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Edited Transcript of SAMG earnings conference call or presentation 1-Nov-19 12:30pm GMT

Q3 2019 Silvercrest Asset Management Group Inc Earnings Call

New York Nov 15, 2019 (Thomson StreetEvents) -- Edited Transcript of Silvercrest Asset Management Group Inc earnings conference call or presentation Friday, November 1, 2019 at 12:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Richard R. Hough

Silvercrest Asset Management Group Inc. - Chairman, President & CEO

* Scott Andrew Gerard

Silvercrest Asset Management Group Inc. - CFO

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Conference Call Participants

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* Sumeet Mody

Sandler O'Neill + Partners, L.P., Research Division - Director of Equity Research

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by and welcome to the Silvercrest Asset Management Group Inc. Q3 2019 Earnings Call. (Operator Instructions) Please be advised that today's conference is being recorded. (Operator Instructions)

Before we begin, let me remind you that during today's call, Silvercrest will make forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, including statements regarding future events and developments and Silvercrest's future performance as well as management's current expectations, beliefs, plans, estimates or projections relating to the future are forward-looking statements. These forward-looking statements are only predictions based on current expectations and projections about future events. These forward-looking statements are subject to a number of risks and uncertainties, and there are important factors that could cause actual results, level of activity, performance or achievements to differ materially to the statements made.

Among these factors are fluctuations in quarterly and annual results, incurrence of net losses, adverse effects of management focusing on implementation of a growth strategy, failure to develop and maintain the Silvercrest brand and other factors disclosed in the company's filings with the SEC, including those factors listed under the caption entitled Risk Factors in the company's annual report on Form 10-K for the year ended December 31, 2019, filed with the SEC.

In some cases, these statements can be identified by forward-looking words such as believe, expect, anticipate, plan, estimate, likely, may, will, could, continue, project, predict, goal, the negative of plural -- or plural of these words and other similar expressions. These forward-looking statements are predictions based on Silvercrest's current expectations and its projections about future events. All forward-looking statements made on this call are made as of the date hereof, and Silvercrest assumes no obligation to update these forward-looking statements.

I would now like to hand the conference over to Rick Hough, Chairman and CEO. Please go ahead.

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Richard R. Hough, Silvercrest Asset Management Group Inc. - Chairman, President & CEO [2]

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Thank you very much for joining us on the third quarter 2019 results. Silvercrest results for the third quarter of 2019 reflect a full quarter of the successful integration of our new small cap growth equity and professionals based in Milwaukee. As we expected, that transaction contributed meaningfully to our accretive growth in Silvercrest's cash flow, margins and earnings per share.

Since the second quarter, the firm's adjusted diluted earnings per share have increased to $0.38 per adjusted diluted share for the third quarter. Silvercrest adjusted EBITDA rose to $8.9 million, and Silvercrest adjusted EBITDA margin has increased to 32.1%, both for the third quarter of 2019.

Our total assets under management at Silvercrest now stand at $23.5 billion as of September 30, with associated revenue of $27.8 million for the quarter. Institutional assets under management now comprise nearly 30% of the firm's discretionary assets under management. While the firm did experience outflows primarily due to rebalancing, the firm established new high net worth relationships, and 2019 looks to be a good year overall for business development and continued organic growth, a trend we are proud of compared with many peers.

Last quarter, we announced that we expected near-term success for the firm's Outsourced Chief Investment Officer initiative. I'm pleased to announce that we have won our first few OCIO clients, representing a diversity of institutions. The remainder of 2019 and 2020 remain important for our organic growth in the OCIO effort, and I'm pleased to report that the marketing opportunities for that business remain strong.

Following the slowdown for institutional business opportunity in the latter part of 2018, we now have a robust institutional asset management pipeline with substantial institutional interest across Silvercrest's equity strategies. Both our asset management and OCIO growth initiatives buttress Silvercrest's value proposition, which is to deliver excellent institutional quality capabilities to our wealth management families and investors, placing Silvercrest at the forefront of the competitive landscape. We will continue to invest in high net worth portfolio management professionals to support the organic growth of that business and to diversify our talent.

