Janus Henderson Group plc (JHG) Q3 2025 Earnings Report, Transcript and Summary

Good morning. My name is Adam, and I will be your conference facilitator today. Thank you for standing by, and welcome to the Janus Henderson Group Third Quarter 2025 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 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. Now, it is my pleasure to introduce Mr. Ali Dibadj, Chief Executive Officer of Janus Henderson. Mr. Dibadj, you may begin your conference.

Welcome, everyone, and thank you for joining us today on Janus Henderson's Third Quarter 2025 Earnings Call. I'm Ali Dibadj. I'm joined by our CFO, Roger Thompson. Before discussing the quarterly results, I wanted to comment briefly on the nonbinding proposal submitted by Trian, a 20.6% shareholder of Janus Henderson and General Catalyst, a growth venture capital firm earlier this week to acquire all outstanding ordinary shares of Janus Henderson that Trian does not already own or control. The Board of Directors has appointed a special committee, which will carefully consider the proposal. The company appreciates the history of constructive engagement with Trian since they first disclosed their investment in Janus Henderson in October 2020. We also appreciate the proposal desire for continuity for Janus Henderson's clients and other stakeholders. The offer will be evaluated by the special committee, and there is no assurance that any definitive agreement will result from the proposal without any transaction will be consummated. Janus Henderson does not intend to comment further about the proposal unless and until it deems further disclosure is appropriate. In the interim, and as always, our focus continues to be helping clients define and achieve superior financial outcomes and to deliver desired results for our clients, shareholders, employees and all our stakeholders. As you can understand, our remarks on this call must be focused on the quarterly results and progress across the business. And we ask that during Q&A, questions be limited to the business results. Now, turning to the quarterly results, where I'll start with some thoughts on the quarter before handing it over to Roger to run through the results in more detail. After Roger's comments, I'll provide an update on our progress in private markets and how we are meeting the evolving needs of our clients and their clients. We'll then take your questions on the quarterly results following our prepared remarks. Turning to Slide 2. Janus Henderson delivered another good set of quarterly results, building upon tangible momentum in the business. Results reflect the sixth consecutive quarter of positive net flows delivered by dedicated client groups, market gains, solid investment performance produced by world-class investment professionals and the efforts and productivity from all operating and support areas. Longer-term investment performance is consistently solid with over 60% of assets beating respective benchmarks on a 3-, 5- and 10-year basis. Against peers, long-term investment performance is even stronger with over 70% of AUM in the top 2 Morningstar quartiles across the 3-, 5-, 10-year time periods. Assets under management of $483.8 billion increased 6% over the prior quarter and compared to a year ago, AUM has increased 27%. September AUM is our highest quarterly figure ever at nearly $0.5 trillion in AUM. Switching to flows. The third quarter marked our sixth consecutive quarter of positive net flows and represented a 7% organic growth rate. Positive net flow results demonstrates our truly global distribution footprint and the broad range of strategies and vehicles we offer. Moving to our financial results, which remain solid. Adjusted diluted EPS of $1.09 is 20% higher compared to the same period a year ago. Our financial performance and strong balance sheet continue to provide us the flexibility to invest in the business, both organically and inorganically and return cash to shareholders. On Slide 3, I want to provide an update on progress being made in the business. We continue to be in the execution phase of our strategic vision, which consists of 3 pillars: protect and grow our core businesses, amplify our strengths not fully leveraged and diversify where clients give us the right to win. In Protect & Grow, we are actively upskilling and utilizing data, people and process best practices across the organization to drive market share improvement and diversification of organic growth across regions and strategies. For example, in the third quarter, there were 21 strategies that each had at least $100 million of net inflows. This compares to 11 strategies just a year ago. These 21 strategies reflect a broad range of capabilities and vehicles across Protect & Grow and Amplify strategic efforts, including 6 ETFs, 6 equity strategies, the fully tokenized Janus Henderson [indiscernible] AAA CLO fund, regional fixed income strategies, absolute return, Victory Park Capital's Asset Backed opportunistic credit fund and Privacore within our alternatives businesses and the adaptive capital preservation strategy within multi-asset. Under Amplify itself, we also announced a partnership with CNO Financial Group for providing long-term capital, which we believe will further accelerate the growth of Vicky Park Capital and expand and scale its investment capabilities for the benefits of our clients. With CNO and Guardian, we now have almost $50 billion in very long-term capital or roughly 10% of our overall AUM. We also continue to leverage our investment expertise through the launches of active ETFs that allow us to cater to client demands globally. During the third quarter in the U.S., we launched our Asset Backed securities ETF, JABS or JABS, and the global artificial intelligence ETF, JHAI. In Europe, we launched our transformational growth equity EUFIT ETF, JTXX, complementing our U.S. launch of transformational growth equity, JXX. Within the diversified pillar, we announced the successful first closing of a non-U.S. direct lending vehicle by our emerging markets private investment team. I'll talk more about the VPC partnership with CNO and our emerging markets private investment team later in the presentation. Along with executing our strategic vision, we are making progress in other areas of the business. As I mentioned, we delivered several consecutive quarters of positive net flows and delivered market share gains in key regions, which demonstrates that we are on the path to delivering consistent growth over the long term. In addition to the net flows this quarter, importantly, Janus Henderson also generated positive organic net new revenue growth in the third quarter. Fee pressures are persistent in this industry and not all AUMs created equally. We're pleased with that result. Elsewhere in the business, we've made the strategic decision to transition our investment management system to Aladdin. This multiyear transition is expected to deliver a more scalable operating model through consistent and integrated technology infrastructure and investment management platform. Transitions of this nature are not uncommon in our industry, and we expect this transition will deliver enhanced services to our funds and our clients and enable strategic growth. Our focus is on making this transition seamless for our clients, maintaining the consistent level of service they expect from us. While we anticipate an approximately 1% increase in adjusted operating costs for 2026 and 2027 from this transition, all else equal, in 2028 and beyond, we expect this transition to deliver ongoing operational improvements and efficiencies and an attractive ROI. We'll provide an update on 2026 expense expectations, including the net impact of this shift in ongoing costs on the next quarter's earnings call. Shifting to capital stewardship. Our solid financial results and cash flow generation, along with a strong and stable balance sheet has enabled us to return nearly $130 million this quarter through dividends and share buybacks. Our cumulative share count reduction is 23% since we started the accretive buyback program in the third quarter of 2018. Janus Henderson's strong liquidity profile continues to provide us the flexibility to invest in the business, both organically and inorganically as well as return cash to shareholders. I'll now turn the call over to Roger to run you through more of the financial results.

