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SEI Investments Company (SEIC 0.07%)
Q3Â 2020 Earnings Call
Oct 21, 2020, 4:30 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Ladies and gentlemen, thank you for standing by. Welcome to the SEI Third Quarter 2020 Earnings Call. [Operator Instructions] Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions]
I would now like to turn the conference over to our host, Chairman and CEO, Al West. Please go ahead.
Alfred P. West -- Chairman and Chief Executive Officer
Thank you, and welcome everyone. And all of our segment leaders are on the call, as well as Dennis McGonigle, SEI's CFO; and Kathy Heilig, SEI's Controller. I'll start by recapping our situation in third quarter 2020. I'll then turn it over to Dennis to cover LSV and the investment in new business segment. And after that, each business segment leaders will comment on the results of their segments. Then finally Kathy Heilig will provide you with some important companywide statistics. As usual, we will field questions at the end of each report.
Now before we cover the results of the third quarter, I will speak to the set of circumstances we face today. Around the globe, we are still dealing with the COVID pandemic. From the beginning of this health crisis, our priority has been on the safety and health of our employees and their families, along with the seamless delivery of service to our clients. I'm incredibly grateful to our workforce for transitioning both workplace-to-home and home-to-workplace and all the while supporting our clients each other and our communities.
The strength of SEI shines best when the challenges are extreme. At SEI, we take immense pride in investing for the long term. We have proven business models that have been shaped over the past 50 years of experience. They are the bedrock of our ability to weather the uncertainties of today and emerge from the current crisis stronger and better positioned to take advantage of tomorrow's opportunities.
Our secret to success is straightforward: remain focused on keeping our workforce healthy and productive, invest in our best-in-class technology, innovate continuously, and deliver world-class service to our clients. We'll also be relentless in executing on our strategic vision in launching the growth-generating initiatives we believe will be at the heart of our future successes. We look forward to sharing our progress with you.
So let's turn our attention to the financial results of the third quarter 2020. Third quarter earnings decreased by 16% from a year ago. Diluted earnings per share for the third quarter of $0.75 is a decrease of 13% from the $0.86 reported for the second quarter of 2019. We also reported a 2% increase in revenue from third quarter 2019 to third quarter 2020. This year's third quarter results benefited from a rebound in our capital markets.
Our non-cash asset balances grew by just under $10 billion from both cash flows and market appreciation. LSV's balances during the third quarter gain just under $1 billion. Also during the third quarter, we repurchased approximately 2.1 million shares of SEI stock at an average price of $51.54 per share. That translates to approximately $109 million of stock repurchaseed during the quarter.
And this quarter, we also continued our investment in the growth generating initiatives. The newest effort is One SEI. This is a large part of our growth strategy. As you recall, One SEI leverages existing and new SEI platforms by making them accessible to all types of clients, all adjacent markets and all other platforms. As a byproduct of the investments suite made in the third quarter, we've capitalized approximately $6.1 million of development and amortized approximately $12.2 million of previously capitalized development. To date, we have not capitalized any of the One SEI work.
Now turning to revenue production. Third quarter sales events, net of client losses, totaled approximately $28 million and are expected to generate net annualized recurring revenues of approximately $15 million. Clearly, we are encouraged with this year's sales results. They reflect the fact that although throughout the company we have successful in entrepreneurial sales teams driving revenue. Our unit heads will speak to their specific sales results.
We have three business objectives. The first is to deliver soft, smooth, safe operations. The second quarter -- I'm sorry, the second objective is to grow our business by helping our clients grow. And our third objective is to continuously innovate, so we can keep growing in the future. To reach these objectives we know that things will never be the same. So we have been busy adapting to new middle models and realities. We feel ready to capture the opportunities inherent in significant change.
Now this concludes my formal remarks. And I'll turn it over to Dennis to give you an update on LSV and the investment in our new business segment. And after that, all the segment heads will update the results in their segments. Dennis?
Dennis J. McGonigle -- Executive Vice President, Chief Financial Officer
Thanks, Al. Good afternoon, everyone. I will cover the third quarter results for the investments in new business segment and discuss the results of LSV Asset Management. During the third quarter 2020, the investments in new business segment continued its focus on the ultra-high-net-worth investor segment through our private wealth management group and additional business and research initiatives, including those related to our IT services business opportunity and the modularization of larger technology platforms into stand-alone components for the wealth management and investment processing space to deliver on our One SEI strategy.
During the quarter, the investments in new business segment incurred a loss of $9.8 million, which compared to a loss of $4.5 million during the third quarter of 2019. This increased loss reflects an increase in investments specifically related to our One SEI strategy, which we have discussed in the prior couple of quarters. Of our expenses in this segment, approximately $8 million is tied to that effort. The One SEI strategy is a companywide initiative to open business opportunity across our entire company, as well as creating new business lines.
Regarding LSV, our earnings from LSV represent our approximate 39% ownership interest during the third quarter. LSV contributed $28.3 million in income to SEI during the third quarter of 2020. This compares to a contribution of $37.6 million in income during the third quarter of 2019. Assets during the second -- during the third quarter grew approximately $1 billion. LSV experienced net negative cash flow during the quarter of approximately $2.2 billion, offsetting market appreciation of approximately $3.2 billion.
Revenue was approximately $94.9 million for the quarter with no performance fees. Since I know the question is coming on expenses, I thought I would address that. Expenses grew approximately $13 million or 4% from second quarter 2020 to third quarter 2020. Just under one-half of this expense growth, approximately $6 million relates to salary and other compensation adjustments we made at the beginning of the quarter, consistent with our annual compensation process for most of our workforce as well as continued hiring in areas of growth.
In addition, approximately 20% or $3 million was due to a spike in health insurance costs during the quarter, which are not predictable and driven by actual experience since we are generally self-insured. The final 30% or approximately $4.5 million is essentially one-time in nature, related to some severance expense and professional services fees and costs associated with trade corrections as a result of a couple of incidents disclosed in our second quarter 10-Q. These costs are spread across our segments as well as G&A. I hope that breakdown helps. Finally, our effective tax rate for the quarter was 21.4%.
I will now take any questions you have.
Questions and Answers:
Operator
Thank you. [Operator Instructions] And we'll go to the first line of Ryan Kenny with Morgan Stanley. Please go ahead.
Ryan Kenny -- Morgan Stanley -- Analyst
Hey, Dennis. How are you?
Dennis J. McGonigle -- Executive Vice President, Chief Financial Officer
Hey, Ryan. Good. Welcome onboard.
Ryan Kenny -- Morgan Stanley -- Analyst
Thank you. Just want to get a sense of how you're thinking about the trajectory of One SEI spend, do you still think that it's something that peaks this year and in 2021, should more or less reasonable 4Q 2019 or is there more to do that next year?
Dennis J. McGonigle -- Executive Vice President, Chief Financial Officer
Yeah. There's -- I think we said on the last call, there's still more to do in the early part of the year, but it will start to come down over the course of the first half of the year and then certainly into the second half of the year. So we're -- as we said in the past, we're -- it's a project and it will take the trajectory more of a project than a sustainable platform build.
Ryan Kenny -- Morgan Stanley -- Analyst
Thanks.
Dennis J. McGonigle -- Executive Vice President, Chief Financial Officer
You're welcome.
Operator
Thank you. Next we'll go to the line of Robert Lee with KBW. Please go ahead.
Robert Lee -- KBW -- Analyst
Great. Hi. Thanks, Dennis. So far all is well with you.
Dennis J. McGonigle -- Executive Vice President, Chief Financial Officer
Yeah. Thanks, Rob.
