Earnings Call Transcript - VCTR Q3 2024

Operator, Operator

Good morning and welcome to the Victory Capital Third Quarter 2024 Earnings Conference Call. All callers are in a listen-only mode. Following the company's prepared remarks, there will be a question-and-answer session. I will now turn the call over to Mr. Matthew Dennis, Chief of Staff and Director of Investor Relations. Please go ahead, Mr. Dennis.

Matthew Dennis, Chief of Staff and Director of Investor Relations

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. Furthermore, please note that the ultimate completion of a transaction with Amundi remains subject to certain closing conditions, as well as regulatory approvals. 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 that was issued after the market closed yesterday disclosed both GAAP and non-GAAP financial results. We believe the non-GAAP measures enhance the understanding of our business and our performance. Reconciliation 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's now my pleasure to turn the call over to David Brown, Chairman and CEO. David?

David Brown, Chairman and CEO

Thanks, Matt. Good morning and welcome to Victory Capital's third quarter 2024 earnings call. I am 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 will start today by providing an overview of the quarter. After that, I will turn the call over to Mike to review the financial results in greater detail. Following our prepared remarks, Mike, Matt, and I will be available to take your questions. Quarterly business overview begins on slide 5. Continuing with the momentum we had in the first half of the year, our business performed very well during the third quarter. We ended the quarter with total client assets of more than $181 billion, which is the second highest quarter-end level in our history. This helped propel revenue and earnings in the period, resulting in new quarterly records for earnings per share, adjusted EBITDA, and margin, which expanded to 53.7% in the quarter. In addition to strong business performance, we made excellent progress toward closing the strategic and multifaceted transaction with Amundi. We signed the definitive agreement in July and immediately began working toward closing, which is anticipated to occur in the first quarter of 2025. We filed a proxy in early September for a special meeting of stockholders where shareholders were asked to approve several proposals related to the transaction. All the proposals were supported by a majority of our shareholders and passed. We greatly appreciate the support as we continue to execute on our growth strategy for the long term. The Amundi US Business, which will become our 12th investment franchise upon close, is having a very strong year as well. Based on publicly available data, their mutual fund business has achieved approximately $2 billion of positive net long-term flows in 2024 as of the end of the third quarter. Keep in mind, this does not include their US institutional business, nor does it include their international institutional and retail businesses. Another point of distinction for them is their investment performance, which remains very strong year-to-date. The growth in AUM is tracking ahead of what we originally projected due to both better-than-expected organic growth and market action. On Slide 6, I would like to take a step back to highlight some key milestones and strategic transactions in our history since our management buyout in July of 2013. Victory Capital has positively evolved from these transactions with enhanced scale and greater diversification of both investment capabilities and distribution channels. Every acquisition we made included several significant strategic elements with the goal of making our company better. When it comes to successful acquisitions in the investment management industry, we have a distinct corporate capability that we feel is advanced, and coupled with our proven track record to execute, sets us up well for the consolidation that we believe is just starting in the industry. For investment professionals who are passionate about what they do and want to own their outcome, our ownership culture provides a platform where