Good morning, and welcome to the Victory Capital Third Quarter 2025 Earnings Conference Call. I will now turn the call over to Mr. Matthew Dennis, Chief of Staff and Director of Investor Relations. Please go ahead, Mr. Dennis.

Thank you. Before I turn the call over to David Brown, I would like to remind you that during today's conference call, we may make a number of forward-looking statements. Victory Capital's actual results may differ materially from these statements. Please refer to our SEC filings for a list of some of the risk factors that may cause actual results to differ materially from those expressed on today's call. Victory Capital assumes no duty and does not undertake any obligation to update any forward-looking statements. Our press release, which was issued after the market closed yesterday, discloses both GAAP and non-GAAP financial results. We believe the non-GAAP measures enhance the understanding of our business and our performance. Reconciliations between these non-GAAP measures and the most comparable GAAP measures are included in tables that can be found in our earnings press release and in the slides accompanying this call, both of which are available on the Investor Relations section of our website at ir.vcm.com. It is now my pleasure to turn the call over to David Brown, Chairman and CEO. David?

Thanks, Matt. Good morning, and welcome to Victory Capital's Third Quarter 2025 Earnings Call. I'm joined today by Michael Policarpo, our President, Chief Financial and Administrative Officer; as well as Matt Dennis, our Chief of Staff and Director of Investor Relations. I'll start today with an overview of the quarter, after which I will expand on our distribution opportunity outside of the U.S., update you on Victory shares, our fast-growing ETF business, then I will provide some perspective on the depth of the M&A opportunities that we have before us. After that, I will turn the call over to Mike to review the financial results in greater detail. The quarterly business overview begins on Slide 5. We had an excellent third quarter. We achieved record high gross flows, and our net flows continue to improve and finished just under flat for the quarter. We ended the quarter with total assets of $313 billion. Long-term gross flows rose 10% quarter-over-quarter to $17 billion, reflecting our expanded U.S. distribution team that is continuing to coalesce and gain traction. And we also had strong sales outside of the U.S. at an annualized rate of $68 billion or 23% of long-term AUM. We are in the best position we have ever been to execute on consistent long-term organic growth. Adjusted EBITDA set a new all-time quarterly high at $191 million, resulting in an adjusted EBITDA margin of 52.7%. Adjusted earnings per diluted share rose to a record $1.63, up 4% from the second quarter and 20% higher than the quarter immediately preceding the Amundi transaction. We've already exceeded our low double-digit accretion guidance for this transaction, achieving these results even before capturing the complete benefit of our targeted net expense synergies. During the third quarter, we repurchased 1.8 million shares. At quarter end, we still have $355 million of capacity on our existing repurchase authorization. We will remain opportunistic and flexible with future repurchases, factoring in the current facts and circumstances. Turning to our integration process of Pioneer Investments. We are slightly ahead of plan on the timing of achieving our net expense synergy goals. At the end of the third quarter, we achieved approximately $86 million of net expense synergies on a run rate basis. There is a clear line of sight for the remaining $24 million of net expense synergies to reach the previously disclosed total of $110 million. Our U.S. distribution teams have been integrated and cross-trained with the territories being reconfigured to optimize coverage. As with all our previous acquisitions, the investment team remained uninterrupted, and there has been little to no impact on the client experience during the integration process. Turning to Slide 6. As we look at the distribution opportunity outside of the U.S., we are very encouraged by our position as essentially Amundi's U.S. manufacturing arm for traditional active asset management products. We currently have $52 billion of AUM from clients outside the U.S. from 60 countries where net flows remain positive. The Pioneer Investments U.S. sales infrastructure that was present before we closed the transaction remains intact and is operating well and coordinating with Amundi's distribution teams in their local geographies throughout the world. We are investing in this area to increase capacity for more sales outside of the U.S., which will include legacy Victory products going forward. We currently manage 19 UCITS and are working on several new ones that we will be launching in the next quarter or so. These new UCITS will be a mix of Pioneer Investments and legacy