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Executives

Greg Martin – CFO

Rich Pzena – CEO and Co-Chief Investment Officer

Analysts

Alex Blostein – Goldman Sachs

Ken Worthington – JPMorgan

Dov Hellman – Sidoti & Company

Larry Hedden – Keefe, Bruyette & Woods

Campbell Anthony – Macquarie

Pzena Investment Management Inc. (PZN) Q1 2010 Earnings Conference Call April 28, 2010 10:00 AM ET

Operator

Good morning, my name is Latica and I will be your conference facilitator today. I would like to welcome everyone to the Pzena Investment Management First Quarter 2010 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question-and-answer period. Pzena Investment Management’s earnings press release contains the financial tables for the periods to be discussed. If you don’t have a copy it can be obtained on their website at www.Pzena.com in the Investor Relations section. Replays of this call will be available for the next week at their website www.Pzena.com.

Before the Company begins I would like to reference their standard legal disclaimer. Statements made in the presentation today may contain forward-looking information about the management plans, projections, expectations, strategic objectives, business prospects, anticipated financial results and other similar matters. A variety of factors, many of which are beyond the Company’s control affect the operations, performance, business strategy and result of the Company and can cause actual results and experience to differ materially from the expectations or objectives expressed in these statements.

These factors include but are not limited to the factors described in Company’s reports filed with the SEC, which are available on its website and on the SEC’s website, www.sec.gov. Investors are cautioned not to place undue reliance on forward-looking statements which speaks only as the date on which the statements are made. The Company does not undertake to update such statements to reflect the impact or circumstances or events that arrive after the dates these statements are made. Investors should however consult any further disclosures the Company made in the report filed with the SEC.

In addition please be advised that because of the prohibitions on selective disclosures, the Company as a matter of policy does not disclose material that is not public information on their conference call. If one of your questions require the disclosure of material non-public information the Company will not be able to respond to it.

Thank you. Now it is my pleasure to introduce Gregory Martin, Chief Financial Officer of Pzena Investment Management. Mr. Martin, you may begin your conference.

Greg Martin

Latica, thank you very much. Good morning I’m Greg Martin, Chief Financial Officer of Pzena Investment Management. I’d like to take this opportunity to welcome you all and thank you for joining us on our first quarter 2010 earnings conference call. With me on the call is Rich Pzena, our Chief Executive Officer and Co-Chief Investment Officer.

For the first quarter of 2010 we reported revenues of $19.2 million, operating income of $9.8 million, non-GAAP diluted net income of $5.5 million and non-GAAP diluted net income per share of $0.08. During the quarter we repaid another $2.5 million of our senior subordinated notes leaving us with only $7.5 million in outstanding debt. We also declared a dividend of $0.03 per share.

I’ll review our financial results in detail in a few minutes. First, I’d like to turn the call over to Rich Pzena, who will discuss our view of the investing environment and how we’re positioned relative to it.

Rich Pzena

Thank you Greg. I’m happy to say that business conditions appear to be normalizing both for our firm and for the broader economy. This is not to say that there aren’t continued headwinds on uncertainties but much of the recent data suggest stabilization and some sectors improving conditions. Bank and credit card companies reported in their first quarter earnings a general leveling off of delinquent loans and credit card balances.

Many industrial companies have seen firming in their revenues and margins have improved significantly on aggressive cost cutting. As for our own business, search activity has revived from a virtually frozen state last year to level slightly higher than where we were several years ago. Net flows from our institutional channel were positive for the third consecutive quarter, with $1.1 billion of total net inflows over that period.

Net outflows in our retail channel have also slowed considerably as the retail investor has started to make tentative moves toward US equities. Our search pipeline is strong and we’ve experienced a measurable uptick in request for proposals. In addition, we expect to be closing our small cap value strategy to new investors in the near future as the combination of strong performance and contributions from existing and new clients has brought our assets under management and this strategy to near our closing target.