Robert Lee -- KBW -- Analyst
Thank you, on the hear. Two quick questions. I guess, just with LSV, I mean obviously, they've been struggling with flows and I mean assets down in bunch year-to-date by 24%. I mean, I don't know if there's any color insight you may have into kind of it's known -- if they've anything in terms of known redemptions that we should be thinking about as we look ahead or any reason to think that this, you know, there could be some change in the near-term trends over the coming quarters?
Dennis J. McGonigle -- Executive Vice President, Chief Financial Officer
Yeah. I mean, it's obvious the trends aren't good, they're not good for value investing generally. And since LSV is very specific to that segment of the market they're clearly caught up, caught up in that. I can't say, there's real predictability kind of quarter-to-quarter as in it. The flows this past quarter, about half of the negative flows were from lost clients, about half of the negative flows were from existing clients. So they were really more just rebalance away with some existing clients. Arguably, the outlook for value improves and that potentially would reverse itself. And as capital gets committed to this segment of the equity markets and I would say, it's really not as -- not predictable.
And if you remember back a couple of quarters, they'd actually had positive moves. So it's even less predictable. So we're just [Speech Overlap] convicted talked about this on the last call, with a high conviction about what you're doing, high conviction about value. They know what they're really good at. Those are the kind of shocker the department has been through. This type of thing before even though, yeah, this one is more prolonged than other periods. And the historical perspective for what it's worth would suggests that when it turns, it will turn very much as our favor.
Robert Lee -- KBW -- Analyst
Great. I appreciate that. Then maybe as a follow-up and I'm just curious if -- I don't know if this is embedded in some of the expense numbers you mentioned it's $4.5 million. But I know over the -- I think it was back at the end of July or so there was one of your vendors had their ransomware pack that I guess exposed some of your client data. So I was kind of curious if you've seen any expense or fall out related to that or maybe -- and maybe this is a question for Steve or one of the other segments kind of how it maybe impacted or changed in any way your approach to working with some of your outside vendors.
Dennis J. McGonigle -- Executive Vice President, Chief Financial Officer
No. On the expense front, there is a portion of expense associated with that event in that $4.5 million number, that we certainly don't expect that to repeat itself and some of that's just what we did to make sure we were on top of this particular vendor. I would say, we're a firm that's always in constant improvement. So when it comes to vendor management, it's an area that whether we had this event or not we would have been consistent with our approach to risk management and vendor management.
Now this points to us at something that in terms of the issues associated with this particular event that our vendor program would have caught this even if it had elements in it. So we're looking at all of that. I'll leave it maybe any follow-up questions to Steve since it's more kind of end-market elements to it as well. But we feel like we're -- from a market perspective this is kind of behind us. It's more just evaluating our condition and improving from here.
Robert Lee -- KBW -- Analyst
I mean should we expect that there may be at least for a couple of quarters a little bit more kind of trailing expenses related to this or that it's pretty much behind you and your...
Dennis J. McGonigle -- Executive Vice President, Chief Financial Officer
Yeah. I would say they're incrementally -- look, given what we expensed in the third quarter. I don't see anything on top of that, probably be down a little bit. And the only area we would have some expenditures out of pocket will be professional services related consultants and I'll just -- but it's not -- I wouldn't say it's any greater than what we've incurred in the third quarter.
Robert Lee -- KBW -- Analyst
Great. Thanks for taking my questions, Dennis.
Dennis J. McGonigle -- Executive Vice President, Chief Financial Officer
No problem. Thank you.
Operator
Thank you. Next we'll go to the line of Chris Shutler with William Blair. Please go ahead.
Chris Shutler -- William Blair -- Analyst
Hey, Dennis. Good afternoon.
Dennis J. McGonigle -- Executive Vice President, Chief Financial Officer
Hi, Chris.
Chris Shutler -- William Blair -- Analyst
So let's see, I guess, first, I want to ask about the One SEI, just to reiterate, you said about $8 million of expense in the new business segment was One SEI?
Dennis J. McGonigle -- Executive Vice President, Chief Financial Officer
Yes. That's consistent with the second quarter as well.
Chris Shutler -- William Blair -- Analyst
Yeah. And in terms of how we should think about that going forward. So basically maintain that $8 million so level into per quarter into early next year and then, it will start to come down. And I guess how much do you expect it to come down as you progress through 2021?
Dennis J. McGonigle -- Executive Vice President, Chief Financial Officer
Yeah. I think, it's my expectation is it will be gradual in the first quarter, a little bit more in the second quarter and then more significantly in the third through where hopefully is pretty much off the books in -- by the end of the year.
Chris Shutler -- William Blair -- Analyst
Okay. Great. And then the healthcare cost item that you mentioned, would you just explain that quickly and is that -- just to confirm that, that $3 million is a ongoing expense?
Dennis J. McGonigle -- Executive Vice President, Chief Financial Officer
No, there's a couple of elements in there. One, first of all, you may not -- whether you're aware or not, we're self-insured on healthcare. We have catastrophic coverage and obviously, it's over the top. But for the first part, we'll pay as we go for healthcare. And what we saw in the third quarter which I think other companies are probably going to have similar experience there was a lot of catch-up in the third quarter in the healthcare arena as people stayed away from their medical appointments and medical treatments in the second quarter because of COVID and it popped back up in the third quarter. So there was some catch-up in terms of healthcare usage if you will. And then we -- unfortunately we had one fairly significant individual health situation that also added to the expense. So that will -- I don't expect that to repeat itself in the fourth quarter. There may still be some level of catch-up for people but it should normalize.
Chris Shutler -- William Blair -- Analyst
Okay. Got it. Thanks for the detail.
Dennis J. McGonigle -- Executive Vice President, Chief Financial Officer
No problem.
Chris Shutler -- William Blair -- Analyst
And then let's see maybe one more. I was just thought that one-time expenses that you mentioned the $4.5 million -- I think it was $4.5 million. And you said it was across segments. Were there any segments where it was more pronounced than others?
Dennis J. McGonigle -- Executive Vice President, Chief Financial Officer
Probably a combination of G&A, some in probably more investment managers and then, the severance was an institution. Maybe a little bit in banking.
Chris Shutler -- William Blair -- Analyst
Okay. All right. Thanks a lot guys.
Dennis J. McGonigle -- Executive Vice President, Chief Financial Officer
So it's pretty -- it was spread around.
Chris Shutler -- William Blair -- Analyst
Okay, makes sense. Thank you.
Operator
Thank you. And I do have a question from Owen Lau with Oppenheimer. Please go ahead.
Owen Lau -- Oppenheimer -- Analyst
Thank you. Thank you for taking my question, Dennis.
Dennis J. McGonigle -- Executive Vice President, Chief Financial Officer
So, no problem, Owen. How are you?
Owen Lau -- Oppenheimer -- Analyst
I'm good. Thank you. So some companies started to talk about upside and downside of working from home. Could you please give us an updated view of SEI's operating model going into 2021 and how should we think maybe the T&D save any potential would that say or any other additional G&A spend going into 2021? Thank you.
Dennis J. McGonigle -- Executive Vice President, Chief Financial Officer
Sure. I mean, the way we're thinking about the return to office, work is -- right now, we have about 250 or so employees in our offices, mostly here in Pennsylvania. We've recently announced our workforce that we wouldn't be bringing back any significant numbers again until the earliest March 1. So we were few months ago, we are more hopeful, that the pandemic would have progressed further than it has, we would have been able to bring more people back by now, but so we made that announcement.
At the same time, we also reminded our workforce that there may be instances where we might need to pull some people into the office or offices or a specific periods of time for their job functions, particularly when we get closer to year end, so year end processing. In terms of additional costs, we would incur more adjustments. I don't really see much change on that front over the next quarter. We are very cognizant of making sure that our employees have a -- as comfortable work from home experiences as they can have. So we've done a lot on that front already.
