Ameriprise's CEO Presents at Credit Suisse Energy Summit - Call Transcript

Feb.24.12 | About: Ameriprise Financial, (AMP)

Ameriprise Financial, Inc. (NYSE:AMP)

Credit Suisse Energy Summit Conference Call

February 8, 2011 8:00 am ET


Unidentified Host – Credit Suisse

James M. Cracchiolo – Chairman of the Board & Chief Executive Officer

Unidentified Host – Credit Suisse

I am pleased to introduce Jim Cracchiolo, CEO of Ameriprise. In terms of the Ameriprise story, we like the combination of margin expansion and free cash flow that Ameriprise has delivered now for the last several years. I guess with that, let me just turn it over to Jim to tell us what’s next.

James M. Cracchiolo

We look at this as an opportunity to give you a further understanding of how we’re doing at Ameriprise and so what I’d like to do today is cover a few things first, our disclosure statements so please read it in our hard materials or here. Most importantly, what I’d like to talk about is how we’re situated. We believe that we’re situated in a terrific position to take advantage of an opportunity that continues to grow in our industry, really in the industry of retail financial services around the whole retirement market. The product, the service, and how we can deliver that to a growing population of people and a growing population of a transition of assets that they have in retirement.

We also would like to update you on the significant progress that we’ve made in executing our strategy. We’ve been very focused on this since we became public and through the entire financial crisis, the storm, the bit of recovery, etc. we continue to invest both organically as well as through acquisitions in helping our business grow and helping to create shareholder value. With that we know that this environment isn’t settled so we see the markets up now for the fourth quarter, they were down in the third quarter, interest rates are still at an all time low.

We feel that we have a good strong foundation, we have flexibility, we have a good position that we can navigate these markets and still create shareholder value and grow both our earnings and our returns over time. With that, as we continue to look at how we invest in the business we think that we’re on the right path and we’ll give you some of our what we would call post signs so that you can actually see that progress as well as what we’re targeting for the future.

If you look at how we’re positioned today since we spun off we are quite large as a diversified financial services company. We’re a Fortune 250 company. We’ve established a strong brand in the marketplace. That brand is continuing to grow in awareness and it has a good trust factor, one thing that the financial services industry loss during this last financial crises. We really are focused on the mass and mass affluent population, the people who we know are moving to retirement with their assets. We also, in that regard, have developed a very strong wealth management business. We’re the largest in financial planning, we’re the fifth largest network overall in the country, we’re a large provider to the retirement market today number seven in IRAs. Overall, about number five position across the industry against all players.

We’ve also invested and over time evolved our asset management business from a proprietary shop to now operating on a more global basis particularly to the third party channels. We’re number eighth in the United States in long term funds, number six in the UK in that market, and we’re expanding globally, we’re about a 27 on a global basis. Our position in our other products and services or annuities or insurance are really to our own channel and we have good positions in those businesses six, seven, eight, 10 but they’re namely focused on how we provide asset accumulation type protection, annuity type products for retirement and the longevity of our clients.

Our record of accomplishment, I think, over the last six years speaks for itself. Remember, we’ve gone through a tremendous financial crisis and we’ve come out stronger and so during that time our revenue grew by over 42%, earnings by 84%, our return on equity up 35%, and our assets under management and administration up 47%. So we think even as our markets continue to be somewhat volatile we can actually continue to grow and if markets stabilize or continue to improve we think that growth could even be stronger.

The shift in our business has also been significant. If you look at the shift in the mix of our earnings, not only did the pie grow tremendously but now over 50% roughly of our earnings come from our advice and wealth management and asset management businesses. You can see over that period that’s where all the growth has come from. That is what we’re focused on continuing. We’ll always have our annuities and protection as a key part of our business because we have great client behavior, great relationships, a great book established but at the end of the day where we’re investing for growth and accelerating that growth is really in the asset like businesses.

