Janus Henderson Group plc (NYSE:JHG) Q3 2023 Earnings Call Transcript

Janus Henderson Group plc (NYSE:JHG) Q3 2023 Earnings Call Transcript November 1, 2023

Janus Henderson Group plc beats earnings expectations. Reported EPS is $0.64, expectations were $0.54.

Operator: Good morning. My name is Lauren and I’ll be your conference facilitator today. Thank you for standing by and welcome to the Janus Henderson Group Third Quarter 2023 Results Briefing. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there’ll be a question-and-answer period. In the interest of time, questions will be limited to one initial and one follow-up question. In today’s conference call, certain matters discussed may constitute forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements due to a number of factors, including but not limited to those described in the forward-looking statements and risks factors’ sections of the company’s most recent Form 10-K and other more recent filings made with the SEC.

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Janus Henderson assumes no obligation to update any forward-looking statements made during the call. Thank you. Now it is my pleasure to introduce Ali Dibadj, Chief Executive Officer of Janus Henderson. Mr. Dibadj, you may begin your conference.

Ali Dibadj: Welcome, everyone, and thank you for joining us today on Janus Henderson’s third quarter 2023 earnings call. I’m Ali Dibadj and I’m joined by our CFO, Roger Thompson. In today’s call, I’ll start with some thoughts on the quarter before handing it over to Roger to run through more details. After those prepared remarks, we’ll take your questions. Turning to Slide 2, global markets were volatile during the third quarter as headwinds including rising global bond yields due to a higher-for-longer interest rate environment and certain economic outlook, geopolitical unrest, and stubborn inflationary pressures are contributing to challenging market conditions. Even with the market downturn in the quarter, Janus Henderson delivered good quarterly results.

Investment performance remained solid with the majority of assets ahead of benchmark on a one, three, five, and 10-year basis. Assets under management decreased 4% to $308.3 billion. However, it remained up 7% since the beginning of the year. Third quarter flows were negative $2.6 billion, a better result compared to the range we communicated on last quarter’s earnings call. As I said on the previous earnings call, our institutional pipeline needed time to mature and our retail flows continue to be negative. We saw both of those factors play out in net flows in the third quarter, but a little better than we expected as we gained share. The other item I spoke about was a few pockets of internal transition that will make us a stronger firm for the long-term but could negatively impact our flows in the short-term.

Transitions such as these can create uncertainty with flows and how clients react. I am pleased that given the trust clients have placed in us, along with the efforts and dedication of our investment and distribution teams, we did not experience significant outflows related to these internal transitions during the third quarter. Looking at the broader flow picture, our 2023 year-to-date flows are still positive at $2.4 billion, a marked improvement from the almost $20 billion of outflows during the same period of 2022. We continue to be on pace to show great improvement for last year’s total annual net flows of negative $31 billion. Our financial results remained solid, better top-line, lower expenses, and non-operating benefits delivered adjusted diluted EPS of $0.64, better than both last quarter and the third quarter of 2022.

Our financial performance and strong balance sheet continue to provide us the flexibility to invest in the business both organically and inorganically and return cash to shareholders, which I’ll talk more about in a moment. Turning to Slide 3. I wanted to touch briefly on progress being made in the business. We continue to be in the execution phase of our strategic vision, which consists of three pillars, protect and grow our core businesses, amplify our strengths not fully leveraged, and diversify where clients gives us the right to win. In Protect & Grow, we’ve talked previously about the importance of protecting and growing our U.S. intermediary business and have been investing in and supporting this channel. As you know, we’ve recruited a new Head of the North American Client Group, launched a national brand campaign, selectively upgraded talent, aligned compensation with our growth strategy, and increased the pace and quality of client engagements.