they can succeed over the long term. Our platform is the ideal permanent home where we create an optimal environment for investment professionals to deliver investment excellence to our clients. While our company has evolved over the years, our core principles and the long-term strategy for profitable growth have remained unchanged. The necessity for industry consolidation is even more apparent now than when we originally developed our strategy and operating platform, combining boutique-style focused investment management with a centralized scaled and effective operating and distribution platform. Our 15-year exclusive distribution agreement with Amundi will make us an even more attractive acquirer of choice for high-quality investment firms seeking all that we have to offer plus strong distribution both domestically, as well as outside of the US. With nearly $300 billion of assets under management and a stronger balance sheet post-closing, we'll be exceptionally well-positioned to make additional strategic accretive acquisitions. As I mentioned during our last call in August, I firmly believe we are entering into a period of acceleration when it comes to industry consolidation. We purposefully and specifically designed and built our platform to thrive in this environment. Today, I am more optimistic about our prospects to continue to execute on our proven strategy and continue to move our organization forward in a very positive way. On Slide 7, you can see that we have achieved significant operating leverage due to our increasing scale over the years. This has compounded our earnings growth and free cash flow while also being a meaningful driver of value creation for shareholders. Since we became a public company in 2018, we've grown annualized adjusted EBITDA by $320 million and expanded our adjusted EBITDA margin by more than 1,500 basis points. You can also see from this graphic that our platform is resilient with margins remaining consistently strong in different market environments. A good example of this was during the COVID pandemic, the market struggled and it turned out to be one of the more volatile market periods historically speaking. Even with that as a backdrop, we did not experience margin degradation like many in the industry did. Turning to Slide 8. An important metric to many current and prospective shareholders is adjusted earnings per share. You can see that we have more than tripled our adjusted earnings per share with tax benefit over the past six years. This is more than a 20% compound annual growth rate over that period. The growth has been a significant driver of total shareholder returns. This plus our free cash flow provides the capital to fuel our growth strategy while also increasing capital returns to shareholders. On Slide 9, we have updated our capital allocation details, which remain skewed towards strategic inorganic growth initiatives designed to grow earnings and cash flow and ultimately, shareholder value. We ended the quarter with $188 million of cash on the balance sheet which is up $69 million from the end of June. Due to our proxy process, we were again prohibited from repurchasing shares during the quarter. Now that the proxy process is over, we will evaluate our ability to resume open market share repurchase activity and perform the appropriate analysis around this activity. Moving to Slide 11. Our investment performance remains strong with 67% of our AUM in mutual funds and ETFs, earning overall 4 or 5-star ratings. This is broadly diversified, encompassing 43 different products. Over the key three and five-year periods, 60% and 73% of our total AUM outperformed their respective benchmarks. 14 of the 16 fixed income funds managed by Victory Income Investors Investment Franchise are rated either 4 or 5 stars overall by Morningstar, which represents 93% of their total AUM. We are very pleased to see this franchise have positive net flows for the year-to-date period and expect continued organic growth given the outlook for interest rates and investors allocating the fixed income asset classes. With that, I will turn the call over to Mike to go through the quarter's financial results in greater detail. Mike?

