Janus Henderson Group plc (JHG) Q1 2024 Earnings Report, Transcript and Summary

Good morning. My name is Brika, and I will be your conference facilitator today. Thank you for standing by, and welcome to the Janus Henderson First Quarter 2024 Results Briefing. [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 section in 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. Now it is my pleasure to introduce Ali Dibadj, Chief Executive Officer of Janus Henderson. So Mr. Dibadj, you may begin your conference.

Welcome, everyone, and thank you for joining us today on Janus Henderson's First Quarter 2024 Earnings Call. I'm Ali Dibadj, I'm joined by our CFO, Roger Thompson. Today's call, I'll start with some thoughts on the quarter before handing it over to Roger. After Roger's comments, I'll provide a progress update on our strategic initiatives including 2 transactions we announced earlier today that we believe will allow us to deliver tremendous value for our clients and shareholders. And then we'll take your questions following those prepared remarks. Turning to Slide 2. Global equity market returns were strong in the first quarter, including in the U.S. where the S&P 500 touched record highs. Despite these strong returns, the market backdrop is uncertain with increasing investor expectations for a higher -- for longer rate environment, stickier inflation and geopolitical conflicts in Eastern Europe and the Middle East. The strong equity markets, alpha generation provided by a world-class investment team, the exceptional service provided by our client teams and importantly and often overlooked, the productivity of our IT and operation teams as well as our regulatory risk, legal, finance and other teams enabled us to deliver a good set of quarterly results. Indeed, investment performance is off to a very good start in 2024, resulting in at least 60% of assets beating respective benchmarks on a 1-, 3-, 5- and 10-year basis. Assets under management increased to 5% to $352.6 billion, which is the highest quarterly AUM figure in 2 years. First quarter flows were negative $3 billion, in line with expectations. The net flow results reflect improvement in our higher fee intermediary channel, particularly EMEA intermediary in Q1, where if you recall, we decided we would focus this year, while institutional net flows were impacted by a few larger redemptions in the first quarter. Our financial results remained solid. Positive markets, coupled with our performance delivered by our investment teams, plus expense management and increased productivity by all our teams at Janus Henderson resulted in an adjusted diluted EPS of $0.71, a 29% increase compared to the first quarter of 2023. Our financial performance and strong balance sheet continues to provide us the flexibility to invest in the business, both organically and inorganically and return cash to shareholders. In summary, investment performance and financial results are strong. We have key areas of flow momentum in our business and still have much work to do to become consistent. We have a strong and stable balance sheet, and we continue to execute our strategy which I'll talk more about later in the presentation. I'll now turn the call over to Roger to run you through the detailed financial results.

