JMP Group LLC
Q4 2017 Earnings Call Transcript

Published: 15 Feb 2018

[Operator:]

Welcome to the JMP Group's Fourth Quarter 2017 Earnings Conference Call. Please note that today's call is being recorded. [Operator Instructions] I will now turn the call over to Andrew Palmer, the Company's Head of Investor Relations.

[Andrew Palmer:]

Good morning. On the line with me today are Joe Jolson, JMP Group's Chairman and Chief Executive Officer; and Ray Jackson, the Company's Chief Financial Officer. We are joined by Carter Mack, President of JMP Group. Before we begin, please note that some of this morning's comments may contain forward-looking statements about future events that are out of our JMP’s control. Actual results may differ materially from those indicated or implied. For a discussion of the uncertainties that could affect the Company's future performance, please review the risk factors detailed in our most recent 10-K. With that said I'll turn things over to JMP's Chairman and CEO, Joe Jolson.

[Joe Jolson:]

Thanks, Andrew. We had a better-than-expected fourth quarter with operating earnings of $0.16 per share, which for the first time since 2016 included a positive contribution from net corporate income of $0.03 per share. JMP Securities continued to produce at near-record levels, contributing $0.12 per share and annualized return on average equity of 38% in the quarter and our asset management subsidiaries were turned to profitability adding $0.02 per share to operating earnings. Importantly, with net investment income of $0.09 per share at our publicly traded partnership, we covered our quarterly cash distribution for the first time in 2017. Early in the year, our performance suffered from a depressed equity capital markets environment and from the turnover of our first two CLOs, which diminished asset management fee income and challenged us to redeploy a material amount of cash that was funded with 8% long-term debt. As the year progressed, our operating earnings improved steadily and we reinvested our capital back into our CLO business and U.S. ECM activity also did recover. In a better environment, JMP Securities achieved impressive market share gains and grew its ECM revenues 83% year-over-year, while U.S. equity underwriting fees increased 27% overall. We're off to a good start this year with record investment banking revenues for the month of January. Also we recently priced the reset of CLO III, which we expect to close next week. We hope to execute on a new CLO around midyear, which would complete the reinvestment of our capital in our credit business and would return our asset management segment to more consistent profitability. Before I continue, Carter will take some time to review the progress of JMP Securities last year.

[Carter Mack:]