We’ve made significant progress in identifying a launch client for our emerging markets value strategy and have received considerable interest in this new offering. As a result of higher AUM levels and continued focus on expenses the firm’s profitability has rebounded which Greg will discuss in greater depth in a few minutes. Cash flow has continued to be strong enabling us to repay another $2.5 million of debt this quarter, leaving $7.5 million of subordinated notes outstanding and no bank debt.

We have paid off a total of $30.5 million of debt over the last five quarters. After evaluating our financial position, future cash needs and current profitability the Board of Directors has declared a $0.03 per share quarterly dividend. With the market up about 75% from March 2009 lows and an economic recovery starting to take shape, investment committees are coming out of their defensive positioning and considering whether to de-risk, re-risk or stay with existing investment guidelines.

Today's catch phrase is liability-driven investing or LDI. LDI basically attempt to duration match assets and liabilities of a plan using a combination of fixed income and low volatility hedge fund strategies in order to eliminate risk from the portfolio. The concept sounds attractive particularly when a plan is fully funded but is less so when a plan faces a funding gap that cannot be met overtime through LDI.

The hard choice in this case is whether to reduce the exposure to risk assets that is equities and commit to multiyear funding requirements or increase exposure to equities and live with the volatility these assets entail. Further, committees are looking at one of the worst 10 year periods for equities in history, a 0% return making the de-risking option appear to be that much more attractive. Our view however is that making this decision while looking in the rearview mirror maybe overlooking a substantial opportunity.

Today's equity market valuation implies a nearly 10% expected return on equities, which assumes a normalization of returns of profitability of companies which we believe is very achievable. Valuation spreads are also attractive which should provide another 200 to 300 basis points of expected annual return for a deep value portfolio over the long haul. So the tradeoff between an expected equity return of 10% plus versus hedge fund like returns and a high fee structure is being actively considered around the globe.

It’s still early however, but we think this will be a focal point for investment committees over the near term. I’d now like to turn the call back to Greg Martin, who will review our first quarter results.

Greg Martin

Thank you, Rich. I would like to start up by discussing our assets under management or AUM, our fee rates and revenues. Our total AUM during the first quarter of 2010 increased 7.7% to $15.4 billion. This $1.1 billion increase is attributable to $1.2 billion in market appreciation slightly offset by net outflows of $0.1 billion. At March 31, 2010 the Company’s $15.4 billion in AUM consisted of $11.7 billion in institutional accounts and $3.7 billion in retail accounts.

During the first quarter of 2010 assets in institutional accounts grew 9.3% due primarily to market appreciation and some small net inflows. Retail assets grew 2.8% during the first quarter of 2010 again due largely to market appreciation but partially offset by some net outflows. Our first quarter 2010 revenues were $19.2 million, an increase of 40.1% from the first quarter of 2009 and an increase of 4.9% from last quarter. The year-over-year increase in revenues was due to an increase in average AUM partially offset by a decline in weighted average fee rates. Sequentially, the increase in revenues was due almost exclusively to increases in average AUM.

Average AUM was $14.4 billion for the first quarter of 2010, up 56.5% from the first quarter of 2009 and up 3.6% from last quarter. Our weighted average fee rate was 53.2 basis points in the first quarter of 2010, down from 59.4 basis points in the first quarter of 2009 and roughly even with last quarter. The year-over-year decrease was due in part to the large institutional inflows in our newly launched EAFE Diversified Value and Global Diversified Value strategies that occurred at the end of 2009.

As we noted then, we typically offer reduced fee rates to initial clients on our new product offerings. The year-over-year weighted average fee rate also decreased in part due to an increase in the average size of the Company’s institutional accounts. The Company's tiered fee schedules typically charged lower rates as account size increases. Institutional accounts comprise 76.0% of total AUM as of March 31, 2010 increasing from 69.8% as of March 31, 2009 and 74.8% as of December 31, 2009.