These changes are allowing us to be on the front foot with our intermediary clients and their clients. The progress in U.S intermediary is showing up in results. In aggregate, third quarter flows in North America intermediary were positive for the first time in over three years. Net flows into the Advisor Group have been positive in each quarter of 2023, which up until now had been offset by negative flows in the retirement channel, reflecting changing demographics in a softening economy. Very importantly, we are capturing market share in this important market. Under Amplify, we’ve previously talked about our institutional and diversified alternatives businesses and our product development and expansion efforts. Our product expansion efforts include the launch of the successful Global Life Sciences strategy and [indiscernible] during the third quarter.

In product development, a successful example is our suite of active ETFs that has grown by over 50% annually since 2018 and had nearly $9 billion in AUM at the end of the third quarter. With this growth, Janus Henderson is now the fifth-largest provider of active fixed-income ETFs in the U.S. with more to come from us. In the institutional business, which is over $8 billion of positive flows year-to-date, we’ve restructured coverage to be more aligned to different client types, helping us to serve their needs better through greater specialization. We completed the majority of appointments and we’re seeing a number of consultant advised wins, which is vital to the future growth of the institutional business over time. Under our Diversify pillar, we continue to look actively to buy, build, or partner to diversify where clients gives us the right to win.

As an example, last quarter, we announced a joint venture, Privacore, to look to take advantage of the democratization of private alternatives into the retail channel. We remain on track with building out the Privacore business with the target of being fully operational by year-end and in the market in early 2024. We’re enhancing our culture with our new mission, values, and purpose. Those are critically important as we augment our culture of performance, collaboration, and accountability, built upon our stable and client-focused processes at Janus Henderson. Fuel for Growth, which allows for reinvestment in Janus Henderson’s strategic initiatives on behalf of our clients, has been realized at a faster pace than expected and at a higher dollar amount.

We expect run-rate cost efficiencies of $50 million by the end of 2023 compared to the original $40 million to $45 million by the end of 2024. All of this cost savings has been or will be reinvested in the business. As part of Fuel for Growth, we announced earlier today our intent to delist from the ASX. With 95% of shares and a significant portion of the trading volume on the New York Stock Exchange, this move will allow Janus Henderson to focus on a sole exchange, reduce costs, and simplify the structure as we continue to invest in Australia and the APAC region as a key growth market for us. Our improving financial results and cash flow generation, along with a strong and stable balance sheet have enabled the Board to authorize a share buyback program of up to $150 million to be completed by April 2024.

I want to stress that this new buyback does not change our desire and pursuit to diversify our business through M&A and where clients want us to do so. At this stage, our liquidity profile allows us to do both. Wrapping up, I want to thank each and every one of my colleagues at Janus Henderson for their hard work and dedication as we continue to show real progress on our strategic path to deliver consistent organic growth. We’re still seeing the opportunity for improvement. Our financial results are solid, we’re generating good cash flow. We have a strong and stable balance sheet. I’ll now turn the call over to Roger to run you through the financial results.

Roger Thompson: Thank you, Ali, and thank you again to everyone for joining us on today’s call. Turning to Slide 4 on investment performance. Investment performance versus benchmark remained solid, with the majority of assets beating their respective benchmarks over all time periods. In equities, the one and five-year performance versus benchmark improved compared to a year ago. Most notably on the one-year basis, where 83% of AUM is now beating benchmark compared to only 42% a year ago. Short-term fixed-income performance versus benchmark continues to improve and is now at 56% of AUM ahead of benchmark on a one-year basis. The longer-term periods remained very strong. Our improving fixed-income performance and differentiated breadth of products across different vehicles and regions, an example being our active fixed-income ETF strength that I just mentioned, that positions us really well for the anticipated movements into fixed income as interest rates stabilize and bonds provide diversification benefits to clients.

In the multi-asset capability, the balanced strategy, which is the vast majority of assets in this bucket, switched to underperforming the benchmark on a one-year basis, but only by 1 basis point. Balance remains ahead of its benchmark over three-year and longer time periods and is in the top Morningstar quartile over the five and 10-year time periods. Investment performance compared to peers continues to be competitively strong, with 75%, 60%, 79% and 87% of AUM in the top two Morningstar quartiles over the one, three, five, and 10-year time periods. Looking further into performance, equities have 64% of AUM in the top quartile on a one-year basis, a great result and a testament to the ability of our world-class investment team to deliver differentiated insights and investment discipline in these extremely challenging market conditions.

