Hello, and welcome to the inaugural edition of Ignite's new Fireside Chat series, spotlighting the executive shape in the asset management industry. My name is Peter Karnavas. We'll get started in just a moment, but first allow me to explain the player on your screen. On the bottom, you will see our audio controls. The slide-in bar allows you to adjust the volume, and the circular double arrows can be used to refresh your media player. Emily Larmer Emily Larmer

Thanks, Pete. Welcome, everyone, to Ignite's first Fireside Chat webcast. Here with me today is David Brown, the CEO and Chairman of Victory Capital. Dave, thank you for joining me today.

Hey, Molly.

Thank you. Before we get into the conversation, I just want to reiterate that we will be saving time at the end for audience questions, so please feel free to submit throughout the conversation, and we will get to as many as we can. Dave, so you've been leading Victory since August 2013 when the company became independent. Victory runs a suite of independent investment franchises that the firm has picked up through a series of acquisitions. Victory's been pretty open about its goal of reaching $1 trillion in assets under management. But as you reported yesterday, the firm had $329 billion at the end of April. So that's a long way to go. You said that acquisitions will help you hit that $1 trillion mark. So I was hoping that we could start up the conversation by discussing Victory's acquisition strategy. I guess broadly, what types of companies does Victory look to buy?

And again, thanks for having me. You know, if you go back to August 13, I mean, we were $15 billion when we did our management buyout back then. And so we've come a long way. And as you said, we have a long way to go. Thank you for joining us. Thank you for joining us. We have done some very large acquisitions relative to the size of what we did in the acquisition. And we've done some smaller ones. And each one that we do has its own unique piece that really helps our company do better.

So I guess, you know, to that point, how do you identify potential targets?

Really a lot of different sources. Of course, we know all of the investment bankers and they show us lots of opportunities. But I think a lot of them today, as we sit here today, go through relationships, go through networking, go through various different kind of channels with just understanding the industry. And we have a lot of people that reach out to us online. being a public company, people understanding that we've been acquisitive, we've been successful in our acquisitions. We get a lot of people reaching out to us.

You mentioned earlier that Victory has a history of buying firms that are large relative to the size that you are. And I guess large firms come in many different shapes, right? So what is the ideal model for you?

You know, we don't have an ideal model. I think, first, we're very focused on our model. And if you think about our model, we run a version of something that's somewhere in between a fully integrated firm and a version of a multilevel team. So unique to us, we think, is we have one platform. One platform that has administration and operations and technology, our distribution, and that's really run off of one platform. And then we have independent, autonomous investment franchises. And so these franchises that we have, they're all separately branded. They have autonomy around the investment process. So we don't have a global CIO that might be pushing down investment philosophy. Each one of the franchises has a CIO. And the way we operate is we're really generating unique portfolios, unique investment returns on each franchise. And they're sitting on top of a platform that's large, it's scaled. And the concept has always been is how do you have the concept of very focused, active investment management partnered up with sizable world-class operations, technology, administration, and distribution. How do you thread that needle? And that's our model. And so when we think about how we go about acquiring companies and what makes sense, we really think about our model and how it fits in.

Your recent acquisition was a U.S. business, which includes the Pioneer Funds Mutual Fund line. That deal closed just over a year ago. So first, let's talk about integrating the firms. You mentioned on your earnings call last week that the firm has achieved $104 million of the $110 million in expected synergies. So I guess, where were we able to find those cost savings? And what did you actually cut? And what's left to go?

Yeah, so when we do acquisitions, our concept when we start is, how do we make our business better? How do we make the platform better? So typically what we're doing is we're bringing on the investment franchise, the investment team, really in touch. And so they come over and they're doing the same thing they were doing before, same investment process, primarily the same people. and hopefully putting them in a position to focus all of their time on managing clients' money and helping them service. And so we try to put them in a situation where they spend 100% of their time doing those things. And so they come over and then what we do is we try to bring the rest of their business onto our platform. And so when you think about distribution and marketing and operations and technology, we're expanding our platform. So we're adding resources, adding people, potentially adding new vendors. And some of the pieces you don't need to bring over because there's duplication. So we usually find cost savings there. And then typically we go into vendors and try to utilize our scale and our size, sometimes in real estate. Sometimes we have duplicated positions in different areas. That's where most of the synergies come. But we use the term net expense synergies because really what's happening is we're investing in our business. and what we're doing is we're adding a lot of resources as well as saving and that net number, so there's an investment in that, that net number is the number that we reported and then the pioneer acquisition As you stated, we're almost substantially complete. We have close to all of what we've expected to see. And really, what we do, it's been the same with every acquisition, the same concept. We're bringing over the investment. So I guess with the Mooney in particular, I guess, you know, what's left? What's left to go? We have a few things left on the integration from a vendor perspective, from a system perspective, but primarily we're complete. From an investment perspective, from service and clients, from distributing, we're really pretty much done.

