State Street Corp. Presents at Goldman Sachs US Financial Services Conference 2011, Dec-07-2011 10:00 AM

Dec. 7.11 | About: State Street (STT)

State Street Corporation (NYSE:STT)

December 07, 2011 10:00 am ET


Edward J. Resch - Chief Financial Officer and Executive Vice President

Joseph L. Hooley - Chairman, Chief Executive Officer, President, Chairman of Executive Committee and Member of Risk & Capital Committee


Unknown Analyst

Alexander Blostein - Goldman Sachs Group Inc., Research Division

Alexander Blostein - Goldman Sachs Group Inc., Research Division

All right. I think we're going to move along here. Next up, I would like to welcome State Street. With us today are the company's Chairman and CEO Jay Hooley; as well as Ed Resch, the company's CFO. This is the first time Jay is presenting at our conference in quite some time, so thank you for joining us today.

Since Jay became the State Street CEO about 1.5 years ago, the company made a number of significant changes to better position itself for today's challenging business environment, including the launch of a multiyear cost-cutting program, as well as a meaningful risk reduction in its securities portfolio, which enabled State Street to have one of the highest Tier 1 common capital ratios today under the Basel III framework in the industry.

Although the environment clearly remains pretty challenging for a lot of financial services companies, State Street's core business continues to see some nice momentum in both the asset service inside of the house, as well as Asset Management.

So with that, let me turn it over to Jay, and I think we'll hear more about the opportunities State Street is seeing in today's markets.

Joseph L. Hooley

Thanks, Alex. And welcome, all. Looked forward to being with you this morning. I've got a fairly brief presentation and we'll get right into Q&A and hear what's on your mind. My presentation this morning is entitled, "Resilience in a Challenging Environment," and I think that has been the story of State Street. This morning, I'm going to go through -- talk a little bit about the environmental challenges, which states all financials, including State Street, how we're dealing with them and then remind you of the long-term growth story that surrounds State Street.

For those of you who are less familiar, I'm going to fly through very quickly just an orientation around State Street for those that may not know State Street as well, and then we'll get right into some of the headwinds that we're dealing with. And as always, I would refer you to our 2010 annual report on 10-K and other subsequent filings and consider any forward-looking statements that we make today against those commentary -- against that commentary.

Let me begin with an overview. Three main themes in my presentation today. We have been a leader in servicing institutional investments, it's all we do is focus on institutions. As a result, we've established leading positions in the markets we serve. And over time, both short and long term, we've outperformed our primary competitors, both financially, as well as product and geographical breadth.

State Street, you can read the slide, over 200 years in business, the last 10 years delivered over 10% CAGR -- top line CAGR, doubling minus debt rating, important to us and important to our customers. Very focused business model, we're in 2 lines of business, asset servicing and Asset Management. Asset servicing 87%, the remainder, Asset Management. And you can read the metrics, the most notable metrics are $22 trillion in assets that we service, just under $2 trillion in assets that we manage. And I'd call your attention to the banner at the bottom, which is noteworthy, that the integration of these business models results in 75 of our top customers buying services from both sides of the organization. And if you consider the Asset Management side, those 75 customers contributed 35% of the Asset Management revenues year-to-date in 2011.

I've given you -- this is more for your own edification, some industry stats which shows you broadly that global custody investor services landscape, and I've also given you a slice of some of the subsegments within the marketplace, both asset servicing and Asset Management. And noteworthy here is that over time, we've established industry leading positions and I believe what are some of the higher growth segments of the market, which I'll tease out further in the presentation.

We have been applauded over time for our quality of service, as well as our innovation. And as a result of that, we have received many industry accolades. Our focused business model and leadership position, as well as innovation in customer service have allowed us to outperform our key competitors. We have a short group of, really, a narrow close-in competitors, being Northern Trust and Bank of New York. I've given you some stats here through 9 months: pretax margins, return on equity, net interest margin, Tier 1 common. You can see our performance relative to the near-in competitors. And I'd also make a similar comparison around the common stock value of us versus our near-in competitors. This is through November 30 this year, annual performance. You can see State Street's performance better than the S&P financials as well as the near-in competitors. And just so that you didn't think that I was going to cherry pick a time period, if I did that same analysis over a 3-year period, you'd see somewhat less performance than the S&P, but you'd see outperformance with regard to our near-in competitors.