Michael Policarpo, President and CFO

Thanks, Dave, and good morning everyone. The financial results review begins on Slide 13. Average assets under management for the quarter rose 3% from the second quarter to $172 billion. Revenue also rose 3% to $225.6 million, up from $219.6 million in the second quarter. Revenue realization was 52.1 basis points in the quarter. For the year-to-date period, average assets under management were up 10% compared with the same period in 2023. Third quarter GAAP operating income rose 9% from the second quarter and reached a record $120.4 million. This is up more than 50% from the same quarter in 2023, and GAAP operating margin widened to 53.3%. Earnings per share reached a record high on both a GAAP basis at $1.24 per diluted share, as well as on an adjusted basis at $1.35 per diluted share. Adjusted EBITDA was $121.3 million in the third quarter, which was 4% higher than in the second quarter, and adjusted EBITDA margin widened to 53.7%. Turning to the balance sheet. We accumulated $69 million in cash during the quarter, bringing the cash balance to $188 million at the end of the quarter. As mentioned, we are prohibited from repurchasing shares during the quarter, which contributed to the cash buildup. Our net leverage ratio improved to 1.7 times, and we returned $32 million to shareholders in the form of quarterly cash dividends and a small amount of share repurchase activity associated with net settlements of employee equity awards. Our Board authorized a 7% dividend increase, bringing the quarterly dividend to $0.44 per share for the final quarter of this year. The dividend will be paid on December 23 to shareholders of record at the close of business on December 9. Turning to Slide 14. You can see that total client assets rose more than 4% or by $7.3 billion from $173.8 billion at the end of June to $181.1 billion at the end of September. Our AUM continues to be diversified from both a channel perspective as well as by client in the various channels and by asset class and investment vehicle. On Slide 15, we cover long-term asset flows. Several of our investment franchises and our ETF platform, VictoryShares, continue to generate positive long-term net flows in the quarter. Victory Income Investors posted its third consecutive quarter of positive net flows and has made a significant contribution to net flows for the year-to-date period. We are encouraged by the outlook for this franchise given very strong investment performance and the current selling environment for fixed income products. For the year-to-date period, RS Global, Sophus, Integrity, VictoryShares, and NEC have also achieved positive net long-term flows. Net flows in July and August were pressured by portfolio rebalancing activity, some with existing clients who remain clients post the rebalancing activity. We saw an improvement in net flows for the month of September. Lastly, our one but not yet funded pipeline is larger than it has been in over three years and is well diversified from a franchise and channel perspective. We expect most of these mandates to be funded in the fourth quarter of this year with some funding in the first part of next year. Slide 16 shows a steady increase in sequential revenue for the past several quarters. Our average fee rate was 52.1 basis points in the third quarter, which is down 0.5 basis point from the second quarter due to product, asset class and channel mix shift, but within our expected range. As a reminder, we are focused on the profit margin of our products first rather than the fee rate, given our unique operating platform. Slide 17 highlights expenses recorded during the quarter. Total expenses declined by 5% to $118.1 million compared with $123.8 million in the second quarter. A portion of the decline is attributable to the reversal of non-cash earnout related compensation accruals taken in prior periods that led to reported compensation expenses declining by 22%. You can see from the graph on this slide that our cash compensation was relatively steady as a percentage of revenue. On Slide 18, we highlight our non-GAAP metrics. Our reported $1.35 adjusted net income with tax benefit per diluted share is the highest level in our history and is up 3% from the prior record of $1.31 per diluted share reported for the second quarter. Adjusted EBITDA and adjusted EBITDA margin were also company records at $121.3 million and 53.7%, respectively. Despite exceeding the 49% margin goal we have guided to, we are not changing our long-term guidance. Finally, turning to Slide 19, we generated $99.8 million in cash from operations during the quarter, and for the third consecutive quarter, our leverage ratio improved to 1.7 times, down from 1.9 times at the end of June. This is down from 2.1 times at the beginning of the year. Our $100 million credit facility was extended in the first half of this year and remains undrawn. I want to reiterate our $100 million of expense synergies we expect to realize from the Amundi transaction. The synergies will be fully realized within two years of close, with the majority of them being realized in the first year. Lastly, when it comes to revenue synergies from the exclusive distribution agreement with Amundi, we will give guidance in the future as we move towards closing. That concludes our prepared remarks. I will now turn it back over to the operator for questions.

Operator, Operator

And your first question comes from Ben Budish with Barclays. Please go ahead.

Ben Budish, Analyst

Hi, guys. Good morning and thanks for taking my question. Maybe just starting on fixed income flows. You highlighted Victory Income Investors has been positive every quarter this year so far. So can you maybe talk about what's perhaps not going as well that's driving sort of the net outflows in that franchise? And how do you think that may fare going into next year?

David Brown, Chairman and CEO

Hi. It's Dave. Thanks for the question. We're really happy with the fixed income flows and what we're seeing. We've had a few one-off things occur that have impacted the flows. But when we look forward and we look at the macro environment for fixed income, we look at the investment performance of Victory Income Investors, which is our fixed income franchise. And I think we referenced it in the prepared remarks, excellent investment performance, really good distribution access and really consistent. In addition, we also have mutual fund offerings, institutional separate accounts and then also ETFs. So we are pretty bullish on the franchise. We're pretty bullish on the opportunity for us to participate in what's happening in fixed income. So really no concern and a pretty positive outlook when we look forward.

Ben Budish, Analyst

Got it. I have a higher-level strategic question. David, in your prepared remarks, you mentioned that the industry is still in the early stages of consolidation. Could you elaborate on that a bit? It seems there has been some consolidation over the past several years. How do you see the industry evolving over the next five years? Also, regarding Victory, since you’re not using cash or debt for the Amundi acquisition, how do you assess your readiness for another acquisition in 2025 from an operational standpoint? Thank you.

