Janus Henderson Group plc (JHG) Q1 2019 Earnings Report, Transcript and Summary

Good morning. My name is Nicole and I will be your conference facilitator today. Thank you for standing by and welcome to the Janus Henderson Group First Quarter 2019 Earnings Conference Call. [Operator Instructions] In today’s conference call, certain matters discussed may constitute forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements due to a number of factors, including but not limited to those described in the forward-looking statements and risk factors sections of the company’s most recent Form 10-K and other more recent filings made with the SEC. Janus Henderson assumes no obligation to update any forward-looking statements made during the call. Thank you. And now, it is my pleasure to introduce Dick Weil, Chief Executive Officer of Janus Henderson. Mr. Weil, you may begin your conference.

Welcome everyone to the first quarter 2019 earnings call for Janus Henderson Group. I am joined by Roger Thompson, our CFO today. Roger will be taking you through the results for the quarter, after which I will make a few concluding comments and then we will be happy to take your questions. As you know, we take a long-term view of our business versus the short-term view that is inherent in our quarterly reporting. To that extent and similar to last year, Roger will be providing you with updates on the quarterly flow, performance and financial results. We will use the second and fourth quarter calls to address these same items along with a more robust discussion on the business and on our strategy. We believe this setup will help better align our calls with how we manage our business. With that said, let me turn it over to our CFO, Roger Thompson to walk you through the quarter’s results.