As we have discussed previously, the current M&A environment for wealth management firms remains both active as well as expensive. Silvercrest, however, is involved multiple conversations at any given time. We believe our brand, culture, capabilities and technological innovation make Silvercrest a premier partner for select businesses and professionals. Regardless of the environment, Silvercrest will opportunistically seek to effectively deploy capital to complement our organic growth.

Thanks very much, and I will take questions after Scott Gerard, our CFO, presents financials.

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Scott Andrew Gerard, Silvercrest Asset Management Group Inc. - CFO [3]

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Thanks, Rick. As disclosed in our earnings release, for the third quarter, discretionary AUM as of September 30 of this year was $17.5 billion and total AUM as of the same date was $23.5 billion. Included in our AUM as of the end of the third quarter is approximately $1.7 billion of AUM acquired as part of our recent acquisition of certain assets of Cortina Asset Management. Revenue for the quarter was $27.8 million, and reported consolidated net income for the quarter was $4.8 million.

Drilling further down on the third quarter, again, revenue was $27.8 million. This represented approximately a 12% increase over revenue of approximately $24.9 million for the same period last year. Increased management and advisory fees as a result of increased AUM drove higher revenue.

Expenses for the third quarter were $21.5 million, representing approximately a 9% increase from expenses of $19.8 million for the same period last year. This increase is primarily attributable to increases in compensation of $0.2 million and general and administrative expenses of $1.6 million. Comp and benefits expense increased primarily as a result of merit-based increases, annually hired staff including the addition of Cortina staff, partially offset by a decrease in the accrual for bonuses and a decrease in equity-based compensation expense due to a decrease in the number of unvested restricted stock units and unvested nonqualified stock options outstanding. The increase in general and administrative expenses during the third quarter as compared to the same period last year was primarily due to increases in professional fees due to an increase in acquisition-related legal fees resulting from the Cortina acquisition, an increase in depreciation and amortization expense related mainly to the amortization of intangible assets related to acquiring Cortina and to the renovation of our office space in New York City; also an increase in occupancy and related expenses and an increase in insurance costs.

Reported consolidated net income was $4.8 million for the quarter. This compared to $3.9 million in the same period last year.

Reported net income attributable to Silvercrest or to Class A shareholders for the third quarter of this year was approximately $2.7 million or $0.30 per basic and diluted Class A share.

Adjusted EBITDA, which we define as EBITDA without giving effect to equity-based compensation expense and noncore and nonrecurring items, was approximately $8.9 million or 32.1% of revenue for the quarter compared to $7 million or 28.3% of revenue for the same period last year.

Adjusted net income, which we define as net income without giving effect to noncore and nonrecurring items and income tax expense assuming a corporate rate of 26%, was approximately $5.4 million for the quarter or $0.38 per adjusted basic and diluted earnings per share.

Adjusted earnings per share is equal to adjusted net income divided by the actual Class A and Class B shares outstanding as of the end of the reporting period for basic adjusted EPS. And to the extent dilutive, we had unvested restricted stock units and nonqualified stock options to the total shares outstanding to compute diluted adjusted EPS.

Looking at the 9 months ended September 30, revenue was approximately $74.3 million, representing approximately a 1% increase over revenue of approximately $73.8 million for the same period last year. Again, the increase was driven primarily by growth in management and advisory fees as a result of increased AUM.

Expenses for the 9 months ended September 30 of this year were approximately $59.6 million, representing approximately a 3% increase over expenses of approximately $57.9 million for the same period last year.

Compensation expense decreased approximately $1.2 million during the 9 months ended September 30 of this year in comparison to one year ago.

General and administrative expenses increased approximately $2.9 million during the 9 months ended September 30 compared to last year.