Thank you, Ali, and thank you again to everyone for joining us on today's call. Starting on Slide 3 and investment performance. As Ali mentioned, investment performance versus benchmark remained solid with at least 60% of AUM beating their respective benchmarks over all time periods. Backing up the strong long-term numbers, we're pleased to report that the 1-year number improved to 70% compared to 44% in the prior quarter, primarily driven by our equity and multi-asset capabilities. In equities, the improvement was driven primarily by the U.S. concentrated growth, international alpha and Global Alpha strategies. In the multi-asset capability, the balanced strategy, which is the vast majority of assets in this bucket moved back above its benchmark on a 1-year basis and is now ahead of its benchmark across all time periods. Performance is strong against peers being in the top Morningstar quartile over 1-, 3-, 5- and 10-year time periods. We see the balanced strategy as a focal point for many of our clients who want to take on more risk, but also want the ballast of fixed income, which now delivers higher yield. Elsewhere, fixed income performance versus benchmark remains strong. We believe our fixed income performance and differentiated breadth of products across different vehicles and regions positions us well for the anticipated movement into fixed income as interest rates potentially fall and bonds provide diversification benefits to clients. Overall, investment performance compared to peers continues to be competitively strong with at least 66% of AUM in the top 2 Morningstar quartiles over the 1-, 3-, 5- and 10-year time periods. Slide 4 shows total company flows by quarter, which were net outflows of $3 billion for the quarter. Slide 5 is flows by client type. Net flows for the higher fee intermediary channel were positive $1 billion for the first quarter, supported by a 25% increase in gross sales year-over-year. The U.S. intermediary channel was positive for the third consecutive quarter with net inflows into several strategies, including most of the active ETFs, Multisector Income, Global Life Sciences and the Biotech Innovation Hedge Fund. As we've spoken about previously, U.S. intermediary is a key initiative under our Protect and Grow strategic pillar. We're pleased by the results for the quarter and that we're gaining market share. During the quarter, we also expanded the sales reach of the Biotech Innovation Hedge Fund and announced a strategic partnership with the Forum Investment Group to market the Forum Real Estate Investment Fund, a hybrid, public and private real estate inevitable fund of which Janus Henderson has managed the commercial MBS lead since its inception in 2019. This distribution partnership will provide access to differentiated products to our clients in an investor-friendly structure. Moving to the EMEA and Latin American intermediary segment. We are expanding our strategic efforts. Net outflows improved significantly compared to the prior quarter. Within the region, both Continental Europe and Latin America delivered positive flows for the quarter. Intermediary flows in Asia were also positive. Institutional net outflows were $3.1 billion, which were primarily driven by the EMEA region and include 2 large redemptions of $1.5 billion in the global high-yield strategy and $1.2 billion in the global commodities enhanced index strategy. We talked publicly about the need to replenish a sustainable pipeline. We're pleased with the work our distribution team is doing, and the leading indicators suggest more and better client interactions and discussions with the maturation of the pipeline is taking time. Net outflows for the self-directed channel which includes direct and supermarket investors were $900 million compared to $1.1 billion in the prior quarter. Slide 6 is flows in the quarter by capability. Equity flows were negative $1.1 billion, improving from negative $3.2 billion in the fourth quarter. The improvement came primarily for the EMEA region in both the intermediary and institutional channels. Net inflows and fixed income were $100 million. Several strategies contributed to positive fixed income flows in the intermediary channel, including the fixed income ETFs, which had positive flows of $2.6 billion in the quarter. Other strategies contributing to the positive flows were multisector credit, core plus fixed income and U.S. buying maintain credits. And offsetting these inflows were net outflows in the lower fee institutional channel, including the global high-yield redemption that I just mentioned. Total net outflows for the multi-asset capability were $800 million. And finally, net outflows in the alternatives capability were $1.2 billion driven by the institutional redemption of the global commodities enhanced index strategy. Moving on to the financials. Slide 7 is our U.S. GAAP statement of income. Before moving on to adjusted financial results, GAAP results this quarter included a nonoperating noncash item related to the release of accumulated foreign currency translation gains due to the liquidation of several JHG entities. This amount is removed from adjusted results. As we continue to simplify our legal entity structure, there will be additional releases of accumulated foreign currency translation reserves in future quarters, which will also be nonoperating, noncash but will likely be losses and similarly, will be excluded from adjusted results. Continuing to Slide 8 and the adjusted financial results. Adjusted operating results are lower compared to the prior quarter, primarily