Cowen Inc.
Q3 2016 Earnings Call Transcript

Published: 28 Oct 2016

[Operator:]

Good afternoon, ladies and gentlemen, and thank you for joining Cowen Group Incorporated’s conference call to discuss the financial results for the 2016 third quarter. By now, you should have received a copy of the company’s earnings release, which can be accessed at the Cowen Group Incorporated’s website at www.cowen.com. Before we begin, the company has asked me to remind you that some of the comments made on today’s call and some of the responses to your questions may contain forward-looking statements. These statements are subject to the risk and uncertainties described in the company’s earnings release and other filings with the SEC. Cowen Group Incorporated has no obligation to update the information presented on the call. And a complete description of these and other risk and uncertainties and assumptions is included in the company’s filings with the SEC, which are available on the company’s website and on SEC's website at www.sec.gov. Also, on today’s call, our speakers will reference certain non-GAAP financial measures which the company believes will provide useful information for investors. Reconciliation of those measures to GAAP is consistent with the company’s reconciliation as presented in today’s earnings release. Now, I would d like turn the call over to Mr. Peter Cohen, Chairman and Chief Executive Officer.

[Peter Cohen:]

Thank you, operator. Good afternoon, everyone. Thank you for dialing in and welcome to our third quarter earnings call. As I always am, joined by Jeff Solomon, President of Cowen, and Steve Lasota, our CFO. Though equity markets moves to higher levels in the quarter bringing most of the major industries to new high as the general revenue environment through our businesses remain challenged and with capital raising activities, merger advise equity commissions and hedge fund asset closed facing headwinds which I think you probably are all aware of. However because of them the steps we have taken and we make the firm over the past few years, Cowen’s operating businesses were well positioned to perform in this environment Our economic income numbers are meaningfully higher today than they were in the last significant industry downturn in 2011 and better than last year’s third quarter. As a result, our 2016 performance is focussed on making a higher swing low and economic income and putting ourselves to be in a position to make higher swing highs and profitability when our businesses begin an uptrend. For the third quarter of 2016, Cowen reported economic income of $11 million or $0.10 per diluted share compared to an economic income loss of $14.5 million or $0.13 per diluted share last year for the third quarter. At Cowen and Company, we continue to use a sound turn in the market to make new investments in Cowen and to ensure and force [ph] organic growth in key investment bank and researches and the verticals in the future. We have also continued to integrate our recent acquisitions of CRT, Credit Research and Trading which was completed only this past May as well as the prime brokerage businesses we acquired last year. Most recently we also have acquired the Washington Research Group team who have joined us in August, the results of the work they are doing had yet sort of started manifesting itself in revenue flow which we expect will happen we’ll start to see in the fourth quarter and into next year. At Ramius, we invested new teams and capabilities even as we sold our alternative solutions business which was the successor to our [Indiscernible] from the funds business. The first of our portfolio team is outperforming their benchmarks, we continue to attract assets. We grew by a net $600 million during the quarter so that’s inflows that have outflows plus performance. And we are taking steps to increase the profitability and extend the number of portfolio offerings in the asset management business. Now as it relates to Ramius itself, Ramius assets under management as of October 1st were 10.5 billion, which does reflect the elimination of the Russell assets which were about $3 billion. The