Victory franchise strategies. Priorities for the launch of new products outside of the U.S. were established through a bottom-up approach with Amundi's distribution teams, advising on which products have the greatest demand. Another immediate opportunity identified relates to the current demand from their clients in Asia for U.S. exchange-listed ETF products. The investment performance of our existing UCITS is excellent. The average performance ranking is in the top quartile for all periods and the year-to-date average ranking is in the 11th percentile per Morningstar rankings. What makes this partnership unique is its structural design compared to historical and typical industry cross-border distribution agreements. When Amundi contributed its U.S. business to Victory, it was their in-house U.S. investment manufacturing arm, which they sought to expand to better satisfy demand from their clients across the globe. Victory Capital now serves as Amundi's U.S. manufacturing platform, which includes the legacy Pioneer Investments product set, but also includes the legacy Victory product set. Most of the other cross-border distribution deals are not set up this way. Essentially, we took over an efficient and highly productive U.S. investment manufacturing arm that was deeply ingrained in the Amundi distribution system, and we are now adding legacy Victory products to it. Think of a freight train moving forward on the tracks, and we are just adding the Victory freight cars to an already fast-moving and fully operational train. This is why we are so excited about the opportunity over the long term. The economic alignment is there for the organizations as well, in addition to Amundi's 26.1% economic ownership. There is a sharing of the fees by both organizations at the point of sale. Amundi earns fees if they sell Victory products and Victory earns fees for being the investment manager. In a lot of cases, the Amundi point-of-sale fee exceeds the stand-alone fee if they were selling an Amundi manufactured product, given the active nature of our product set, and that is all before factoring in the 26.1% economic ownership. As far as the opportunity set goes, we are very excited about the entire Asia region where there is a high demand for U.S. dollar-denominated products. The Middle East is another market that has caught our attention. Amundi has a great distribution network in both regions. In Europe, Amundi enjoys a dominant position in many distribution channels and geographies that are very difficult to penetrate. I also want to make a point here with some of the recent news reported from Amundi around their UniCredit distribution relationship that this is not a material part of our business and we don't expect this to impact the momentum outside of the U.S. Through Amundi's international networks, joint ventures and third-party distributors, they have one of the industry's most effective and deep global distribution engines. The combination of our expanded U.S. product set, Amundi's existing infrastructure, aligned incentives at the point of sale and Amundi's global competitive positioning creates a transformational opportunity for Victory. We look forward to reporting on our progress in these markets as sales begin to ramp up in 2026. Slide 7 showcases VictoryShares, our rapidly expanding ETF platform. At the beginning of 2023, we saw a market opportunity and evaluated our ETF product mix and positioning. We began investing more in marketing and distribution resources, specifically dedicated to growing sales of our ETFs. Since then, we have launched several new active and rules-based ETFs and rationalized others to optimize our offerings. We also began hiring dedicated ETF sales professionals and entered into several strategic distribution partnerships. The result has been an acceleration of growth with year-to-date positive net flows of $5.4 billion, which represents a 53% organic growth rate through the first 9 months of this year. On an annualized basis, this is tracking at a greater than 70% organic rate of growth. We currently have a suite of 26 ETFs, spanning from active to rules-based with an average fee rate of 35 basis points. We entered this business 10 years ago when we acquired CEMP, which had less than $200 billion of ETF AUM. Since that time, we have grown this part of our business at a 29% compound annual growth rate with AUM currently approaching $18 billion. Moreover, our operating platform enhances the benefits of scale and reduces the cost of manufacturing ETFs, which results in margins that meet our firm requirements. Our expectation is that this strong sales momentum will continue to accelerate in the U.S. and that it will be compounded by the non-U.S. sales of our ETF products that I just covered. Turning to Slide 9. Our investment performance remains excellent. Nearly half of our mutual fund and ETF AUM ranks in the top quartile based on Morningstar's 3-year rankings. Nearly two-thirds of our