Thanks, Ali, and thank you for joining us on today's call. Starting on Slide 4 and investment performance. As Ali mentioned, longer-term investment performance versus benchmark remains solid with at least 60% of AUM beating their respective benchmarks over the 3-, 5- and 10-year time periods. Looking at further detail, at least half of each capabilities AUM is ahead of benchmarks over medium and long-term periods, reflecting consistent longer-term investment performance across capabilities. Overall, investment performance compared to peers continues to be very competitive with over 70% of AUM in the top 2 Morningstar quartiles over the 3-, 5- and 10-year time periods. Slide 5 shows total company flows by quarter. Net inflows for the quarter were $7.8 billion, which improved significantly over the net inflows of $400 million a year ago. Excluding the onetime impact from the Guardian general account funding last quarter, our gross sales increased for the fourth consecutive quarter and improved by 86% compared to the third quarter of last year. All 3 channels and regions experienced an increase in gross sales compared to the prior year across a broad range of capabilities, including ETFs, U.S. buy and maintain credit, Australian fixed income, U.S. research, our tokenized AAA CLO fund and Asset Backed opportunistic credit from VPC. Turning to Slide 6 and flows by client type. Third quarter net flows for the intermediary channel were positive $5.1 billion, equating to a 9% organic growth rate. In the third quarter, net flows were positive in the U.S. and Asia Pacific with net outflows in EMEA. To set expectations, we do not expect to repeat this level of net flow in Q4. In the U.S., net flows were positive for the ninth consecutive quarter with inflows in several strategies, including most of the active ETFs, U.S. research, multi-sector income, U.S. Mid-Cap Growth and Privacore. U.S. intermediary is a key initiative under our Protect & Grow strategic pillar, and we're pleased that we gained market share on a year-over-year basis. Additionally, whilst negative, the third quarter net flows for U.S. mutual funds within the intermediary channel was the best result in several years. Under our Amplify strategic pillar, we've talked about amplifying our investment and client service strengths using various means, including vehicles through which we deliver to our clients. In addition to active ETFs, flows into CITs and hedge funds in this channel were positive in the third quarter. In EMEA, Continental Europe and the Middle East delivered net inflows, while the U.K. had net outflows, primarily driven by a single outflow in investment trusts. Institutional net inflows were $3.1 billion, marking the fourth consecutive quarter of positive flows. Gross sales were the best result in over 2 years and reflect fundings across all capabilities covering corporates, pensions, insurance and private credit clients. Net outflows for the self-directed channel, which includes direct and supermarket investors, were $400 million. The third quarter includes approximately $600 million of ETF net inflows from our supermarket clients. Excluding ETFs, self-directed net outflows were roughly flat to the prior year. Slide 7 shows our flows in the quarter by capability. Equity flows were negative $3.3 billion compared to $2.6 billion of net outflows in the prior quarter. The current quarter was impacted by the merger of the Henderson European Trust into another third-party trust, which resulted in $900 million of net outflows. The environment remains challenging for active equities across all regions. Whilst net flows for equities were negative in aggregate, CITs, active equity ETFs and Horizon SICAV funds all delivered positive net flows in the quarter. Elsewhere, while still negative, the U.S. equity mutual funds had their best flow results in over 2 years. Third quarter net inflows for fixed income were $9.7 billion compared to $49.7 billion of net inflows in the Guardian-boosted prior quarter. Several strategies contributed to positive fixed income flows. Active fixed income ETFs delivered over $5 billion in the quarter and included 5 active ETFs with at least $100 million of net inflows, including JAAA, JMBS, JSI, JBBB and VNLA or [indiscernible]. Other strategies contributing to positive flows were Australian fixed income, U.S. buy and maintain credit, the tokenized JAAA fund and multi-sector credit. Net flows for the multi-asset capability were breakeven, primarily due to net outflows in the balanced strategy, which were offset by an institutional win in our adaptive capital preservation strategy. And finally, net inflows in the alternative capability were $1.4 billion, driven primarily by absolute return, biotech hedge fund, VPC's Asset Backed opportunistic credit strategy and Privacore. Moving on to the financials. Slide 8 is our U.S. GAAP statement of income. Before moving on to the adjusted financial results, GAAP results this quarter include an approximately $28 million charge related to the strategic decision to transition our investment management platform to Aladdin. This charge is removed from our adjusted results and the majority is noncash. Continuing to Slide 9 and our adjusted financial results. Adjusted financial results improved