The weighted average fee rate for institutional accounts decreased to 59.4 basis points for the first quarter of 2010 from 69.1 basis points for the first quarter of 2009, and was roughly flat compared to last quarter. The year-over-year decline in the institutional weighted average fee rate arose as a result of the institutional inflows in our EAFE Diversified Value and Global Diversified Value strategies and the higher institutional average account size mentioned earlier.

The weighted average fee rate for retail accounts decreased to 34.1 basis points for the first quarter of 2010, from 37.1 basis points for the first quarter of 2009 and from 35.0 basis points last quarter. The year-over-year decrease was due to the timing of asset flows in our retail accounts and the effects of the temporary, voluntary partial fee waiver on the John Hancock Classic Value Fund. Our share of this reduction expires in May 2010. The sequential decrease in retail weighted average fees rate was due solely to the timing of asset flows in our retail accounts.

I would like to now draw your attention to the tables in the press release. We reference, we have included quarterly asset and revenue information for all of 2009, reflecting a change in our AUM categorization that occurred in September. Now let's turn to the remainder of the P&L. Our first quarter compensation expense was $7.4 million up 23.3% in the first quarter of 2009 and up 10.4% in the fourth quarter of 2009. The year-over-year and sequential increases in our compensation expense was driven largely by increases in our discretionary bonus accruals.

General and administrative expenses were $1.9 million for the first quarter of 2010, down 24.0% from the first quarter of 2009 and flat compared to last quarter. The year-over-year decrease in general and administrative expenses arose primarily as a result of decreased professional fees and data systems costs arising from our continuing efforts to reduce overall operating expenditures. Operating margins were 51.0% for the first quarter of 2010 compared with 38.0% for the first quarter of 2009 and 53% last quarter.

We have included non-GAAP income statements that adjust for certain valuation allowance and tax receivable agreement items. I will briefly discuss these adjustments at the conclusion of the financial discussion, but will focus my remaining marks on the non-GAAP information. Other income expense, net of outside interests was income of $0.4 million for the first quarter of 2010 and consisted primarily of $0.5 million in income related to the positive performance of the Company’s investments in its own products offset by $0.1 million in net interest expense.

Other income expense net of outside interests was an expense of $0.08 million for the first quarter of 2009 and income of $0.2 million last quarter. The year-over-year and sequential increases in first quarter 2010 other income arose primarily as a result of more favorable performance of our investments as well as a decrease in interest expense associated with the reduction in our outstanding debt. The effective tax rate for unincorporated business taxes was 6.0% for the first quarter of 2010, 7.7% for the first quarter of 2009 and 6.0% last quarter.

The fluctuations in these effective tax rates are driven by certain expenses that are permanently nondeductible for UBT purposes. While this rate will tend to vary period-to-period, we generally anticipate it being between 5 and 7% going forward. The allocation to the non-public members of our operating Company represented 86.6% of the operating company’s net income for the first quarter of 2010. This allocation represented approximately 90.4% of the operating Company’s net income for the first quarter of 2009 and 86.6% of the operating Company’s net income for the fourth quarter of 2009.

The variance in the allocation percentages are the results of changes in the ownership interests of the Company and the operating Company. Given the exchange that occurred at the end of the first quarter, the allocation to the non-public members of our operating Company will be approximately 85.4% of the operating Company’s net income beginning in the second quarter.

The effective tax rate for our corporate income taxes not including UBT was 42.6% for the first quarter of 2010, 42.6% for the first quarter of 2009 and 42.7% last quarter. We generally anticipate our corporate effective tax rate to be between 42 and 43% in the future. In the first quarter of 2010, we repaid another $2.5 million of our senior subordinated notes. At quarter end, our total debt was $7.5 million and our total cash was $19.7 million. This cash number includes approximately $0.2 million of cash held by our consolidated investment partnerships.

