Quarterly Webinar Replay

Chris Zand: Hello and thank you all for joining us today for the Osterweis quarterly call, where we will discuss recent market activity and trends, our portfolio positioning and our outlook for the remainder of 2025. I'm Chris Zand, and I'll be moderating a panel discussion today featuring Chief Investment Officers John Osterweis, Carl Kaufman, Nael Fakhry, and Greg Hermanski. As always, feel free to enter any questions you have into the Q&A as we go through today's discussion. And with that, let's get started. John, as always, I'd like to start with you by getting your big picture thoughts on the second quarter, which of course was an eventful stretch for the markets.

It all started out with a sharp selloff that we hadn't seen in some time following the April 2nd announcement of reciprocal tariffs against essentially all of our global trading partners. That of course triggered a response from China and Canada who announced their own tariffs and the possibility of global economic slowdown loomed. Once concerns about the current situation spilled into the bond market and yields started climbing, the administration pivoted and announced a 90-day pause, which cooled things off almost immediately, and hope for trade deals began to replace fears of a recession. Fast forward to the end of the quarter and the equity markets recovered most, if not all their losses marking a historically strong recovery. John, what do you think caused such a robust rally, particularly after such a violent start?

John Osterweis: Thank you, Chris, and welcome everybody. I think to answer that question you have to say, "What caused the massive selloff?" And it was a very rational response to unparalleled tariffs that would simultaneously prove to be very inflationary and probably inimical to growth. And I think people quite rightly feared pretty massive stagflation. However, once Trump backtracked and set in the 90-day extension, people said "The worst is not going to happen. We actually have a pretty strong economy and it's back to more business as usual." And so the market, which had dropped quite precipitously, recovered basically all of that and has continued to move up, really reflecting people's sense that the economy remains strong and inflation hasn't really picked up, it hasn't dropped either, it's been pretty steady.

So those are all very positive, very positive backdrop for corporate profits and the stock market. And then I think the other thing that people have focused on is the absolutely massive investment that's going into AI. This is a real tailwind for the economy and for corporate profits in the big tech sector, and we're going to actually spend quite a bit of time later in this call really running through what's going on in AI. So I think for the moment people are pretty sanguine.

Chris Zand: Thanks, John, very helpful. Maybe we could spend a little more time talking about macroeconomic conditions. We did see nice stability across a variety of metrics during the quarter. You talked a bit about inflation. What are your thoughts on where unemployment is right now, and how does that play in around how you're thinking about the economy's ability to continue to expand?

John Osterweis: Unemployment is holding steady around 4.5%, which is pretty benign. And so that's a sign again to investors that the economy is reasonably robust and of course inflation, it hasn't moved much, so people aren't that worried. I would say that the risk here is that the leading economic indicators are pointing to some slowdown in the second half, and part of that is that the really significant impact of these tariffs hasn't yet hit. And so we don't know quite what the impact will be, whether it will be seen in terms of rising prices or whether corporations will eat their increased cost and report lower margins. So we don't know, and I would say the good news is the economy is robust at this point and that supports the market. The risk is that the leading economic indicators would point to somewhat less robust activity in the second half.

Chris Zand: Great. Thank you John. Carl, I'd like to turn to you next. The fixed income markets also rallied in the second quarter, adding to their gains from the first quarter. Can you talk about why bonds are performing so well this year and also compare how bonds have performed this year versus what happened in 2022 where stocks and bonds both declined?

Carl Kaufman: Good question. Thank you everybody for joining. Fixed income has had a pretty solid year so far. It's not fantastic, but it's solid given all the uncertainty. I certainly agree with John that the health of the macroeconomy is the main reason for the rally, especially in the more economically sensitive sectors of fixed income. There might be another factor as well. The money supply is, after 19 consecutive up months, is at a record high, so there's a lot of money out there, and basically financial assets are having their inflationary moment, it's driving up asset prices all over the world. So that's where you're seeing inflation right now is in financial assets, which I guess is where I'd rather see it than at the supermarket, although we're seeing it there too.

