Westwood Holdings Group (WHG) Q3 2026 earnings review
Westwood's newer funds grow, but its fee income hardly moves
Westwood, a Dallas-based investment manager, earned more from its newer funds while fees from its traditional pension clients kept falling. Management fees hardly moved, because client assets shrank. Total revenue rose 9%, but gains on the firm's own investments supplied most of that increase. Profit fell 16% after $1.7 million of severance pay and higher professional fees, finance chief Terry Forbes said.
| Fees from managing client money | $24.8M +2% from a year ago |
|---|---|
| Total revenue, including investment gains | $26.6M +9% from a year ago |
| Client assets managed | $16.1B −7% from a year ago |
| Quarterly dividend (outlook) | Unchanged $0.15 per share |
⚖️ Verdict: 🔴 Bearish
The story got worse because the shrinking institutional business now outweighs growth in exchange-traded and private funds, so total fees barely rose. One good sign: newer products kept lifting the average fee, and a delayed pension mandate of over $450 million finally arrived.
The question now is whether the newer funds can grow fast enough to replace fees that departing institutions take away. Either they keep adding assets and lift total fees, or an energy downturn slows them all, since most invest in energy. Fourth-quarter fees and the next count of fund assets will tell.
🐂 Bull Case
Higher-Fee Products Lift Westwood's Average Fee
Westwood charges clients a yearly percentage of the money it manages for them. By our math, that rate climbed to about 0.60% of average assets, from 0.56% a year ago, as clients moved toward its pricier products.
- Fees from mutual funds and exchange-traded funds: up 7.8%, while those assets fell 2%
- Wealth management advisory fees: $1.7 million, against $0.8 million a year ago
- Trust fees, charged for trust and custody services: up 2.8%
Wealth fees doubled even though wealth clients withdrew a net $183 million. Chief executive Brian Casey said the firm has "advanced our fee alignment plans", but neither he nor the filing linked that work to the jump.
What to watch: the fee rate in fourth-quarter results. A rate that holds near 0.60% would show the shift toward pricier products lasts beyond one quarter.
ETF Assets Pass $430 Million, but Gains Narrow
Westwood's exchange-traded funds (ETFs), which trade on a stock exchange like shares, held more than $430 million in September. The firm launched PWRX, a power and infrastructure fund, which chief executive Brian Casey called "the first new ETF on the Texas Stock Exchange".
- End of 2025: above $200 million
- July 2026: above $400 million
- November 4: about $460 million, Casey said
But the gains between these milestones have narrowed each quarter, from about $120 million to about $30 million. Casey also did not repeat the ETF asset goal he set last quarter.
What to watch: ETF assets at the end of December, due on the fourth-quarter call. Steady gains above the November level would show that broker approvals bring in new money.
Private Energy Funds Grow, but New Pledges Slow
Westwood also runs private funds that buy existing stakes in energy deals from other investors at a discount. Investors pay a fee of "around 1%" a year, chief executive Brian Casey said.
- Private fund assets: $723 million at September 30, against $612 million in June
- New commitments: about $30 million in the third quarter, against $147 million in the second
Fund assets grew about 18% by our math, though new pledges fell to a fifth of the prior quarter's level. The next step depends on WEST III, the third fund, which Casey said "is attracting substantial early interest".
What to watch: private fund assets in the next quarterly filing and any first close for WEST III. Growth there would show that the slow third quarter for pledges was a pause.
Positives this quarter didn't test
Three parts of the growth case got no new figures in the release, the filing or the call, so this quarter left them where they stood.
- Managed Investment Solutions, one of three newer business lines: no asset figure; chief executive Brian Casey said its real-asset strategy is under review for an approved list by year-end.
- The goal of more than $1 billion in assets for each newer line: Casey did not repeat it; the next call will show whether it stands.
- ETF fee waivers, the discounts new funds give until they grow: no date for their end, which would lift the average fee.
🐻 Bear Case
Big Institutions Keep Pulling Money From Value Funds
Westwood's oldest business invests for pension plans and other institutions, mostly through value funds that buy shares of companies it considers cheap. Chief executive Brian Casey said "Our pipeline remains robust across value, Managed Investment Solutions, and energy strategies".
In July a large company's retirement plan moved over $450 million into the SMidCap fund, which holds small and mid-sized companies. Its size matches the mandate Westwood had promised for the first quarter. Without it, other institutional clients withdrew roughly $450 million more than they added, by our math.
- Institutional assets: $7.8 billion, down 13% from a year ago
- Institutional fees: $9.9 million, down 10%
- Net client outflows this year to September: $1.9 billion, against $0.3 billion a year earlier
Casey said outflows were "led by two public plan relationships", and the filing named SmallCap Value as the main source. A few large clients therefore decide the flows, so one exit can undo a big win.
What to watch: institutional net flows in the fourth quarter, the money clients add minus what they withdraw. Losses near this quarter's underlying pace, with no big mandate to offset them, would confirm the decline continues.