decline from July 1were 2.5 billion, the decline from July 1 includes approximately 2.5 billion of assets associated with the sale of our interest and Ramius alternative solutions. Including this reduction and assets we had about 800,000 redemptions, 520 800 million in redemptions, 522 million in subscriptions and 286 million in positive performance. As we announced in August we entered into an agreement to sell our interest in alternative solutions business, which as I said was a successor to our from the funds business to sale closed on September 23 the gross purchase price of proceeds [Indiscernible] $17 million that’s before expenses. We had reached a point where we felt we could no longer effectively scale this strategy on our platform to bring it to its full profit potential. So in conjunction with our partners in the business we initiated a formal process to sell our interest. We are proud to have developed and scale the team and are happy to see that the business has found a home with a quality firm. Management fees for the alternative investment, management segment on average about 5.2 million per month in the third quarter in 2016 which is unchanged from the second quarter in earlier this year, third quarter of 2016. The average management fee for the quarter was 53 basis points unchanged from the prior year period. This number has always been suppressed by the effect of the low fee paying asset of Russell so we would expect that the realization on fee should increase in the future. As we have noted in the past fee cost structure is varied by product and [Indiscernible] we do not manage this metric but we do believe that this number will trend higher as I just mentioned. In what’s been a challenging year in general for hedge funds, Ramius affiliated fund mostly asset from the broader hedge funds industries, year-to-date we raised $1billion 60% of which is for emerging strategies and attracted some very high quality blue chips investors across all products. Emerging strategies include event, equity long short global macro and stressed credit. In merger arbitrage we expanded the strategies global footprint through the successful launch of the MLIS Ramius Merger Arbitrage usage fund in partnership with Bank of America Merrill Lynch, one of the premier usage platforms in Europe, the launch having just occurred asset growth is just beginning. In addition, the team was recently ranked number one for the month of August by Barclay [ph] Hedge. Healthcare royalty partners had a successful quarter and continues to attract interest and assets from real investors. Our consumer focus launch for an equity fund which was launched earlier this year has attracted some prominent investors and is performing quite well. Subsequent to the quarter end we launched another equity long short fund initially focussed on the communication and technology media and consumer sectors with a very talented portfolio manager who we had mentioned in last quarter’s call, Samantha Greenberg. Initial investors included large corporate pension from a prominent high network individual. We introduced long short strategies because they are the largest hedge fund category and the most scalable and with the right portfolio managers we think have the best opportunity to outperform the industries. We believe that our newest partners are on track to reach scale and we are looking forward to helping them achieve significant progress in the fourth quarter of 2016 and into 2017. Investments performance on the balance sheet rebounded during the quarter as you can see some of our investment strategy benefited from the stabilization of the market, growing market or decreasing market sentiment and easing of volatility, the biggest contributor to the rebound was merger arbitrage which is you know as adversely affected by the extraordinary events surrounding the termination of the Pfizer-Allergan transaction in the second quarter of last year. And we want to thank all of our colleagues for what we achieved in the quarter and their efforts to move the organization forward. And I will now turn it over to Jeff who will discuss the quarter at Cohen and Company.

