Janus Henderson Group PLC

NYSE:JHG

Earnings Call Analysis

Janus Henderson Reports Strong Growth and Strategic Acquisitions

In the third quarter of 2024, Janus Henderson demonstrated solid business momentum, achieving a 6% increase in assets under management, totaling $382.3 billion, and $400 million in net inflows, marking their third consecutive quarter of positive flows. Adjusted diluted EPS rose 42% year-over-year to $0.91, driven by higher performance fees. The firm anticipates fourth-quarter performance fees will exceed those of the same period last year, particularly boosting from the U.S. mutual fund performance. Additionally, they authorized a $50 million increase to their buyback program, totaling $200 million, reflecting strong liquidity and a stable balance sheet.

A Strong Quarter Reflecting Momentum

Janus Henderson has reported a positive performance in Q3 2024, showcasing a solid momentum across its business segments. The total Assets Under Management (AUM) increased by 6% from the previous quarter, reaching $382.3 billion, marking a 24% year-over-year increase. This growth is underpinned by a combination of favorable market conditions, positive investment performance, and a significant net inflow of $400 million, representing their third quarter of positive net flows over the last seven quarters.

Exceptional Investment Performance

The firm’s investment performance has been notably strong, with at least two-thirds of its assets outperforming their respective benchmarks over all measured time frames of one, three, five, and ten years. This competitive edge in investment performance contributes significantly to both client satisfaction and potential revenue growth.

Earnings Growth and Financial Strength

Adjusted diluted EPS rose 42% year-over-year to $0.91, driven by increased operating income alongside non-operating benefits. The company’s ability to leverage its operational strengths is reflected in an adjusted operating margin of 35%, which is an increase of 390 basis points from a year prior. These metrics highlight a robust financial position enabling both business reinvestment and shareholder returns.

Strategic Acquisition to Enhance Growth

In a bid to enhance its private credit capabilities, Janus Henderson successfully acquired Victory Park Capital (VPC), a well-established global private credit manager. This acquisition, finalized on October 1, involved $99 million in cash and approximately 824,000 shares of JHG common stock. The strategic aim is to leverage VPC’s unique asset-backed lending focus and extensive expertise in generating risk-adjusted returns, which positions Janus Henderson well to meet growing client demand for diverse private credit alternatives.

Solid Capital Return Strategy

Throughout 2024, Janus Henderson has prioritized returning capital to shareholders, completing share repurchases amounting to $155 million year-to-date. The Board also declared a dividend of $0.39 per share to be paid to shareholders on November 27, indicating a consistent commitment to rewarding shareholders alongside growth initiatives. Furthermore, the recent $50 million increase to the share repurchase authorization to a total of $200 million reflects a strong cash position and an optimistic financial outlook.

Operational Enhancements and Future Guidance

Janus Henderson is executing strategic investments aimed at boosting productivity and market share, particularly through technology, marketing, and client engagement initiatives. While addressing potential cost increases, the firm forecasts a significant rise in performance fees in Q4, driven by improved mutual fund results and strong performance from hedge funds. This is a welcome sign of financial health, indicating potential long-term organic growth. Moreover, adjusted compensation ratios are expected to remain within the 43% to 45% range moving forward.

Emerging Trends and Long-Term Outlook

The company's diversified strategy is present across regions and channels, notably in ETFs, where an active equity ETF was launched during the quarter. Net flows were particularly strong in several strategies, indicating increasing interest in U.S. Mid-Cap Growth and multi-sector credit. These developments reflect a positive growth trajectory and enhanced market positioning as Janus Henderson aims to leverage opportunities across existing and new asset classes.

Conclusion: A Promising Future

In conclusion, Janus Henderson's latest earnings call outlines a company that is not only recovering from past setbacks but is also poised for significant future growth. With a strong financial performance, a solid strategy in place for capital return, the recent acquisition of Victory Park Capital, and an unwavering focus on optimizing client offerings, the company is on a promising path toward consistent long-term success. Investors can remain optimistic about the potential returns as Janus Henderson continues to adapt and thrive in an evolving market landscape.

Earnings Call Transcript 2024-Q3

[Operator]

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

[Ali Dibadj, executive]

Welcome, everyone, and thank you for joining us today on Janus Henderson's Third Quarter 2024 Earnings Call. I'm Ali Dibadj, I'm joined by our CFO, Roger Thompson. In today's call, I'll start with some thoughts on the quarter, including our recent acquisition of global private credit manager, Victory Park Capital. Then I'll hand it over to Roger to run through the quarterly results in more detail. After our prepared remarks, we'll take your questions.



Turning to Slide 2. Janus Henderson delivered another good set of quarterly results, building upon tangible momentum in the business. Results reflect market gains, solid investment performance produced by our world-class investment professionals, the second consecutive quarter of positive net flows delivered by our dedicated client groups and the efforts and productivity from all our operating and support areas. Our teams have worked together to protect and grow, amplify and diversify our business and create growth across channels and regions, which is starting to show in our quarterly results.



Investment performance is consistently solid with at least 2/3 of assets beating respective benchmarks on a 1-, 3-, 5- and 10-year basis. Assets under management increased 6% to $382.3 billion, which is 24% higher compared to a year ago. Net flows were positive for the quarter at $400 million. The net inflows marked our third quarter out of the last 7 with positive flows, demonstrating real progress towards our aspiration of delivering consistent organic growth over the long term.

Our financial results remain solid, better top line revenue provided by positive markets, net inflows and outperformance delivered by our investment teams, coupled with operating leverage and nonoperating benefits resulted in adjusted diluted EPS of $0.91, a 42% increase compared to the same period a year ago. Our financial performance and strong balance sheet continue to provide us the flexibility to invest in the business, both organically and inorganically and return cash to shareholders.



On Slide 3, I want to provide an update on progress being made in the business. We continue to be in the execution phase of our strategic vision, which you may remember consists of 3 pillars: protect and grow our core businesses, amplify our strengths not fully leveraged and diversify where clients give us the right to win. In Protect & Grow, we are actively upskilling and utilizing data, people and process best practices across the organization to drive market share improvement and growth. Examples include applying sales processes that have worked in some regions to those in others, data transformation projects, launching a prioritization tool to clearly outline, prioritize and align all employees' efforts with our initiatives as a firm and enhancing our employees' ability to manage change and execute on our strategic plans more effectively.