David Brown, Chairman and CEO

So from an environmental perspective for the industry, I'm extremely constructive. We've had an election, which I think will give people certainty on the future. I think also the challenges in the industry which is driving the need for consolidation are only accelerating. And I think a rate environment where people have some more transparency and potentially lower rates. You put all of that together, I really believe that we are entering into a phase that is going to have more consolidation than the industry has ever seen. I've been pretty consistent on that. There have been some transactions, but I think there are going to be a lot more as we look forward. As far as specific to Victory, I think we are superiorly positioned to take advantage of the consolidation. We have a really, really good track record of executing on these kinds of acquisitions that I think will be very common going forward. We have a great offering as we laid out in our prepared remarks for investment professionals, and we have great distribution access, and we'll have scale. And we're ready. From a balance sheet perspective, post-close, we're going to be in a much better position than we are today, and we're in a really good position today. And then operationally, we'll be ready as well. We have a really unique platform that is really conducive to acquisitions and onboarding acquisitions. And Amundi is just the latest one. We have a long track record of doing this, and we have a great team. So I couldn't be more encouraged about the future from an acquisition standpoint. And we've been able to really create shareholder value. We've been able to create value for our clients and additional offerings. We've been able to create operating leverage. So I and our team are just unbelievably excited about the opportunity and how we're positioned looking forward.

Ben Budish, Analyst

All right, I appreciate the thoughts and thanks for taking my questions.

Operator, Operator

Your next question comes from Etienne Ricard of BMO Capital Markets. Please go ahead.

Etienne Ricard, Analyst

Thank you and good morning. On the topic of the distribution partnership, Dave you've raised in the past that Amundi has a significant presence in emerging economies via some of its joint ventures. So how are you and Amundi thinking about distributing Victory's products in these economies relative to Amundi's presence in developed markets?

David Brown, Chairman and CEO

So the distribution agreement doesn't distinguish between different geographies. As you've stated, Amundi has a pretty large distribution offering in Europe. I believe close to 75% of their assets are in Europe and the other 20% is in Asia and surrounding areas. We will plan to go at all of the countries and areas really the same way. We are working with their teams today on structuring, on what products make sense for which regions. And then from there, we'll just work with them to get our products into the different structures, if it's a JV or if it's not a JV. So there is really no distinguishing actions that we are taking to do something different in one region versus another. I think what's most important is they have really, really good distribution access and their infrastructure is set up in all of these areas and especially in these emerging areas. I believe the emerging areas are going to take some time as those countries allow US investment into the country. So I think it's going to take a little bit of time. But long-term, I think we're going to do really well in Europe and then in the other emerging areas that they have joint ventures in China and in India.

Etienne Ricard, Analyst

Okay. Interesting. Switching topics, VictoryShares, a couple of your free cash flow ETFs have had really strong inflows. What has worked well in terms of distribution for these products? And how do you plan to replicate it with future product launches?

David Brown, Chairman and CEO

We are in the early stages with our VFLO and SFLO ETFs. These newer ETFs have started to gain traction due to our distribution approach and their investment performance. Our unique advantage is our intermediary sales force, which includes all our salespeople selling ETFs. They work closely with financial advisors and RIAs to understand their challenges and provide solutions, which include these products. This strategy helps us reach advisors quickly, as evidenced by the positive results of these ETFs. We plan to launch more ETFs and have already introduced several that are just beginning to take off. This area of our business is exciting and growing rapidly. Looking ahead, I believe it will become an even larger component of our operations, especially since we have been involved in the ETF market for over eight years now, dating back to our acquisition in 2015.

Etienne Ricard, Analyst

Thank you very much.

Operator, Operator

Your next question comes from Alex Blostein with Goldman Sachs. Please go ahead.

Alex Blostein, Analyst

Hi, good morning. Thanks for the question. I was hoping you guys could expand on the institutional pipeline commentary you made that it's, I think you said one of the strongest in several years. Maybe just a little color on the composition by the type of strategy, the type of channel and the fee rate associated would be helpful. And then I guess when you zoom out a little more broadly, do you think closing and getting these mandates in the door will be sort of enough to finally get Victory as a whole into positive organic growth in 2025?