So that's a very brief fly-through of State Street from the standpoint of background. Now I want to take a few minutes and flesh out this period that we're going through, this economic trough, and we do believe it's a trough that will recover over time and just give you a little sense of what the headwinds look like from a trust bank standpoint.

And there are 4. Those 4 headwinds are: low interest rates affecting the net interest revenue, that's not a surprise, it's a bank; second, would be the constrained economic growth that's weighing on equity markets and equity market growth does have a direct effect on both our Asset Management and asset servicing business; rising cost of compliance and regulation. By and large, not exclusively, a lot of the regulation that's heading to the financial services industry misses us. We do get hit up a little bit from the standpoint of capital, but the cost of complying for us in 2011, we estimate to be $50 million going up in 2012. So compliance costs are a factor here; finally, the increasing capital requirements are pressuring or leaving ROEs somewhat uncertain at this point.

With those as headwinds, let me now take you through how we're dealing with the headwinds. We're not sitting back and waiting for them to heal. There are really 4 prongs to the strategy in dealing with this. First, is driving profitable growth in the core. Somewhat ironically, the more pressure pension funds are under, investment managers are under, that's good for our core because they're inclined to outsource more, they're inclined to outsource more with stronger, better capitalized players. So our core business has and should continue to perform well.

Next, as Alex mentioned, we introduced a fairly substantial IT & Ops transformation plan. I'm going to tease that out in a couple of subsequent slides, but the bottom line is over a 4-year period, we will achieve a $600 million cost save, but more importantly, we'll transform the core IT infrastructure. Managing risk in this environment to optimize risk-based return and also avoid harmful losses. And then, also, optimizing capital management, which I'm also going to take you through. As Alex mentioned and I'll show you, we find ourselves in a very strong capital position, we believe, as we're growing through this stress test, determination as to how we deploy that capital is a question that's front and center to us right now.

Let me share with you how executing our strategies will allow us to widen our lead, and let me just go back to the core business and remind you that this core business of asset servicing and Asset Management is set against some, I think, terrific long-term secular growth trends. I've listed them on the slide, the 2 first ones are the most dominant. In my mind, the globalization of financial assets, the growth in savings and retirement plans, as well as complexity is our friend, the separation of alpha and beta, and also regulation and transparency. Not the cost but as regulation comes in place, our customers need more help, need more reporting, are willing to outsource more activities.

Let me just tease each of these out. Globalization. We're an organization where 40% of our revenue and 42% of our almost 30,000 staff are outside the U.S. in 29 locations. A market-leading footprint, so as assets grow, retirement plans develop. We think we're well positioned to capture that. If I just focus in on Europe for a minute. Now most people, I'm sure, that you spoke to here today don't think about Europe as a growth segment. We have a little different feeling that Europe represents a couple of things: one, deep asset pools; and also a more rapid evolution to a company-sponsored and individual-sponsored savings plans. Through the course of the crisis, savings rates are going up, so generally, we view Europe as a pretty attractive marketplace, broadly. We've developed this footprint in Europe, organically, and through acquisitions most notably in 2003, we acquired Deutsche Bank's Global Security Services business, which gave us market-leading positions in Germany and Ireland, and augmented our UK as well as Austria footprint. Last year, we acquired Intesa SanPaolo, which gave us market leadership in Italy, a growing pension and retirement market, as well as Luxembourg. Last year, we also acquired a small software company called Mourant, which gave us a market-leading position in servicing alternatives, which I'll come on to further in the presentation.

So Europe looks like a pretty attractive market for us and we're best positioned, I would say. Let me also -- our focused business model, continuous new product innovation and aggressive cross-sell also has resulted in a few other things. We have 26 major products and of those products, our top 100 customers use 14 products; our top 1,000 use 8.4. Not only we have good penetration, but we think there's upside growth to continue to cross-sell additional products to the existing customer set we have. The quality of services and relationships that we've created have also enabled some great persistency from the standpoint of customers. Top 100 customers, average time with State Street, 20.1 years; top 1,000, 11.1 years. Once we get a customer to where they leave the opportunity to cross-sell as we build out more products is pretty significant.

And over the course of the last 10 years, 70% to 80% of new revenue has come from existing customers. In 2011, 3 quarters to-date, that's 79%. So we continue to be able to cross-sell our product set against the institutional customer base that we do business with.