mutual fund and ETF AUM, which is rated by Morningstar, earned a 4- or 5-star overall rating. This encompasses a diversified set of 56 different products. The majority of our AUM continues to outpace respective benchmarks over all measurement periods. On Slide 10, we highlight our capital allocation strategy. Our deployment of capital is primarily targeted at both organic and inorganic growth opportunities. As a growth company, reinvesting in the business and pursuing strategic acquisitions represents our most compelling use of shareholder capital. Given our growing earnings and cash flow, we can also return capital to shareholders. This flywheel effect has resulted in returns to shareholders of more than $1 billion since we went public, which is particularly noteworthy when you consider that the company received just $156 million in net proceeds from the initial public offering. This demonstrates our ability to create substantial shareholder value through disciplined capital allocation, coupled with consistently excellent execution. Our presentation deck includes a chart showing our industry-leading earnings growth on Slide 21 and which highlights our quarterly fully diluted EPS growing from $0.40 to $1.63 for a compound annual growth rate of 21% since our initial public offering in 2018. When we discussed our acquisition strategy, we are often asked about industry fragmentation and our ability to continue executing on our strategy, given we have grown so quickly as we are a much larger company now. On Slide 11, we highlight the opportunity set that we see before us. It is important to note that our core strategy has not changed since the management buyout in 2013. We built a unique platform that is ideally suited to thrive given the secular trends challenging the industry. It is also especially conducive to creating value and growing earnings from acquisitions. Considering that every deal starts with a strategic foundation to it, our company has become much better positioned over the years from a competitive perspective. Each of the acquisitions listed on the left-hand side of the slide was highly strategic. We diversified our investment and product capabilities, enhanced expanded and globalized our distribution capabilities, gained firm-wide size and scale and added leadership talent with each of these transactions. The financial benefits were a positive outcome, allowing us to generate growing cash flow, increase earnings and perpetuate our strategy for creating shareholder value. Our runway is very long. We intend to increase further in size and scale, not for growth's sake alone, but to enhance our competitive position in our distribution channels by investment and adding complementary investment capabilities to optimally position us at the point of sale with our diverse set of clients. As the industry remains very fragmented, the reason for joining forces with a larger partner has only intensified over the years, increasing complexity, regulatory burdens, technology requirements and access to distribution are all becoming more difficult for asset managers that are not mega-sized. Even with the large acquisition universe, we will always remain selective, disciplined and strategic. As you can see from the graphic on this slide, the opportunity set is vast. According to Simfund data, there are currently more than 450 asset managers in the U.S. with more than $10 billion of assets under management. Our focus area has increased in size that we have grown over the years, and we are focused on evaluating firms with between $50 billion and $200 billion of assets under management, where there are more than 110 prospective targets, managing $11.1 trillion. In the event we execute on a transaction on the smaller side, it would necessitate being something highly strategic in the areas of investment capabilities or distribution access. We are also routinely asked about our views on adding alternative investments to our product range. While we do not aspire to become a full-on alternatives manager, we do want to have a curated alternatives product set as we are projecting that some of our clients will increase allocations to alternative investments. Over the years, we have actively evaluated opportunities to acquire, partner or organically add alternatives. We have been disciplined and avoided rushing into this space. However, we do remain attracted to the principles associated with alternative investments around diversification for clients' portfolios. We've never tried to offer every product in every asset class and instead centered around where we have expertise. For alternatives, we will center around specific investment themes, such as income for example. Our strategy here is consistent with our broader approach of selective expansion, and we will continue to maintain focus on our core strengths as a firm. With that, I will turn the call over to Mike, who will go through the financial results in more detail. Mike?