due to the significant annual performance fees realized in the fourth quarter. More relevantly, compared to the first quarter a year ago, operating income and EPS are up 21% and 29%, respectively, primarily due to higher average AUM, operating leverage and good investment performance. Looking at the detail. Adjusted revenue decreased 6% compared to the prior quarter, primarily due to lower seasonal performance fees, which were partially offset by higher adjusted management fees. Adjusted revenue increased 11% over the prior year, primarily as a result of higher average assets and improving U.S. mutual fund performance fees. Net management fee margin was stable at 48.7 basis points level with or above each of the prior 3 quarters. This is a good result and a differentiating position compared to many competitors considering the fee pressures experienced in the asset management industry. While we're not immune to those fee pressures, we do see that our competitively resilient fee rate is a differentiator versus many of our peers, given the mix of capabilities where we're seeing success, particularly in our higher fee intermediary business. Continuing on to expenses. Adjusted operating expenses in the first quarter were $299 million, a slight decrease compared to the prior quarter, reflecting continued expense discipline. Adjusted LTI was up 18% compared to the prior quarter, largely due to seasonal payroll taxes triggered by the annual vesting in the quarter. In the appendix, we provided the usual table on the expected future amortization of existing grants for you to use newer models. The first quarter adjusted comp to revenue ratio was seasonally higher at 48.2%, which is down from 50.1% in the first quarter of last year. The higher rate in the first quarter is primarily due to the payroll taxes on annual LTI vesting at the beginning of year reset of payroll taxes and retirement contributions. Our 2024 expectation of an adjusted compensation ratio range of 43% to 45% remains unchanged. Adjusted non-comp operating expenses decreased 11% compared to the prior quarter, primarily due to lower G&A expenses. Lower-than-anticipated non-compensation costs in the quarter is due to the timing of our expenses, we still anticipate adjusted non-compensation annual growth of mid- to high single digits compared to the prior year, which suggests significant acceleration in our non-compensation costs for the remaining 3 quarters of the year given we expect non-compensation expenses to increase as a result of investment-supporting areas of opportunity in our business. As I said earlier, while adjusted operating income decreased 18% compared to the prior quarter, it increased 21% over the same period a year ago to $128 million. Our first quarter adjusted operating margin was 30%, an increase of 250 basis points from a year ago, demonstrating the leverage in our business. Adjusted diluted EPS was $0.71, down 13% on the prior quarter, but up 29% from the first quarter of 2023. First quarter adjusted diluted EPS primarily reflects higher operating income and benefits below the line from strong alpha generation on the JHG portion of our seed book, active management of our balance sheet and a slightly lower tax rate. Skipping over to Slide 9, I'm moving to Slide 10 to look at our liquidity profile. Our capital position remains strong. Cash and cash equivalents were $900 million as of the 31st of March, which is lower from the end of the year, primarily from the payment of annual variable compensation. The first quarter cash position is typically our lowest given seasonal cash needs. Compared to the same period a year ago, our cash and cash equivalents are 8% higher. During the quarter, we funded our quarterly dividend and repurchased 2.7 million shares for $81 million. As of the 31st of March, there was $7 million remaining under the existing buyback authorization, which was completed in April. This return of excess cash is consistent with our capital allocation framework. We'll look to return capital to shareholders where there isn't an immediately more compelling investments either organically or inorganically in the business. The Board has declared a $0.39 per share dividend to be paid on 29th of May to shareholders of record as of the 13th of May. Finally, I'm pleased to say that our improving financial results and cash flow generation, along with a strong and stable balance sheet, has enabled the Board to authorize a new share buyback program of up to $150 million to be completed by April 2025. The buyback program does not change our desire and pursue to diversify our business through M&A where clients want us to do so. At this stage, our liquidity profile allows us to do both as we've demonstrated by the acquisitions announced earlier today that Ali will discuss further about in a moment. Finally, Slide 11 looks at our return of capital to shareholders. We've been disciplined in consistently returning excess capital to shareholders as the historical data reflects. We've maintained a healthy quarterly dividend. And since 2018, have reduced shares outstanding by almost 20%. Our return of capital reflects our positive financial outlook, our cash flow generation and our strong and stable balance sheet. We believe that our buybacks and stable dividends do not impair our ability to execute M&A, should further opportunities arise, and we'll continue to actively look to buy, build or partner to diversify where clients give us the right to win. With that, I'd like to turn it back over to Ali to give us an update on our strategic progress.