compared to the prior quarter and the prior year. The improvement was primarily due to higher average AUM and good investment performance generating higher performance fees. Adjusted operating income improved 22% and EPS improved 21% quarter-over-quarter. Improvements over prior year were similar with operating income and EPS both up 20%. Looking at the detail. Adjusted revenue increased 11% compared to the prior quarter and 14% compared to the prior year, primarily due to higher management fees on higher average AUM and improved performance fees. Net management fee margin was 42.7 basis points in the third quarter. The expected and communicated decline from the prior quarter was primarily a result of the successful integration of lower fee Guardian AUM. We are also very pleased with positive firm-wide organic net new revenue generation in the third quarter, which demonstrates our success across a broad range of strategies and regions. Third quarter performance fees were positive $16 million, primarily reflecting the SICAV absolute return strategy in U.S. mutual funds. The U.S. mutual fund performance fees were positive this quarter at over $3 million, which is the best result in over 10 years. This result compares favorably to negative $9 million of U.S. mutual fund performance fees over the same period a year ago. We currently expect Q4 2025 performance fees to be at or above the Q4 '24 total, reflecting very strong performance of our hedge funds, but final amounts will be dependent on performance over the remainder of the year. Continuing to expenses. Adjusted operating expenses in the third quarter increased 6% to $350 million, primarily reflecting higher profit-based compensation, LTI expense and investments supporting strategic initiatives. Adjusted LTI increased 20% compared to the prior quarter, largely due to mark-to-market on mutual fund share awards. In the appendix, we provided the usual table on the expected future amortization of existing grants due to use in your models. The third quarter adjusted comp to revenue ratio was 43.3%, which is flat to the prior year and in line with our guidance. Our 2025 expectation and an adjusted compensation range of 43% to 44% remains unchanged. Adjusted noncomp operating expenses decreased 5% compared to the prior quarter, primarily from seasonally lower marketing and G&A expenses. For non-compensation guidance, our expectation of high single-digit percentage growth in full year non-comp expenses compared to 2024 remains unchanged, reflecting investments supporting our ongoing strategic initiatives and operational efficiencies, inflation, the full year impact of the consolidation of VPC, NBK, Tabula and Guardian and the FX impact of a weaker U.S. dollar year-to-date in 2025. Our expectation of high single-digit percentage growth in non-comp expenses implies growth in the fourth quarter. We do expect to invest a little bit further in high ROI investments, supporting areas of momentum in our business, examples being marketing and advertising as well as client-related expenses such as T&E. We remain committed to strong cost discipline, ensuring that we manage our cost base while continuing to support the long-term growth objectives of the business. Our expectation of the firm's tax rate on adjusted net income attributable to JHG remains unchanged in the range of 23% to 25%. And finally, we'll give 2026 guidance on our full year call. But as Ali mentioned, our transition to Aladdin will result in higher costs in 2026 and 2027 before we deliver the improvements and efficiencies for the future in 2028 and beyond. Our third quarter adjusted operating margin was 36.9%, an increase of 200 basis points from a year ago. And finally, adjusted diluted EPS was $1.09, up 20% from the comparable third quarter 2024 period. The increase in adjusted diluted EPS primarily reflects higher operating income and operating leverage. Skipping over Slide 10 and moving to Slide 11 and a look at our liquidity profile. Our balance sheet remains strong and stable. Cash and cash equivalents were $1 billion as of the 30th of September compared to $395 million of outstanding debt. During the quarter, we funded our quarterly dividends and repurchased 1.5 million shares as part of our corporate buyback program for approximately $67 million. The Board has also declared a $0.40 per share dividend to be paid on the 26th of November to shareholders of record as at the 10th of November. Slide 12 looks in more detail at our consistent return of capital to shareholders. We've maintained a healthy quarterly dividend and have reduced shares outstanding by almost 23% since 2018. During the first 9 months of 2025, we've returned $331 million, including $143 million via share repurchases. The buyback program and dividends do not alter our ability to invest in the business organically and inorganically as well as return cash to shareholders. Currently, our liquidity profile allows us to do both. Our return of excess cash is consistent with our capital allocation framework. We'll continue to look to return capital to shareholders where there isn't an immediately more compelling investment in the business. With that, I'd like to turn it back over to Ali to give an update on our strategic progress in private markets.