So I know that the deal included a 15-year global distribution agreement. One year in, how has that been going so far, and how has that impacted the sales of victory funds?

It's been tremendous. And the agreement that we have with the Monday is it's a 15-year exclusive distribution agreement of traditional active investment solutions is now its term. And really what that means is the Monday, our products that are being sold outside the U.S. by the Monday sales force around the world, If it's an active investment management, traditional investment management solution, they are selling products off of Victory's platform. Either the vintage Pioneer or the new Legacy Victory, they're selling everything off of our platform, and they have to sell that. We have an exclusive on that. and Amundi is a top 10 global manager with close to $3 trillion. And their sales force outside the U.S. is tremendous. And so today, through that distribution and through the acquisition, you know, we have clients in 60 countries. I believe of those 60 countries, 29 of them, we have over $100 million in clients. It's a really great opportunity for us to grow our business and get access to clients outside the U.S. We have been net flow positive since we've done the acquisition pretty significantly in that channel. There's a lot of momentum. We've launched new products. We've launched new usage. We have some country-specific vehicles we've launched as well. We've increased our sales force outside the U.S. and here supporting inside the U.S. that channel. So it's been tremendous. And Amundi's been just a really tremendous partner for us. And they've ownership in our company. And that has been a great, great thing for us.

I want to touch on a point that you brought up in terms of expanding your sales force. Could you talk a little bit about that? What types of positions have you hired and filled, both related to Moondi and if outside of the Moondi deal as well?

So outside the U.S., we've increased the number of people that we have working with the Airbnb sales folks. Inside the U.S., the service and the RFP aspect of our business, we've increased the support outside the U.S. And then inside the U.S., from institutional U.S. intermediary and all of the support around that, we've increased our sales. Thank you so much for having me. So think of inside the U.S., your traditional wholesaler, national accounts, RFP support, client service, same thing on the institutional side, sales and service. Outside the U.S., really salespeople, servicing people, and then inside the U.S., supporting our outside the U.S., really on RFP, servicing folks as well. So almost everywhere we've increased and invested in

What kind of technology are you referring to?

Some things we do, some proprietary technology around RFP, things around the ability to go and to understand what buyers are thinking, what potential clients and clients are thinking of, what to buy next, and potentially making our salespeople know where to go, where our products would be in demand. So a lot of things around that.

Interesting. It changed gears a little bit. You know, Victory made headlines recently for its bids to buy Janice Henderson, which now is poised to go private in the coming months through a deal with Triant Fund Management and General Catalyst. Now, it's not often that we as the public get to see how the negotiation process works between two firms and the way that we got to see it in this situation. So I guess what I'm wondering is how did your go at buying Janus Henderson differ from the approach that you take to other firms?

So first, we followed a process that they defined. And it started off in a very private way where we submitted offer letters in a private setting. And then afterwards, we made the decision to submit offers in a public setting. That was very different for us as well. I think the way and the structure of how it occurs typically is very unique to each deal. This was unique to that opportunity. And so, you know, how each potential transaction occurs really is unique to the process that the firm that's selling is set up. So we just follow the process.

Are there any similarities between how the Janus deal unfolded? I guess not how it unfolded, but how the process worked out with the approach that you would take to, say, Namundi or any other company?

I think the Janus was very unique for us and potentially, like you said, unique for the industry. But I think each transaction or potential transaction is unique, and that's kind of the standard. So it was pretty unique.

Oh, sorry. I was just asking, what was it about Janice Henderson that was so attractive to Victory?