Thanks, Dave, and good morning, everyone. The financial results review begins on Slide 13. Revenue increased 3% from the second quarter to $361.2 million. Average assets for the quarter rose 7% quarter-over-quarter, and our fee rate was 47.2 basis points. GAAP results include approximately $21 million of transaction-related compensation, restructuring and integration costs, which was down from $54 million in the prior quarter. As a result, GAAP operating income was $138 million, a 47% increase from the second quarter. On an adjusted basis, we delivered adjusted EBITDA of $190.5 million, which yields an adjusted EBITDA margin of 52.7%. Adjusted net income with a tax benefit grew to $141.3 million or $1.63 per diluted share, up 6% and 4%, respectively, from the prior quarter. Our weighted average shares rose in the period due to having a full quarter of the shares issued to Amundi from the acquisition outstanding. If you recall, we delivered the share consideration to Amundi in multiple tranches during the second quarter. Our capital allocation strategy remains active and disciplined. We opportunistically repurchased 1.8 million shares during the quarter as we took advantage of market conditions to return capital to shareholders. The Board also declared the regular quarterly cash dividend of $0.49 that will be payable on December 23 to shareholders of record on December 10. Combined with our regular quarterly dividend, we returned a total of $163 million to shareholders in the quarter, which was an all-time high. Our balance sheet remains strong with $116 million of cash and a net leverage ratio of 1.1x, providing us with financial flexibility to continue pursuing our inorganic growth objectives. On Slide 14, you can see the diversification in our $313.4 billion in total client assets. In addition to diversification in the U.S. across channels, client types and asset classes, our mix of business continues to benefit from meaningful diversification into non-U.S. geographies. As of quarter end, 17% of our AUM was from investors outside the United States. Our long-term asset flows continued to improve on all metrics, as you can see on Slide 15. We've now achieved our fourth consecutive quarter of improving net long-term flows with net outflows of $244 million. Annualized, this is just 33 basis points of our AUM. Gross sales of $17 billion represent a 10% increase from Q2, displaying the growing traction of our expanded distribution platform. Particularly encouraging is the breadth of positive contributors during the quarter. Multiple investment franchises generated positive net long-term flows, including Victory Income Investors, Pioneer Investments, RS Global, Trivalent and our VictoryShares ETF platform. This diversification across franchises demonstrates the strength of our platform and successful distribution across all channels. Our revenue performance on Slide 16 reflects the enhanced scale of our platform and higher average AUM in the quarter. We expect the fee rate to remain in the 46 to 47 basis point range moving forward, reflecting the current mix of our business. On Slide 17, you can see our expense details for the quarter. Overall, expenses declined from the second quarter. Recall that we incurred several one-time expenses associated with the Amundi transaction in the previous quarter. Compensation expense on a cash basis was 22.8% of revenue. To date, we have achieved $86 million of net expense synergies on a run rate basis and should have $100 million of net expenses removed by the end of the first quarter of 2026, the first full year of ownership. After which, the final $10 million in net expense reduction will be realized over the course of the next 12 months. Turning to Slide 18, we cover our non-GAAP metrics. Our adjusted metrics highlight the underlying strength of our business platform. Adjusted net income with tax benefit increased 6% quarter-over-quarter to a record $141.3 million. Earnings per share grew 4% to $1.63, also a new record high. It is worth highlighting the power of our unique and successful inorganic growth strategy to deliver significant earnings growth. Adjusted EBITDA has grown 57% when comparing Q3 2025 to Q3 2024. Similarly, adjusted net income with tax benefit grew 59% over the same period. These metrics demonstrate our ability to generate strong cash flow and maintain strong, consistent margins even while we are integrating a new business. Wrapping up on Slide 19, the balance sheet continues to strengthen and provides us with enhanced financial flexibility. We successfully refinanced our term loans during the quarter. We combined them into a single loan, lowered our interest rate by 35 basis points and extended the maturity out 7 years to 2032. Our net leverage ratio is at our lowest level since our initial public offering. This deleveraging, combined with our strong cash generation, positions us with significant financial flexibility to execute on inorganic growth opportunities. Our capital allocation strategy remained active during the quarter. We opportunistically repurchased 1.8 million shares as we see tremendous value in our stock at current prices. Combined with our regular quarterly dividend, we have now returned over $272 million to shareholders year-to-date. And during the quarter, we surpassed a total of $1 billion returned to shareholders since becoming a public company in 2018, which is a gratifying milestone. We ended September with $160 million in cash on the balance sheet and our $100 million revolver remains undrawn. When we refinanced our term loan, we also extended the maturity on our revolver by 5 years to 2030. Looking ahead, we expect to continue to return capital via buybacks and dividends while simultaneously pursuing growth initiatives and investing in the business. Our ability to generate robust cash flow puts us in the enviable position to effectively balance investments, pursue strategic and transformational inorganic opportunities and deliver ever-increasing shareholder returns without compromising our financial strength. With that, I will turn the call back to the operator for questions.

