Q2 2021 Janus Henderson Group PLC Earnings Call
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Good day.
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And then.
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Good morning, My name is Andrew and I will be your conference facilitator today. Thank you for standing by and welcome to the Janus Henderson Group second quarter 'twenty 'twenty..1 results briefing all lines have been placed on mute to prevent any background noise.
For the speakers remarks, there will be a question.
And the answer to your period and the interest of time questions will be limited to 1 initial and 1 follow up question.
If you require operator assistance. Please press Star then zero.
And today's conference call certain matters discussed may constitute forward looking statements actual results could differ materially.
And from those projected in the forward looking statements due to a number of factors, including but not limited to those described and 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 and it's my pleasure to introduce <expletive> Weil, Chief Executive Officer of Janus Henderson. Mr. Weil, you may begin your conference.
Welcome everyone to the second quarter 2021 to.
<unk> for the Janus Henderson group, and <expletive> Weil, and as usual I'm joined by our CFO Roger Thompson.
As we've said on previous calls and in line with taking the long term view of our business. We use the second quarter call to run through a more robust discussion on our business as well as our strategy.
We also include the usual updates on quarterly flow performance.
<unk> and financial results.
In line with this and today's presentation and I'd like to start with the summary.
Of our second quarter results and then I'll touch on progress, we're making towards delivery of our strategy of simple excellence and then as usual I'll hand, it over to Roger who've taken to the results with more precision and detail.
Earnings could always will follow our prepared remarks.
And with taking your questions.
Turning to slide 2.
Here's the story of our quarter as I say it for.
First investment performance and solid with 66% of our assets, beating their benchmarks over 3 years second net outflows of $2.
$5 billion is an improvement over the first quarter markets were strong and lifted our 6% to a new high of $427.6 billion.
Third our financial results. These are very strong and better than our strong prior quarter. This is mainly driven by a combination of higher markets and extremely strong performance.
And these Roger will take you through that.
Adjusted EPS was up 27% to of $1.16, compared to 91 cents a quarter ago. We.
We generated more than $260 million of cash and the second quarter and we remain committed to returning excess cash flow to our shareholders.
Okay.
<unk> for the consequence, we declared a second quarter dividend of <unk> 38 per share and today given strong earnings and cash generation. We are also announcing the board has authorized the new 200 million dollar accretive share buyback, which we expect to complete by April 2020 to.
Looking.
A bit deeper at the net flow result, let me call out of some positive underlying trends to highlight.
The first net flows and our intermediary channel were flat with positive flows and EMEA and Latam and Asia Pacific regions. This was offset by U S intermediate outflows, particularly of mid and smid cap growth equities from our.
And our team in Denver, which has experienced some pockets of underperformance that we've talked about and recent quarters.
Second looking at institutional we're continuing to win business from across the very diversified list of strategies reinforcing the breadth of our investment capabilities.
Non equities remains challenged.
The next as I've told you in prior quarters, our path to organic growth starts with net flows going positive outside of our quant equity business, we're aiming for consistent growth, which we achieved and the fourth quarter last year, but in the first and second quarter of this year, we've fallen short.
And thats not okay with us however, the underlying trends and the pipeline.
<unk> and make us confident that we have a good chance to deliver our goal of more consistent positive flows outside of the quant equity and the second half of the year.
Turning to slide 3 we continued to make significant progress executing our strategy across the first for planks that you can see on this page for example, with.
And need to hire excellent talent and strengthen our already first class teams last week, we announced the appointment of James Lowery, who will be joining our executive committee and a newly created role of global COO.
This will help us strengthen our leadership team and he'll contribute on.
And building the infrastructure as well as firm wide leadership and hopefully <unk>.
We can see.
We've also continued to significantly enhance our risk and control environment moving towards our best in class approach and importantly, this has been evidenced by lower regulatory capital requirements, which are assisting us and delivering this further return of capital to shareholders, we have announced today.
Strategies looking ahead, we remain fully focused on the first for planks of our strategy, which remain key to strengthening and running our day to day business and ultimately delivering organic growth.
With progress in those first for clients, we're now able to develop new growth initiatives.
Greater energy and focus and this is going to include some additional investment over time, both organically and potentially inorganically as well.
Turning to slide for <unk>.
We lay out the 5 areas on this slide that are in focus for us as we think about.
And our growth initiatives.
And within those areas, let me call your attention to some of the recent highlights.
And Etfs, we have a small but successful franchise, particularly and active fixed income etfs, such as our short duration and vanilla and our mortgage backed securities Jay MBS Etfs.