The opportunity, I think, is even greater today than it was five years ago. If you look at the retirement market, it continues to grow. The assets will continue to grow, by 2016 there will be $22 trillion dollars of retirement assets. IRAs are increasing, 401ks, but most importantly people are thinking about how do you put all those assets together, plus their own investable assets to actually get a retirement check. The mass and mass affluent populations in this case, is growing twice as fast and the need for advice has increased.

This is our sweet spot. 68% of consumers desire to receive retirement advice. 79% of consumers do not feel confident about their retirement. That is critical, the reason they want advice is because they don’t know actually how to navigate, how to think about things for the future. With that in mind, 54% really do prefer to work with a financial advisor and having over 10,000 of them that really do financial advice and planning around the retirement market, that’s the opportunity for us.

Our businesses and the way we think about them how we go to market is really two fold, our wealth management and retirement business and our asset management business. Our front end of the company Ameriprise is really focused around how our advisors can actually gain more clients, deepen their asset base, continue to serve more people, and do that with a full range of products and services, annuities, insurance protection, investment products, retirement cash, and manage their balance sheet.

On the asset management business, we took the opportunity of moving that from a proprietary business focused only on our channel to gain further scale to actually move that now to look at the third party channel to compliment that and grow both domestically and internationally, where we see a great opportunity as well because as people move to retirement they need product and they need capability and how we put that all together as institutions need it and retail consumers need it.

So those are the two businesses, that’s how we go to market, that’s how we look at our investment plans and how we will continue to great shareholder value. If you look at putting that together what do you get? You get a diversified revenue stream, you get lower risk from deep long term relationships, you get products designed for the consumer not as a commodity product to just sell and move on but as a solution set because we’re worried about the clients overall and how they are achieving their goals. That gives us good strong results.

We have one of the deepest client relationships anywhere in the financial services industry. It keeps the client longer, it keeps the assets longer. In that case, we can generate multiple revenue streams and higher profitability per asset. We also have quite high client satisfaction and as we look and compare that over the last year again, that actually increased and grew.

Our client retention and persistency is quite strong, that’s why our products like our annuities, or our life insurance actually generates really good returns. It has excellent behavior because of the client behavior, that they’re more planning oriented. With that in that manner we can generate really strong returns versus our peers and that’s why we’re targeting to move into the high teens in the combination of all those businesses and products that we put together.

If you look at the advice and wealth management just in looking at the advisor side of that equation, I know people are focused on that, we continue to grow our advisor base, our client assets. We’re bringing in good flows, our wrap business continues to grow, it’s the second largest in the industry. From that perspective, new advisors are joining us. We’ve focused really over the last two years, three years on bringing in recruits from the industry. We never did that before, we always focused on organic growth. That’s actually accelerated in the fourth quarter and January continues to show good strength.

Our advisor retention continues to be at all time highs and with that our productivity and advisor retention in our employee channel, which always use to be a novice channel, has now converted to a highly productive channel and you can see the retention is going up and consistent with now or closer to our franchisee channel.

Our operating net revenue per advisor continues to grow. I know people look at this quarter-to-quarter, our fourth quarter was a bit tough. Down markets in the third quarter, clients wanted to hold more cash, they wanted to understand what was happening. Our advisors did as well, but over the course of that year you can see that productivity, we’re continuing to focus on it, continue to bring it up and even as we recruit people in their productivity is a bit higher. In fact, significantly higher than any of the people who are leaving.

We think we can get that to continue to grow. Of course, markets will always affect it but we manage a lot of assets, a lot of our business here is fee based business so as markets go so does some of the activity but also clients follow that. So as we think about moving into 2012 if things continue to stabilize a bit and there’s a rosier outlook, we think clients will get reengaged again as they did at the first part of 2011 even though that activity slowed again at the end of 2011.

This Slide actually gives you a little better understanding of our share wallet. If you look at any one of these items, we have a deeper penetration than the competitor average, but the most important part is we do all of it and so you’ll find in certain houses certain things dominate. In our case, we actually have very deep multifaceted relationships. On average, a client with us has over four accounts. If they do financial planning they have over seven accounts. That’s pretty significant. We keep our clients long and those assets transfer in many cases to their children.