Under Amplify, we closed our acquisition of Tabula Investment Management on July 1 and have moved quickly to begin leveraging the business. Recently, Janus Henderson launched our first active ETF in Europe, where we see client demand and our team's strong investment performance, the Japan High Conviction Equity UCITS ETF. This launch represents an important milestone, allowing us to cater to client demand globally for our investment strategies, including in an ETF wrapper. We anticipate launching a range of new active European ETFs across equities and fixed income strategies in the coming months. These will take time to mature, but we are energized by their prospects.

In September, Janus Henderson announced a partnership with Anemoy and Centrifuge to manage Anemoy's liquid treasury fund, a fully on-chain tokenized fund issued on Centrifuge's public blockchain that provides investors with direct access to short-term U.S. treasury bills. Blockchain readiness and tokenization are key pillars underpinning Janus Henderson's innovation strategy and the decision to partner with Anemoy and Centrifuge in this way reflects the firm's commitment to digital assets and our desire to embrace disruptive financial technologies.





Under the diversified pillar, we are expanding differentiated private market capabilities for clients with the closings of NBK Capital Partners in September and Victory Park Capital on October 1. As I said before, both of these are skating to where the puck is going on behalf of our clients. NBK allows Janus Henderson early entry into the rapidly expanding emerging markets private capital space.

VPC, which I'll talk about more on the next slide, specializes in asset-backed lending. Along with executing our strategic vision, we're making progress in other areas of the business. As I mentioned, we delivered consecutive quarters of positive net flows and market share gains in key regions, which demonstrates that we are on the path to delivering consistent growth over the long term.

In addition to the net flows this quarter, importantly, Janus Henderson also generated positive organic net new revenue in the third quarter. Fee pressures are relentless in this industry and not all AUM is created equal. So we are pleased with that result. We are seeing success across a mix of capabilities and regions, including higher fee strategies such as hedge funds and thematic.





In September, we announced a unique and innovative affinity partnership with the American Cancer Society. Through this pioneering partnership, Janus Henderson will donate the equivalent of 50% of its management fee revenue from all AUM in our government money market fund. In other words, for every $1 Janus Henderson receives in fees, the ACS will also receive $1 to support cancer research, advocacy and patient support. This allows us to enter the over $6 trillion and growing money market category with a differentiated product that is extremely hard to replicate. It delivers the same performance, has the same fees, has a 30-year track record and looks and smells like any other money market fund in the sea of sameness, but ours gives away half its management fee to an incredible cause that fights to end cancer as we know it, something that has likely touched all of us in some way.





This partnership is our first initiative under our recently launched Brighter Future Project, which is the mechanism Janus Henderson will use to connect our purpose of investing in a brighter future together with our clients, employees and the communities we serve. We are honored to support the American Cancer Society, and it's Janus Henderson's sincere hope this partnership will help create a brighter financial and physical and mental future for many of the 60 million people and growing that our firm serves around the world. Last quarter, I spoke about the encouraging trends we're seeing in strengthening our brand positioning. Given very strong ROIs, we continue to invest in those efforts globally via various means, including ad campaigns, sponsorships, events and channel marketing. Shifting to capital stewardship. Our improving financial results and cash flow generation, along with a strong and stable balance sheet has enabled the Board to authorize an increase of $50 million to the existing buyback authorization.





Janus Henderson's strong liquidity profile continues to provide us the flexibility to invest in the business, both organically and organically, as well as return cash to shareholders. Now turn to Slide 4 for more background on our acquisition of Victory Park Capital announced in August and closed on October 1. Victory Park Capital is a global private credit manager with a nearly 2-decade-long track record of delivering risk-adjusted returns to a long-standing diverse and global institutional client base. VPC has specialized in asset-backed lending since 2010, including small business and consumer finance, financial and hard assets and real estate credit. Its suite of investment capabilities also includes legal finance and custom investment sourcing and management for insurance companies. In addition, the firm offers comprehensive structured financing and capital market solutions through its affiliate platform, Triumph Capital Markets. Our M&A strategy is always client-led and what we heard from clients was an interest in private credit and that they were looking for something different relative to direct lending. Asset-backed lending has emerged as a significant and differentiated market opportunity within private credit, and we believe it will remain appealing to clients as they increasingly look to diversify their private credit exposure beyond direct lending.





We are extremely excited to partner with VPC. We believe they are a great business. There's alignment on the growth trajectory. The team is motivated to grow the business together. And importantly, the culture is a great fit with our own mission, value, and purpose. We are executing on our growth plan across both client service teams using our industry experience of how a traditional manager can help an alternatives manager grow, including via our specialized distribution platform, Privacore. The partnership with VPC demonstrates continued execution of our client-led strategic vision on several fronts. VPC complements Janus Henderson's successful $36 billion securitized franchise and expertise in public asset-backed securitized markets by expanding asset-backed capabilities into the private markets, enhances our offerings to institutional clients through in-demand private credit strategies, expands options for Janus Henderson in the insurance industry through VPC's capabilities, further diversifies our private credit capabilities following our recent acquisition of emerging market private credit team, NBK Capital Partners.



And finally, it leverages our joint venture, Privacore, to provide desired private credit products to private wealth clients. We expect the transaction to be neutral to accretive to EPS in 2025. Janus Henderson acquired a 55% ownership interest with a defined path to reach 100% ownership over time. Upfront consideration included $99 million of cash and issuance of approximately 824,000 shares of JHG common stock on October 1. There is also a long-term mutually attractive earn-out provision. I'll now turn the call over to Roger to run you through the detailed results.

[Roger Thompson, executive]

Thanks, Ali, and thank you all for joining us on the call today. Turning to Slide 5 and investment performance. As Ali mentioned, investment performance versus benchmark remains solid with at least 2/3 of aggregate AUM beating their respective benchmarks over all time periods. Looking in further detail, at least half of each capability's AUM is ahead of benchmarks over all time periods, reflecting consistent investment performance across all time periods and capabilities.



