Janus Henderson Group PLC

NYSE:JHG

Earnings Call Analysis

Significant Growth and Strategic Advancements

In 2023, the company navigated a challenging active equities environment, experiencing net outflows but countered with positive net inflows in fixed income resulting in a total net flow of $7.2 billion. Notably, active ETFs grew exponentially, cementing Janus Henderson as a top provider in the U.S. Diversified alternatives also saw significant growth, exceeding 35% AUM. Additionally, the company is advancing strategically through joint ventures like Privacore and nurturing a strong corporate culture which is integral to ongoing success and client relationships. Financially, adjusted earnings per share improved by 34% year-over-year, reflecting solid operational performance and financial management strategies aimed at cost efficiency and continued investment in the firm's strategic initiatives.

Optimizing Business Channels and Capturing Market Shifts

There has been a strategic emphasis on improving business channels, notably with proactive investments in the U.S. intermediary channel. This has led to 1% organic growth and enabled the company to experience positive net flows for the first time in seven years, indicating a successful recovery and capturing of market share in both gross sales and net flows. On the fixed income front, inflows hit $1.7 billion, contributing to a total positive net flow of $7.2 billion for 2023, a positive sign given the company's positioning for potential industry shifts into fixed income in 2024.

Solid Financial Highlights and Forward Guidance

The adjusted revenue for the company increased by 12% due to higher performance fees, though it was tempered by lower average AUM. The adjusted diluted EPS stood strong at $0.82. Looking forward, the firm anticipates a compensation ratio of 43% to 45%, down from the previous 46%, and a tax rate on adjusted net income at 23% to 25% for 2024.

Robust Capital Returns and Diversification

Reflecting a strong cash flow generation, the firm returned over 70% of its operational cash flows, amounting to $2.5 billion, to shareholders since 2018 through dividends and share buybacks. In 2023, this equated to 73% of operational cash flows, underscoring the firm's robust financials and its strategic pursuit of diversification, including potential M&A activities.

Strategic Pillar Achievements and New Horizons

Under Amplify, one of the company's strategic pillars, the institutional business witnessed $7 billion in net inflows, a first since 2018. The diversified alternatives and active ETFs, including fixed income ETFs, have shown impressive growth, with the ETFs alone attracting $6 billion in net flows and finishing at $12 billion in AUM. New product launches, such as additional SMA strategies and various funds, coupled with an ambition to lean into active equity ETFs, illustrate commitment to innovation and client-driven needs.

Promising Prospects and Strategic Direction

There's measured optimism regarding organizational growth, driven by strategic moves and clear progress in areas like institutional diversified alternatives and product expansion. The company projects organic revenue growth over time and acknowledges the non-linear nature of this progress, which marries strategic clarity with a grounded approach to execution and market adaptation.

Reinvestment and Cost Management

The company has outpaced its cost savings efficiency targets, achieving over $50 million in savings sooner than expected, giving it both the opportunity to reinvest in strategic initiatives and to return cash to shareholders. This financial flexibility underscores the company's intention to maintain a balance between investment in the business and shareholder returns.

Growth Opportunities in Emerging and Fixed Income Markets

The firm is poised to capitalize on growth within fixed income, given its variety of well-performing sector offerings and potential in emerging markets. Insurance, forming a significant part of the fixed income business, has been identified as another area for organic and potentially inorganic expansion.

Global Expansion and Client-Centric Product Development

Leveraging the success and learnings from its strategic initiatives, particularly in the U.S., the firm is looking to replicate this success internationally. With a renewed approach to product launches shaped by client feedback and market needs, there is a clear focus on expanding offerings, including in the ETF space, to meet diverse client requirements around the globe.

Positioning for Retirement and New Product Channels

The CIT market emerges as a new landscape for growth, bolstering the company's aspirations to develop and expand its presence in the U.S. retirement space, indicative of strategic agility and responsiveness to market developments.

Earnings Call Transcript 2023-Q4

[Operator]

Good morning. My name is Jordan, and I'll be your conference facilitator today. Thank you for standing by, and welcome to the Janus Henderson Group Fourth Quarter and Full Year 2023 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's 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 Fourth Quarter and Full Year 2023 Earnings Call. I'm Ali Dibadj. I'm joined by our CFO, Roger Thompson.

In today's call, I'll start with some comments on the year. Roger will then go through the results. And after that, I'll provide an update on the strategic progress we made in 2023. After those prepared remarks, we'll take your questions.

Turning to Slide 2. After one of the most challenging market backdrops in 2022, most global markets rebounded and experienced growth in 2023 that concerns about inflation, aggressive monetary policy, recession fears and shocks to the banking system in early 2023 were overshadowed by inflation coming off peak levels, resilient economies, particularly in the U.S., the expectation of the end of rate hikes. Even with positive market returns for the year, headwinds remain as global markets look set to remain conflicted with the consequences of historic rate hikes finally manifesting themselves.

Amidst this volatility, we ended the year strongly, with fourth quarter results that delivered underlying net flows, revenue, operating expenses, margin and EPS that are all ahead of or in line with external expectations. And on top of that, our team delivered better-than-anticipated performance fees and tax rate.

As I reflect upon the year, there are several signs of clear progress at Janus Henderson. This progress was the result of the collaboration, hard work and perseverance of colleagues across the firm and is squarely on the path to achieving our ambitions of organic growth and delivering superior outcomes for our clients, their clients, colleagues, shareholders and other stakeholders.

