Conference Transcript - VCTR 2026-02-10

Michael Policarpo, Analyst — UBS

I'm the U.S. Asset Manager and Broker Analyst at UBS. I'm pleased to introduce David Brown, Chairman and CEO of Victory Capital. Victory had a very successful 2025 with record highs in gross sales, revenue, EPS, and AUM, which ended the year at $317 billion of AUM. So from one Brown to another, Dave, welcome. Thank you. We are not related. I've got to clarify this. Thank you for having me. Of course, of course. Thank you for being here. So, as I just mentioned, 2025 really marked a big step forward for victory with the successful Pioneer transaction. When you look out over the next 12 to 24 months, what's the two or three biggest drivers for victory and kind of what's the biggest risk to that plan?

David Craig Brown, Chairman

Well, so let me start off and say when we look out two years, I mean, first, we really do want to complete the Monday Pioneer acquisition integration. So we're well into that. I think we denounced that we had $97 million of our planned $110 million of net expense synergies completed. That's probably a good guide on how far we are through the completion of it, so around 90% complete. So we want to complete that, first of all. I think the second piece is we want to continue to build out our distribution platform. You know, from that perspective, we've integrated, we've trained, we've expanded our partnerships on the intermediary side. And so getting our distribution platform to the right level, and we're just about there, I think is another really big step for us. I'd include the international side on that. I mean, we're just in the beginning of really growing our international distribution channel. We've been NetFlow positive since we've bought the Pioneer business. But really, we have not sold the Legacy Victory products through that channel yet. We've just launched five USITs. Three of them are Legacy Victory. We're just getting ready. In 26, we just started selling our U.S.-listed ETFs through that channel. So there is a lot of excitement there. And I think getting that going is another important aspect to getting the distribution platform. I'd say the other big driver for us is going to be, you know, M&A. We're super active. You know, the environment today is definitely conducive to doing acquisitions. You know, for us specific to Victory, our leverage is at a level where we can do acquisitions. You know, it's part of our strategy. and I think that's going to be an important part of who we are over the next two years. We'd lean more towards a sizable and scaled platform to buy, something that was the same kind of concept as a pioneer acquisition.

Michael Policarpo, Analyst — UBS

If we could put a little more meat on the bone on that last comment, Dave. So I think you kind of talked about $50 to $200 billion in AUM. Is that kind of what you're thinking about here? Okay, and then how do you determine the right size for these deals? I mean, Pioneer seems like it's been a great success so far, but what are the qualities that you look for, and what were the qualities that made this Pioneer such a good transaction?

David Craig Brown, Chairman

So the sizing, I mean, we included, I think it's the second quarter in a row, we included a pyramid that showed actually the number of available managers within the different sizes, And we kind of boxed off the $50 to $200 billion size manager. It does not mean that we couldn't do something larger. And it doesn't mean we wouldn't do something smaller. But I think that $50 to $200 is an area where I'd say, you know, call it our sweet spot. You know, when we look at, you know, what are the characteristics of a good acquisition? I think Pioneer is a great one to kind of take a step back and tick through. So when we thought about Pioneer, we thought about can we make our platform better? Can we make our business better? And part of that was the global distribution agreement with Amundi. So we globalized our business. We really globalized with our client base, but also the opportunity to sell outside the U.S., which benefited all of our franchises. So when I think about doing an acquisition, I think about the strategic side of it is, can we make our company better? And then on the pioneer one, you have this ability to go sell your products outside the U.S. So I'd say, you know, strategically, can you make the platform better? And then the other side of it is, you know, for Pioneer, we expanded our product set. So from an investment capability perspective, we got a lot of new fixed income products. We got some active equity products, some different vehicles. And so when I think about we now have more products to go and square off with our clients and new clients, again, strategically, that's what we're looking for. And that's worked out really well. And then, obviously, there's a financial element to it. We announced $100 million of synergies. We increased it to $110 million. So there's a real accretive kind of concept to the acquisition. We guided towards low double-digit, and we're probably closer to around 20% already from an accretion standpoint. We're not even completed on all of the net expense synergies. And then, you know, for Pioneer, it's been Neflo positive. And so we've been Neflo positive, you know, since the acquisition every single quarter. So you think about organic growth, very creative, expand your distribution, expand your product set. That is, those are the things we're looking to do. You're not going to find that in every single acquisition, all of those elements. And then the other thing, I'd say the last thing, which is kind of in the background, is it's given a size and scale. So the ability to be larger, to be more important to the distribution platforms, to be more important to the institutional consultants, that matters. And it matters as you go and make these investments in these platforms that you're able to spread those expenses over a larger asset and revenue base.

