054 | Building robust income portfolios

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Tutor:

  • Keith Balmer, part of the BlackRock Multi-Asset Strategies Team

Learning outcomes:

  1. Investing for income
  2. Identifying risks
  3. Investment solutions
  4. Generating income

Channel

Asset Management
Learning Outcomes: To understand and describe: 1. Investing for income. 2. Identifying risks. 3. Investment solutions. 4. Generating income. Tutor: Keith Balmer, part of the BlackRock multi-asset strategies team The low yield backdrop and future interest rate risk KEITH BALMER: Well I think it’s a really interesting time at the moment, because what you’ve got is you’ve got a diverging monetary policy going on around the world. So in one corner you’ve got Europe with Draghi and his big bazooka printing money and ultra-loose policy. So we’d expect there to be yields low for longer and for quite some time. And then, that’s the same with Japan, same sort of policy, same sort of ideas, and that’s going to put an incredible pressure on yields and continued pressure on yields. t’s a really really difficult time for investors looking for yield, particular across European assets. If you go on the other side, so where people are starting to tighten up or we certainly expect to see this tightening policy to happen in the States, UK market slightly behind the States, but following the similar sort of trajectory. Now on that side, with a rising rate environment, you do have other issues to contend with. So it’s good news because yields will be picking up. So an income investor can start to get nicer yields from their investments; however, in that journey, as rates increase, you now have duration risk or interest rate sensitivity. So what that really means is that as interest rates are increasing your bond price actually decreases. So now you’ve got a situation where it’s going to be good when yields get there but that path is going to be very very difficult. So you have to protect about that sort of interest rate risk. So it’s a really interesting dynamic, and the combination of those and that divergence also means to say that your currency becomes quite a big impact. So if you’re just a UK investor, you’re investing in sterling, that’s obviously not a problem. However, when you want to invest outside and look more at the global world, then you have the impact of if you have ultra-loose policy on one side that’s generally going to mean that that currency weakens. So we’ve seen that with the euro, we’ve seen that with the yen, and if you’re going to be tightening then you’re going to have much sort of more a dollar strength coming through. And so therefore lots of considerations have got to be put into your decisions when actually putting a portfolio together. Politics and demographics PRESENTER: Well that’s the policy changes at the level of central bank, but what about at the level of government here in the UK and some of these massive demographic changes that are taking place? KEITH BALMER: So, yes, you’ve seen this big impact happening, and the government’s trying to help out. So your UK investor, particularly at the retiree end, sort of the greying age, at that end, with yields down, there’s lots and lots of issues that come alongside that. So what the government’s trying to do is they’re trying to help out. So they’ve relaxed the rules when it comes to say ISAs. So the NISAs coming in, they’ve radically increased the amount you can actually put in and they’ve increased the flexibility. So now at £15,240 per person, with a couple that’s more than £30,000. It’s a lot of money you can now lock away into a tax efficient vehicle. And the great thing is you can actually move it not just from your cash ISA into stocks and shares, but now you can also do it the other way round, so you have a bit more flexibility. We think this is generally a good thing, however we would advise caution, because if you think about it your typical investor today holds too much cash. Now if you’ve just encouraged people to have a larger amount tucked away in a tax efficient vehicle well that could encourage people to hold that more in cash and so therefore really sort of having more of an issue where people aren’t taking enough risk to achieve their goals. So it’s good, but it needs to be managed so that investors don’t get too conservative and hold too much cash. On the other side there’s obviously the big pension reforms So the annuity reforms have disappeared. And what does that mean? Well once again I think there are great opportunities, and I think that’s great opportunities for an adviser and great opportunities for the retiree, for the client, because where annuities got to, based on yields, they didn’t give a fantastic amount of income for investors, and so therefore I think that if you have the right skills and expertise and the right mindset you can put together a really good portfolio that allows an investor or a retiree to get a better return for their savings, and hence a better lifestyle. I mean that’s what we’re all really talking about. PRESENTER: But a lot of this is how long you can fund your lifestyle for and the length of time people are living for is going up considerably. KEITH BALMER: Yes . So there are quite a few stats going around in terms of longevity. So there’s one general theme that’s happening: the population around the world is getting older. So, if you think back to sort of the impact on yielding assets, you’re going to get more and more of a demand for that type of asset. So once again those yields, they’re under pressure, structurally under pressure. On the other side for actually the person