We're also cognizant of -- in really all of our locations, the challenges that working parents are having, the school -- school-aged children or younger than school-aged children. So we've made some adjustments there, what we think will -- can help at least a little bit with that issue. When it comes to G&A, I don't expect much change there. Over the next quarter, we're certainly not planning any big client events or celebrations. And I'd say, and when it comes to travel, and the movement of our workforce out into the field and conversely the movement of clients visiting campus, that will occur, and it is occurring on a very limited basis.
I'd expect that will expand a little bit over time, but I would expect that really to get anywhere close to. So I'll call it normal for a while. And it's really twofold. One, we're very protective of our workforce and our willingness to let them travel and conversely prospects and clients really don't want a lot of visitors. So we can accommodate visitors here to campus safely, we prepared the campus for that. We have protocols for our employees who do travel, who were required to travel by client demand and voluntarily travel I might -- but I don't see travel and entertainment changed much.
Owen Lau -- Oppenheimer -- Analyst
That's very helpful. Thank you. Thank you, Dennis.
Dennis J. McGonigle -- Executive Vice President, Chief Financial Officer
You're welcome. Thank you.
Operator
Thank you. Next we'll go to line of Robert Lee with KBW. Please go ahead.
Robert Lee -- KBW -- Analyst
Great. Thanks. Dennis, just a tax follow-up maybe two. I know it's always hard to predict just given moves around with option exercises and what not. But any venture where you sit now, what you're kind of thinking of that as a kind of tax rate going forward?
Dennis J. McGonigle -- Executive Vice President, Chief Financial Officer
Yeah. I think it will be in this range. Third quarter, we had a little bit of tax benefit from some expiring elements for the most part, it should be on a similar range to third quarter than the fourth quarter.
Robert Lee -- KBW -- Analyst
Great. And then maybe one last thing on a few straight patients and I know the last thing you ever want to be talking about is hypotheticals. But hypothetically, if down the road we have -- are facing higher corporate tax rates maybe who knows, but is there any reason where you sit today, would you expect kind of let's say what 700 basis point increase that would be kind of the full effect on you guys or is there any way where you're saying that you think it maybe puts a foreign-sourced income or something it would be less? Trying to get your own kind of sense on that?
Dennis J. McGonigle -- Executive Vice President, Chief Financial Officer
Hypothetically, I think we would have to prepare for any, I would say flat direct increase in the statutory rate, without any other elements of adjustment. It will probably hit us pretty directly.
Robert Lee -- KBW -- Analyst
Okay. Thank you for taking my hypothetical question.
Dennis J. McGonigle -- Executive Vice President, Chief Financial Officer
Yeah. And I don't know if you recall, when the tax cut occurred, we got pretty much full benefit from that as well. And there is also this little thing on most companies balance sheet call deferred tax assets or liabilities, those have to adjust as well. So if you get these one quarter anomalies, one that -- and we all have that, we don't have it probably as much as most companies and something to watch out for hypothetically.
Robert Lee -- KBW -- Analyst
Hypothetically. Thank you. Appreciate it.
Operator
Thank you. And I have no further questions in queue at this time.
Dennis J. McGonigle -- Executive Vice President, Chief Financial Officer
So Al, with that, I'll now pass it on to Steve to talk about the private banking segment. Steve?
Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services
Thanks, Dennis. Good afternoon, everyone. For the third quarter of 2020, revenues for the segment totaled $114.8 million, which was down 2.1% from the third quarter of 2019, which was due primarily to previous announced client losses and a decrease in our asset management revenues. In comparison to the second quarter of 2020, revenues for the segment were up 6.6% for the third quarter, which was due primarily to one-time revenues tied to implementation activities.
For the third quarter of 2020, quarterly profit for the segment was down $4.7 million from the third quarter of 2019. This year-over-year decrease was primarily driven by previously announced client losses and a decline in our asset management business. Quarterly profit was up about $1.7 million from the second quarter of 2020 mainly driven by our increase in one-time revenues.
And turning to sales activity. For the quarter, we closed $29.8 million of gross recurring sales events and recontracted eight clients for another $22.6 million in revenue, which in total solidified $52.4 million of recurring revenue and resulted in approximately $600,000 of net recurring events for the investment processing business offset by a negative $1.3 million in asset management events. This offset brought our total net recurring events for the quarter to a negative $700,000 for the segment.
The difference between our gross events and the net events was primarily due to a small net down in one of our deals signed for the quarter. The average term for our recontracts this quarter was 3.9 years and also in the quarter, we closed $11 million on one-time sales.
I'm pleased to announce that during the quarter, we signed an agreement with one of our largest and longest-running client partners US Bank to adopt the SEI Wealth Platform. US Bank, the fifth largest bank in the nation has been a client of SEI since 1977 and will join over 50 other signed clients committed to utilizing SWP as the core technology and infrastructure to grow and modernize their wealth management business.
In July, US Bank signed this long term SWP contract and implementation agreement. US Bank selected the SEI Wealth Platform to fuel their global growth, strategic initiatives and to take advantage of an upgraded technology and infrastructure solution set that will power the future of their wealth management and investment services business.
US Bank will consume SWP in a software-as-a-service model. As this is a large scale implementation, we expect a multi-phase, multi-year conversion. In the interim, US Bank will remain on our TRUST 3000 platform. We have started implementation activities with US Bank. This event is significant for us for several reasons. First, it validates our One SEI strategy, as we were able to modularize our platform and approach to offer only core to core back office for SWP and move this agenda faster, finalizing it during the pandemic.
Second, it allows us to land SWP with US Bank and then provides us the opportunity to expand our additional SWP front office capabilities to US Bank. Third, this is a large scale SaaS adoption of SWP further validating the broad capabilities of SEI's Wealth Platform. And finally, this will allow us to support US Bank's continued global growth in a more meaningful way. We have enjoyed many milestones as long time partners with US Bank in this industry and we are thrilled to be able to continue our long-term partnership as well as to expand our relationship.
Also during the quarter, we signed an agreement with a new client to SEI Pacific Premier Trust, a division of Pacific Premier Bank. We won this business in a competitive process and we expect Pacific Premier Trust to migrate SWP from a competitor platform in the first half of 2021 and we look forward to welcoming them to be SEI family and supporting their future growth initiatives.
From a UK perspective, we continue to see -- continued expansion and growth from the Fusion Schroders migration and continued progression with the HSBC implementation. As an update on our backlog, our total signed, but not installed backlog is approximately $73.1 million in net new recurring revenue.
Turning to implementation activity. In the third quarter, we successfully converted two clients to the SEI Wealth Platform, Choate Hall & Stewart LLP in Boston, Massachusetts and Legacy Trust Company in Houston, Texas, both existing TRUST 3000 clients. Both clients were successfully brought live on SWP in a 100% remote environment. While others in the industry are experiencing implementation delays, we continue to install clients on time and on budget.
Throughout the quarter, SEI and our client partner teams continue to successfully operate in virtual environment and met all milestones and live dates to avoid any disruption to our clients' business. The teams have enhanced our remote training, and implementation capabilities and the continued success of these conversions will ensure our ongoing ability to bring clients live under unforeseen circumstances. This capability to finalize these implementations during these disruptive times is a testament to our clients, our workforce and bodes well for the future.
From an asset management standpoint, total assets under management ended the period at $23.5 billion representing a 2% increase from the second quarter of 2020. Our AUM increase was due to market appreciation. Our cash flow for the third quarter 2020 was a negative $314 million.
And turning to the business environment. Despite the ongoing pandemic and the challenges that has brought, we continue to operate as business as usual and our workforce continues to rise to the occasion and across our company, we have executed extremely well, finding new ways to engage clients and prospects.