Michael Policarpo, Analyst — UBS

Maybe two follow-ups there. As you look at that $50 to $200 billion-sized asset manager, um how what is kind of the the sentiment in the space these days when you're looking at some of these potential uh targets and you're looking at in meeting with these managers um are they finding it you know challenging to stay as an independent player in the space and are they really looking for you know that opportunity to be part of a bigger platform that can help them on a distribution standpoint and and have more capabilities yeah i i think um most and i think

David Craig Brown, Chairman

it's an evolving kind of sentiment. As time has progressed, I think firms that are of that size are challenged on the distribution side. Can they be relevant at the platforms? Can they be relevant with their product set? Do they have a deep enough product set? Can they make those investments? Those things are only getting harder. I think there's a realization of that. The investment required for operations, technology, AI, all of these things you need to do to be efficient, and the industry is changing. Obviously, ETF is a share class, ETFs. All of these things require mass investment from an operational perspective, from a product development perspective. I think those things become challenged for a manager in that size. And then I think when you look out a couple years, and I think most people that are running these businesses understand this. I think there's just a common kind of thought that I am going to need to be a lot bigger because there's going to be more investments to come. And what will I do? And so I think when you put all that together, most firms are either thinking about doing acquisitions or being acquired. And if you go back five years ago, I don't think those were the discussions in the boardroom. But I think now that's happening. And then a lot of the larger firms, a firm like Amundi who had a U.S. presence that said, we have a really good business. I want to invest in other parts of the world, so I maybe want to contribute this business to another business and focus somewhere else but still be present. I think that a lot of the larger firms are looking at their strategic plans and saying, how does asset management fit? Do I want to invest? Can I invest? Do I want to spend? Is this where I want to have my strategic chips down. And so I think a lot of those discussions are happening.

Michael Policarpo, Analyst — UBS

And then if we go back to kind of the initial part of your answer on the aspects of what you'd be looking at as a deal and what you want to gain for the platform, maybe just narrow in on the client segmentation side. And you talked about how being bigger has made you a lot more relevant through different channels. But is there anywhere that you would want to be bigger? Maybe an acquisition can help you, whether it's with institutions, intermediaries, or on the retail

David Craig Brown, Chairman

side? Maybe what's the best opportunity for you? You know, I don't think we have a specific client segment. I'd tell you the areas that we like. Obviously, we like the retirement side. On the institutional side, we like the insurance space. That's an area actually on the institutional side that's growing, selling products to insurance companies. The RIAs are a great channel for us, and it's an area where we'd like to be bigger. And then you think about the large platforms, the Morgans, the Merrills, the UBSs, and even the second tiers.

Michael Policarpo, Analyst — UBS

You need to be present there.

David Craig Brown, Chairman

You need to be invested there. There's just so much volume that goes through there, and there's a lot that goes into there. So, of course, going into those channels matter. And then outside the U.S., we have invested a lot in our infrastructure in the U.S. to support outside the U.S. or international. But that's an area we'd like to, you know, when we think about client segmentation, we love, and it's all white space, we love the opportunity of now being able to sell our products outside the U.S. because we didn't have that access before.

Michael Policarpo, Analyst — UBS

Maybe if we double-click a little on that, Dave, and you just talked about at the beginning, you launched, was it five UCITs in Europe, and you've brought some of your listed ETFs there as well. Maybe just expand on that a little bit and give me a little bit of color about how quickly can some of those products start to ramp? Do you need some sort of kind of performance track record, or do they already have some of that built in?

David Craig Brown, Chairman

So let me start off saying we have probably, I think, 22 usage today that are being sold throughout Europe and really throughout the world. And those usage are primarily kind of the legacy pioneer strategies. You know, equities, fixed income, multi-asset, well-distributed, well-established on a lot of different kind of platforms. Our strategy there is we are bringing the legacy victory onto those same channels, same platforms, kind of same sales forces are selling those. Those will take some time. We've launched those at the end of 25. They will take some time to kind of get into the system, to be kind of educated, put on platforms. we'll start to see the benefit of that piece through the end of 26. And then the U.S. listed ETFs really have the track records. They have the scale. That's really just a product of is how quickly we can educate the sales force and get them out to market, which we're doing right now. So I anticipate that that'll add to the victory shares momentum that we have in kind of growing that business. But that'll be a faster kind of growth. All of that said, institutionally, we have access to all of outside the U.S. that a Monday sales group is selling. Those are available now. We don't need to launch any specific products, but those are available today and are being sold.

