Q1 2022 Janus Henderson Group PLC Earnings Call
Yes.
Yes.
[music].
Good morning, My name is that and I'll be your conference facilitator today.
Thank you for standing by and welcome to the Genesis Henderson Group first quarter 2022 results briefing.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question announced areas in the interest of time questions will be limited to one initial and one follow up question.
And today's conference call certain matters discussed may constitute forward looking statements.
Actual results could differ materially from those projected in 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 Dennis.
Janus Henderson assumes no obligation to update any forward looking statements made during the call. Thank you now it is my pleasure to introduce Roger Thompson interim Chief Executive Officer, and Chief Financial Officer of Genesis Henderson.
After Thompson you may begin your conference.
Good morning, and welcome everyone to the first quarter 2022 earnings call, Jonathan It's Greg on Walter Thompson, CFO and interim CEO .
Before I discuss our quarterly results I'd like to start by getting a few updates first as we announced back in late March were extremely pleased with how <unk> has been named as the next gen.
Henderson.
Although he is highly regarded and well respected in the asset management industry and the feedback we've received both internally and externally has been overwhelmingly enthusiastic and positive.
The challenge with sales to meet with Ali and I Echo that feedback I, along with the rest of the Executive Committee and excited to work with Ali and we look forward to meeting with clients and shareholders and employees. When he became CEO next month.
As we transition to when you see it's important to emphasize within the interim the firm continues to operate its business as usual and we continue to make progress in delivering our strategic initiatives.
In that context, I'm pleased to announce that we've completed the previously announced sale of impact as it were pretty close to March.
The closing of the transaction was the culmination of the efforts by our dedicated teams on both sides and we wish him all the very best for the future.
We also continued to grow our active ETF franchise with assets now exceeding $5 billion.
During the quarter, we launched two Etfs.
A triple B CLO Etfs in the U S. Further capitalizing on the back of the success of our AAA, CLO, ETF, which raised $800 million in the first quarter and that was $1 1 billion of AUM and in Australia, We launched a net zero transition resources ETF, which was also one of the five U S sustainable ETE.
What we launched in September 2021.
With that let me turn to the quarterly results starting on slide three.
Our investment performance remains solid with 63% of our assets, beating their respective benchmarks over three years, which is up compared to 58% of assets last quarter.
Assets under management are down due to the closing of the insight transaction at the end of March the effects of the markets and net outflows.
Excluding <unk> net outflows were disappointing at $6 3 billion.
Driven primarily by outflows in equities.
Institutional redemption in the balanced strategy that we communicated to you on the last quarter's earnings call.
Our financial results remained solid.
Down compared to the prior quarter, primarily from weaker markets and lower performance fees.
And finally, we remain committed to returning excess cash to shareholders in the quarter, we completed $43 million of share buybacks and the board has authorized a new buyback $200 million to be completed prior to the 2023 AGM.
Additionally, given the strong earnings growth in 2021, and a progressive dividend policy. We are pleased to announce a <unk> increase in the quarterly dividend to <unk> 39 per share.
Moving to slide forward I look at investment performance.
While one year investment performance reflects the very challenging environment long term investment performance remained solid with 63% and 74% of assets, beating their respective benchmarks over three and five year time period as of 31 March.
Performance of multi asset and alternatives is excellent across all time periods.
Equity is more mixed but with continued improvements in strategies such as U S. Mid cap growth, which is now above benchmark over all periods presented.
And fixed income investment performance is doing well, despite the extremely challenging quarter for bonds in the first quarter.
Switching to relative investment performance compared to peers. This remained solid with over 60% of AUM represented in the top two morningstar quartile over all periods.
Slide five shows company flows exclude the intake.
For the quarter net outflows, excluding <unk> was $6 2 billion compared to $1 billion last quarter over.
Over the next few slides I'll provide insight into the outflows, but in summary, the quarter saw continued outflows in equities, coupled with the outflow in the multi asset capability previously disclosed.
Let's turn to slide six which shows the breakdown of flows by client type.
Net outflows for intermediary with one 7 billion.
By region intermediary flows are negative in the U S EMEA and Latin America and positive in Asia Pacific.
In the U S. The outflows were dominated by our U S made a mid cap growth strategies due to the performance challenges we saw in 2020, but with the strongly improving performance as I. Previously mentioned, we are optimistic that we are beginning to see the pace of outflows slowing.
And looking at the first quarter highlights in the U S. Intermediary channel the SMA channel had $800 million of net inflows coming primarily from the concentrated growth strategy.
Net inflows into Etfs were $800 million with the majority coming from the from the AAA CLO products.
As I've mentioned, our ETF business is now over $5 billion in assets, and we're well positioned with our AAA and triple B CLO strategies in a rising rate environment.
Similar to trends across the industry EMEA growth inflows slowed compared to the fourth quarter due to a risk off sentiment caused by the Russian invasion of Ukraine inflation and plugged in monetary policy.
Institutional outflows were $3 $6 billion, which was primarily the result of the $2 $2 billion redemption to the balanced strategy.
