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Performance and People Changes
Marc Irizarry – Goldman Sachs: Just digging a little deeper into performance of active equity and fundamental equity in particular. Can you talk, just a little bit about some of the people changes and then, should we expect that there’s sort of a go forward replacement cycle, because if you look at the organic growth rate in active equities, it actually improves sequentially. So, should we think about some of the people changes, maybe pressuring where you are with consultants and fundamental equity and just maybe address to performance and people changes there?
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Laurence D. Fink – Chairman & CEO: That’s such a good question. I am going to give it to Rob.
Robert S. Kapito – President: We have continued to build investment teams that can weather the different cycles in the market place, and we are looking for teams to deliver consistent long-term performance, and as you know we’ve spent a lot of time and money over the last few years investing in the right talent to build out the right teams needed to deliver performance, and you should expect that we are going to be very focused on this going forward, especially in areas where we see or feel that there has been underperformance. Let me give you a little bit of a broader answer to that beyond just fundamentals, and I’ll touch on that. The first thing is that in our alternatives area, you see that we’ve expanded our product suite and addressing this with several new teams that are around infrastructure. We think a lot of investments will be made, private equity and real estate, and Ann Marie did cover a bit of that by announcing the addition of the new Swiss Re Private Equity team into our product suite. Larry mentioned a little bit about fixed income where we are focused on the process to make sure our teams can deliver strong performance. He mentioned our fundamental fixed income products which we are very proud to say have now moved back to top quartile performance and the numbers are over 80% in active taxable fixed income exceeding the benchmark. Then in iShares, continuing to innovate the product suite where our index funds continue to deliver very strong results over 95% or above their performance tolerance. Now finally, the equity area which you highlight, we have brought in a brand new emerging markets equity team to raise the bar. We hired a gentleman named, Timothy Keith to head a new flexible equity team. We have Chris Leavy, who is a tremendous hire for us, who is focusing now on strengthening our performance in the Large Cap Series and the fundamental large cap growth in energy and global opportunities products as well. So, I can tell you that Larry and I are going to be less tolerant of performance that is not up to par with what we need to do to drive growth and raise assets but, when I look at performance, I also want to focus your attention on our focus areas and how this translates into areas of growth for our firm. So, we have an income theme and there, we have focused attention on our equity dividend product. It has not only had strong performance, but is was rated five stars by Morningstar and is the Lipper Leader for Total Return and our global dividend income, which has produced really good income, and 85% of the holdings that they have, have increased their dividend. So, here’s an area where we have fundamental equity with good performance and that translates into driving growth. Also in the income area, investors are being served by the high yield team that Larry cited, which is continuing to be in the top 14% of their peers and raising a significant amount of assets and driving, because of the performance that they have. I’ll just mention a couple others in alternatives, just to highlight a few that may not have been mentioned as well as it should have been is, our core appreciation composite which is our alternatives flexible fund, hedge fund has outperformed the target by a significant amount and we continue to attract interest, and this global alpha product that we started in fixed income is up over 7% net of fees year-to-date, that’s a very exciting product for us going forward. Within solutions, the one product Larry mentioned was the Global Allocation Fund and I would just say that this is a long-term theme and while the second quarter was a bit underwhelming the absolute performance year-to-date is positive and clients have focused on the good long-term performance and the ability of this team to generate a good alpha in very different environments. Lastly on the retirement space, we created as you know the first target date fund and 20 years later, we were very well-positioned with our white LifePath funds, they have outperformed in average of 84% of their peers across all the vintages in 2011 and we also continue to see good flows in the ETFs and Indexed product with notable flows in the fixed income area. So I would say that performance can be described as very good in most areas, turnaround finally in a few areas that you will focus on in the last few calls, but most especially the strong performance in our five key focus areas and the continued investment in our portfolios themes are really driving the business at this point.
Marc Irizarry – Goldman Sachs: Just, on the alternative bucket, it looks like maybe some of the core products or experienced volatilities. The volatility that you’re seeing is sort of in line with that you’ve seen historically and are we moving to sort of a new place with alternative allocations where maybe manager selection is mattering more and is volatility becoming more important? I don’t know if that’s for you Larry or Rob.