The first half of 2021 marked the 10th consecutive half of positive net flows and our active Etfs.
We have and innovative pipeline of products such as the AAA CLO ETF J AAA, which we launched at the back end of last year and June we launched the U S real estate ETF jre.
But for the natural extension of our existing U S real estate equity strategy.
We also filed a preliminary registration statement with the SEC for 5 sustainable active Etfs for investors and the U S, which we expect and hope to launch in September.
This includes 3 equity and to fixed income.
Which enable active etfs.
Again, if approvals are granted we expect to be the only firm of.
Offering active sustainable Etfs, including both equities and fixed income and the U S.
Turning to ESG.
I just mentioned some of the sustainable investing.
And so states, we're developing and you should expect to see more ESG focused product launches in the coming quarters, including in Australia.
We have already and excellent track record and our dedicated sustainable equity strategy. For example, our global sustainable equity strategy of celebrating its 30 year anniversary next month and it's ranked in the top.
<unk> proud of star decile over both 3 and 5 years.
We have a strong background and ESG, while we recognize there is an awful lot more work to be done. We're excited about where we are and our growth phase and ESG, we're making investments and our central ESG support available to investment teams growing from for people to a team of 15.
We are also building of cloud based approach to ESG data management, ensuring delivery of consistent central data standard to support all of our front office applications.
We're also targeting more than half of our Luxembourg Domiciled fund range.
By the AUM to be and article 8 or 9.
<unk> designation by January 2020 to under the EU sustainable finance disclosure regulation.
As you can see we're making great progress and ESG.
Finally in Asia, we have recently further strengthened our leadership and Japan. This is really important to US earlier this year, we welcomed <unk>.
As we've talked about before a very senior Daiichi executive and he is now chairman of our Japanese business last week, we also announced the appointment of tomo and <unk> kind of motto who's our new head of distribution and Japan.
We think these to leaders have the chance to really energize and strengthen our efforts in Japan.
And along with the continued excellent support from our partners that Daiichi life.
Before handing it over to Roger let me briefly wrap up.
We continue to focus on excellence and growth and our business. We're confident that we're on the right path and that simple excellence is working to deliver a stronger.
<unk> organically growing more profitable and more resilient business, but we have an awful lot of work left to do let me now turn it over to Roger to take you through the results with some more precision.
Yes.
Thanks, Nick and thank you everyone for joining us turning to slide 6.
Investment performance remains solid with around.
And 2 thirds of the firm wide assets, beating their respective benchmarks on the 1.3 and 5 year basis as of the FERC for June.
Relative performance compared to peers reflects 33, 67% to 55% of AUM represented of the top tier of Morningstar quartile on of 1.3 and 5 year basis.
As called out from the bullets at the.
Page, 42% and 41% of our AUM is in the first Morningstar quartile on of 3 and 5 year basis.
And these longer term metrics tend to be the better indicators for flows.
Now turning to total company flows on slide 7 for the quarter net outflows improved to $2.5 billion from.
Top of the <unk> 3 billion and last quarter.
The outflows mouth, some good underlying trends that we're seeing and the business, which I'll talk about on the next few slides.
Slide 8 shows the breakdown of flows in the course of by client site.
Net inflows for the intermediary channel were flat.
By region intermediary flows of positive.
<unk> and EMEA, Latin America, and Asia Pacific and these were offset by outflows in the U S.
And looking closer at the regions for EMEA and Asia Pacific second quarter flows reflect and annualized organic growth rate of 6% and 11%, respectively and Mount the fifth.
And for executive quarter of positive flows and each region with momentum carrying into Q3.
Within EMEA and Continental Europe saw a $1 billion of net flows and the second quarter equating to a 17% growth rate.
It's important to note that the management fee rate and the EMEA.
Latin America, and Asia intermediary business is higher than the other areas of the business and these flows of contributing to our strength and net management fee rates for I'll talk about and more detail later.
And U S intermediary and we're seeing a diverse set of products and inflows, including multi sector income.
Contrarian and developed world bond offset by the impact of the performance challenges and our smid and mid cap growth strategies.
Moving to institutional.
And we sold $1.8 billion of of outflows and the second quarter, which was primarily driven by quantitative equity outflows masking.
Paula, but significantly higher fee wins.
As we've said previously concert of equity flows will take longer to heal, but elsewhere and we're encouraged by the progress being made and globalizing the institutional team and the solid diversified pipeline.