Let me -- the aging of the world's population that move towards retirement, retirement trends are all very positive. In fact, it's probably the most important trend that promises growth for us, the shift from DB to DC. If you think of how we played this down the right side of the slide. We're a market leader in servicing solution for pension funds. Our Asset Management business offers target date funds, both directly and on a white label basis to our institutional customers. And more recently, this has moved to its bundled solutions, bundling the Asset Management and the asset servicing. The best example of that I can give you is liability-driven investment, where a pension fund outsources the asset liability management front office and back office. So the pension theme is a big one for us.

Complexity is another theme which shows itself in product innovation, enhanced risk management and compliance in increasing regulation. And for us, let me show you how that's a benefit. Middle-office outsourcing, a business we pioneered, we currently, of the $22 trillion in assets that we service, $8 trillion of those are in this complex middle office environment. The demand for those services are growing faster than we can supply services, given the front office dealing with the complexity of regulation and product change.

Derivative is another example where as the CFTC moves to central clearing of derivatives, we think that's a big opportunity. Our customers are all the buy side firms. They would like us and we've stepped up and committed to being in the derivatives clearing space. And, finally, as investors struggled asset allocation strategy, SSgA has a number of multi-asset class solutions to address that need.

Another trend, separation of alpha and beta, you've heard it before. I think it's more true today than it's ever been. There is some stats on the page from industry groups that would suggest the alternatives business will continue to grow at 12-plus percent over the next couple of years. As I talked to the institutions, the pension funds, they were all allocating more assets to the alternatives segment. But you also see the path has continued to grow and I would say passive subset of that is the ETF market, which most think will grow in the 15 percentage range over the next several years. Provide with significant advantage and if today, we're the #1 servicing agent of ETFs and the #2 manager of ETFs, and we're the #1 service provider of alternatives across the globe.

So we're big in the space that's growing more rapidly, I guess, it's the simplest way to put it. Let me shift now and I just -- I've got this -- there's more information in the deck that I want to cover, but this IT & Ops transformation announcement that we made about a year ago, I think, is important to us. I think it speaks to the times that we're in, given the headwinds that we're facing. We still need to find ways to generate returns for shareholders.

The IT & Ops transformation plan is just that, it's a plan that's designed to generate $600 million of run rate savings by the end of 2014. And it has -- as a result of that, we believe we can generate 400 basis points of pretax operating margin, kind of all else being equal. So this is designed to reduce cost and as I've come onto, it also should have a significant impact on our ability going forward, not only to structurally change the shape of the cost curve for us, but renovate our IT organization. There's 2 components to it. I'm not going to take you through the detail, but the operational plan side of it really deals with standardizing processes, automating by applying technology and taking advantage of labor markets around the globe. You can see that what we did on the right side, given this is a 3-year plan as we set annual benchmarks that we're reporting against through the course of 2012, so you can see what we set out to achieve and what we've achieved in that calendar year.

On the IT side, there's many components to this, but the most important component thematically is we're to a cloud environment, where we're going to take all the subsystems and rewrite the data -- rewrite the systems under a cloud, which is going to not only make us more nimble from the standpoint of introducing new products, but it will also enable us to be more of an information provider. Today we have a lot of information that's in multiple different system even though the application's the same. Our customers, increasingly, are looking for information: access to information, data and analytics. That's where this business is going out 5 years. You can't get there without moving to the cloud, so that's really what's behind the cloud movement.

Let me now -- these are the savings associated with that. I won't spend the time, given the time that we have here today, but you can read through them. Risk management, key focus for us; enhancing our risk management; beginning with values. The values that we have as an organization, make sure that we have the governance in place, and I think we've made a lot of moves that give me a lot more comfort that going forward, we're making the right risk return trade-offs and that we're minimizing the likelihood of surprises around unforeseen events.

Let me get on to capital and then I'll wrap this up. The last of the 4 initiatives that I've mentioned was optimizing our capital. As you can see from the chart, we have pretty high levels of capital. Among the highest in the banking industry, I think, if you compared those both domestically or even globally. Of particular notice under Basel III, Tier 1 common ratio is among the highest at 11.7%.

If -- this is an outline. I think it's important to kind of go back in '11 and just level set. Back in '11 there were 19 banks that went through the stress test or the CCAR, as it's known. The median payout ratio of those banks that we're able to both increase dividends and repurchase shares was about 58.6%. We increased our quarterly dividend to $0.18 per share, a payout of about 20% and received the authorization from the board to purchase 675 million of shares, so our total payout was about 57%. So we're roughly in-line with the industry.