Thanks, Roger. Turning to Slide 13 and an update on our progress in private markets. We've made progress in the private market space through Privacore, Victory Park Capital and our emerging markets private investment team. Starting with Privacore, which seeks to take advantage of and be the leader in the democratization of private alternatives in the private wealth channel. Year-to-date, Privacore has advised on $1.4 billion raised in the private wealth channel. Privacore is now selling on 5 wirehouses and platforms, and the team is expanding into RIAs and broker-dealers. In addition to advising on third-party products through its open architecture model, Privacore has also recently launched 2 proprietary funds, the Privacore VPC Asset Backed Credit Fund, AltsABF, which is sub-advised by our very own Victory Park Capital and the Privacore PCAM Alternative Growth Fund, Alts Grow, sub-advised by Partners Capital. In addition to these advised third-party and proprietary funds, Privacore expects to have more products coming online in the upcoming months and is working with Janus Henderson to expand its reach. In September, we announced that CNO Financial Group, a nationwide life and health insurer and financial services provider with $37 billion in total assets would acquire a minority interest in VPC. As part of the partnership, CNO will provide a minimum of $600 million in long-term capital commitments to new and existing VPC investment strategies. One of these strategies will be the Privacore Victory Park Capital Asset Backed Credit Fund I previously mentioned. This collaboration with CNO reinforces our shared belief in the long-term potential of asset backed private credit markets and further deepens Janus Henderson and VPC's insurance presence. CNO's investment of long-term capital speak to VPC's strong track record of providing private credit solutions across industries, their differentiated expertise in highly developed sourcing channels and the significant value VPC brings to its investors and portfolio companies. The transaction was completed on October 1, and Janus Henderson remains the happy majority owner of VPC. The transaction with CNO builds on Janus Henderson's recent momentum in the insurance space with our previously announced multifaceted strategic partnership with Guardian, which is working well. Lastly, in early October, our emerging markets private investment team, formerly NBK Capital Partners, marked a strategic milestone with the announcement of the successful first close of the $300 million Shariah-compliant fund, the Janus Henderson MENA Private Credit Fund IV with $125.5 million committed. The vehicle, which attracted strong demand from global and regional institutional clients and family offices, provides investors with access to emerging market private credit opportunities that deliver attractive cash yield and total risk-adjusted returns. The second close is planned for year-end 2025 with the final close in mid-2026. The successful first close of this direct lending vehicle underscores our commitment to investors in the Middle East and the growing number of companies in the region seeking access to flexible values-driven financing. It also highlights the important role of private credit plays in connecting capital with opportunities across dynamic growth markets. This business also strategically complements our emerging market public credit business, which is now at almost $2 billion of assets under management. Privacore, Victory Park Capital and Emerging Markets Private Investments underscores Janus Henderson's commitment to private capital as a key strategic growth area as we continue to diversify our capabilities and deliver differentiated solutions for our clients. Now wrapping up on Slide 14. We are making meaningful progress across the business, although we're not firing on all cylinders yet and have more improvement to go. We're executing against our strategic objectives, including capturing market share in key regions, diversifying our flows across regions and strategies, establishing new strategic partnerships and developing newly added pieces of our business. Investment performance is solid versus benchmark and peers. Net inflows were positive $7.8 billion, marking our sixth consecutive quarter of net inflows and the best quarterly results ever, excluding the Guardian net inflows of last quarter. While we are very pleased with the quarterly results, it's worth noting for modelers that these flows also reflect several fundings, which have depleted the near-term existing pipeline opportunities. Our financial performance and strong balance sheet allow us to continue returning cash to shareholders through dividends and share buybacks while reinvesting in the business for future growth. Our focus continues to be helping clients define and achieve superior financial outcomes and to deliver desired results for our clients, shareholders, employees and all our stakeholders. Finally, before I turn it over to the operator for questions, I want to acknowledge our CFO, Roger Thompson, who will start a well-deserved retirement beginning April 1 of next year. Roger joined the firm in 2013 as CFO and began leading the APAC Client Group in 2022. He is a valued member of our Executive Committee, a director on several of our Boards, has been a strong supporter of several of our employee resource groups, a friend and mentor to many people and a true culture carrier within our firm. He personifies all 5 of the Janus Henderson values. On a very personal note, the successes we've seen over the past few years with Janus Henderson could not have happened without Roger. He's been an incredible feedback giver, strategic thinker and all-around partner to me. I also want to thank him for the collaboration and fun on many of our client and investor meetings, earnings calls, town halls, travels even when we missed transcontinental flights and so much more. And I and the firm owe Roger an incredible debt of gratitude. While sad to see Roger go, we're very excited for his next phase in life. Pleasingly, and demonstrating the talent we have within Janus Henderson, I'm delighted that our Head of Corporate Development and Strategy, Sukh Grewal, will become our CFO and joins our Executive Committee. Sukh joined the firm in 2022 and through each of our recent acquisitions of Tabula, NBK Capital and Victory Park Capital and partnerships with Privacore, Guardian and CNO Financial Group, he's been instrumental in helping to define and deliver our strategy to protect and grow our core, amplify our strengths and diversify where we have the right. As a reminder, as we turn the call over to the operator for questions, we're unable to comment further on the nonbinding proposal and ask that you focus questions on the business results. With that, let me now turn the call back over to the operator to take your questions.