David Brown, Chairman and CEO

The institutional pipeline spans multiple franchises, likely three or four, rather than just one. Although we have a sizable pipeline that isn't yet fully funded, it's quite broad and deep. This pipeline involves various franchises and not a single type of institutional client, with larger mandates and fee rates that align with our usual institutional charges. While we are mindful of the fee rates, our primary focus is on maintaining margins, and we ensure that the opportunities we pursue adhere to our margin requirements without compromising them. Looking ahead, predicting quarterly flows is challenging, but with current activities, the Amundi distribution agreement outside the US, and the expansion of our intermediary and institutional sales forces, we are in an excellent position for organic growth. This is the best position we've ever held as an organization, with more salespeople and distribution access than ever before. Additionally, we are opening a new channel internationally that will significantly enhance our reach post-deal. The Amundi transaction will greatly strengthen our intermediary sales force in the US and abroad, positioning us well for success. Though I hesitate to predict specific flows because of market uncertainties, we are in a strong place to thrive.

Alex Blostein, Analyst

Got it. Okay. Makes sense. And the second question, I was hoping you guys could just update on where Amundi's revenues and expenses stand currently. Obviously, the markets have been very constructive and their flows have been pretty good. So an update on what that looks like today would be helpful.

Michael Policarpo, President and CFO

Yes. Thanks, Alex. It's Mike. Yes, the total AUM for Amundi US is not publicly disclosed. But I think in Dave's comments, he shared that we believe we'll be approaching $300 billion in AUM, post-close. Obviously, the market and organic growth has provided tailwinds for the Amundi US business as well as Victory's business. And I think the guidance we've provided in the past is that the fee rates at the Amundi US business are probably in the high-40s. So slightly lower than the fee rates at Victory. And then we've also guided to the long-term 49% margins which we feel very confident with achieving post the extraction of the $100 million of expense synergies. So a lot of tailwind in both businesses. As Dave mentioned in his prepared remarks, the public data on the Amundi US mutual fund businesses organic growth for the year-to-date period, and they've had very strong performance as well.

Alex Blostein, Analyst

Yes. I got you. Great.

David Brown, Chairman and CEO

And I would add to that, just one other comment is, when we evaluated the business, when we were doing our diligence to where it is today, it has outperformed our expectations to the positive on a number of different areas from an organic growth perspective, from an investment performance perspective. So we're really, really happy and we are really impressed with the team, and we're really impressed with the results and excited to have them part of our organization.

Alex Blostein, Analyst

All right. Thank you both.

Operator, Operator

Your next question comes from Brennan Hawken with UBS. Please go ahead.

Brennan Hawken, Analyst

Following up on your last point, you mentioned Amundi exceeding your expectations. Can you provide an update on whether this implies that the accretion anticipated from the deal will be larger? Additionally, could you offer some insight into the scale we should expect?

Michael Policarpo, President and CFO

Thanks, Brennan. It's Mike. Yes, I think we'd still kind of stick with the guidance that we provided, which was low double-digit accretion post the first full-year of ownership. We've kind of confirmed the guidance with respect to the expense synergies. And then we've provided that we will provide some more clarity on revenue synergies as we get closer to the transaction. But we're really focused on kind of the execution phase, getting to closing. And as Dave mentioned, kind of making sure that the business is ready to operate day one, which we're fully confident that we'll be able to execute based on the playbook that we have. And as Dave mentioned, they have outperformed both in an investment performance flow and AUM perspective, which will provide some tailwinds. But I think at this point, with the close coming in Q1, I don't think we are ready to lock in anything different than the guidance we've provided in the past.

Brennan Hawken, Analyst

Okay. I'll just let my imagination run away with it. You also spoke to the opportunity to consolidate. I'm not asking you to tip your hand here, but like are there any particular parts of the market or from either a capability perspective or geographic or whatnot that you find interesting or you think are particularly compelling or maybe mispriced?