Finally, net outflows for the self directed channel, which includes direct and supermarket.
From Smith with $700 million and the quarter.
Moving to slide 9 and the breakdown of flows and the quarter by capability.
Equity net outflows in the quarter of $1.9 billion.
The quarterly outflows were driven primarily in the U S for the small and mid cap U S growth as well as the liquidation of certain.
Market and value strategies managed by the change of cargoes that we talked about from the prior quarter.
Outside of the U S equity flow to slightly positive driven by European equities and global real estate.
Floating to fixed income of negative 100 millions of dollars in the quarter compared to a positive $400 million of the prior quarter.
Of the overall result of negative this quarter, we continued to see positive flows and retail across a wide range of strategies, including multi sector income global strategic fixed income U S volume maintain credit and tactical fixed income and Australia.
And the inflows from multi asset with $500 million driven by the continued inflows into the balanced strategy.
<unk> across North America, EMEA and Asia Pacific.
Constitute the equity outflows and the second quarter for $1.3 billion.
Finally, alternative inflows were $300 million compared to $900 million of outflows and the prior quarter the.
Inflows were primarily driven by of the absolute return strategy.
Strategy and and our multi strategy products, which is 1 of our hedge funds, which is stay and momentum in several geographies.
It's really pleasing to see the positive flows and a higher fee alternatives business, which shows the and other benefits of our diversified product set.
Slide 10 is our standard presentation of the U S GAAP.
Of income.
Moving to slide 11 for a look at the summary financial results.
As you can see on the slide our financial results of extremely good with metrics up strongly quarter over quarter and year over year.
The second quarter results reflect strong seasonal performance fees and higher average assets.
Statements average AUM and the second quarter increased 4% compared to the prior quarter and 30% from the same period, a year ago, primarily from market guidance.
Total adjusted revenues increased 17% compared to the prior quarter, mostly due to higher average assets seasonal performance fees and a further improvements to our net management.
Adjusted operating income and the second quarter of $269 million was up 34% from the prior quarter and 95% from the same period a year ago.
Second quarter adjusted operating margin was 44, 6%.
To 39% from the prior quarter, and 33, and 5% a year ago.
And lastly, adjusted diluted EPS was $1.16 for the quarter compared to <unk> 91 for the prior quarter and 67, a year ago, representing a 73% increase year on year.
Before moving on I wanted to clarify the difference this quarter between the U S GAAP and adjusted diluted EPS there were 2 non.
Non cash items behind the difference.
First our proposal to increase U K Corporation tax to 25% to 19% of effect from the first of April 2023 was enacted and this requires the deferred tax liabilities to be re measured at the 25% rate.
We recognized an income tax expense of 30.
And $1 million related to this re measurement.
And secondly, we recognized of $40.8 million impairment on intangible assets related to certain investment management contracts.
Turning to slide 12, which outlines the revenue drivers for the quarter.
The biggest drivers of the quarterly change.
Range and adjusted revenue for higher average assets strong seasonal performance fees, and an increase and net management fee margin.
Net management fee margin for the second quarter was 47, 1 basis points, which is up from 46.8 basis points from the prior quarter and up from $45.7 basis points.
To go this marks the seventh straight quarter of high net management fee margin.
The increase and the margin is due to both positive markets and changes and the underlying asset mix. We continue to be focused on high quality assets, and that's showing up and the fee rate.
Inflows of coming into the higher fee margin.
In areas, such as the EMEA and Asia Pacific and Dmitry.
Multi strategy products that I've just talked about.
And I was outflows being and relatively lower fee margin areas, including quantity of equities.
Performance fees for the quarter was $77 million versus.
First of $17 million and.
A year of our quarter and a year ago.
Given the exceptional second quarter performance fee result, and the day.
Diversified mix of funds, which of deliberate I wanted to give you a little bit more insight into what drove this and I'll take that on slide 13.
Performance fees from the CCAR range and the second quarter were $50 million.
Both of the compared to 12 million and the first quarter and $9 million a year ago.
The increase compared to the first quarter was the result of second quarter seasonality as of pickups pay annual performance fees and June and Additionally, this reflects strong performance and the absolute return strategy, which has the quarterly measurement period and payouts.
Second.
Due to fulfillment space and the U K <unk> and unit trusts were $15 million compared to $4 million and the first quarter driven by strong performance and the absolute return fund.
Third performance fees and U K investment trusts during the quarter was $13 million compared to zero and the first quarter.