Slide 5 shows company flows. As I mentioned, net outflows were $2.6 billion in the quarter, which is consistent with our messaging last quarter and reflects the continuation of net outflows in retail and less institutional gross sales as we continue to mature the pipeline following the funding of several large mandates in the first half of the year. Year-to-date net inflows of $2.4 billion demonstrate a significantly improving trend compared to 2022. Turning to Slide 6 for a look at flows by client type. Net outflows and for the intermediary channel improved to $1.3 billion compared to $1.6 billion in the second quarter. The quarterly outflows from the EMEA and LATAM regions, as higher interest rates, inflation, and recessionary fears are weighing on flows.

Janus Henderson is not unique and the EMEA industry in general has experienced a challenging flow environment with meaningful year-to-date net outflows across most regions. U.S. intermediary flows were slightly positive, supported by strong positive flows from several strategies, including the AAA CLO ETF, our mortgage-backed security ETF, and U.S. mid-cap growth. As Ali discussed and we’ve spoken about previously, U.S. intermediary is a key initiative under our Protect & Grow strategic pillar, and we’re pleased that we had positive flows this quarter. Our year-to-date flow results have improved by over $5 billion compared to the same period a year ago, and that we are capturing market share. Institutional net outflows were $400 million in the third quarter, in line with our comments from last quarter’s call.

Following onto the large inflows that we had in the first half of the year, we were not anticipating large fundings in the third quarter. Our distribution team is working to build a sustainable pipeline and it will take time. Finally, net outflows for the self-directed channel, which includes direct and supermarket investors were $900 million. Slide 7 is flows in the quarter by capability. Equity flows were negative $2.3 billion in the third quarter compared to breakeven in the prior quarter. The environment for active equities remained challenging across all regions. Despite the outflows, we’re encouraged that U.S. equities captured market share during the quarter. Net inflows for fixed income were $900 million, taking net positive flows to $5.5 billion year-to-date.

We are encouraged by the steady improvement in the short-term investment performance to go along with our solid longer-term investment performance in fixed income. Several strategies contributed to positive fixed-income flows, including our fixed-income ETFs which had positive flows of $1.4 billion in the quarter. Other strategies contributing to the positive flows for the quarter were the U.S. buy and maintain credit, multi-sector credit, and Australian fixed-income strategies. Total net outflows for the multi-asset and alternatives capabilities were $700 million and $500 million respectively. Moving on to the financials, Slide 8 is our U.S. GAAP statement of income, and on Slide 9, we explain the adjusted financial results. Adjusted revenue increased 1% compared to the prior quarter, as increased management fees on higher average AUM were partially offset by lower performance fees.

Net management fee margin for the third quarter was 48.7 basis points compared to the prior quarter of 48.5 basis points. The increase is primarily due to mix shift. Last quarter we told you that we expected the fee rate to be relatively flat in the third quarter, after a decrease in the second quarter due to the large low-fee institutional fundings in the first half of the year. Third quarter performance fees were negative $16 million driven by U.S. mutual fund performance fees of negative $17.5 million. As we sit here today, based on current investment performance, our estimates of aggregate performance fees for the full year remains unchanged towards the negative end of negative $35 million to $45 million. This includes roughly negative $65 million from U.S. mutual fund performance fees.

Clearly, the results will be dependent on future performance. Continuing on to expenses, adjusted operating expenses in the third quarter were $280 million, flat compared to the prior quarter. Adjusted LTI was down 5% compared to the prior quarter, largely due to mark-to-market on mutual fund awards. In the appendix, we’ve provided the usual table on the expected future amortization of existing grants for you to use in your models. The third quarter adjusted comp-to-revenue ratio was 45.3%, in line with expectations. Adjusted non-comp operating expenses declined 1% compared to the prior quarter, primarily due to lower G&A expenses. Adjusted operating income increased 3% over the prior quarter to $125.4 million in the third quarter. Third quarter adjusted operating margin improved to 31%.

