Janus Henderson Group PLC Q1 FY2024 Earnings Call

Good morning. My name is Brika, and I will be your conference facilitator today. Thank you for standing by, and welcome to the Janus Henderson First Quarter 2024 Results Briefing. In today's conference call, certain matters discussed may constitute forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements due to a number of factors, including, but not limited to, those described in the forward-looking statements and Risk Factors section in the company's most recent Form 10-K and other more recent filings made with the SEC. Janus Henderson assumes no obligation to update any forward-looking statements made during the call. Thank you. Now it is my pleasure to introduce Ali Dibadj, Chief Executive Officer of Janus Henderson. So Mr. Dibadj, you may begin your conference.

Welcome, everyone, and thank you for joining us today on Janus Henderson's First Quarter 2024 Earnings Call. I'm Ali Dibadj, and I'm accompanied by our CFO, Roger Thompson. I'll begin with a brief overview of the quarter before passing it to Roger. After his remarks, I'll update you on our strategic initiatives, including two transactions we announced earlier today that we believe will create significant value for our clients and shareholders. We will then open the floor for your questions after these comments. In the first quarter, global equity market returns were strong, particularly in the U.S., where the S&P 500 reached record highs. However, the market environment remains uncertain, with rising expectations for prolonged higher interest rates, persistent inflation, and geopolitical conflicts in Eastern Europe and the Middle East. The strong equity markets, combined with alpha generation from our top-notch investment team, the exceptional service from our client teams, and the productivity of our IT, operations, regulatory, risk, legal, and finance teams, allowed us to achieve a solid set of quarterly results. Investment performance is off to a great start in 2024, with at least 60% of assets outperforming their benchmarks over one, three, five, and ten-year periods. Assets under management grew by 5% to $352.6 billion, marking the highest quarterly AUM figure in two years. First-quarter flows were a negative $3 billion, which aligned with our expectations. The net flow figures showed improvement in our higher fee intermediary channel, especially in the EMEA region during the first quarter, where we decided to focus this year, while institutional net flows were affected by some larger redemptions. Our financial results remained robust. Positive market conditions, combined with the performance of our investment teams, effective expense management, and enhanced productivity across all teams at Janus Henderson led to an adjusted diluted EPS of $0.71, reflecting a 29% increase compared to the first quarter of 2023. Our financial performance and solid balance sheet continue to offer us the flexibility to invest in the business, both organically and through acquisitions, as well as return cash to shareholders. In conclusion, we are experiencing strong investment performance and financial results. We have key areas of momentum for flows in our business, but there's still much work ahead to achieve consistency. Our balance sheet is strong and stable, and we are actively executing our strategy, which I will elaborate on later in the presentation. I will now hand the call over to Roger to provide details on our financial results.

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

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

The first question is from Craig Siegenthaler from Bank of America.

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

I'm happy to start with broader views and Roger can go through it more. We are very excited about these deals. Both of them, along with Privacore, position us to move in a client-focused direction and help us to enhance and diversify the business as we continue to protect and grow. We believe they will provide significant value for our clients and shareholders due to the favorable economics, which I'll let Roger explain in more detail.

The financial terms aren’t disclosed, but these transactions are relatively small upfront and entirely cash-based, and we expect that to continue in the future. This has been fully accounted for in our calculations regarding the buyback, for instance. Additionally, we plan to slightly increase our capital this year, likely to support some ETF launches stemming from the Tabula transaction and other opportunities we identify. All of this is considered from our cash perspective as we look ahead, including the buyback. In fact, the buyback this year will be somewhat larger than last year. We also repurchase stock to cover employee compensation, making the buyback completely accretive. While the approval spans the whole year, it doesn’t mean we will take the entire year to execute it. I hope that addresses the cash capital aspect of the question, and I’m open to further inquiries later.

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

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

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

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

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

Dan, thanks. Yes, your recollection is right. We told you that we would need to replenish the institutional pipeline after an $8 billion positive flow year last year. There is lots of activity. I'm actually very, very pleased about the level of activity that we're having with clients, a lot of activity and positive feedback we're getting from consultants, which has a little bit of lead time obviously, so the leading indicators are actually quite positive. This stuff takes a while. We talked about a 12- to 18-month type time frame. That's probably still right, plus or minus, is our view. But of course, these things move at the pace of the institutional world and the pace of the consultant world quite often. I would note that we're also being quite mindful about what AUM we take on. I think you all realize, investors realize, we certainly realize that not all AUM is created equally. So we're very mindful about delivering value to our clients and delivering value to our shareholders and not in search of so-called low-calorie AUM. So we're being very mindful of that. The leading indicators are quite positive. You mentioned in terms of people. You're correct. We're investing in people and changing the organizational structure a little bit to make sure that we pair off against our institutional clients in the same manner that they run their businesses, i.e., much more regionally, and we're starting to see already some very fruitful results out of that. Sure. Thanks for the question. Let me begin with Tabula as a starting point and then we can expand the discussion. If we look at the time frame from the start, we’re noticing many of the same trends. Tabula enables us to enter that marketplace and capitalize on these trends. The active ETF market has grown about 50%, which is significant considering the small base. We're beginning to see increasing interest in the ETF UCITS format in Latin America and Asia as well. As I mentioned earlier, we're anticipating future developments, similar to our approach with NBK and Privacore. This aligns with our Amplify pillar, and we’re enhancing our skill sets in a way that is not limited to specific vehicles to meet client needs. We consistently prioritize our clients. I hope this addresses your question; we are leveraging our extensive investment expertise, as highlighted in an earlier question. We have exceptional investors and client service teams, and now we're packaging that differently to serve our clients. We don’t believe in simply replicating models. Those purchasing ETFs have varying needs and preferences, so we’re taking a unique approach. In the U.S., as you mentioned, the securitized platform on the fixed income side is a prime example. We have a strong investment team and impressive performance, and we have structured this in a vehicle-agnostic manner that clients find appealing. You can apply this thought process to Europe with Tabula and likewise for Latin America and Asia. Additionally, it doesn't have to be limited to fixed income; we do offer ETFs in other asset classes, including active equities. All will be active, but we see potential in equities as well. Lastly, compared to some other ETF franchises, our fee structure is quite different because it is active. Not all assets under management are equal, and we’re very conscious of that. Our strong investment team covers a wide range of areas, and we’re delivering this through the ETF format, making the fee rate for most of these very attractive due to the quality of our investment approach. Hopefully, this provides a comprehensive overview.