And again this was driven by seasonality from trusted per annual performance fees and the second quarter. The trust, earning performance fees of the smaller companies and European growth investment trusts.
U S. Mutual fund performance fees were negative 3 million of the quarter compared to negative 4 million and in the last quarter.
Finally, I want.
The the absolute return strategy has already or will the switching from a quarterly measurement period to an annual measurement period in line of regulation.
And the UK oil switched that occurred on the first of June with the last quarterly payout and May the seed capital payout, if and when more quarterly fee and the third quarter and.
And the point of which to an annual measurement and starting in the first of October.
And the appendix, we've provided updated AUM eligible to earn the performance for you by quarter.
It reflects this change and are happy to talk to you through that offline.
Turning to operating expenses on slide 14.
Adjusted operating expenses and the second quarter with 330.
And will the insulin which is up 6% from the prior quarter.
Adjusted employee compensation, which includes fixed and variable costs was up 10% compared to prior quarter, primarily as a result of higher variable compensation on higher profits.
Adjusted LTI was down 7% from the first quarter largely due to payroll.
Taxes on annual vesting in Q1.
The second quarter adjusted comp to revenue ratio was 41%.
For the first half of 2021, the ratio was 43% and for the full year, we still anticipate the range of 40% to 42%.
And for non comp operating expenses were 6% higher compared to the prior quarter, primarily from higher G&A for 2021, the expectation of non comp operating expense growth of mid single digits remains unchanged and finally, our recurring effective tax rate for the second quarter was 22, 4%.
Turning to slide 15, which is and the Codell liquidity cash.
Cash and cash equivalents for $965 million as of processes of June and increase of $141 million, resulting from the strong cash flow generation from the profit we just mentioned.
As a reminder, we now exclude cash and investments related to <unk> and VR.
The hours from the slide is the more accurately reflects our 3 liquidity and also aligns with how we discuss our liquidity and capital resources in the MD&A section of our 10-Q and 10-K filings.
During the second quarter, we paid approximately $65 million and dividends to shareholders and declared of 38 cents.
<unk> per share dividend to be played on the 25th of August to shareholders of record as of the 19th of August.
Finally, as <unk> previously mentioned with a strong balance sheet significant cash flow generation and reduced regulatory capital requirements. The board has authorized for $200 million buyback, which is expected to be completed by.
The next AGM in April 2020 to.
The $230 million buyback to completed and the first quarter, the quarterly dividend, including a 6% increase announced last quarter and the additional $200 million of buyback that we've announced today demonstrates our commitment of returning excess cash to shareholders.
I'd like to turn it back out of it to the operator for Q&A.
We will now begin the question and answer session.
To ask a question you May press Star then 1 on your telephone keypad.
If you were using the speaker phone.
Please pickup your handset before pressing the <unk>.
If at any time to your question has been addressed and you would like to withdraw your question. Please press Star then to.
And the interest of time questions will be limited to 1 initial and 1 follow up question.
At this time, we will pause momentarily to assemble our roster.
The first.
First question comes from Dan Fannon with Jefferies. Please go ahead.
Thanks, and good morning.
You both mentioned the diversified most of the strategies that are taking inflows on the institutional side and I think you mentioned the solid pipeline. So just hoping to get a little more color either at the fund level or.
And maybe sizing some of that so we can think about some context.
Hey, Dan it's Roger.
Let me try and answer that.
It's the mix as we say and it's off to a mix of a continuation of the things. We've just called out so some smaller fundings and higher fee areas. So.
I think we've talked previously about the the expectations and hopes we had and multi strat is an important area.
And with the we've seen some wins and that and expect to see continuation there and thats a good high fee product.
The on the on the other end of the basketball Bell if you like we've.
Got some good opportunities for winning some big of fee.
And the bigger AUM.
And from the lower fee product as well. So this is the should be a good mix. Both in terms of salaries, we expect to come through but the most important thing for US is obviously the growth in revenue and <unk>.
And profit.
The mix of.
Coming in and fixed income continuation of flows in and.
And equity in different areas.
And in areas like multi strength gives us confidence to both growth and and.
Sustained.
The management fee rate.
Great and then.
Follow up to the.
Focus areas of growth and spy.
The segments that you highlighted you mentioned organic and inorganic and some of the things that are already happening. So could you maybe alternative seems like an area, where inorganic might be a potential opportunity and could you talk about.
Your appetite for.
M&A and this backdrop and maybe within the context of these segments where.
And it might make more sense.