Michael Policarpo, Analyst — UBS

Okay, great. And then if we go back to the Pioneer deal, and maybe if you could talk about the kind of two to three metrics that you would use internally to judge the success of the transaction over the next 12 to 18 months. You already talked about the net positive flows. You're 90% way through the retention or the synergy that you've actually raised. So maybe just, you know, what are some of the other things to kind of think through there?

David Craig Brown, Chairman

So I'd start off with investment performance. I mean, one of the things I think we've done well as a firm over the years is, as we've done acquisitions and brought businesses onto our platform, we have not disrupted the client experience or the investment performance. So we're looking at investment performance. We said in our last earnings call that the investment performance for Pioneer under a Monday's ownership was good. Under our ownership, it's as good, if not better, depending on the product and the time period. So we'll be looking at investment performance. We'll still look at that synergy number. We'll want to get to that $110 million, and we'll complete that through calendar year 26, the remaining $13 million. We will look at gross flows and net flows on the Pioneer side. I mentioned that we were net flow positive. I don't expect that to change. They have a lot of good momentum and a lot of good products that are in demand. We will also look at the international channel. And so that's another, even though going through that channel will be Pioneer and the legacy victory products, we'll look at the performance of that channel. We're NetFlow positive there since we've done the transaction. We'll look at that going forward. And then the other thing we're going to look at, and we've done this, is we'll look at product development on the pioneer side. We've launched one ETF already. We'll launch more down the road. But we'll look at product development as another important KPI. And I think that's, you know, if I think about my top tier of things that are important to us, that's the list.

Michael Policarpo, Analyst — UBS

Got it. That was really helpful. And then you talked about a lot on your earnings call. You talked about the real success on the gross sales side, and that was a really impressive result for the year. So the long-term net outflows have improved, but how would you think through the specific drivers of what will get you to kind of that positive firm-wide net flows?

David Craig Brown, Chairman

Yeah, and I think they've improved, but we're not happy with just being negative. I think our goal as an organization is to have organic growth. You know, if you think about the different levers for our business around fee rate and margins and capital and gross flows, I mean, net flows, the net flow is the last KPI that needs for us to be green. And I think we're right on the cusp of that. And so, you know, you think about our areas where we think we have strength to get us there. I think of our Victory Shares platform in the ETF business. It's growing nicely. We've seen great growth there. We've got a really good diversified group of ETFs that have good performance, that are really solving issues within portfolios. And by the way, the fee rate on those are an average, I think, of 34 basis points. So this is not passive-type ETFs that eat into your margins or your fee rates. So I look at victory shares as a driver for us. I also look at our international distribution channel, which, again, I said this a couple times, is really white space for us. So that's going to be an area that's going to help us grow. Fixed income, we have two really high-performing fixed-income franchises. is the Pioneer portion and then the Victory Income Investors. And we have ETFs, we have mutual funds, we have collective trust funds, and then we have, obviously, the institutional separate account. So I look at fixed income as an asset class, and we have a lot of different offerings there as another area. Our global products, we have two really competitive global products, one under RS and one under Pioneer. And then our multi-asset products, we have a multi-asset income product, which has done really well and some of our solutions offerings. And so I look at all of that and I think that that is a lot of momentum that we should be able to capitalize on and we'll have some headwinds like everybody else on the active equity side. The good thing about that is what's underlying our active equities is pretty good investment performance. I think some of the asset classes we were penalized for in 25 and back have come back a little bit. Small cap is one of them that we have a sizable amount of assets. I think you're seeing people allocate there now a little bit, and you're seeing some of the returns and a little bit of the market shift go away from maybe the AI trade or the MAG-7 trade, and there's definitely a rotation going on. So I think we'll benefit from there. And then I'd say the last part is we have invested quite significantly into distribution through the partnerships. So on the intermediary side, we've entered into probably a half a dozen new partnerships the end of 25 and into 26, where we have either become a premier partner, bought data packs, marketing support, conference support, which are super important to getting close to the buyers of the products. And then one more thing is we did in 25 really double the size of our intermediary sales force through the acquisition. And so having more people selling, and that group, it will take time as we've gotten them educated, as we've gotten them up to speed on the products from their organization. So the Pioneer people know the Victory products, the Victory products people know the Pioneer products. It takes time to get to the buyers and eventually for them to buy. So we're just in that phase. So I think all of those things gives us a lot of kind of tailwind into this organic growth mode.