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

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

If I could add a couple of points to that, John. The improvement we're seeing in European flows is quite broad. We're optimistic about Continental Europe, Latin America, and also core Asia regarding intermediary flows. However, the U.K. remains challenging and is still experiencing outflows. We are likely holding our ground in terms of market share, but it’s a tough environment there. We're still facing negative trends in the U.K., although we've reorganized and are enthusiastic about the new leadership we've introduced. Conversely, in Continental Europe, Latin America, and Asia, we have shifted to a positive outlook. As Ali mentioned earlier, this aligns with the three quarters of positive performance we've seen in the U.S., and it's reflected across a relatively wide range of products. We are certainly gaining market share in European equities, which is seeing positive flows. Our performance in European equities is strong, especially in thematic areas like global technology, biotechnology, and life sciences. While there's more work to be done, it's encouraging to see Europe making progress, following the U.S.'s positive results last quarter and the one before that, and a positive quarter for Continental Europe. We're happy with the overall direction we are heading.

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

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

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

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

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

Let me start on that and then Ali can add to it. We currently have nine UCIT ETFs, which amount to about $500 million. This includes a variety of Article 9 comparable funds, mostly focused on fixed income at this point. What excites us is that these are available on 10 exchanges and sold in 15 countries. This presents an opportunity for us to launch Janus Henderson products on the Tabula platform, which will encompass both fixed income and equity. We plan to move quickly to get these launched in 2024. Currently, we have nine funds that are quite interesting and we will continue to market them. We are looking at adding more investment talent to expand our offerings, and we hope to launch a significant number of these this year.

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

Sure. Thanks for the question. We don't believe we have to invest meaningfully in the origination part to it. In fact, that's something that we look at when we look at these types of acquisitions is the origination skill set and how much sort of capacity of the origination skill set has. Here, it's quite strong. There continues to be an opportunity for them, in fact, to scale up if they had the capital. And that's where we come in. So point number one, not enormous investment in the origination, they already have it. Number 2 is, plugging into the distribution that we have, both in the region, but also globally is really how we can help them grow and help them get more deals. In fact, they're leaving money on the table, NBK would say, because they have so much coming in, being very selective, keeping the same diversification, keeping the same credit quality but could put more to work. And so that's where the plug-in to us makes a lot of sense. The third point that I'd mention is, of course, also the partnership we have with NBK Wealth, which allows us to cross-sell effectively both our products and also NBK's products more broadly as that business grows. So we believe that this is a great foundational building block for our emerging market franchise and for our private franchise in the emerging markets. So we're quite excited. And again, I think it's going to deliver great value for our clients and phenomenal value for our shareholders, given this is where the growth is happening. Sure. We are very energized by what's going on at Privacore right now, the progress to date in a very short period of time has been great. We mentioned a $200 billion alternative asset manager that's currently in the market. We now are working with a very well-known technology investment firm to do the same. We have an agreement with a $50 billion global private alternative asset manager that we're bringing to market. So it's actually quite exciting to see the progress here. We'll give you more updates in future quarters in more detail, but it's very exciting for a couple of things, right? The hypothesis was that there is a desire among our clients, particularly the private wealth clients, RIAs, warehouses, kind of access to very well-performing alternative shops, but can't get access to them because there's a missing service element and product creation element to it. At that nexus, it's Privacore to bring in best-in-class managers of alternative asset management and pair that to the relationships in the warehouse with brokers, dealers that Janus Henderson has and Privacore has. And we're seeing that play out. And very excitingly, we're seeing it play out with brand-name large alternative asset managers. These are not small folks. These are folks that you all will know. And so it's just the start. But if you expand that a little bit, there are beliefs out there that the, call it, low single-digit type exposure in the private wealth channel to privates and alternatives more broadly, will go up to something like 15% to 20% allocations in private wealth. Folks and other firms that have enormous amounts of respect for and that some of you cover say this is an $80 trillion AUM opportunity in private wealth. And we think Privacore can be a really important part of that democratization of the alternative landscape to private wealth. We have currently a minority stake in Privacore with very clear and well-established milestones to become full owners of Privacore. So we are quite excited for the progress. I think the team there is fantastic. We have a great relationship with them, and they are showing us that hypothesis is playing out.

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

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

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