Thanks, Joe. JMP Securities rebounded in 2017, driven by $77.3 million of investment banking revenues, the second best annual total in our history. Those revenues were well diversified across our four industry groups with 37% in healthcare, 29% in financial services, 19% in technology and 14% in real estate. Our brokerage revenues came $21.1 million bringing JMP Securities total revenues to $98.5 million for year. After a slow start to 2017 in the first quarter, revenues improved sequentially each quarter. The second half of the year was particularly strong with $55.4 million of revenue and $0.25 of operating EPS at JMP Securities. The main driver was a huge improvement in our equity capital markets business which generated $38 million from IPO and follow-on equity underwriting in 2017, up 83% from $20.7 million in 2016. Another big driver was the improvement of our convertible securities business, which produced $11.9 million of revenue for 2017, after putting up just $1.2 million for 2016. Our M&A business also had a solid year with $22.7 million of revenue compared to a record $28.6 million a year before. I'll spend some time going through each of these business lines in order to give you a sense of the progress we've made and the reasons behind our optimism about JMP Securities future. We were able to increase of our equity capital markets revenue by 83% in 2017 due to the rebound in overall U.S. ECM business, which grew by 27% last year, if measured by underwriting fees paid. More importantly, in our four target industries of technology, healthcare, financial services and real estate, U.S. ECM fees grew by 55%. We were involved in 17, IPOs in 2017 versus 9 in 2016 and 56 follow-on equity offerings versus 25 the year before. Our above-market growth rate particularly in our focus sectors demonstrated our ability to gain market share instead of benefiting solely from a rising tide. Our share of total U.S. ECM fees paid in our target industries increased from 73 basis points for 2016 to 96 basis points for 2017. We believe that this growth is due to a number of factors, most importantly, our buildout of our equity capital markets team over the past couple of years. We added two senior equity capital markets professionals focused on the technology and healthcare sectors in late 2016 and early 2017, and also increased the overall staffing of the group. This has enabled a more targeted and productive calling effort by our capital markets professionals covering technology and healthcare sectors that accounted for 74% of the U.S. ECM fees paid in our four targeted industries last year. We continue to focus on increasing our role and economics on offerings in all four industries and made nice progress in 2017, serving as a book runner of 11 offerings versus just three during 2016. While we were pleased with last year's results, and were fortunate to benefit from a healthier market environment in 2017, U.S. ECM revenue levels in our target industries were still well below those reached in 2013, 2014 and 2015 when average annual revenues in those industries was $4.6 billion. In comparison, 2017 produced only $3.7 billion of revenues in those sectors following a depressed 2016 that produced just $2.4 billion. This leads us to believe that if recent market volatility subsides and the environment again turns favorable, we could see another leg up in U.S. equity issuance and underwriting revenues in 2018. Our results early this year bear that out. We've already participated in three IPOs and seven follow-on offerings, book running one and have a strong pipeline of equity deals that should come to market in the next few months, if conditions allow. Our convertible securities business also experienced significant growth in 2017 as we participated in 16 convertible transactions compared to four in 2016 and dramatically increased the number of bookrun deals with seven versus just one in 2016. This improvement came as the result of the consistent commitment to the area over many years and a continuing emphasis on the product in discussions with clients. We believe that JMP Securities has established a premier convertibles practice among boutique investment banks, ranking 13th among all book runners of U.S. convertible issue and first among firms outside both the bulge bracket in 2017. On the M&A front, while 2017 was a down year compared to our record 2016, we continued to strengthen our strategic advisory practice and expect that it can grow materially over the next few years. Our $22.7 million of M&A revenue for 2017 missed our internal plan of $25 million mainly because of the couple of deals that slipped into January rather than closing at year-end. Even so, our 2017 number far surpassed the run rate for the years preceding 2016. We feel that with all our bankers across all of our industry groups focused on the product, we have significantly enhanced our clients awareness and perception of our advisory capabilities. Our pipeline looks good and we've already closed three deals this year with the senior M&A bankers we've hired over the past few years now reaching for productivity and with plans to bring in a couple more this year, we are confident in our ability to grow our advisory business in 2018 and beyond. To sum up, 2017 turned out to be a very good year for JMP Securities Investment Banking Group with strong momentum during the second half that has continued into 2018. We added to our equity capital markets capabilities, which paid off in the form of increased market share and an additional book-run transactions. Our convertible securities franchise expanded its track record of book-run transactions and it's reputation for getting tough deals done, and our strategic advisory business a significant potential for growth in what's a currently a favorable environment for middle-market M&A. Before I finish, I also want to touch on our institutional brokerage business, which is a key part of our investment bank not only due to it's ability to provide proprietary equity research and trading execution services to our institutional customers but also because of it's ability to distribute the security offerings that we originate. Our brokerage revenues of $21.1 million for 2017 were down 11% year-over-year as the overall U.S. equities commission pool was under significant pressure once again. The latest McLagan report indicates that the cash wallet for all brokers decreased by 15% for the first nine months of 2017, when compared to the same period in 2016. Consequently we know that JMP Securities in fact gained market share and McLagan shows that our market share gains among smaller peer group were even been greater. MiFID 2 is a topic on the minds of many in the institutional equities business and we have devoted a great amount of study and thought to it. As the market adjusts to the effects of MiFID 2 we are working closely with our brokerage clients to be sure that we continue to deliver the value added research and execution services they've come to expect from JMP securities. The changes have yet to fully play out fully and will take quite some time to do so but we are confident that the investment we continue to make in our brokerage platform will benefit our institutional clients and that we will be rewarded. Thank you Joe.