If you look at our advice and wealth management business, one of the things we said you should continue to look at is our margins. We wanted to bring those margins by 2012 up to 12%. When we set that goal the interest rate environment was projected to improve, we weren’t going to be at all time lows for the next three years. We actually came close to that, 11% in 2011. It slowed a bit from where we were tracking, because as I said to you in the fourth quarter.

But in that margin already embedded is significant investment to continue growth of advice and wealth, bringing in experienced people, including investing in a tremendous brokerage platform that is a multiyear investment. We’re currently carrying two systems and we’re converting our advisors. We converted our employee population last year, this year we’re converting our franchisees. We started that in the fourth quarter.

In addition, we ramped up our advertising. Tommy Lee Jones, those ads have been rated, through our research, number one in the fourth quarter across the industry and the awareness to the potential client prospects and our current clients is quite strong. There are continued strong investments that we’re making.

Now, as we look at the environment if things slow a bit continuing from 2011, we’re going to manage the expense base. I’ll talk about that a bit more. We have a lot of discretionary expenses that we’re also investing in beyond those larger investments that we can manage and regulate. Having said that, we think we can continue to grow the revenue base in advice and wealth, productivity, bringing in more people and having them ramp up. So as we see, I can’t dictate the environment, but what we’re going to do is play a bit offense and defense depending on how the environment unfolds.

The other thing I think is very important for people to try to understand is, “Well, Jim I know you’re moving into the asset [light] businesses, but how does the annuity business, how does the protection business fit in? Why do you have those businesses?” Well, I start with the idea that how did we build the company? Over the years we built this company really from the perspective that it was a product company, asset management and protection products. That’s how we started to build the company.

Back in the late 80s we started to convert this to be more of a full financial advisor rather than a seller or reps of products. Over the years now, we have our reps that aren’t sales agents, they don’t sell just an investment product, they don’t sell a protection product, they are not sales agents that sell insurance contracts, they are full fledged financial advisors that have multiple licenses, they operate in multiple states. In that regard, today we’ve made the front end of that business really a profit center, the distribution profit center.

Now, with that we want to generate multiple facets of our revenue. Some revenue comes from them managing client assets through multiple platforms, our wrap business that we get fees on but multiple products provided through a network, our brokerage platform and capabilities, investment products, cash products, spread products. In addition to that however, over the years we built excellent businesses in our protection and our annuity business. High returning business, great client persistency, longevity, those things generate good returns. We have a good business there, we understand our clients.

So what we want to do is continue to provide good retirement type protection products to our client base, not external so a year ago I made a decision to exit the third party channel. The environment is tough, interest rate is low, volatility, client behavior is unpredictable, too many companies chasing after the same dollar. In this case we only provide these products to our current client base. They’re planning oriented clients, they have good behavior. Those clients stick with us longer, persistency is better.

We can actually give a good benefit and generate a good return. However, as we focus the environment continues to get more difficult so we’re managing that. So our fixed annuity business, we temper it. In good markets, we can invest well, we can give a good spread, we can give good client returns, we accelerate it. In these environments we just turn off the faucet.

In our annuity business we’ve been able to put great product, hedge it appropriately. We are focused on generating good strong mid teen returns in this product and even in this environment we think we’re able to do that. But having said that, we’re not immune so we just recently raised prices again and on our guarantee we’ll be coming out in May with a new line up of those annuity products that are more geared to this low interest rate environment. But, we believe that we can really focus on generating mid teen returns. This is not going to be a high growth business for us because it’s only against our client base, but it will be a strong business and we can manage the capital quite well and returns quite well.

So the other question people have is, I see the volatility the environment has on people who has these products and what their exposure may be and what call they have on their capital base. When Walter and I talk about our excess capital position of over $2 billion, we’ve accounted for that extra call so in that regard we think this business can contribute nicely, really serve our clients really well for maintaining long term relationships with them for products we also provide and we can manage with good credit ratings and at the same time generate strong returns against the entire company’s capital base and a growth in our asset [light] businesses.