who’s going to be in retirement, they’re now going to be living for longer. So from the adviser’s side they’ve got to be very careful, because they’ve got to plan for a lot longer retirement for their investors, but also the investor has to start saving an awful lot earlier, because if they’re going to live longer then they also need to have a bigger pot of money. Now, if I think back to my parents, they’re part of the SKI generation. the spending kids’ inheritance, SKI. Now what that actually means in practice is my parents have just come back from a three month tour of New Zealand and Australia. They’re both over 70. And this is really symptomatic of the retiring population. It’s no longer just sitting there in a retirement home waiting for the moment that it all ends. People want to now go out, enjoy, explore. So therefore not only do you need a bigger amount of money just to live through life and just get there, you also need more because people’s lifestyles are much more active. So therefore you’ve got this real sort of double-edged sword coming through and really people aren’t saving enough. The savings gap for long term income PRESENTER: Well you mentioned there the importance of starting to save earlier, are people saving enough at the moment? MV NEED TO GET LINK TO THIS SURVEY KEITH BALMER: Well the key answer is no. So once again there’s some nice statistics here. We went round and we thought instead of us telling people what they would like, we asked them. So through the BlackRock Investor Pulse survey we go out and we ask a variety of different people around the world, these numbers are actually specific to the UK, and we asked people what sort of income would they need or want in retirement, and they said on average about £26,000. So there’s no heroic assumption there, it’s a nice amount. The key thing is that people didn’t understand how much money they needed to save in order to generate £26,000. So when we asked them how much they actually thought would generate £26,000 of income, they told us about £260,000 , which is obviously nowhere near enough. If you actually just went and bought an annuity, and so in today’s prices that annuity without any protection with inflation you would need about double that £260,000, so it’s nearer £500,000. So people are radically misunderestimating how much they actually need to save. And hence people aren’t saving enough because they don’t realise that, that’s too far in the future, and that’s where I think a financial adviser can really really add some benefit. Now, if we take that £500,000 figure, if you then put on the cost of living increases, so inflation. If you assume some sort of inflation is going to come back at 2-3%, which I think is fairly accepted, then that £479,000 with inflation protection is near a million. Now there’s very very few people out there who are thinking I need a million pounds in order to get £26,000. So there’s a big education process that we need to go through, and there’s a big understand process, because otherwise there’s going to be lots of investors who are going to be disappointed and not live the lifestyle that they actually want to have. The role of cash in a portfolio PRESENTER: Well you mentioned earlier about people having too much cash, a sort of reckless conservatism I think it’s being called, so is cash then something to be avoided at all costs? KEITH BALMER: No, I think there’s clearly a position for cash in the portfolio. We’ve got funding, we need liquidity requirements, we need to pay bills, so you’ve always got to have cash. It comes down to how much cash do we actually have, and I really like this phrase of reckless conservatism , because there’s two risks. There’s people that are, they’re too concerned about the short-term risk today, i.e. I don’t want to lose any money today, and that’s the conservatism, but what that does mean to say is that they’re actually introducing a much bigger risk, and that much bigger risk is that they’re not going to be able to achieve their goals later in life. We asked people how much cash they thought they should be holding. And that’s actually the darker line across the bottom. And, interestingly, regardless of how much investible wealth they have it’s about the same amount, it’s between 30 and 40%. Now I’m not suggesting that that’s the correct amount, but that’s what people feel they should be holding. If you actually look at how much cash they are holding, it’s significantly higher. And once again another interesting fact is that as people have more wealth then they generally get closer to where they think they should be, and I think that’s much more that influence of financial advisers. So the more wealth you have the more likely you are to use a financial adviser and hence have proper financial planning. But even so, you know, as we highlighted here, someone with £125,000 typically will have about £23,000 more in cash then they think they should be having. So we think once again this is a great opportunity for advisers to actually sit down with their clients, educate them and actually say look we can actually get your money to work for you in a more pragmatic way than just holding it in cash which earns nothing and that means you’re more likely to hit your goals when you retire. Multi-asset investing for an income portfolio PRESENTER: So it’s not about the size of your retirement pod, it’s what you’re doing with it. How does changing that asset mix affect what you can expect to get out? KEITH BALMER: Well we thought we’d do quite a nice fun experiment and say okay if you want £26,000 what else could you do? And so we took some of the ISA rates, as you can