[Joe Jolson:]

Thanks for that that summary, Carter. Against that backdrop, JMP Group produced operating earnings of $0.20 a share last year versus $0.48 in 2016. Notably, operating platform EPS, which is derived from JMP Securities and our asset management businesses was up 138% to $0.31. JMP Securities contributed nearly all of that amount round into $0.31 up form $0.05 in 2016. Asset management rounded to $0.01 compared to $0.07 for the prior year, primarily due to transitional year at JMP Credit and HCAP Advisors. Since Carter already did a deep dive into JMP Securities, I'll focus on asset management and our principal investments. Asset management earnings were disappointing last year but directionally not a huge surprise due to the redemption of CLO I and CLO II early in 2017, which initially lowered our CLO management fees by more than 60%. By the end of the second quarter, we closed CLO IV, which increased AUM in that business by $450 million to a total of approximately $810 million, and at the end of July, we arranged a $200 million credit facility to warehouse loans for CLO V, which we hope to execute on by midyear. If so, JMP Credit's earnings for the second half of 2018, could recovered to be at or above the level in 2016. At Harvest Capital Credit we suffered unusually high credit losses during 2017, which resulted in the clawback of our incentive fees and hurt asset management earnings by roughly $0.02 a share. Net corporate income, while adding $0.03 of operating EPS for the fourth quarter, translated to a loss of $0.12 for the full year. In 2016, net corporate income contributed $0.35 of operating EPS in part due to a onetime $0.10 gain on the sale of RiverBanc. The primary reason for the decline in 2017 was the redemption of CLO I and CLO II early in year, which increased our net investable cash, funded with 8% long-term debt, to $2.59 a share at the end of the first quarter. As 2017 progressed, we made steady progress at putting that cash back into the CLO business and ended the year with $0.77 of net cash to invest. We continue to expect that net investment income could cover our fixed corporate cost once CLO V closes, assuming relatively stable conditions in the non-investment grade credit markets. We were disappointed last year that Workspace Property Trust was enabled to complete its planned IPO in the fourth quarter, primarily due to unstable equity markets for property reach. The company has pulled its registration statement for now and is considering other ways to raise capital to grow, what is a successful developer and manager of suburban office space. At the low-end of the filing range, a completed offering could have added roughly $0.20 a share to our net investment income for the quarter. I want to spend a few minutes giving an update on the four strategic initiatives, we outlined a year ago. Our first initiative has been a long-term plan to grow our strategic advisory business to $50 million of revenues by 2021, and Carter updated you on our progress in that area. Our plans called for doubling of these revenues over the next four years and the key part of our approach has been to work on increasing the average fee earned per transaction. In 2017, our average fee was $1.3 million, compared to $850,000 just two years earlier. We have achieved this to some degree by introducing our advisory capabilities or reintroducing them to some of our publicly-traded companies within our research coverage universe. This effort has enabled us to compete more effectively for larger transactions and we are hopeful that our advisory – average advisory fee will continue to grow as a result in coming years. Our second objective was to protect JMP Securities franchise value during the industry downturn through selected investments in the firm's capital markets platform with the goal of increasing our U.S. ECM market share when industry conditions normalize. As Carter mentioned, total U.S. equity underwriting fees in our four industry verticals were 55% year-over-year in 2017, while JMP Securities revenues in that area had jumped 83%, indicating a material increase in our relative market share. Our overall capital markets revenues, which were made up of equity and debt underwriting fees, as well as brokerage revenues, were up 40% year-over-year for the fourth quarter and 55% for the full year. Recently, stock market volatility has increased materially which could negatively impact corporate appetites for raising new capital if it persists in the near-term. Longer term, however, we are excited that the new tax rules limit on corporate interest deductibility seems to favor equity-over-debt financing for growth companies for the first time potentially ever. If this thesis proves correct, even a modest shift from debt-to-equity and the capital structures of small-to-mid-cap growth companies could be very favorable for us given our product mix. Our third corporate initiative was to explore ways of growing our asset management platform. In November, we made a minority investment in Astor Investment Management, a $2 billion Chicago-based registered investment advisor focused on tactical asset allocation strategies using a proprietary macroeconomic model. Not only was the investment immediately accretive for our shareholders, there is also very limited overlap between the distribution channels at Astor and Harvest Capital Strategies, which could offer both companies potential revenue synergies going forward. We will continue to evaluate opportunities such as these to broaden and strengthen our asset management business. We ended last year with sponsored AUM, which includes the asset of managers in which we have an economic interest of $5.2 billion, up $1.5 billion from the previous year. Finally, our fourth initiative was to redeploy our investable cash balance, which was unusually large as mentioned earlier in 2017. Now while much was reinvested in the second half of the year, there is a lag inherent to committing to new loans, closing on them and then earning income. We hope to complete the reinvestment process and cycle the remaining capital back into our CLO business in the next six months by executing CLO V if market conditions allow. Earlier this month, we priced a reset of CLO III, which as I mentioned is expected to close next week. The reset will extend the CLO’s reinvestment period for two years and it lowered its weighted average cost of funds by 55 basis points to LIBOR plus 135, the level set when we refinanced the portfolio a year ago. The reset is also expected to trigger an early debt retirement charge of $1.2 million net of minority interest in the first quarter, but thereafter, is expected to improve the return on our capital invested in CLO III by more than 400 basis points. In addition, it will have a benefit of accelerating deferred tax expenses from the refinancing done a year ago, which we think that substantially reduce our shareholders' 2018 tax liabilities on a normal dividend distributions per quarter. We ended the year with an adjusted book value, which adds back accumulated noncash depreciation and amortization expense related to Workspace of $5.23 a share. This amount fully reflects the onetime charges taken in the second and fourth quarters to refinance CLO III and our 7.25% long-term debt respectively. In addition to that, we took a tax charge of $0.07 a share in the fourth quarter to reflect the impact of new lowered corporate tax rate on our deferred tax assets. We've already announced monthly cash distributions of $0.03 a share for the first quarter 2018, equaling $0.09 for the quarter, unchanged from the previous quarter. During 2017, we spent an additional $2.1 million, or the equivalent of another $0.09 a share, to repurchase 400,000 of our shares. In December, our Board of Directors authorized us to repurchase another 1 million shares in 2018, giving us an additional means of returning capital to shareholders. To conclude, I want to thank the company's employees and independent directors as always because of their dedication and hard work, JMP Group and its shareholders can be proud of the company's strong finish to last year and we're very optimistic about this year's prospects. Operator, we will be happy to entertain any questions. Thank you.