As for your other question, 2022 was rather a unique situation. It was all about inflation and rising interest rates. You had rates at zero, the Fed raising rates, and as you know, up rates, down prices. And when rates go up, that's a healthy alternative to equity. So equities go down, so you had the inflation concern, you had rising interest rates, and bonds and stocks lost value. Fortunately at the moment, inflation is under control. Interest rates are holding fairly steady at rates that are pretty normal for the last 2,000 years, and this is why bonds have been generating a positive return. If you look at the economy, clearly coincident indicators are still very healthy. Leading indicators are pointing towards weakness, and I think some of that has to do with the expectation that tariffs will cause inflation. Remember tariffs cause inflation with a lag and every time you get an extension of the tariff deadline, it seems that shipments just spike up and inventories build, which delays the inflation from tariffs.

Chris Zand: Perfect. Thank you, Carl. Very helpful. Can you discuss how we approached the market swings during the quarter on the fixed income side?

Carl Kaufman: Sure. Now, the correction lasted about 35 minutes, so we didn't really have a lot of time to make big adjustments, but we did do some buying of some longer-dated paper. There wasn't a lot that came in. The high yield market sort of acted like the adult in the room. It didn't really react downwards or upwards a whole lot, it just remained calm. But there were some bargains, but there weren't a lot. During the quarter, we did buy some new issues of companies that were refinancing some of their lower coupon debt and having to finally pay normal rates of what they would pay the rates they put in 2018, 2019 coming due. So we did add some at coupons that were about three percentage points higher than the average coupons in our existing portfolio. So we did manage to raise the income level there in a few names, not as many as we would like, but we'll take it where we can get it.

Chris Zand: Great. Thank you, Carl. John, coming back to you, could you discuss how we responded to the volatility on the equity side?

John Osterweis: Sure. So when Trump first announced these very high tariff levels, we started to raise some cash because we were worried about the adverse impact that these extraordinarily high tariff proposals might have. We then looked at the kinds of stocks we own and made sure that we were in the right kinds of stocks. As the market went down, we pretty aggressively tried to harvest tax losses and reposition the portfolio into companies that we thought would fare better coming out of this. So we both raised some cash, and then took losses, and then bought the dip and added to positions that we thought had real legs on the upside.

Chris Zand: Thanks, John. Very helpful. I know we're going to spend some time talking about AI in a bit, but I want to stay on these macro themes a bit longer, specifically tariffs. Now that the 90-day pause has been extended, clearly markets feel a lot more comfortable with the situation compared to where we were in April, even though we really don't have a ton of clarity on where tariff levels will eventually land. Where do you think tariff levels are headed and how do you think that will impact the market and the economy as they begin to take effect?

John Osterweis: The honest answer is I'm not sure where tariffs are going to end up. I don't think anybody, including the president, knows the answer to that. I do think we will end up with higher tariffs than we had before Trump 202 or whatever it is. I do think we will have a number of bilateral trade deals, which will mean that tariffs will not be as high as perhaps people feared. The problem is we don't know, as I said earlier, what the final impact of tariffs will be, whether they will be expressed in terms of higher costs and lower margins for companies or higher costs and then higher prices for consumers, and that's to be determined. The other thing that it probably is worth mentioning is that once these new tariffs are put in place, there will be clearly a one-time step-up in inflation. I don't think tariffs will keep going up year after year, and remember inflation is the change over time. So it's probably a one-time step-up and then we may see a period of... Hopefully we'll see a period of inflation leveling off, which would ultimately be pretty positive I think.

Chris Zand: Thanks, John. Very helpful. And that's actually a good segue into my next question for you, Carl. How do you think tariffs will impact Fed policy?