Compensation and benefits decreased primarily because of a decrease in the accrual for bonuses, partially offset by increased salary expense as a result of merit-based increases and newly hired staff, including the addition of staff from Cortina. The increased general and administrative expenses for the 9 months also included increases in professional fees due to the Cortina acquisition, an increase in depreciation and amortization related to the Cortina intangible assets and the renovation of our office in New York, in addition to increases in occupancy expenses and insurance costs.

Reported consolidated net income was approximately $11.2 million for the 9 months ended September 30 this year; that compared to $12.1 million in the same period last year.

Reported net income attributable to Silvercrest for the 9 months ended this year was approximately $6.2 million or $0.72 per basic and diluted Class A share.

Adjusted EBITDA was approximately $21.3 million or 28.6% of revenue for the 9 months ended September this year compared to $21.1 million or 28.5% of revenue for the same period last year.

Adjusted net income was approximately $12.4 million for the 9 months ended September of this year or $0.86 per adjusted basic and diluted earnings per share.

With respect to the Cortina acquisition, we closed this transaction on July 1. In consideration for the purchase assets and goodwill at closing, we've made cash payments in the aggregate amount of approximately $33.6 million. We drew down $18 million on our term loan facility with City National Bank, and we issued Class B units with a value at closing equal to approximately $9 million. The total deal consideration includes contingency consideration in the form of 2 potential retention payments and a potential growth payment during the 5 years after the closing of the acquisition based on achieving revenue milestones.

Looking quickly at the balance sheet. Total assets were approximately $203.1 million as of September 30 of this year compared to $133.4 million as of the end of last year.

Cash and cash equivalents were approximately $40.8 million at September 30, and this compared to $69.3 million at the end of last year.

Goodwill and intangible assets increased as a result of the Cortina acquisition. Furthermore, as a result of the adoption of the new lease accounting standard effective January 1 of this year, certain lease commitments now appear on the statement of financial condition as operating and finance lease assets and liabilities. As of September 30, our operating and finance lease assets and liabilities totaled $34.5 million and $40.9 million, respectively.

Total borrowings as of September 30 of this year were $17.1 million, and total Class A stockholders equity as of the same date was approximately $63 million.

That concludes my remarks. I'll now turn it over to Rick for Q&A.

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Richard R. Hough, Silvercrest Asset Management Group Inc. - Chairman, President & CEO [4]

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Thanks very much, Scott, and we're available for questions at this time. Do we have anyone in the queue?

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Questions and Answers

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Operator [1]

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(Operator Instructions)

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Richard R. Hough, Silvercrest Asset Management Group Inc. - Chairman, President & CEO [2]

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Okay, operator. I happen to know people are trying to ask questions and it's not working properly. Could you please open up the line for Sumeet?

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Sumeet Mody, Sandler O'Neill + Partners, L.P., Research Division - Director of Equity Research [3]

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All right. Great. Can you hear me, guys?

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Richard R. Hough, Silvercrest Asset Management Group Inc. - Chairman, President & CEO [4]

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Yes.

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Sumeet Mody, Sandler O'Neill + Partners, L.P., Research Division - Director of Equity Research [5]

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No problem at all. So I guess we can start with the Cortina acquisition. I noticed they contributed $3.2 million of revenues in the quarter. Just want to get some color how you feel you've been performing in the first quarter after closing the deal and how that integration progressed versus your expectations. And are you largely satisfied with the contribution in the quarter?

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Richard R. Hough, Silvercrest Asset Management Group Inc. - Chairman, President & CEO [6]

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I'm very satisfied with the contribution in the quarter. It hit our own projections that we internally did our deal on very closely. The amount of accretion we expected on the deal day 1 was just about on the mark for our own financials in evaluating the deal. In an environment where many companies will do deals on the prospect of future growth, we seek to make sure they are accretive early on, and we succeeded. The expense ratios and other metrics are also as expected, and we were pretty, pretty aggressive about it.