The same thing in our protection business. Again, let’s look at where our protection business is and where it isn’t. Most of our business is really in these products asset [light]. We have some term, but in that regard our biggest book is VUL and so that gives us a good strong return consistently. Now, right now in this environment it’s been slower growth. Why? Because, people are a little more concerned at putting money into equity based product.

Having said that, our UL index that we just launched is growing nicely but one of the big issues that I know people are focused on is really limited benefit UL and fixed blocks. We have very small business in that business and we have not been aggressive at all over the years in it. So here again, we can generate mid teens returns, very solid base. Our clients fortunately live longer as well so it’s a good returning business for us and we understand the behavior quite well.

Our auto and home infinity business mainly to the mass affluent population. In that regard, we had some hits with the catastrophic loss, there were a lot of storms this last year. We had an increase the end of last year in some of the auto claims based in one or two states. We’ve come over that. Right now that business is tracking really well for where it was over the last five years and we continue to get steady growth in policies.

Here again, I think you’ll find the earning stream will be quite strong and will generate again, strong returns in this business consistently. It’s probably the better part of what you would see in the auto and home industry. It’s more of a direct business. We have very low cost on a relative basis and our underwriting is quite strong.

So that all fits together in what we market to go to market as our distribution business. A lot of our product comes from third parties but we also, because we have one of the best packaged product platforms, we have deep relationships, we understand our client, we can generate very good returns on things we manufacture as well. So, we’re focused on growing that, bringing in more client, more client assets, developing an even higher quality advisor force, bringing in and attracting advisors, keeping that productivity going, and balancing the product and service looking at returns if it’s a balance sheet product but mainly growing all of the assets of the client that we can get a very strong return per dollar of asset. We think that this business will continue to grow and expand its profitability and margins.

The second business and opportunity is really our asset management business. We want to make this an increasingly global business between Columbia and Threadneedle internationally, we’re starting to look at how we expand this business both domestically but also on a global basis and we have a broad product set. With the acquisition of Columbia, the growth of Threadneedle, we have the product, we have the service, we have the investment performance that we can continue to build and grow here.

So let’s talk about that for a minute. As I said, the eighth largest in long term US funds, fourth in the UK in retail, 27th as a global asset manager and we’re expanding our positioning around the world. We just opened offices in the Far East, Middle East, we’re going to continue to expand in key markets both for institutional as well as the intermediary wholesale channels.

Today, our asset makeup is looking at over $300 billion in assets at Columbia, $100 billion plus at Threadneedle. A nice mix between equity, fixed income, and a growing alternative business. We’ve actually, through the first quarter of this year, we’ll complete our integration with Columbia bringing that fully online on our new capabilities. We’ve reestablished our distribution pipelines both institutional and retail and those pipelines are growing. I’ll comment on it in a few moments.

We also have a very strong and broad product line. In fact, as you look at it to say, “Well, how does that compare and what does it look like?” We have 113 four and five soft funds in Morningstar both here at Columbia and at Threadneedle and how they’re rated in the UK. So we think we have a great platform that we’ve been able to build and put together through a combination of organic and acquisitions.

Even though we face some challenges, as the industry does with lows, as well as our own [inaudible] where we lost certain assets, we’ve established something that we think we can build on and will generate very strong returns for Ameriprise.

So what are we dealing with? Well, let’s talk about the flow dynamics. On the left side of this picture very clearly what’s happening from a market driven perspective and what’s our expected outflows? Well first of all, the industry last year suffered one of the most significant periods of outflows. We know particularly in equity funds, I think there was alone in the fourth quarter in December was a huge outflow in equity funds.

That hopefully, all of us want to turn. It’s been a bit more positive in taxable and tax exempt is starting to turn around again. We expect outflows, as I think the industry does, in a number of categories. In our category, the two areas affecting us a bit more is our ex parent outflows. So I’ll talk about that in a moment here. Our parent outflows we got hit in the fourth quarter, we told you that was coming, it’s not a lot of fees. We offset that with winning a huge mandate in the UK, the largest actually mandate in the UK with Threadneedle. But that will continue in the first quarter.