Overall investment performance compared to peers is very competitive with nearly 3/4 of AUM in the top 2 Morningstar quartiles over 1-, 3-, 5- and 10-year time periods. And as you can see in the appendix, much of that is in the top quartile. Slide 6 shows total company flows by quarter. Net inflows for the quarter were $400 million compared to net inflows of $1.7 billion last quarter and a significant improvement over net outflows of $2.6 billion a year ago. The year-over-year improvement was primarily driven by a 36% increase in gross sales. The increase in gross sales compared to the prior year is across a broad range of regions and strategies, including ETFs, thematics, such as life sciences and technology, U.S. equities, balanced hedge funds, multi-sector credit, and European equities. On Slide 7 are flows by client type.



Third quarter net flows for the intermediary channel were positive $1.8 billion, bringing year-to-date intermediary net inflows to $5.2 billion, equating to a 4% annual organic growth rate. In the third quarter, the U.S., EMEA, LatAm, and Asia Pacific regions all delivered positive net inflows in the intermediary channel. In the U.S., net flows were positive for the fifth consecutive quarter with net inflows in several strategies, including most of the active ETFs, U.S. Mid-Cap Growth, and multi-sector credit. U.S. intermediary is a key initiative under our Protect & Grow strategic pillar, and we're pleased that we're gaining market share.



Under our Amplify strategic pillar, we've talked about amplifying our investment in client service strengths using various means, including vehicles in which to deliver products. In addition to ETFs, flows into CITs were also positive in the third quarter in this channel. Moving to the EMEA and Latin American intermediary segment. Here, we've spoken previously about expanding our strategic efforts. And in this region, net flows were positive for the second consecutive quarter. And in APAC intermediary, net flows were positive and represent the best quarterly result in almost 3 years.



Institutional net outflows were $500 million. Following a directionally improved second quarter, we talked publicly about the need to replenish a sustainable pipeline. We're pleased with the work our distribution team is doing, and we're encouraged by the leading indicators and increasing number of opportunities across all our regions, but the continued development and maturation of the pipeline will take time. Net outflows for the self-directed channel, which includes direct and supermarket investors, was flat to the prior quarter at $900 million. Slide 8 is flows in the quarter by capability.



Equity flows were negative $1.5 billion, which was relatively stable compared to quarter 2 and improved from negative $2.3 billion a year ago. Despite a challenging environment for active equities, gross sales for equities improved 39% on a year-over-year basis, with increases in the U.S., EMEA, LatAm, and Asia Pacific. Net inflows for fixed income were $2.2 billion. Several strategies contributed to the positive fixed income flows in the intermediary channel. Fixed income ETFs delivered further strong positive flows of $2.4 billion in the quarter, led by flows in JAAA. Other strategies contributing to the positive flows were multi-sector credit and Australian tactical income and offsetting these inflows were net outflows in the lower-fee institutional channel.



Total net outflows for multi-asset capability were $400 million, improving from $800 million of net outflows in the prior quarter. While still in net outflows, this is the best quarterly result in 2 years and reflects improving flows in the balanced strategy. And finally, net inflows in the alternatives capability were $100 million. Moving on to the financials. Slide 9 is our U.S. GAAP statement of income. Before moving on to the adjusted financial results, GAAP results this quarter include an expected $111.9 million noncash no operating accounting release of accumulated foreign currency translation losses related to subsidiary entities liquidated this quarter.



This amount is removed from adjusted results. Continuing to Slide 10 and the adjusted financial results. Almost all adjusted operating results improved compared to the prior quarter and the prior year. The improvement was primarily due to higher average AUM and good investment performance, generating higher performance fees. Adjusted operating income improved 4% and EPS improved 7% quarter-over-quarter. Improvements over the prior year were even stronger with operating income and EPS up 36% and 42%, respectively.



Looking at the detail. Adjusted revenue increased 7% compared to the prior quarter and 21% compared to the prior year, primarily due to higher management fees on higher average AUM and improved performance fees. Net management fee margin remained stable compared to the prior quarter and declined very slightly compared to a year ago. Janus Henderson's net management fee margin continues to be a differentiator compared to many peers, given the fee pressure headwinds experienced in the asset management industry.



In addition to a stable fee rate, we are also very pleased with positive firm organic net revenue generation in the third quarter, which demonstrates our success across a broad range of strategies and regions. Third quarter performance fees were positive $9 million, including negative $9 million of U.S. mutual fund performance fees. While still negative, U.S. mutual fund performance fees have improved significantly compared to the negative $18 million in the third quarter of 2023. As we sit here today, we estimate fourth quarter aggregate performance fees to be higher than the fourth quarter of 2023, primarily due to improvement in U.S. mutual fund performance fees and strong investment performance in hedge funds. Clearly, the result will be dependent on performance over the remainder of the year.





Continuing on to expenses. Adjusted operating expenses in the third quarter increased 8% to $318 million, primarily reflecting higher profit-based compensation, LTI expense, AUM-related costs and previously communicated increases in noncompensation expenses. Adjusted LTI increased 12% compared to the prior quarter, largely due to mark-to-market on mutual fund share awards and 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 43.3%, in line with our expectations and down from 45.3% a year ago, demonstrating the leverage in our business. Our 2024 expectation of an adjusted compensation ratio range of 43% to 45% remains unchanged. Adjusted noncomp operating expenses increased 10% compared to the second quarter, primarily due to expected higher G&A and investment admin expenses. As I mentioned last quarter, we anticipated adjusted non-compensation costs to accelerate in the second half of the year, which is what we saw in the third quarter.



In the fourth quarter, we expect to invest a bit further in high ROI investments supporting areas of momentum in our business, examples being technology, marketing and advertising in both U.S. and EMEA as well as client-related expenses such as T&E. As we execute these focused investments and also now include the consolidation of VPC beginning in the fourth quarter and the full cost of NBK, we anticipate annual noncompensation expense growth to be at the higher end of our existing mid- to-high single-digit growth expectation. Please note that a portion of the expected fourth quarter spend is seasonal or onetime in nature, all else being equal, an indicative quarterly run rate going forward for noncompensation expenses will be lower than what we anticipate in the fourth quarter.