Your first question comes from the line of Craig Siegenthaler with Bank of America.

Congrats on the 21% annual EPS growth since the IPO.

Thank you.

So we wanted to start with an open-end question on M&A. And I heard some of your commentary on the different size ranges of targets and how the larger focus today is in the $50 billion to $200 billion AUM range. But can you refresh us on your views on pursuing more cheap consolidation transactions that are highly earnings accretive versus strategic and organic growth synergistic deals? It sounds like maybe you might be leaning towards larger deals today.

Well, let me start off and say that, as an organization, we aspire to be a $1 trillion firm. That is our internal goal from a size perspective. And we think eventually, you will need to be that size to effectively be able to compete over the long term. So our goal is to be a $1 trillion under management. We're $313 billion today at the end of the quarter. And to get there, we'll do a number of different things. The first will be everything we'll do will be strategic. So we are not interested in just doing financial transactions where you're buying businesses, consolidating and there's no strategic element to it. So everything starts for us, does it make our company better? Does it satisfy one of the strategic elements that we're trying to satisfy? And so a lot of that will come with the size and scale of transactions. So we will move up. If you think about that triangle, we'll be at the top of that triangle. And we could do something larger than the $200 billion focus area. Anything on the smaller side would be highly strategic. It could be a product perspective, it could be a distribution or something else. But for us, it starts off with strategy. And then what comes from it because of our platform are really the ability to create shareholder value through earnings growth, through margin expansion and through organic growth. And I think we can satisfy all of those things with our acquisition strategy. And lastly, I'd say is we really believe that the industry is going to go through an even more intense consolidation phase as we look forward. All of the reasons firms want to partner to get larger, to deal with issues such as technology, regulatory access for distribution, those things are intensifying. So we're going to go through a phase where there's going to be lots of consolidation. And we think we have an unbelievable platform to be a really good partner to those firms. And I think we have a great track record and history of executing on them.

Our follow-up question is on the Pioneer acquisition. You're running ahead of even the more recently revised synergy target. So we're curious, what is driving that? Is it conservatism? Is it use of AI and other technologies that have improved operating efficiencies? Did you find more redundancies in certain functions? And I heard your commentary that it's not from the investment team. So just curious on that.

Craig, it's Mike. Yes, I think as we approach every acquisition and evaluate the opportunity to consolidate operations and administrative functions onto our platform, as you said, it does not impact the investment teams. And so that's our #1 goal. It doesn't impact the investment teams, their process, leave them alone, let them have all the tools that they need to manage money and continue down the path that they're on from a strong investment performance perspective, and we've accomplished that with the Pioneer Investment integration. Of course, as we look at planning, we go through the exercise and spend time, figuring out where the opportunities lie. We probably tend to be conservative as we go through that because there's always unknowns as you're going through an integration. But as we've gone through the Pioneer integration, I think we found opportunities around technology, we found opportunities in kind of investment operational areas to provide technology to alleviate some additional costs that we anticipated. So I think it's really just the opportunity set to go through an integration. We've got highly skilled people that have done this for a number of years, and we're able to find opportunities as we go through the process. So I think, again, conservatism and then execution has allowed us to kind of achieve quicker and then higher than we had originally anticipated from a net expense synergy. But we are making investments. I just want to reiterate that these expense synergies are net of investments that we're making in areas of the business. Dave's comments on the non-U.S. distribution in the prepared remarks, I think, is an area we're making investments because we see a tremendous opportunity there, product development, data, technology, distribution partnerships. So as we think about all of that bundled together, I think we've just been in a position where we've been able to accelerate some of the recognition and be a little bit higher than we anticipated as well.