Michael Policarpo, Analyst — UBS

So a lot going on on the organic growth side. A lot of leverage, as you mentioned. And it's super important for us. Yeah, that's great. Maybe a couple of things I wanted to kind of follow up on there. So you were starting to talk a little bit about the, you might see a bit of a rotation from kind of the U.S. and the MAX 7 and probably a bit more in the kind of international markets. We've been seeing that in some of the flows. I'd love to hear your view on that, maybe a little bit more. What are you hearing and seeing from, you know, from clients and seeing in client behavior? And then the second part I wanted to ask you about, too, is just when you talk a lot about some of the non-U.S. growth and the opportunities there that you're still just early days and tapping into, where specifically are you talking about?

David Craig Brown, Chairman

Yeah, so to answer the first part of your question around, really, asset classes, where we're seeing a little bit of a rotation from a performance perspective, you know, out of some of the winners of 25 and maybe the end of 24, where it was the tech and the AI and some of the companies we all know, I think you're seeing that move into small caps, and you're seeing it move into different types of sectors away from there. It doesn't mean that the AI and technology trade is not going to work, but I think you're seeing a broadening out of the market, which is super healthy. We're seeing clients allocate outside the U.S. I think there was a good article in the Journal this morning about that. You're seeing clients allocate outside the U.S. to international products, to global products. We have fantastic offerings there. And I think the average U.S. retail investor is under-allocated, their portfolio outside the U.S. So you're starting to see that. And I think you're seeing is, you know, is the U.S. market potentially, you know, does it have the same growth prospects over the next year or two as some of the outside the U.S. markets? And so I think we're seeing a little bit of that. I, you know, I think fixed income, you know, depending on what happens with the Fed and rates, I still think people really, really like fixed income. You're going to see people allocating the fixed income. I don't think that's going to change. So that's what we're seeing. You know, outside the U.S., the buyers, you know, where we're positioned, and it's really through a Monday sales force, you know, our best and biggest opportunities in Asia. You know, if you think of Asia and then Asia X Japan and Japan, so I'd say Japan and the rest of Asia, we think is our best opportunity from an asset gathering perspective, you know, from where we're positioned from a product perspective. So we're super excited about Asia. Europe, but Europe really, not because there's so much of a desire to buy U.S. manufactured or product, but just because Amundi is so well positioned in Europe. And so Amundi's distribution in Europe is as good as it gets, and so we have great distribution there through Amundi, and we have great partnerships there, and long kind of deep root of partnerships. So we think Europe is going to be a good driver for us. And then the Middle East, you know, Amundi has a number of partnerships there, and they have good relationships there. And I think one of the things that we bring to the Amundi business when they go and they talk to their clients is a U.S. listed investment manager, which I think is desirable for Middle East investors. You know, they want to invest in the U.S. They want to invest. Historically, they've been in private markets. Historically, if they wanted to access the public markets, it's been very beta-like. I think there's a little bit of a shift away from that we're seeing, and so we think we're going to benefit from that.

Michael Policarpo, Analyst — UBS

Oh, interesting. Okay. Okay, great. Why don't we switch gears to the active ETF side of the industry that's been a big industry shift. And following the success of the Victory Shares platform, which you've touched on a few times, how do you continue to think you'll take share in that space? We've seen, obviously, a lot of the larger players also leaning into this industry shift. So how do you continue to separate yourself from them?

David Craig Brown, Chairman

I mean, we're approaching the active. We have a number of active ETFs on the fixed income side and some on the equity side. We'll continue to do what we're doing. We're really creating differentiated product. We're not creating Me Too products. If you looked at our free cash flow series is another one that I think is very differentiated. But we're going to create product off of our franchises and then off of our solutions platform and then wrap those, obviously, in an ETF structure and then go and sell those really as active management. They're priced like the active management. They're sold like the active management. But we're going back and saying, how do we solve problems in the portfolio? you. Our sales infrastructure, our marketing infrastructure, our client service infrastructure is totally integrated on the ETF side. So we don't have, we have separate ETF sales specialists, but our entire infrastructure is set to basically support the ETF business. And so we're able to kind of use data and analytics on selling and servicing the ETFs. We have our salespeople trained on ETFs, and so from that perspective, it's somewhat business as usual. But we're not trying to compete on the, you know, kind of the beta side where, you know, there's a race to zero, and we're not trying to create products that everyone else is doing either.