Moving on from expenses. Adjusted operating income increased 4% compared to the prior quarter and 36% over the same period a year ago to $171 million. Our third quarter adjusted operating margin was 35%, an increase of 390 basis points from a year ago. Adjusted diluted EPS was $0.91, up 7% from the prior quarter and up 42% from the third quarter of 2023. The increase in adjusted diluted EPS primarily reflects the higher operating income and nonoperating benefits.



Skipping over to Slide 11 and moving to Slide 12 and a look at our liquidity profile, our capital position remains strong. Cash and cash equivalents were $1.4 billion as of the 30th of September compared to $699 million of outstanding debt. In September, we successfully completed a $400 million issuance of senior unsecured notes at a coupon rate of 5.45% due in 2034. The intent of the issuance is to repay the $300 million of notes due in August '25. We executed the make-whole call on the $300 million earlier this month, effective in November. Therefore, you will see lower cash and lower outstanding debt when we report fourth quarter earnings. During the quarter, we funded our quarterly dividend and repurchased approximately 1 million shares for $40 million. The Board has also declared a $0.39 per share dividend to be paid on the 27th of November to shareholders of record as at the 11th of November. Finally, we closed on the Victory Park transaction on October 1, which included consideration of $99 million in cash and the issuance of approximately 824,000 shares of JHG common stock.



Finishing on Slide 13 and a detailed look at our consistent return of capital to shareholders, 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, the Board has approved an incremental $50 million on the existing repurchase authorization, bringing the total authorized up to $200 million. Our capital allocation philosophy has not changed. The incremental buyback authorization reflects our improved financial outlook, better cash flow generation and a strong and stable balance sheet. We've maintained a healthy quarterly dividend and have reduced shares outstanding by roughly 21% since the commencement of our buyback program in 2018. During the first 3 quarters of 2024, we've returned $343 million, including $155 million via share repurchases.



With that, I'd like to turn it back over to Ali for a brief wrap-up before we take Q&A.

[Ali Dibadj, executive]

Thanks, Roger. Wrapping up on Slide 14. We continue to make progress across the business, building on the results of past quarters. And while there is more work to do, we believe we are on the path to delivering consistent results over time. Investment performance is solid across all time periods versus benchmark and peers. Net flows were positive for the second consecutive quarter and reflect a 36% increase in gross sales compared to the third quarter a year ago. This marks our third quarter of net inflows in the last 7 quarters and provides a tangible indication that our strategic plan is starting to take hold. Adjusted diluted EPS increased 42% compared to the prior year, reflecting market gains, investment performance, positive net flows, operating leverage, high ROI investments and nonoperating benefits.



Our strong balance sheet and financial results allow us to continue returning cash to shareholders through dividends and share buybacks while reinvesting in the business for future growth. We are executing against our strategic objectives. I'd like to thank my teammates at Janus Henderson for putting all the extra effort. We are undoubtedly headed in the right direction on behalf of our clients, colleagues, shareholders and all our stakeholders.



Let me turn the call over to the operator to take your questions.

[Operator]

[Operator Instructions]. Our first question goes to the line of Ken Worthington with JPMorgan. [Operator Instructions]

[Kenneth Worthington, analyst]

Can you talk about the build-out of the institutional pipeline and the focus on the $100 million to $400 million mandate wins? How is this build-out progressing? I think last quarter, you talked about the diversity of institutional wins. As that pipeline rebuilds, from which geographies are you seeing the greatest demand and which products and asset classes seem to be of the greatest interest?

[Ali Dibadj, executive]

Thanks for the question. So just to set the stage a little bit, recall that 2023 was a positive year for institutional for us. And we said then and we continue to say that we're rebuilding that pipeline since then. Last quarter was a positive pipeline and to your point, was quite broad. And you see this quarter wasn't quite positive, but we're clearly building the pipeline. We're not fully there. Those numbers will ebb and flow from a flow perspective, but they're certainly in the right direction. We don't talk so much about the actual numbers in the institutional pipeline. We're continuing to work on rebuilding it. We think the work that the team is doing is clearly starting to show. And a lot of the leading indicators are in the right direction.



The areas to your question that we're finding a lot of interest in are things like our hedge funds, equities, particularly the small and mid-cap areas, enhanced index, our solutions business, pockets

of our global fixed income business. And I mentioned those specifically, not just to precisely answer your question, but also because we have this very strong view, which we've said before and certainly said in the prepared remarks that not all AUM is created equally. And look, you guys should tell us if you think we're thinking about this the wrong way. But we work very hard to balance fee rate, profitability and AUM. We don't just try to go for headline AUM on things in institutional in particular. And we say no to a lot of things. We don't participate in RFPs a lot of times when it may be a great AUM headline, but it's not great for the shareholders, not great for our bottom line. So again, tell me if you think we shouldn't be doing any of that. But I will say that some of the leading indicators that we look at across regions, all regions are quite positive. For example, RFP activity in the U.S. is up close to 35% as far as September year-on-year. EMEA and LATAM, same thing, closer to 30% there. So we feel like we're certainly on the right track, we're not firing on all cylinders, but we feel positive about the momentum that the team is making and the changes we're making on the team as well.

[Operator]

Our next question goes to the line of Dan Fannon with Jefferies.

[Daniel Fannon, analyst]

So question just on ETF flows. You've obviously had a lot of success. I was hoping to get your context around sustainability for some of the products in a lower rate environment. And then also, there appears to be, as always in this market, more competition. So how do you think about kind of sustainability or defending your kind of the early lead that you have in some of these products?

[Ali Dibadj, executive]

Dan, thanks. So obviously, we've been extremely pleased with the success that we've seen in the ETF suite, the active ETF suites that we have in the U.S. We are, I guess, at least the fourth largest global provider of active fixed income ETFs, and that business continues to grow for us. To disaggregate your question a little bit, when interest rates came down, as you'd imagine, I think knowing me and the team that we have here in Roger, especially, we were looking at this on a daily basis. Frankly, we didn't know if anything would change. We sort of had created a category. And what we found was there was no change. In fact, as rates come down, as Fed rates come down, base rates come down, this becomes more attractive to people across our active fixed income ETF suites.