Thanks, Dick and thank you everyone for joining us. The first quarter’s results can be characterized by three points: first, near-term investment performance improved across a number of key areas and the long-term results continue to be strong; second, despite the continued elevation in net outflows, we finished the quarter with 9% higher assets under management as markets rebounded to the lows we saw in December; and third, the financial results are in line with our budgets, but as expected, lower both year-on-year and quarter-over-quarter given lower asset levels exiting the volatile fourth quarter. Investment performance as of 31 March was strong with 69% of firm-wide assets beating their respective benchmarks over the 3-year time period, improving on the prior quarter. Total company net outflows were disappointing. Looking ahead, we still anticipate outflows in areas of underperformance and some notable outflows from changes recently announced, in particular, the impact in the emerging markets team that will be departing, which I will go to in a little bit more detail in a few minutes. That said we remain optimistic about future prospects across many areas of the business given our global distribution footprint, good investment performance and the breadth of our product offerings. Adjusted EPS of $0.56 reflects the impact of fewer days compared to the fourth quarter and lower performance fees. Finally, we returned $101 million of cash to shareholders during the quarter via dividends and share repurchases. Moving to investment performance which is on Slide 3, overall, investment performance relative to benchmark is strong with all time periods showing improvement compared to the fourth quarter. We saw continued strength in the performance of our equity and multi-asset capabilities across the 1, 3 and 5-year time periods and short-term improvements in our fixed income and alternative capabilities. INTECH’s performance remains challenging. However, year-to-date performance albeit in a very short time period, has been encouraging. This quarter, we have also included the percent of mutual fund AUM at the top two Morningstar quartiles, which was previously included in the appendix. As you can see in the table on the right hand side of the slide, performance against peers is very strong with 78%, 72% and 86% of our equity mutual fund AUM, which are our largest capability, in the top two quartiles on over a 1, 3 and 5-year basis. Now, turning to total company flows, for the quarter, net outflows was $7.4 billion compared to $8.4 billion last quarter. While the quarterly result is disappointing, we did see improvements compared to the fourth quarter across a number of areas. The better results was generated primarily by lower redemptions in equity and alternatives as market sentiment improved in the first quarter along with ongoing market share gains in our multi-asset capability. It’s important to note that the first quarter result includes $1.9 billion of outflows related to management decisions and other onetime events, including the closure of the Australian equity business and certain cash management accounts, the retirement of Bill Gross and the announced departure of the global emerging markets team. Moving to Slide 5 which shows the breakdown of flows in the quarter by capability, equity net outflows for the first quarter were reduced to $2.9 billion compared to $4.1 billion in the prior quarter as a result of lower redemptions in our U.S. intermediary channel. The favorable comparison versus last quarter was driven most significantly by nearly a $1 billion improvement in the Global Equity Income fund, which posted net inflows during the quarter and much improved redemptions in the international equity U.S. mutual funds, which while still negative in outflow terms, were significantly better. Flows into fixed income were negative in the quarter $2.8 billion. This resulted primarily from outflows in our U.S. intermediary business. Fixed income outflows included $1.3 billion of redemptions from our flexible bond fund in the intermediary channel in addition to redemption related to the retirement of Bill Gross I previously mentioned, which resulted in roughly approximately $700 million in redemption. INTECH outflows were $1 billion, which is flat to the prior quarter. Multi-asset flows continued to be driven by strong flows of the balanced strategy. The total inflows for the capability in the first quarter $700 million, an improvement over the prior quarter. The balanced strategy continues to be a great example of a cross-selling strategy across all regions of the globe. Alternative net flows were negative $1.4 billion driven by outflows in the UK Absolute Return fund and the property fund. Finally, I wanted to say a few words about the recent announcement concerning the departure of the individuals overseeing our global emerging markets strategy. At the end of the quarter, that strategy had roughly $5.1 billion in assets under management. And our current expectation is that we will see the majority of those assets to be at high risk of redemption in the second and third quarters. So far in the second quarter, we’ve received notification of redemptions of $2 billion for the strategy. We remain fully committed to the emerging market asset class and are actively pursuing various options, including recruiting new talent to our investment team. Slide 6 is our standard presentation of the U.S. GAAP statement of income. Now, turning to Slide 7 for a look at a summary of financial results, first quarter results compared unfavorably versus last quarter and the same period a year ago as we expected given the lower AUM levels the firm had entering 2019. Additionally, we also see the impact of lower performance fees and seasonally higher compensation expenses. That said, the market returns experienced in the first quarter will benefit revenue and cash flow generation for future quarters. Average AUM in the first quarter increased 1% over the fourth quarter driven primarily due to the market rebound beginning in January. Total adjusted revenues for the quarter decreased 6% compared to the fourth quarter due to 2 fewer calendar days in the quarter and lower performance fees. Adjusted operating income in the first quarter of $143 million was down 13% over the prior quarter, primarily as a result of the lower revenue, seasonally higher compensation expenses seen in the first quarter and the impact from mark-to-market on long-term incentive compensation. First quarter adjusted operating margin was 34.4% compared to 37.3% in the prior quarter and 40.1% a year ago. Finishing up on the financial results, adjusted diluted EPS was $0.56 in the first quarter compared to $0.59 the prior quarter and $0.71 a year ago. On Slide 8, we have outlined the revenue drivers in the quarter. Performance fees and fewer calendar days were the biggest drivers of the quarterly change in adjusted total revenue. Management fees decreased 2% from the fourth quarter. Net management fee margin for the first quarter was 42.9 basis points, which is down 0.5 basis point compared to the fourth quarter driven by mix shift in the business primarily from outflows in higher-fee equity product. As we did in the first quarter last year, we provided the net management fee rates by capability in the appendix. We’ll disclose this metric on an annual basis going forward and hope that you find it useful. Compared to the prior quarter, performance fees were lower primarily from segregated mandates partially offset by better fees on our U.S. mutual funds. Despite positive returns year-to-date the UK Absolute Return fund didn’t return performance fees during the first quarter as the investment performance remains modestly behind its high watermark. Regarding mutual fund performance fees, the first quarter improved to a negative $9 million from negative $12 million in the prior quarter as weak performance in the first quarter of 2016 rolled off and was replaced by much better performance in most cases. If we are successfully continuing to add alpha in the second quarter, this will further improve performance fees going forward. Moving to operating expenses on Slide 9, adjusted operating expenses in the first quarter were $274 million. Adjusted employee compensation, which includes fixed and variable staff costs, was down 7% compared to the prior quarter. Fixed staff costs are up slightly as expected due to annual pay raises and seasonality of payroll taxes resetting and 401(k) matches. Variable compensation costs were lower than the prior quarter due primarily to the lower profits as well as reflecting the final adjustments to the 2018 bonus pool that placed during the first quarter. Adjusted LTI was up 50% to the prior quarter primarily due to $15 million of mark-to-market adjustments as a result of the market change. In the appendix, we provided further detail on the expected future amortization of existing grants. The first quarter adjusted comp to revenue ratio was 45.4%. This revenue is higher than the guidance we previously provided due to lower revenues, seasonal compensation expenses and the mark-to-market on adjusted LTI. Importantly, for the full year, we still anticipate a comp ratio in the low 40s. Turning to adjusted non-comp operating expenses, collectively, there was a decrease of 9% quarter-over-quarter. The main drivers of the decrease were lower marketing expenses due to the seasonally higher spend in the fourth quarter and lower G&A costs. Compared to the same period a year ago, non-comp expense was down slightly when adjusting for $12 million legal outcome during the first quarter of 2018. Reflecting on the strategic priorities we laid out last quarter, we continue to focus on simplicity and operating efficiency and some of the business decisions that were made during the first quarter were done with this in mind. In addition to those, we expect to deliver further efficiencies in the future. We are maintaining the guidance on 2019 non-comp expenses that we provided last quarter, which is that excluding the $12 million legal outcome in ‘18, we would expect to see non-comp expenses flat year-over-year. Finally, our recurring effective tax rate for the first quarter was 22.8%, which is just below our prior guidance. For the full year, the firm’s effective tax rate is still expected to be 23% to 25%. Lastly, Slide 10 is a look at our capital management. As we said previously, we remain committed to returning excess cash to our shareholders. And on this slide, you can see those results over the last 8 quarters. During the first quarter, we paid approximately $70 million in dividends to shareholders and today declared a $0.36 per share dividend to be paid on the 29th of May to shareholders of record as of May 13. During the first quarter, we also purchased 1.3 million shares of our stock for $31 million. It’s important to remember that this activity only reflects 1 month of execution. In the first quarter ever year, we purchase shares on market to grant employees shares of company stock as compensation. And therefore we do not execute our accretive buybacks until this program is completed. Going forward, we anticipate $50 million to $60 million of share repurchases per quarter, depending on share price levels as part of the $200 million authorized share repurchase. With that said, I would now like to turn it back over to Dick for some final thoughts before we open it up to Q&A.

