today, there is $10 trillion that's sitting in cash at institutions. At some point in time, you could call it, that money is going to move. So when it comes to BlackRock, I lose sleep at night trying to figure out what market share of that $10 trillion should we have. So the asset management industry can grow and that's where it's going to come from, is this $10 trillion that's going to be reallocated. Now we think that it's going to be a staged process. So when you talk about active management and passive management, it's going to be both. The clients are going to first dip their toe in, because some of them have been burnt over the last few years, and they may dip it in using a passive product to get their Beta and then they'll move to the active managers that have consistent and good performance. And we think we're uniquely positioned to capture that. And it's very believable because we see it happening in many of our products, where clients will come in first into the index product because they want exposure, and then they're looking for those that are more active, that have good performance in those areas, and I need to have those to get that flow. So when you look at the asset management industry, please don't forget that. That's #1.

The second thing that I want to highlight to you is don't underestimate the technicals in the marketplace. And the technicals in the marketplace are such that I estimate over $300 billion of buybacks this year. If that occurs, there is not enough IPOs that are going back into the marketplace to replace that $300 billion. So you could see a stock market that rises and the economy could be flat because there's not enough to buy. And when you translate that into the fixed income market, the fed and sovereign wealth funds are buying all the duration from 7 years out of the curves. So there's no duration in the market. And that's why it's being expressed in credit and other funds. So I think there is potentially in a sense, and this sounds maybe silly to you, a shortage of securities, which can push the market higher and that money is going to first come out to professional managers to manage that money. And I think that the asset management world is -- has had sort of a change and you're going to see the best-performing managers are going to get those assets and the ones that have the platforms that could provide the holistic solutions are going to get that money first. And that's what I think is the underpinning of growth in our industry, and I hope we separate ourselves to be able to capture a pretty good market share of that.

So I want to thank you very much for your time and your attention today, and of course, to those of you who invested in us, you're investment in us and those of you who are thinking about it, if we can ever answer any questions, we're always available to do that. So thank you very much for your time.

Craig Siegenthaler - Crédit Suisse AG, Research Division

Rob, thank you very much, and next up, we'll sift through Bancorp.

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