David Brown, Chairman and CEO

We don't approach acquisitions in that manner. We begin with several acquisitions aimed at enhancing our company. There are numerous ways to address that question through acquisitions. Amundi provided us with size and scale, additional investment capabilities, and distribution access, which will all improve our company. We intend to pursue future acquisitions in that spirit. We're not focused on a particular asset class or type of company; our priority is to enhance our company. We also want to ensure a cultural fit and prioritize investment excellence over the long term. That's our approach. I believe size and scale will be crucial in the future as the industry matures. Therefore, any actions we take will be viewed through the lens of wanting to grow larger and enhance our scale, which is vital for long-term competitiveness. Besides that, I don't see anything particularly unique or specific. There are certainly areas in the market that are growing at a faster pace, and we are aware of that. We want to be involved in those growth areas, but that won't be the sole driving factor behind our decisions.

Brennan Hawken, Analyst

Got it. Thanks for taking my questions.

Operator, Operator

Your next question comes from Michael Cyprys with Morgan Stanley. Please go ahead.

Michael Cyprys, Analyst

Great. Thanks so much for the question. Maybe just continuing on that M&A topic there. over the years, I guess, where is their scope to make Victory better today? Where do you want to have greater scale? What is the appetite to extend into some of those growthier areas like private markets? And maybe you could give us a sense of the types of deals that are coming across your desk that you guys are evaluating?

David Brown, Chairman and CEO

Thank you, Mike. As I mentioned earlier, we aim to grow larger. It's essential for firms to achieve size and scale. With the Amundi deal closing at $300 billion, we will be adequately sized and scaled today. However, in five years, that might not be sufficient for the competitiveness we aspire to. Size and scale are crucial, particularly in the U.S. intermediary distribution and in the variety of products we can offer that channel. Moreover, investments will be necessary in areas like marketing, training, collateral, data, technology, and having sales personnel. Therefore, being larger is vital for achieving these objectives. We also intend to expand our product offerings beyond what we have now to better engage with both potential and existing clients. We will delve deeper into traditional asset management and explore private markets in specific sectors, approaching this expansion creatively. We have been diligently strategizing how to proceed, having noted various outcomes from firms that have pursued acquisitions and partnerships. We have a clear strategy for this and aim to broaden our product range while strengthening our client relationships through acquisitions and new product launches. Lastly, we will continue to adhere to our operating and business model, which we believe is distinctive. We will not abandon our identity or what has led to our success, but we will achieve our goals while maintaining the same model and mindset that have worked for us previously.

Michael Cyprys, Analyst

Great. As a follow-up, can you share any lessons learned from previous transactions as you approach the Amundi deal? How do those insights shape your future actions, particularly regarding what to pursue or avoid that differs from others? Additionally, you mentioned private markets as a potential area of focus. What lessons have you gained from how others have handled acquisitions and partnerships in that space?

David Brown, Chairman and CEO

So, reflecting on our past acquisitions, we are cautious and methodical. We conduct thorough diligence and take our time when integrating new businesses into our platform. We maintain an open-minded approach, which is evident in our work and execution. Over the past 11 years as an independent company, we have refined these practices, and our experienced team, which has been in place for nearly a decade, plays a vital role in this process. We are applying everything we've learned to this current transaction and will continue to do so for future opportunities. Regarding private markets, we've watched various partnerships and acquisitions and appreciate the insights they've provided, despite each company's uniqueness. It's challenging to draw comparisons without all the specifics, but we are pleased with our position and the chance to improve our business in ways that can enhance acquisitions, partnerships, or product launches. Private market investing is significant for us and represents growth potential that many are discussing. Looking ahead, we will engage with this market in a manner that aligns with our traditional business practices, and our strategic ability to reflect and learn will serve us well in the future.

Michael Cyprys, Analyst

Great. Thanks so much.

Operator, Operator

Your next question comes from Kenneth Lee with RBC Capital Markets. Please go ahead.