There are no financial covenants on our remaining debt and our Board of Directors declared a cash dividend of $0.03 per share. As a result of the foregoing, we reported $0.09 of basic non-GAAP net income per share and $0.08 of diluted non-GAAP net income per share for the first quarter of 2010.

Now I’d like to briefly walk through the valuation allowance and tax receivable adjustments, the net effect of which comprise the difference between our non-GAAP and GAAP results. For the first quarter of 2010, the Company recognized a $1.3 million reduction in its valuation allowance and a $1.0 million increase in its liability to its selling and converting shareholders, due to revised estimates of future taxable income.

For the first quarter of 2009, the company recorded a $0.8 million reduction to its valuation allowance and recognized a $0.6 million increase in the liability to its selling and converting shareholders. We would expect on a quarterly basis to record adjustments to the valuation allowance and our liability to our selling and sharing converting shareholders as we extend our projections out in future quarters. The ultimate amount of these adjustments will depend on our estimates of the future taxable income of the Company and the level of our economic interest in the operating Company.

Net of the effect for the valuation allowance and tax receivable agreement amounts I just discussed, we reported a $0.11 of GAAP basic income per share and $0.09 of GAAP diluted net income per share for the first quarter of 2010. And now we’d be happy to take any questions.

Question-and-Answer Session

Operator

(Operator Instructions). We’ll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Alex Blostein.

Alex Blostein – Goldman Sachs

Hey good morning, everybody.

Rich Pzena

Good morning.

Alex Blostein – Goldman Sachs

A couple of questions on the AUM. And then, Greg, I want to turn it over to you to talk about a couple of P&L items. So first, Rich, on the small-cap value strategy, how big was that as of the end of the quarter? And I guess how much in net flows have you guys seen in that product over the last year?

Rich Pzena

I will answer that question in a second. Small-cap was a $1.1 billion at the end of the quarter, the net flows for the year in the last year were hardly a few $100 million unless you need me to be more specific than that.

Alex Blostein – Goldman Sachs

Yes, that’s fine.

Rich Pzena

For 2010. Okay.

Alex Blostein – Goldman Sachs

That’s fine. And then I guess on the retail business, it sounded like the pattern of flows varied throughout the quarter. Is it just fair to assume that flow has gotten better and I guess towards March? And what are you guys seeing so far in the second quarter?

Rich Pzena

Yes, flows in March -- net outflows in March were about half the level of the net outflows in January and February, January and February were about the same, and then it fell on half and then the rate of outflows in April so far look like they’ve fallen in half again of net outflows from the March level. So it’s getting to be pretty close to negligible.

Alex Blostein – Goldman Sachs

Got it. And then real quick on just expenses. It seems like the comp picked up a little bit in the quarter and I'm guessing it's partially reflection of much stronger investment performance on the most recent quarter and one-year basis. Is this sort of a catch-up I guess from what you guys were accruing before and going forward, we should see kind of like the same run rate or should there be a step up or down from current levels?

Rich Pzena

Yes, this was basically a budget for the year, we’re not trying to tie the specific comp by quarter to the revenues of that quarter. So if the revenues do wind up growing over the course of the rest of the year, the rate of growth of comp from the first quarter will be much, much lower so with expanding AUM we should have margin expansion.

Alex Blostein – Goldman Sachs

Got it. And then one last one on just broader how you guys are thinking about marketing the products given the fact that near-term performance is getting better and it sounds like RFP activity is picking up. You have done a great job managing expenses, so like G&A have basically been flat for the last four or five quarters or so. Should we think about a step up in marketing or anything like that over the next couple of quarters, sort of take advantage of potential market share shift?

Rich Pzena

Yes, we recently added a senior level marketing person who joined us about three months ago and he is going to be focusing on the Australian market for us. We have a search for a second senior level marketing person, where we expect the focus will be in Europe and at some point if those are successful we will be looking for a third where the focus will be in Asia.

Alex Blostein – Goldman Sachs

Got it. Alright. Thanks, guys.