With the capital levels I just showed you, it's my hope and expectation against this year's CCAR test which we're in the process of going through, that we should be able to improve on both of those. If I look at the -- just more or less says that, so we'll skip onto that, in the interest of getting to questions.

Let me just summarize. There are 4 key initiatives that we intend to focus on given the economic trough that we're working through. Those being drive growth in the core, and we think inherently, we've been able to demonstrate that. We should be able to continue to demonstrate that, given the value our product has to our customer set today. Second is to execute on the IT & Ops transformation, which not only provides us earnings power through the trough, but repositions the whole business from the standpoint of its technology and it really restructures the operating environment and resets the IT infrastructure. Rigorously focus on the risk management and optimize capital deployment within the regulatory framework that we're all working against. And the focus on these initiatives in 2011 should allow us to continue to maintain, if not widen our lead. You saw on the earlier slides, we're #1 and #2 in most of the markets that we compete in. Produce financial results that outperform the primary peers is the second goal. We should continue to benefit from our global footprint, what's going on around the globe, even on the back of poor economic growth, you're going to see savings rates grow, you're going to see governments forcing companies and individuals to generate or to establish savings plan at the individual and company level, which is right in our sweet spot. And also to take advantage of the strongest capital position that we have in our peer group. So we think if we do all those things, that we can generate earnings through the trough and create tremendous leverage for ourselves when we come out of the trough: economic growth, returns, risk taking, improves and the overall market improves. So with that, I would -- I guess, Alex, you're going to commandeer the Q&A?

Question-and-Answer Session

Alexander Blostein - Goldman Sachs Group Inc., Research Division

Thank you for the invitation. Maybe I'll kick it off with a question and then we'll turn it over to the audience. First off, I want to talk maybe a little bit more about the core business over the last few quarters. It feels like it has been the general theme for the trust banks to talk a little bit more about pricing, maybe focus on the margin for each individual client, a little bit more so than in the past, partially given the environment. So, 2-point question, I guess. Number one, what are you seeing on the pricing side of the equation, are there any changes that you think are realistically going to happen? And then number two, for some of the newer and higher growth areas, what's the competitive landscape like?

Joseph L. Hooley

Sure. So on the pricing front, I think that as this economic trough has depressed the market base revenues in this business, and it's hung around for a while, I think that the marketplace on the supplier side is much more attuned to pricing as a lever to help offset some of that. So I -- it feels like there's more and more attention to appropriate pricing. I know that in recent past, we've turned away from deals that we just said, there's a point at which we're not going to chase business for pure price. So I hope that, that will get better over time. I'm not hanging a lot of our success on that, because I don't control that and I don't know what the rest of the marketplace is going to do. And it's a marketplace, even though it's pretty concentrated, there's enough suppliers out there. So for us, it's -- one of the other things that I could've said that's critical through this trough is to make sure we don't let up on the investment, and we haven't let up on the investment. So to me, the pricing equation is as much about have you differentiated your product. If somebody's bidding a pure custody deal and, there are 4 bidders -- it's going to be a price game. So for us -- and the reason that we focused on things like middle office, the alternatives, analytics products, the more we can differentiate -- and this is kind of business 101, the better our pricing power is going to be. So I think, hopefully, pricing gets a little better. Generally, I know we're very focused on that, but it's as important that we differentiate through not only the product set but the geographies that we're in, the combination of multiple services against really solving a customer problem. To me, that's the more predictable way that we're going to solve the problem, the pricing question. I think to your other question, some of the -- if you look at the broad landscape, some of the narrower aspects of the marketplace will be things like the middle office or alternatives, hedge fund, private equity administration tend to have better pricing dynamics, because the value is more differentiated. And the middle office, I referenced an $8 trillion number and I think some industry reports would suggest we have 60% of that market. We were in it 11 years ago, we made a big investment. It's a real game-changer in the eyes of the customer when they can outsource their whole middle office and worry about distribution Asset Management and product. And it also creates an unbelievably persistent relationship because we both made significant commitments. As we get into that product set, there's much better differentiation. I would say the same thing for the alternatives, where we're the market leader in servicing alternatives. If any of you have spent time with the big institutions that have to worry about asset allocation, they're allocating more to beta, more to alternatives. We're a market leader in hedge, private equity, real estate, there's less competitors there. So I don't know if that helps, but it's -- to me, the key is differentiation, the key is orienting towards the faster-growing revenue streams and being -- having a line that you won't go past from a pricing standpoint.