I'm encouraged by the continued strong market activity, we are seeing and the growth opportunities in front of us. I'm further encouraged by the execution of our One SEI strategy and the investments we are making in our platforms and business to drive sustainable growth. Our people, our culture, and our technology or differentiators. And I feel well positioned due to them.
That concludes my prepared remarks and I'll now turn it over for any questions you may have.
Operator
Thank you. [Operator Instructions] And we'll go to the line of Owen Lau with Oppenheimer. Please go ahead.
Owen Lau -- Oppenheimer -- Analyst
Yeah. Thank you for taking my questions, again. Sorry, Steve, for the one-time revenue, I didn't get the amount. How much was the one-time revenue and what was that? And overall, we see margin started to expand from here? Should we take it as a sign that it's the beginning of a more sustainable margin expansion from here, or is it too early to say it will balance the line over the next couple of quarters. Thank you.
Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services
So the one-time Owen that we closed in the quarter was $11 million in one-time sale. As far as the margin, I would say, yeah, we're still dealing with the client losses that we've announced at nauseam before and we're still going to kind of digest them through this quarter and the rest of this year. I think, I've mentioned this before on a number of calls, my hope is that sometime in 2021 as we get through this and start to implement in a more meaningful way our backlog. I'm hoping to get to a point where we can have a more sustainable and accelerating margin path.
Owen Lau -- Oppenheimer -- Analyst
Got it. Thanks, Steve.
Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services
Sure.
Operator
Thank you. And next we'll go to the line of Robert Lee with KBW. Please go ahead.
Robert Lee -- KBW -- Analyst
Great. Thanks, Steve. I hope you're well.
Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services
Sure, I am. Hope you are too.
Robert Lee -- KBW -- Analyst
All good. Thanks. Lot of the numbers you went through I think pretty quickly. So maybe if you can go back. Well, I guess, my first question is really of the private bank SWP win. Is that -- I'm assuming that's incorporated into your kind of net numbers to the quarter and how should we think about -- is that kind of sort of a neutral revenue impact for a while? I'm just trying to get a sense of how that impacts just your revenue.
Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services
Sure, Robert. That's a great question and I understand there's a lot of moving parts here. So what I'll say is that, so remember obviously US Bank is a great move to SWP for us. And like in the past, any time an existing client moves to SWP even when it's in a competitive process, while, I'd love to announce the entire event as new revenue, we can't, we obviously have revenue on the books. So we only announce earning data.
In this case, again because of the One SEI strategy, we afforded the ability to just sell the core back office processing core to core on SWP to TRUST to US Bank and obviously, we did that because it wasn't the full stack at a reduced rate. So actually it was a little net down from TRUST -- from the TRUST number. But we have the ability now as I said to kind of land and expand and upsell US Bank and potentially negate or improve that net down.
So the gross, it reflects obviously that and the net reflects the net down from that as well as the new sale and any net-ups we had from that. The importance I think that you should take from this and I know we talked about this a little last quarter. Between last quarter and this quarter, we have solidified through new business and recontracts close to $100 million of revenue in the segment.
For the next three to seven years, quite frankly, I think that is the significant point that you should take. And I think it's the important point we should take going forward. When we look at growing this business, there is really four legs to growing this. One, retaining our existing clients. Two, growing our existing clients. Three, freeing new clients on. And four, expanding our opportunities, our solutions and our markets and our best, if you will. We're doing all four.
Robert Lee -- KBW -- Analyst
Great. And then maybe just a quick follow-up with the backlog of $71 million odd to be a backlog, if you could just remind us, how you're thinking about that in terms of turning on, I mean, I guess, if I remember correctly, maybe the first half overlay kind of an 18-month period, maybe starting next year, then the other half kind of over the next several years post that. That's still the right way to think of it?
Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services
Yeah, I think so. I think last time it was, I think the rough numbers I think was about 50%, in the next 18 months, we expect to come on and then the next 50% after that, going up to almost 28 months, 30 months. If I looked at it now, we've obviously added to that backlog now. But I'd say that's still directionally correct, how we would look at it. Obviously some of the deals that are in conversion, that will be down to about 15 months, but some of the new we added, will add to that. So if I had to look at roughly, I'd say around 52%, 53% in the next 18 months and the rest after that spread out.
Robert Lee -- KBW -- Analyst
Okay. Great. Thank you, Steve. Appreciate it.
Operator
Thank you. Next we'll go to line of Chris Shutler with William Blair. Please go ahead.
Chris Shutler -- William Blair -- Analyst
Hi, Steve. Good afternoon.
Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services
Good Afternoon, Chris.
Chris Shutler -- William Blair -- Analyst
How you're doing?
Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services
Good.
Chris Shutler -- William Blair -- Analyst
So first on US Bank. So if that's -- it sounds like a modest net down recognizing it's like-for-like. Just -- I'm trying to reconcile how that makes sense if SWP is massively better technology than what US Bank has had in the past. And it's -- that's certainly isn't kind of the same as your experience in Wells Fargo five years ago when you announced that, that always like-for-like also, but was still a pretty nice step up in recurring revenue.
Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services
Well, Chris, they did not buy the full stack of SWP. So, while -- what they're getting certainly is a step up to what they have, but they have not bought the full stack. So again going back to our One SEI strategy, some of the talks we've had, the full stack, while, extremely powerful and extremely valuable is sometimes hard for the such big -- such a big transformational change. So in this case, they literally bought the core to core back office kind of SWP to TRUST 3000 and that's what they're installing. So all the value-add front office applications, unlike Wells are not included in this.
Chris Shutler -- William Blair -- Analyst
Okay. Got it. Okay. That makes sense.
Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services
So obviously US Bank is quite a large and long-standing partner. And obviously getting this done in this time given the pandemic and securing this revenue and the move to SWP and giving us the opportunity to grow, I think is a significant step.
Chris Shutler -- William Blair -- Analyst
Yeah. Okay, makes sense. And then, secondly on maybe expenses just help us think through the trajectory of expenses in your business not only Q2 to Q3, but just how we should think about them going forward? So is Q3, a good jumping off point I guess.
Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services
Yeah. So certainly, expenses were up. Dennis went over them a little bit. If you look at our net-up, I think our expenses were now quarter-over-quarter a little over $5 million. Some of that, I'd say, $1 million of it was directly tied to our asset management revenue increase, if you think about it as the revenue increases, there are underlying sub-advisor manager fees go up. Half of it was tied to some of the processing and trade corrections that Dennis had mentioned. And the remainder was personnel expenses, kind of partly due to our normal mid-year raise cycle. And some of it very positively tied to some new headcount tied to new revenue coming in.
So I think going forward, obviously, as I've said before, my job is to grow the topline and bottom line. We've got a great group of people that are focused on this. And we're going to manage expenses, but as we bring new business on, you will see an uptick in some of our personnel and some of our technology, but that's in the vein of bringing new revenue in. But we're very focused on managing this and hopefully keeping it flat or bringing it down and hopefully getting into next year where I can provide a more sustainable and accelerating profit trajectory.
Chris Shutler -- William Blair -- Analyst
Okay. Got it. And lastly, Steve, on the asset management distribution business, did you say that the flows were negative $314 million?
Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services
Yeah. Cash flow is negative $314 million for the year -- for the up quarter.
Chris Shutler -- William Blair -- Analyst
For the quarter. Is there any -- excuse me. Is there any sign of that business turning a quarter, it feels like you're sort of in this flattish to slightly negative in most quarters these days.
Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services
Yeah. I think what's going to happen and I think where we're in, you can imagine the environment. And I think private banks are taking a pretty conservative view on their asset management side. We see a -- and that negative for us, that was really made up of two clients who really were deciding to put a cash position, a more defensive cash position together. And we see a lot of unrest with the election coming, the pandemic going on. So, I think to turn the corner fully, we're going to be a little bit more -- we could see a little bit more stabilization after the election and some of the other things for the banks to feel a little bit more comfortable to lean in.
Chris Shutler -- William Blair -- Analyst
Okay. Thanks a lot.
Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services
Sure.
Operator
Thank you. And next we'll go to the line of Ryan Kenny with Morgan Stanley. Please go ahead.
Ryan Kenny -- Morgan Stanley -- Analyst
Hey, Steve. Good afternoon.
Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services
Good afternoon, Ryan. Welcome.
Ryan Kenny -- Morgan Stanley -- Analyst
Thanks. Just on the TRUST 3000 platform, I know you still have some clients on that platform and it's profitable, and you've talked about wanting to keep that platform running for a while. Just want to get a sense of where we're at in the transition and has the pandemic in the current economic environment impacted the appetite from migrating to TRUST 3000 to SWP at all?
Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services
No. I think certainly some people, some of our clients aren't entertaining any moves right now because of the pandemic, I'd put them on the lower side. I think we're still engaged with many of them on the increasing capabilities they can get with SWP, then I think that will happen in the normal course. And I think as I've said before, TRUST 3000 is still a very powerful platform that competes well in the market and I view it and the one word I always use, it's an asset and I would say, it's a growing asset. So my view of it right now is we're going to continue with that and it's a growing asset, we're going to continue to support it. And as we continue to move clients to SWP, yeah, we'll continue to look at it.
But I think with the One SEI mindset, there's opportunities for us to take components of our other platforms, combined with TRUST 3000 and provide an even powerful tool because I do think, when we look at the grand scheme of the clients left from TRUST 3000, there is some that SWP might not be a fit for, for a number of reasons including, maybe the limited size of their wealth management business, maybe they're more on trust side and maybe the capabilities to provide them are ones that they just don't want to invest in right now. But I think there is opportunities for us to continue to grow the trust relationship and expand our services through some of the other assets via the One SEI mindset.
Ryan Kenny -- Morgan Stanley -- Analyst
Thank you.
Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services
Sure.
Operator
Thank you. And next we'll go to the line of Chris Donat with Piper Sandler. Please go ahead.
Chris Donat -- Piper Sandler -- Analyst
Hey, Steve. How are you doing?
Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services
Good. How are you, Chris?
Chris Donat -- Piper Sandler -- Analyst
Doing fine. Wanted to ask questions on the land and expand strategy, and it's -- my question is directly about US Bank, but I wouldn't expect you to answer directly. So just thinking in general about landing and expanding with the One SEI strategy, what are you competing against as you think not so much on the core to core transaction that you're doing now with US Bank. But as you were -- if you were to sell more of the SEI Wealth Platform, what's your competition that's in-house in banks like US Bank?
Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services
Well, thank you. That's the way I was going to answer that. I don't want to speak specifically about any one client. But what I would say the norm across all banks we're seeing anywhere from home grown legacy technology to plug-and-play front office anywhere from CRM to portfolio management to modeling software. So it kind of runs the gamut. But the key is, it's in many cases very disparate technologies cobbled together to solve the situation, but in the long term, it's made the situation worse. So they're really looking for a straight through powerful platform and technology stack.
And I think part of the benefit of doing it this way is, it gives them the ability to digest a major part of the improved platform and then start to transition other pieces in a more kind of expanded cadence, which I think is a very appetizing especially when you look at in many of these firms have a number of systems anywhere from 5 to 10. So I think it provides definitely a better trajectory in a more acceptable less risky way of transforming their internal operations and replacing the internal systems.
Chris Donat -- Piper Sandler -- Analyst
Okay. Got it. Thanks very much.
Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services
Sure.
Operator
Thank you. And I have no further questions in queue at this time.
Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services
Great. With no other questions, I'll turn to in the Investment Managers segment. So for the third quarter of 2020, revenues for the segment totaled $123.8 million, which was $11.6 million or 10.4% higher as compared to our revenue in the third quarter of 2019. This year-over-year revenue increase was due primarily to net new client fundings and existing client expansion.
Our quarterly profit for the segment of $44 million was $3.7 million or 9.2% higher as compared to the third quarter of 2019. Higher profits year-over-year were primarily driven by an increase in revenue offset by a smaller increase in personnel expense and investments. Third-party asset balances at the end of the third quarter of 2020 were $730.4 billion, approximately $61.8 billion higher than the asset balances at the end of the second quarter of 2020. This increase was due to net new client fundings of $29.3 billion and market appreciation of $32.5 billion.
And turning to market activity. During the third quarter of 2020, we had a strong sales quarter with net new business events totaling $12.2 million from recurring revenue as well as recontracts of $9.5 million in recurring revenues. These events include the following highlights. In our alternative market unit, we closed a number of strategic new names, while sales to existing clients continue to be robust as these clients continue to launch new products.
SEI was selected to provide our front office platform providing investor on-boarding data management and reporting to support a $135 billion alternative manager in a highly competitive transaction. This significant deal demonstrates our capability to deliver stand-alone comprehensive platform solutions in addition to our standard role as fund administrator.
In addition, we were selected by a start-up credit shop with a significant track record, capitalizing on the -- on our market leadership in the private credit space and we were also selected by a growing private equity real estate manager to convert from a competitor, due to our operational expertise and technology platform.
In our traditional market unit, in addition to continuing our momentum with collective investment trusts, and expanding our relationships with our client, we also are pleased to announce the addition of our first turnkey ETF clients to our advisors in our circle trust platform.
In Europe, private credit, private equity and real assets continue to be the main drivers of new fund launches with strong cross-sells with existing clients. In our family office services unit, we continue to see steady demand in the single-family office segment with new name sales events for the Archway Platform.
In summary, we continue to see strong momentum in the business and across our client base. As we all know, this year has had its fair share of challenges and I'm immensely proud of our workforce, who are the real key to our continued success. Their persistence and resilience in the face of these challenges have been nothing less than remarkable and is being noticed and appreciated by our clients.
As we enter the final stretch of 2020, we will continue on executing on our growth opportunities as well as investing in our overall platform, including the front end platform, which we feel had significant growth opportunity for us.
That concludes my prepared remarks. And I'll now turn it over for any questions you may have.
Operator
Thank you. [Operator Instructions] And we'll first go to the line of Ryan Kenny with Morgan Stanley. Please go ahead.
Ryan Kenny -- Morgan Stanley -- Analyst
Hey. Just a question on the fee rate. So if I looked at Investment Managers revenues over your average assets under administration and management, it looks like the fee rate came down a bit this quarter. I just wanted to check, is that because of pricing pressure or is it asset appreciation and on-boarding coming in at the end, so the fee rate should then roll forward? Thanks.
Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services
Yeah. I think it's more of the latter. And if you think of this quarter, our new events and even looking at the new events that funded, a lot of it is with existing clients. And many of those clients might be reaching higher tiers or lower tiers of their breakpoints etc. So I would say it's more a function of that as well as, you know, as we look for some of our products and solutions, they are less tied to assets and more tied to a platform fee in some other volume increases. But I'd say the primary for the quarter is more of the type of business that came in from clients.
Ryan Kenny -- Morgan Stanley -- Analyst
Thanks. That's helpful.
Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services
Sure.
Operator
Thank you. And next we'll go to the line of Robert Lee with KBW. Please go ahead.
Robert Lee -- KBW -- Analyst
Hi, again, Steve. You can probably predict my first question.
Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services
Backlog. I'll leave it out, so you can ask me for it. It's $36.9 million at the end of the quarter.