Greg Martin

Sure.

Operator

Your next question comes from the line of Ken Worthington with JPMorgan.

Ken Worthington – JPMorgan

Good morning. First question, you mentioned that RFPs were up. How are you guys doing in the finals? Is the three year and kind of five year numbers gaining less attention and people see kind of the long-term track record and the short-term track record and starting to really warm up? Or where would you say we are in the thawing process?

Rich Pzena

Well I’ll start by saying that there is a lag from the increase in RFPs to the increase in finals, OK? There is a long process. And RFPs, I can't even tell you how long the average RFP lasts, but from the point till final, it is probably six months. So we’re now about 12 months past to bottom in RFP activity, but we’re just sort of starting upward on the finals. So final activity will lag that, yes and obviously we’re not winning finals at the same rate that we won finals presentations back in the five year period leading up to through 2007 actually. But I think what you’re seeing now is because the one year numbers have stayed, have turned quite positive the hesitant -- I guess I’m going to put it this way, I think it’s more of an issue in the RFP going to final than it is in the percentage of finals that we’re winning.

So I think we’re seeing a little bit of a pickup, a little bit of a pickup in the RFPs that go to final. I don’t know that I can answer really yet whether our win rate on finals is changing. I think our win rate in finals is proportionate to the number of people in the final. So we’re winning our fair share of finals versus an unfair share that we used to win. And which is probably twice our fair share, and but the issue of just excluding us for the numbers once we’re put into a search isn’t happening with the frequency that it happened before. So it’s positive signs but not overwhelming signs.

Ken Worthington – JPMorgan

And when the -- does it take until the three year numbers get better until the one year number that was really bad kind of rolls off from the three-year numbers, does it take like another year or do you actually think it takes six months? I know I'm asking questions that are probably too detailed for a public call like this, but…

Rich Pzena

No I can give you a flavor, I mean if you – because our monthly performance data is pretty widely available. So if you start to, if you look at how poor our monthly performance data was in July of 2007, August of 2007, you’ll be able to figure out yourself how rapidly that three year track record will improve but July alone, if I remember it correctly July alone of ’07 we were seven or 800 basis points behind the market and that one month will drop off, three months – for two or three months from now.

Ken Worthington – JPMorgan

Okay, perfect. And then the other thing and I'm sorry, you answered this on the call, but I missed it. The partnership ownership percentage, why does that go to 85.4%?

Rich Pzena

Every year we give our employees who own the Class B shares, the opportunity to convert some of their shares to Class A in case they want to sell them or just convert them and we exercised a few, the rate went from 86.5 to 85.5% percent really meaning there is 1% more of the B shares that are now A shares that are employee shares.

Ken Worthington – JPMorgan

Okay, perfect. Thank you so much.

Rich Pzena

Does that make sense?

Ken Worthington – JPMorgan

Yes it makes perfect sense. I just missed it when you guys said it on the call.

Rich Pzena

Okay.

Ken Worthington – JPMorgan

Thank you.

Operator

Your next question comes from the line of Dov Hellman with Sidoti & Company.

Dov Hellman – Sidoti & Company

Hi guys just a quick question, you talked about getting a guy out in Australia, just what are the trends you’re seeing there in relating to the flows that you – institutional flows you got in the past quarter, I guess what kind of traction did you see in Australia there?

Rich Pzena

We have a pretty big business in Australia. We have about a $1.4 billion in assets from Australia today. The RFP activity is incredibly strong in Australia. The Australian market is probably the best, its growing private pension market in the world because of government policies toward basically privatizing their retirement program where every employer is required to set aside 9% of payroll into retirement plans, and so the market in Australia, the size of the pension market has rapidly overwhelmed the ability of the local stock market to absorb those investments.

Australia has been for quite awhile a place, its accumulating assets and very, very committed to global asset management. So we tend to be on the list particularly if they’re looking for value of in search activity for global and that’s where a lot of it is coming from for us.