[Jeffrey Solomon:]

Thanks, Peter. U.S. Capital ratio and environment improved somewhat in the start of the year, but overall activity remains muted. In the U.S. at year market year-to-date overall dollar volume rate is at its lowest level in 13 years. Considering this the most typical market since 2003 in terms of IPO is Cowens performance in investment banking was pretty solid. This is a testament to the strategy we set forth in 2010 to build a top notch sustainable investment banking business initially focussing on healthcare verticals. Healthcare, and more specifically biopharma is traditionally the most active sector for raising equity capital, and we felt that it would serve as our anchorage as we grew additional verticals. This approach has served us well because despite a lower level of equity capital raising activity across all industries our healthcare clients have consistently raised capital throughout this period. Our third quarter ECM revenue was fairly consistent with the first few quarters of the year coming in at about $24.9 million, down 49% from the prior year quarter. We also successfully executed on our backlog with a window that was only slightly open as during the quarter we closed 22 transactions compared to 27 in the prior year period. We were a book runner on more than half of the transactions in the quarter consistent with our prior year quarter, and our average underwriting fee declined to $1.1 million compared to $1.8 million a year ago reflecting lower amounts per transaction on terms of money raised. While the majority of our equity capital markets revenue represents fees associated with traditional follow on or IPO activity, a growing number of our clients accessed equity capital through convertibles and continue a shelf offering. In fact, we have booked a greater amount of fees associated with convertibles and continue shelf offerings this year than in previous years and collectively these two products accounted for more than 25% of the ECM revenue for the quarter. We continue to be very positive on the outlook for debt capital market and this quarter we closed two transactions. In September, we announced the new head of our DCM area with new leadership in place, we are in a stronger position to leverage our credit sales and trading platform, account and credit research which we acquired earlier this year. Our M&A business had another solid quarter, five deals in four sectors and this represents a number of different sectors including industrial technology healthcare and information services. All together, the third quarter for investment banking was most diverse in terms of industry mix, and it reflects our efforts in reaching here to build out our industry and product expertise and verticals outside of healthcare in ECM and while we always have more work to do, during the quarter we announced the hiring of several new industry bankers with significant M&A experience both in healthcare and in some of our other core industries. Turning to our institutional business, institutional brokerage business, which includes equities, prime services and the new Cowen Credit Research and Trading business. Our core equities revenue, which we define as cash equities, electronic trading, special situations, options and convertible trading we declined about 8% compared to the third quarter of 2015 but was largely flat in the second quarter of 2016. It is important to note that although revenue was down our performance was quite strong given the fact that equity trading volumes were the weakest they have been in quite some time. In fact the latest market research indicates that we held market share even as things, as others lost significantly. We continue to invest in differentiated research capability as the environment for great -- is our platform as Peter mentioned, during the quarter we hired a six [ph] person team of the Washington Research Group and their macro policy commentaries covered topics such as Washington strategy, aerospace defence, financial services, healthcare, housing, medical devices and technology and it’s really a natural complement to the corporate insights from our equity and credit research team. Importantly, macro policy targets the portfolio managers at our loan only client which is an area of the market place which is actually controls a significant amount of commission but is to date being underpenetrated by Cowen. We passed the one year anniversary of our prime services business acquisitions having closed on those in the third quarter of last year, in the fourth quarter of last year and these acquisitions formed our prime services business, and overall the business development has been positive even as trading volumes for the past few months have fallen. Customer assets in custody are growing and as have so this could be some metrics there as of September 30, 2015 AUM with Cowen Prime was $4.6 billion but today as of September 30 is $7.3 and that includes the concept asset as well. Year-to-date the growth in custody asset is approximately 9% and the good news is the newer clients are carrying more debit and short balances which means that our financing revenues are growing even as our commissions have slowed down in the past few months. Large loan books create an opportunity for us to lend heart of our securities which is a service we intend to offer and we are currently building out a new securities lending business that will dovetail into our prime services business. The good news is the pace that wins in our outflow trading business has accelerated, which is encouraging as it helps us to offset the natural attrition of clients who grow to a size where they ultimately end up internalizing their trading activity. This is the full quarter of Cowen credit research and trading on our platform. The business which focuses primarily under stress credit trading, emerging markets, special situations, equities and trade claims is performing in line with our revenue expectation. We are really just getting started with revenue integration opportunities and have yet to see the benefit of the integration but early collaboration we are seeing in equity is that’s been quite encouraging. In addition, our equity and credit research analysts have co-authored a number of research thesis and then collaborated on a number of ideas which has really added audience to both our equities franchise and our corporate credit franchise and it’s really created a lot of interesting opportunities for us to monetize capital structure in both equity and credit accounts. So, that is [ph] happening in Cowen and Company, I will turn it over to Steve Lasota who will review our financials. Steve?

[Steve Lasota:]