Yeah, first, I mean, Janus is a fantastic organization. They have great investment professionals, and they start there with everything, and so they do a great job for their clients, and of course, that's attractive. The other thing is they sell, and they're clients. They sell the channels that we're in, and they're clients. A lot of them are relative power clients, so that's always attractive. And as we've said publicly, we're looking to get size and scale, and Janus is

So, you know, as you mentioned earlier, and again, just now, you know, the idea of, you know, buying a big firm. So, I mean, will the way that the Janice Henderson deal, you know, shook out, will that shape the way you approach other firms? Yeah.

No, not really. I think, like I said, each opportunity is unique. And we've been pretty active. Like I said, we've done eight transactions since the year 2014. So we've been through a lot of different scenarios. And the core part of what we're trying to do is better our business, make our business even more competitive. and many more.

So I guess moving away from the world of acquisitions and victory, I wanted to talk a little bit about your ETF business. The first Victory Shares ETF launched in 2023, and now you have about $21 billion in assets in U.S. ETFs, at least. That was at the end of last month and according to Morningstar. How have you been able to scale up so quickly?

Yeah, I mean, we actually, we bought in 2015 a very small organization called CNB, which is the Compass Official Model Portfolio. That was our original entrance into, you know, kind of into the ETF business. And so over the years, what we've done is we have been able to Thank you for joining us. We have a free cash flow series suite of products. We're launching new products. We've launched a product off of the Pioneer platform. And so I think the innovation on product and the training of our sales force and the breadth of our distribution has really allowed us to scale up. And now our U.S. listed ETFs are available outside the U.S. In Asia, we're kind of expanding.

So I guess why those markets?

Why outside the U.S.?

Yeah, why have you been focusing on the earth?

Yeah. I think it's just, again, it's white space for us, and I think there's great buyers. You know, some of the geographies outside the U.S. really want the U.S. U.S. food ETF, and it's a product set there, I think, travels well. I think it fits well in a lot of different portfolios, and so, you know,

What is the distribution partnerships? What types of distribution partnerships have you focused on with your ETF line?

So in the U.S., a lot of the larger intermediary platforms, there's a lot of the larger names. We're just getting started, but we're being led by the MRD distribution groups.

So, I guess, are there any other specific channels that you're focusing on in the U.S., either with your ETFs or even your mutual funds?

I mean, you know, I'd say intermediary, for sure, on the institutional side a little bit. But I think that's what we're selling in the products.

So we have one question that came in that asked, do the various franchises also have their own distribution teams or do you have a sales team at each of them?

Each of the franchises do not have their own sales team. We typically have a product specialist. We're utilizing a much larger sales team that represents all of our products on the different channels.

How do you think about acquiring a distribution team versus organically growing your distribution team?

And how do you integrate them? So we have what we've done acquisitions in certain situations. They're great distribution professionals. We bring them onto our platform and they wind up representing either All of the products that we have to offer. And so what we're always doing is we're always thinking about how do we emerge a platform. So if there's an acquisition that has real distribution, like Pioneer, we brought on a good amount of the Pioneer sales executives, sales people, marketing and servicing people from the web.

So I guess how do you sort of determine when the gaps are filled by an external person or you have enough people there from the company that you've acquired?

So not an exact science, but we're looking at market demand, channel demand for the products. We're looking at our territory coverage. We're also looking at skill set. And so as the buyers become more specialized, we're thinking about partnering up with our salespeople to be more specialized. So it really depends on a number of different inputs.

This is kind of a fun question that came in. Most CEOs tend to be pretty corporate and conservative when it comes to social media, but you are much more active and informal than most. What informs your approach?

That is a fun question. You know, I really believe on social media, there's a lot of corporate speech. And I think on some of the social media that I participate in, I think, you know, humanizing leadership, humanizing people in leadership roles, I think really is important. and a lot of funds. It's very effective, especially with the messages. And so my approach to social media is less around, you know, being more corporate and more around humanizing, you know, the role in humanizing, you know,

It's interesting because there's definitely a variety of approaches that you see taken around the industry in terms of social media presence. We had another question that came in. As Victory continues to grow its AUM, can you walk through the ways that that scale translates into benefits for end clients? Sure.