In the first quarter we’ll expect about $4 billion to $4.1 billion of outflows from Bank America their 401k and pension plan. It’s something that again, you never want to lose but we know when we separated from Bank America they weren’t going to give Columbia all their assets anymore and that’s part of what we have here. Second with that, we have approximately $3 billion left in insurance portfolio. Merrill Lynch sold that insurance business, we know those are closed books that would wind. We experienced some of that last year. That we figure will go by the end of the year, most of it.

Again, that’s a closed block not a lot of fees, but those are big lumpy things that when you look at flows you say, “Well, why are you in outflows?” We plan for it, we understand it. We knew that when we did this acquisition those things would occur, that’s not a big negative to us. You don’t feel good about losing them but at the end of the day look at what we created, look at the type of profitability we built, look at the asset base, look at the performance, the investment people we have.

The last one is a loss that we told you about last year, the 529 from New York. That has to convert as they pull that out so that will probably occur end of first quarter or second quarter. The only other thing I want to do and get on record is some of these, the 401k from Bank America, the 529 when that occurs, will flow out through [Sim’s] Data so if you’re looking at that at one period and saying, “Well, what happened?” Those are two items that will flow out, the 401k for Bank America probably the end of this quarter, the 529 I can’t give you an accurate date yet but it could be first but maybe second. The other $3 billion that I mentioned here is really an institutional outflow.

With that in mind, what’s happening on the positive side? We’re gaining traction in third party channels. As we look at market metrics, etc., we’ve gained share in all the key channels that we’re trying to do business with. Those flows are improving in all focused funds including equity. Where many people are in outflows, we’re actually gaining traction in some key categories.

We’re building now momentum back in taxable and tax exempt. One of our big portfolios in tax exempt of course was with US Trust. You know what happened the beginning of last year, everyone sort of move to the sidelines there. That money is starting to flow back in. Taxable performance is quite strong again and we’re starting to market those funds more visible as part of our lineup rather than just equity.

Our institutional pipelines are growing. We today, have 30% or 40% more in the institutional pipeline than we had a year ago. We’re actually ahead of target in the percentages we’re winning. We feel good about there. There’s going to be good mandates being funded in the first quarter. Threadneedle, has come through that European, I don’t know what to call it at this point, storm I’ll make it nice and simple and even though people have held mandates, etc. they’re winning strong mandates now again and they have good flows coming back in including in January.

So overall, if I look through the ex parent stuff that I’ve mentioned on this side, I actually see us gaining a lot of traction. Now, I can’t dictate one of our big portfolios where we have great performance is in equities, if equities doesn’t come back that’s going to be a little more difficult. We’ll gain share we think, we’ll continue to improve our flows, but it’s not going to come bursting back. Now, if that starts to shift a little based on markets we’ll pick up even more but I do believe you’re going to see signs of continued improvement in both the retail and institutional ex the parent stuff I just mentioned.

The other thing people question is, “What happened to your performance at the end of the year?” Well, very clearly there was slight movements in basis points that moved some of those funds below the medium particularly because of third quarter performance. Fourth quarter was excellent performance, January is showing even stronger performance.

As we look at performance [inaudible] those things have moved back nicely and so it was a slight blip. We didn’t have all the information when we went through the earnings. I gave you a little direction on it. We now have all the information and that looks like it’s recovering really nicely but having said that, we’ll still carry that third quarter but as these quarters start to roll off and move on we think you’ll see a continued improvement.

What’s happening with the asset management business margins? Another thing we told you to focus on for us. Well, it’s actually continued to improve in a very tough environment. We continue to realize the benefits of acquisitions. We’ll get a bit more of that this year. If the markets stabilize, see one of the things people don’t realize is what happens to your revenue. Well, if the revenues goes down because markets compress in one quarter you don’t get that back immediately until the market starts to roll it back over.