Robert Lee -- KBW -- Analyst
Great. Thanks. And on the recontracting, I guess is $9 million. Can you maybe give us some color around what you saw this quarter or maybe last or expecting in terms of kind of -- are you kind of recontracting kind of similar revenue level, but adding some additional services? I'm just trying to get some color around kind of the...
Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services
Yeah. So every -- rather it's a -- every client is a little different. Some clients have -- depending on the segment, some clients have had a rough year and maybe their assets have dropped and certainly we're a good partner and we'll lean in to help them as we recontract and look for the future and potentially to sell them other business. But I think, mostly for this quarter, we saw recontracting at the same fee level, and just a continuation and expansion of years, and in some case, expansion of services and an uptick, because of the expansion of the services.
Robert Lee -- KBW -- Analyst
Great. That was it. Thank you.
Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services
Sure.
Operator
Thank you. Next, we'll go to the line of Owen Lau with Oppenheimer. Please go ahead.
Owen Lau -- Oppenheimer -- Analyst
Thank you. Steve, just a quick modeling question. For the size, $1 [Phonetic] million uptick in expense line item, was there any kind of one-time consulting expenses related to investigation or compliance or these incremental expense would stay there because of the personnel expense you mentioned? Thank you.
Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services
Yeah. In this quarter -- in this segment, I'd say half the uptick was really tied to personnel and I would say that was a combination of the -- again, our mid-year salary and promotion kind of routine we go through, as well as new people -- hiring new people for new business, which I think is a great sign. Our investments were up and that was probably closer to that 20%. And there was some others around the consulting, and professional services. And as Dennis mentioned a little bit due to professional fees and cost due to some of the other situations we had at the -- earlier this year. I think for the most part, we're looking to manage the expenses, we could see some uptick due to personnel and continue to bring new revenue and new business in but we're hoping to keep that at a modest pace.
Owen Lau -- Oppenheimer -- Analyst
Got it. Thank you, Steve.
Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services
Sure.
Operator
Thank you. I have no further questions in queue at this time.
Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services
Okay. Thank you. If there is no other questions, I will turn it over to Wayne Withrow to go over the Advisors segment. Wayne?
Wayne M. Withrow -- Executive Vice President, Independent Advisor Solutions
Thanks, Steve. During the third quarter of 2020, we continued execution of our business strategy in a virtual environment. While making progress, we continue to evolve our virtual model and feel we are uniquely positioned to take advantage of this new reality. Third quarter revenues totaled $103 million. These revenues were flat compared to the third quarter of last year.
Now, while revenues were flat, our asset balances increased year-over-year, but our asset mix resulted in this growth, not being reflected in revenue growth. The good news is, these assets are on our platform and we hope to receive increased fees as they move into equity and fixed income products.
Like revenues, expenses were flat compared to the third quarter of last year. The corporatewide increases Dennis discussed and increases in sub-advisory expenses driven by our SMA program and mostly -- were mostly offset by savings in an assortment of other areas including travel and sales compensation.
Our profits remained flat from last year's third quarter. Assets under management at the end of the third quarter was $69.4 billion. This is up roughly 2.5% from September 30, 2019. Our average assets under management during the quarter were up a similar percentage from last year's quarter. Positive markets and positive cash flow from sales activity contributed to overall asset growth, but portfolio repositioning in the money market products prevented this growth from yielding revenue growth.
Net cash flow for the quarter was $140 million. This total is net of $158 million in advisory fees taken by our advisors. Going forward, I intend to report cash flow gross of these advisory fees, since they are not the result of sales activity. Exclusive of these fees, cash flow for the quarter was $272 million.
In addition to this cash flow into our assets under management, we had $250 million in cash flow in the non-managed assets on our platform. We recruited 56 new advisors during the quarter. As I discussed during SEI's second quarter call, our investment management unit is now curating some products managed by third-party asset managers. We are seeing growth of these curated products.
In summary, we are settling into the new normal driven by COVID-19 and are focused on driving growth, operating in this new environment. Our scale, strong financial position, and technology driven culture will allow us to capitalize on this new business environment.
I now welcome any questions you may have.
Operator
Thank you. [Operator Instructions] And we'll first go to the line of Ryan Kenny with Morgan Stanley. Please go ahead.
Ryan Kenny -- Morgan Stanley -- Analyst
Can you hear me?
Wayne M. Withrow -- Executive Vice President, Independent Advisor Solutions
I can Ryan. Hi.
Ryan Kenny -- Morgan Stanley -- Analyst
Hi. Just wondered, see if you could give us an update on the competitive environment, specifically in the turnkey asset management program, what you're seeing there and how we should think about any pricing pressure going forward? Thanks.
Wayne M. Withrow -- Executive Vice President, Independent Advisor Solutions
Yeah, I mean I think the competition in the turnkey space is fierce and it's other turnkey providers, and it's also competition from the internally managed broker dealer platforms. And I think you will continue to see pricing pressure in those markets. However, I mean, I would say that if you look at the leverage inherent in our business model, I think we are really well positioned in a fee compression world right now.
Ryan Kenny -- Morgan Stanley -- Analyst
Thanks. And has the remote working environment impacted demand for your platforms at all?
Wayne M. Withrow -- Executive Vice President, Independent Advisor Solutions
I don't know if it's increased the demand for our platform. I think the plus -- that in a remote environment the functionality in the platform and just the ease of remote processing has allowed us to thrive in a remote environment. And I think people are more inclined to outsource perhaps than they were in the past, but it's really -- the platform is really an enabler. And I think it -- quite frankly, it operates as well in a virtual world as it does in a live world.
Ryan Kenny -- Morgan Stanley -- Analyst
Thanks.
Operator
Thank you. We next go to the line of Robert Lee with KBW. Please go ahead.
Robert Lee -- KBW -- Analyst
Thank you. Hi, Wayne. How are you?
Wayne M. Withrow -- Executive Vice President, Independent Advisor Solutions
I'm great, Rob, and I don't have a backlog to talk you about.
Robert Lee -- KBW -- Analyst
Okay. I just want to make sure I understand your comments around kind of the net cash flows and the change starting this quarter. Can you -- and I apologize, if it's late in the day. So can you maybe just walk through that again and why it's changing?
Wayne M. Withrow -- Executive Vice President, Independent Advisor Solutions
Yeah. I mean, every quarter, our advisors collect their advisory fees out of the investment accounts. And traditionally, we have always included that if you will, negative cash flow as redemptions, which go to pay the advisory fees in our cash flow numbers. But really, if you look at cash flow as a measure of sales activity, that really has nothing to do with sales activity. And it's -- as we've gotten bigger and bigger, it's become a more significant number. As I said during the last quarter, it was $160 million, that went out just to pay for the advisory fees for advisors. So we're no longer going to -- we'll include that, if you will in market appreciation and depreciation, which is really, it's much more into that, it's not something that's a direct result or even an indirect result of sales activity.
Robert Lee -- KBW -- Analyst
Okay. I see. So it's kind of like you'll report AUM net as opposed to gross, but gross to be kind of grossed up so same dollars...
Wayne M. Withrow -- Executive Vice President, Independent Advisor Solutions
We report AUM and AUA net, I'm just saying that in the net calculation. We're not going to include the fees paid to advisors.
Robert Lee -- KBW -- Analyst
Okay. Great. I think I get it. And then also I think you -- and you touched on the $250 million of cash flows to non-managed assets. So can you -- and I think last quarter you're going to start and maybe talking more about kind of those total was not those AUA if you will. So can you maybe just update us on kind of where that is today?
Wayne M. Withrow -- Executive Vice President, Independent Advisor Solutions
I'm sorry. Could you repeat the last part of that question again, Rob? I didn't get it.