Laurence D. Fink – Chairman & CEO: I’m going to give it to Rob.
Robert S. Kapito – President: It’s really the only change has been the volatility and the risk-on and risk-off. We still rely upon the process that the individual managers have, which has really not changed, but I think that you may see more volatility in the numbers just because of this risk-on and risk-off situation which is happening globally, but I believe the long term performance in those and the current process that we have will bear out the right performance numbers for the quarter moving forward.
Marc Irizarry – Goldman Sachs: You’d expect your flows to sort of follow that volatility pattern a bit more as well?
Robert S. Kapito – President: Yes, and I think that the highlight that I mentioned, the FIGA, some of these products which are the go-anywhere product giving flexibility to the managers, is going to help their returns and we already see that attracting flows and also the clients that are interested, the amount of visits and interests are up on those.
Performance Fee Outlook
Daniel Fannon – Jeffries: On the alternatives, just thinking about the performance fee outlook, obviously it’s very difficult to pinpoint or forecast, but can you give us a sense of how you think about performance fees, today versus maybe this time a year ago or as we think about kind of maybe even on the shorter term basis next quarter and obviously a big ramp potentially in the fourth quarter, but any guidance on how you are thinking about that outlook, it would be helpful.
Ann Marie Petach – Senior MD and CFO: As I mentioned in my remarks, the volatility in the environment has made it difficult for me to pinpoint even my own internal forecast on performance fees, because we’ve seen, as I’ve been observing, where these – some of the biggest funds are relative to higher watermarks, I see the above high watermarks one week and the next week below them, and it’s so much a single point in time measurement that that’s what makes the forecasting hard. Rob had the luxury of talking over time and I fully agree the performance overtime is going to be strong. But I am – and I know the question you are asking is the performance on a single date, and that becomes challenged. Of course last year also was not our most robust year ever in performance fees, and year-to-date we’ve tracked broadly in line with last year. But that being said, this environment does make it challenged.
Laurence D. Fink – Chairman & CEO: But I would say, things like Obsidian that is now back to close to as high watermark is an opportunity now going forward, and we have other products that are doing quite well like FIGA and our three BAA, so I think because of the volatility it’s hard to track actually the amount of performance fees, but I would say, we are in a better position at this moment than we were last year in terms of where we are, in terms of high watermarks and other issues. So, it’s now up to the PM to perform, but we are in a pretty good position, but the volatility is pretty extraordinary.
Daniel Fannon – Jeffries: I guess on the expenses, Ann Marie, you mentioned that there was a 14% increase in marketing within the broader kind of G&A line. I guess, could you help us understand what kind of the dollar amount that is and may be as we think about expenses going forward, how much – where you are in that spending kind of marketing campaign, and think about maybe the ramp or is that a good run rate kind of thinking about the rest…?
Laurence D. Fink – Chairman & CEO: Let me just say one thing before Ann Marie discusses the specific. Obviously, all our spend is a reflection of what our commitment to everybody is related to our margins, not one expense is looked separately from a total view of where we are tracking in our margins. Our margins were up about 0.5%. I think, it’s depending obviously where beta – I can give you a much better degree of where our margins will be, but one should not just lock in a spend on anything hard because we are going to mitigate spend, as we think about margins, as we think about going into 2013, but that said, we are very committed in this brand campaign, it is a long-term strategy, and a major component of where we believe this firm needs to go. With that end, I can’t give you more of, I guess, the granularity of that.
Ann Marie Petach – Senior MD and CFO: So, just give you the specific, sequentially marketing expense was up little more than $20 million, I would say that would be a reasonable rate, which we could run but there will be some seasonality in our marketing. So, you’re not going to say, as Larry said, we’re going to spend it the way it makes sense. When everyone’s in vacation July and August, we’re not going to be running the same amount of ads, we’re going to spend less money and you’re going to see that come down in the fourth quarter, when people are ready to invest, you’re going to see it come up, so we’re going to spend. I think the important thing is we’re going to spend the money in a way we think we’re going to get a real return on it
Laurence D. Fink – Chairman & CEO: And versus the overall level of where the firm is.
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