And I say suite to answer a little bit of the spirit of your question as well, we have four active fixed income ETFs with at least $1 billion in AUM. And that market is actually quite important because to the competitive perspective, one of the challenges of ETFs, obviously, is to have liquidity and to have scale. Well, we've got plenty of that. We've got plenty of that, and that allows us to deliver more to a broader set of clients who are clearly voting with their feet and delivering to us their capital to manage in these ETF forms. So we haven't seen a hiccup and we continue to see growth there.



Now we want to grow on that growth, not just in the suite that we have in the U.S., but as you know, adding new pieces to that suite. So we just launched our emerging market debt hard currency ETF, I guess it was in August or so. In September, we launched active equity ETF, mid-cap growth Alpha ETF and of course, we're trying to take the show on the road and go into Europe, as you know, this acquisition of Tabula, which is not just for Europe, but for Latin America, the Middle East, APAC as well. And we launched our first fund there or here because that's where I am now, the Japan High Conviction Equity U of ETF, and you should expect more launches in the coming months.



So we feel like we have the right to win in that area. We're not seeing massive pressure. We're actually continuing to see growth, and we want to build on that growth to deliver further for our clients and ultimately, obviously, for you, our shareholders.

[Daniel Fannon, analyst]

Great. That's helpful. And then just as a follow-up, Roger, I understand the guidance for this year. But just as we think about '25, I know it's a bit early, but you're having success with the elevated investment as we think about flows and some of the momentum you talked about. How do you -- how should we characterize the pace of investment as we think about 2025 given, as I said earlier, some of the success you're having today?

[Ali Dibadj, executive]

Yes. Hi Dan, thanks for the question. You're right. I mean there is a -- we are seeing some early success, and we definitely define it as early success. And there are things we are doing, as Ali just talked about, the launch of the ETF franchise in Europe. Hopefully, we'll see and reflect some of the growth we've seen in the U.S., but we will need to support it. We need to do marketing around the ETF business in Europe as an example. But we're also doing things around the world to capture that opportunity.



There are also other things that are out there, whether they be the results of our success, growing AUM results in some higher investment admin costs and some of that's coming through in this quarter that you can see. And there's also obviously inflation out there. So costs will be higher next year. There is some -- we've given some guidance around the fourth quarter. Our non-comp costs will go up in the fourth quarter, again, totally in line with our guidance, nothing is changing there. A little bit of that is one-off as we really have some opportunity in the fourth quarter, and we'll really be pushing some things hard in the fourth quarter where we really think we can succeed. But yes, so costs will probably increase in Q4, sorry, will increase in Q4. We will probably increase a little bit as we get into next year as well, but we'll give full guidance on that on the next call.

[Operator]

Our next question goes to the line of Patrick Davitt with Autonomous Research.

[Patrick Davitt, analyst]

A follow-up on Dan's ETF question. So obviously, a good problem to have. But without the strong inflows to the AAA ETF, you would still be in fairly consistent outflow. So I'm curious if you have any updated thoughts on the potential to get the large flagship active equity products back to inflow in a world that seemingly still has little demand for products like that regardless of performance.

[Ali Dibadj, executive]

Thanks, Patrick. So you're right, we're obviously very pleased about the progress across the board from a flows perspective. But absolutely, the star that has helped us is on the ETF side. Now to be clear, it's not just one product that's driving it, right? We have now four products across the board that, as I mentioned a second ago, over $1 billion. We have a whole suite of products that we want to bring to bear. And so first, if you focus in on ETFs, then I'll answer the second part of your question. From an ETF perspective, our view very strongly is that you have to have the combination of great investment strategies put in the right vehicle. And we clearly have many great investment strategies, some that are according to our strategy, Protect & Grow, Amplify, Diversify, some that are in the Amplify bucket that we haven't brought to clients in a form that they want to consume. They're small strategies, let's call it that. And we think we can put those in ETF form given the reputation we've built, given the abilities process-wise and client service-wise we've built to deliver great investment performance in a form factor that they seem to want to consume.



Now that's just not in the U.S., that's overseas as well, again, starting in Europe, but also then in APAC and LATAM. So the ETF franchise per se will continue to grow. And yes, we're building on the success that we've had in certainly starting with one and then now four crossing over the $1 billion mark. So ETFs is not kind of a one-trick pony, so to speak. It's something we want to build on and grow.



Then on the core of our business, again, that goes a little bit more to the protect and grow part of our strategy, absolutely very focused on that. What we're finding is more and more on a global basis, we're seeing our market share gains stick in those categories. You're right, broadly speaking, mutual funds are not growing categories, but if we can continue to gain market share like we are right now, we do think that the aggregate of our diversified business can deliver organic sales growth over time. I'll just note to you that this quarter, we did deliver revenue growth, so net new revenue growth with the broad base of our firm's opportunity set for our clients. And that includes ETFs, of course, although those are lower fees, it also includes improvement across regions and product categories. So ETFs, we're building on and everything else as part of Protect & Grow, we need to and want to deliver to our clients, and we will continue to gain market share and hopefully turn that into growth as well.

[Roger Thompson, executive]

And just putting some sort of facts around what Ali just said or some data around that, we have, I think, 13 strategies with more than $100 million of net flow this quarter. That includes mid-cap growth in the U.S. It includes global tech leaders. It includes enhanced index. It includes a European strategy, European equity strategy. In fixed income, it's not just the securitized area. Our multi-sector credit has got significant net inflows. And one of our hedge funds has pretty significant inflows as well. So no, it's -- you always want it to be broader. But like I say, I think 13 of our strategies are more than $100 million this quarter.

[Operator]

Our next question goes from the line of Bill Katz with TD Cowen.

[William Katz, analyst]

I did join a little late, so I apologize for that. I think you guided for performance fees to be up year-on-year, which is a nice surprise to what we were thinking about. I was wondering if you could unpack that a little bit, if you've already covered this, I apologize, but if you could unpack it between maybe what you're seeing in the non-mutual fund platform. And then based on our math, I think that sort of moves to breakeven in the fourth quarter. Is that about the right way of thinking about the delta here as we look quarter-to-quarter or year-on-year?