On the integration side, it's gone mostly smoothly. You're going to get your occasional hiccups, in particular with technology. We're still sorting through some of those. But in the scheme of things, they're pretty minor and short term. I think those will be behind us soon. The portfolio managers, which are so important to what we're doing, the intellectual capital of the firm, are great partners. We couldn't be happier about the cultural match. In a business when you're talking about investment talent and people, that's so critical. And they're among the finest partners that, frankly, we've ever started to work with in the 17-year history of this firm. And the clients have reacted positively. So on that score, it looks good, and we're already in new searches for new institutional business.

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Sumeet Mody, Sandler O'Neill + Partners, L.P., Research Division - Director of Equity Research [7]

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Great. That's helpful. And then one on the client rebalancings in the quarter. How much of that was related to Cortina clients? I mean have you seen any attrition following the deal? And then secondly, we noticed Cortina had a couple major clients that concentrate roughly 20% of its revenue. Just want to get color on those clients, maybe get a better understanding on the nature of those relationships. How long have they been with Cortina? Or anything notable there?

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Richard R. Hough, Silvercrest Asset Management Group Inc. - Chairman, President & CEO [8]

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Sure. So 2 different questions. First was on rebalancing. Yes, there was some rebalancing. They've had strong returns. And you would expect that. It's been a headwind, as you know, for our own value equity strategies with this performance. I would not say there's anything notable there or of concern. It's just part of the business. It's a high-class problem.

With regards to the high concentration, right, it's always been the case that they've had some in these specialized strategies. The clients that are responsible for that concentration have been with the firm for most of its history, if not all -- depends which one you're looking at -- and thoroughly understand the process and characteristics of the portfolio. A small cap growth or a small cap opportunity portfolio which includes microcaps can be quite volatile and uncorrelated in other respects. And these clients are very familiar with the process. They really buy into what our team is doing, and they've been positive about the deal. Does that help? Does that answer your question?

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Sumeet Mody, Sandler O'Neill + Partners, L.P., Research Division - Director of Equity Research [9]

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Yes. No, that's really helpful.

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Richard R. Hough, Silvercrest Asset Management Group Inc. - Chairman, President & CEO [10]

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By the way, I should mention, they're the kind of split between the 2 different portfolios that are based out of Milwaukee.

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Sumeet Mody, Sandler O'Neill + Partners, L.P., Research Division - Director of Equity Research [11]

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Okay, okay. I guess a couple for Scott here. Look like on the expense side -- comp expenses, I noticed we reduced the equity comp in the quarter. Should we expect that to kind of return to more normalized levels going forward, and I guess how should we think about that adjusted cash comp ratio?

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Richard R. Hough, Silvercrest Asset Management Group Inc. - Chairman, President & CEO [12]

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Yes. I think I -- you may recall, we had a large number of restricted stock unit grants that we made in 2015 with a -- those had a 4-year vest, so those were fully vested this past August. And that's why you see the meaningful decrease in equity-based compensation expense.

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Sumeet Mody, Sandler O'Neill + Partners, L.P., Research Division - Director of Equity Research [13]

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Okay, okay. Got it. And then just on the comp ratio for the rest of the year, I mean, how are you guys expecting that to run maybe into 2020?

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Richard R. Hough, Silvercrest Asset Management Group Inc. - Chairman, President & CEO [14]

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Yes. So that is an interesting question because, of course, we have managed the company towards a certain compensation percentage. We've usually come in right on it or even under it, as we've done recently in the past couple of years. And given the higher margins of the Milwaukee business, obviously, you've seen that compensation ratio of total revenue decline. Our cash flow generated by the business ultimately needs to be invested at a good rate of return, whether that's hiring talent or potentially doing a deal, as we did with our friends in Milwaukee. I think it remains to be seen to what extent we maintain that percentage. The key issue here is if we can keep our percentages lower and increase the cash flow and earnings for the company, all things being equal, we'll do that. However, as a small company that really feels the need to invest for growth and the need to continue diversifying our professional talent, especially to drive organic growth in the high net worth business, it's possible that we will eat into that ratio a little bit, so not necessarily stay as high as it is.