Yes, so we first think about organic and these areas and I think we're doing a good job of of adding alternatives, adding to our alternative.
Suite with the organic efforts extending some of the strategies like our like our health care life Science strategy and the U S.
And and adding.
The versions of that strategy that focus on the less liquid and of the spectrum and.
Push us a bit more into the alternative space.
Turning to the base, we already have and that makes a lot of sense for us.
And we're looking for opportunities to do that both in equities and in fixed income.
As you do that you also look in the marketplace and take a look at the inorganic opportunities that are out there but like.
Always when we talk about inorganic.
From these.
It's hard to find the culture match, it's hard to find compensation that fits it's hard to find people who want to be part.
Of the organizations to pose to be and their own little.
The self directed area and so finding finding the right fit.
And the non trivial exercise it's difficult.
And for 10, and especially difficult.
Probably and alternatives. These days with very high prices for a lot of different parts of that business. So.
We're actively looking at opportunities both organic and inorganic we very much intend to grow.
Our presence and alternatives will push more.
And just into liquid alternatives will also have some more less liquid elements.
But those will be smaller and.
That's how we're looking at it I don't think I can be more.
More specific and that.
Great. Thank you.
More of the next question comes from Ed Henning with CLSA. Please go ahead.
Hi, Thanks for taking my questions.
2 questions also just from the areas of growth can.
Can you just run through how you're measuring success here and have leased and thinking about the key milestone.
And then also just within that if you look at the opportunities. The highlighted what do you think is the biggest near term opportunity and then also what's the biggest medium term opportunity for it.
Okay.
Well, thanks, and taking the second part first the biggest near term opportunities clearly.
We're most active and launching new products is I think Roger mentioned in his comments, we filed the registration statement for 5 new Etfs and the U S. We're looking at additional things, we can do down in Australia.
And so Etfs I think probably.
And the near term.
1 area that we're very active we've talked.
To that what we're pushing for.
And where it already with and alternatives that continues to be asked to.
And ESG, we're putting an awful lot of effort to.
Taking the right steps forward to see what.
Include strengthening the approach across the whole firm, but include the adding new products and includes.
Focus on.
The product.
Our.
The equity product and Europe focused on ESG is coming up on its 30 adhere first right and to remarkably excellent effort and so we've got things happening across the board.
But Mike the farmer, you need to plan for different seasons, and so you wanted to do things that are paying.
Today, and you want to do some things that are that our plans today and hopefully.
Tomorrow, and the medium and none and the long term. So we are trying to act across the timeframe supposed to do things better and more immediate but also things of that lay the foundation for future success.
I think on the measurement side Ed.
There is nothing super clever about that for us.
And thing for Us and we've talked about is about growing our business and.
And we've talked about how we get there.
So, yes, it's flow, but for us its really its revenue growth.
Some of the profit.
Growth. So we look at all of the areas we're investing in.
Are they delivering what we wanted them to do things around at different speeds of fixed just said.
Some things you need to any of the cloud seats, naphthyl and and nurture those.
But ultimately it's about the delivery of flow leading to revenue and profit.
Okay. Thanks.
Just to just to close on that I'm, sorry to go back and towards non EBIT.
These areas are areas, where we're looking at additional investment the great thing about having the strong financial results that we're having as it enabled us to to make the appropriate investments in delivering.
And growth so and each of these areas, we're taking a hard look at organic and inorganic opportunities and we know we have the capability to make some additional investment and our business.
Okay. That's helpful. Thank you.
The next question comes from Patrick Davitt.
Autonomous research.
Please go ahead.
Hey, good morning, guys.
The first question and kind of on the this idea of that you see all of these opportunities to invest and you know we've kind of gone through a pretty good period of you guys.
Being pretty.
Good at finding ways to offset.
And that investment need went with expense savings how should we think about the tenor of expense growth and through the lens of all of these investments you want to make and perhaps even without having the offset of more expense saves to kind of beyond this year.
I think you know and our core.
Surface, Patrick and and what we're doing we're always looking to be more efficient.
But theres always investments to make and we make it and we're making a lot of investments and the business on pace and to add Thats included in the and the guidance of giving them on where we're headed on.
Margin and comp ratio.
And so so.
No.
That is a constant.
The challenge to look at how we become more efficient.
To allow us to continue to make those investments of the business I guess, if you kind of if we.
If we were to go and launch something sizable or buy something sizeable obviously the expense base is going to it's going to grow but thats.
<unk> is and what the expectations of revenue and.
And revenue growth over time so.
They would change that they would change the salaries of the business.