The pipeline is broad and diverse range of opportunities what results will be lumpy quarter to quarter as we saw this quarter.
Finally, net outflows for the self directed channel, which includes direct and fleet market investors was $900 million.
Slide seven shows the breakdown of flows in the quarter by capability.
Equity net outflows for the first quarter were $3 8 billion compared.
Compared to $3 2 billion in the prior quarter.
Outflows were primarily driven by U S made a mid cap growth strategies in U S retail and institutional.
Areas of flow strength included U S concentrated growth global equity income and the biotech innovation hedge fund.
Flows into fixed income were flat in the quarter, which is a good result against the tough backdrop of bonds during the quarter and.
In the U S. Our fixed income strategies captured retail market share and were led by inflows into the fixed income ETF strategies.
Total net outflows with multi asset with $2 2 billion entirely made up by the one off redemptions in the balanced strategy that I'll talk to you about in the last quarter.
Alternative flows were negative $200 million for the quarter.
Before moving on I do want to call out two redemptions that will impact 2022 flows.
First our long standing European insurance clients has made the decision to bring the managements of the Sterling volume maintained credit mandates in house.
This was unrelated to either Jonathan This is investment performance and client service and due to an internal decision to build their own investment management capabilities to support their growth.
The mandate was low fee with total AUM of approximately $7 3 billion.
And $2 billion has already been redeemed in April the balance we were doing over the remainder of 2022 and tranche is yet to be confirmed.
Secondly, we recently announced the sale of our UK property tons, which will result in an estimated $1 4 billion outflow in the second quarter.
Moving onto the financials slide eight is our standard presentation of the U S. U S. GAAP statement of income.
Slide nine is a look at the summary financial results.
Before diving into the financial results note that the sale of <unk> closed on 31 March. Therefore, <unk> financials are included in the entire quarter. However, as I stated last quarter index impact to the consolidated results is not meaningful.
Adjusted first quarter financial results were down compared to the prior quarter and prior year, primarily from lower average AUM and performance fees.
Adjusted revenue in the quarter decreased 13% compared to the prior quarter due to lower average AUM performance fees and fewer calendar days.
Adjusted operating income in the first quarter of $180 million was down 25% over the prior quarter, principally driven by lower revenue.
First quarter adjusted operating margin was 37, 4%.
Before moving on I wanted to clarify the difference this quarter between U S GAAP and adjusted diluted EPS.
The primary difference was a $33 million noncash tax adjustments on the impairments of goodwill that we recognized in 2020.
With other small adjustments, including the loss on the sale of in Tech and.
And LTI acceleration don't departed executives.
On slide 10, we've outlined the revenue drivers for the quarter.
Net management fee margin for the first quarter declined to $46 eight basis points compared to 47 basis points from the prior quarter.
However, it's flat to a year ago, highlighting the strength and stability of our fee rates.
The quarterly decline is due to the mix shift resulting from weaker markets.
Excluding <unk> the net management fee margin for the first quarter was $49 four basis points.
First quarter performance fees were lower compared to the prior quarter due to U S mutual funds.
And seasonally high performance faced some segregated mandates in the fourth quarter.
Regarding the U S mutual fund performance fees, the first quarter was negative $14 million.
Compared to negative $7 7 million in the prior quarter.
Looking at 2022 performance fee revenue based on current investment performance, we expect full year performance fees to be negative in aggregate.
U S. Mutual fund performance fees are projected to be approximately negative $60 million. If we achieve benchmark performance for the rest of 2022.
Based on current investment performance. These negative fees would only be partially offset by performance fees generated from segregated mandates fee cabs, you pay offs and investment trusts.
Turning to operating expenses on slide 11.
Adjusted operating expenses in the first quarter with $299 million down 3% from the prior quarter.
Adjusted employee compensation, which includes fixed and variable costs was up 3% compared to prior quarter, primarily as a result of annual merit increases and seasonally higher payroll and retirement costs, which were partially offset by lower variable costs, given the lower pre bonus profit.
Adjusted LTI was down 10% from the fourth quarter, mostly due to mark to market.
In the appendix, we've provided the usual table on the expected future amortization of existing grants fee to use in your models.
The adjusted comp to revenue ratio was 42, 5%, which is in line with the guidance, we've given and less than the 44, 2% ratio in the first quarter of last year.
For the full year, we anticipate that the comp ratio in the low forties.
Adjusted non comp operating expenses were down 10% from the prior quarter, primarily from marketing and general and administrative expenses.
For 2020 to the expectation of non comp operating expense growth of the late in the low teens remains unchanged.
Finally, our recurring effective tax rate for the first quarter with 26, 1% for the full year. The firm's statutory tax rate is still expected to be in the range of 23% to 25%.
Finally, slide 12 takes a look at our liquidity.
Cash and cash equivalents were $782 million as of 31 to March a decrease of approximately $324 million, resulting primarily from the payment of annual variable compensation. The first quarter cash position is typically our lowest given seasonal cash needs.