[Ali Dibadj, executive]

Bill, yes, we haven't talked about it on the call, so you didn't miss anything, and I hope the IC call was good. As we sit here today, we estimate, as you say, fourth quarter performance fees, what we said on the call was higher. they'll be significant. They will be higher than the fourth quarter of '23. that is in 2 reasons. One is the improvement in the U.S. mutual fund performance fees. That's really pleasing to see. You saw it drop this quarter. It was minus 18, I think, a year ago, minus 9% this year. And whilst we don't know what we're adding on, we do know what's dropping off. We dropped a pretty -- a poor Q1 '20 -- sorry, Q4 '21. So we'd like to see that improve further in Q4. On top of that, yes, we expect some positive performance fees from some of the very strong investment performance in hedge funds. But we'll see where we are at the end of the year. Obviously, the result will be dependent on performance over the remainder of the year. So it's those 2 pieces. It's the mutual fund performance fees that I know you've talked about, Phil, and that is moving the right way. And as I say, we've got some strong performance at the moment in hedge funds that we obviously hope continues until the end of the year.

[William Katz, analyst]

Okay. That's helpful. And then just as a follow-up, I noticed that the Board increased the buyback authorization by $50 million up to, I think, $200 million. And just given what looks like a very strong balance sheet at the end of the quarter, I'm not sure there's any timing in there of sort of ins and outs. But just conceptually, you've done a couple of deals now. Your balance sheet is in great shape, buying back a bit more stock. How do we think about just sort of incremental deployment from here? And maybe you could sort of parse that between what you might be looking at on the inorganic side versus capital return to shareholders.

[Roger Thompson, executive]

Yes. Well again, and I hope we've been very consistent in our messaging around capital. We have a strict hierarchy of needs. And at the bottom of that, we will return capital if we don't see an immediate need for it. So the Board have authorized an additional $50 million. Our expectation is to do that by the AGM next year. And we look at -- so we will look at that in terms of the things that we want to do. Should there be something else we want to do in terms of seed capital or any other M&A, Obviously, that would -- that may change, but our expectation is that we would do that buyback between now and the AUM. And the mix of the buyback and the dividend is something we look at. So the -- we'll obviously look at the dividend as we always do each quarter and particularly at year-end and evaluate that with our Board.

[Ali Dibadj, executive]

And just to add to Roger, Bill, we obviously have the flexibility given our balance sheet to invest both back in the business organically, but also as you've seen and you'll hopefully continue to see inorganically in a way that bolsters our business for clients and ultimately for shareholders as well.

[Operator]

Our next question goes to the line of Craig Siegenthaler with Bank of America.

[Craig Siegenthaler, analyst]

My question is on the insurance channel. So we've watched you guys be very active on the M&A front, expanding into privates and ETFs, but we think one area where Janus can do more is in insurance. So we wanted to get an update on your appetite to form strategic partnerships, IM agreements or raise SMAs with third-party life companies. And do you have enough product now, especially in private credit with the Victory acquisition, which could help you compete in this channel?

[Ali Dibadj, executive]

Craig, yes, thanks for the question. As you know, it's certainly on our minds as we think strategically about protecting, growing and diversifying. We have a strong base, I'd say, 3 points. Number one, we have a strong base of clients that are insurance clients right now. Some of the most sophisticated insurance firms in the world, literally globally, rely on us to manage their both GA and also their separate account businesses. And the feedback from all of them is quite positive. Obviously, we'd like to have more of those relationships, and we start from a good base is point number one. Point number two is there is obviously a lot of activity in the space right now. You see deals happening all over the place. As you'd imagine, we are knowledgeable about some of the deals that are out there given the background of my background and the background of the team here. So we see a lot of those come by. We will be very selective in doing the right thing that isn't giving away the farm, so to speak, just to have an insurance relationship, but we see a lot of opportunity in having insurance relationships. The most important thing for us, though, for one of those insurance relationships is to make sure that culturally, just like any M&A, culturally, we're aligned.



And to be fair, that's something that a lot of people overlook. It's something that we're very, very focused on because if we want to make a partnership with an insurance company, we want to make sure that we're culturally aligned to grow the business for them, for us based on the IMA structure that one could craft. So yes, we're very active there. You're exactly right, though, my third and last point is that although we do have a great base to work from, a big missing part for that was private credit. And in particular, what we were hearing from clients in insurance world is not just typical direct lending, something that is additive, that's orthogonal or noncorrelated to direct lending in the asset-backed world. And so we scoured really the earth to find what we thought was the best asset-backed private credit shop in the world. And lo and behold, we found Victory Park Capital. And we went through a process looking through their investment process, their performance, their potential to grow, the price points, obviously, but also in the end, to the point earlier, the people there. And the people there at Victory Park were exactly aligned with how we think about things. We have our own mission value purpose.





It turns out that when you walk into their office in Chicago, their main office in Chicago, you see Chicago's best places to work yet another year of winning. You see their motto, which is who cares wins, that's very aligned with us. And so we thought that from a cultural perspective, let alone all the other dynamics, they're quite a good addition. And we think with that, you're exactly right, not just with their culture, not just with what they invest, but their insurance relationships as well, we do think that it opens up a new set of opportunities, very much to your question to build out relationships with insurance partners who we can deliver for and hopefully over-deliver both for them and for us. So we're very active in that space, and I think we'll be -- we have even more tools in our toolkit with Victory Park Capital.

[Craig Siegenthaler, analyst]

Thanks, Ali. We have a follow-up on Privacore. And I know it's early innings, but have there been any additions to the platform in 3Q and October? And also, I think, potentially, could we see you add to your minority equity stake. And I know there was a big $200 billion AUM manager that was added earlier in the year, but I think those before 3Q. So we're looking for anything incremental.

[Ali Dibadj, executive]

Yes. Thanks a lot for the question on Privacore. We are very, very pleased with the progress we're seeing on Privacore. And just to remind everybody, Privacore essentially sits at the nexus of institutional quality alternative investment managers who want to access the private wealth business and the private wealth clients, our clients who want to get access but need different form factors, need client support, need a triage of sorts as well. And that's essentially what Privacore provides with really great success. So you're right, we had the $200 billion alternative asset manager, a well-known asset manager that came into the platform with knock on wood, it was good success for them.