And finally, adjusted diluted EPS was $0.64, up from both the prior quarter and the same quarter a year ago. Updating on our expectations for full-year ’23 operating expenses, as Ali mentioned, we now expect to deliver $50 million in Fuel for Growth cost savings to strategically reinvest back into the business. We’re pleased with this result, but we will continue to maintain our cost discipline and seek ways to operate our business more efficiently going forward. As we’re approaching the end of ’23, we are refining our previous guidance. The expected and adjusted compensation ratio remains unchanged in the mid-40s. We’ve lowered the range of our adjusted non-compensation expense percentage growth compared to the prior year and now expect it to be mid-single-digits.

We’ve also updated our expected statutory tax rate to approximately 24% from the previous range of 24% to 26%. Skipping over Slide 10 and moving to Slide 11 and a look at our liquidity profile, our balance sheet remains very strong. Cash and cash equivalents increased to $1.1 billion as at the 30th of September, an increase of approximately $150 million, resulting primarily from good operating cash flow generation. We’ve maintained a strong liquidity position and we continue to balance the capital needs and the investment opportunities of the business with returning capital to shareholders. Along these lines, as Ali’s mentioned earlier, the Board has approved a new share repurchase authorization of up to $150 million to be completed by April 2024.

Our capital allocation philosophy has not changed. The buyback authorization reflects our improved financial outlook compared to where we started the year, better cash flow generation, and a strong and stable balance sheet. I want to reiterate Ali’s comments that this buyback authorization does not impair our ability to execute M&A should the opportunity arise. We continue to look actively to buy, build, or partner to diversify where clients give us the right to win. We’ll also continue to return cash to shareholders through our quarterly dividend, and the Board has declared a $0.39 per share dividend to be paid on 30th of November to shareholders of record as at 13th of November. With that, I’d like to turn it back over to the operator to open it up for questions.

Operator?

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Q&A Session

Operator: Thank you. [Operator Instructions] Our first question comes from Craig Siegenthaler from Bank of America. Craig, please go ahead.

Craig Siegenthaler: Thanks. Good morning, Ali. My first question is on capital management. So a lot of fresh commentary on M&A and buybacks in the prepared remarks, both would drive EPS higher. First, we want to get an update on the potential for an M&A announcement over the near-term, and I think, Ali, you made it clear in the commentary that you can buy back stock and do M&A at the same time. And also, just in terms of the focus, is private credit still the number one strategic focus?

Ali Dibadj: Hey, Craig. Thanks for the questions. First from a capital allocation perspective, our framework and our hierarchy hasn’t changed. So we have kind of three buckets to think about. The first one is cash that we have to have on hand. So whether it be for regulatory needs or liquidity needs or capital we set aside for contractual obligations or kind of recurrent payments, things like that, that’s the basis of step one. The next piece is, we look to invest back in the business, both organically, as we’ve been doing to grow the business, and of course inorganically as well. Think seed funding, think technology, other things. And then if we have anything left, we return excess cash to shareholders, which we are announcing that we’re going to start doing today thanks to the Board approval.

The reason we’re doing that, as Roger mentioned a while ago, is because we’ve delivered better results than we had anticipated. And so now we do have the opportunity to return cash to shareholders and are able to do that and — and invest in the business both organically and we believe inorganically appropriately. So we — we certainly think we can do both now. To your point, that doesn’t change our M&A stance whatsoever. Our M&A stance continues to be client-led, adding capabilities that clients want us to add, and you saw us do two, for example, over the past little while. One is Privacore in the private space and one is the emerging market debt business that we brought on board, which continues to grow quite nicely. So we want to be client-led in what we are acquiring.