Michael Policarpo, Analyst — UBS

So model portfolios is another really fast-moving trend in the space, and you're seeing a lot of good growth from that segment of the wealth market. Can you maybe just talk a little bit about the opportunity that you see there for victory, Kind of what's your place in the market? What's the opportunities for growth there and how's competition there?

David Craig Brown, Chairman

So we've owned a model provider since 2021 in West End Advisors. You know, it's got, it's approaching, you know, close to $30 billion of assets. Very well distributed on all the large platforms. A number of products, a number of different products. And we're net flow positive on that platform since we did the acquisition. We've launched ETFs, so we've taken their investment kind of process and put it into an ETF. MODL is an example of it. And so what we'll do on that platform is we'll evolve the West End platform to potentially do some tax-efficient products that you've seen. We'll probably evolve their models to include some private market exposure as well. there is we have we have a 10 person model sales specialist team that today sells mostly or if not exclusively West End products so we have people that that just sell the West End product and service it and then the rest of our sales force also sells it but but really then is helped by this sales this model sales force so we view that as a big part of our growth going forward I think, you know, I think at the point of sale, the advisors like the models. It allows them to do a lot of different things. It allows them to kind of give their clients access in the right way, and then for the advisors to go on and do different things, you know, either servicing clients or getting new clients.

Michael Policarpo, Analyst — UBS

Can you maybe unpack a little bit about where West End has had most of its success, either specific platforms or, you know, certain areas within the wealth management space?

David Craig Brown, Chairman

So the larger platforms, so they've done well on the larger platforms. They've also, when we've launched their ETF, they've seen a lot of demand on the ETF side because historically they've only been able to offer advisors models. Sometimes the advisors have clients that can't go into the models, and they want other structures. In the past, they've not been able to kind of say, I want West End across my book. I'd like to buy an ETF. where now, in the past, they couldn't do it, where now they can put their clients into models and then also put them into ETF so you can kind of get the complete package. So we've seen success there. But I think from a platform perspective, if you thought about the larger intermediary platforms,

Michael Policarpo, Analyst — UBS

that's where they've seen the most success. Okay, great. And you did touch on two really interesting points there in terms of adding this tax efficiency element. Any of you on kind of timing on that or maybe what's involved on the investment side to get there. And then adding privates is kind of an interesting angle. That's certainly something that we started to see some products come to market with BlackRock and Partners Group. So maybe talk a little bit about how you would approach that from a partnership perspective.

David Craig Brown, Chairman

On the tax side, that's a 26 kind of product launch. And I think that one we're well down the path on that. On the models from adding the private market exposure, We're working on that, and we're working back from what we think the clients want and need. We're also thinking about the retirement side of that as well, and so offering that through the retirement channel. How we get the private market kind of manufacturing, we're working on that as well. I think there's a lot of different options, and we're exploring all of them. But I think when you really take a step back, I think one of the ways we'll deliver those models will be you'll have access to public market allocation and then potentially, if you like, you can have a private market allocation within there, be it fixed income or real estate or secondaries or private equity and it'll depend on the buyer, it'll depend on the

Michael Policarpo, Analyst — UBS

channel, but that's how we're thinking of it. Really interesting. Okay. I'll just remind folks in the room and on the web that if you want to submit a question, you can do so through the app. You can submit a question through the web. You can ask any questions live here in the room. We'll see if any come through the web there. So Dave, if we move to the margin side, which again was another really impressive result in 2025. And as I see a strong margin like that come through, I still kind of wonder, is that the ceiling here? Or how do you kind of think about what's the puts and takes to the margin going forward? Yeah. I mean, our official guidance,

David Craig Brown, Chairman

and has been for a while has been 49%, and I think if you followed our company, we've exceeded that quite significantly, even during kind of the integration period with Pioneer. And so we're looking at our margins, you know, what the right level is, at least from a guidance perspective. Today it's 49%. I think from a ceiling perspective, our last quarter was 52.8. I think the quarter before was 52.7. I think we're at, it doesn't mean we can't exceed it, but I think we're at, you know, where we think we can, you know, where I'd say full margin. You know, we have really spent a lot of time with our vendors. We spent a lot of time around technology. Instead of hiring people, we've tried to put scalable technology in. And if you think about a lot of the firms in our space, I think that they are investing a lot of money to try to get to the platform that we already have built. And so when I think about it, our margin expansion is going to be, you know, marginal from where it is today, if you will.