We returned $107 million to shareholders via dividends and share buybacks, we purchased one 3 million shares of our stock for $43 million.
And we paid $64 million in dividends and as I previously mentioned the board has approved a 3% increase in the quarter Lee dividend to <unk> 39 per share.
This increase aligns with our capital philosophy of paying a progressive dividend that grows with profits.
Finally, the board has approved an accretive share buyback authorization of $200 million to be completed prior to 2000 <unk> AGM.
I look forward to Janus Henderson continue on its journey of organic growth in Q2 and by being joined by Ali and our Q2 earnings call in late July .
Now I'll open it up for Q&A operator.
Thank you if you would like to ask a question. Please press star one on your telephone keypad now if you change your mind and wish to withdraw your question. Please press star and the interest of time questions will be limited to one initial and then one follow up question.
Our first question today comes from Dan Fannon Jefferies.
Please go ahead.
Thanks, Good morning.
So it gives just wanted to follow up on flows you mentioned, a broad range of opportunities within kind of the institutional.
Our pipeline. So just hoping you could expand upon that and then if you could clarify just the timing of the redemptions just so I understand it I think at $2 billion already left in April on the total of 73, but the timing of the property fund.
I guess just in general in the context of <unk>.
<unk> asset allocator.
The intermediary conversations.
How has the change within the ranks of the management team at Janus as well as having an activist potentially impacted those conversations if at all so sorry for the multipart question, but wanted to get some broader context.
Thanks, Dan.
Yes, I think Kevin has quite a few things. So let me take let me take them.
That's probably one of the time.
Let's see where we get two so first one is the <unk>.
Probably maintain mandate in the U K.
That's a $7 3 billion mandate it is very likely.
But that will come out in the course.
Oh jewelry in 2022.
I have a $2 billion came out in April .
Working with the clients.
In source that money.
We don't have yet the full details of that when the remainder will come out so that will be $7 billion coming out.
The remaining three quarters of the year starting with two.
The real estate transaction.
We.
Completed other exchanged.
Last week, so very pleasing.
Yes.
A small premium.
So given the given the ongoing changes.
And reviewed by the FCA.
And then did.
Real estate get open ended funds.
That is a very good outcome for sure investors.
That will happen over the next month, so again that will be within our Q2 results.
In terms of the pipeline.
There are a number of things in there.
Taking a little bit lumpy.
And we wanted or expected things to be working through with clients.
Mainly on clients.
The ability.
The need for clients to be able to see.
Do they have reported.
And regulatory et cetera. So some of these things are quite complicated.
Longer than originally thought by the client we're pleased to be working through those.
It's a range of things and it's a range.
Fee rates as well so again, we've got some.
Some higher fee.
<unk>.
<unk>.
That is lower asset.
The biggest things that perhaps.
At lower fee.
So I recognize that.
Thinking about these pipelines for a number of quarters now.
We've got a deliberate so.
That's something that.
Yes, I'll recognize it hasnt come through in the last quarters.
But it will be it will be bumpy and this outflow from buying my time.
Ilmenite flow picture in institutional but again, it's more important to look at revenues from flows.
And we'll see that coming through over the next over the next few quarters.
And then finally in terms.
Okay.
Feedback we've received.
All.
Yes.
At least rival.
Sort of universally universally.
Both internally and externally.
He is a very well respected.
Investment professional.
With a background.
Now, let's just portfolio management and strategy and CFO .
Okay.
That's a very strong feedback.
It was minimal.
Professional capacity across cross different trends.
So that is.
Ali joins US next month as I said so.
That's going to be that's going to be very soon.
Client feedback has.
Has been very positive so far so.
Is there anything thats changed in terms of our outlook, if anything I'd say, hopefully it's going to be positive.
Rather the negatives in terms just in terms of.
Client reaction.
Look forward to getting getting Ali.
On the road.
Seeing shareholders analysts clients and staff.
As soon as he joins.
Jude.
So I think I've covered.
Oh, sorry.
I mentioned China.
There's no change there.
So trying to update investors and Jonathan for almost two years now.
So it's an ongoing.
In relationship which.
Again, I think Thats, a circle back quite nicely.
So you have after what you've asked one question, Dan I guess Youre allowed a second one im not sure that that was really one four.
Any follow ups.
Yes, I'll take that appreciate all along with the detailed response so thank you.
Thank you Sir.
Our next question is from mainly accessed from Jonathan Litt. Please go ahead.
Okay.
Good morning.
Simon Thanks for taking my questions I'll ask Scott.
On the cost management and capital management side of things, obviously, you maintained your guidance on the pause button.
Has announced another buyback.
I suppose it is early days with all ladies and officially landed yet is there any sort of anticipation that celebrate that.
<unk>.
Target at all or.
Do you think that might be quite a steady ship going forward.
Thank you.
The things that I wanted to wrap up capital management philosophy, which I think is I think you've settled.
In terms of.
Regular progressive dividend, which we've increased <unk>. This.
This quarter.
And.
And then kind of a consistent buyback.