Dov Hellman – Sidoti & Company

Got it. And then in terms of I guess, your capabilities there, so you hired someone internally, are you also looking externally to do something there or no, is it also going to be an internal effort in terms of marketing?

Rich Pzena

By externally you mean partnering with somebody on the distribution side?

Dov Hellman – Sidoti & Company

Exactly.

Rich Pzena

No, this is all internal. These are big, big clients where you have, where the numbers where you can access them directly, it’s not like a market where a partner is going to be of much help. It’s very much dominated by consulting firms and the consulting firms have – we’ve maintained good relations with those consulting firms so it’s sort of a natural market for us. And we actually have pretty high ratings among all the major consulting firms.

Dov Hellman – Sidoti & Company

Got it. Okay, and then in terms of institutional flows, could you maybe just qualitatively say new clients I guess versus existing clients in terms of the flows in the quarter?

Rich Pzena

Yes, let me see if I can say that easily. I can't say that easily with the data in front of me but I can, we can answer that Dov.

Dov Hellman – Sidoti & Company

Okay.

Rich Pzena

Yes, we can answer that question for you.

Dov Hellman – Sidoti & Company

Okay, great. And then in terms of I guess the traction into diversified international strategy and the global diversified value strategies in terms of I guess that portion of the flows. Was that significant, or what kind of traction I guess are you seeing there?

Rich Pzena

No, that was not significant in the quarter. We had, there was big inflows into those strategies in ’09, but most of the activity that we’re seeing is in the concentrated not the diversified strategies.

Dov Hellman – Sidoti & Company

Got it and then just lastly in terms of capital managements, so obviously you have the dividend now. What is the process you think going forward in terms of looking at the dividend and making that decision? Is there, do you think in terms of increasing it right now you’re kind of right at average, I guess with your peer group looking at all the rest of your peers. What do you think in terms of I guess raising that going forward. Would that be an annual process for you to make that decision?

Rich Pzena

Yes, I mean the big issue for us is Board priority to want to repay all of our debt. So we think that that can happen pretty quickly and then we’ll revisit the dividend but until the debt is repaid we’re not going to really revisit the dividends.

Dov Hellman – Sidoti & Company

Got it. Okay, perfect. Thank you very much.

Rich Pzena

Sure.

Operator

Your next question comes from the line of Larry Hedden with KBW.

Larry Hedden – Keefe, Bruyette & Woods

Good morning.

Greg Martin

Good morning.

Rich Pzena

Good morning.

Larry Hedden – Keefe, Bruyette & Woods

Most of my questions have been asked, but just to circle back on the dividend, once you do pay down the debt, is there a payout ratio or a range that you'd sort of consider or that you think would be appropriate going forward given the capital needs of the business?

Rich Pzena

Yes, I mean I guess I would answer that question by saying the business doesn’t have very significant capital needs. So payout ratio that starts to get in the towards the 50% range is the way we’ve always thought about it prior to and when we first came public, our payout ratio was just under 50 and I think we’re comfortable with that payout ratio when we’re operating without the thing that makes the Board uncomfortable about the debt is that the debt is personal debt from my family to the Company and so that’s why that paying back is their highest priority.

Larry Hedden – Keefe, Bruyette & Woods

Okay, great. And then going back to the diversified strategies, could you just give an update on sort of the reception that you are getting? I know you said that the products didn't necessarily account for any of the flows in the quarter. I was just trying to get a sense as to the reception that you are seeing from clients [ph].

Rich Pzena

Yes, I mean the diversified strategies appeal to a different kind of client than the concentrated strategies do and its not like we’re actually actively trying to market the diversified strategies, separately we’re basically saying to clients we have these two different options, one is going to track the benchmarks closer than others, one is going to have lower fees than others, one is going to have less volatility than others and it depends on the client. So I can't, I can't discern any patterns to share with you. I think there are times when somebody says especially after the performance is really great, the want the high test stuff more.