[Operator:]

[Operator Instructions] Your first question comes from Ann Dai with KBW. Your line is open.

[Ann Dai:]

Hey, good morning. Thanks for taking my question.

[Joe Jolson:]

Sure, Ann.

[Ann Dai:]

First question for you guys – good morning, thanks. First question for you guys is going to be on comps. So it felt like it was a pretty good – there’s a pretty good comp control into the end of the year. I guess I'm just curious whether the lower ratio was more driven by accrual or an indication of some change in comp? It looks like headcounts about even, so just wanted to think ahead into next year and if next year's a growth year for both broker-dealer and the investment income side of things. Should we be expecting to see that comp ratio come in a bit on a full-year basis?

[Joe Jolson:]

I think that – for us our comp ratio ordinarily is lower in the fourth quarter because we tried to be conservative at the beginning of the year. There was a – I think it was 2015 maybe where it was like – it was the first year ever where we had to chew it up to the detriment of our earnings in the fourth quarter. So I mean, we've been pretty consistent in that. There really hasn't been a change in any of our other compensation policies. I think that the – if revenues growth would be some leverage on the comp line obviously, the other positive hopefully going forward is, there is very little compensation attached to the net interest income coming from the CLO dollars. And so most of that revenue drops to, if not all of it, drops to earnings. And so the impact of the turnover also distorts – in our CLO investments earlier in the year also distorted our comp ratios a little bit last year. It made them look higher than they otherwise would be once that capitals deployed.