There’s plenty of stuff out there. Private credit, to your point, is certainly one of the areas that we’re focused on. It is an area where clients want us to participate and we’re certainly looking for opportunities, but there are plenty of other opportunities out there as well that allows us to have a broader scope on behalf of our clients.

Craig Siegenthaler: Thanks, Ali. Just as my follow-up, your active equity performance is a lot stronger, 80% of AUMs beating benchmark and peers roughly over one year. Now, like we all know, there are some secular and cyclical headwinds here, but I wanted to see if you’re seeing an improvement in client conversations either on the sales side or the redemption side of the equation?

Ali Dibadj: Look, it’s a great observation. Our teams are doing an extraordinarily good job by sticking to the process, being disciplined, and delivering what we do best here at Janus Henderson, which is active investment performance, now you see that across the board. Obviously, that entails clients piquing their interest and being interested in talking with us. So certainly performance improving helped that, and as you mentioned, we’ve done a pretty good job at that. Now what I will say is that performance in — in a vacuum, isn’t necessarily the only thing that clients want, right? They want really clear client service and — and sales support. And as you’ve seen in some of the comments, performance of our numbers, we continue to deliver that very well and clients trust us.

They trust us to deliver both performance and great client service, and so the combination of that has seen a significant increase. Significant increase in client interactions both in the intermediary channel and the institutional channel, as well as kind of the supporting areas like consultant discussions as well.

Craig Siegenthaler: Thank you, Ali.

Operator: Thank you. Our next question comes from Dan Fannon from Jefferies. Dan, please go ahead.

Dan Fannon: Thanks. I was hoping to follow up a bit on the first question, just with regards to what are the minimum levels of cash that you want to hold on to, that you need to for the reasons you mentioned, as well as how you think about leverage in this environment, what you’re willing to put on the balance sheet?

Roger Thompson: Hi, Dan. It’s Roger. Let me pick up on that. I think, the — as Ali said, we’ve got a — we’ve got a profile of capital. Our cash and cash equivalents are up just over or about $100 million from where they were in Q3 ’22. And to your point, actually, some structural work we’ve done and efficiencies in the business has actually reduced our reg capital requirement that as is largely driven in the U.K. So there isn’t a — there isn’t a single number, but we look at — we look at that cap — at that that cash and capital balance and that is that is now, significantly above where it was a year ago or a little bit before that when we when we stopped doing a buyback previously. And that gives us — that gives us the fuel to do both, a strong dividend, the buyback, and to Ali’s point, continue with looking in M&A opportunities.

Dan Fannon: Great. And then just given the success you’ve had in reducing, more — finding more efficiencies and, operating the business in a — more efficiently, can you talk about the longer-term expense framework as we think about maybe next year and even further, given, the balancing of continuing investment growth, but some of the — some of the footprint in reduced fixed costs that may be coming out of the business over time, and even the growth rate for the overall expenses?

Roger Thompson: Yeah. Again, let me pick up on that and then Ali, perhaps you want to chip in as well. We’re investing in our business. We’ve been very clear about the areas that we think we can grow in and we’ve been investing in those areas and Ali’s laid those out. One of those is our U.S. intermediary business where as Ali said, we’ve invested both in people as well as brand and other areas. It’s great to see that coming through in — into market share gains and positive flow in, I’d say, what’s a difficult environment. That being said, we’re looking — we’re constantly looking at how to balance that investment with efficiencies and deciding, where we’ll be less or where we can do better, and where we can do less, and that’s a constant act, but we’ve said that, we laid out this $40 million to $45 million.

We got a little bit further than that and quicker than that, which is great, and we’ll continue to look at that in 2024 in order to — in order to continue to invest. So I’m not going to give expense guidance today for 2024. We’ll do that in — on the full-year call. But again, you should expect us to remain balanced in investing in the business and trying to find efficiencies to offset those investments. Ali, anything you’d add to that?