We have now a, I guess, $70 billion technology-focused, probably premier technology-focused investment firm that's on the platform. We have about a $50 billion real estate manager that's going to come on the platform, if not already. We have a $40 billion private equity firm that is newer that's coming on the platform to another kind of very well-known. And we're getting significant flow from folks. It's tens and tens, I know the exact number, but let's just say tens and tens of GPs who are extraordinarily high performing, again, institutional quality who need help, Janus Henderson, Privacore's help to get on to create the right product form and to support the private wealth channel.



So we're very pleased with what we're seeing there. We certainly can choose to bring them on board fully. Candidly, Greg, it's a little bit of a decision about do you want to let them flourish a little bit before bringing them fully on board or not, we'll make that decision in due time. But if you take a little bit of a step back, I'll just take this opportunity to reiterate this concept of we're going to where the puck is going across our -- many of our M&A in private. So, if you think about what we've done with Privacore, we're really democratizing open architecture alternatives, right? A lot of people are trying to democratize, but they have a closed architecture version.



We have one of the only open architecture versions to bring that across to the private wealth channel. That's a multitrillion-dollar opportunity. That's again where the puck is going. Clearly, with NBK that we brought on board, which was the first private credit GP that we brought on board, that's investing in emerging market privates, a place we heard our clients' needs are quite great. And then, of course, to the earlier question, with Victory Park Capital and asset-backed credit, again, skating where the puck is going. So we feel like we're kind of hooking ourselves to growth trajectories in all of those areas. And Privacore obviously, will be essential to NBK, but certainly also to 50 Park Capital as we grow that business.

[Operator]

Our next question goes to the line of Mike Brown with Wells Fargo.

[Michael Brown, analyst]

I just have one on the institutional pipeline. A large bond manager is seeing significant flow pressure and understanding that's a somewhat sensitive topic to talk about competitors. But I guess I'm curious if your fixed-income business is seeing a pickup in activity. Has the pace of RFPs picked up in the last 2 months? And could this be an opportunity for Janus Henderson? And maybe just with mandates in a situation like this. Yes, yes. But I guess with mandates in a situation like this, is it -- is the time frame somewhat faster or kind of similar to what a typical kind of institutional mandate would be?

[Ali Dibadj, executive]

On the institutional side, it's a little bit faster. So typically, you would talk about 12 to 24 months, honestly, from an RFP perspective. Here, you're talking about things in several quarters on the institutional side. When unfortunate things like that happen, which candidly, no one wishes on anybody, but when they happen, they move a little bit more quickly on the institutional side of things. Just to be clear as well, things move much more quickly on the intermediary side. So often, intermediary can have much more flexibility in RIAs, et cetera. That is something that we hope to continue to get our fair share of, particularly with some of the ETF platforms that we have, Mike.

[Operator]

Our next question goes to the line of John Dunn for ISI.

[John Dunn, analyst]

So the multi-asset segment remains in slight outflow. Maybe could you talk about what do you think it's going to take to see better inflows in the balanced funds?

[Ali Dibadj, executive]

Sure. Happy to take that. So multi-asset, to your point, is predominantly the balanced fund. So let me start there, and then we can move to the other part of it, which is the solutions area. Look, I think what you're seeing among clients right now is this willingness to step back into the markets. You're seeing that from a flow perspective into the equity markets, but want a little bit of ballast from fixed income to deal with some of the potential volatility there.



Balance clearly, by definition, is the perfect almost personification of that need, particularly as there is a return profile that you now get from fixed income when you weren't getting it before and equity seems to be doing okay more broadly as well. So, for us, we're seeing more interest in that space. We're seeing more interest within balance. If you look at our flow trajectory over the past several years, we're doing better and better, clearly gaining share. And a lot of that is on the back of knock on wood, fantastic performance by the team in both sleeves, and the portfolio construction between the fixed income and the equity sleeve of things.



So we are very bullish about the balanced fund. We think everybody on this phone, everyone else should take a look at it, either ours or somebody else's, but we think it's the right model for this market where there is hopefully equity return and fixed income balanced and return in the game, and our performance is quite strong. So that's -- you're right, the bulk of the multi-asset side of things. Now there is the rest of multi-asset, which is effectively a solutions business, -- and there are 2 elements there to think about.



One is the solutions business that we're bringing to intermediary. So think of model portfolios. We are kind of notching wins on the list. It's small, but we're notching wins on the list there with some very specific clients. We have a great team here at Janus Henderson on this front, great solutions team, folks who've built this type of stuff before in large intermediary businesses. And also, it's probably worth saying Myron Scholes of Black-Scholes is our Chief Strategy Officer. So he thinks through a lot of what we can bring to bear in the intermediary channel.



The other piece of the solutions business is on the institutional side of things. We have won mandates from some of the most sophisticated sovereign wealth funds to run models for them to run adaptive strategies we call them, which use option signals, for example, to identify when there are paradigm shifts in the markets. And so you can be much more nimble with how you allocate some of your assets to the large sovereign wealth fund. And we think we're going to see some more progress there. So yes, multi-asset is balanced. We're quite bullish given the market environment right now. There is a return on both sides of that fund and also the solutions, we certainly hope that, that builds up as a real business for us over time.

[John Dunn, analyst]

Got it. And then my other one was, how are you thinking about integrating your acquisitions? Are they going to be more like affiliates or something more integrated? And to the extent you do more in private credit, would it be like bolting on to Victory Park -- or yes, just maybe your philosophy around that?

[Ali Dibadj, executive]

Yes. We're not big believers in boutique models as you've seen other people play. In other words, independent and just loosely tied into a holding company. We have historically not seen that work in most instances. We very much believe in what we call integrating smartly. We like to integrate where we think we can add value, i.e., distribution, regulatory, compliance, legal, IT ops, those types of things, but not integrate in areas where the firm can't add value. So we have these conversations all the time with folks that we could partner with or acquire. And the conversation inevitably goes to, "Listen, if we're going to acquire you, rest assured, we don't know how to invest like you do. So we're not going to come in and tell you how to invest. That's what we're bringing your expertise in for. So we're not going to integrate that." Yes, there'll be oversight, Yes, there'll be risk profiles they have to go through, but we're integrating smartly across the board. So we are not, in any way, looking to build a boutique model. That's not the plan. That's not how we're thinking about things at all, and that's not what folks we've acquired have signed up for.