see here, we saw how big a bag of money do you actually need in order to get £26,000 a year, and as it turns out, with the best rate instant access at the moment, it’s about 1.5% on the cash ISAs, you need about £1¾million. So we don’t necessarily think that’s the best way of going, but if we work our way across. Gilts at the moment are giving about 1.8% yield. So that comes down the amount that you need in your bag to about £1½million. Now, if we go to that sort of investment style, we do think you’re introducing a lot of interest rate risk into your portfolio. So, as we talked about before, as rates start to increase, then that’s the risk that you’re going to have in your portfolio. But if we can’t go there now, and we move sort of across and say okay well let’s go into UK dividends, now there are some good things from UK dividends. One of the great things is growth. We touched on it a little bit before, but in terms of inflation, if inflation comes back, and we expect it to duly come back, then your purchasing power will be eroded through time. Now the great thing with equities is because it does some sort of inflation hedge you get some growth potential. So therefore you can get a growing income stream. At about 3½% dividend income, then you can actually do okay and this particular example to get £26,000 you need about £¾million. So you’ve come down quite radically from cash. The problem comes in, if you’re an income investor, you generally don’t want to take a huge amount of risk within that part of your portfolio. And if you don’t want to take too much risk in that part of the portfolio, equities and 100% equities is probably not the best way of going, because you introduce equity risk. And obviously the volatility of equities is significantly higher and sometimes too high for a typical income investor, particularly someone in retirement. So then you sort of come across and there are multi-asset solutions out there. Sort of multi-asset income solutions, we’ve highlighted one that potentially could get 5½%. So if you combine different assets together, with a yield of 5½%, well that does mean to say is instead of having £1.7million in your cash you can come down to £470,000, which actually is a little bit less than we saw before on that annuity rate. It combines the benefit of equities with bonds. So you get a little bit more security, a little bit more conservatism, but you also have a certain amount of growth aspect in there. So it’s trying to sort of be that all-encompassing solution for investors. PRESENTER: Is it just about volatility or is there also an element here where perhaps somebody’s been expecting their portfolio to overdistribute? KEITH BALMER: So there’s certainly an element where, you know, we’ve taken 6¼% as an example, but what you’d find is even if you went down to 5% or 4% then actually what would happen over that period is the same sort of picture. The red line would end up higher than 1,000, the blue line would still maybe have some money left, but I say going back to if people are going to live 30 years, we’ve only done 20 years here. So that becomes very interesting. But people still have needs. That income that they’re going to have or rely on, we’ve taken 6% here, we’ve talked about 5%, that’s very much a personal choice. But it does depend on how much they require and the lifestyle they want to have. But certainly 5% we see as being a fairly standard amount that a client would need. Balancing out the needs of income and long term growth PRESENTER: But how does a client with their adviser work out what that blend is between income today, longer term growth and this volatility that you’ve been talking about? KEITH BALMER: Well once again this is the problem and the opportunity for an adviser, and I think this is one of the major major difficulties that people have in today’s markets. Insofar that your adviser has to now become much more educated in terms of the world of investments, all the different ranges, and because you’re having to monitor for that volatility, the ability to move in and out of those asset classes. So it is an opportunity, because I think you can do better than annuity, but I think there’s also a risk involved, because obviously relative to annuity you’ve got this problem. What we see with your typical income investors, and once again demonstrated here, is that an income investor can actually get quite comfortable with a particular product an d not actually take the income. So there may be a solution that’s actually very useful for an investor. They like that, they’ve understood what’s going on with that type of portfolio, the risk they’re actually taking with that, and as long as they’re comfortable with that they don’t need to take the income. So if you look it’s no surprise as you go through the. Age groups more and more people invest into income type of products. So I don’t think that’s particularly surprising. What may be surprising is if you look at the 65 to 74, so your retiree people, half of them don’t actually take the income. But I think there is certainly a psychological bias that’s in there, which means that investors, they like the fact that they could take an income, if requiredAnd so I think as you see once again the general percentage is up, but also the amount of people that are taking the income is also up. PRESENTER: And presumably in retirement your income needs will change over 30 years; there might be times when you want more income and times where you don’t need it. KEITH BALMER: Absolutely, so typically in the first part, once again I’m going to go back to my parents, it’s not only the holidays they’ve done in New