Ali Dibadj: Yeah. Maybe just a little bit. Look, we’re going to continue to be client-led and ROI-driven in our investments. We have, in a relatively short period of time, really reoriented our — think about it as a portfolio of expenses, we’ve reoriented our portfolio expenses to be much more focused on meeting client needs and focusing on ROI, again, aligned with our strategy. So we feel like we’re on our front foot right now. You’re seeing that in our market share gains relative to our peers pretty much across the board. We believe we’re certainly building a stronger firm in a very challenging environment. And we will continue to look for opportunities to take our expenses and reorient them in the most client-led and ROI-driven manner.

Dan Fannon: Great. Thank you.

Operator: Thank you. Our next question comes from Nigel Pittaway from Citigroup. Nigel, please go ahead.

Nigel Pittaway: Good morning, Ali and Roger. Just a question on the cost guidance, if I can. You brought that down to mid-single digit on the non-comp costs, but it looks like even a 10% increase in the fourth quarter and what you’ve done in the third quarter will only bring you to that 3% increase. So are you flagging sort of a significant increase in the fourth quarter and if so, where is that going to come from?

Roger Thompson: Yeah, Nigel. Yeah, that we are expecting an increase in Q4, which is more seasonal than anything else around things like — things like brand and some professional work that we’re doing that will be a pickup in Q4. Again, I think when you’re looking year-on-year, you should be looking at our spend for ’23 compared to ’24 as opposed to annualizing Q4, but yeah, we do expect a pickup in Q4. Again, we’ll continue to try and balance that, we’ll continue to look for efficiencies, but we brought in that guidance from, I think it was low single digits at the beginning of the year now to — sorry, low double-digits at the beginning of the year to now mid-single digits. We’ll continue to try and balance that but we would expect — we do expect to spend a little bit more in Q4, so that’s more timing than anything else.

Nigel Pittaway: Okay. Thanks. Yeah, the 3% was year-on-year, but nonetheless, thank you for that. And then also on the comp ratio, it’s almost the opposite, that you’re going to have to have, pretty low comp ratio in the fourth quarter to meet that full-year guidance. Is that — is that the right way to think about that one as well?

Roger Thompson: Again, there’s a little bit of — there’s a little bit of timing in there, that the early part of the year is always a little bit higher, but yes, there is — we’ve talked about mid, mid-40s, we’re at, what, 43 and a bit, 45 and a bit this quarter. We don’t expect to be too far off that, maybe a little bit higher in Q4 than Q3.

Nigel Pittaway: Okay. Thank you for that. And then finally, maybe just on investment performance. I mean, I know it has sort of improved on a number of durations, et cetera, but obviously, the three-year performance, which is often viewed as key, has sort of deteriorated quite a bit. Do you see that as a hurdle at all or are people just sort of willing to look at, one year and five-year and not sort of focused too much on that three-year performance?

Ali Dibadj: So we obviously strive to deliver on all performance cycles. We all know what happened roughly three years ago from a COVID perspective, which drove quite a significant dislocation in the marketplace. Our investment teams remain disciplined in their processes. Our clients know that, they look at the process, and so, generally speaking, I’d argue people look at all time frames and make a judgment that way.

Nigel Pittaway: Okay. Thank you.

Operator: Thank you. Our next question comes from Ken Worthington from JP Morgan. Ken, please go ahead.

Ken Worthington: Hi. Good morning. Thanks for taking the question. When you talk about the institutional pipeline needing to mature, can you update us on what a fully mature pipeline looks like to you versus what the pipeline looks like today? And what is the timeline you think you need to reach that pipeline maturity?

Ali Dibadj: It’s a great question. So look, remember our institutional business so far has delivered $8.5 billion of positive flows for the year. Imagine that, Ken, being in a pipeline, pick a number six to 12 months ago, and that has to be replenished. So if you go forward, that is something that we would like to do obviously, and the cheeky answer to your question is we’d like the pipeline to be bigger than it is today. Now from a timeframe perspective, these are longer cycle sales as you — as you know. You can think about these sales as far out as two years from now, depending on what needs are there from a client perspective. So these things take time. The good news is that they are ramping up significantly in terms of the activity levels.