Yeah, I think it's around product choice. So the ability to deliver more products, so giving a client's choice. I also think the ability to service clients. And so when you think about the ability for clients to get information. Also, I think depth of resource for the firm. That's on the investment side, making sure that an investment professional and investment teams can build portfolios with all the resources they need. and be able to reinvest into that, I think really benefits clients. And then I think the ability, not just to service the clients, but to individualize the service to clients, I think is really important. And I think getting larger and having scale and being able to do all those things is a must-have as we think about the future for the industry, not just for the industry.

Yeah. So I guess another question that came in was around Amundi. So I guess, how are you thinking about balancing the operational efficiency and vendor consolidation while still ensuring that your team has the data analytics and flexibility needed to compete effectively?

Yeah, I think we have that balance. I mean, I think you're going to let the client lead. You know, you're going to give clients everything that they need, and You know, over the years, and specifically with the Pioneer, you know, the acquisition.

Someone else asked, what makes a great acquisition? So what's the biggest selling point for an independent firm to become acquired by Victory?

I think that there's a number of different things. And so you think about that anybody that we acquire an independent firm, first, they're keeping your brand. You keep your brand, you keep your investment process, so you get to practice your craft and do your brand. You also get put in a position where you're hopefully going to spend all of your time focused on managing clients' money, and you're going out and speaking to clients when you have them, so you're going to spend all of your time doing what your clients want you to do, which is manage my money, and talk about how you manage. And in the last piece, you get to do that on a platform that's sized and scaled in this world class. And if you do that really well, you know, the victory platform will get you more points. And so I think it's a really unique proposition for independent firms. And then we have a proven track record of being successful. We have done, like I said, eight acquisitions, and I think our results speak for themselves. And so we see that a lot. That question is asked a lot, but we see all of the people involved. for partnering with us and wanting to have discussions and potentially partnering up with our partners.

So, I mean, I guess, you know, you mentioned the eight acquisitions. I mean, just the fact that, you know, as you grow up the scale, you know, with Amundi, for example, there's the distribution part of it. So, I mean, as you buy more, are you able to use any of the other investment franchises or anything you've gotten with those deals to help sort of build your attractiveness as a buyer or to help, you know, lure potential companies? Yeah.

Yeah, one of the things that we'd like to do is we'd like for potential acquisitions targets to come speak to some of our franchises and say, what has been your experience? And I talked about auto track record. I think the best track record you can have is where you can go to the person and say, you were in this position before. Now you're part of victory. How would you go after that? And I think that that goes a long way because it's not just myself and the leadership team talking about it. It's the people that have gone through the full circle experience.

I guess I was referring to, you know, the Amundi distribution platform. I mean, it sounded like what you were saying, if I'm understanding correctly, is that any, like, would any firm that you acquire, like, would they then be able to be, you know, their products be sold on the Amundi platform?

Yes, so the agreement basically encompasses any business, product, or platform that's on our platform. And so in the future, if we were to do two more acquisitions and there were investment products, they could get sold through the money distribution agreement. And that's a huge attraction to many because they're going to get access to U.S. distribution and also outside the U.S. distribution.

What kind of feedback have you gotten on that? If you've sought to buy anyone aside from Janice since the Amundi deal, what type of feedback have you gotten on that point?

We always thought that that was a very unique aspect of the transaction in partnership with Inward Youth is getting access to a close to $3 trillion manager that has all of these distribution relationships and networks out front in the U.S. And so we always have known that this was a differentiator for us. Not many firms in the U.S. of our size So it's been well received, and even at the time of the announcement of the employee acquisition, we knew it was going to be well received.

Well, thank you so much for joining us today. We really enjoyed your conversation. I will pass it on over to Pete for some closing remarks.

Thanks, Emily. And just thanking everyone for attending today's Ignite's Fireside Chat. I'd also like to reiterate our thank you to Victory Capital Chairman and CEO David Brown for sharing his insights, and to you, Emily, for leading today's conversation. To our audience, please keep an eye out for the follow-up email for access to the archived webcast for this event, along with updates for future installments of our Fireside Chat series, as well as other upcoming Ignite's webcasts. Thanks, everyone. Have a great rest of your week.

Thank you.