Thank you, Jeff. In the third quarter of 2016, we reported a GAAP net loss attributable to common shareholders of $4.9 million or a loss of $0.05 per diluted common share compared to GAAP net income of attributable to common shareholders of $11.9 million or a loss of $0.11 per diluted common share in the prior year period. GAAP income before income attributable to non controlling interest, taxes and dividends was $24.1 million. Income attributable to non controlling interest was $18.5 million. Income tax expense was $8.8 million, preferred stock dividends were $1.7 million which led to a GAAP net loss of $4.9 million. Now the income tax expense increased because of quarter on quarter fluctuations in our income attributable to non controlling redeemable interest which can cause us to record higher income taxes due to the fact that GAAP requires us to use whole year projections in calculating the quarterly tax provision. Income attributable to non-controlling interest changed significantly from the last two quarters due to the positive performance of one of our consolidated funds. GAAP revenue was $131 million, net gain on investments was $26.2 million comp and benefit expense was $98.5 million and G&A and other expenses were $49.7 million. In addition to our GAAP results, management utilized non-GAAP financial measures which we refer to as economic income. Management uses economic incomes to measure our performance and to make certain operating decisions. In general, economic income is a pre tax measure that excludes the impact of accounting rules that require us to consolidate certain of our funds, certain other acquisition related adjustments in reorganisation expenses, goodwill and intangible impairments and preferred stock dividend. The remainder of my comments will be based on these non-GAAP financial measures. In the third quarter of 2016 the company reported economic income of $11 million or $0.10 per diluted share. Our comparable GAAP pre tax net income attributable to Cowen of $5.5 million differs from our economic income of $11 million due to $5.5 million in transaction related expenses. Our prior year economic income loss was $14.5 million or $0.13 per diluted share. Third quarter economic income revenue was $153.5 million compared to $82.8 million in the prior year period. Investment banking revenue was $36.7 million compared to $53 million in the third quarter of 2015. Quarterly brokerage revenue rose 23% year-over-year to $51.5 million. Management fees were $16.5 million compared to $18 million from the prior year period. Incentive income was $11.8 million compared to a give back of $8.6 million in the prior year period. Investment income was $19.7 million compared to an investment income loss of $22 million in the prior year period. Other revenue was $17.2 million compared to $564,000 in the prior year. Comp and benefits expense for the quarter was 61% of economic income revenue compared to 67% in the prior year period. Variable non-comp expenses in the third quarter were $14.8 million compared to $11.7million in the prior year period. The increase is primarily related to higher floor of brokerage and trade execution costs due to higher brokerage revenue and increased marketing and business development expenses, most of which is related to acquisitions during late 2015 and during 2016. Fixed non-comp expenses totaled $28 million in the third quarter compared to $26.2 million in the second quarter of 2015. This increase was primarily due to higher communications, increased occupancy costs, and increased depreciation and amortization, all of which are related to acquisitions during late 2015 and 2016. GAAP Stockholders’ equity increased by $8.4 million to $771 million at September 30, 2016. Common equity, which is shareholders’ equity less the preferred stock, was $669.9 million compared to $661.5 million at September 30 of 2015. Book value per share, which is common equity divided by shares outstanding, was $6.24 per share compared to $6.18 at September 30 of 2015. And Tangible book per share, which is common equity less goodwill and intangible assets, was $5.42 per share compared to $5.62 at September 30. Invested capital was $683 million as of September 30, 2016. I will now turn the call back over to Jeff for closing remarks.

[Jeffrey Solomon:]

Thanks, Steve. With the $1 billion in total capitalization in the same old platform we are seeing the benefits of being able to have their resources to invest in businesses and talent to drive shareholder value when many of our competitors are facing significant challenges. We made several investments in talent during this market downturn and will continue to do so selectively as opportunities present themselves. We’ve also done so while balancing our cost structure. We are looking to take advantage of our newer capabilities such as credit research and trading in prime brokerage to further our services in debt capital markets and equity finance as well as advance our other businesses and it takes courage to invest during a time period in which others are eliminating businesses in headcount. And while it take a period of time for these investments to manifest themselves in our numbers we believe the effort we're making to invest in key individuals and businesses will position us for next leg of growth. We believe the results on our operating businesses demonstrate the success of our strategy thus far and we've been prudent – as we have been prudent shepherds of capital. Before the open the call to questions, I’d just like to thank our colleague not only for working as hard as they do to achieve our vision for the future that for making Cowen such a great place to work. Operator?

[Operator:]

[Operator Instructions] And our first question comes from the line of Devin Ryan of JMP Securities. Your line is now open.

[Devin Ryan:]

Hey, thanks. Good afternoon everyone.

[Jeffrey Solomon:]

Hi, Devin.

[Devin Ryan:]

Maybe just starting on Ramius, I don't know if you can give any more detail just on the redemptions in the quarter, on the subscription, where they came from and then just kind of broader outlook how you guys are feeling of outflows right now?