Thanks, Roger. Turning to Slide 12. And a reminder of our 3 strategic pillars of protect and grow our core businesses, amplify our strengths, not fully leveraged and diversify where clients give us the right to win. We are in the execution phase, and we believe this strategic vision will lead to consistent organic revenue growth over time. In Protect & Grow, we've talked previously about the importance of protecting and growing our U.S. intermediary business and the progress we have made in capturing market share. We're now working to shift the strategic plan to drive change and improve results in the EMEA and Latin American intermediary channels and early trends are encouraging with much more work to do to deliver steady results. Within Amplify, we've talked about our institutional and diversified alternatives businesses and our product development and expansion efforts such as our build-out of active ETFs in the U.S. Over the next few slides, I'll highlight the exciting progress we've made in our efforts to amplify and diversify the business including an update on Privacore Capital and 2 transactions we announced earlier today, the acquisition of Tabula Investment Management and a strategic partnership with NBK Wealth and the acquisition of their private investments team, NBK Capital. Moving to Slide 13 and an update on our joint venture, Privacore Capital, a trusted partner to alternative managers in the democratization of private alternatives with Wealth Management clients. Privacore Capital has made substantial progress in its mission to deliver institutional quality alternative investment products to private wealth clients through its open architecture distribution platform. I told you last quarter that Privacore was partnering with a premier almost $200 billion alternative asset manager and is currently in the market to distribute its first product. Privacore is about to partner with a second firm, a well-known technology investment firm in order to represent them in their fundraising efforts. In addition, Privacore is working with an alternatives manager that oversees more than $50 billion in assets globally and has filed registration statements with Privacore for 2 new alternative funds. We look forward to providing additional details for these funds on future calls. Established last June, in less than a year, Privacore has put together a highly experienced team, is in the market placing products, is filing to launch new alternative products and is having active conversations with several high-quality asset managers interested in partnering with Privacore. We are excited about the significant progress to date and the opportunities for Privacore Capital to launch integral and tender offer funds and develop custom products for wealth clients in addition to placements. Privacore is in its initial stages of meaningful product development, and we anticipate that it will be a key player in the democratization of alternatives. We look forward to sharing more, including the details of the new launches with our second quarter results. Now turning to Slide 14 for more background on our pending acquisition of Tabula Investment Management announced earlier today. Tabula is a leading independent ETF provider in Europe, with $500 million in assets under management across 9 UCITS products, primarily in fixed income and sustainability strategies. It's an institutional grade investment management business led by an extremely experienced management team. The European ETF market is undergoing a significant transformation, growing considerably and mirroring trends observed in the U.S. market where active management is increasingly incorporated in the ETF wrapper. This shift represents a considerable growth opportunity for asset managers seeking to broaden the way in which clients access their investment capabilities and capitalize on evolving client preferences in the European market. We believe this acquisition will allow Janus Henderson early access to this growing market and build on our extremely successful suite of active ETFs in the U.S. where Janus Henderson is the fourth largest global provider of active fixed income ETFs by assets under management. We believe partnering with Tabula will enable Janus Henderson to respond to client demand globally for its exceptional investment acumen to include an ETF wrapper. In particular, Janus Henderson is seeking to enhance its partnership with its U.K. and European client base, which is increasingly looking at active ETFs and to further expand its reach in key growing markets in Latin America, the Middle East and APAC where there is rising demand for UCITS ETFs and our presence is increasing. Turning to Slide 15. In addition to Tabula, we also announced a strategic partnership with National Bank of Kuwait Groups, NBK Wealth, and the pending acquisition of their private investment team, NBK Capital Partners, which allows Janus Henderson to enter the emerging markets private capital space. NBK Capital is a leading alternative investment manager across multiple private capital asset classes in emerging markets, including the Middle East and North Africa. They secured $1.1 billion in capital commitments to date and have built an 18-year track record of strong investment performance. Janus Henderson has a well-established history of investing in emerging markets with capabilities in both emerging market equity and more recently, emerging market debt. As investors look across the global market for differentiated investment opportunities, emerging markets remain underpenetrated for private capital solutions and therefore, present a key strategic growth area. We believe partnering with NBK Wealth will provide Janus Henderson the opportunity for early entry into this rapidly expanding market where there is increasing appetite for both sovereigns and corporates. In addition to enhancing product offerings for existing clients, the partnership also provides Janus Henderson with the access to engage with new clients that includes some of the largest and faster-growing pools of capital, such as the Middle East and Asian Sovereign Wealth Funds and pensions who want to actively invest globally, thereby expanding our footprint in the region. Both Tabula and NBK Capital are prime examples of our strategic pillars of Amplify and Diversify, respectively. Tabula's existing infrastructure and ecosystem offers Janus Henderson instant access to an institutional platform that we believe will immediately position the firm as a trusted and credible player in the growing European ETF market and allow us to amplify our existing investment skills in a sought-after wrapper. NBK Capital gives Janus Henderson a private investment capability, allowing us to better serve our clients, we are increasingly seeking differentiated investments in private credit, including evolving opportunities in emerging economies, and positions the firm as a pioneer in anticipating and embracing this growing trend. Importantly, Privacore Capital, Tabula and NBK Capital are only the beginning of what we expect to be more well thought-out acquisitions and partnerships of varying sizes to meet our clients' needs to support the growth of Janus Henderson. As I've said previously, we'll be disciplined in identifying where to buy, build or partner. We want people who are like-minded in terms of culture, investment mindset and client service which is what we believe we have in Privacore Capital, Tabula, NBK Capital. Now wrapping up on Slide 16. In conclusion, we are proud of the progress made during the first quarter. Investment performance is solid, including a meaningful improvement in short-term performance. Adjusted diluted EPS increased 29% compared to last year, reflecting strong markets, alpha generation, expense management and increased productivity. Our strong balance sheet and financial results allow us to return cash to shareholders through dividends and share buybacks including $145 million in the first quarter, declaring a $0.39 per share quarterly dividend and approving a new share buyback authorization of up to $150 million, all while continuing to reinvest in the business for future growth. We are executing our strategic objectives. U.S. intermediary flows are positive, and our early strategic efforts in the EMEA and Latin America intermediary segments have resulted in improved intermediary flows. We continue to work on our institutional channel. We amplified and diversified our business with client-led inorganic bolt-on acquisitions. We expect that these acquisitions are only the beginning. The M&A pipeline remains active and we continue to look to buy, build or partner where clients give us the right to further diversify the business. Looking forward, our focus is unwaveringly to help clients define and achieve superior financial outcomes and to deliver desired results for our clients, shareholders, employees and all our stakeholders. Let me turn the call back over to the operator for your questions.