Zealand, Australia, they also want to go and see their grandkids, they want to have fun. So the first part is also where you’re going to be spending more; unfortunately that’s also the time that you shouldn’t be spending as much or you can least afford it. So once again it all comes back to that prior planning, prior preparation, but also an understanding from an adviser’s point of view exactly what are the client needs and what is the best way to structure that sort of outcome for a client. The value of diversification PRESENTER: Okay and then how do you go about putting a really robust income portfolio together? We’ve talked about a lot of the principles around this and the timings, but you’ve still got to put that portfolio together for clients. KEITH BALMER: Yes, and I think one of the key things that you’ll fall back to on this one is diversification. So you need to get a yield. And so therefore there are only certain assets out there as we saw before that can actually deliver on that yield objective, but you can’t rely on just one individual asset achieving that goal for your clients. So therefore you have to take a diversified approach. Now the way that we look at the world is very much in terms of through the eyes of a client. You’ve got to be very much aware that a client doesn’t want to and can’t afford quite often a big 10%, 20%, 30% drawdown on their whole pot. So diversification is very much key on that and being conservative. Now diversification will change through time and that’s sort of down the correlations. We’ve shown three different periods here. So June 2014, last year, the numbers aren’t particularly important, just look at the colours. So the greener it is the more diversification benefit you have. So by combining those two assets you’ll get less volatility overall. The redder you get, the higher the correlation and the less diversification benefit you’re going to get from a variety of different asset classes, and once again the actual asset classes aren’t particularly important. But in June 2014 you can see it will be generally easy to put together a portfolio that was fairly diversified. Over that period, if you then take exactly the same portfolio, so we’ve kept the same asset classes on the different axes. 2008 is one that’s been very well-known, it was a significant period of stress in the markets, everyone knew that correlations went up, and so you see a big block of red coming in, but actually back in June 2013 there’s much more red in there, there’s much less diversification. So, for example, back in June 2013, this was around the taper tantrum. This was Bernanke’s statement to the market, the changing of the language that he used in his speech to say that basically we’re going to stop printing money. Now in that period everything moved at the same time and everything moved horribly for investors. Within our portfolio we use quite a lot of hedging tools, and so that’s something that I would advise to always have an eye on the downside risks and when it’s appropriate protect some of that risk, because you don’t know when these events are going to actually happen. PRESENTER: But I suppose underlying all this is the fact that however much diversification there you’ve got, you can’t avoid losses on portfolios full stop can you? KEITH BALMER: Correct. So once again this is a world that we’ve moved away from. For investors that can’t avoid and can’t afford any loss at all, an annuity’s your best product. That gives you the guaranteed stream, it may not be much, but if you can’t afford any loss that’s the way to go. One of the other problems with annuities obviously when you do die there’s no inheritance, because everything’s gone, but for some investors that’s a perfect solution. For other investors, you’re now in a situation where, and this is dilemma that a lot of people are facing. So if you don’t like the rates you’re getting on annuities, if you don’t like the rates you’re getting in your risk-free areas where people used to be able to get, such as cash, if you can’t get the income from there, what do you do? Do you go one hand and you accept the lower income, the annuity stream and have a lower quality of life than you think you deserve, and you’ve worked hard for, or do you manage to sort of get your clients to take on a little bit of risk. Take that sort of baby step out to get their return or that level of income just up one level, but with the understanding that now you’re starting to take on an element of more risk. What we don’t suggest is obviously taking that big leap and going straight into 100% equities, because I think there will be periods that that will be significantly detrimental to an investor’s health and wealth. The changing risk/reward characteristics of asset classes PRESENTER: But if correlations are always changing through time, as this slide’s sort of showing, I mean does this suggest that the risk and reward characteristics of income assets are changing as well, and what might be seen as low risk one day could be very high risk in two years’ time? KEITH BALMER: Yes, absolutely. I think there are certain qualities that will generally stay true. So your fixed income, typically, will be at the lower risk end and the lower volatility end and your equities will be towards the upper end and if you go into more niche areas, such as emerging markets, you might pick up a little bit more risk. But that’s evolved a lot through time, certainly as the world has become much more global. The problem that we see today in markets, particularly when we talk about income, is a lot of people just get attracted to a big number and they start investing into asset classes