[Operator Instructions] And our first question comes from Ken Wellington from JPMorgan.

Roger, congrats to you. We'll see if farewells for later. But maybe first, in terms of net flows, clearly seeing a nice improvement in the intermediary and institutional channels. You highlighted the products that contributed. What I'm really after is like what is the story behind the numbers? Like what's the story behind the improved gross sales? Is it possible to help us better understand how and maybe which of the initiatives seems to be translating into what we can obviously see are the better results?

Ken, thanks for the question. Look, as you pointed out, we feel pretty good about what we delivered in the quarter on flows. You're right, it's a lot of thought process to get there. If you start with the intermediary side of things, the $5.1 billion of flows in the third quarter were certainly positive. We -- again, as we said in the prepared remarks, we want to make sure that people don't expect that to continue at that pace consistently. You've seen some of the public ETF data. But the whys are actually coming into play. The whys are actually certainly helping. And on the intermediary side, we've done many things, right? One is we've made sure that we have the right people in the right places. We've then made sure that we actually pay them the right way, incentivize them to grow and get new products on shelves and make sure they're the right products for the end client. We then are making sure that we have the right product. Now that comes in 2 flavors. One is ensuring that the performance is right. You'll see that our performance continues to be solid and versus several years ago, has certainly improved on average. And also make sure that the right wrappers, whether they be ETFs or CIPs or mutual funds, which we still are big believers in or SMAs or other wrappers as well, to make sure the product is right. And of course, then we want to make sure that we're calling the right people and are productive about it. So we're using a lot of data, including some newer technologies to make sure that folks are targeting the right people. So you put all that stuff together to your question, it's not just the outputs, but the inputs and wise. We feel pretty comfortable that we're on the right track. And obviously, in the U.S., that certainly started to show. This is our, I think, ninth consecutive quarter of positive flows, and it's starting to show outside of the U.S. as we transport that thought process on the intermediary side. On the institutional side, the $3.1 billion of flows this quarter marked the fourth consecutive quarter of positive flows. Gross sales were the best results we've had in something like 2 years. We're going to continue to build on that momentum. Again, there, too, I think we depleted some of our future pipeline and what happened this quarter. But still, the whys are a lot of the same, as I talked about on the intermediary side, around product, around vehicle, et cetera. But very importantly, it's also building relationships with our clients that are more than just transactional relationships. That's true in intermediary, but it's even more true in institutional, where we focus on building more nodes of connectivity between the firms. It might not just be delivering investment performance. It's also delivering ourselves, what we know about technology, what we know about AI, what we know about regulatory environments. And that's also part and parcel. You may have seen this to our brand campaign that's out there that is resonating. Again, both for intermediary and institutional, which is this Ampersand, right? This Ampersand is the symbolism of how we work with our clients. It's this together concept of Janus Henderson that our clients told us we were special about. So it's together, this Ampersand, it's their goals and our solutions. It's their problems and our hopes to deliver solutions for their problems. So it's all of those things together. It's not just one thing. It's never just one thing. As you know, there's no silver bullet, but we're certainly pulling all this together and hoping to continue to build over time, not overnight. I'm not sure we're there yet. We're not firing all cylinders, but over time, a very sustainable growth for us on a consistent basis.

Okay. And I'm always looking for the silver bullet. So -- and just in terms of product performance, it generally looks very good, have seen some deterioration in equities. Can you talk about the themes you're seeing in the equity franchise that are impacting performance?

Okay. Let me pick up on that first. I think you're right. The 1-year performance in equity is a little lower, but it's -- the longer-term time periods remain really solid, at least 50% ahead of benchmark. And against competition, the figures are even better with over 80% over 3 and 10 years ahead of competition or top 2 Morningstar quartiles. As you say, it's very concentrated. The move in Q3 over Q2 is really due to U.S. concentrated growth and U.S. research moving below benchmark over 1 year. I think really importantly, that is really to do with a poor Q4 last year. Our year-to-date performance is strong. Both of those are ahead of benchmark over year-to-date. Overall, equity is 63% ahead of benchmark year-to-date at the end of September. So it's a short-term number with, as you say, some really tricky markets that our excellent investors are working through, which again, I think, continues to be where active management is important. It is essential for client portfolios, 350 investment professionals and intensely focused on delivering between good and bad, as we always say, separating the week from the chat. That is a tough market at the moment, and you will get short-term blips, but it's that long-term performance, which is really critical to what clients look at. And then we're really proud of the reinvestment performance that we've got.

The next question comes from Bill Katz at TD Cowen.

I apologize for my voice. So maybe first question is a 2-parter. I was wondering if you could comment about the ability to drive expenses and growth in the business and what hurdles you face as a public company? And then within that, I'm curious with the Aladdin opportunity, how do we think about the incremental leverage into '28 relative to the spend in '26 and '27?