We have access.
Excess cash.
Going back to 200 that we've announced $200 million, we've announced today is pretty consistent with what we've done.
Over the over the prior yesterday, a little bit more last year.
So that's consistent.
Our philosophy around around capital.
Thanks, Joe.
But again, that's really a bold decision.
But again I would say that that's well understood.
Capital in terms of costs.
Have to look at that look at the year as it plays out.
Investing in the business, we're excited about the future.
We always we always manage the business as tightly as we can for the cost point of view.
There are I am guiding to higher non comp cost this year.
Again, as we talked about in Q1 results.
It's a combination of three things.
That is a return to normal.
As such as <unk>.
Travel and entertainment marketing.
Which were low in 'twenty or 'twenty one.
Our return to <unk>.
Mobile.
Maximizing some of the opportunities we've got.
By increasing marketing spend again that was low in 2020 one.
With Covid.
We have a number of major infrastructure upgrades.
<unk> been working on for the last few years.
So this will go live in 2022, which is great news.
That means we start to amortize the work that's been done over the last couple of years.
And then there is inflation there was inflation obviously in the skin in the system.
So we will continue to manage that.
Yes.
So the trend will.
We will continue to be as efficient as we can but I guess to come back to your Q2 results.
And then just quickly.
On the investment.
<unk>.
I mean.
This is really hard to say.
Got it.
With that.
All of it tends to bounce around quite significantly again.
And then better way.
To get that number why it could take us.
Selling meaningful impact.
Item line is this.
The accounting piece in that.
Hi.
Non controlling interest so you net those two numbers we have to show it gross.
Sorry.
Yes.
Feed and therefore consolidated state is.
Yes.
Those lawsuits.
<unk>.
Okay.
That's the first piece obviously.
We don't hedge.
The client positions, which we need to consolidate in that line.
Was that this quarter will still result.
In a relatively.
Significant loss.
We see sorry, we hedge.
Yes.
What we can efficiently.
Book.
But there are certain.
Seeds in instruments.
<unk>.
We call edge as efficiently as we.
We'd like.
So this quarter. There is there is a net loss of around $10 million.
Okay.
What you said, which is that would you say.
<unk> gross number.
Offset by hedge the hedge is not perfect.
We'll continue to look at that number I would like to be as little as possible.
It obviously includes out here as well.
But where we've got things like hedge funds.
Hey, Alan hedged.
It sounds like yourself.
Hopefully that.
Does that help slides, we're happy to take your take you through that flattens well.
Okay. Thank you so much.
Our next question comes from Ken Worthington with JP Morgan. Please go ahead.
Hi, good morning.
Maybe following up on Dan's question on the institutional business. So how do we think about.
Institutional franchise.
Recall that <unk> was the single biggest part of the U S institutional business.
So does that divestiture.
Impact.
Your your your broader franchise overall youre more scaled with intact Youre now less scaled without <unk> you had big outflows this quarter, even without the balance one theres bigger redemptions to come I assume that $7 3 billion is also bucket it is institutional.
What does this shrinkage.
And can you further flush out the steps that you're taking to stabilize the platform and really freight to ship.
Yes, Thanks, Ken.
Good series of questions, Sorry Festival, our institutional business Exane. Thank you guys your $2 billion.
So it's a sizeable book.
And that is that is global.
It is well diversified.
It is an area that we.
We've been in.
Investing in.
Making sure we've got the right products.
The right people.
Yes.
Building client relationships, so we talked a little bit.
It's about the investments we've made.
Okay.
You consult relations.
Which is which is working really well again.
Please take time.
But the team underneath Richard Graham, who joined <unk> last year, I think really establishing a much better relationships.
With consultants globally.
Okay.
The institutional team in the U S.
We've upgraded that team over the last couple of years.
We've got products.
Around the world.
Which we believe is of interest to institutions. So we are having a lot of good conversations.
I talked a little bit about the pipeline.
Sorry, I realize that I've been talking about that for the last few quarters and we need to.
Deliver that so thats obviously.
The intention there.
And we believe we are seeing some.
We believe we're seeing some good some good results you are right.
The large fi maintain mandate, let's just told you about is it needs to change so that would be a sort of headline loss.
This would be again.
The point you towards towards revenue rather than just assets.
Some of the business that we have.
Wait.
With.
Yeah.
The reason that pipeline.
Is it significantly higher fee products, it's a mix we'd like to say we've got some we've got some bigger mandates, which we which we hope we expect to fund.
At the lower end.
We've got some we've got some business, which again, we hope and expect to fund higher fee.
But no change to our business is proceeding success.
Various areas, Australia institutional business has done very well over the last couple of years.
Okay.
We've got a growing business in the middle East.
We consistently.
That was before the merger.
Post the merger our institutional business.
It's sort of too small to the size of Janus Henderson.
And Thats something Thats a side, we've made a number of.
Number of investments there and we'll continue to push there.
I would hope and expect that to continue to grow over time.
Okay, Okay, I think Thats fair.