To the private credit side of things, when appropriate, yes, our hope is that Victory Park Capital is a chassis for other teams at least to come into where Victory Park has the ability to plug them in. If you think about it, prior to Victory Park Capital, we didn't have a private chassis or expertise to buy teams and bring them on board. Well, guess what, out of the many, many benefits we get from Victory Park Capital to the insurance conversation before, to working with our public securitized business, as we talked about before, to other opportunities that we bring on board from a cultural perspective, we now have a chassis to bring teams on board where appropriate for Victory Park Capital. So John, your question is quite appropriate in the way we're thinking about things strategically as well.

[Operator]

Our next question goes to the line of Michael Cyprys with Morgan Stanley.

[Michael Cyprys, analyst]

I just wanted to ask on the distribution side of the organization and update us on some of the changes you've made across the distribution side of the organization over the past couple of years. Which changes do you think have been most meaningful for the growth that you're seeing today in inflection? And how do you anticipate the distribution team evolving as you kind of look out from here? And maybe you could tie into that how might you evolve the client experience over the next several years as well?

[Ali Dibadj, executive]

Yes. Thanks very much for the question, Mike. We've made a lot of changes to the distribution side of the business, both on intermediary, which is where we started in the U.S. and then are expanding it to EMEA, LatAm and APAC. And then obviously, in the institutional business, which is a little bit later changes that we're making. In fact, we're still making some changes as we speak. The way we think about the changes are relatively well versed. So we think very much around what the people are on the team. So are they the right people? Do they have the right relationships? We think we're there mostly across the board.





We then think a lot about the product. Do we have the right products that are there? Can we build them organically or inorganically? We think then about the process people go through. So what are the process people take? What kind of data can we give them? Who are they looking to in the marketplace? And that's something that changes quite a bit when we bring in new people, showing new leadership to bring on board. And then we absolutely have to think about the incentives that we build for folks. Do we have the right incentives in place to have them aligned with growth of the business? And that has to be put in place as well.





So as we go down the line, each of those elements change, the people, the product, the pay, incentives and obviously, the process and the data that we use for that. And that's something that we started in the U.S. We changed that quite a bit. And I think you're seeing at least early signs, maybe it's a little bit later now, but early signs of the fruit and labor, where we now have 5 consecutive quarters in the U.S. intermediary business of positive flows. We picked up a lot of those experiences and brought over those are being put in place. And now you have the second consecutive quarter of positive flows in that area.



And again, we're applying those to the rest of the business. So those are the main changes that we're going through. It's soup to nuts, and it feels like we're certainly on the right track and the great, great leadership team that we have on the distribution side right now is delivering on that. All of this, to your second part of your question, is very focused, the way we do all of those 3, 4 things to deliver better client outcomes. We have to deliver on the investment performance. That's first and foremost what we do, but we have to deliver them in a manner that clients can easily be supported. And that's what the client group does. And so you'll see more interaction with clients. You'll see deeper relationships with clients. You'll see also, hopefully, over time, more clients who rely on us for more and more of their asset management needs.

[Operator]

Our last question will go to the line of Alex Blostein with Goldman Sachs.

[Alexander Blostein, analyst]

Luke here on for Alex. Just one for me, and I apologize if I missed this earlier, but I want to get your thoughts on the near- to medium-term growth drivers for VPC and what the differentiated strategic angle is for VPC from partnering with Janus specifically?

[Ali Dibadj, executive]

Luke, thanks very much for joining and putting in the question. So again, what we've been hearing from clients over and over and over again is that they want more private credit, but they want something that's different than typical direct lending. They want something that's uncorrelated or complementary to the direct lending suite that is pretty well baked out there and look, candidly, for the most part, has turned into a broadly syndicated loan market, if I may say it. And so asset-backed is the clear area that they were looking at. And so we found VPC.



VPC has phenomenal origination as a differentiator. The teams there are very, very strong. They're very creative. They've got great networks. They've got great data and technology actually. And on top of that, as I mentioned before, a great culture and a great, great set of partners who are there. And they have great origination, but they needed more capital. They were effectively leaving money on the table when they had all of this flow coming in from a deal potential, they didn't have the capital behind it. So our opportunity to work with them is to grow the capital that they can put to use. That will take time. We're well aware of that. We've done this before on the team. We know it takes time, but we're working together with their distribution team and our distribution team to lay out the plans to exactly, to your point, grow.





Now they have 4 kind of buckets of their business. One is the asset-backed opportunistic credit funds. So that is something that we think has a lot of growth. The growth, the emphasis there is on capital preservation through market cycles. If you think about to the insurance question earlier on, that's something that could be quite interesting for them, but many other clients that we have as well. And we've already had some interest. They have a legal finance book, which is really uncorrelated to broad market experiences. It's an opportunity set that they've seen. It's not actually typical litigation finance. It usually comes in after a settlement has been made and finances the settlement of legal decisions. They have a very dedicated, very large insurance services system. It's custom investment management for insurance companies, a dedicated team that they have that we can now bring to bear globally among our insurance clients. We're already having conversations with that. And the fourth area, which we think also adds opportunities to have something called Triumph Capital Markets or TCM, as we call it. It provides structured financing solutions to nonbanking financial institutions. So we can bring that to bear as well.





So those 4 together, we think, create a very broad-based, at least 4 legs to the stool, so to speak, that we believe we can grow and bring those opportunities to a broad set of clients, both geographically and also channel-wise, especially if you bring in Privacore to the mix.

[Operator]

That will conclude the question-and-answer session. So I will now pass the conference back over to you, Mr. Dibadj, for closing remarks.

[Ali Dibadj, executive]

Thanks, Megan. I just wanted to end the call by thanking everyone at Janus Henderson, whether they be in the support functions, the IT operations functions, the investment teams, the client groups, everywhere across the firm for all the hard work to deliver these very clearly strong results and signs that we're on the right track and most importantly, most importantly, delivering to our 60 million clients, 60 million brighter futures we're trying to deliver around the world as well as to our shareholders and all of our other stakeholders. So thank you for your interest. Thank you for your hard work at Janus Henderson, and bye for now.

[Operator]

That concludes today's conference call. Thank you for your participation. I hope you have a wonderful rest of your day.