But we'd obviously be looking again.
We're constantly looking at growing the business and growing the bottom line of the business.
So I think that that's probably the best way of thinking about.
Going to come with the.
Culturally looking at trying to run a more efficient ongoing business. If we make investments you would expect those to be adding to the revenue and the bottom of the business as well.
Okay Fair enough and then and then.
1 on the performance fees. It doesn't really look like there was much of our cost.
And it for $1 of is that correct.
And so could you and if that is correct for it.
It is not correct and is there.
Kind of like of core compensation and it's much lower than what you were running out of this quarter and you can see.
You can see you can say of comp and benefits was up 10% quarter on quarter. So.
As we've talked about before.
Before we go to a relatively for me like pay out of at the top of the house.
And so obviously high and higher profit results and and.
And.
And of higher comp pool, and you can say that and the 10% increase quarter on quarter. So that's the that's that's better.
Okay.
Thank you.
The next question comes from Luiz.
The others with Chardan. Please go ahead.
Hi, Thank you for taking my questions I do have to.
And lastly, our it seems.
Totally evident that you really started the thing on HG.
And heavily investing on.
And that strategy I find it to be a little bit at odds with some of the commentary loss results, where it seemed like it would take to a more cautious approach to ESG.
And.
And change that.
And you're going into that and be more aggressively and then my second question.
And it's to tax.
Can you talk to me again seems to be quiet and lives.
Uh huh.
Now the fed huh.
Should we assume that used to be pulling in.
And some of maybe the bottom and if you've got it given the you know.
The tax rate so far has been sort of outside of that guidance range. Thank you.
And Roger I'll I'll take the first part from Hudson and we'd be group.
<unk> talked about the tax rate, but on ESG, Noah and apologies if you have defense, but we've changed.
The tone, we havent really intentionally done that we continue to work and develop and make progress and strengthen our approach to ESG and thats been consistent and recent quarters and we're not signaling a turning point where signaling a continuation of the path.
And that we've been on and.
So apologies, if we haven't communicated that perfectly but thats.
And that's the intent from our side and Roger on the tax.
Yeah, we were very slightly under our guidance and the quarter I think the tax rate and that's carrying tax rate of $22 for the <unk>.
<unk> 23 to 25.
Yes, we pay tax and the places where we earn profit so.
The the.
And the guidance stays the same at 23 to 25, but you're right. We've been at the lower end of that and the first half.
Yeah.
Okay. Thank you.
The next question comes from Simon Fitzgerald with other.
And and partners. Please.
The.
Are there I'm just going to.
Stick on the ESG side of things for the.
The minute.
And you called out of the sort of growth potential from that day.
Just looking to sort of forward a few years or even sort of medium term do you see this as being a fully fledged independent style and such.
Go ahead of the intake ease or do you see this as being just another sort of <unk>.
Addition to your equity strategy.
And more broadly.
Thank you Simon we're not thinking about it as the separate staying away from the rest of the firm we're thinking about it is integrated into the core of.
The firm and and a lot of it is formalized and things that people have been doing for a long time, and then gathering the appropriate data and making sure that the documentation and the evidence.
Of that is clear and Thats part of it part of it is adding new resources to meet new research to strengthen the approach.
And and.
And we're really doing both.
But we see that as part of the core franchise and part of who we are not as of.
Separate and distinct and.
And so we're not we think about it both in terms of products, but also in terms of.
Overall investment process and then also the terms.
So overall company core identity.
We want to we want to be at all of those levels at firm and investment process and to add products.
Okay. Thank you the dominating and the final question.
Okay.
I would add to that as well as you said equity, but it's actually it's and it's.
Totally across the firm.
And our fixed income business is very engaged with the ESG a quant equity business is very engaged with ESG some of them.
And our own Oh and.
Products, you'll see some of the absolute return products moving to articulate to escalate over the next couple of quarters. So again I just wanted to clarify that it's not just equity.
It's across the entire business.
Yeah. That's great. Thank you and then just final question just on the performance for the intense of the restructure and ran for the diets should we then think that the I.
I guess the.
Strongest for the seasonal pattern will be in the sort of June and.
And the feature.
So youll ask the.
The the annual performance fees from the from the first of the absolute return funds will now be in Q3.
And the annual performance fees from the CCAR version of the opposite.
Performance fees will be Q3, actually say against the should that come in and that will smooth out a little bit I guess because Q3.
And is normally our lowest quarter.
In terms of what's eligible side.