And just maybe as a follow up.
And the outlook is sort of more challenging here, you've got a 20% owner I assume the pressure is going to be going up meaningfully.
You have plenty of cash.
Announced the $200 million authorization, you sort of called out that thats sort of the authorization level that you guys have been.
Looking at for the last couple of years.
Given the weakness in the business.
And the downturn that we're seeing in the stock I'm sure you anticipated that why not go bigger than the $200 million authorization, you've got plenty of cash you've got a clean balance sheet. It would seem like youre in a in a.
A very powerful position to take advantage of sort of near term inefficiencies.
Why not substantially bigger than the authorization that was.
Which may occur.
But again I think that's really yes, that's part of all we are we are conservative in our balance sheet.
We recognize that.
Matt has been.
Yes.
That is deliberately cautious.
So we're not looking to leverage.
She can anyway.
There is there is as you've seen in this quarter there was a lot of beta.
Industry.
And a lot of them Jonathan.
Jonathan.
Is it a high basis stock so we don't want him to be.
Over leverage.
The 200 million authorization is something that.
We could work through an <unk>.
Should we be should we be confident we've got true excess cash going forward, we could add to that in the future that doesn't mean, that's the only thing we do this year.
Holly.
We may find other opportunities.
Over the year.
And spend the money the other way, but our expectation would be to do that 300 million buyback and when you look at that that's really.
The increase in dividends and 300 million buyback would represent around.
Majority of this year's earnings.
So we're paying out all expectations to pay off this year's earnings.
You are right, we will cover it all.
Our starting position.
Sorry about that.
Deliberately conservative policy.
Okay, great. Thank you so much.
Okay.
Our next question comes from Alex Bluestein from Opex, Alex. Please go ahead.
Hey, good morning, guys. Thanks for the question.
A little bit of a bigger a bigger picture question as well and I'm not sure if youre able to answer before Ali ultimately starts, but how do you think the firm's strategy could broadly change over.
Over the next year or so what will be the same what will be different and I guess.
What is sort of kind of like the near term plans for the company in the interim as he joins and kind of gets his feet wet in terms of what he wants to do.
So I think thats, yes.
That will evolve over time, what will not change is our focus on delivering consistently strong investment performance and client service costs.
So that is that is the bedrock.
What we look to do.
Okay.
We've made a lot of progress over five years and delivering and delivering.
Our combined business.
And improves chassis, if you like on the call.
Yeah.
We've made some what we would say some real tangible real tangible progress there, but it's not really come through yet in our financial results.
So obviously, we're going to be working closely, particularly maybe working closely with Abbvie has to walk.
That looks like.
And how that evolves over time.
Our strategy that we've been on has been the right strategy, but no doubt that will evolve with the new CEO .
Forward.
But I think thats, probably an evolution rather than a revolution.
Yeah.
Yes Ali Ali joins in a month.
Yes.
<unk>.
He has met quite a few people.
Over the last couple of months just to say Hello that just gives them a great staff and be able to be often running.
As quickly as we can when he gets here.
<unk>.
Putting 90 devices.
Yes, I think he is off to a great start it's gone down very well with this Mac.
But obviously, we will come back to you.
Over the course of the next few earnings calls.
As we evolve the strategy and push the business forward.
Got it great and then quick question on just on the numbers.
The management fee rate over the net fee rate margin the way you guys describe it.
I think it was $46 eight bps this quarter down a little bit due to mix.
A number of moving pieces happening here, obviously with intact out of the run rate business.
Large insurance mandate, albeit it sounds like it's very low fee rate business.
But also equity markets are coming down and it's a high business. So.
Yeah.
Yes.
So the.
The jump off point is $49 four basis points.
As you say.
You've got all the pieces there.
Yes.
Okay.
Our fee rate will be.
Bye.
Hi, Bobby.
Equity markets given that.
That equity fees are higher.
So should equity markets continue to fall.
Now our fee rate will come down a little bit.
Is that just too just because of mix.
The main mandate, yes, as I said, it's large assets like very low fee, so that will actually improve.
Yes.
Okay.
Coming through in that we've seen some cyclical outflows in U S mid and smid over the last couple of years as you've seen.
Performance.
Particularly the enterprise fund, which is which is the mid cap fund.
<unk> has been excellent really excellent.
All of 'twenty one.
The first format for this year and we're starting to see those flows.
Hershey business.
So thats an important wants to come back to Europe .
The European intermediary business also high fee business that did slow in Q1 as I said.
Float on the package.
Amongst treated patients as I said.
That's an industry phenomenon.
It should should that continue.
Then we don't get the kicker.
Okay.
From a higher fee European Dmitry business, but again, that's been that's been a real strength over the last over the last year.
Okay.
So hopefully things settle down and we start to see positive flows again coming out of European Dmitry.
Very good alright, thanks, guys.
Yes.
Okay.
Our next question comes from Robert Lee from <unk>. Please go ahead.
Great. Thanks, Thanks for taking my question.
Maybe just.
A little bit on first one on the.