[Operator Instructions] The first question is from the line of Craig Siegenthaler from Bank of America.

So my question is on the NBK and Tabula deals. And actually, first, just congrats on those 2 in the firm partnership which was a couple of weeks ago. But my question is, how you finance them, including any potential future payments like earnouts? How much did they cost in total and then remind us how you think about valuation when deploying capital strategically?

I'm happy to start with broader views and Roger can go through it more. Look, we are very excited about these deals. It allows us to -- both of them as well as Privacore allows us to skate to where the puck is going in a very client-led way and help us to amplify and diversify the business as we continue to protect and grow. We think they will deliver enormous value for our clients and appointing our shareholders given the economics which I'll pass to Roger to go through in more detail.

Yes. So the financial terms aren't disclosed. But they're relatively small transactions upfront and all cash and would expect to be cash going forward. So that's fully factored into our calculations when we thought about buyback, for example, Craig. So in addition to these deals, we also expect to increase the capital a little bit this year, probably to do some ETF launches off the back of -- or certainly do some ETF launches off the back of the Tabular transaction and some other opportunities we see as well. So that's all factored in from our cash perspective when we look forward in terms of things like the buyback. Actually, just carrying on the buyback as well, just probably preempting a question. But the buyback is a little bit more this year than last. We also buy back stock for all employee comp. Therefore, the buyback is fully accretive. And whilst the approval is for the year, that doesn't mean that we will necessarily take the entire year to do it. So hopefully, that sort of concludes the cash capital part of the question, but happy to take more later.

Your next question comes from Ken Worthington with JPMorgan.

This is Michael Cho on for Ken. Congrats myself as well on the deal announcement. Just one on NBK, just to follow up here. I mean clearly, Ali, you talked through NBK clearly supports Janus' entry into the EM private capital space. But longer term, how are you thinking about sizing that market opportunity for Janus? And how are you thinking about incremental capabilities to potentially address that opportunity adequately?

Yes. Thanks for the question, Michael. We're pretty energized about the opportunity we see here. And again, it allows us really early entry into a market that is rapidly growing while we build on some foundational strengths that we have as we diversify. So remember, we have the emerging market equity business. We have an emerging market public debt business more recently. And building on top of that now, we have an emerging market private capability, and we see this in very, very high demand among our clients, both in the region and outside the region. And the real logic behind the demand, we understand and we've actioned with this acquisition is that the emerging markets is really where the growth for the longer term will likely be faster, household formation, corporation formation. But at the same time, the banking system isn't broadly sophisticated. So with that nexus, we found a fantastic team, 20 years of average experience investing in the region, a great cultural fit and a fantastic partnership with NBK and NBK Wealth and we think that, that combination and what we're hearing from clients, both locally and globally, really will deliver great value for clients and shareholders alike.

Great. And then, just bigger-picture question for you, Ali. You've been with Janus for a couple of years now. But as you think about your prior time with Alliance, how do you feel that relationship that Alliance had with AXA and Equitable and do you see value for Janus here and pulling together some of those same big pieces? I mean, just curious how you're thinking about the bigger picture thought around the right capability, the right structure around alternatives and fixed income that Janus just given some of your past experience.

We believe at Janus Henderson, we have enormous kind of sets of arrows in our quivers that can deliver for our client needs of all sorts. We obviously are very focused on delivering currently the improvements that we're seeing in the intermediary channel for many of our clients. And as you know, we are rebuilding the pipeline on the institutional side, which, as you mentioned, includes clients like insurance companies. And those insurance companies need things like private. We just mentioned 1 deal. And obviously, there's many more in the pipeline that one could imagine doing on the private side of things, certainly on the credit side. But also they need other things that we have as well. Fixed income side of our business is about half, maybe a little bit more than half on the insurance side as well, and we continue to see needs from that segment. So look, we are very pleased with our core business that we're protecting and growing. We look for opportunities to amplify that and then diversify to deliver on client needs and to your point, clients of all sorts, including for sure insurance companies as well.

We now have Dan Fannon with Jefferies.

I wanted to follow up on some comments you guys have been saying for some time about replenishing the institutional backlog. So curious what you think is a reasonable time period for that. And also underneath that, I believe you've been doing some hiring and some changes internally. I was hoping to get a little more color on what you're doing proactively to enhance that channel.

Dan, thanks. Yes, your recollection is right. We told you that we would need to replenish the institutional pipeline after an $8 billion positive flow year last year. There is lots of activity. I'm actually very, very pleased about the level of activity that we're having with clients, a lot activity and positive feedback we're getting from consultants, which has a little bit of lead time obviously, so the leading indicators are actually quite positive. This stuff takes a while. We talked about 12- to 18-month type time frame. That's probably still right, plus or minus, is our view. But of course, these things move at the pace of the institutional world and the pace of the consultant world quite often. I would note that we're also being quite mindful about what AUM we take on. I think you all realize, investors realize, we certainly realize that not all AUM is created equally. So we're very mindful about delivering value to our clients and delivering value to our shareholders and not in search of so-called low-calorie AUM. So we're being very mindful of that. The leading indicators are quite positive. You mentioned in terms of people. You're correct. We're investing in people and changing the organizational structure a little bit to make sure that we pair off against our institutional clients in the same manner that they run their businesses, i.e., much more regionally, and we're starting to see already some very fruitful results out of that.