That impacts. It impacts flows including, if people aren’t putting a lot more money into equity flows that you had originally counted or tracked to, that’s the other issue that slows your margins a bit from what we were expecting. Last year we did not get hedge fund performance fees which we think will normalize. We had an excellent month of January. We think again, you can’t dictate it’s over 12 months, we book it early in the fourth quarter but having said that, that’s one of the things that impacted our margins on a year-over-year basis.

We also are balancing growth investments here at the same time managing expenses. So we’re creating our Columbia brand, we’re expanding our distribution on a global basis, we have some new product coming out, we’re going to launch our active ETFs. Having said that, we’ve got to manage some other expenses to keep those margins in case the markets are not our friend and we have headwinds. But, we’re focused on margin improvement.

What I mentioned to the street is we’re not going to get that target probably in 2012 that we set out three years ago based on the markets, and industry flows, and a whole bunch of things. Having said that, we think it will come it may be just a year later it may not, it depends on what happens with the markets this year and what shifts with equity. Having said that, we’re on track to improve those margins and we’re generating quite strong PTI so again, a major change from where we were a few years ago.

We’re going to continue to be focused on consistent competitive performance, focused on generating in flows. We are looking to realize and grow our global platform, particularly win mandates internationally and certain of the regions around the world as they grow, and continue to focus on expanding profitability.

One of the things that we’ve been successful in over the many years is how do we actually reengineer our expense base. Last year we invested a bit more because we saw that we were gaining good traction and we felt it was a good opportunity to actually take a bit more space. We also know that some of those investments do occur over elongated times like a brokerage platform. You can’t decide to put something in like that and it happens in 12 months. But, having said that, we have always been focused on cutting our costs, managing our expenses, reengineering both strategically, structurally, and from a cost perspective and this year we’re going to step that back up.

We used a lot of our resources last year to do the Columbia integration. This year we’re going to redevote them after the first quarter, in many cases back into reengineering the rest of our company. We’re going to look to accelerate those reengineering savings to over $150 million this year and again, based on the markets I might temper what goes back into investments.

From a capital perspective, and things that I know you’re very focused on and you should be, is what’s your capital position, what’s your flexibility there, are you generating more capital to use in the future? And as we look at it, since we shifted our business a lot, a significant amount of capital has been freed up including even after we spent $1.7 billion returning to shareholders last year, we have a stronger capital base at the end of 2011 than we had in 2010 based on the shifts that we’ve made and how we’ve actually managed that balance sheet.

In that regard, we increased our dividend twice last year, 56%. We’ll continue to focus on how we return to shareholders. We’re going to generate good strong earnings we think if things continue this way. In that regard, we’re going to continue to look at share repurchase, dividends, as well as, where appropriate, acquisitions that can fit in or that we can create shareholder value from both strategically as well as tactically.

With that in mind, I think we’ll continue to generate free capital that we’ll be able to do one of those three things or all three of those things and that’s what we’re going to continue to focus on. If we do it successfully, and the only thing I can say to you there is we’ve navigated, since becoming a public company, quite well through the financial crisis, quite well through the recent storms, and I showed you the results that we achieved. So if we can continue down that path we think we’ll be in a position of strength, we’ll be able to manage through the continuation of what we see in these market cycles, our earnings continuing to shift, and we think we can generate the high teens returns 15% to 18% starting this year.

With that in mind, we believe that we’ll be situated quite nicely. Many of our competitors are going to find that their returns are going to be very tough to come by as things go along based on capital requirements and the shifts in businesses, and the market, and low interest rate environment. We think for the combination of businesses, the size of our earnings stream, the diversity of that earnings stream, these will be excellent returns for you to compare against the industry peers.

Very importantly, if you compare each individual segment, you will find as strong, if not better, performance in many cases based on where people are and the PEs that are being attribute versus what we’re getting in these businesses. So here again, I think it’s a good investment for a combination of reasons, but most important, we think there’s a long term great opportunity and we’re situated well for it.

With that, I’ll take any questions.

Unidentified Host – Credit Suisse

We have some time for questions. I’ll just kick it off, the $150 million of reengineering savings, I think that’s the first time I’ve seen that. Can you talk a bit about how much of that do you think potentially falls to the bottom line just given the environment we’re in right now?