Robert Lee -- KBW -- Analyst
The assets under administration, I mean, I think you had $250 million of cash flows to non-managed assets, right? So I mean that's becoming increasingly important. So I mean, I was just trying to get a handle on what is your AUA or kind of your non-managed assets on the platform today?
Wayne M. Withrow -- Executive Vice President, Independent Advisor Solutions
Yeah. I would say, it's north of $10 billion. But it's -- the AUA -- when you look at AUA, which is primarily a pure custody, it's not so much a revenue driver as it enables us to gather the assets under the platform. And it's a variation of the land and expand strategy as Steve discussed. This gives us existing clients which we're better able to address going forward as they have increasing needs or differing needs that we can meet with other products.
Robert Lee -- KBW -- Analyst
Thanks, Wayne.
Operator
Thank you. And I have no further questions in queue at this time.
Wayne M. Withrow -- Executive Vice President, Independent Advisor Solutions
Okay. With that, I will turn it over to Paul, who will discuss our Institutional segment.
Paul F. Klauder -- Executive Vice President, Head of the Institutional Group
Thanks, Wayne. Good afternoon, everyone. I'm going to discuss the financial results for the third quarter of 2020. Third quarter revenues of $79.6 million decreased 1% compared to the third quarter of 2019. Third quarter operating profits of $41.8 million decreased 3% compared to the third quarter of 2019. Operating margin for the quarter was 52.5%.
Revenue decreases were impacted by negative client fundings and were offset by higher capital markets. Operating profits were negatively impacted by one-time severance expenses and a one-time trading error, but positively impacted by lower travel costs. Quarter end asset balances of $89.7 billion reflect a $200 million increase compared to the third quarter of 2019. This slight increase is driven by positive capital markets offset by negative client fundings.
Net sales were a positive $1.65 billion for the quarter, which was comprised of gross sales of $2.35 billion and client losses of $700 million. New OCIO signings were strong and included US healthcare, US not-for-profit, governmental and fiduciary management defined benefit. The unfunded new client backlog at quarter end was $925 million.
Sales momentum saw a positive turn with increased activity and a return to in-person execution in select accounts, while also enhancing our virtual interactions with prospects. OCIO RFPs and inbound inquiries continue to be strong in the quarter and in the early stage of the fourth quarter. We are very focused on existing clients, as our current clients are apt to also go through a formal rebid process due to a time anniversary with SEI.
On the new strategic initiative side, we formally launched our enhanced CIO/ECIO solution to the large end of the institutional marketplace in the third quarter. We are actively marketing this solution and building a pipeline and looking to add more sales resources. This solution is consistent with the One SEI mindset. We continue to research other strategic initiatives and evaluate new markets globally.
Thank you very much, and I'm happy to answer any questions that you may have.
Operator
Thank you. [Operator Instructions] And we'll go to the line of Ryan Kenny with Morgan Stanley. Please go ahead.
Ryan Kenny -- Morgan Stanley -- Analyst
Hi, Paul. How are you?
Paul F. Klauder -- Executive Vice President, Head of the Institutional Group
Good, Ryan. Yourself?
Ryan Kenny -- Morgan Stanley -- Analyst
Good. On the ECIO, just want to understand how material of a driver that is for revenues at this point?
Paul F. Klauder -- Executive Vice President, Head of the Institutional Group
Well, it's not a driver at all. There's no revenue in our group for ECIO. So we're just launching this into the large institutional marketplace. We think globally there's about 1,800 suspects that fit the qualitative and quantitative definition of those that want to in-source and have a team and the solution is to make the team more efficient and more effective. So anything that we do with respect to ECIO, we have not had a transaction yet, would be incremental to the revenue and incremental to the profits of the unit.
Ryan Kenny -- Morgan Stanley -- Analyst
Got it. Thanks. And then one more question. I understand that there's some benefit from lower rates on the DB businesses from delays in the funding status. How should we think about quantifying the revenue impact, if long end rates were to rise from here?
Paul F. Klauder -- Executive Vice President, Head of the Institutional Group
If long end rates were to rise, it'd be hard for me to just give you a quick quantification on -- from a revenue perspective. But our book is about $32 billion or $33 billion of corporate defined benefit assets. The average funded status of those defined benefit plans presently is about 84% on a PBO basis. 100 basis points would certainly give them a better inflection point and would probably move the funded status 3% or 4%, all things being equal with the assets.
Certainly, not in a position to annuitize or immunize the portfolio, but it may be for certain clients that are more funded or certain clients that have more cash that type of move might give them an opportunity to do a curtailment. So, certainly, it's a tailwind for our business when long rates are low and it would be a headwind as long rates raise over time, because legacy defined benefit plans may decide to take action.
Ryan Kenny -- Morgan Stanley -- Analyst
Got it. Thanks.
Paul F. Klauder -- Executive Vice President, Head of the Institutional Group
Thank you.
Operator
Thank you. Next we'll go to the line of Robert Lee with KBW. Please go ahead.
Robert Lee -- KBW -- Analyst
Hi, Paul. How are you?
Paul F. Klauder -- Executive Vice President, Head of the Institutional Group
Good, Robert. Good to talk to you.
Robert Lee -- KBW -- Analyst
Me too. I guess, I really just wanted to clarify your comments about net flows and funding. I guess, I was a bit confused, which is not unusual. But, I guess, I was just trying to reconcile, if I heard you correctly, the quarter, you maybe -- the increase in AUM was driven by markets, offset by some, I guess, outflows or defunding it. You had like right about $1.6 billion of net inflows. I just want -- I must have heard something wrong or maybe I'm just misunderstanding it. Want to make sure I have it correct.
Paul F. Klauder -- Executive Vice President, Head of the Institutional Group
I'm comparing -- just so the quarter end asset balance, Robert, I'm comparing it against the previous year. So collectively for the four quarters, we've had more outflows than we've had inflows with respect to the third quarter in and of itself. We sold $2.35 billion. We lost $700 million and we have a backlog of $925 million. So not everything that we sold in the third quarter funded in the third quarter. So some of that -- so we usually -- when we have a sales event, we usually have a 30 or 45 day lag before it actually comes in to the portfolio. And therefore, we start accruing revenue. But my comments about the negative client fundings are more year-over-year, not quarter versus quarter.
Robert Lee -- KBW -- Analyst
Great. Got it. That's helpful. And then, I guess, I'm just kind of curious. I mean, your margin is pretty healthy in this business. It's been running at a pretty high rate. So, I mean, as you look ahead typically as you kind of launched the ECIO initiative and understanding some of the One SEI costs are in a different segment, but is there any reason -- how should we be thinking about margin development going forward and maybe peak margin or that settling back down toward 50 makes more sense? I'm just trying to get a handle on that.
Paul F. Klauder -- Executive Vice President, Head of the Institutional Group
Yeah. I would say clearly the biggest impact with respect to market -- Robert is, if we lose a client and they move out of our OCIO platform versus a similar dollar that comes in we're probably going to lose profitability. We probably are making more on what we're losing than what we're bringing in. So we have that reality. We have the rebid reality when we go out and retain a client. We probably are not going to be gaining them at the same rate that we just had. Now that said, offset by clients that are more diversified that might consume more alternative investments.
ECIO, the great thing about ECIO, is much of the technology is not all the technology is built. It's very similar to the technology infrastructure and stack that Steve and Phil McCabe sell to the investment management services unit. So there's not a lot of build out there. There's a service model. There's some salespeople. There's some reporting and things like that. But it's not -- we don't think that's a huge investment in capital. And again, it's a real great leverage point of SEI of unleashing those capabilities to an adjacent market.
Robert Lee -- KBW -- Analyst
Great. Thank you. Appreciate the color.