[Jeffrey Solomon:]

Sure. We have subscription in merger arb, we have subscriptions in both of our long/short equity products. We grew in healthcare royalties. Real estate we didn't have any offerings in a quarter but we're going to be closing to new real estates funds in the fourth quarter. Redemptions has came from partially from Russell we have redemptions there. We had very small redemptions in merger arb, but net-net merger arb grew by about $100 million in the quarter.

[Jeffrey Solomon:]

So, I just think, Peter may have miss, spoke on the call, actually earlier, you said there were 800,000 redemptions for the quarter, so I just to be clear, I think you actually said $800 million by action, so there were 800,000, Bevin.

[Devin Ryan:]

Right, exactly, now I guess that does make a difference. That’s helpful. Okay. So very little there in the subscription, so I guess then on the outlook for flows, I mean, how do you guys feel there is obviously more products, now you have [Indiscernible] behind you, so what does it look like moving forward?

[Steve Lasota:]

Well, I don't know we'll be specific because we don't really know the timing, but all of our strategies are performing well and we've got lot of interest in the royalties business, because lot of people looking at merger arb which has tremendous rebound in the third quarter. A too long shore, every product has done very well and there are lot of people looking at those. We doing now and we'll be closing between our debt fund and then equity fund over $300 million of new assets in real estate. I'm just trying to think, I mean those are kind of the bigger ones.

[Jeffrey Solomon:]

So I think lot of what you're seeing Devin in terms of what we're hearing about hedge funds make is a big high profile hedge fund closures. Honestly steps that we took like five or six years ago. And once we reshape the business there'll be little more nimble with a little – with much more focus on targeted products with easily articulating strategies. We recognized I think six years ago that some of the challenges associated with managing, multi-strategy and frankly fund to funds money was significant. So, I really feel like there's a shift more to emerging managers if you will, and way from some of the bigger assets aggregators, we kind of thought that would happen frankly a lot longer, a lot longer ago than it has. That we're starting to see that happen and our markets have actually been very difficult market, pretty good launches. We just could take about the scale and I think that the numbers that we've raised to-date, Peter mentioned 600 million in AUM, just emerging strategies year to-date has pretty good when you talk about the – how are the new launches have gone. So, we're pretty good.

[Peter Cohen:]

Just to add to what Jeff said, we believe the environment we're in today is A, its very hot to run a very, very large pool of diversified assets. I think you better off running more pools, smaller pools, a very focused asset and very kind of niche strategies that you know very, very well, and that's the path we set out when we have rebuilt Ramius when I had a attractive business after 2008 [ph] and its working for us. And we think there are some new strategies that we can add in the next 12 months that ,yeah, when aggregate can be meaningfully scaled no one of them being terribly big but if you put it much on together that can be very good. And the investor is looking for a very nichy, very [Indiscernible] very focused strategy, its not like just trust with your money, I mean somebody wants merger arb or wants merger arb today as oppose to all get through multi-strat that use to be the answer. And as you seen why the multi-strat guys are suffering from redemptions. So, we think – I mean, the landscape changed a lot and it's going to continue to change.

[Devin Ryan:]

Okay. That's helpful. And maybe speaking of niche strategies, healthcare royalty I know you guys have a large level of accrued carry there that isn't included in the balance sheet so we can't really suit that it in, I'm curious if you have an update on kind of where that sits there, roughly what that looks like, and then any thoughts around the timing of when we could see that roll through the P&L?

[Steve Lasota:]

Devin, as we talked about in the past I mean, we still have a good insight as to what that number is, but there still a couple of investments that need to run their core -- we will recognize that those incentive fees where they carry and it’s still hard to predict but it shouldn’t be too far out in the future.

[Jeffrey Solomon:]

Yeah. Just – we know what those fees are but they have to be crystallize by the sale essentially of the last asset in the fund and so there's a very small number of assets left in fund one, but they have to be realize and so it’s a matter of time until that happens, obviously everybody is economically aligned to make that happen sooner or rather than later and its hard to say whether that it would be a 2017 event, it could be, but soon as it happens we will let you know. Everybody is very focused on it.