Carl Kaufman: Sure. I always get the tough questions. I mean, assuming that Powell stays on the job, which looks like he will, I think the pressure to lower rates in the face of rising tariffs at this point, unless those tariffs affect economic growth meaningfully, I think rates probably stay where they are because at some point you will have rising inflation and possibly an economic slowdown or you might not, depending. I mean, as John said, nobody knows where they're going to shake out. And there's going to be a one-time boost to inflation, and that's really not where you want the timing to lower rates. So we'll just have to wait and see what happens with these final tariffs. I saw a deal just before we got on the call that Philippines had struck a trade deal with the U.S. They're going to buy military equipment, et cetera, et cetera, and they got their tariff reduced from 20% to 19%. You can't make this stuff up, so we just don't know where they end up.

Chris Zand: Thanks, Carl. Now, earlier you alluded that Trump continues to flirt with the idea of firing Powell. Can you discuss the importance of Fed independence from your perspective and what you think will happen for the remainder of Powell's term, which is about 10 months away now?

Carl Kaufman: I think it's very important that the Fed remain independent. The bond markets have spoken. I don't know if you noticed yesterday when news came out that Trump said he was probably not going to fire Powell, bond markets traded up a point after having traded down the prior day. So the bond markets will not like a puppet Fed. Now, there's still conspiracy theorists out there that say there will be a shadow Fed and they'll be lowering rates. I think one prominent money manager is making a big bet on that today.

Nobody knows, but I think the odds are right now that Powell stays in the job. After that, the question is if we get Waller, who has been sort of the most outspoken Fed governor for lower rates, if he's appointed chairman and confirmed, he still has to get the votes of the Fed Committee to lower rates, it's not unilaterally. It's not like what Trump is doing in the White House now with presidential orders. It doesn't work that way at the Fed, at least not yet. So it clearly could have an independent Fed with a non-independent chairman. We'll just have to wait and see how it plays out. But I think it's extremely important that the Fed does remain independent for other countries to have faith, A, in our currency and B, in investing in our markets.

Chris Zand: Thank you, Carl. Very helpful. I'd like to pivot now and come back to the topic of artificial intelligence. Nael, I'd like to turn to you. I know you wrote about this in our last outlook. Can you give a brief summary of the current state of the industry for AI?

Nael Fakhry: Sure. Happy to do so. I'd say most of us think of the release of ChatGPT in late 2022 as the key milestone in terms of AI development over the last few years, and we agreed that was obviously super important, but more recently the release of DeepSeek's R1 reasoning model, which came out just in January, so really not that long ago, and that's a Chinese large language model. We think that was really more a watershed moment more recently, and that's for two reasons. First of all, the cost differential. This model was developed at a much lower cost. In fact, the latest trading run costs less than $6 million and that would compare to tens of millions of dollars for prior models. And then secondly, as I said, it was a reasoning model, so it uses something called a "chain-of-thought" approach.

So basically it was trained to think, quote, unquote, in a step-by-step process before providing an answer and kind of check its steps along the way. And what that did was it dramatically enhanced and approved the accuracy of the model. So these so-called hallucinations that you've probably all heard of and read about and probably experienced yourself, you basically get a false answer. That problem was really addressed very effectively when DeepSeek was released. So DeepSeek showed that you could build an AI model for a fraction of the cost that's actually much more effective. And since then the whole industry has been racing to try to create these reasoning models, and that has represented, in our view, a sea change in terms of AI development.

Chris Zand: Thanks, Nael. Another development we've been following is the cost of running AI queries also coming down. Can you explain what's happening there?

Nael Fakhry: Yeah, so the statistic that we keep coming back to is kind of an eye-popping one. So the cost of running an AI query since ChatGPT, which was released, like I said, several years ago, the cost of running a query has fallen by over 90% over the last several years. So that's a really shocking decline in cost. That's what happens with technology though, is it improves. And what's interesting though is that these reasoning models, so the DeepSeek model and all the models subsequent that are reasoning models, they actually consume way more data. So Alphabet, which is the parent company to Google, they recently reported that they're seeing about a 50 times year-over-year increase in basically data used for AI.