Alexander Blostein - Goldman Sachs Group Inc., Research Division

No, that's helpful. Another one for you, staying with the new business momentum theme, can we talk a little bit about how the new business momentum's going in the fourth quarter? There's been a couple of press releases of you guys winning some sizable mandates. Wondering on 2 things. Number one, does the volatility out of Europe slow down the pace of funding, so maybe that's, you're winning, but maybe it'll take a little bit slower to fund them or that may not play a role? And then second, the dislocation among some of your larger European competitors on the servicing side, does that create an opportunity for you guys to win some business there?

Edward J. Resch

Yes. I think on the second one, absolutely. I think that the question, in terms of the businesses that we operate in, is fundamentally are you going to be there and be there for the long haul. And I think if there's a question about -- the answer to that question, it absolutely creates opportunity for us given our focus and our business model. I do think, also, though, that the pace with which decisions are being made has slowed down, given the disruption. And I think that's generally been true in periods of disruption, going back in time. So good opportunity, good pipeline, slower decision making, Europe, we think, does present some opportunity.

Joseph L. Hooley

Alex, I'll just jump in. In the quarter, AllianceBernstein outsourced their middle office to us, $300 billion. We have 2 superannuation mandates in Australia so it's those themes that I referenced where we're seeing the most interest.

Alexander Blostein - Goldman Sachs Group Inc., Research Division

Okay. It'll be one more for me and -- the broader theme across this financial conference the last 2 days has been return capital. And you alluded to the fact that you're hoping to deal a little bit more, so just curious to hear your thoughts on whether or not you think the fact that we get a bank by bank results will that matter and do you think that will differentiate the businesses a little bit more? And then if you could just flesh out any comments, what exactly you're hoping to do with your capital in for next year?

Joseph L. Hooley

Sure. I think -- I'm sure you've heard or you all know that the stress inputs are out there, are fairly onerous, as a general theme. We're in a pretty good place. I think relative to our business model and our capital, as we said, we're going to go through the process and we'll take guidance from the regulator with regard to what we're able to do. But we're hopeful that we can improve on the capital deployment back to shareholders and at face value, it would feel like we might be able to get there. The other thing which we balance against that -- we balance with that is this -- broadly, this investor services marketplace has been consolidating and I think it will continue to consolidate. It's a scale business. European banks are under a lot of pressure. I still expect that we'll see acquisition opportunities in Europe. So we're always looking at capital deployment from the standpoint of what's best for our shareholders, long term. We would hope to be able to improve dividend and payout, but that's going to be dependent on the process. And also to have flexibility should the right acquisition come along to further advance our position on the global stage.

Alexander Blostein - Goldman Sachs Group Inc., Research Division

Okay. Questions from the audience?

Unknown Analyst

Just a general question. You talked about a lot of the secular and the revenue growth, when you talked about a fairly concentrated supplier market, but a very fragmented client market. Even in more normalized interest rates, why aren't we higher? That's the first question. And then secondly, just what's the prospect of unbundling services so that you can charge more through fee for service rather than through the net interest margin. How likely is that to be adopted by clients?

Joseph L. Hooley

Yes. On the question of ROE, we got 2 things going on there. The first is -- and I didn't tease this out, but I could have. Market-driven revenues, to us, is not just net interest revenue. It's also -- we've had subdued growth and things like securities lending because the low level of leverage being applied by hedge funds. The Trading business has been up and down because of more risk off trade, less cross border trading. So there's a number of things that are environmental that are market related that are providing some headwinds against the revenue line. I think the other piece of the ROE question is, we still find ourselves in this period of not knowing what our capital levels need to be, both a point and point in time. So I think that -- and our response here is to try to fight through that trough. We think someday, interest rates will recover, risk taking will improve and leverage will increase in hedge funds. So I think that we're working through that period. We would hope, once we get more definition specifically around capital levels, that we'll be able to calibrate what our ROE should look like, both in the current period and over time. And I forgot the second part of your question.

Unknown Analyst

It's a follow-up, actually.

Joseph L. Hooley

Oh, yes, the unbundling.

Unknown Analyst

But even before that, even before you had a cyclical downturn and capital was important then you had all the things you talked about, that cyclical headwinds, ROEs was still 12% to 15%, which is okay, but it's not -- not great relative to what it could be and I'm just trying to understand why that is.