Yes. And I'd like to add to that. I think the other perspective is we are in the investment management business, but we're also in the acquisition business. And I think unlike many other investment managers, who are in the investment management business that have decided to do acquisitions because they need to grow, we are in the investment management business. But we've also developed a skill over a long period of time on doing acquisitions. And so part of the success we've had in synergies, the ability to invest while we do acquisitions on our platform and the ability to exceed some of the goals we put out there maybe from a numbers perspective and from a timing perspective, really comes down to is we have a second part of our business, which is doing acquisitions.

Your next question comes from the line of Michael Cho with JPMorgan.

I just want to start on the non-U.S. business. You walked through some commentary there. You said positive net sales in the third quarter since the close. Wondering if you could give some color on the magnitude of the flows and maybe the strategy that help drive those inflows. And Dave, you talked through about sales ramp in this segment into '26. And so maybe some more color on your expectations on the magnitude of uplift for Victory in this segment.

Thank you for the question. A significant portion of our sales has come through the Pioneer franchise due to the established infrastructure. The Pioneer franchise is well-integrated within the Amundi distribution network. Since we completed the acquisition, most of our sales have been from the Pioneer side. However, we anticipate this will change in 2026, although we will continue to see strong sales from Pioneer. We highlighted in our prepared remarks the positive investment performance within the UCITS platform. In 2026, as we introduce the legacy Victory products onto the platform through UCITS and U.S.-listed ETFs, we expect to begin seeing inflows into those products. We have also enhanced our infrastructure for selling RFPs and marketing for the non-U.S. segment. While we do not disclose the exact size of the flows, we believe this presents a transformative opportunity, indicating that from 2026 onward, it will become a significant and meaningful contributor to our growth. There is potential for legacy Victory in this area. Before the acquisition close, we had some distribution outside the U.S., but not to the same extent or depth that we now have with Amundi.

Great. Can you provide an update on the acquisition opportunities you mentioned? Based on your slide and comments, it seems like there are many options available, which hasn't changed over the years, and this market segment remains appealing. However, with the $100 billion integration with Pioneer currently in progress, I'm curious if there are specific segments you're prioritizing in the near term based on that triangle chart. Additionally, you mentioned income, and I wonder if you have any specific classes or themes in mind that might align well with Victory's existing platform.

On the first part, as far as in the middle of the integration, we're well through the integration and you can kind of see that the way the numbers, the net expense synergies have progressed and what our projection is. And so we're really doing well with the integration. And we're getting close to being at a point where we'll be wrapped up. And so we are fully kind of open for business from an acquisition side. I would not rule out a mega size deal. We have the $50 billion to $200 billion as the focused area, but that doesn't preclude us from going above $200 billion, and that doesn't preclude us from going below $50 billion either. And I'd say as far as areas of focus, as I said, we really do start off with the strategic side. We're interested in high-performing products. We're interested in products that have demand today and that we think we'll have demand in the future. We know we have to offer a larger set of products for our distribution partners. And so we'll be focused on all of those things. From an alternative perspective or private markets perspective, the themes that we're interested in income is an example, but not the only one. There are other areas that we think fit nicely with us. And they really do span across different asset classes. And I'd say, I don't want to focus on one of them. But income is an important one. I think income is something that has lasted over time. We have income products today. They're selling well. We know how to sell them. There's lots of demand for them. And so income is one of the themes. But for us, around the private markets and alternatives, we don't want to be all things to all people. We want to do certain things really well, and we want to matter for those certain things, and that's how we'll approach the private market/alternative side.