Thanks, Roger. Before getting into Q&A, I want to address one big question that you all probably have. Why isn’t our strong investment performance that we have talked about translating into better flows? The real answer is that despite some recent improvement, we continue to face pockets of longer term underperformance in a number of material areas in our business, including European equity, U.S. flexible bond and our INTECH business, which are each driving meaningful net outflows. The better performance we have experienced year-to-date must be sustained for longer periods of time before it will begin to gain client attention and materially impact their behavior and flows. In addition to these, we have made a series of business decisions and have faced a number of special events, which have resulted in and are expected to result in additional outflows over the next couple of quarters. The sum of these factors accounted for roughly 80% of the outflows in the first quarter. This result is disappointing, and we own that. But it does mask a number of encouraging results across areas in our business. For example, we continue to take market share in our U.S. retail channel in our U.S. equity strategies. Our multi-asset capabilities are growing well. Our Fixed Income teams in the UK and in Australia continue to prosper. And our UK Absolute Return strategy has returned to above-benchmark performance year-to-date. However, there are no quick solutions. We are focused on building the right firm for the future. We retain our focus and our discipline through shorter-term challenges. Thinking on a tactical level, the effects of our business decisions in some of these special events will pass in a relatively short time. And the best leading indicator of our long-term success is our investment returns. Today, overall performance at our firm is strong. Thinking more strategically, we have great people and we are focused on taking the right steps to build the right culture based on putting clients at the heart of everything we do, succeeding as a team and acting like owners. Going forward, we will continue to prioritize our investments and our focus on producing dependable investment outcomes, delivering excellence in client experience, building a simpler and more efficient infrastructure and maintaining a proactive risk environment, and finally developing our small slate of new growth efforts. By keeping these things in focus and not getting too distracted by some of the shorter-term challenges and quarterly results, I am confident that we will deliver success for our clients, for our owners and for our employees. With that said, I would like to turn it back to you, operator, for questions.

Thank you. [Operator Instructions] Our first question will come to us from Dan Fannon from Jefferies.