Paul F. Klauder -- Executive Vice President, Head of the Institutional Group
Thank you.
Operator
Thank you. Next we'll go to the line of Chris Shutler with William Blair. Please go ahead.
Chris Shutler -- William Blair -- Analyst
Hey, Paul. Good afternoon.
Paul F. Klauder -- Executive Vice President, Head of the Institutional Group
Hi, Chris.
Chris Shutler -- William Blair -- Analyst
So first could you break out the net new assets in the quarter versus the market appreciation?
Paul F. Klauder -- Executive Vice President, Head of the Institutional Group
So again the net new assets meaning that the sales are just sales. There's no market appreciation in the sales. Are you saying the second quarter versus the third quarter?
Chris Shutler -- William Blair -- Analyst
Correct. To get from the second quarter ending assets to the third quarter ending assets how much of it was markets versus how much of it was net-net new or new business won?
Paul F. Klauder -- Executive Vice President, Head of the Institutional Group
Yeah. It looks like it's about roughly $2.5 billion would be market about $1.5 billion roughly is probably based on new events.
Chris Shutler -- William Blair -- Analyst
Okay. And then, I think going back a year or two ago, you were talking about at least thinking about doing tuck-in acquisitions in your space or maybe making select higher or two mainly to address the endowment foundation area. Is that still something that's a strategic priority or maybe just an update on that would be great?
Paul F. Klauder -- Executive Vice President, Head of the Institutional Group
Sure. It is something formally we looked at last year or fourth quarter. We did have an outside firm present us some opportunities. So we have decided to pause on the properties that we saw. We did not think they would bring anything incremental to us or differential to us. So we have set our sights more on a personnel strategy of select individuals that enhance the capabilities for an E&F solution which we've already delivered on two fronts and there's another one that we're looking at.
But also part of that process when we were looking at properties and specifically the larger end of the market confirmed our belief that many of the larger end of the markets actually don't want to outsource. They want to in-source and that really kind of unleashed with the capability of One SEI to really go to market with this enhanced CIO solution. Rather than fight, the flight of trying to sell a $2 billion endowment that you should outsource. We are going to deploy our capabilities and saying, we can make you more efficient from a technological standpoint. So I think that was a breakthrough series of work that we were able to do both internally and externally.
Chris Shutler -- William Blair -- Analyst
Got it. Okay. Thanks for the update.
Paul F. Klauder -- Executive Vice President, Head of the Institutional Group
Thanks, Chris.
Operator
Thank you. I have no further questions in queue at this time.
Paul F. Klauder -- Executive Vice President, Head of the Institutional Group
Great. I will now turn the call over to Kathy Heilig, SEI's Controller.
Kathy C. Heilig -- Chief Accounting Officer and Controller
Thanks, Paul and good afternoon, everyone. I have some additional corporate information about this quarter. The third quarter cash flow from operations was $131.1 million or $0.89 per share, bringing year-to-date cash flow from operations to $395.2 million or $2.64 per share. Third quarter free cash flow was $116.3 million bringing year-to-date free cash flow to $333.5 million.
In the third quarter, our capital expenditures excluding capitalized software were $8.7 million. This number includes the expansion of our facility. Our year-to-date capital expenditures excluding capitalized software are $43.1 million. We project for the fourth quarter the capital expenditures will be approximately $15 million.
We also would like to remind you that many of our comments are forward-looking statements that are based upon assumptions that involve risks and that the financial information presented in our release and on this call is unaudited. In some cases, you can identify forward-looking statements by terminology such as should, may, will, expect, believe, continue or appear.
Our forward-looking statements include our expectations as to the time horizons of our investments and the ability to take advantage of opportunities; our ability to expand our relationships and revenue opportunities with existing clients; the degree to which we benefit from our scale, resources, technology, and infrastructure; our ability to bring clients live in unforeseen circumstances; the demand for our products and services and the components of our business that will drive growth; revenue that we believe will be generated by sales events that occurred during the quarter or when our unfunded backlog may fund; our resource allocations and technology and platforms in which we choose to invest including our One SEI initiative; the strategic initiatives and business segments that we will pursue, the strength of our pipeline and growth opportunities and our ability to execute on and the success of our strategic objectives.
You should not place undue reliance on forward-looking statements as they are based on the current beliefs and expectations of management and subject to significant risks and uncertainties, many of which are beyond our control or subject to change. Although, we believe the assumptions upon which we base our forward-looking statements are reasonable, they could be inaccurate. Some of the risks and important factors that could cause actual results to differ from those described in our forward-looking statements can be found in the Risk Factors section of our annual report Form 10-K for December 31, 2019. That report is available on our website.
There may be additional risks that we do not presently know or that we currently believe are immaterial, which could also cause actual results to differ from those contained in our forward-looking statements. We do not update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statement.
And now, please feel free to ask any other questions that you may have.
Operator
Thank you. [Operator Instructions] And we'll go to the line of Chris Shutler with William Blair. Please go ahead.
Chris Shutler -- William Blair -- Analyst
Thanks. Just one last one for Steve. Steve, I want to come back to the US Bank discussion and just the -- trying to figure out like, is there a compelling reason for a bank to only buy the kind of the back end the custody platform and not use SEI for the front office tools? I would think that using SEI for everything would be a lot more integrated better experience etc. But just help us think through kind of the thought process of a bank as they go through that back end implementation and what the risk is that they wouldn't use SEI for other solutions?
Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services
Yeah, Chris. So I understand, but I think you're overthinking it a little. So look at it this way. I think it's very compelling to use the whole platform. However, as we discussed numerous times, a lot of times when adopting the whole platform would be like open heart surgery. It's quite a large transformation. And part of our plan to increase growth was to adopt the One SEI mindset to modularize our platforms and give the ability to adopt pieces of the platform. Now obviously in this case, they're adopting the core-to-core back office, which is a large part of it.
However, there's a lot of great front end technology and other services that are packaged with the platform. And I think the real key here is it gives the ability for any institution to lean in and adopt SEI and move in a less impactful way and not as many hurdles and then certainly add more components as they go. So I think quite frankly, it gives optionality, which in this day and age and especially dealing with large financial institutions I think is much needed and more positive. So I quite frankly look at this as a huge positive move and positive outcome with a great opportunity for the future.
Chris Shutler -- William Blair -- Analyst
Okay. Thanks for that. Appreciate the clarification.
Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services
Sure.
Operator
Thank you. And I have no further questions in queue at this time.
Alfred P. West -- Chairman and Chief Executive Officer
So ladies and gentlemen, we are fighting on two fronts: first, the COVID-19 disruption; and second, growing revenues and profits during this difficult times. On the first front, we were very fortunate to have planned well and been able to keep our workforce healthy and productive. On the second front, we face short-term headwinds, but we believe that we will prevail, thanks to our motivated and innovative workforce and the strategic investments we are making in our future. Please be safe and remain healthy. Have a great day. Thank you for attending.
Operator
[Operator Closing Remarks]
Duration: 84 minutes
Call participants:
Alfred P. West -- Chairman and Chief Executive Officer
Dennis J. McGonigle -- Executive Vice President, Chief Financial Officer
Steve Meyer -- Executive Vice President, Head of Global Wealth Management Services
Wayne M. Withrow -- Executive Vice President, Independent Advisor Solutions
Paul F. Klauder -- Executive Vice President, Head of the Institutional Group
Kathy C. Heilig -- Chief Accounting Officer and Controller
Ryan Kenny -- Morgan Stanley -- Analyst
Robert Lee -- KBW -- Analyst
Chris Shutler -- William Blair -- Analyst
Owen Lau -- Oppenheimer -- Analyst
Chris Donat -- Piper Sandler -- Analyst