Clearly, our consultant wins have come up quite significantly. Our discussions with institutional investors has gone up quite significantly. And as you well know, one of our strategic initiatives is to invest in our institutional distribution pipeline including adding a better team, and we’ve done that for now, and who are quite significantly in the marketplace talking to institutional clients. So it will take time. I don’t have a precise answer for you, but we’re certainly on the right track and getting stronger in a tough environment.

Ken Worthington: Okay. Thank you. And then on the ASX delisting, how and when will the delisting from the ASX be executed? How much of Janus’s market cap is listed today on the ASX and are there any steps that you’re taking to kind of protect shareholders during this transition?

Ali Dibadj: So the ASX is about 5% of our shareholders right now. You might remember it was close to north of 40%. I think 44% at its peak of shareholders at a certain point, and so clearly that’s come down quite significantly. Remember, our decision to do the delist is to be able to focus on 95% of our shares, to focus on that sole exchange, New York Stock Exchange, to reduce significant costs as we fuel growth and to simplify our structure for regulatory reasons, M&A reasons, and other reasons. And so, that’s clearly a focal point for us. If you think about that, that’s, call it 10 or 11 days of trading volume for us. There’ll be roughly, and Roger can jump in with more details, there’ll be roughly 120 calendar days to work through that 5% and people can convert directly from an ASX listing to a New York Stock Exchange listing, which will probably reduce that 5% as well.

It’s important to note, Ken, as well, that this has no bearing on our clients or investments in Australia itself. It’s a very important market for us, I was there 10 days ago. I want to go back very soon because we are growing in that market, we’ve been growing for three years and want to continue to do that in a very vibrant market. Roger, you may have some better detail on dates.

Roger Thompson: Yeah. Just so Ken, you can see that we published how the timeline will work, but essentially, we announced that — we announced the process today, we become delisted on the 6th of December. There is then — there is then a — two facilities, a voluntary facility and a compulsory facility that will probably take us through to sort of mid to the backend of the first quarter, which is what Ali’s saying, is really this is a 120-day trading window that this will happen in. In terms of, investor protection, as Ali said, it’s a relatively small amount over a long period of time, but you obviously don’t like any selling pressure. The other thing I’d say is that, this is a transfer or can be a transfer of shares, so it’s not an automatic cancellation.

People — some people will hopefully move over to the NYSE, so hopefully some of that 5% will move over. And then, whilst the buyback is definitely not directly linked to the delist, we will be in the market during the delist period with the buyback as well, so we’ll be buying shares during that period from a buyback perspective. So that’s the process. Happy to take anyone through it in more details, how it works, but it’s more process than anything else.

Ken Worthington: Great. Thanks very much.

Operator: Thank you. [Operator Instructions] Our next question comes from John Dunn from Evercore. John, please go ahead.

John Dunn: Hi. Thank you. It was great to see the improvement in the U.S. intermediary channel, maybe could you just talk a little more about the, kind of puts and — in the fund level, puts and takes there and anything that we should be kind of looking out that might move from being a drag to being more of a tailwind?

Ali Dibadj: Sure. We are very pleased with the progress in the U.S. intermediary channel. We put a lot of focus on it from a strategic perspective and we’ve done a few things there. For example, we’ve brought in a new leader of that organization and new people, as well as given blue sky from people internally to supplement the folks we’re bringing in from the external world. So clearly, a change in people was part of it. We put in new KPIs, new compensation metrics, which was very clear on what we wanted to get out strategically from that business and that has clearly delivered. And of course, very much to your point, John, we have a set of products and great performance, to the earlier question, to deliver for our clients. If you think about our products that have done well in that channel, but frankly more broadly, it’s a similar set of products.