This is James filling in for Dan. You mentioned some sort of controlled outflows related to the EM team departing and Bill Gross’ departure, I think the number was $1.8 billion. Just hope that you can maybe add a little more color to that, and what the extent of outflows we might expect related to some of these events in subsequent quarters is.

James, it’s Roger. Yes. I think the number I gave was $1.9 billion. So yes, there’s there are a number of things that we regard as one-off in the business in the first quarter and one that carries on into the second and third quarters probably. So that $1.9 billion, we closed our Australian equity business in the first quarter, which we talked about on the last call. That resulted in about $500 million of outflows. In addition to that, we redeemed some cash mandates in the UK and we also closed the retirement of Bill Gross, and we talked about the beginning of some flows we expect to see from emerging market. So that adds up to the $1.9 billion. In total, the emerging markets franchise is about $5 billion of AUM. As we said, that’s a franchise that we are committed to. And we’re looking as to how to replace that team, but we do expect to see significant risk of outflows into Q2 and Q3.

Okay thanks. And then maybe just any color on INTECH and the institutional backlog there?

Yes. I mean INTECH, INTECH had some tough numbers at the back end of ‘16 and the back end of ‘19. As I said, investment performance in the first quarter has been strong, but that’s a very short time period. INTECH flows will be lumpy, so we had $1 billion of outflows in the first quarter. We are obviously watching that very, very carefully. It is an area of risk in our business, but we’re obviously pleased to see the strong investment performance in the first quarter.

Our next question comes from Ken Worthington with JPMorgan

Hi good morning. Maybe to follow up with the departures, there have been a number of departures and also retirements out of Henderson. You mentioned the EM team and there have been others. Can you talk about maybe the catalyst that you see driving this turnover? And maybe while numbers might not be higher than the industry average, there’s definitely some higher profile managers that have left or retired. And then, where are we in the seasoning of whatever the catalyst is for these departures? And maybe I’ll leave it there.

Sure. Thanks, Ken. Yes. Since the merger, I think we’ve had a lot of stability on our investment teams, but recently we’ve seen a little pickup in obviously the high-profile one we’re talking about most at this point is the EM team that Roger mentioned. In terms of the catalysts, look, Bill Gross retiring is a completely separate and unrelated catalyst to what the EM team is deciding and so I don’t think I can sum a reasonable description of catalysts because they’re all pretty different. They are all pretty unique circumstances. We don’t overall, we see a very stable investment team and we don’t have any other departures to disclose. But people do get older, they do retire. We do have folks who decide they want to build their own firm and make other life choices. We’ll continue to face that in an ongoing basis, but I don’t think there’s a special description underpinning these they’re just sort of individually unique decisions. And we feel overall that the investment team remains pretty darn stable.

Yes, that’s all for me.

Our next question comes from Nigel Pittaway from Citi.

Hi guys. Just first of all, a question on the margins by asset class, there have been quite significant movements if you do look now compared to 12 months ago, but most notably in Fixed Income, where it’s come down from 31 basis points to 26. Presumably that’s a mix within Fixed Income, but I’m just wondering whether you can elaborate a little bit more on why that’s occurred.

You are quite, right, Nigel. On – I think it’s Slide 14 of the deck, we’ve given you those margins, which we said we’ll give every year, split out by capability and the biggest change, as Nigel’s pointing out, is Fixed Income. There are 2 big pieces in there. We’ve lost some retail fixed income money we highlighted on the call in the remarks earlier. The outflows from the flex bond fund, retail outflows at higher fees. And we’ve also got some institutional fee pressure in Fixed Income particularly.

Right, okay, okay. And then maybe just secondly on the dividend, you previously talked about sort of wanting a progressive dividend policy. And obviously, it is flat and presumably now, stays flat for the next 4 quarters. I appreciate you are doing a buyback as well, but can you sort of maybe just give us some color behind why I guess we didn’t get progressive this time around?

It is exactly to say, Nigel, we are talking about a progressive dividend. We have got earnings which are flat to slightly down on last year. We have got a dividend yield, which is in the top quartile of our peer group. We don’t, as you know, we don’t target a payout, but at $0.36, I think we’re a little bit above 50% payout. So, the combination of those I guess got the board to a position that $0.36 was a very good number. And in addition to that, we will continue to return excess cash to shareholders through the buyback. The intention of a progressive dividend is to grow over time. And as we see earnings grow, we’d want to be pushing that up.