[Ann Dai:]

Okay, that’s helpful. Thank you. And my other question for you is just on headcount and where you see growing. So you, Carter, talked a little bit about building up ECM and M&A capabilities over the last couple of years so if we look ahead, how do we think about headcount growth for you guys? What are the areas where you're still looking to hire and expand opportunistically? Or is it more that now you've made these investments – you're more focused on just getting the balance sheet fully invested and putting cash to work?

[Carter Mack:]

Well, I would say more focused on getting balance sheet fully invested and putting cash to work. Although, we do – we are looking to add a couple of senior bankers over the year because we think there's some good opportunities particularly in healthcare M&A. So those are initiatives but there's no outsized growth plans for the investment bank. We're starting to see, as I mentioned, the benefits of some of the growth initiatives we put in place over the last couple of years.

[Joe Jolson:]

Yes, I mean, I think if you look over the last few years, our headcount didn't shrink a lot in the downturn, I think it was down 8% in that two-year period, maybe 9% and most of that was attrition. So we didn't – as part of the reason 2016 earnings were so soft at JMP Securities was that we didn't chase the revenue curve downward by slashing our headcount. Generally speaking, we're pretty efficiently – you look at our productivity numbers of the investment bank and the like we are pretty efficient. And so I think that because we didn't slash headcount, we didn't have to catch up to the revenue curve this year. And so what you saw was comp was relatively under control with revenues going up and the operating margins improved quite a bit at JMP Securities, you know as a result as well as non-comp was relatively flat. So shareholders benefited from an increased market share and also from leverage on the comp line.

[Ann Dai:]

Okay, helpful. Thanks.

[Joe Jolson:]

Thank you.

[Operator:]

Your next question comes from Alex Paris with Barrington Research. Your line is open.

[Chris Howe:]

Good morning, this is Chris Howe sitting in for Alex.

[Joe Jolson:]

Hey Chris.

[Chris Howe:]

I had a question in regard to the success in investment banking, you're seeing thus far in 2018. You mentioned the three IPO, seven follow-on offerings and bookrunning on one deal, were any of these carryovers from 2017? And just some additional color on what you're seeing thus far and the level of optimism moving through the year?

[Carter Mack:]

Well, on the equity offering front, none of those were really carryovers from 2017. I mean, they were all planned deals so that either companies were taking advantage of the market environment in January or had planned to launch deals post year-end. So it wasn't – they weren't deals that they were planning on doing in December that rolled into January. I would say the pipeline for IPOs has increased pretty dramatically early in year as we've, one mandate on a number of transactions in both – particularly in technology and healthcare. On companies that we've been calling on for a while, that we've had a nice success rate of getting involved in a number of IPOs that should come over the next few quarters. So that's one factor and then on the M&A front, we had I'd say a couple of deals that closed early in the year that we knew from probably November onwards that they were probably going to close in 2018 rather than 2017. And we see a nice pipeline of transactions that should close first and second quarter of this year with a nice pipeline of engaged transactions, so we feel good about the start to the year.

[Ray Jackson:]

Yes, just to add one thing to that, in that Workspace would've gone public in the fourth quarter, we would've gotten $2.5 million fee in our plans. So part of the reason we're slightly below on the advisory side is a chunk of that fee was advisory revenues and so when that deal pushed, that affected it as well.

[Chris Howe:]

Okay. And then I just had one quick follow-up, just some general commentary on how you would characterize the mix of the pipe and versus where it was this time last year for M&A?

[Carter Mack:]

I would say, we have more transactions that are closer to closing beginning of 2018 that we bid in beginning of 2017 and the pipeline of engaged transactions is similar.

[Chris Howe:]

Thank you.

[Operator:]

Your next question comes from Jeff Briggs with Singular Research. Your line is open.

