This is reminiscent of the late 1990s Internet bubble, when Michael Lewis' 1999 book, The New New Thing, described it all you needed to know.
We examined recessions in the U.S. over the last 100 years and in Japan over the last 45 years, and the evidence is compelling.
The U.S. experienced 14 recessions during the past century.
I'm looking at the five year returns, measuring from the beginning of the recession, the value outperformed the broad market by an average of 5% per year.
Interest rates have been in structural decline for the past 40 years.
The trend has led us to a world where you can buy value stocks at PEs of 10 just like at any time in the past 70 years, while average growth stock multiples have doubled from 30 times to 60 times earnings.
Microsoft's stock price is up ten-fold during the past 10 years.
That's 25% per year, helped by strong growth in cloud technology replacing on-premises hardware demand.
This has led to 8% annual growth in operating income.
To get an 8% annual stock price appreciation going forward given Microsoft's high multiple would now require 20 years of 10% operating income growth.
But considering that, market analysts estimate that public cloud penetration of data needs has reached 30% to 35%, and that the possible maximum penetration for the public cloud would be approximately 70%.
So where will 20 years of growth come from?
Turning to the business front, we finished the quarter with approximately $1.1 billion in net inflows.
For the previous 12 months, we had net positive flows of approximately $2.1 billion.
We reported diluted earnings of $0.16 per share for the third quarter compared to $0.13 last quarter and $0.19 per share for the third quarter of last year.
Revenues were $33.9 million for the quarter and operating income of $15 million.
Our operating margin was 44.1% this quarter, increasing from 36.4% last quarter and decreasing from 46.3% in the third quarter of last year.
Taking a closer look at our assets under management, we ended the quarter at $33.3 billion, up 5.7% from last quarter, which ended at $31.5 billion and down 7% from the third quarter of last year, which ended at $35.8 billion.
The increase in assets under management from last quarter was driven by net inflows of $1.1 billion, as I've just mentioned, and market appreciation including the impact of foreign exchange of $0.7 billion.
A decrease from the third quarter of last year reflects $4.8 billion in market depreciation, including the impact of foreign exchange, partially offset by net inflows of $2.1 billion.
September 30, 2020, our assets under management consisted of $13.3 billion and separately managed accounts, $18 billion in sub-advised accounts and $2 billion in our Pzena funds.
Compared to last quarter, separately managed account assets increased, reflecting $0.4 billion in market appreciation and foreign exchange impact, partially offset by $0.1 billion in net outflows.
Sub-advised account assets increased, reflecting $1.3 billion in net inflows and $0.3 billion in market appreciation and foreign exchange impact, and assets in Pzena funds decreased slightly to $0.1 billion in net outflows.
Average assets under management for the third quarter of 2020 were $33.1 billion, an increase of 11.1% from last quarter and a decrease of 8.1% from the third quarter of last year.
Revenues increased 12.7% from the last quarter and decreased 8.4% from the third quarter of last year.
During the quarter we did not recognize any performance fees similar to last quarter when compared to $0.3 million recognized in the third quarter of last year.
During the third and second quarters of 2020, we recognized $1 million reductions in base fees related to these accounts compared to $0.5 million reduction in base fees during the third quarter of 2019.
Our weighted average fee rate was 41 basis points for the quarter compared to 40.4 basis points last quarter and 41.2 basis points for the third quarter of last year.
Looking at operating expenses, our compensation and benefits expense was $15.8 million for the quarter compared to $15.6 million last quarter and $16 million for the third quarter of last year.
G&A expenses were $3.2 million for the third quarter of 2020 compared to $3.6 million last quarter and $3.9 million for the third quarter of last year.
Other income was $0.5 million for the quarter, driven primarily by the performance of our investments.
Looking at taxes, the effective tax rate for our unincorporated and other business taxes was negative 6.8% this quarter compared to a positive 4.1% last quarter and negative 5.1% in the third quarter of last year.
We expect the effective rate associated with the unincorporated and other business taxes of our operating company to be between 3% and 5% on an ongoing basis.
Our effective tax rate for our corporate income taxes, ex-UBT and other business taxes, was 26.5% this quarter compared to our effective tax rate of 26.6% last quarter and 24.4% for the third quarter of last year.
We expect this rate excluding these items to be between 23% and 25% on an ongoing basis.
The allocation to the non-public members of our operating company was approximately 78% of the operating company's net income for the third quarter of 2020 compared to 77.7% in the last quarter and 74.5% in the third quarter of last year.
During the quarter through our stock buyback program, we repurchased and retired approximately 102,000 shares of Class A common stock for $0.5 million.
At September 30, there was approximately $10.7 million remaining in the repurchase program.
At quarter end, our financial position remained strong with $49.2 million in cash and cash equivalents as well as $70.3 million in short-term investments.
We declared a $0.03 per share quarterly dividend last night.

Summary:
We reported diluted earnings of $0.16 per share for the third quarter compared to $0.13 last quarter and $0.19 per share for the third quarter of last year.
Revenues were $33.9 million for the quarter and operating income of $15 million.