And our next question comes from Patrick Davitt with Autonomous Research.

Just one quick follow-up on the flexible bond fund, it does look like there may have been one very large redemption there, there is about $5 billion left. Are there a lot of chunkier mandates in there, even though it’s kind of a retail mutual fund, it’s surprising to see that big of a redemption in one month?

You are right. There were two big decisions made in the month of March. There was a little more coming out in April. And you will see that when the sim fund data gets released this month. That’s the end of one of those decisions. They are the biggest single decision-makers in that fund, so there was as you said it’s a very sizable fund. It’s a very important fund for us and has been stable and strong fund, and we expect it to continue that way. But there are a lot of smaller decision-makers after that, so no more as such large single decision.

Great. And my follow-up on LTIP compensation, you called out the $15 million mark-to-market, but it looks like from your guidance that it’s still kind of mid-40s per quarter for the year. So why wouldn’t that come back down after the mark-to-market?

Yes, the $15 million is the move quarter-on-quarter. So last quarter, we were low in LTI, as that number was effectively marked down; with the awards being worth less this quarter, it’s up. So, the actual numbers in this quarter is, I think, about 5 or 6. So yes, you’re right. In the appendix, we’ve given the guidance for the rest of the year. It’s a slightly lower number than Q1.

And Michael Carrier from Bank of America has our next question.

Just a question on the sales. I think when we look at the redemptions that improved in the quarter, still looks a little bit muted. I think you talked about some of the products that are pressuring the net flows. But I just wanted to get a sense on what you’re thinking you shift that over time. And then, just any update on the head of distribution as well because that may have some impact on the sales side.

Alright, thanks. Taking the second one first, we don’t have anything to say on the head of distribution at this time, but we will soon. And on your first question around the flow picture, I’m trying to think of what’s a reasonable answer. Roger, I don’t think I understood his question perfectly.

I think I’ll, say I think what you’re saying, Michael, is looking at gross flows. Gross flows are down compared to the first quarter of last year, and I think there is probably two or three areas to highlight there. First is European equities, which is a story we have talked about, about performance. And although we’ve got some short-term performance improvements there, the performance that came through over the last year has meant we’ve got lower gross sales this year over last year. The economic environment is obviously also part of that, particularly in the UK. We are seeing improving sales on the continent. The second is in Fixed Income. We had a sizable win in Australia, the first part of which funded in Q1 last year. The institutional business obviously will get a little bit lumpier. And I guess offsetting those is the continued sales in multi-assets, so our balanced fund continues to be very strong. But on the downside of gross flows, I’d probably point to intermediary sales in Europe driven by equity and in institutional in fixed income.

And we will take our next question from Simon Fitzgerald from Evans & Partners.

Good morning, everyone and thanks for taking my question. Just first one, I wanted to talk about the trajectory in management fees. It looks since the first quarter of 2018, management fees are down about 12%. Your costs have been fairly stable, down around 2.4% over that period of time. Just wanted to know why a more aggressive cost approach hasn’t been considered, if it has at all?

I guess we are taking a long-term view of the business, Simon. We are here to grow this business. We are – and we have obviously delivered all of the merger cost savings that we talked about. We expect, as I have said previously, to continue to look for efficiencies in the business. I don’t think we’re fully done yet. Equally, there are things we want to do to continue to grow this business. So, we are investing in the business and we will continue to do that. So, we think we managed the cost on this business pretty carefully. We’ll continue to do that. We’ll continue to drive out costs where we can, but you would also expect us – you would also expect and I hope want us to continue to invest to grow the business.

Good, thank you. And just the final question, I just want you to clarify on the emerging markets. Did I hear you right that you’re saying that there’s been $2 billion worth of redemptions that will fall through in April, was it?

We’ve been notified of $2 billion, so, they – that will come out over – yes, as the clients redeem.

Alright. Thanks, Roger.

And our next question comes from Craig Siegenthaler with Credit Suisse.