[Robert Maltbie:]

Nice quarter, this is Robert Maltbie sitting in for Jeff Briggs. My first question is regarding the swing factor, if you want to call it that, from uninvested on CLO if you fully invest posture very soon, what was the impact on operating income?

[Joe Jolson:]

Yes, I think that – Hey, Robert. I think that it really depends on what happens in the next four months or five months in the markets. But just to give you a point of reference, the CLO credit spreads have tightened at this point as short rates have been going up. And I mentioned we just did that reset of CLO III at LIBOR plus 135 basis points, so asset spreads have come in as well but the net of the two is the return on our capital that we would be reinvesting in the CLO businesses is somewhere around 14% to 15% now I would guess and I think of short rates go up some more that could improve north of 15%. So I would say that a year ago, the return on that capital was closer to 9% or 10%. So that gives you some framework in terms of that. Now the cost of the money is 8% and so it is invested in essentially cash so we're making a onetime kind of return on the money market.

[Robert Maltbie:]

Thank you. That was part of my next question is the impact of respectively three rate hikes and it looks like that would have a favorable impact on your CLO book?

[Joe Jolson:]

It has. As I mentioned, primarily because the investors in the CLO debt at least at the investment-grade are at the AAA, AA, A level or the global banks and when LIBOR was 25 basis points they have a minimum kind of return on assets and equity that they are targeting and so the spreads widened out to couple of hundred basis – 250 basis points. And so as LIBOR now roughly 140 basis points or whatever, the spreads have narrowed similarly and I think if LIBOR goes to 2% you might actually see those spreads tighten closer to 100 basis points. Back in 2007, our first CLO was the average cost of funds was LIBOR plus 72 basis points, as a point of reference. Of course, the market was overheated then in hindsight but that gives you at least a point of reference to all-time lows at least for us in terms of the cost of funds.

[Robert Maltbie:]

Thank you. Relating to the investment banking environment, you mentioned that last year was a great year, a good year. Looking at the prospects so far this year, what was type of – can you give us a little color on what type of operating leverage you have, given that the overall level is still below, significantly below prior year peaks?

[Carter Mack:]

Yes, I mean, I think on that prior question we talked about the fact that we don't really have plans to increase headcount significantly in 2018 on the investment banking or equity capital markets side and I don't believe we need to on the research or sales and trading front either. So we feel like there's a lot of operating leverage if we got back to kind of overall U.S. ECM revenues like we saw in the three-year period between 2013 and 2015, that's another $1 billion or so of overall fees up from $3.6 billion, I think of overall fees that we saw in our four industry groups in 2017. So we think there's a fair amount of growth in equity underwriting that could happen in 2018. Joe also mentioned, we think there maybe some trend to equity financing over debt financing given the new tax law. So I feel like there's a lot of operating leverage in the platform. The growth in our M&A business also gives us optimism on that front as well.

[Joe Jolson:]

Last year, we had a soft first quarter and an improving second quarter and in the second half, we were at record earnings at JMP Securities. Robert, if you annualize the second half and just conditions are stable to what they were in the second half of the year, that would've been $0.50 annualized. So I'm not saying that that's going to happen but that's kind of where it was. So we'll see as the year progresses. This recent volatility, it creates an extra unknown in terms of the timing of when companies might want to raise new capital. But I think that kind of gives you a framework $0.31 last year could be $0.40 to $0.50 this year depending on the environment. If conditions are reasonably stable.

[Robert Maltbie:]

Great. Couple of questions relating to swing factors. You mentioned the Workspace IPO being pulled because of difficult environment for REITs. First question is what type of environment would you need to see that possibly getting to market? And then my second question relates to the asset management platform in terms of the operating swing factor from relatively down year to maybe a better environment for that portion of your platform, your business?