So the large hyperscalers like Alphabet, like Amazon, Microsoft, others, they're spending somewhere in the order of 350 to 400 billion dollars on capital expenditures this year, so about 20% more than last year. So even at this dramatic scale, you're seeing a huge increase in capital spending. And the reason for that is that as the query costs have come crashing down and the models have actually improved, you're seeing this widespread AI adoption. So the hyperscalers are addressing that. They're improving large language models, they're building data centers to host them, and do all the work on the back end. And so you're seeing this very broad AI adoption across the economy.

Software companies are rolling out agents to do all these tedious tasks. They're actually using AI to improve coding. Consumers, I use it for all kinds of things from planning trips. You might be using it for research, crafting a letter. Businesses that are outside of technology are using AI for customer service, optimizing pricing. Insurance companies are using it for underwriting. I mean, there's just a really broad set of applications. And Carl actually coined this term, it's "extreme automation." That's what they're kind of trying to do. You hear other terms hyperautomation, and we think that that proliferation of AI across the economy, it's a direct result of DeepSeek kind of pioneering this very low cost but highly effective approach to AI with reasoning models.

Chris Zand: Fascinating. Thank you, Nael. Greg, I'd like to turn to you. Has all this progress translated to any revenues yet or are we still waiting on that?

Greg Hermanski: That's a good question, Chris, and the short answer is yes, we're definitely seeing revenue from AI. A couple of years ago, the beginning of the deployments of AI, the revenue generation was mainly from the sale of semiconductors and AI servers to hyperscale of customers. However, as Nael was just describing, we're seeing a broadening out of the demand by customers in different businesses, and that's driving an acceleration in revenue growth both in the size of the deals and the number of people that are spending on AI. And so that's translating to pretty impressive ROIs and revenue growth for the hyperscalers. So for example, Alphabet's cloud division, it's been growing around 30% a year, and the operating margins have doubled from 9% to 18%. Amazon has also reported very strong revenue growth of 17%. They're the biggest hyperscaler and their margins are now at a record of 40%.

Microsoft is reporting 33% year-over-year growth for Azure revenue, and most of that's being driven by AI deployments. Oracle's forecasting 40% cloud revenue growth next year, and Meta's also has been making huge investments as they're seeing strong return on investment from what they've done on their ad platforms. So what we're seeing, it appears, is a healthy demand that's being driven by this feedback loop for AI. So the hyperscalers are seeing demand from their customers, they're seeing increase in margin, they're seeing increase in revenue, so the strong ROI is compelling them to increase the CapEx spend on semiconductors and other infrastructure and hardware suppliers. Another thing, there's another indication of demand growth that's looking at the consultants like Accenture. So if you see what's going on there, you're seeing an increase in number of AI engagements as well as an increase in the size of the engagements, and that's also a really good indicator of future demand.

Chris Zand: Thank you, Greg. Very encouraging to hear the potential starting to be realized, especially given the huge investments that have happened. Can you talk a little bit about the AI companies that we're invested in? I know we have exposure across multiple areas of the AI stack.

Greg Hermanski: Yeah, so as we were just discussing, we see a lot of growth in AI. We think it's an area that we should spending a lot of time on. And actually we think that we're in the early days of the AI revolution, and we were able to use the recent drawdown to kind of add and shift our positions of the portfolio. So if I started kind of the bottom of the AI stack during the last drawdown, we were able to add back one of our old positions in the EDA (electronic design automation) company called Synopsys. Synopsys sells critical software for chip and system designs, and they also license their chip intellectual property to customers. Their business over the last few years has just exploded as more and more companies are looking to design custom semiconductor chips to take advantage of AI.

We see strong secular growth tailwinds that should continue to drive strong revenue and free cash flow growth for Synopsys. Then also in the last quarter, we were able to add back another name that we used to own, Applied Materials. So while Synopsys sells a software to design semiconductors, Applied Materials produces the equipment to manufacture the semiconductors. So their tools are critical to enable the production of new and more powerful semiconductors, and they're also very well positioned as we look forward. And then we continue to own some of the leaders in AI semiconductor companies, Nvidia and Broadcom, we were able to add to our Broadcom position during the downturn.