<unk>.
By then from the comp ratios so.
When we think about.
Sure.
This quarter year to date quarter to date.
No.
Comp ratio guidance still in that kind of low 40% range of know how.
How much flex ability do you really have in that obviously, that's variable comp related to profitability and performing.
Good pressure just stays that we've had so far that that comp ratio.
It will be towards the high end of that low <unk> or should we really continue.
Continues.
King.
More towards mid <unk>, just trying to.
How are you guys thinking about the more flexibility in managing that.
Yes.
Right.
Second part of the.
Comp cost.
About 40% in our total cost base is variable comp.
So that naturally flexes.
So.
That piece of it looks after itself.
The comp in Q1, you have to remember that there are some.
So some lumpy pieces.
Stock vesting.
Sure.
So Q1 is always a higher.
Fixed cost base.
Sell throughs.
Because you have a straight quarters.
I think we're 44% last year, 42% this year, so the guidance of 42% comp ratio.
Yes.
Given given where we are with markets.
What I talked about I'm pretty confident with that as a comp ratio.
We will continue to will continue to manage the business the business tightly.
That comp ratio.
Right.
On non comp as I said Q1 was it.
Q1 was actually a relatively light quarter, we do expect to see increased non comp in the remaining three quarters, but again, we will be we will be reviewing that and being careful with it but there are things that we want to and expect to come through in the remaining three quarters.
Okay, Great. My other questions were asked so thank you.
Okay. Thanks Robert.
Our next question is from Ed Henning CLSA. Please go ahead.
Hi, Thanks for taking my questions.
Just first one you've talked about a strong balance sheet to die you also talked about reducing scale of your institutional business.
Can you just talk about the appetite for acquisitions to accelerate growth.
On guidance more scale in your institutional business I know, you've obviously been growing.
<unk> been growing organically, but just interested to start with just about acquisition appetite.
Okay. Thanks, Ed.
I guess the first pieces.
The most important thing for us is maximizing the value of what we've put together and what we've been building over the last five years.
And we haven't really done that obviously yet.
But they're all they're all in.
We are.
We are a truly global firm.
And have the right the right geographic footprint.
And old.
Client channels, but I guess, you were asking specifically around the institutional channel we got it got it.
Institutional business, which is established around around the world and we've been investing in that over the last five years.
We're not sure we're not shortage of capabilities or products.
And we've got some really strong performing capabilities and products.
And we talked about this in.
Q3, I think it was throughout our areas.
<unk>.
We continue to look at.
You shouldnt be too surprised if over time, we do more in those areas. So the more we invest.
And investment capabilities.
Rather than rather than distribution.
So we've talked about.
Essentially different some other areas in fixed income that were not fully in yet we've talked about.
Some other moving moving into some some areas around.
So but again, that's so yes.
As Alex asked earlier I think.
It's all going to be part of an ongoing strategy.
I think most important thing for now is it's very much business as usual we continue to we're always looking at things.
We look at a lot of opportunity.
Yeah.
There are very few that are very very good and we didn't want to do the very very good loans.
It's business as usual.
Looking at things as we are with our now.
And we will continue to look at them.
Ali joins in a month.
So but.
Like I say the most important thing is maximizing the value of what we've got.
We'll continue on that road.
Okay. Thank you and just some mechanical questions just on the numbers you talked about performance fees likely down year on year.
Will that likely just trend through each each quarter or is there a lump that potentially come through in performance.
Status quo sizes.
Yes.
Had a very strong Q2 last year.
So that was that.
Yes, again, it's difficult to project forward performance. So obviously it depends on what performance is.
The time period.
But given given.
Given what we see today, we cut back today.
Q2 will be a weakened significantly weaker performance fee quarter.
Quarter than we had last year, there's two pieces in that.
First is the silicon face we have on the U S mutual funds.
And as I said, we've got a couple of again you can you can.
Calculate this straight through.
Sure Yes.
But we would expect that to be to be given current performance. It could be zero zero alpha between now and the end of the year.
The fulcrum fees would be $60 million negative.
And as I say.
Again, just looking at what we see now in terms of performance space.
Again, if we cut them today.
Positive performance space from from a segregated accounts from a fee caps, which were very strong in Q3 last year.
10 funds tomorrow.
Would not offset not fully offset that $60 million. So again, it'll be what it'll be.
Hopefully performance is very strong over the rest of the year.
And those numbers are a little bit better.
That's the that's what we can say given performance.
<unk>.
Where we are today and just decided that it was no alpha between now and the end of the year.
Yes, and Thats, saying absolute number of the dollar performance stages negative not just down year on year.
Correct.
Yes, okay.
Can you clarify.
Okay.
Our next question comes from Patrick Davitt from Autonomous Research Patrick. Please go ahead.
Okay.
Hi, good morning, everyone.
One more on the expense.
As we look kind of beyond this year.
<unk> for that to then step down with some of these big infrastructure build outs are finished or is that kind of a new run rate.
He always wanted you always want that.
Yes.