[Joe Jolson:]

Okay. So Workspace pulled its IPO for now and is looking at alternatives for raising private capital to grow. So I wouldn't be expecting that to come back, but they may be able to at least for the next 6 months to 12 months. I think that from the standpoint of the asset management business, I think I mentioned the turnover of our CLO assets under management early in the year essentially lowered revenues in that business by 60% for the first half of the year and costs were similar, so that was negative operating leverage. So that business went from earning roughly $0.04 a share in 2016 to breaking even last year. And CLO IV got done in the middle of the year now they're profitable again, modestly profitable but if CLO V gets executed, the second half of next year, they should be back at that kind of $0.04 kind of earning rate maybe a little bit higher because assets under management would have fully recovered at that time, maybe even be a little bit higher. And I also mentioned the incentive fees for HCAP were basically wiped out last year for credit losses. There may be some spillover into 2018 from that because it's a clawback three-year look back, but we would be hopeful that there would be some improvement in incentive fees as 2018 progressed and the base management fees cover the fixed cost of the business but it was slightly profitable as well last year but obviously, the incentive fees is a big part of that drops to pretax earnings. So that was a couple of cents swing, so those two things primarily I think. The two of those together would be a better year in 2018 and an even a better year looking into 2019 just from that, those two things. Hopefully, that helps you on that.

[Robert Maltbie:]

Yes, thank you. Final question relates to MiFID. I know MiFID impacts international business funds there, more exposed there, adopting that here maybe in a quicker fashion. What have you seen and what are your expectations in terms of the headwinds created by MiFID moving into 2018?

[Carter Mack:]

Well, I pronounce it differently, it's called MiFID too. But we spend a lot of time over last year talking to our clients and preparing for MiFID II and the possible effects of our business. I would say it's hard to tell early in 2018, in fact, our net commission business is up nicely over last year so far this year. So, so far, we aren't seeing necessarily the effects of MiFID II negatively on our business. Obviously, we're planning that there would be some pressure on commissions especially from the bigger asset managers, but so far the business has done well.

[Joe Jolson:]

In the aggregate, I mean, if you just look at the different things, we think that MiFID will effect us less than our peer group just because of the less concentration among the global asset management companies in our client base than average. That being said, the first part of the year, volatilities increase, as Carter mentioned, so whatever negative impact there might be from MiFID has been offset by higher volatility and, also I think Carter mentioned in his prepared remarks, we did gain some market share last year as well. So those are the kind of variables that will result in how we do this year I think in that business.

[Robert Maltbie:]

Thank you. That’s all I got.

[Joe Jolson:]

Thanks for all the questions. Operator, I don't think there are any more questions, are there?

[Operator:]

We do have a follow-up question from Ann Dai with KBW. Your line is open.

[Ann Dai:]

Hey, thanks for the follow-up. Just one on tax reform and corporate structure. So, obviously, C-corp conversion is a bit of a hot topic today. Just curious having had some time to digest the proposal, do you guys feel like there's a universe in which it might makes sense to return to C-corp structure, maybe loss a bit in after-tax earnings, but potentially lead to a larger investable universe and would that be a feasible option for you guys?

[Joe Jolson:]

Yes. We’re going to spend time now that the dust settles on end year to evaluate whether that makes sense or not. Obviously, as our investment income improves, which is the primary reason we converted to a PTP, it's a little bit more dilutive projecting out than it would've been last year, I wonder if might not have had any real effect on our results. So – but we'll look at that, there's some level of lower earnings if we think that broader distribution of our stock could lead to a better valuation that it might makes sense to do it. So it's been a month and a half and right at the end of the year too. So there's still a lot of interpretations coming out, but we've got our folks working on it internally, and we'll hopefully have a decision whether we want to do that this year by the end of the – by the time we have our call after the first quarter in late April.

[Ann Dai:]

Yes, okay. Thanks for the thoughts.

[Joe Jolson:]

Okay.

[Operator:]

There are no further questions at this time. I would turn the call back over to Joe Jolson.

[Joe Jolson:]

Yes. Thanks, everyone, for your interest and all those good questions. We look forward to updating you at the – I think at the end of April with our first quarter results. Thank you.

[Operator:]

This concludes today's conference call. You may now disconnect.