That will smooth the little bit.
And can I. Thank you.
The next question comes from Alex Blaustein with Goldman Sachs. Please go ahead.
Hi, This is actually Brian on the hospitality I was wondering if you can speak to the.
And strategic hire James Larry on the global CRM and as you mentioned.
What are your hopes for him to look at particularly given his experience at State Street Alpha and then and this is more of an aggressive <unk> to focus on investments or to focus on expenses and financing.
Hi, Brian.
And I haven't done as good of job is I should do from my seat and the uniting all of the different parts of the firm to push forward in infrastructure and data stewardship and architecture and a lot of that side of the firm and in order to be excellent and investing in order to be excellent.
And client experience.
Thanks.
We need to have.
Ourselves really aligned and tied together and executing very efficiently and those infrastructure areas and so the first.
Possibility that that our new COO will have is to take.
All of the different pieces and parts.
Of that effort and make sure.
We're being efficient and effective and aligned and urgent and how we deliver those things.
Of course, you'll also be welcome to contribute.
Broader firm leadership.
Strategy and other things as he.
And I spent time and I know, we've moved to a lot of scale and and is capable of and those areas as well but.
Initially first and foremost the job 1 will be.
Really making sure that everything we're doing all of the investments that we're making across the piece and infrastructure that.
And that we're doing that in the most effective and aligned way possible. So that we can have the strongest most simple most.
Most of the law and infrastructure to deliver.
Excellence for our clients and and our internal investors and teams.
Thank you and maybe just a quick 1 for Roger and Jim.
Wondering if you could help us to think about what was the driver of the impairment of the asset management contracts.
And just if there are any implications from that going forward.
As you probably know Ryan.
We recognize and tangibles.
And the number of different very specific places.
So.
Some things grow and something that growth faster.
Originally thought when you brought those things up you can net.
Excellent offer the balance.
And it's got better and you expected you never take the upside and.
And when things.
And when individual piece of that growth.
Is actually as you thought to.
Start with the need to look at those.
And and look at the fair value of that intangible.
1 particular area that we needed to look at.
The intangible, but the way the woman.
Is that fair value of the.
And the intangible wasn't backed up set up to our second half, but as you know thats and non cash items.
Thanks, and thank you.
The next question comes from Nigel the way the Sidney Please go ahead.
Hi, guys said just to just first of all of the question on the need of the mid cap strategies I mean, the had been underperforming for a while now and there is a big chunk of from there. So just wondering how worried are you of that but.
And the strategies.
Don't see it sort of turn and performance and.
And the feature.
All right thanks, Nigel to here.
<unk>.
And how worried are we.
And the sort of in the short term we're concerned in the short term, we see that performance isn't where we would like it to be and Thats clearly going to have.
Ex on flows and revenues, it's high to wonderful business and.
And so obviously it has the potential to cost some pain and is indeed, causing some pain, but.
These teams have been stable and strong and performed super well for <unk>.
Decades, and they're some of our absolute best.
And others and I don't mean to heap more pressure on them by saying this but.
When you look across Jonathan Coleman, and Brian domain, and the folks who are really leading and managing those products. They are as good as anybody and the world. So do we have long term.
Concerned no we don't.
We are really long term very confident.
And that in the short term.
The results have been weaker than we would like and.
And we'll just have to see what market effect that has and that certain has created some pain and will create some more but those are absolutely the best and the world and what they do and.
And that will turn out and the long run.
Okay. Thanks for that and then sorry to sort of harp on the the poor areas, but also of let's say the balance on the still looks as it fits and the slot.
Nightly lower cortisol.
And my understanding is that might have turned slightly negative recently is the is the sort of the sort of fairly relaxed about that or is that another area of the play where.
Some concern.
For the balance funded in the.
And 1 of our.
The largest growers and strongest claims and so we watch it very carefully.
And it had some softer months and then it had some stronger months.
Actually no.
And where it is as of the most recent public debt.
Maybe raj.
Roger does but no we're not we're very pleased with the transition we're pleased with the leadership we liked the process we like the manager.
It's going to move around a little bit of these things do its not an easy job to manage that fund, but we have a superb manner.
Manager and its per team and were really comp and.
And it's been.
The other is really our biggest business driver for a while now and we we.
And we don't see signs of that abating.
Roger anything you want to correct your add on that.
Well like you say.
Yes, it is strongly outperformed its benchmark.
Even over 1 year. It is I think youre right nodule is third quarter and over 1 year.
The top decile of over 3 and 5 and probably even better than the top decile over to Ted.