that they don’t actually understand what the risks are. Last year was a very very good example of that type of environment. So if we look through the different yields that we have here, on the left hand side you’ve got what we call traditional fixed income. So within traditional fixed income you’ve got say US 10-year, you’ve got UK 10-year gilts, you’ve got corporate credit, but investment grade and then high yield, and you can see that the yield levels generally are very very low, and there’s no particular surprise to all investors today. But that’s where the sort of safe havens generally had been in the past. A lot of people have invested into global high yield. Now global high yield has had a wonderful rebranding. In the past, you know, when I was growing up that was called junk bonds. Now if I spoke to my parents and asked them would you invest in junk bonds? The answer would be absolutely no. Would you invest in global high yield? I like high yield, why not? So you’ve got investors that have gone into this asset class without understanding it. I don’t necessarily say it’s a bad asset class to be in, but you’ve got to have a good level of expertise and understanding to know the level of risk that you’re taking in that asset class. So that’s what we’re seeing sort of certainly a lot of pressure and we think continued pressure going to be on those yields within the traditional fixed income. So if that’s not going to be the place that you’re going to get income from, you’re going to move sort of across the spectrum. We touched on equity before. So you can still get a pretty good yield on equities, 3½%; however , if you look underneath, sort of the white bars beneath, then that’s where the problem comes. So UK equities this is just the three year maximum drawdown that we’ve seen over that three year period and UK equities has had a 10% drawdown. Same with global equities and emerging markets where we’ve seen people start to get more exposure in their portfolios. There are periods where they will have sort of a higher beta and some bigger drawdowns. So you’ve got to be cautious, but as mentioned before you do get the growth element. And actually your yields that you get on equities, dividend yields are better than the yields you’re getting on fixed income at the moment, and then people’s eyes light up when you look at the non-traditional assets. So they look at the 5 to 7% yields and some people then start to look in and invest into those. I like to call this the iceberg chart, because people always look at the top level and that’s the yields that they see, the ones that they photograph, but actually underneath is the big issue. So things like REITS you can get a 4% yield, but actually over the last three years you’ve had an 18% drawdown. Emerging market debt, it’s another one of those asset classes that can add good diversification in portfolios. It’s generally a defensive part of your portfolio, decent yields, but at times, and this is when markets go through big stress periods, they will have oversize losses. And that’s at exactly the time that you don’t want them in your portfolio. So you’ve got to be very very careful. The one last thing I’d touch on, on this particular slide, is coming back to the fixed income, we mentioned right at the start that you go into this sort of rising interest rate environment and you’ve got this duration risk or interest rate risk. Now if we look here at the drawdown over the past three years, it may surprise you, but the drawdown over the past three years for US or UK 10-year treasuries has been somewhere round about 9-10% - now this is pretty big capital lost! The need for regular portfolio review PRESENTER: Well, given there are no free lunches on this, which I think this chart’s showing us, how much tweaking do you need to do to a portfolio tactically to be in the best place you can possibly be throughout time? KEITH BALMER: Yes, I mean it’s a very difficult question to answer, and it really comes back to how much resources you have. If you’ve got significant resources, then I would suggest a very flexible approach would be the way forward. This is the historical asset allocation that we’ve had for one of our multi-asset income funds going back to 2011, and as you can see we’ve been quite radical in the changes. So if we just take the light green to an asset class that we touched on before, the high yield, back in 2011 we had 55% in high yield. It was a space that wasn’t particularly liked by investors at that stage. You could get very decent yields. So on average and fairly high quality names within the high yield space you could get about 7½% yield, you had good upside potential, and you also had an improving economic situation. So what that means is that there’s going to be less risk of default, which means there’s actually less downside. So we thought that was a very very attractive place to be and allocated accordingly. But as time’s gone on what you’ve seen is that actually that more and more investors have piled into the chase for yield, this quest for yield, they’ve chased those returns, and so now there’s not much upside left. And if you go back to June of 2014, there was zero upside left. Most of these assets were priced to call at about 105. So no upside potential, you could only get the carry in the yield. And that became a much less attractive place to be and as you can see our allocations went right down. So we were down to about 15% at that stage. And what you also don’t see is that the quality changed. So back in 2011 we were happy to have your CCC, so the lowest quality within high yield. Start of 2014 we thought no you’re not getting paid