I can't tell you exactly what that's going to look like, because we have to be a bit opportunistic. And unlike a deal, when we make hires, obviously, that hits the expense side of the P&L right away and doesn't have the same tax benefits of a deal. But it's something we're going to have to do to grow over time, and we're just going to be careful about it. We're very aware of the characteristics of this company and how they affect shareholders.

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Sumeet Mody, Sandler O'Neill + Partners, L.P., Research Division - Director of Equity Research [15]

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Okay. Great. That's helpful. And then I guess kind of moving forward in that same vein, can you discuss a little bit how you -- I appreciate the comments on the M&A environment in the prepared remarks, but is that -- how do you balance the kind of M&A push versus lift out? Is that -- which one do you see kind of being more efficient as you go forward? And maybe just talk about the priority differences there.

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Richard R. Hough, Silvercrest Asset Management Group Inc. - Chairman, President & CEO [16]

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Yes. It's -- we've only -- we've rarely done a lift out at Silvercrest in our 17-year history. There's much more fertile ground for us on the M&A front. And so it's much more likely -- and that's where we're going to, personally for us and what we're looking for in terms of the characteristics of the professional joining us, more likely to find opportunity. There is possibility down the road that as the RIA business matures and professionals find themselves unhappy at much larger roll-up type firms or in that situation, they may start to look around the way some of their colleagues are at the brokerages, which is not fertile hunting ground for us and our business model. It's possible that down the road, that there could be some RIA-type lift outs, but we're not running around seeking those. If you look at the business, the wealth management side with RIAs is as highly concentrated. It's not a large number of firms that control a majority of the AUM, Silvercrest being lead among them. So it's going to be on M&A.

The best opportunities for us are going to be firms that know us well from the industry or the character of our leadership here and seek a direct conversation because they know what they want and are not participating in an auction process. We have very large conglomerates, banks, private equity roll-up firms, all competing at -- in what I think is a pretty expensive market right now.

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Sumeet Mody, Sandler O'Neill + Partners, L.P., Research Division - Director of Equity Research [17]

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Okay. All right. Great. And I guess sort of just a followup there. As we approach the end of the year, just want to get an update on the capital allocation priorities. I mean the dividend yield is kind of running around 5%. You guys are -- how are you guys thinking about balancing that against that -- being opportunistic in M&A and hiring and considering you don't want to affect the float with buybacks, and the debt load being pretty modest?

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Richard R. Hough, Silvercrest Asset Management Group Inc. - Chairman, President & CEO [18]

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So I -- if you could be a little more specific, it might be helpful. Let me just start at an answer, and if I'm off the mark, let's try again. It has been our stated policy to support a meaningful dividend in our business for our shareholders. As a microcap stock that's fairly thinly traded, it's not always entirely rational. It's kind of a funny market. We think it's important to pay our investors, as we grow and invest our money profitably. So it is very important to us to support it and prudently increase it, as we have been doing on a very regular basis.

At the current yield, we're starting to get towards the top end. I think, for now, unless we're going to see some other movement, but we have strong cash generation, very low debt, so we can continue supporting it even in the wake of changing markets, for some time. We also have cash at the C corp level to support that dividend and still take advantage of M&A opportunities. We have constructed this dividend in a way that we felt we could do both, not have to make a hard choice at this time. That's a function of both being lightly levered, having strong cash flow and having a dividend that's clearly manageable based on those 2 factors.

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Sumeet Mody, Sandler O'Neill + Partners, L.P., Research Division - Director of Equity Research [19]

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Okay. Great. No, that's perfect. And then just turning to the results now. I mean I want to touch on the institutional channel, especially compared to the high net worth, and I just wanted to drill a little bit more in on the pipeline as well, just kind of the growth continuing from the first half into the second. Where are you seeing some of the most traction within those products in the pipeline [potential]?