Bill, thanks for the question. So first on the first one, look, we're clearly investing in the business to our guidance for this year of high single-digit growth, high single percentage growth in non-comp. We're seeing opportunities to invest. And as we see opportunities to invest, we constantly look at ROI. We look at where we invest, what's the return on that investment. I mentioned marketing spend and branding a second ago. I mentioned some of the investments we made in our people from a compensation and growth driving perspective. We constantly look at ROI. Roger is great at that. And so we look at where we get the benefit out of it. We think we can continue to do that and get good ROI, which is why we continue to spend more. Again, not peanut butter, not blanket, but in particular areas, we found that we can deliver value and value for our clients leads to growth. On your Aladdin question, as we mentioned, we'll give you more detail on the next quarterly call. We expect the short-term costs, as we said, to go up by about 1% of our overall expense base for 2026 and 2027. And then after that, we would tend to see some benefits. It's early days to know exactly what that is, but certainly, we'd like to see some benefits. And we're doing it, yes, for cost benefits, sure, but also really, really importantly because we think we can deliver better for our investors. We think we can deliver better for our funds, our mutual fund trustees and mutual fund shareholders, which are very important to us. We believe we can deliver better to our clients more broadly. And so we're doing it for all sorts of reasons. For us, this was the right match to work with Aladdin, may not be for everybody. For us, that was the right match.

Okay. And just as a follow-up, maybe on capital priorities from here. Balance sheet is in great shape. You bought back a lot of stock in the quarter. A, does the offer from Trian take you out of the market temporarily? And b, more broadly, how are you thinking about capital return from here? Maybe if you could comment on where you stand on the M&A pipeline.

So let me pick up on that, Bill. Yes, so I guess the short answer is nothing changes. Our current expectation is we'll complete the full $200 million buyback by the Annual General Meeting of next year. In the third quarter, we bought another $67 million worth of stocks, 1.5 million shares. Cumulatively since we started the buyback in 2018, we've now bought back 23% of the stock, and that consistency is something we've talked about. We've got $83 million of the buyback outstanding. And we have an ongoing 10b5-1 plan that's in place, which is unaffected by Monday's nonbinding acquisition proposal. Ali, I'll pass back to you on M&A. But again, as we said, our capital philosophy remains completely unchanged and has been for a very long time that we will invest in the business but return cash to shareholders where we don't have an immediate need or near immediate need for that. Again, in terms of individual items, Ali?

Well, just we have the flexibility, obviously, to continue to do M&A and invest back in the business organically and return cash to shareholders. So we're in a privileged position.

The next question comes from Craig Siegenthaler from Bank of America.

And Roger, best wishes for your retirement. Our question is on Victory Park. There's so many positive levers currently between Guardian Life, the CNO partnership and even capital raising at Private Core and probably a few that I'm actually missing. So how has Victory Park's AUM grown since the deal closed? And then how do you think about future growth of Victory Park over the next few years?

Craig, thanks for the question. We are very pleased with the Victory Park Capital acquisition. Just to take a step back, as you might remember, we targeted 3 areas from a private perspective that we wanted to go after. One of them was the democratization of alternatives into the wealth channel, and that's how we stood up. To your point, Privacore. We have a team that is doing extraordinarily well and driving flows appropriately from the wealth channel into the appropriate products from GPs. They're on 5 different platforms or wirehouses right now and with product in the marketplace. And so that's one piece of the puzzle for us to get wealth more exposed into the opportunities in the alternatives landscape. And that certainly includes some element of Victory Park Capital. As I mentioned, one of the proprietary products Privacore is delivering is with Victory Park Capital in that wealth channel. So that's one element. The second element is in private credit. But private credit in the U.S. from a direct lending perspective, we thought was rather oversaturated at this point. There may be opportunities in the future, but at this point, direct lending in the U.S. was not a place we wanted to go. So we certainly want to focus on outside the U.S. direct lending and in particular, the MENA private credit business that we brought on board, which has done extraordinarily well. I was just out in the Middle East a couple of weeks ago now, and the interest is very, very high for our product because they are a group of folks who've been doing this for basically 2 decades and have been able to show very, very good results. That's why we did our first close on this, probably $300 million total Fund IV for them and first one for Janus Henderson, but Fund IV for the team -- and the close, I think, certainly suggested that there's more to come in that piece of the business. So that's the non-U.S. private credit. And then to your point, not direct lending in the U.S., but we're certainly looking at asset-backed in the U.S. and globally, and that's where we come across Victory Park Capital. Victory Park Capital is a firm where the culture fits Janus Henderson, i.e., client-focused, i.e. growth-oriented, i.e. deep, deep research with deep diligence on the companies that they lend to and a lot of history with them. And we thought they were the best of the bunch. And so we did bring them on board. And to answer your question, if you note, out of the 21 products that delivered more than $100 million of flows this quarter, they have been one of them. And so they're mid-rise right now. I can't comment too much about the full raise. But if you think about that, which does not include CNO, right, which comes in, in likely Q4 here or has come in, in Q4. I do think that, to your point, we think there's enormous opportunity for Park Capital, not just in Privacore, but more broadly, especially with the insurance relationships. And the insurance relationship we have with Guardian is going fantastically well. And with CNO as well, we feel that it's another firm that we had really a culture match, really thoughtful, deep thinking, great management team, great people. And so partnering with them also makes a ton of sense. So I think you're right to suggest that there's a lot of opportunity here. We have to make the right moves and step by step, we'll get there. Again, this is one of those not overnight things, but over time, perhaps we'll get there.

