Westwood Holdings' Private Capital Carry Delays and ETF Fee Waivers Clash With Growth Claims in Earnings Call

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Date of Call: Aug 6, 2026

Financials Results

• Revenue: $25.3M, compared to $25M in the first quarter and $23.1M in the prior year's second quarter
• EPS: $0.17 per share, compared to $0.09 per share in the first quarter and $0.12 per share in the prior year's second quarter

Business Commentary:

ETF Platform and Assets Growth:

• Westwood Holdings Group's ETF platform surpassed $400 million in assets in July, marking significant growth.
• This was driven by the strategic focus on expanding their ETF offerings, which include the Enhanced Income Series and the upcoming launch of the Westwood Salient Enhanced Power and Infrastructure ETF (PWRX).

Private Capital and Commitments:

• The company closed $147 million in new private capital commitments in Q2 2026.
• This growth is attributed to the successful co-investment fundraising efforts and the strong interest from RIAs, family offices, and independent advisors in their private markets platform.

Institutional Sales and Outflows:

• Westwood generated $382 million in gross sales through their institutional channel, but experienced net outflows of $1.3 billion.
• The outflows were concentrated in legacy large-cap value business due to performance challenges and a shift towards lower-fee, passive investment options like ETFs.

Multi-Asset and Wealth Strategies:

• The multi-asset strategies delivered strong long-term results, with more than half of them ranking in the top third or better against peers over three-year periods.
• This performance is linked to the strategies' focus on high-quality businesses with strong fundamentals, which aligns with the broader market's movement towards defensive, quality investments.

Revenue and Earnings Performance:

• Total revenues for Q2 2026 were $25.3 million, compared to $25 million in Q1 and $23.1 million in the prior year's Q2.
• The increase in revenue was driven by growth in their ETF and private energy secondaries funds, despite higher compensation expenses and income taxes.

Sentiment Analysis:

Overall Tone: Positive

• The CEO expressed being 'very pleased' with results and key developments, highlighted 'meaningful pipeline growth' across strategic areas, and stated the firm is 'very excited' about ETF platform success and upcoming launch. The tone emphasizes confidence in long-term positioning and strategic vision.

Q&A:

• Question from Max Sykes (Gabelli Funds): Your thoughts on the trend in your average fee rate for the firm and where you could see that going as the mix gets more beneficial. Also, a reminder on whether there are embedded carry or performance fees in the secondaries business and if there are locks associated with that.
  Response: Average fee is expected to grow as ETF assets scale, with waivers in early years. Private capital aims for carry (10% or 15% over 8% pref) in the future; currently none is reflected in financials. No carry is currently embedded.

Contradiction Point 1

Disclosure of Potential Future Carry in Private Capital

Inconsistent statements on whether potential future carry is currently reflected in financials.

What are your expectations for revenue growth in the upcoming quarter? - Max Sykes (Gabelli Funds)

2026Q2: Private capital commitments now exceed $500 million and carry annual management fees of 1% to 1.5%, with potential future carry of 10% (or 15% over an 8% preference) on successful investments. Currently, no carry is reflected in financials. - [Brian Casey](CEO)

What is the trend in the firm's average fee rate given flat AUM but growth in ETFs and private capital, and are there any carried interest or performance fees or quarterly locks in the secondaries business? - Macrae Sykes (Gabelli Funds)

2026Q2: Private capital funds (energy secondaries) have annual management fees of 1% to 1.5%, with potential future carry of 10% (over 8% pref) or 15% (over 8% pref). The firm is excited about the performance of its investments. - [Brian Casey](CEO)

Contradiction Point 2

Presence of Q&A Session Content

Contradiction on whether any Q&A session actually occurred.

"What are your thoughts on the company's recent earnings report and future outlook?" - Max Sykes (Gabelli Funds)

2026Q2: No carry is currently reflected in the financials, though the firm is trending in that direction. - [Terry Forbes](CFO)

Given flat AUM but growth in ETFs and private capital, how is the firm's average fee rate trending, and are there carried interest or performance fees in the secondaries business with any quarterly locks? - Unknown Participant

2026Q2: What is the trend in the firm's average fee rate given flat AUM but growth in ETFs and private capital? Also, are there any carried interest or performance fees embedded in the secondaries business, and are there any quarterly locks associated? - Max Sykes (Gabelli Funds)

Contradiction Point 3

Private Capital Commitment Growth and Fee Structure

Commitment growth is reported, but carried interest is only a future possibility.

What are your key concerns regarding the company's earnings performance? - Max Sykes (Gabelli Funds)

20260501-2026 Q1: Please check the provided transcript for any questions asked during the earnings call. The transcript provided indicates that no questions were asked by participants during the Q&A session. - Unknown Participant

What is the trend in the firm's average fee rate given flat AUM but growth in ETFs and private capital, and are there any carried interest or performance fees embedded in the secondaries business along with any quarterly locks? - Operator:

2026Q2: Private capital commitments now exceed $500 million and carry annual management fees of 1% to 1.5%, with potential future carry of 10% (or 15% over an 8% preference) on successful investments. Currently, no carry is reflected in financials. - [Brian Casey](CEO)

Contradiction Point 4

ETF Fee Waivers and AUM Growth

ETF fee waivers are described as initial and tied to expense ratios, but the quarter highlights strong ETF AUM growth.

Max Sykes (Gabelli Funds) - Max Sykes (Gabelli Funds)

20260501-2026 Q1: Our pipeline of opportunities has grown to over $1 billion. - [Brian Casey](CEO)

What is the trend in the firm's average fee rate given flat AUM but growth in ETFs and private capital, and are there any carried interest or performance fees or quarterly locks in the secondaries business? - Operator:

2026Q2: ETFs carry higher fees, but initial fee waivers are common to keep expense ratios low; as ETF assets grow, the average fee is expected to increase. - [Brian Casey](CEO)

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