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Richard R. Hough, Silvercrest Asset Management Group Inc. - Chairman, President & CEO [20]

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Yes. Right. So what's interesting, as you may recall, when we were speaking a year ago, the pipeline had really dried up. And it's not surprising, that's -- there was a lot of downward pressure in the equity markets, and I think a lot of institutions in particular, which is the pipeline we can most easily measure, defer decision-making or searches. And then as markets improve, that pipeline opened up. At -- and we define our pipeline as looking over the next 6 months, and they are not a general pipeline, but there are opportunities where we're involved in an invite-only RFP or where we're a semifinalist or finalist candidate. So it's near term, and it's a pipeline of opportunities where we have a very significant chance of winning business. That pipeline is now very strong and robust. It's grown all the way back and exceeded where we've been in the past. So that portends to some very good organic business development in the institutional channel.

Interestingly, we have current search activity across large-cap value and equity income, in addition to our SMid-cap value and focus value strategies. We are softly closed, except for certain institutional investors, for the small-cap value. So the activity in our other strategies is very important.

Secondly, I'm pleased to see that activity in an area where a lot of institutions have sought to go passive or to index. And it just speaks to the quality of our investment team here and the strength of the firm. It may also speak to a long-term trend with regards to active versus passive, which I've talked about in the past and which I'm somewhat contrarian on. I think active will reassert itself, at least comparable to where it is today versus passive. So I think the fourth and first quarters of 2020 are going to be pretty important for the institutional business in terms of realizing that business.

We do have new business opportunities with the growth strategies, but that marketing effort and organization was part of our integration during the third quarter. And so there is a pipeline there, but I'm not characterizing at this point. And in future calls, I will probably be talking about our institutional new business opportunities in general. I won't necessarily spotlight it by strategy, but I will mention in general where it resides, just as I mentioned, for example, that we have large-cap and equity income interest in our current pipeline.

We're also, as you know, incubating our international value and emerging markets strategy. And we will also be incubating new growth strategies over time in Milwaukee, but we're going to knock off the opportunity we have now and grow into those new opportunities; just as we made small-cap value a success at the firm, now we're transitioning to some other things on the back of that success. So hopefully, you find that helpful with a lot of color around that business.

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Sumeet Mody, Sandler O'Neill + Partners, L.P., Research Division - Director of Equity Research [21]

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Yes. That's great. And then just turning to the OCIO business. Saw the wins in the quarter, that's great. I just wanted to get a little more color around the pace of growth there. I know you've talked about sort of a medium- to long-term goal of meaningful growth. I just wanted to see, was this kind of as expected or kind of coming a little bit quicker than you thought with some of the wins?

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Richard R. Hough, Silvercrest Asset Management Group Inc. - Chairman, President & CEO [22]

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I would say as expected. When we added to this team over the past 1.5 years, 2 years and built it up, it was, remember, building our OCIO capability using the intellectual capital that services our high net worth client base with asset allocation, risk analysis and management as well as manager selection and then kind of institutionalizing that capability and that intellectual capital in a way that it was appealing to the OCIO marketplace. What I stated earlier this year, and perhaps at the end of last year, but certainly in our first and second quarter calls, was that 2019 and 2020 were going to be very important for seeing some wins and building that business now that we've got the team in place. And well, here we are in the third quarter of 2019, we're starting to see that new business flow. So I would say that is exactly as I expected, and I'm pleased to see that type of wins that we're getting.