Thanks, Ali. Just for our follow-up on investing. So year-to-date expenses have grown by 20% over the last 2 years, and that really doesn't account for CapEx either. So we're curious, do you feel your ability to invest has been constrained by being public balancing both growth objectives with the desire to show operating leverage.

Again, thanks for the question. We're investing where we see that there's ROIs. And so we'll continue to do that. You've clearly seen that in our numbers. You're right, we're investing in the business, and we're getting return off of it. When we stop getting a return, we'll stop. Don't forget that a lot of that operating cost growth is due to the M&A that we brought on board, again, a different type of investment, but investment nonetheless in growth and most importantly, delivering for our clients a broader suite of high-caliber investment products and client service.

The next question comes from Patrick Davitt from Autonomous.

First question, we saw some big credit wobbles in the bank loan market in October. And clearly, you mentioned that had an immediate impact on bank loan and CLO fund flows. At a high level, I'm just curious how your bank loan and CLO teams are reacting to those specific issues, how they're scrubbing the portfolio and to what extent those issues are having any impact on your discussions with the distributors of those products for you?

Patrick, thanks for the question. So exactly as you described it, the wobbles are precisely why active asset management, particularly in fixed income is so critical across the board, particularly in fixed income. You mentioned there are a couple of companies that wobbles out there. I mean, Tricolor First Brands are the ones that hit everybody's radar screens. And without active asset management, perhaps one would have been index exposed to those names. And we, in fact, were significantly below index exposed, some areas not at all exposed to those businesses. So we very much espouse active asset management. We select based on criteria and understanding the companies underlying. And we certainly think that in any world, separating the wheat from the chat, which we do and 350 people at our firm do every day, including fixed income folks, is very important. Now remember also how we operate. We operate in the CLO world disproportionately. If you think about our securitized franchise and think about the 5 ETFs that we have that are over $1 billion, the largest one is the AAA CLOs. And just to remind folks about the construct of those, the CLO exposure generally, no matter what grade it is, the CLO exposure generally has better cash flow protections to it. And if you're in the AAA CLOs, if you're going to get hit, that basically means something like 70% or 75% of the loan portfolio in its entirety would have to default for you get impacted. So it's actually a relatively safe area. Now again, back in April, we saw some stresses in the market, obviously. And what we found also is JAAA, JBBB, given their size, given their competitive advantage in terms of the moat that they've built, sort of became the price discovery method for AAA and BBB CLOs overall. And at that time -- and again, at this time, nothing in our price action nothing in our spread moves suggests that there is any feeling of contagion or sense of contagion in the marketplace. So again, active asset management, Patrick, to your core answer to your question, active asset management is why we've been able to do well in this environment and an environment going forward, hopefully.

And any sense that the distributors are more or less concerned in distributing the product because of what's going on in the broader bank loan market?

We're not hearing anything to be fair. I mean you see the public ETF numbers, but I'm not hearing anything different at this point.

I think Patrick, all volatility is different. Again, as Ali said, in March and April, we had a dip there with some outflows in the CLO ETFs. But from May all the way through the summer through September, we had obviously very, very strong inflows. So again, everything is different, but short-term volatility. And as Ali said, with the sort of -- we are the market in these things, so you'd expect to see some price discovery.

Next question comes from Brennan Hawken from BMO.

Very much, Ali, I appreciate the comments about being limited in what you can say on the bid. But I had some questions that are more process, not really about opining on the offer. I was hoping you could maybe walk us through the special committee's process and time line. How will updates be communicated as you progress and whether or not there's been any interest expressed by strategic buyers now that Janus is formally in play?

Thanks for your question. I really appreciate it. From a process perspective, as best as I can tell, what I've been told is that the special committee will be going through a process over months, not weeks. But beyond that, we aren't commenting on the proposal at this time.

Okay. Had to give it a try. All right. So your ETF progress has been great. Look, obviously, JAAA is a spread-sensitive product, right? And so when you get concerns about spreads, the flows they will oscillate. But really encouraging to see how many products you've got now above $1 billion. And specifically, you've got your first equity product, I believe, JSMD, which is approaching that threshold. Can you walk through your strategy for equity products within the active ETF construct? And what your launch plans are as you progress and widen out the suite?

Sure. Let me just -- I was going to say, well, Ali, while you're thinking about the sort of strategic answer, let me just make sure that, again, everyone's got the grounded facts. Yes, you're right. We're now operating a pretty sizable ETF franchise. It's about $40 billion as of the end of September. That's 8%. That will be up from -- I don't have the number in front of me, but something like 2% or 3% a couple of years ago. Net flows into ETFs in the third quarter were $5.7 billion. And yes, the largest of those was JAAA in the high 3s. But JMBS, securitized income, JBBB, you're right, SMidCap growth, short duration were all in the hundreds of millions of dollars of flows. So we're seeing some real diversification of flow behind JAAA, which is now a $25-plus billion product.

