About Victory Capital

Victory Capital celebrated two very important milestones in 2023: 10 years as an independent company and five years as a public company. I am extremely proud of what we have achieved over the past decade on behalf of our clients and shareholders, including fostering a culture of employee ownership in our Company (VCTR) and our products that remains the foundation of who we are and how we operate today. As of December 31, 2023, our employees and directors held almost 20% of the diluted equity in our firm. Additionally, at year-end, our employees had invested over $200 million in Victory Capital products, all by choice and side by side with our clients.

Equity and fixed income markets had another volatile year in 2023, with many investors electing to remain on the sidelines in the face of uncertainty about the economy, inflation, interest rates, and geopolitical risks.

In the face of these headwinds, our financial and operating results remained strong due in large part to strong execution by our employees and the efficiency and effectiveness of our business platform. We also continued to invest in many parts of our business to drive long-term growth and shareholder value. Additionally, our Investment Franchises continued to deliver excellent investment performance on behalf of our clients.

Progress Over Five Years

When we became a public company in February 2018, we laid out five clear commitments to our shareholders, and we have successfully delivered against each of them.

Make accretive acquisitions. We have completed four acquisitions since 2018, including USAA® Asset Management Company, THB Asset Management, New Energy Capital, and WestEnd Advisors. In their own respective ways, each of these acquisitions has made our business strategically stronger while collectively generating well in excess of 100% of earnings accretion.

Increase scale. Our business has experienced significant increases in both size and scale over the past five years, with AUM increasing by more than $100 billion. This has enabled us to enhance operating efficiencies and expand our operating margins by more than 1,200 basis points while increasing strategic investments back into the business.

Diversify our asset mix. We’ve meaningfully expanded our product offerings across asset classes and vehicles, including broadening our fixed income capabilities and introducing specialized solutions such as active ETFs, multi-manager strategies, alternative investments, and model portfolios. Today, we have a durable and sturdy business that is built to persevere in all market conditions.

Broaden our distribution platform. Our distribution platform is broader and more diversified across business channels than at any time in our history. Our institutional business has grown with the addition of many large, well-known, and respected institutional clients within and outside the U.S. Within our intermediary business, we’ve added an RIA sales and service team and dedicated ETF and third-party model specialists, while meaningfully expanding our presence on retirement and financial advisor distribution platforms. We’ve also introduced a direct investor business that includes Victory mutual funds, brokerage capabilities, and a 529 education savings plan.

Become the industry’s acquirer of choice. Our ability to attract the quality businesses and investment professionals that are today a part of our organization is a testament to the strength and attractiveness of our business platform as well as our ability to successfully execute against our long-term strategic vision.

Commitment to Investment Excellence

Seeking long-term, risk-adjusted returns that drive better investor outcomes for our clients has been and will remain our highest priority, and our Investment Franchises continued to deliver against this objective in 2023.

Our funds received nine 2024 U.S. LSEG Lipper Awards for consistently delivering strong risk-adjusted performance relative to peers. For the period ended November 30, 2023, the LSEG Lipper Awards recognized two of our fixed income funds and one mixed asset fund for the three-year period, three fixed income funds and one equity fund for the five-year period, and two equity funds for the 10-year period. Read more here.

These accolades, which measure our performance relative to our industry peers, are a direct reflection of the dedication of our Investment Franchises, which strive every day to deliver investment excellence on behalf of our clients and investors.   

Progress Against Strategic Priorities

We continued to make significant progress against our strategic priorities in 2023.

Continually evolving our product set to align with the needs of our clients remained a key objective. We added two new ETFs to our VictoryShares lineup – the VictoryShares Free Cash Flow ETF (ticker: VFLO) and the VictoryShares Small Cap Free Cash Flow ETF (SFLO).

Our WestEnd Advisors (WestEnd) Investment Franchise, which was acquired at the end of 2021, continued to attract attention from financial advisors seeking third-party ETF model strategies for their clients. In 2022, we introduced the VictoryShares WestEnd U.S. Sector ETF (MODL), which delivers WestEnd’s time-tested process and approach in a single ETF vehicle. We are continuing to evaluate innovative ways to broaden WestEnd’s product set in 2024.  

On the direct investor side of our business, we introduced “Victory Capital InVest,” the new brand for our direct business. We also expanded our platform to include brokerage capabilities. Our new “Marketplace” brokerage platform offers our investors more choice and flexibility on a single platform.

Community Engagement

Giving back to the communities in which we live and work is core to our culture. We encourage employee involvement through initiatives such as annual matching gift allowances and two days of paid time off for qualifying volunteer work.

Our Employee Resource Groups (ERGs) support our community efforts and are an integral part of the impact we deliver. Our five ERGs, which represent Asian American, Black, Hispanic, Women, and Military-affiliated employees, provide a platform for employees to come together with a sense of belonging and celebrate their affiliation, share their perspectives, serve their community, and advocate for their interests.

We continued to support our alliance with Xavier University of Louisiana (XULA) in 2023 by providing financial support to students through the Victory Capital Scholars Program and providing guidance and mentorship to students in XULA’s investment club. Our alliance with XULA is designed to promote diversity in the asset management industry and prepare XULA students for careers in business.

Looking Ahead

The new year is off to a very solid start. We look forward to continuing to introduce new products that align with our clients’ investment needs while also continuing to invest in areas that support the growth of our business, such as data and technology, distribution, digital marketing, and the hiring of talented professionals.

On behalf of all our employees, I would like to thank our clients and shareholders for your trust and confidence in us.

Sincerely,

David Brown
Chairman and Chief Executive Officer

¹ Total AUM includes both discretionary assets under management and non-discretionary client assets under advisement and excludes other assets.