Importantly, not unlike the institutional business, on the equity or strategy side you have to have clients to win clients. No one wants to be the first to be alone. And that first precious client we won several years ago in small-cap value made the waters safe for many following institutions and helped build our reputation among consultants and institution-seeking equity management. The OCIO business is no different, although it's driven by a combination of Boards and personal relationships as well as a more institutional-driven approach. And I'm pleased that our first few clients represent a diversity of institutions. I think that's important. We have won a college endowment that we will be helping to manage. We have won a hospital. We have won a law firm pension assets, and we have won a endowment/foundation, classic charitable foundation. So 4 different institutions, that allows us to point to them and do a good job that other institutions can look to.

Some of those flows will actually occur in the fourth quarter and are not reflected in our third quarter numbers. And in fact, what came in in the third quarter, I believe, mostly went into our nondiscretionary assets, although we're being paid a higher fee than we would normally get for nondiscretionary assets. So a bit of those flows, you're going to see in the fourth quarter, not the third. But I thought it was really important to mention those wins because I had made an issue of it in my earlier calls this year, and the same is true for 2020. It's important that we get the job done now.

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Sumeet Mody, Sandler O'Neill + Partners, L.P., Research Division - Director of Equity Research [23]

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Okay. Great. Yes, that's really helpful. And then just one more question if I could. It's really more of a modeling question, but on the discretionary fee rate, looks like it just kind of came in north of 60 basis points in the quarter adjusting for Cortina. Just wanted to see how you expect that to settle. And how should we think of those drivers affecting that discretionary rate going forward?

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Richard R. Hough, Silvercrest Asset Management Group Inc. - Chairman, President & CEO [24]

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Are talking about how the OCIO business will affect it or what I see for that rate in general?

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Sumeet Mody, Sandler O'Neill + Partners, L.P., Research Division - Director of Equity Research [25]

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Just the rate in general.

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Richard R. Hough, Silvercrest Asset Management Group Inc. - Chairman, President & CEO [26]

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Yes. In general, it has been extremely stable for our high net worth board business, which is 70% of our business. We have won larger mandates over time. That has driven it down by a couple of basis points, to be expected. And the institution -- the growth in the institutional business, in general, at Silvercrest has driven that rate a bit down. The Milwaukee combination and the growth strategies raised it up. And the nature of their specialized strategy and the rarity of it allows them to maintain a higher fee level successfully. I don't expect that to change, and I don't expect it to change for the rest of the business. It's been very stable for a very long period of time. What does tend to affect it on an overall basis is the shift between fixed income and equity. We take a very long-term view with our high net worth business, and it doesn't change a lot, even when we're making decisions, but that is one thing that could change it. And obviously, we've been a bit more weighted toward equity, in general, over the past 10 years. But we're close to the midpoint of our range. So again, I don't expect that to change really substantially.

Now since we're seeking to grow the institutional business with the Milwaukee growth strategies, we'll be seeking significant mandates. And it is possible that to get larger mandates that we will see the fee bases come down a bit for those wins, just as we saw with our small-cap value equity strategies here. But they've got a really special strategy and it's very compelling in the marketplace, and that really remains to be seen. It would have to be very, very large mandates, I think.

So no prediction, other than to say that it's been stable. The change you saw was just primarily a result of the combination. And if it does come down due to very large wins, well, give me as many of those as you can. That's a really high-class problem.

Sure. And Sumeet, before you go, if you've got more, you might as well monopolize the question period because of the issue and people asking questions, and -- I know you're trying to be polite for others, but don't worry about it. They'll get in the queue.

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Operator [27]

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(Operator Instructions)

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Richard R. Hough, Silvercrest Asset Management Group Inc. - Chairman, President & CEO [28]

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All right. Well, thank you for joining us for our third quarter of 2019 quarterly results. We had a very good quarter, much of it driven by the successful merger with the growth strategies of Cortina in Milwaukee. We're very thrilled with both the professionals as well as that organization and quite optimistic about the future. We had lots to discuss today about the successes in the OCIO business and our strong institutional pipeline, and we look forward to reporting more when we have our fourth quarter results. Thanks very much.

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Operator [29]

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Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.