Michael Policarpo, Analyst — UBS

Okay. Yep, that makes a lot of sense. So if we take a step back and go a little more high level, You have talked about a public goal of reaching $1 trillion in AUM, and so you took a big step forward this year, still talking about more M&A in the space. How do you kind of bridge the gap in getting there from, call it, the $320 level now to the $1 trillion? How much will be organic? How much will be inorganic?

David Craig Brown, Chairman

So, I mean, it does seem like a lot to go from $300 plus to $1 trillion, but just a quick walk down memory lane. I mean, we did the MBO, our management buyout from Key Corp in July of 2013. You know, we were under $15 billion. And then when we went public in 2018, we had $60 billion. And so when you put it in perspective to go from $15 to $60 and $60 to $300 plus, it doesn't seem like that high of a hurdle when you put it in perspective. How we're going to get there primarily is going to be through M&A. I would love to say that we could get there through organic growth in the next X amount of years, but that's not going to happen. I don't think that's possible in our industry. But it'll be through, you know, inorganic growth. It'll be through low single-digit organic growth and whatever the market gives us. But it'll be through larger M&A, maybe smaller, you know, strategic M&A, but it'll be through larger M&A. And as we discussed earlier, I think that 50 to 200 range, it can be higher than the 200. And I think that is, if you go back and look since we did our MBO, I think we averaged, we have averaged a transaction every year and a half is about the cadence. And so if you think about that, it's probably three, four, two, three, four, five years out, depending on the size of M&A, to get to that number. The number is important for us. We put it out there publicly because we think that that is the size you need to be to be able to compete long-term, kind of in perpetuity. The trillion-dollar number, those firms will be big enough and scaled enough to go and have the depth of the product, to have the resources to basically get access to clients, to service clients, to service the platforms, to reinvest in your business. We think that's the number. I think if you go to the other side, there's going to be a smaller kind of sized manager that maybe will be a specialist, maybe have a few products, very different profile. And then everyone in between that small manager and large manager is going to be challenged. And I think that's, I think, you know, I've said this for a while, I think consolidation is going to happen a lot faster than we all think. You think about some of the recent transactions over the last couple of years of public companies either getting bought or going private. And all the transactions that are happening, I think it's only going to accelerate.

Michael Policarpo, Analyst — UBS

As we think about that kind of trillion-dollar level for victory, what does the firm look like at that point in time? Because at that point, yeah, you are talking about a significant amount of scale of AUM, but when you think about what the team on the ground looks like versus today, what's going to be the biggest change?

David Craig Brown, Chairman

Well, I think it's a trillion-dollar, and just from what it looks like financially, It's a trillion-dollar manager with $5 billion in revenue and probably $2.5 billion of earnings. I think that, you know, and everything that goes from there, you know, I think that's very, very, very much like we look today. But I think when you think about the product set, I think you'll have a fully built-out kind of public market offering, fixed income, multi-asset equities, very similar to what we have today, maybe deeper in a few areas. You'll have a sizable ETF business. You'll have a sizable outside-the-U.S. business. You'll have a number of USITs. You'll have a sizable institutional business. Part of that will be private market. You know, I hate to use the term alternatives. I'll say private market investing. So some of the products that we'll have in that trillion dollars, they will either be specifically private market, so some of them, But then also you'll have models or you'll have kind of very much like a target date fund where you're going to have, you know, basically risk profiles and timelines and you're going to have private markets investing in those models. So we'll look like that. And then our business will be, I mean, today 17% of it's outside the U.S. I expect that number to be more. So maybe it's 25% or 30%. And the rest probably inside the U.S.