[Devin Ryan:]

Right. Yes. I know, that's helpful. I mean, I understand that it’s a moving target here until it's actually realized at the same time. It seems like it’s not mark-to-market if you will in terms of what we see, so it’s kind of incremental benefit that just to maybe even think about that would be helpful. But anyway, look I will stay tuned, maybe moving on just to the capital markets, so you guys made some hires in that capital market and they seem complementary with what you're doing with CRT. So I'm just trying to think about the potential for that business, how much can it get, and if you have any thoughts around kind of the revenues that you're targeting with your DCM platform?

[Jeffrey Solomon:]

Well, I think you know, I think we see an opportunity here as we pushed out into some areas in equity finance and we'll be doing DCM for a while, but we really needed. We wait about six months, so we needed to get new leadership in here. And we took our time. I think this is a great time we'll be looking at funding emerging gross companies using debt as we've seen significant growth in the alternative lending landscape. We really see an opportunity also to take advantage in the leverage finance base of doing deals -- more deals that are both high yield and privately place as we look at our leveraging of the CRT distribution platform. So, I mean, this is all part and parcel of being able to build out a holistic approach to growth customers. So the strategy is simple, when you walk into a client to talk about their financing alternative. If you don't have a range of financing alternatives then you can present to them with a range of capital cost associated with them then you're simply pushing product. And we've always said here that the best opportunity when you sit down with the client, think strategically about how best to finance their business and you should be product agnostic and doing that and adding these capabilities both as you see not in just in DC but adding out convertibles and adding our ability to continue with offerings gives us a chance to basically talk to client about a whole range of options and then executive on them when we figure out collectively which would be the best for them. So, I think we'll see growth just because we're in low yield environment and there's a lot of capital flashing around, look at we put to work in direct lending and the clients we served are really under served by the banking universe, the larger banking universe for sure.

[Devin Ryan:]

Okay. That's great. Maybe just last one here around kind of just investment banking and kind of outlook. Obviously we get the long term dynamics around healthcare and why we'll see kind of redemption activity it’s kind of a matter of when not if it seems but I'm curious what you're seeing in the backdrop right now. It feels like we're moving closer to that time where companies say, okay, we've got to go or are we waiting for something else to happen whether you know in election or something else is going trigger that movement of company is actually come into market. I'm just curious it's kind of getting any new indicators that would suggest things are improving there?

[Jeffrey Solomon:]

You know its sector by sector I would say, each sectors has its own dynamic, there's no question that there are sectors that are waiting until after the vertical landscape is little bit more established in order to address the market, but we are starting to see some technology companies come to market. We tend to focus on industries in equity capital market. We tend to focus on industries that are little bit more capital intensive, because they repeat customers and I just think that's new ones most people don't focus on. There are definitely high profile software deals and internet deals that come and I'm not saying that we wouldn’t be involved in them but they are generally speaking they are not big capital users so they don't access the market significantly over time, and so we're much more focus in those areas and being able to provide debt financing and M&A advice. And there we're seeing if you can see from the activities we've had, we've actually had a pretty robust quarter for us, again given the size of our investment banking footprint in those areas. So I think that the election will certainly answer one big question and I certainly think that the Federal Reserve Board finally getting off to the side and raising rightful answer on another question and once those questions get answered people will understand little bit more what the landscape looks like in access to markets. I still think that as we've seen this year it’s sort of the opposite in terms of healthcare which strives lot of our revenue sales, it’s the opposite and where it was last year as we've been saying for a long time. these are clients that need to raise money and in any kind of environment there are always clients who need to raise money and we are certainly doing – we've increased our market share tremendously even over last year and we become, they got to shop in the sectors that we make most heavily, so I feel pretty good about where we stand and as things turn back around that backup is cleared we'll be in good shape.

[Peter Cohen:]

Yes. Further to what Jeff saying, I can't remember the time ever, where more people approach us like almost daily about joining our platform from all matters and mocks of financial services industry. And we have investors right through this kind of difficult cycle and spend I would say many millions of dollars where the revenue is not evident yet will be forthcoming and we continue to do that because consolidation its going on, is likely if anything to accelerate unless the environment changes radically and I think once the election is behind us and we find out exactly Elizabeth Warren has in mind that potentially can create lot of opportunities for us and we wanted to be position for.