And then sitting on top of the semiconductors and the servers are the hyperscalers, and as I just discussed, Microsoft, Alphabet, Amazon, they've all been growing rapidly, and we own all three of those businesses and then sitting on top of the hyperscalers of the software companies and they're big users of this AI capacity. So we own Intuit and Salesforce. Those are two companies that we think are really well positioned to merge as AI winners. They have incumbency advantages and they have robust product roadmaps and they've been discussing to use AI. And then finally, kind of at the top of the AI stack for us is we own a consulting company, Accenture, which I had mentioned earlier that they're seeing an increase in their engagements. So as they help their customers navigate this challenging time and they figure out how to deploy AI within their customer's businesses, they're really well positioned going forward.

Chris Zand: Thanks, Greg. Very helpful. Any other companies in the portfolio, maybe not necessarily tied to AI, that are a particular interest at the moment?

Greg Hermanski: Absolutely. There's one stock that I'd like to discuss. It's an oldie but goodie, in Boeing. We bought the stock back late last year on the thesis that many of the headwinds that the company's been facing are finally going to go away after many years, and as a result, we can see significant increase in free cash flow generation for the company. So some of the headwinds that have plagued the company, there was a strike last year, the second half of last year that stopped production. They had been having supply chain issues post-Covid. They'd had poor quality in their manufacturing operations before that, and then also problems with their defense business and their balance sheet had eroded during Covid. So they had a recent change in the management last year. They brought in an outsider for the first time as the CEO, Kelly Ortberg, and he appears to have been a key catalyst for the company.

So one of the things that he did is he decided to sell a non-core business that's really helped to strengthen the balance sheet. The defense business has been benefiting from the large increases in budget for defense spending, and then they also won a very large award for the next generation fighter aircraft for the air force. There also has been significant improvements over time in the supply chain, which is helping them on their deliveries of the commercial aircraft. But maybe the most important thing that happened was the way that the new CEO responded to the strike. It would've been pretty reasonable to think that you just try to ramp up your production again as quickly as possible. But what he did is he took it really slow. He tried to change the culture, he tried to make sure the focus was on quality and not just delivering planes that would come out in any condition.

So as the company has started to ramp up their deliveries again, they've been able to do it without what is called "traveled work." So when a plane comes out of the plant, all of the work has been done. There's nothing that needs to be done, it's ready to be delivered to the customer. This has helped improve both the quality and ultimately the speed of operations, and we've seen deliveries improving month after month. Looking forward, we see revenue and free cash flow improving significantly over the next three years at least. The dearth of new aircraft since Covid has put both Airbus, which we own, and Boeing in a great position to significantly grow the number of aircraft deliveries for at least the next five years. And if you look at the next loss for new planes, it's eight to ten years away. So there's a big runway for growth there.

Chris Zand: Thanks, Greg. There was a question regarding Boeing and issues with the airplanes themselves. Is that a concern investment-wise from your perspective at this point?

Greg Hermanski: Well, that's been the focus of the new CEO on quality, and no, the planes have been coming out in great condition and all of the planes that they're selling now have been on the market for a long period of time, so they've been well-tested.

Chris Zand: Great, thank you, Greg. Nael, I'd like to turn back to you now. John had mentioned the importance of portfolio construction during his remarks. Can you talk about how that fits into our quality growth framework?

Nael Fakhry: Sure, yeah. I mean, portfolio construction is something that we spend a lot of time thinking about, talking about internally, and it's an important issue. And I think a big part of it is that when we build a portfolio, we want it to hold up in multiple environments because you don't know how the market's going to react. Obviously what we talked about earlier this year in April is just the most recent example. So we don't want to have a portfolio that just does well in bull markets and then when the market rolls over, it doesn't hold up. So for us, a key part of how we build our portfolios is to own companies that are rooted in what we call quality growth factors and characteristics.