enough. The risk is too much relative to the reward, so we flushed out most of those positions from our portfolio. So that’s just one example going from 55 down to 15, and we moved quite quickly back in the middle of 2012. There’s other asset classes that we brought into the portfolio, and so these are some of sort of the less well-known and less well allocated across people’s portfolios. So you can also introduce other sort of aspects. Two elements I’d sort of suggest here. Preferred stock, you know, we’ve had a fairly decent allocation where we don’t think that people invest into them as much as maybe they could. We think it’s a really interesting asset class, but it’s generally because people don’t know about them and then covered calls is another area which is the lighter orange, where you can see there’s a growing allocation within that. And we’ll talk about that in a couple of minutes . One other thing I would touch on is, and let’s come back to your flexibility stage, for us it’s very much relative value. For us to deliver on our investment outcome that we’re sort of trying to deliver to our clients, we don’t do it at all costs. It’s got to be very much to that risk-first approach, and we think within the investor universe, particularly when you get into retirement, that’s key. So you need a certain element of conservatism. So if you see the light grey and the darker grey shades at the bottom, if we didn’t like anything, I don’t think a financial adviser should be afraid about not investing in anything. It’s much better to preserve that capital than try and eek out an extra few basis points of yield. So we went up to 15% in cash, and I think that’s key, but it’s quite a brave decision, because cash as we talked about before doesn’t earn anything. And on the other side you’ve got your hedges. So if you put your portfolio together then you can start managing for that duration risk, you can start managing for the equity risk that you’ve got in your portfolio, and you can manage for the currency risk that you’d potentially also have in the portfolio. So you’ve got to really consider all three of those aspects when you actually put a portfolio together. Covered calls: a definition PRESENTER: Well you mentioned a couple of the alternatives there. You mentioned covered calls, got a concrete example here, how does it work, why is it a good potential income investment? KEITH BALMER: So, once again there’s a few different ways of doing covered calls, and we think for an income investor they’re an attractive place to play. And the rationale behind that is by writing a call you can pick up a reasonably attractive premium and so therefore delivers a very nice income. PRESENTER: So a call it’s the promise to sell the stock to somebody at a set price at a set time in the future ? KEITH BALMER: Exactly. So the person who’s on the other side of that trade has the right but not the obligation to buy. So the idea behind it is we will write a call option, and what that means it that we will effectively choose an individual stock and we’ll write that call option, which on the other side an investor’s potentially looking to find a very efficient way of picking up any big upside, but without spending too much. So they’ll buy that option. So we’re selling away an upside. But we still have an element of growth, and we need that growth and once again we’ve talked about before for an income investor growth is still important. Preferred stock: a definition PRESENTER: And the other one you mentioned was preferred stock. KEITH BALMER: So it’s a preferred stock, where it sits in the capital stack is quite an interesting place, which means if you sort of think equities at the bottom, it’s above equity, and that’s the preferred nature. So you get the dividend paid to you in preference over a dividend paid to you of just common equity. But you’re below people in the rankings, below seniority relative to your typical debt that’s issued. And it’s a bit of a quirk, because not many people play in that space. PRESENTER: Well I think we’re almost out of time, Keith, and I suppose bringing all of this together and sort of summarising it down, what do you think advisers really need to consider when it comes to putting together robust income portfolios for clients? KEITH BALMER: So I think, yes, it’s a very good question. I think that there’s a few key points on this. One of them is you’ve got to look through the eyes of your investor, and so most of that’s got to be a conservative approach to it. You can’t get too aggressive in this, and by aggressive I mean choose the asset allocation carefully, both in terms of which assets you’re investing in, make sure you understand them, make sure you understand how they’re going to react in different market conditions, but also how much you’re going to allocate to each of those different asset classes. Don’t invest too much into any individual asset class, because there’s obviously a situation where that can lead to a loss in that particular part of the portfolio which is not going to be diversified away. So a diversified conservative approach and you’ve got to go quite far to actually look for where you can actually pick up those income objectives, because your typical traditional places are not going to provide for them, and then just the last point on that is remain flexible. You can’t just have a set allocation which is going to last for the next 20 years, because the markets change and you have to be very very reactive to what’s happening in those markets to just manage for those risks. PRESENTER: Keith Balmer, we have to leave it there. Thank you very much. KEITH BALMER: Thank you, Mark.