Joseph L. Hooley

Yes. I think part of that is -- and if you look at our franchise over the last 5 or 10 years, we've been building for the long term, both product and geography. We think this is a great long-term business so we try to balance the short-term investment to make sure that we continue to differentiate. So I think some of the answer is its investment, and we think it's a worthwhile business not to starve, but to continue to reinvest in. And when you have more favorable tailwinds, you probably do a little more of that than -- in the downturn. With regard to bundling or unbundling, there's a -- we've got very good customer level P&Ls and we always strive to make sure each product covers its cost plus the margin. By and large, that's a balancing game that, over time, you try to get right. So we don't underprice certain things in order just to create margins in other places and put ourselves in a place where we're on our back foot. We're constantly managing that customer P&L, net interest revenue is one of those items. I'd tell you the other one that's a good example is securities lending, and the way securities lending works is it's a split. So it's fully transparent, the customer gets, on average, 75% of the earnings, we get 25%. If the customer decides to exit securities lending, we're back and saying, well, what are we going to do, collectively, to make sure that we recover the economics of the relationship? Is that responsive to your question?

Unknown Analyst

Jay, I really think like it's the heart of the question, because, as you say, the capital market's revenue has shrunk quite a bit. So how are those discussions going when you go back and say you're not doing securities lending or we're not getting the FX revenue that we thought.

Joseph L. Hooley

Getting better. I would say, just to give you an arrow point just to make the point, securities lending, for as long as I can remember, the spreads have trended towards favoring the customer so it probably started out at 60%-40%, and now it's 75%-25%. This year it's -- the tide has turned. It's gone the other way, so we have had some success both in pure fee increases and changing of splits and even more broadly, I would say, on the pricing question, it seems to me, and this won't surprise anybody, that we have an existing relationship where the economics of change because of a market factor or because of the customer factor, and think about the persistency of the relationships that I share with you. It's the ability to go back and either reprice, sell additional service or take some other action, where the pricing hasn't visibly changed yet as in the open market RFP process. So that's -- I guess that would be the part that I would hope would change over time, or at least firm up.

Alexander Blostein - Goldman Sachs Group Inc., Research Division

Maybe one more for me. There's been a lot of focus on SSgA recently and maybe it might be helpful to go through why you think SSgA makes a lot of sense within the overall featured umbrella? And then within that, is there anything you could do to enhance SSgA, both in revenue synergies with the core business, as well as in the overall profitability?

Joseph L. Hooley

Sure. We are happy to take that on. There was a suggestion by a shareholder that we'd be better off spinning it off. I think that's probably the reference that you're making. I gave you a few points from the deck. SSgA -- so of the top 100 customers, 75 are common, and of those 75, SSgA derives 1/3 of the revenue from that 75. So there's clear customer synergy and I would remind you that SSgA is a pretty unique property and that it's -- the preponderance of its assets are around cash, beta strategies and ETFs. So -- and I would say, almost more prevalent outside of the U.S. than inside the U.S. If we're providing servicing to a sovereign wealth fund or a central bank, our ability to get the cash to manage and the passive assets to manage is pretty good. So I would say, from a pure cross-sell synergy at the customer level, we've made good headway and there's good arguments, I think, to keep both the asset servicing and Asset Management piece together. The other thing I would say is that there are many themes going on in the Asset Management industry. I mentioned one before which is it feels like we're back to the bar-belling of -- beta's getting more of the growth and alpha's getting more of the growth. The long lonely segment feels like it's under more pressure, but the other thing that's going on, given some of the struggles of buyers of Asset Management, is there's more bundling going on. Bundling from a standpoint of target date funds and 401-Ks or -- broadly, the industry cause of solutions, where you either combine different asset classes to produce an outcome or you take front-office activities and back-office activities, combine them and provide a full solution. In some of those later examples, we've got an $8 trillion in assets under management middle office, we've got a $2 trillion front office that has a broad set of asset classes, but is strong in the beta asset classes. We look to combine those things to provide solutions to customers and we think that's going to be a meaningful growth part of the Asset Management industry when you look out 3, 5, 7 years. So given those reasons -- and you could always look at the value of splitting something off and what value that would have to shareholders. And as a management team, we always look at that and continue to come back to the integrated value far outweighs the separate value of the asset.

Alexander Blostein - Goldman Sachs Group Inc., Research Division

All right. Thank you for those. I think that's it for today.

Joseph L. Hooley

Thank you.

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