Great. That's helpful. And then I was hoping you could expand upon your vision for the ETF franchise. You have obviously the announcement today, the success of the last 12 months on certain fixed income products, do you anticipate look-alike products coming to market with what you have existing on the active footprint within equities? Or is this mainly just focused on fixed income as you think out the next couple of years, but I was hoping to get a little bit more of a road map of what your vision is for your ETF franchise over the longer term?

Sure. Thanks for the question. Let me start off maybe with Tabula as a jump-up point and then we can expand that discussion. You shift the time frame to kind of the start time we're seeing a lot of the same trends. So Tabula allows us to get into that marketplace and take advantage of some of those trends. I mean, literally, the ETF market on the active side grew about 50%. Small base, mind you, to be fair, right? But growing about 50%. We're starting to see growing interest actually in the ETF UCIT form in Latin America and in Asia as well. So we're seeing that. As I mentioned a second ago, we're skating to where the puck is going, like we are doing with NBK and Privacore as well. And the strategic prong that it fits under is this Amplify pillar. And so we're amplifying the skill sets that we have in a vehicle-agnostic way to deliver to the client needs. Again, we're always being client-led. So that hopefully starts to answer your question, which is we're taking the skill sets that we have, which is this incredible set of investment acumen a little bit to the question earlier -- Michael's question earlier, we have great investors, great client service folks. And now we're putting it in a different wrapper, right, to deliver for our clients. We are not prone to doing a cloning in our mindset. We think that the folks who are purchasing ETF have different needs, look for different characteristics. And so we're doing things slightly differently. Now come to the U.S., exactly as you described it, the securitized platform on the fixed income side is exactly an example of this. We had a great investment team, fantastic performance and we put it in a form factor, again, being vehicle-agnostic, that clients could digest this product with enormous success. Take that example, think about that through Europe with Tabula and then think about that for Latin America and Asia as well as a thought process. Two other pieces to note. One is it does not only have to be fixed income. In fact, we do have ETF in other asset classes, including active equities. They will all be active, but we could imagine doing things in equities and think that there's potential to do that. Now the last thing that I'd say is as compared to some other ETF franchises that folks may be familiar with, the fee rate on this thing is very different because it is active, right? Again, not all AUM is created equally. We're very, very mindful that we have an investment team that's very, very strong across many, many different, again, arrows in the quiver. We're delivering that in a form factor of ETF and the fee rate for most of these is very, very attractive because of that investment, actually. Hopefully, that gives you a full picture.

We now have John Dunn with Evercore ISI.

It was great to see Europe and Latin America intermediary improve. You guys have talked about transporting some of the U.S. practices to those markets. Can you bring that to life a little more like specific shifts you're making? And how sustainable do you think better results are overseas?

John, thanks very much for the question. Yes, you're right. Recall, we had talked about taking some of the experiences and expertise and changes, which I'll go into in a second, from the U.S. markets that have delivered, we believe, now sustainable results in the U.S. intermediary business is growing. And by the way, it's not just growing fundamentally, it's growing market share and even in kind of the most challenging areas of the U.S. intermediary business like active equities, we're growing market share, too, which again suggests that sustainability is playing out there. That team has done a phenomenal job and hats off to them and to continued successes in that business. And what we did in that business, to your very point, are things that we are bringing and modifying, right, to make sure that they're customized, but modifying to the rest of the world. So things like investing in the business, investing in people in the business, bringing new people on board or upgrading internally, promoting people internally with that. We are looking at data much more carefully. We have market share data cut, as you'd imagine, every which way for each of our sales folks now, which we didn't have before. We're spending more on branding and marketing on a global basis, again, to make sure that there's a pull element to it, not the push element of our sales force to give them a little bit of an amplification push as well. And of course, we're very focused on KPIs, KPIs that have differentiated comp structures that are much more focused on growth and that are extraordinarily focused on delivering clients' needs. Now couple that with investment performance that is stronger. That's what you're seeing in Latin America and EMEA, we're very, very pleased with the early progress from that team. And we want that to continue, obviously, for investors sake and client sake as well.