We want to own quality growth businesses, and we're a broken record on this, but we just think it's really important to own these high quality businesses and avoid the speculative ones, but we want to own them when there's some sort of temporary headwind. Boeing's a great recent example that Greg just brought up. There were temporary headwinds. The valuation had come in and this was a business that we understood and even some of the ones that we bought earlier this year during the selloff, great assets that were just mispriced. So it's always important to have some sort of opportunity to buy these businesses.

And just as a reminder, the way we define quality growth businesses as having three qualities. So the first is they have a durable competitive advantage, and that can show up in many ways. It could be a scale advantage they have, it could be because of the industry structure. And there are a lot of characteristics that kind of tell us that the business has a durable competitive advantage in terms of incremental returns on capital, pricing power, profit margins, other things. But ultimately the best indicator is growing free cash flow and that's what we're seeking.

Secondly, we want a business that can grow and grow at or above the rate of growth of GDP, and we want these businesses to be able to do that through reinvestment. So ideally there are secular tailwinds that are enabling growth in the industry and the business is able to reinvest to drive that growth over time. And then the third characteristic of a quality growth business, according to our definition, is really good governance. So we want management to be incentivized. We want them to have the right incentives to be aligned with shareholders.

We think that when there are opportunities to take share and grow faster than competitors, companies with good management teams that have the right incentives tend to do so and actually really shine. They also don't get caught up in fads. There are a bunch of other really important attributes of good governance. So if we own a portfolio of what we call quality growth companies, we buy them at good valuations, we think that our portfolios are ones that perform well over time that hold up across most environments.

Chris Zand: Thanks, Nael. Very helpful. I have just one last question for the panel and it's about the budget that was just signed into law commonly referred to as "The One Big Beautiful Bill." And that question is how do you think that will affect the markets and the economy? And when do you think we will begin to see those impacts?

Carl Kaufman: I'll tell you, I'll start with that one, Chris. One of the first repercussions is that the bond market has already become a little uneasy about all the borrowing that they're going to be doing because clearly this increases the deficit by quite a bit. The 10-year Treasuries are staying in the mid-fours and there's going to be a lot of bonds issued going forward. However, a lot of the provisions don't really start till next year, so there's going to be a bit of a delay. So the government is going to have to offer more yield when they do start financing, I think especially at the long end, cutting the short end will just steepen the yield curve.

Foreign central banks have been cutting their exposure to the U.S., so they may not be the old reliable buyers they once were. Their regulators are already considering relaxing capital requirements to allow banks to buy more Treasuries efficiently, which we think could have unintended consequences. The bigger question is whether the bond market becomes so saturated that rates do move up significantly regardless of what's going on in the economy. We used to call this "crowding out" back in the day where rates rise and companies looking to finance are crowded out by excessive government supply and higher rates. So far that hasn't happened, but it is a concern of people. I don't know if John has anything to add to that.

John Osterweis: I might just make a couple of comments, none of them particularly brilliant. Obviously the bill has some positives. I mean, the most obvious example would be accelerated R&D expenses, which clearly benefit businesses and tend to, it would obviously cause a more rapid investment, which would be very good for the economy. For individuals, SALT deductions probably a major positive. Offsetting that, millions of Americans are losing Medicaid and other benefits and will probably face higher inflation because of higher tariffs. So at the lower end, I'm not sure this bill should be viewed as a positive. Leave it at that.

Chris Zand: All right. Thank you, John. Thank you, Carl. That does conclude the roundtable portion of our presentation today. So now we'll move into the Q&A section. If you have any questions, please enter them into the Q&A box or you can raise your hand. And before we get into the questions, I just want to remind everyone that if you have any questions specifically about your portfolios, to feel free to reach out to us to schedule a review or to cover any questions that you have. So with that, we'll start with a question that came in before the webinar. I would like to hear from the Osterweis team about why there are so few international stocks or bonds in the portfolio. I'd like to understand the thinking around the allocation geographically. John, do you want to start?