There are things, we certainly turning off.
We modernize our infrastructure.
There are systems that were able to turn off savings there, but the truth and the truth is we're continually.
There is more data.
Sure.
It's more.
Yes.
<unk> cost.
So I think you probably this is really around leverage as I said, we will continue to try and squeeze.
Where we can be as efficient with where we can.
Turning things off.
Et cetera, but I think really we're talking about.
Yes.
Yes.
This being the run rate.
Therefore, that's why it's so critical for us to grow this business organically because this is about leverage.
Okay.
Yes.
And the $82 billion institution number you gave are there a lot of these kind of $5 billion plus mandates in that number.
Just trying to frame the risk of this becomes more common theme.
No.
There are no thats, probably one of the biggest ones.
I think we do have a.
And we do have a sort of volatile institutional business, we have a number of larger and larger clients.
Being one of them like I say, probably one of the biggest.
And we have a very long tail of small small mandates.
One of the things we're looking at.
Trying to make sure.
We're filling the patient in the middle as well.
Yes.
This will be one of the biggest there's probably a couple of others.
Five category.
Yes.
But with a very long time.
Thanks, that's helpful. Thank you.
Our next question comes from Nigel pitch away from city Nigel. Please go ahead.
Thanks, very much hi, Roger.
Just first of all 90, just delving a little bit more anticipated made you partly answered this already but.
What was the quantum of outflows from those two strategies in the first quarter.
And with the sort of mid cap turning positive in the month of March.
Until you know.
So that's <unk>.
Getting some pretty good it's something you've said before.
Obviously, it's taking a while side can we just sort of maybe delve into sort of a level of confidence as to where youre at with those two strategies.
Yes.
Okay.
Thanks Andre.
Yes.
We've seen some sizable outflows over the last five quarters I think probably.
When does that slow start at the beginning of beginning.
Beginning of 'twenty, one probably.
In Q1, it's about $2 billion of affluence.
Across maiden Smith.
That is.
Like I say, hey that was a tough performance period in 2020.
Is the team have made that kind of a bit more particularly on enterprise.
The numbers are the numbers are very strong.
No.
We're now into positive territory.
All time periods.
So we're starting to have some some.
You always still concerned.
That is a great franchise.
And it's and it's starting to look very interesting clients. So.
Yes, you got to you got to slow the outflows before you get to inflows with regards to zero.
Something that's.
Hopefully it will happen.
In the short run.
No.
The team are working hard on that basis, both the client relationship teams.
Hello.
Brian Jonathan.
Working on the working on the investment side of that like I say, it's delivered some fantastic numbers over the last.
Over the last five quarters, so were pretty yes.
Pretty confident and that's been a painful painful outflow.
Over the last over the last year or so.
But I can say at the end of the tunnel.
Okay. Thank you and then.
A common topic over the Q&A just back on the expenses.
Yes, obviously.
Got lower expenses first quarter sorry.
As <unk> highlighted there's a fair bit of catch up in the last three quarters, Yes, obviously that's.
The model that <unk> headwinds in the markets are down.
But already in <unk>.
What point do you actually have to reassess that and say, we really cant invest.
So much this year keeping.
Happening on the revenue line.
Yes, sorry.
Investment there are things that we.
We really need to do and want to do two things.
Ensure that we've got the best business going forward and then there are things, which are a little bit more discretionary.
The discretionary pieces of things that we'll look at much quicker.
Other opportunities for us to be to be winning business.
If the if the market environment is such that the opportunities are less then we will spend less money and those discretionary cases.
Yes.
But we don't we take the long term view of term markets change we will we will look at it we will look at things tactic.
Okay got it thank you very much.
Alright, and Thats what side.
Right.
Over the next over the next quarter call.
Mhm.
Okay, great. Thank you.
Our next question is from Brian Bedell from Deutsche Bank, Brian . Please go ahead.
Alright, great. Thanks very much.
Maybe just a couple of questions I'll try to keep it.
Back on the conversations with distribution partners.
The intermediary sales didn't hold up really well in Q1.
So just trying to get a sense of.
Is there.
There are risks to that sales now.
Remember as we move into <unk> ahead of when he comes on board.
And maybe what are those conversations how are those conversations going.
Or do you think it might be just maybe coming into <unk>. We may have just a headwind on.
The growth to value rotation.
And the market generally.
Yes.
Yes.
Conversations with clients are very good.
No.
The relationship is very strong, particularly around.
Key.
And larger clients.
And the sort of focus list of products.
So I don't think so.
Randy.
No concerns there as you say, we're pretty pleased.
This is a larger outflow quarter.
It's painful but.
There are areas, where we're relatively pleased our fixed income franchise being flat in the first quarter.
That is pretty strong.
Europe has slowed down but it's growth it's gross flows and thats a market impact if we can turn around U S mid and smid.
Then that would be that would be a strong amounts regarding forward.
So I think.
The conversations we're having clients with clients about very positive and gives us opportunity to talk to people.
And we're starting to see.
And that conversation now.