If I could add a couple of bit to that, John. I think the other things, it is a -- it's a pretty broad improvement in what we're talking about of European flows. We're positive in Continental Europe. We're also positive in LatAm and actually, we're also positive in core Asia in terms of intermediary flows. The U.K. is a tough market. That market is still at outflows. We're probably not losing market share, but that's a tough market. We're still negative in the U.K. We've reorganized there. We're excited about new leadership we've brought in, in the U.K. But in the continent, LatAm and Asia, we've moved to positive. And as Ali said on the call earlier, that backs up the 3 quarters we've done positive in the U.S. and it's coming in a broad -- a relatively broad range of products. We're definitely taking share in European equity with positive flow there. We've got some outstanding performance in European equity, but also in thematics, things like global tech and biotech and life sciences. So more to do, but really pleasing to see Europe joining the party, U.S. positive last quarter and the one before and continental Europe positive this quarter. So we're pleased with the direction of travel.

Got it. And then the balance fund back to a great performance. In the past, it's been a good contributor. In past cycles, like how quickly have you seen interest return to that strategy? And what do you think that look is for '24?

I'm glad you raised the balance strategy, John. It's really become a big focus of our client base. And the client base is effectively saying, and I'm sure you know this, they're effectively saying, look, we want to take on a little bit more risk. We feel like things are better cautiously, but better certainly. But we want to maybe not go all the way. We want to have exposure to equities but have the balance of fixed income, which, oh, by the way, is actually delivering a relatively good return of good yield. And so the balanced portfolio has become a very, very big focus for our clients. And of course, gladly, the investment performance on that team is extraordinarily good. I think over any time frame you choose, they're one of the best performing balanced franchises out there. Unfortunately, see it as an opportunity. They're not one of the biggest balance franchises out there. And so there's still enormous amount of opportunity to take that business and grow that business on the basis of the client needs in this part of the cycle environment as well as the great performance. So we're really excited about the balance strategy at this point.

We now have Adam Beatty with UBS.

Just a quick follow-up on the institutional kind of rebuild. You've talked about that somewhat already on the call. But just wanted to get a sense, I'm assuming the couple of mandates that went away in the first quarter, there was some seasonality to that, maybe some annual-type decisions. So I just wanted to get a look on if there's anything else near term, either positive or negative, that might hit the flows in the next quarter or 2? And also, just broadly, just the institutional response so far to the improving performance in the equity franchise.

Yes. Let me start on that one, Adam. Yes, we've told you in the past if we've got any large outflows that we're expecting. And at the current time, we don't. And as Ali said, there is a lot of things in the early-to-mid phase. Some of those are quite large. They could come through. But as we said, it's going to take us time to rebuild that full pipeline to something where we can be consistent and delivering on an overall basis. So it's likely to be lumpy for a period of time. But at the current time, nothing to tell you about. Ali, do you want to pick up on equity?

Sure. We are seeing more interest on that side. And the hypothesis that we had a little while ago is certainly being repeated back to us, which is exciting for us and other active asset managers, which is, wow, it sounds like there's going to be a real cost of capital here for a while. And so it makes fixed income attractive for sure, but it also comes back to good and bad companies lead from chaff separation to create alpha. That something we're hearing back from clients. We're hearing back from the most sophisticated clients as well as end clients with whom we have connectivity with. So they're effectively saying, "Gosh, there's a higher cost of capital, a bad company that has to pay a higher cost of capital will fail, a good company will be successful and that divergence between a good and bad company will again create alpha." Honestly, that's music to our ears, right, when we hear that. Given the performance that you see here that's been consistent for such a long time, given the 340-plus investment professionals that we have at this firm, who all they do all day long, it's our DNA, understand wheat from chaff. Sometimes we short the chaff and invest in the wheat and sometimes we just pick off the wheat. I think that's the positive part and grow. So it's music to our ears. We think there's a real interest in a movement starting from institutional to consultants to intermediary end clients. Understanding that the tide will not lift all boats, and active asset management is a real place people are paying attention to.

Excellent. And then just wanted to ask a little bit more about the investment capabilities at Tabula. A lot of the detail is about distribution and the usage vehicle, obviously, very important. Just wondering how similar or different the investment strategies are to what Janus Henderson has here in the U.S. And also, they mentioned kind of an ESG capability. So I don't know how important that was in terms of your partnership with them. Maybe you could talk to that.

Let me start on that and then Ali can chip in. Yes, we've currently got -- what company has currently got, we will currently have 9 UCIT ETFs, as Ali said earlier, it's about $500 million. And it includes a range of Article 9 compares to order line funds. So it's a mixture of things. It's largely fixed income at the moment. And the exciting thing for us is this is existing in 10 exchanges. It is sold through 15 countries. So the opportunity for us is now to launch Janus Henderson product through that Tabular platform. And as we said, that's probably both fixed income and equity, and we will be moving very fast to get those launched during '24. So there's currently 9 funds. They're interesting things. We'll certainly keep marketing those. They're something interesting things for us to look at, but we'll be adding to that with some of the investment talent that we have, and we'll hopefully get a good number of those launched this year.