Thank you. Just a follow-up on the elevated turnover on the investment side of the business, but there’s also a Bloomberg article out I think about 2 hours ago where it mentions that 2 of your credit managers are also departing and I think the strategy internally is to replace them with quants. I’m just wondering if you can provide us a little color on this situation, which I think is separate from the EM departures?

Yes, Craig, it’s Roger. That’s just a change that Jim, who is Head of Fixed Income team has made. We’re looking at the overall credit team. We’ve reduced in one area and increased in another area. So, yes, that’s Jim really looking at that Fixed Income team and continuing to build and improve it.

And then just as my follow-up, the backdrop for the industry is more on the challenging side here, industry consolidation is going on, but I’m just wondering, have you thought about any changes to your retention and compensation strategy on the investment side of the business?

This is Dick. Thanks for the question. No, we haven’t. We’re happy with our retention and compensation strategies. Fundamentally, we don’t believe people stay for retention packages and trying to create economic hostages generates a fair amount of friction. So, we don’t – we have a sort of a normal amount of deferred compensation as part of our regular compensation, but other than that, we don’t have a big retention program. We think people should stay because they like the work, they like the people and they are optimistic about the success. And frankly, if they’re not in that camp, they probably shouldn’t stay. So, we see particularly on the investment team, we see that we’ve got some changes, yes, and we’ll probably always have some changes, but overall, we feel pretty darn stable. And as Roger highlighted numerous times in his comments, overall, the investment performance is quite good and over time, that will be an increasingly defining feature of our success. So, we’ve got some stuff to work through and we will work through it. But longer term, we think the strong investment performance is the best indicator of where we’re heading, and we have terrific people on our investment teams. And we feel just fine about where we are, we don’t feel the need to make changes.

And we’ll take our next question from Alex Blostein with Goldman Sachs.

Hi, good morning. I guess, if you guys talk on the EM strategy, I think the U.S. lead is a little bit over 100 basis points in management fees. I’m not sure if it’s the exact same, but can you help us on what the blended fee rate is in that $5 billion that the team has managed?

Sorry, Alex, you were very muffled there. I think you were asking what the blended fee rate is on EM. I think you said something about 100 basis points, which sounds very high. We’re probably talking – again, I don’t think we’ve disclosed it overall, but I’m happy to say it’s probably in the mid-60s.

Got it. Mid-60s, okay. And then the balanced product continues to grow really nicely for you guys, it’s one of the strong areas of growth obviously. Can you just remind us on what capacity is for that product both on the fund size and across other vehicles?

Yes, this is Dick. That product invests in the most liquid markets in equities and fixed income, so it’s not seriously capacity constrained. You can see some other competitors in balanced space are even larger, substantially larger. So, we are nowhere near close to a capacity limit in that product.

Next question comes from Andrei Stadnik with Morgan Stanley. Please go ahead, sir. We are unable to hear you.

Can you hear me okay?

Yes, thank you.

Yes, we can hear now, Andrei.

Good morning, sorry about that. Just wanted to ask in terms of the situation in Europe and UK around Brexit, do you think some kind of resolution on Brexit would lift client sentiment and help lift industry-wide flows in – from Europe and UK?

Yes, without a doubt, particularly in the UK. As I said, we are seeing some improved numbers coming through on the continent, but the UK remains a challenged industry. The data that came out yesterday for m arch, I think it was yesterday for March showed a continued significant industry outflow. So that yes, the investment sentiment is pretty low in the UK. So yes, any – I think any resolution would be viewed positively.

Thank you. And my second question around any flows you’ve seen in Japan, any flows you saw in the quarter, and how that Dai-ichi relationship is progressing?

No flows, no notable flows in the quarter from Dai-ichi. Dai-ichi remains an incredibly important partner and a very valued partner. The relationship continues to build, whether that be around – obviously own 15 and a bit percent of the stock. But on top of that, we’ve got the business that’s continuing to grow in Japan. We had somewhere in the second quarter, Dai-ichi will launch in a new area for us, so, in Dai-ichi Insurance, the adaptive asset allocation product, that could be quite sizable. We’ll see over time, so we’re pleased with that. We’ve got a continuing developing relationship in Australia with TAL, the affiliate of Dai-ichi down there. So, we’re very pleased with that relationship and the team down there are doing a great job in building that relationship. So, we hope to see more money come through there in the future as well. So, there’s a number of areas where we expect to see growth, but nothing to talk about specifically in number terms in Q1.