[Devin Ryan:]

Great. That's very helpful color. Last one actually just on the Luxembourg transactions, are there any in the backlog we should expect over the next several quarters?

[Steve Lasota:]

We continue to look on that Devin but there's nothing that we see in the next couple of quarters.

[Devin Ryan:]

Got it. Okay.

[Peter Cohen:]

Our Luxembourg business that was of five products of the last one where we actually have an operating, small operating insurance company has been profitable, but we have early expectation and we'll finish the profitable. We also last year went to the aircraft leasing business, now this is very spoke business because we're serving government agencies. It's small but its profitable, but looking to grow that business. So I mean there's a lot of investment spending going on around here for the future.

[Devin Ryan:]

Okay. That's it from me thank you guys.

[Peter Cohen:]

Thanks, Devin.

[Operator:]

Thank you. [Operator Instructions] Our next question comes from the line of Steven Chubak of Nomura. Your line is now open.

[Unidentified Analyst:]

Good afternoon guys, this is actually Julian Krator [ph] filling in for Steven.

[Peter Cohen:]

Hi, Julian.

[Unidentified Analyst:]

Hey, guys. So my first question come is around comp, so year to-date your comp ratio is around, correct me if I'm wrong a 62% and I think last quarter Steve, I think you're aiming for roughly a 60% accomplished for the full year, is that soon achievable target how should be speaking about that?

[Steve Lasota:]

It obviously depends on how the fourth quarter goes, but as Peter was just discussing a little bit, we are making some investments for the future. We have been approach by a number of people that were broadening the platform. You've seen some of the announcement that we have made. So, anyway between 60% and 62% for the year seems achievable, but again it depends on the fourth quarter.

[Unidentified Analyst:]

Okay. Got you. And lastly switching gears, I noticed in prior years you typically buyback on let say like 3 million to 4 million shares a year and so far this year you've repurchase around like a little over 1.5 million shares and you share count actually increased little bit this quarter because of the vesting of equity awards. How should we be thinking about the fourth quarter in terms of the share repurchases, should we expect to see descent uptick in amount of share repurchase to offset that higher share count. How should we be thinking about that?

[Jeffrey Solomon:]

I think we slowed it down in part because the environment is little bit more uncertain and we have obviously we're assuming well capitalized. So we feel that and we have a number of growth initiatives as I think Peter mentioned that our – on our horizon. So the balance we have in terms of buying back stock versus investing the future of the business is always an artful balance. Rick, we’ve decided atleast this quarter and probably for the foreseeable future that we are not going to be doing a lot of stock buyback but only because we think we love the fact that we got the capitalisation where it is and it gives us a tremendous amount of flexibility to invest in new businesses that longer term will drive more growth. So it’s not to say that we won’t, we’ll look at it from time to time and if it becomes ridiculously opportunistic we’ll continue to look at it versus some of the new growth initiatives but right now our feeling that we have our capital very well deployed to take advantage of some pretty significant long term dislocations.

[Unidentified Analyst:]

All right. Thank you guys.

[Jeffrey Solomon:]

Okay.

[Operator:]

Thank you. And I’m showing no further questions on the phone lines at this time. I would now like to turn the call back over to management for further remarks.

[Peter Cohen:]

Well thank you all for dialing in and as I think you’ve heard us say we are investing in this cycle and I’m pretty excited about some of the new businesses that we think we are going to be building, we will be building and you know let’s focus the selection gets behind us and we get back to kind of normalized market environment [Indiscernible] and we’ll be a beneficiary of it. But in any event the steps we are taking to diversify the business, we believe is definitely going to pay dividends down the road and give us a much more stable revenue and earnings base. So with that, thank you all, happy Halloween and everyone get out and vote. Great to somebody. Thanks everybody.

[Operator:]

Ladies and gentlemen, thank you for participating in today’s conference. This concludes today’s program. You may all disconnect. Everyone, have a great day.