Next question comes from the line of Alex Blostein with Goldman Sachs.

Dave, building on that last point, I'm interested in how you envision partnerships in the alternative space. We've seen different partnership structures, so I'd like to know what you are considering. Are you looking at explicit mergers and acquisitions or possibly having some of the established managers take an equity stake in your company? Additionally, could there be investment outsourcing agreements on the horizon in the coming quarters? How do you anticipate this volume evolving? It’s clearly a significant segment of the market and an essential tool for wealth advisers that you have yet to fully engage with.

Alex, thanks for the question. I would start off saying that we probably are not interested in investment outsourcing. I think that's challenging. I think all of the other scenarios you laid out around ownership, investment, acquisition are within our universe. And I think we're exploring all of them. In our prepared remarks, we have talked about how we have not done a transaction. But over the years, we have been very involved in discussions, analyzing and so we feel really good about our understanding of the space. We feel really good about what we think our clients are desiring and what they will desire down the road. When alts and private markets opens up, especially on the RIA side, on the intermediary side on the retirement side, I think we have a really good understanding. And I'd say from different versions of M&A is how we will approach it.

All right. And just to clean up modeling. Fee rate, so I remember there was a bit of an outsized. I think performance fee benefit last quarter. So you kind of saw that step down a bit this quarter. How are you thinking about sort of the go forward on the fee rate relative to the kind of mid- to high 40s where you guys have been? And ultimately, given the mix shift in the business, anything notable you would think about over the next sort of 12 months as the fee rate evolves?

Yes. Thanks, Alex. It's Mike. Yes, I think we have kind of said our fee rate should be in the 46 to 47 basis point range long term. We don't anticipate any significant fee pressures. Clearly, the mix of business will impact that. But as we look out for the next 12 months, we feel pretty confident of the 46 to 47 basis points from an ongoing perspective from a fee rate.

Your next question comes from the line of Ben Budish with Barclays.

Maybe just following up on that last question from Alex. I think he mentioned the performance fees, which we saw in your Q were quite outsized in Q2. I'm just curious, when we look at the maybe quarterly run rate over the last few years, it's kind of been like the low single-digit amount. Is there anything different about the Pioneer assets that you acquired where performance fees might be higher on a run rate basis or should be structurally higher? Anything like that to call out? And I guess what a lot of investors are trying to figure out.

Yes. The fee rates of 46 to 47 include our consideration of any annualized or performance-related fees. The Pioneer funds have a few mutual funds with fulcrum fees, similar to those in the legacy USA mutual fund business we acquired. Some of these fulcrum fees are categorized as performance fees, but there's nothing particularly unique about them. As you've noted, these fees have generally been in the 1 to 2 basis point range on an annualized basis and are expected to remain at that level moving forward. They may fluctuate based on our business mix. If we identify opportunities to share risks in pricing with institutional clients, there may be a part of those fees tied to performance. However, overall, this represents a minor portion of our business. As we evaluate our fee rates, we maintain a strong focus on margins. Given that over two-thirds of our expense base is variable, we expect to sustain our margins concerning all our fee rates. Dave pointed out in his prepared remarks that our ETF business averages 35 basis points, slightly below our overall fee rate, but that business maintains strong margins and contributes positively to our total margin. Therefore, we see performance fees as relatively insignificant in the grand scheme, and our primary focus remains on the bottom line and margin aspects.

Okay. Understood. Maybe just another follow-up too on the M&A and alts discussion. When we listen to a lot of the large cap alt managers, we kind of hear this theme of GP consolidation of more LPs wanting to do more with less. In the credit space, we kind of hear that you need to have really massive sourcing capabilities in order to be effective. Just curious your response to that early. How do you think about what makes sense given the magnitude of what you might be able to acquire in that space?