John Osterweis: Why don't I start with that? I would say the number of international stocks we've had in the portfolio has varied very significantly over time. I think looking backwards, at one point we had close to 25 or 30% international names in the equity portfolio. Today we have a couple. And it's really a question of where we see the best opportunities. We don't really invest in countries per se, we invest in individual companies. If you go back in time, one of the reasons we had so much international exposure was big international companies were systematically cheaper in England and on the continent than their U.S. counterparts.

And so we could buy one of the leading international multinational companies at a significant multiple discount overseas as compared to the domestic counterpart. I think that has pretty much run its course. So today we've got a couple of foreign companies, Airbus being one, Accenture being another. If we see opportunities and we understand them, we'd see more international exposure. But long and short of it is for some time we have felt that the U.S. was the most robust economy and probably the place to put the greatest emphasis. This will change as the opportunities change.

Chris Zand: Thanks, John. Maybe Carl, you can cover the bond side?

Carl Kaufman: Sure. One of the things we do not do is play 3D chess. So we do not buy non-dollar denominated bonds, but we do see an occasional opportunity of companies that are domiciled outside of the U.S. Typically, it's for tax reasons, but occasionally we do find interesting companies that happen to be based in other countries that do a lot of business in the U.S. and are unique. So we tend to own bonds issued by those type of companies or companies that for tax reasons like aircraft lessors are domiciled than a tax haven.

Chris Zand: Thanks, Carl. Go ahead.

Carl Kaufman: The U.S. does have among the highest interest rates of the developed world, so we find there's a lot of opportunities here for higher rates.

Chris Zand: Great point. Thanks, Carl. Staying on the topic, where do you see the dollar going? And if lower, would you be investing further in international markets as a result?

Carl Kaufman: I can take that one. We probably would not play foreign markets, but the weakening dollar has been hurting translations, clearly because you're getting fewer dollars translated back. But if you think the dollar is going to strengthen, and I think it's ending this month on a positive note, first positive month in a while, in a few. So I don't think it's a permanent situation where the dollar is just going to continue weakening. It has had 10% corrections in the past and I think it probably will recover at some point when we get more certainty on trade and tariffs, et cetera. We're not going to change the way we invest based on the dollar.

Nael Fakhry: Yeah, I would just echo that. I think on the equity side, we're much more focused on, I think it comes through, but just on the industry and the company itself because I think that's something we can really understand. It's going to be really hard for us to understand where the currency is going to go. And so if there are opportunities, whether they're abroad because they just happen to be abroad, the currency is doing whatever it's doing, that's going to be more... We're going to try to understand that and make sure we're aware of that, but that's not going to drive, it's going to motivate an investment decision for us.

Greg Hermanski: I would also just add that we tend to be long-term investors, so if we're going to own a company for three to five years, that could outplay that thesis on a weaker dollar for a temporary period of time. So like Nael was just saying, we're focused on the company and the opportunities of the company more so.

Chris Zand: All right. Thank you very much. This next question has to do a bit about rebalancing and anticipated further rebalancing. You realized losses year-to-date due to tax loss harvesting. Do you have plans for realizations for the rest of the year for tax planning purposes? Nael, Greg, any thoughts there?

Nael Fakhry: I would say no plans at this moment. I mean, there are actually very few losses for the most part in most portfolios, but we're obviously going to be opportunistic and where it makes sense, we will definitely do so. But no plans for anything systematic at the moment. The reality is early this year there was an opportunity, and so where it made sense, we swapped positions. So for a business that was roughly equivalent that we thought would roughly do the same, we locked in the loss and then bought an equivalent company or a duplicate company in a handful of cases, and that can be pretty fruitful. And we'll do so again, but no imminent plans.

Chris Zand: Right. Well, I think that concludes the questions we've had in the queue. I'd like to thank all of our panelists for taking the time for today's presentation and thank all of you for tuning in. If you have any follow-up questions or would like to see the replay, please let us know. Enjoy the rest of your afternoon.