So it's and it's a very good place.
But.
And the very short term relative performance.
Great.
Okay. Thank you.
The next question comes from John Dunn with Evercore.
Please go ahead.
Hi, Thank you.
Since the fund launches.
Priority do you guys have kind of a rule of thumb for average number of launches per year I would guess that 5 would be at the higher and.
Average.
And I think we don't have vastly over cost of it looking at what.
And what clients to looking for what we can deliver and making sure we've got that and the right place. So we've done a lot of work over the last few years of making sure that we're fully leveraging the product set that we've.
You've already to all the capabilities that we've already got by making sure that we've got vehicles around the world. So we've been launching things like global sustainable, which originally was there any of the U K, we've been launching that around the world.
And we're just.
Think of it in his comments and I. We've just we've just filed for.
And new Etfs, having already done 1.
So we have a lot of capacity and it seem.
To work and hard.
There is a lot of capacity around the world for us to launch multiple products in multiple places.
So there isn't there isn't a number.
Probably haven't done as much of a new product.
For over the last few years, because we've been making sure that we're leveraging the.
The vehicles around the world and making sure we've got the right things and the right place and we've seen some real success for that side of the sustainable would be a good example, strategic bonds that was again was the UK fund that was selling around the world and <unk>.
Balanced obviously.
Just talked about that was something.
And that was setting and the U S and now with fel very successfully and multiple markets. We've probably got nor the last few years of launching vehicles of existing products.
We've now got.
And a number of things that we're looking to launch and the future, but yes, it will be the will.
And we'll try to do as much as we can to satisfy clients.
At the moment, if we've got if we got products out there.
And I guess part of the final credit fund part of that it's the capital.
And we will continue to put to say capital to work so the.
There are probably some of it.
There was probably some seed capital, which will add in the and the remainder.
The remainder of this share and next year as we launched.
And the medical products.
Makes sense and then well.
What are some of the products that you might anticipate catching some more demand and.
Rising rate environment.
I guess it depends on on.
Sort of what kind of rising rate environment is there a rising rate environment, which cost.
Equities to be repriced, lower and you would expect value and more value ish kinds of strategies to do better in that environment and then the more growth strategies.
You can see.
A rising rate environment, which.
As part.
Part of the bullish.
Michael where it doesn't really cause the big downdraft and equities, there's all kinds of rising rate environment and go back.
And look and history, you can see up and down the equity markets.
With rising rates so.
I don't know exactly we have got a pretty good mix.
Conservative and more aggressive more value more growth on the equity side. Similarly, I think we have a pretty good mix on fixed income and our alternatives.
Our alternatives should and offer some nice protection from some of the cycles as well with snap salute returns so.
That third.
And part of the business is obviously, a place where we're focused on increasing our presence but.
And I would expect debt, we would have parts of the business that could be well and equity parts of the business can do well and check and and our alternatives could continue to grow.
Got it thanks very much.
We'll take our last question from Andre Stadnik with Morgan Stanley. Please go ahead.
Thank you I just wanted to ask 1 question from.
Can you talk a little bit about the.
The kind of investments you are going to be making in Asia, particularly around China and.
And what kind of.
The results of outcomes do you expect over time.
Yes, we've looked hard at China, and and our view is we don't think we are capable uniquely as a small company of gist.
Hiring 5 to 10 people in Shanghai and taking on the Chinese.
These market, we'd probably need the right sort of partnerships and relationships with the right folks on the ground.
We've looked to debt over the years and we haven't found the right thing to do we've come close to actually a couple of times.
But.
But we continue to be open to that circumstance, but I don't think were.
Huge investment and just go it alone ourselves in China, and so we will probably continue to service debt market.
As we have been consistent with past practice.
For the most part.
And until such time as we.
Can identify the right opportunity to to.
And with the partner, who who make sense to us.
And which may or.
May or may not happen, but it's a part of the world. It's a market that we've looked at a lot we continue to be interested in it.
And we will see whether we get the opportunity to make a big step forward there.
And we don't.
It is.
And a great interest to us, but also to every other company with whom we compete.
And.
And so the.
And there'll be no guarantees to get written about our ability to find that right opportunity, but we're certainly interested in it and and have done a lot of looking.
Thank you.
This concludes our question and answer session and the Janus Henderson Group second quarter 2021 results briefing. Thank you for attending today's call. You may disconnect. Your lines at this time.
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Okay.
And then.
Okay.
Good day.
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Yeah.
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