And just to add to that, look, our philosophy is relatively simple and pretty consistent. We do things in a client-led way. What we believe our core competency is investing in the right companies, delivering investable -- good investment performance for folks with differentiated insights, disciplined investments and delivering world-class service. We're happy to put in different packaging if clients want that different packaging. For example, we put in ETFs. We put it in CITs, we put in SMAs to deliver on what our clients want. But to be very, very clear, we're not believers in cloning. We don't think that makes sense. The products that we currently have in mutual funds are in mutual funds for a reason. There are some real benefits of being in mutual funds in terms of the accessibility, for example, that people can get mutual funds in. So cloning it doesn't really make sense because it's not necessarily client-led needs. We haven't heard of our clients at least, maybe for others, but our clients at least saying, "Hey, let's turn these things into ETFs necessarily. But for some areas, exactly as Roger described it, some of those businesses like JSMD, JSML as well as some of the more exciting ones that we launched just very, very recently, JHAI, which is an AI ETF it's not just the kind of high flyer ETF. It's a really thoughtful longer-term place to take advantage of AI shifts more broadly, so picks and shovels and everything else that we think from a longer-term perspective will benefit JXX in the U.S. and JTXX in Europe, again, based on the UCIT platform there. Those are transformational businesses that we invest in, in a very concentrated manner in delivering ETF form. Again, we are client-led in the way we develop our products, and they can take many, many different forms. ETF certainly is one of them that seems to be for the right investment strategy for the right client, the packaging that people are preferential to at this point.

[Operator Instructions] Final question. This will come from the line of Michael Cyprys from Morgan Stanley.

Just Ali, you're making investments across the business to drive growth. Curious how you would characterize the level of speed at which you're investing in the business versus, say, a year ago? And how do you see that evolving into '26? Does that stay at a similar pace? -- might that accelerate? How do you think about that?

Yes, Michael, thank you very much for the question. It's a really insightful question actually because what typically happens, and I think we're there now, is that at the start of a kind of new strategy, which we started, call it, 3 years ago, almost to your point, you invest a little bit and you wait for the reaction, right? It's kind of like a scientific method, right? You have a hypothesis, you try it, you see what happens and you get the response and then you kind of add more fuel to the fire or not, right? And when we started off the strategy, we had spread out a little bit, I guess, of where we're investing because we didn't really know what would hit, what would hit. We didn't know how the clients would respond, et cetera. And so now we're in the process effectively of culling and focusing, for lack of a better word. And so you look at your overall expenses, you look at where they're going, you look at what the returns are from a growth perspective or other elements, right? Risk mitigation could be an element, future cost savings is an element, et cetera, and you readjust. And so you can do that on a micro level on a day-to-day basis, but you certainly have to look at it from a broader basis as well. And that's the stage we're at right now, which is not so much from a quantum perspective, but from where we're going to invest a much more focused look. So it's a very good question, Michael. And I think you're right, we're at this point where we have now some experience. We have now some data. We know what's responding or not, and we can kind of focus in and hopefully get some ROI out of the business in particular areas and not kind of get lower ROIs in other areas. Hopefully, that helps.

Great. And then just as a follow-up question. When you're thinking about the investments you're making in the business, how long of the list of items that do not make the cut to get funded, don't get funded in maybe the manner that you'd like? What's the rationale for why those don't get funded? If you had more resources, might those be able to be funded? Or imagine at some point, organizational capacity bandwidth comes into play? I guess how close are you running into that organizational capacity constraint?

Roger can chime in on this. I think -- look, I think we are spending in the right areas and seeing the results come through. So to your earlier question, you're right. Some of the areas we just are unable to spend more, like we can't launch 100 products, right? Maybe we can, but we can't launch 1,000 products, right? We can only launch a few of them. So there's some organizational capacity there. By the way, some of that is why we're looking at Aladdin as an underlying tool to be able to allow us to get more capacity on things. That's why we're, as I've talked before, using technology more broadly to help us do things more efficiently. I mentioned the RFPs, for example, RFPs have gone up about 100% since a couple of years ago, and we haven't added more costs there because we're using technology to help us out. So we're trying to find ways and we are finding ways to do that. I couldn't tell you how long the list is. I mean, as you can imagine, an organization our size, everybody wants something, but we're always focused on the ROI of it. So I think we're being pretty disciplined and spending in the right ways.

Yes, I think that's quite right, Ali. I'm not the most popular guy around here because we are pretty strict on ROIs. And there are -- pleasingly, there is more demand than supply. But as you -- exactly as you said, Mike, that is 2 things. It is both money and it is the ability to do things. So prioritizing things and prioritizing some things are independent, some things are interrelated. So you really need to understand those things in order to be able to say, yes, we can do this one or we have to go a bit slower with this one because we're doing something else. So that combination of capacity and cost is really critical to look at, but we are very disciplined in that.

With this, I'll now hand back to Ali Dibadj for any concluding comments.

Okay. Thanks, Adam. Thank you all for joining the call today. I know it's a busy day. I think this quarter continues to show our momentum step by step, not overnight, but we are building towards sustainable growth. And that's thanks to our IT, ops, legal, finance, people, risk and compliance and other support functions. It's thanks to our world-class 500-plus client service teams. Thanks to our outstanding group of 350-plus investment managers. And to all of them, thank you, and let's continue to finish the year strongly on behalf of our clients, our shareholders and our other stakeholders. Thanks, everybody.