Michael Policarpo, Analyst — UBS

So on the, you know, you kind of spark a thought in my mind as you talk about the private markets and that probably becomes a bigger piece of your business. We have, of course, observed that the public valuations for a lot of those names have been coming down. It's kind of a more recent phenomenon. But, you know, curious what you have observed maybe over the last six months. Has some of the opportunities in the private market space from an M&A standpoint improved at all? Is that getting a little more interesting to you?

David Craig Brown, Chairman

I think the valuations coming down probably are well justified. I think they probably got ahead of themselves somewhere the businesses were. They're fantastic businesses. But on the other side, I look at a traditional asset manager. I think the valuations are probably too low, and I think there's probably a coming together of those valuations. For us, one of the things we have done over the years, is we have stuck to what we do really well. We've stuck to managing money in public markets, which I think we've done really well. We know how to sell, service, operate, reconcile, all the things that go with selling public market-type products. And also, we have stuck to doing acquisitions in areas where I think we have felt really good about being able to execute on them. I mean, one of the things we've done really well has just consistently done acquisitions where we've been able to add value, been able to better our platform. They've been accretive. Some of them had lots of synergies. Some of, like a West Ends, had revenue synergies. We're going to continue to do those. The private market acquisitions for us, we have studied and watched that space for a long, long time. I'm happy we have not done anything. you know it doesn't mean we wouldn't do something in the future but i think you know we have we have made our way sticking to what we know best and there's a lot of different ways to access private market you know manufacturing you can get it through distributions distribution partnerships you can get it through you know minority stakes there's lots of different ways you can do you build it yourself so there's a lot of different ways to do it and we're exploring those ways But I think the alts and the private side, you know, I think the valuations coming down is probably pretty justified.

Michael Policarpo, Analyst — UBS

Got it. While we're on the topic of M&A and capital allocation, maybe just touch base on, just touch on quickly the view on kind of buybacks and dividends. And you talked about leverage levels are now kind of at lower levels, so I'm assuming debt paydown is not as high on the list. But maybe just give us a quick update on your priorities.

David Craig Brown, Chairman

First and foremost is we want to make sure our balance sheet supports our strategic desires of doing acquisitions. And so we're always going to default to that first, make sure we have a balance sheet that supports that. I think today, leverage at the lowest it's been as a public company around one time, we're in a really good spot from that perspective. And so when I think about the second level, what's number two, and it's a little bit of a shift for us, I'd say we lean more into buybacks. And we have bought back a significant amount of our stock since our IPO, and we've started to buy back more, and I think we were pretty clear on the call to say that we're going to buy back our stock aggressively. And I think the way we articulated it on our call was we're at ground zero between the underappreciation of our industry and then the underappreciation of specifically a victory. So I can only think of, you know, if we're not buying a company, I want to use our dollars to buy our stock because I think it's a tremendous value for our shareholders. So we're going to use our capital to do that. We're not going to abandon the dividend. Our dividend has gone up every year, every quarter from, you know, when we were doing a quarterly. That's not going to change. But I think, you know, our use or primary use of capital is going to be acquisitions. And then, you know, second, we'll be buying our stock back.

Michael Policarpo, Analyst — UBS

Great, great. So maybe just kind of one to close out here as we get closer to the end. As you think about the next three to five years, and we're kind of sitting here back in Key Biscayne, and we assess the asset management landscape, what do you think will kind of be the observations in terms of the folks that have separated themselves as kind of the true winners and maybe the laggards in the space? Well, and we've talked about size and scale,

David Craig Brown, Chairman

that I think consolidation is going to happen. And I think the folks that are able to work their way through either consolidating or to be consolidated, I think will be winners. But I think what type of firm will be a winner is you're going to have to be either a small specialist firm that's offering a product or two, not going to be us. But, you know, for us and for the industry, it's going to have to be that trillion-dollar type manager that has a really broad and deep product set that obviously adds value to their clients' portfolios, offers their manufacturing in all different kinds of vehicles, whether it's an ETF, an active ETF share class, whether it's a collective trust fund, whether it's a usage. is you're going to have to be able to offer a model, SMA. You're going to have to be able to offer your clients or every single vehicle, however they want to access you. You're going to have to have that. And you're going to have to have the size and the scale to service them. And then the other thing I think you're going to need to do is you're going to have to be up to speed operationally, technologically, from an AI perspective, and have to invest in your business. Great. That's a great spot to end.

Michael Policarpo, Analyst — UBS

Dave, thank you so much. Everyone, please join me in thanking Dave. Thank you.