Kenneth Lee, Analyst

Hi, good morning. Thanks for taking my question. Just one more on M&A. Broadly speaking, I wonder if you could just talk about how bid/ask spreads are looking like among your discussions? And also wondering relatedly, if you could just frame what the motivation is like from potential sellers in getting a transaction done. Thanks.

David Brown, Chairman and CEO

Yes, I believe the bid and ask are aligning. People are prepared to make transactions, and the market is robust. Looking forward, there is a clearer view on the next four years from a government administration standpoint. When considering the Federal Reserve and interest rates, there is a solid perspective available. I think this creates an environment where people feel encouraged to engage in transactions. As I mentioned earlier, I anticipate significant consolidation ahead. The motivations will stem from a favorable environment created by interest rates and policy, alongside various reasons why organizations, depending on their nature, might seek to transact. These factors are not diminishing; rather, they seem to be intensifying. All these elements combined suggest that we are entering a period of substantial consolidation, and I believe we are well positioned to take advantage of it. Moreover, I think that stakeholders have realistic expectations regarding pricing.

Kenneth Lee, Analyst

Great. Very helpful there. And just one follow-up, if I may. In terms of recent conversations you may have had with institutional investors, I wonder if you could just provide a little bit more color around sentiment activity and perhaps whether you expect the post-election uncertainty could help drive more allocations or net flows there. Thanks.

David Brown, Chairman and CEO

Yes, we haven't had too many conversations since the election was just a couple of days ago. However, I believe there will be a desire to make more allocations and take on more risk. Even if interest rates remain where they are currently, I think the environment will improve as people begin to understand the future better. Much of the uncertainty has been alleviated, which I believe will be beneficial for our business and the investment management industry as a whole.

Kenneth Lee, Analyst

Great very helpful. Thanks again.

Operator, Operator

Your last question comes from Ken Worthington with JPMorgan. Please go ahead.

Michael Cho, Analyst

Hi, good morning guys. Thanks for squeezing me. This is Michael Cho in for Ken. I just wanted to follow-up quickly on the distribution with Amundi here. I realize revenue synergies are coming. But I guess just from an operational perspective, can you just update us where your initial priorities will be focused with respect to Victory products as you get the sales effort off the ground for this partnership?

Michael Policarpo, President and CFO

Michael, it's Mike. Thanks for the question. I think as Dave said earlier, the infrastructure at Amundi with respect to this global distribution partnership is in place. The Amundi US product is being distributed throughout the Amundi global network. And so our efforts really have been around evaluating which Victory products should be a high priority or a focused product with respect to that global network, doing some work with respect to structuring. There are some commingled vehicles that will be part of the retail distribution. And then also starting to think about education on those products. So really, we're lining ourselves up to be focused from an execution perspective post-closing, not just with new Victory products, but the current existing Amundi US products that are in the network and then leveraging those relationships, leveraging those contacts to bring forth Victory products from a prioritization perspective. So it really has been around education structuring and product design.

Michael Cho, Analyst

Great. Thanks Mike. And then just a quick follow-up on flows. You gave some monthly commentary for the quarter. I think you said July and August were a little soft, maybe September was a little better. You sounded pretty constructive on 4Q. Any comments on October?

Michael Policarpo, President and CFO

Nothing at this point that we'd highlight for October. I'd say, it is probably been closer to what we saw in September than the early part of Q3. But we don't necessarily provide monthly flow information. But I think as Dave mentioned earlier, we've got a significant one not funded pipeline that we're excited about here in the fourth quarter. And then we've got some additional opportunities that are lined up for us as we get into the early part of next year.

Michael Cho, Analyst

Okay, thank you.

Operator, Operator

There are no more questions. I will now turn the conference back over to Dave Brown for closing remarks.

David Brown, Chairman and CEO

Thank you for your interest in Victory Capital. We will be attending the Goldman Sachs Global Financials Conference in New York City next month, and we hope to see all of you there. Have a wonderful day, and thank you.

Operator, Operator

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.