Yes. We have always concentrated on areas where we can excel and compete. Many large cap alternative managers are targeting vast markets, and we are not aiming to compete directly with them in those segments. There is a new area in the market they are attempting to enter, which traditional managers are currently addressing, including the intermediary market, the retirement market, and various parts of the RIA market. To succeed in these areas, we'll implement different sales strategies from those we have used traditionally, applying them in the private market as well. If we consider acquisitions in the alternative space, we will apply the same principles we use for traditional acquisitions. We are very mindful of value, focus on shareholder interests, and prioritize acquiring exceptional products that we believe we can assist in growing. We will maintain this approach going forward. I believe we have a strong track record and are a valuable partner for both private market and traditional market investors.

Your next question comes from the line of Michael Cyprus with Morgan Stanley.

Maybe just continuing along the themes on the inorganic topic. I was hoping maybe you could elaborate a bit on the inorganic pipeline, how that composition looks today? How would you just sort of characterize that size, quantity types of properties? How that's evolving now versus 3 or even 6 months ago? And anything you would mention in terms of how close you might be on any of those?

Our pipeline is full, and we are actively engaged in discussions. I cannot provide specifics today regarding timing or the types of acquisitions we might pursue. However, we are having numerous discussions, and I believe the acquisition landscape has improved over the past few quarters. There are significant changes occurring in the industry at a fast pace due to technology, regulatory shifts, and increasing challenges in accessing distribution. We have been involved in many conversations and are very active. Additionally, we are well into the integration of Pioneer and Amundi, which positions us to effectively act when the right opportunity arises.

Great. And then just a follow-up on that. As you think about executing on this M&A pipeline over the next 12, 18 months, maybe you could elaborate on what sort of risks that you see that might result in not much getting done there over the next 12, 18 months? And when you're speaking with prospective targets, what is it that may hold them back from looking to transact?

I think the risks become very unique to the acquisition. So I don't think there's a general thing that I'm concerned about. I think the risks are very focused on the exact target, the type of transaction, and the structure of the transaction. Most of the risks could be mitigated restructuring and especially with the way we approach acquisitions where it's really around partnering and growing forward as opposed to succession-type planning acquisitions. But as we look at it today, we think the environment is really conducive. And like I said, we're coming to the end of our integration with the Pioneer-Amundi. So we're ready to go.

Your next question comes from the line of Kenneth Lee with RBC Capital Markets.

Just following up on the theme of inorganic opportunities, specifically on alternatives, how do you think about the challenge integrating potentially very different cultures or mindsets between traditional and alternative as you look at some of these opportunities, that's usually a point of potential friction there.

Yes. Thanks for the question. We think about it a lot, and we think about it very carefully. It's probably one of the driving factors why we have decided over the years to just sit back and watch and observe and learn. I think there are different strategies that you can employ to mitigate some of those challenges. You can do that through structuring, you can do that through the types of product sets you talk about. But private market and alternative businesses are different than traditional. And I think that's the challenge. And I think it's why we have sat back and kind of studied and learned and been very patient. And so anything that we do going forward in this space, we will address that issue. We recognize it, and we're glad that we have been able to observe what others have done in the space.

Got you. Very helpful there. And just one follow-up if I may, a little bit more housekeeping. Global non-U.S. equity net inflows pretty positive there. Anything to call out either outsized mandates or things of that nature?

Not specifically in the global asset class, we are seeing a lot of demand for that asset class inside the U.S. and outside the U.S. We have two excellent products with two different franchises there. So we have good performance, and we also have really, really good distribution around this asset class inside and outside the U.S. So it's just in demand by clients wanting to get access to a global portfolio.

And that is all for the Q&A session for today. This concludes today's conference call. You may now disconnect your lines. Have a pleasant day, everyone.