When the performance is not so great, maybe they all want the high test stuff as much. But my bias would to be to say that most of the recent activity that we’ve seen is more on our concentrated portfolios.

Larry Hedden – Keefe, Bruyette & Woods

Okay, that's helpful. Could you size the AUM of those strategies on a combined basis?

Greg Martin

It’s about $2 billion.

Larry Hedden – Keefe, Bruyette & Woods

Okay, and then just moving on to the institutional gross sales, I know institutional sales tend to be lumpy, but the sort of gross sale number came in a little bit lighter than I had expected. Is there anything going on there? Perhaps did anything get delayed or pushed out into the next quarter? Any comments you can add there would be helpful.

Rich Pzena

No, there is nothing to say, really it’s very, very lumpy. And if you look at the history its all over the place. So I can't point, there is nothing that’s really been delayed in particular. I would tell you generally the first quarter isn’t the most – isn’t the strongest quarter for gross flows, but I don’t know that that’s more anecdotal than I can tell you. I have great data for, but institutionally if you think about the pattern that we’ve experienced in our history. The first quarter is generally when people are reassessing what they want do, they get I’m talking institutionally now. They get their yearend results and their Boards meet, they make decisions on probably who they want to fire, more than who they want to hire and then they engage their consultants over their search process to figure out for their new hires and that tends to happen in the second, third quarter. And funding tends to be strongest in the third and fourth quarters.

But I can't tell you that I have scientific data to prove that. But that’s been the pattern that we’ve experienced since for most of our history.

Larry Hedden – Keefe, Bruyette & Woods

Okay, and then one final question. Could you just kind of sort of revisit your strategy in the retail channel? And maybe talk about whether that's changed over the course of the last several quarters?

Rich Pzena

No, it hasn’t at all. We’ve continue to look for – you’re talking about our approach to market as opposed to our investment strategy, question you’re asking me?

Larry Hedden – Keefe, Bruyette & Woods

Correct.

Rich Pzena

We have a very, very strong partnership with John Hancock which is most of what the assets under management are. We spend a lot of time with them, I guess if I was going to talk to you about what the underlying shareholders of the fund look like today. They’ve probably migrated towards more professionally managed and less sort of the broker driven individual retail accounts. So a lot of the fund now is in programs with big brokers so it almost looks more institutional in nature than it does true retail. We tend to have a lot of support to John Hancock in dealing with the big fund aggregators who drive that discretion on assets under management. So we take a program like – really all the brokerage firms have them and lot of the mutual fund complexes have them where they actually have discretions to manage their client accounts.

And we’ve been more successful in those then we have been in the general retail broker driven strategy. So from the standpoint of our contributions to that, we are very happy to provide John Hancock with support in calling on those clients and we can reach them better than we can reach the millions of not millions but tens of thousands of retail brokers around the country that’s really John Hancock’s role.

So I would tell you the strategy isn’t very different, our marketplace might be shifting a little bit but the strategy isn’t very different. John Hancock is still very, features us prominently in all of their marketing activities and we continue to have sub advisory relationships with obviously with others, they’re much smaller than the John Hancock relationship but we like those kinds of relationships and they’ve been relatively good for us. So I don’t know if that gives you any flavor but that’s my thoughts.

Larry Hedden – Keefe, Bruyette & Woods

Okay, that’s helpful and it covers all of my questions. Thank you.

Rich Pzena

Okay.

Operator

(Operator Instructions). Our next question comes from the line of Campbell Anthony with Macquarie.

Campbell Anthony – Macquarie

Hi my questions have been answered. Thank you.

Rich Pzena

Okay.

Operator

And there are no further questions at this time.

Greg Martin

Great. Well thanks everyone for joining us on today’s call.

Operator

This does conclude today’s conference call. You may now disconnect.

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Source: Pzena Investment Management Inc. Q1 2010 Earnings Call Transcript
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