We’ve done quite well in the fixed-income business. Part of that is from the innovation that we’ve brought to bear in that channel with our securitized suite of ETFs, and we have more to come on that over time that can deliver for the needs of our clients in the U.S. intermediary channel. We’ve also been quite successful actually on the equity side as well. So things like mid-cap growth have been quite attractive as well in that — in that channel. So it’s actually pretty broad-based. Actually, if you take a step back and you think about the top 10 inflowing strategies from a firmwide perspective, about five of them are in fixed income and about five of them are from equities, which is a really broad balanced focus. But the changes we’ve made in that channel, the excellent efforts of that team there in the U.S. has been fantastic and quite a motivation for the rest of the firm as well.

John Dunn: Got you. And then you mentioned in — you’re investing in 50 — I mean, in institutional distribution. But with the potential coming wave of demand for fixed income, can you talk about the process of how you are getting in front of clients and trying to get prepared for that in both the intermediary channel and then the institutional channel?

Ali Dibadj: Yeah, absolutely. We have a broad suite of fixed-income products and strategies to bring to bear to our clients and institutional channel to build on your intermediary comment earlier. We certainly have the securitized skill set that can be brought to our clients in different forms. I mentioned the ETF form, in particular, intermediary channel, but certainly can be brought in different forms to the institutional pairings as well as separate accounts and otherwise. Obviously, we have some less innovative but storied franchises like the Australian fixed-income franchise, the multi-sector credit franchise, the buy and maintain franchises, whether it be in Europe, U.K. or the U.S., that bring a great performance to our client base in the fixed income — in the fixed-income world.

Now that’s the kind of product-by-product sale, so to speak, but we also have obviously a solutions business, that we can bring to our clients a outcome-oriented solution based on some combination of some of those fixed-income products but also things that are more bespoke in nature. You couple our product-based focus as well as our solutions or outcome-based focus and the intellectual capital that we have among our investors and researchers here to be able to share knowledge to our institutional investors, and we’re finding quite a lot of interest across the board and a lot of activity exactly as you say, as the market is looking like there is some interest in that broad fixed-income asset class.

John Dunn: Thanks very much.

Operator: Thank you. Our final question comes from Marcus Barnard from Bell Potter. Marcus, please go ahead.

Marcus Barnard: Yeah. Good morning, gents. Just interested on the buyback, sort of slightly following on from Ken’s question. I take your points about the strength of the balance sheet leading to the resumption of the buyback, but it seems a bit coincidental that it comes at the same time that you’re doing the CDI delisting. So I guess, question one is, is it — are the two linked or is it just a complete coincidence? And I guess the second question is really, if a discount does open up between the price of the CDIs and the NYSE stock, are you going to use the buyback to help manage that discount? Thanks.

Ali Dibadj: Thanks for the question. So the buyback is not exclusively linked to the delist at all. We obviously think about these things holistically, of course, and the holistic view is that our current liquidity profile, as we mentioned earlier, allows us to both implement the buyback and continue to invest in the business organically and through M&A, whether we buy or partner with others. So that’s the view that we have across the board. Roger, I don’t know if you have anything to add.

Roger Thompson: No, as I said, I think, that the buyback and the delisting are not — are not connected, just looking at our capital. But as you say, it will — it will, absorb some liquidity. The shares are fungible so there isn’t a discount, they equalize between the two. So that’s just looking to happen that way given the type of CDIs, how the CDIs work.

Marcus Barnard: I was thinking more or less of intraday level when New York’s shut but the Australian market’s open.

Roger Thompson: Yeah, the buyback will be done on the New York Stock Exchange.

Marcus Barnard: It will be done on the New York Stock. Okay. Thank you.

Roger Thompson: Thank you.

Operator: Thank you. That is now the end of the Q&A session, so I’ll now hand back over to Ali Dibadj for closing remarks.

Ali Dibadj: Great, Lauren. Thank you very much everybody for listening. This is another quarter that hopefully demonstrates our commitment to deliver for our clients, their clients, our employees who work so hard, our shareholders. Janus Henderson continues to get stronger and stronger in a very challenging environment. So thank you all for your interest in our firm and have a good day.

Operator: This concludes today’s call. Thank you for joining. You may now disconnect your lines.