James M. Cracchiolo

I think it’s going to be a bit more. It doesn’t mean we’re stopping investments, we mean that we’re going to manage the investments that I’ve mentioned to you. They’re important for us to continue to do, but as we reengineer we can take more of those savings and move them to the bottom line. That won’t occur in the first quarter because it takes a bit of time to ramp of those things and get the savings, but as we track through the quarters we think that we’ll show that our expenses will be tightly managed this year including after those investments.

So what we’re not targeting is for expense growth to continue. We’re targeting that who knows what environment we’re on in revenue and we’ll manage the expenses tightly so that whatever that is can fall.

Unidentified Host – Credit Suisse

The other one I wanted to ask you about was M&A versus buyback and kind of that balance? I guess my perspective is, just from hearing you talk about Columbia and Threadneedle, it doesn’t sound like you think you have many product tolls on the asset management side. With that being the case, should we think about a potential asset management deal as being more of a financially oriented deal? And if that’s also true, then you would think evaluating how cheap your stock is versus M&A becomes critically important. But anyway, can you opine on that?

James M. Cracchiolo

That’s a pretty good analysis. Let me give you on the product line up, we have really good product in almost all the categories but even where we actually think we’re light we’re organically investing in some additional global products, expanding our emerging market debt platform and equity platform where we continue to see opportunities. Bringing together both Columbia and Threadneedle’s activities on a debt perspective so that we can actually come to market with even more appropriate product for certain of our international potential clients and clients that we have.

We’re doing some of that ground work but there’s always some opportunity, particularly in that or some alternatives, etc., as a compliment. But to your point, there’s nothing major that we’re missing that we need to go out and buy. So really what it will be is strategically is there something that further expands our ability in the marketplace from a combination of that plus distribution? In certain areas there may be and in certain areas there may not. Again, we’re an international player but we don’t have as much scale as some others and so there’s possibly those opportunities.

Having said that, there’s also the opportunity to look at financially beneficial transactions that aren’t necessarily strategic, but now that we’ve integrated Columbia and we have a good platform with Threadneedle we can put more assets on that platform, take out expenses and extract a good shareholder return as this environment continues to cause consolidation. Now, when we evaluate those things we do exactly what you said, we evaluate those things against buyback, we evaluate those things against other ways that we can return to shareholders at the same time building what we think will be a longer term profit stream.

As we go forward, I want to be very clear, we have done three acquisitions since we became public. All those acquisitions have worked out well for us. They’ve given us either compliment of capabilities or in some cases a greater actual flow in asset base that we can extract revenue and profit from. But as we continue to do that we’re going to be very mindful of what creates better return for our shareholders rather than just the idea that we have cash on hand let’s go spend it.

I know that’s easy for me to say right now, it’s hard for you to imagine but I’d just say look at our track record, look at what we’ve been able to do. I think people have questioned us when we were going to do an acquisition and when Columbia came about I think you realized the type of benefits we got from Columbia. So we’ll look at those things. This is what’s happening around the world, we’re able to play, we have the flexibility, we have good capital, we’re generating capital, but we’re going to continue to return to shareholders.

Unidentified Host – Credit Suisse

Just thinking about momentum in your business and you commented on the fund performance and how you’ve seen it turn around, and I’ll throw out some numbers to you since you’ve said you’ve seen more complete data. Just on some of the mutual fund numbers that I can see, it looks to us like you underperformed in 4Q by, on average for your US equity funds, by a couple hundred basis points and now just a month in to the year it’s been about the same reversal in the other direction. Is that just based on kind of the broader swap of funds you’re looking at? Does that sound directionally correct to you?

James M. Cracchiolo

Again, I can’t tell you what holds up, etc., but through January that investment performance if we roll that back on would actually give us stronger numbers than what we had previous to the fourth quarter rolling on.

Unidentified Host – Credit Suisse

Why don’t we end it there. We’re going to have a break out with Jim and Walter in Hong Kong Room A. Thanks a lot.

James M. Cracchiolo

Thank you.

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