I'm sorry, I wasn't sure if Ali want to add.

No, I think it's a great answer.

[Operator Instructions] We have the next question from Michael Cyprys from Morgan Stanley.

Congratulations on both of the transactions here this morning. I wanted to ask on NBK with the private markets deal. I was hoping you could speak to some of the steps you'll take to accelerate the growth at NBK. Do you feel that you need to expand sourcing and origination in order to meaningfully drive growth or add more resources? Or is it really just about plugging it into global distribution? And maybe you could talk about your vision for this over time.

Sure. Thanks for the question. We don't believe we have to invest meaningfully in the origination part to it. In fact, that's something that we look at when we look at these types of acquisitions is the origination skill set and how much sort of capacity of the origination skill set has. Here, it's quite strong. There continues to be an opportunity for them, in fact, to scale up if they had the capital. And that's where we come in. So point number one, not enormous investment in the origination, they already have it. Number 2 is, plugging into the distribution that we have, both in the region, but also globally is really how we can help them grow and help them get more deals. In fact, they're leaving money on the table, NBK would say, because they have so much coming in, being very selective, keeping the same diversification, keeping the same credit quality but could put more to work. And so that's where the plug-in to us makes a lot of sense. The third point that I'd mention is, of course, also the partnership we have with NBK Wealth, which allows us to cross-sell effectively both our products and also NBK's products more broadly as that business grows. So we believe that this is a great foundational building block for our emerging market franchise and for our private franchise in the emerging markets. So we're quite excited. And again, I think it's going to deliver great value for our clients and phenomenal value for our shareholders, given this is where the growth is happening.

And then just a follow-up on the Privacore relationship, great to hear about the new partnerships that you were alluding to earlier. I was just hoping you could elaborate a bit more on your overall strategy and objectives here over the longer term, if you look out over the next 5 years if this is successful, what would that look like at Privacore?

Sure. We are very energized by what's going on at Privacore right now, the progress to date in a very short period of time has been great. We mentioned a $200 billion alternative asset manager that's currently in the market. We now are working with a very well-known technology investment firm to do the same. We have an agreement with a $50 billion global private alternative asset manager that we're bringing to market. So it's actually quite exciting to see the progress here. We'll give you more updates on future quarters in more detail, but it's very exciting for a couple of things, right? The hypothesis was that there is a desire among our clients, particularly the private wealth clients, RIAs, warehouses, kind of access to very well-performing alternative shops, but can't get access to them because there's a missing service element and product creation element to it. At that nexus, it's Privacore to bring in best-in-class managers of alternative asset management and pair that to the relationships in the warehouse with brokers, dealers that Janus Henderson has and Privacore has. And we're seeing that play out. And very excitingly, we're seeing it play out with brand-name large alternative asset managers. These are not small folks. These are folks that you all will know. And so it's just the start. But if you expand that a little bit, there are beliefs out there that the, call it, low single-digit type exposure in the private wealth channel to privates and alternatives more broadly, will go up to something like 15% to 20% allocations in private wealth. Folks and other firms that have enormous amount of respect for and that some of you cover, say this is an $80 trillion AUM opportunity in private wealth. And we think Privacore can be a really important part of that democratization of the alternative landscape to private wealth. We have currently a minority stake in Privacore with very clear and well-established milestones to become full owners of Privacore. So we are quite excited for the progress. I think the team there is fantastic. We have a great relationship with them, and they are showing us that, that hypothesis is playing out.

I would now like to turn it back to Ali Dibadj for any final remarks.

Thanks very much, Brika. I want to thank in this context of the quarter, each and everyone of our employees at Janus Henderson. And you've heard these calls before, we often speak about investments and client service, and I want to just take a brief moment to thank all of the employees at Janus Henderson, all of the functions, the IT people, the ops people, legal, compliance, risk, finance, all the other folks as well that sometimes are unsung at Janus Henderson, without whom we just could not have delivered these very strong results. Everyone at Janus Henderson is hard at work all across the world, living our values, executing our strategy to deliver for our clients, their clients, our employees, shareholders and all of our stakeholders. So thanks for those folks who are listening to the call. Thanks for investors and analysts, and bye for now.

Thank you for joining. At this time, I confirm that does conclude the Janus Henderson First Quarter 2024 Results Briefing. You may now disconnect your lines, and please enjoy the rest of your day.