Good morning and good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the first quarter '17 trading statement conference call. [Operator Instructions] I must advise you that this conference is being recorded today on Wednesday, the 19th of April 2017. I would now like to hand the conference over to your speaker today, Mr. Andrew Formica. Please go ahead, sir.

Thank you, and thank you all for joining us. With me on the call are Roger Thompson, our CFO; and Phil Wagstaff, our Head of Distribution, who will be available to answer your questions after I just made some brief opening remarks. Firstly, I'd start and say I'd characterize the first quarter as challenging for us, but one where we saw an improving trend in client sentiment and flows. Our 3-year investment performance statistics softened slightly, with 73% of assets outperforming, but the 1-year number did improve from 50% to 54%. In our Retail businesses, we saw GBP 1.4 billion of outflows, with the majority of this coming from the SICAV range in Continental Europe, as clients continue to pull back from European growth assets over the quarter. 85% of this outflow came in January and February, and outflows reduced in March as sentiments towards European assets improved. And we have seen this positive trend continue so far in April. In the course of the first quarter, we've seen some evidence of an increasing risk appetite and the strengthening focus on Europe, both within Europe and across the globe. With our Institutional clients, the first quarter overall was negative, driven by redemptions from one of our Global Equity strategies where we announced in December that the team would depart as part of our premerger planning. The strategy in question had about GBP 800 million of assets that we felt would be at risk from this decision, and we thought they're already at risk because of poor performance going into that decision. GBP 300 million of that GBP 800 million left in December, and the remaining GBP 500 million left in the first quarter. The majority of our Global Equity capability, notably our GBP 11 billion Global Equity Income franchise is…

[Operator Instructions] And we have reserved -- received the first question. The first question comes from the line of Mike Werner from UBS.

One question. Last time you met with us, you were talking about the European equity performance and how it had a really tough Q1 '16. I was just wondering, now that, that's behind us on a 12-month basis, how has the performance looked within the European equity franchise over the past 12 months now that the Q1 '16 data is behind that?

Yes. Look, I think, Michael, the -- you're right that, obviously, last year, the full year numbers, the Q -- the 1-year numbers were poor for European equities. And then actually, the majority of that was actually in the first quarter. With that having dropped off, we still -- we've recovered somewhat from where we were, but we still remain in some of our largest strategies sort of at the top end of third quartile. So whilst we've seen an improvement on a 1-year basis, some of our biggest strategies, particularly in the SICAV range, continues to be in that middle to top third quartile, rather than moving into second quartile.

I can add something to that, Mike, if you like, which is that a couple of our largest strategies have a growth bias. And some of the redemptions we saw in January were a result of people making a rotation to more value style. And so some of the underperformance in the large strategies also comes from that bias. But I think we're beginning to see the first shoots of clients coming back to growth having played out the value trade.

And I guess just on the 3-year performance for the European equity, I mean, I assume that's still holding up quite well?

Yes, it's about 75% on a 3-year basis.

And the next question comes from the line of Anil Sharma from Morgan Stanley.

Apologies, joined a bit late, so sorry if it's already been asked. I just wondered, since we last spoke, obviously, you've seen Blackhawk's announcement about what they're doing with some of their equity funds and moving in some of it to a bit more quant versus fundamental. I just wondered what you guys made of that announcement and if there's any kind of read across the way that you guys are thinking about the future Henderson Janus business.

Anil, I think each business makes their decisions based on their own both beliefs and outcomes that they are seeking, so I wouldn't comment on what they're doing. I think in terms of the industry, I would just highlight the fact that we are an industry that has always experienced periods of change, and that's going to continue there. And some of the developments you're seeing in such as machine learning and AI, that I'm sure will have direct relevance and read across to our industry in time. I don't think it's there yet. But as I've spoken about in the past, it's something that we at Henderson and we at Janus Henderson will continue to monitor and invest in to just sort of understand it. But I think at the moment, it's too early to say it's anything other than something that's unique to have on your radar, a bit like driverless cars, whether these are going to come -- whether it comes in my lifetime, I don't know.

Okay, cool. That's helpful. And then just one kind of final one. Just in terms of the FCA study, I think it was due to get proposals out in summer. Do you think that's sort of realistic, given everything that's going on in the U.K.? Or would you expect...

Yes, look, we haven't had confirmation of this. But typically, when you enter a U.K. election, first these areas like Whitehall and Treasury go into purdah, and the FCA normally puts themselves in a self-imposed purdah as well through the period. So it wouldn't be unusual, given we've now had an election called, that all consultations are put on hold until the outcome of the election. Now we haven't had anything official from the FCA on that, but that's typically during election periods that they actually put themselves on hold until the result of the elections are known.