And our next question comes from Robert Lee with KBW.

Great, thanks. Thank you and thanks for taking my questions. Can you maybe just give an update on kind of what you’re seeing out of the Dai-ichi relationship in Japan? And then maybe as a second part, can you maybe drill down a little bit in the U.S. intermediary business, maybe where some of the emphasis for investment may be there? Do you feel like you have the right product structures, whether it’s SMAs or CITs, just kind of how you’re thinking about more deeply penetrating at least U.S. intermediary? Thank you.

Let me – Robert, yes, you must have just missed it. We just did the question on Dai-ichi, so I’m happy to pick up with that – or John can pick up with you on Dai-ichi after. But Dick, do you want to pick up on U.S. intermediary?

Yes. So, on U.S. intermediary, the opportunity that we have is we have some really strong investment performance. And then as you think about how you convert that into increasingly positive business flows, I think the area we look at for investment is really around technology and data. The smarter you can take your limited resources and apply them to opportunities, the more progress you can make. And our team in the U.S. is very focused on increasing the effectiveness and efficiency of their activities through the use of data and targeting their activities. We have invested substantially in increasing their tools to do that in the past and probably, we’ll continue to do that as opportunities arise. I think that’s the best way that we know of to convert the very strong performance in our U.S. equity platform into increasing flows.

And we’ll take our next question from Brendan Carrig with Macquarie.

Got it. My questions have been answered, so I’m over. Thank you.

Thank you. Our final question will come to us from Ed Henning with CLSA.

Thanks guys. Just a quick one from me. Can you just run through and talk about your channel mix and where you’re seeing your gains and losses from there?

Yes, you’ve got us looking for the right page. What we’re seeing is hard to describe in global channel space. We pretty much have to break it down regionally as we’ve tried to indicate. We’re doing well in U.S. intermediary particularly in balanced and equities. We’re doing – we’re suffering along with the market in UK retail and we’ve had some ups and downs in institutional in various places, but the exposure that we have due to some performance challenges at Intech and in Fixed Income has driven some negative flows. So, it’s a little bit of a complex story, a little hard to summarize, but we’ve tried to give you a sense that the U.S. is doing well in intermediary. There are some challenges in other places and institutional is hard to describe in the aggregate. It’s a lot of sort of lumpy individual decisions moving in different directions quarter-on-quarter. So, I don’t know that I can do better.

Are you saying the channel mix be a headwind for you at the moment or because of the growth in U.S. intermediary and also retail is hopefully a little bit of tailwind for you going forward?

Well, I mean, I think we’ve talked about the pain of the mix is, we’re losing some high-fee retail assets with the global EM team departure, that affects our mix somewhat. There’s been pressure as Roger mentioned earlier on the call in institutional Fixed Income in particular and that has had some affects. And so do we – I don’t think we see a continuous story going forward in one direction or the other. It’s not a question of huge long-term waves, but that’s what we’ve seen. Roger, do want to –

No, I mean, in terms of fee pressure, it is – we talked about it being a continuous grind of a basis point also a year. We saw 2 basis points in the last year. If you go back over the previous years before that, it’s significantly less. So – it’s slightly higher this quarter. There’s a number of – and the biggest changes are – is actually the business is coming in the door and going out of the door. So, we’ve won some business at lower fees and lost some business at higher fees. I mean, the underlying fee pressure in our business remains there. We built our business expecting it to remain there. And I think the other thing is that we got to remember is all business is – not all business is the same. So, we’re very happy to look at business at lower fees. The institutional business has a longer duration. So, you’ve got to look at the sort of net present value of a piece of business. So, it’s not – it’s not all – certainly all about assets, sometimes it’s not purely about the margin and the ultimate revenue on those assets as well, you’ve got to look at the duration and the NPV.

Thank you. And ladies and gentlemen, that does conclude today’s question-and-answer session, as well as today’s Janus Henderson first quarter 2019 results conference call. We do appreciate your participation today. Have a good day. You may now disconnect.