Costs Rose Faster Than Fees
Westwood spent more to run itself while fees from managing money barely moved. By our math, costs excluding severance rose 5.4%, against fee growth of 1.9%.
- Pay and benefits: 58.6% of revenue, up 3.9 percentage points
- Outside professional services: 9.0% of revenue, up 2.5 points
- General and administrative costs: 9.0% of revenue, down 2.4 points
Finance chief Terry Forbes cited $1.7 million of "severance-related compensation expenses". The filing blamed "additional consulting and recruiting expenses" for the professional bill, while a smaller charge for past acquisitions trimmed general costs. Taxes already took 32% of pretax profit, and the filing warns a pay-deduction rule due next year could raise that "potentially materially".
Profit therefore came from Westwood's own investments. Gains on its own funds and private-fund payouts added $1.8 million to revenue. A funding round at the Texas Stock Exchange lifted its stake by $2.6 million, and with a smaller software gain, these items topped pretax profit.
What to watch: pay costs as a share of revenue in the fourth quarter, once severance drops out. If they stay near this quarter's level, costs will keep outgrowing fees.
Most New Growth Depends on Energy
Most of Westwood's newer products depend on energy. Three of its four exchange-traded funds hold energy or power companies, and its private funds buy energy stakes.
Energy and real assets made up 23% of client assets in June, up from 16% at the end of 2025. Chief executive Brian Casey said "Energy was the clear standout" in the quarter, and energy and real assets "led in gross and net sales".
That helps now but ties the newer businesses to energy prices. Casey said the private funds should "deliver some carry", a share of fund profits, without giving a date or amount.
What to watch: the share of client assets in energy and real assets in the next investor presentation. A rising share would leave the growth case dependent on one sector.
👓 Other Themes
Westwood Swaps Its WEBs Stake for Two ETFs
On October 14 Westwood agreed to give up its stake in WEBs Investments, which it carried at $5.4 million. In return, WEBs will move two of its exchange-traded funds into funds that Westwood will advise. Chief executive Brian Casey called the pair "natural additions to our growing ETF platform". The deal remains "subject to fund shareholder approval".
Falling Small-Cap Stocks Cut Client Assets
Market moves cut Westwood's assets under management, the client money it invests, by $561 million in the quarter, after adding $679 million a year earlier. Chief executive Brian Casey described "large-cap stocks advancing, while small and mid-cap stocks declined", which worked against the firm's small-cap value funds. Falling bond prices also weighed on its income portfolios, he said.
💲 Other KPIs
Cash and investments climbed to $65.0 million at September 30, from $56.5 million in June by our math. A higher mark on the Texas Stock Exchange stake supplied part of that rise. Westwood carries no debt, and the balance also tops the $63.4 million held at the end of 2025.
The share count keeps creeping up because Westwood pays staff partly in stock and bought none back. Diluted shares rose 2.8% from a year ago, close to the pace of the past three quarters. The firm left its $5.5 million buyback authorisation unused, so each share's slice of profit shrinks.
Free cash flow, the cash left after running the business and buying equipment, came to about $5.9 million by our math. That sits 30% below a year ago. Over nine months the total fell to $6.1 million, as the firm spent $2.9 million on office fit-outs and equipment.
🔮 Guidance
Unchanged. The board kept the payout at 15 cents a share, the level it has paid every quarter since at least late 2024. By our math, it took about 31% of this quarter's economic earnings per share, the firm's profit measure before stock pay and amortisation. That share stood at 45% in the second quarter.
New. Casey said the firm is "targeting completion early next year" for moving the DVSP and DVQQ funds into versions Westwood will advise. The funds' shareholders still have to approve the plan. Westwood pays no cash; it gives up its WEBs stake instead.
Unchanged in direction, now with a date. Chief executive Brian Casey said "we would expect to fully transition our wealth strategy next year". The firm chose Black Diamond as its new wealth software and formed a dedicated wealth investment committee. Earlier calls described the model as a service for very wealthy Texas families.
❓ Key Questions
Does Westwood still aim for $1 billion per business?
Last quarter Casey set a goal of more than $1 billion each in ETFs, private capital and Managed Investment Solutions. This quarter he did not repeat it, and the firm gave no asset figure for Managed Investment Solutions.
Why did wealth management fees double?
Wealth advisory fees rose to $1.7 million from $0.8 million while wealth clients withdrew money. The filing gives no reason, so readers cannot separate new pricing from reclassified trust fees or new clients.
How much will next year's tax rule cost?
Westwood's tax rate already reached 32% this quarter. The filing says a wider limit on deducting executive pay could raise it "potentially materially", but it gives no estimate.
How much of Westwood's fees come from energy?
Three of four ETFs and the private funds all depend on energy. A breakdown of fees by sector would show how far a fall in energy prices would cut revenue.
What do ETFs and private funds earn in fees?
Westwood reports assets for both but not their fee revenue. Without it, readers cannot judge when ETF fee waivers end or how much private fund fees offset institutional losses.