[Operator Instructions] And we have received another question. The next question comes from the line of Hubert Lam from the Bank of America.

Just a quick question. I just wanted to get a sense of what feedback so far you heard from consultants on the merger. And do you expect any consultants to put you on hold or are now putting you on a list, which would stall the Institutional momentum that you've actually been -- you've been very good at gaining over the last several quarters?

Hubert, I'll pick up on that. So the reaction from clients has been excellent globally. Everybody understands the rationale for the deal. The primary consideration is that the teams are running their money and not affected, and the great thing about the complementary nature of this deal is that most of the teams are not. We've not been put on hold by any consultants. We've been put on watch by a couple. But as you know, that simply means there's something going on here, and you should be aware of it. So we're enjoying the same sort of relationship with our consultants that we were before. I think it's probably fair to say that we may not get as many pitches or finals during this period as we would normally, but we're not on hold.

Okay. And you shouldn't expect -- we shouldn't expect Institutional flows to just slow down towards the completion of the merger in other words then?

Well, on the contrary, on the basis that we're going, we're probably going better in Institutional now than we have been for a number of years after investing in it quite heavily. And Andrew also mentioned in his opening remarks that we had some significant funding in the first week of April that we expected at the end of March. We've got nice momentum behind the Institutional business right now.

And we do not have any further questions at this time, so please continue.

Okay. Well, thank you all for taking your time today. As you can see, it was a tough quarter. The -- we had seen a significant improvement in March, and that momentum has shown through so far. The merger does have an impact clearly at the moment, but we see that as sort of moving pretty quickly. And...

One more question.

Sorry, we are being told there's one more question. If we can get that through before I wrap up?

Yes, so the question came in just a few seconds ago. The next question comes from the line of Nigel Pittaway from Citi.

Andrew, it's Nigel Pittaway here. Sorry I was a bit slow on the button there. But just a couple of questions maybe. First of all, just on how you're feeling about this positive trend on European flows in April, I mean, do you think it's sustainable? Because before, you were sort of a little bit worried that there were still quite a lot of elections to come. So are you feeling that it's really a permanent turn? Or is it still just as likely to swing back again? And then just secondly, maybe just a quick comment on MiFID II and how confident you are that you are going to be able to stick to sort of commission sharing arrangements on the back of that rather than being forced to take any costs in the P&L.

Again, I'll let Phil pick up your point on Europe. He'll always be far more cautious, given his sales targets are linked to it.

Yes, I mean, it's a great question, Nigel. I wish I knew the answer. The good news is there is green shoots. What I'd say is there's 2 things going on in European equities, which I think I mentioned earlier. The first is that there is clearly some uncertainty about the structure of Europe with all the elections coming up this year, and that is making international investors nervous, so that is Asian investors and U.S. investors. There's something else going on in Europe, which was its rotation to value stocks from growth stocks, and a number of our funds have a growth bias. So we've been impacted doubly by those. The second of those things, I think, is beginning to play out, and we've seen some evidence that people are coming back to growth. I think the other thing going in our favor here, and I'm beginning to see it, is there's an extraordinary stretch in valuation terms between U.S. equities now and European equities, which is a message that we're giving to our clients and is being well-received. Whether this is the first shoots of spring or one swallow, it's hard to say, and only time will tell, but we're feeling okay about where we are right now. We're in a much better place now than we were in early January.

And to your second question on MiFID II, it's really referring to whether through that, we see a need for unbundling research to become a hard cost. Look, it's not -- in all our analysis and working through the regulations, it's not regulation-driven that you'd make a hard payment. There have been a number of notable competitors of ours who'd come out and said that they will pay hard. That's a decision driven by them in a board level and a business level. It's not a regulatory level. We certainly don't see that as necessary at the moment. We also don't see the vast majority of our peers doing it. So even though there's been some [ relatively ] headlines in that, we don't see any pressure, either from clients or consultants or business pressure to do it ourselves. And certainly, when you talk to global players, particularly the large American firms, there is no intention to go down this route. So the first thing I'd say is it's not expected or necessary from a regulatory point of view. And we don't believe that even though you've seen some high-profile things, that is actually becoming a business-imperative decision. If there are changes, obviously, we'd tell you, but that's where we sit today. All right. Given there's no more questions, thank you for your time. We'll update you at the EGM and AGM next week, and then look forward to speaking to many of you after that in our trips down in later in the year or when you're coming through London. Thank you very much.

Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may now disconnect. Have a nice rest of your day.