In fact with more money coming through the door. So again.
I'm picking the positive six obviously there.
So it's been a painful quarter.
Bob.
With.
Yes, we're continuing we're continuing.
Talking to our clients that's the most important thing in delivering investment performance.
So I don't know.
Is there any change.
Yes, but obviously, we are very cognizant of the market environment.
And investor sentiment we are.
That obviously has it has a significant impact on our ability to deliver positive flows.
Okay. That's great color. Thank you and then just on maybe it's time to.
The ETF franchise.
<unk> continues to ramp up over 5 billion.
Can you talk a little bit about I know you've also been growing your sustainable.
The ESG dedicated Prada.
Product lineup and then any other organic growth initiatives as you said everything is sort of.
Continue to.
At the same playbook, obviously as you anticipate filing you joined but maybe if you can just talk about any other major organic.
Product development growth initiatives as well as sustainable products.
So yes on the second piece first.
A lot of products in 2021.
So as that as that matures.
That's the real growth opportunities for 2000, 22022 things we launched in 'twenty. One so we launched a suite of <unk>.
Turning to Bill Etfs.
We launched <unk>.
Things like AAA.
And now a triple B CLO.
That's.
Okay.
Raised $800 million in the first quarter.
Sure Dave.
In March some of all of that.
Q1.
It's a big inflow.
So there's some good.
Some good areas that we'll continue to we'll continue to look at that product pipeline. There are things, we'd like to continue doing in 'twenty. Two I think we launched 21 new products.
In 2021, so we got we got a lot of things, which.
It's starting to mature.
Unsustainable.
We're doing a lot of work that we are investing investing pretty heavily.
Our investment investment.
The team.
The core group.
Around ESG has gone from four people to <unk>.
In terms of product.
About 50.
Still driven by Europe , although we are seeing.
Some things written again regulatory change in ESG is is probably the softest area change at the moment and you're working to.
Some uncertain.
Moving moving Reg uncertain regulatory environment.
So level two.
Patients in Europe .
Which we need to be.
That needs to be embedded by the end of the year. The actual rules in order to come out until the end of June .
So there's.
There's a lot of work going on.
We've launched a number of.
Fox.
Box Glace in article nine tonnes in Europe .
And expect to launch.
Onshore convert some more.
Over the remainder of the year at 55% of our state calculation.
In Luxembourg.
How either optic later optical <unk> again, we've been pretty cautious on this.
As you would expect from Janus Henderson, we wanted to do this right.
And make sure that we've got the infrastructure in the reporting.
Behind it to make sure that.
<unk>.
Yes.
Yes.
We're really confident.
In exactly what we say we are doing we are doing.
And we have seen a couple of people being caught up in that and I think the rules will continue to move and we want to make sure that we were doing the right thing so we're being cautious, but we're making some pretty significant investment.
In.
In the teams in the data.
And in the systems.
Reporting to make sure that our.
Our sustainable products.
It's obviously a growth area.
We could have very long term track record and that we've got a global sustainable products.
Just celebrated its 30 <unk> anniversary last year kind of electricity, we launched that.
The U S fund over the last couple of years in Australia last year now about $3 8 billion.
Yes.
Over the last 18 months probably.
And we think we see that obviously.
Yes.
Specific strategy around around.
ESG.
But we're looking to make sure that we're doing the right thing across a broader range as well.
That's great color. Thanks, so much for all the detail.
Yes.
Yeah.
Our final question today comes from John Dunn from Evercore, John Please go ahead.
Thanks.
Maybe just a quick check in on the strategy for growing it.
Typically an earlier you talked about maybe.
Inorganic ways to do it so maybe just potential areas of interest maybe.
How are the competitive environments for winning those.
Currently.
Yes, there's certainly things that we do so we're seeing some real success in the <unk>.
Couple of areas to call out so biotech innovation hedge fund.
Is growing pretty significantly over the last over the last year or so since it was launched.
Our multi strat product just one of those ones, which.
Is not going to offset.
Is that by maintaining mandate I told you about but in revenue terms is it.
It's a very different pricing points.
So winning $50 million and $100 million tickets and multi strat.
It's something that.
It moves the dial on the revenue side.
So we've got we've got <unk>, we've got we've got.
Yes.
Long long tenure and successful.
Return fund range in Europe as well.
That is continuing to do what it's supposed to do.
And again.
We hope and expect that.
Together assets over time.
So we've got we've got an office business.
But there are areas that we continue to look at where we might be where we might add to that over time. So.
There's nothing specific to talk about here.
That closed anything.
But.
There's always there's always interesting things to look at.
Particularly probably in the in the <unk>.
In the left.
Less liquid end of fixed income.
Thanks very much.
Okay well. Thank you for your time today and for the questions. If there's any follow ups. Please do let me or the IR team now.
Good to talk to you today are very much look forward to doing this call with you with Ali in three months' time. Thank you.
Concludes today's conference call. Thank you very much for joining you may now disconnect your lines.
[music].
Okay.
Alright.
Okay.
[music].