We are executing our strategic vision, which consists of 3 pillars: protect and grow our core businesses, amplify our strength not fully leveraged and diversify where clients give us the right to win. Later on in the presentation, I'll provide detail on the progress made for some of our strategic initiatives.

2023 net outflows of $700 million improved markedly from 2022 net outflows of $31 billion. The improvement was driven by lower redemptions and large wins in global institutional and a turnaround in the North American intermediary business, both of which are strategic initiatives that we've emphasized at Janus Henderson and previously discussed here.

In early 2023, we reenergized our culture, by introducing our mission, values and purpose company-wide. And we continue to embed this critical mindset across the firm.

Cost efficiencies or Fuel for Growth, which allow for reinvestment in Janus Henderson's strategic initiatives on behalf of our clients, were realized at a faster pace than expected and at a higher dollar amount. We achieved run rate cost efficiencies of more than $50 million by the end of 2023 compared to the original $40 million to $45 million by the end of 2024. All of these cost savings have been or will be reinvested in the business.

We simplified our operating model with the go-live of a significantly upgraded order management system. We transformed a crucial platform, and we delisted from the ASX, allowing us to focus on a sole, more active exchange and reduce costs.

Our improving financial results and cash flow generation, along with a strong and stable balance sheet, enable the Board to authorize a share buyback program. This buyback program, coupled with our quarterly dividend, enabled Janus Henderson to return $321 million of cash to shareholders in 2023. Importantly, this return of cash to shareholders does not impede our pursuit to diversify the business through M&A where clients give us the right to do so.

The 2023 results on Slide 3 illustrate how our improvements in the business are starting to bear fruit. Long-term investment performance remains solid, with the majority of assets ahead of benchmark on a 3-, 5- and 10-year basis. Total AUM increased 17% in 2023, mostly reflecting strong fourth quarter markets and currency translations. Ending AUM of $334.9 billion is 7% higher than the 2023 average AUM. As I discussed on the previous slide, net flows showed tremendous progress during 2023, resulting in an organic growth rate of less than negative 1% compared to negative 8% in 2022.

Financial results remain solid. Our financial performance and strong balance sheet continue to provide us the flexibility to invest in the business organically and inorganically and return cash to shareholders.

I'll now turn the call over to Roger to run you through the detail of the quarterly financial results.

[Roger Thompson, executive]

Thank you, Ali, and thanks again to everyone for joining us on today's call.

Starting on Slide 4 and look at the quarterly results. As Ali has already discussed our solid investment performance, I'll touch briefly on AUM, flows and EPS. Net outflows were $3.1 billion in the quarter. However, ending AUM was up 9% from Q3, and adjusted financial results improved compared to the third quarter.

Adjusted earnings per share increased 28% to $0.82 compared to the prior quarter as fourth quarter EPS benefited from the stable management fee rate, strong annual performance fees and a lower tax rate. Even without the upside from the better-than-expected performance fees and a lower tax rate, our core fundamentals, including flows, net management fee rates, revenues, expenses, operating income and EPS were either ahead of or in line with Street expectations.

Finally, on this slide, the Board declared a $0.39 per share quarterly dividend. And we purchased $62 million of our shares outstanding as part of the buyback program announced last quarter.

On Slide 5, we'll look at the investment performance in more detail. Long-term investment performance versus benchmark remains solid, with at least 60% of AUM beating their respective benchmarks over the 3-, 5- and 10-year time periods. The lower 1-year number is driven by our Equity and Multi-asset capabilities.

In Equities, the 1-year performance is impacted by the narrow leadership driving market gains in the U.S. and the low-quality rally for small and mid-cap growth stocks, which weighed on relative returns to benchmarks in the fourth quarter. In the Multi-asset capability, the balanced strategy, which is the vast majority of assets in this bucket, is marginally underperforming the benchmark on a 1-year basis.

Balanced remains ahead of its benchmark over the 3-year and longer-time periods, and the performance is strong against peers, being in the second Morningstar quartile of over 1 and 3 years and in the first quartile over both 5 and 10 years. The balanced composite performance has had a strong start to 2024. And as we sit here today, it's back above its benchmark on a 1-year basis.

Short-term Fixed Income performance versus benchmark has steadily improved during 2023. Pleasingly, 79% of AUM is now ahead of benchmark on a 1-year basis. The longer-term periods remain very 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 stabilize and bonds provide diversification benefits to clients.

Overall investment performance compared to peers continues to be competitively strong with 63%, 68%, 80% and 89% of AUM in the top 2 Morningstar quartiles over the 1-, 3-, 5- and 10-year time periods.

Slide 6 shows total company flows by quarter. And for the quarter, net outflows were $3.1 billion.

And we showed flows by client type on Slide 7. Net outflows for the intermediary channel was breakeven compared to $1.3 billion of outflows in the third quarter. This is the best quarterly result for intermediary in over 2 years. The quarterly result was a tale of 2 regions as outflows in EMEA and Lat Am were offset by net inflows in the U.S. intermediary region. Outflows in EMEA were not unique to Janus Henderson in 2023 as EMEA, in general, faced meaningful flow headwinds. U.S. intermediary had its best quarter flows in 4 years, supported by strong gross sales and positive flows in several strategies, including the AAA CLO ETF, mortgage-backed security ETF, multi-sector income and our short-duration income ETF. Pleasingly, we captured market share during the quarter and for the full year 2023.

As we've spoken about previously, U.S. intermediary is a key initiative under our Protect & Grow strategic pillar. We're encouraged by the results for the quarter and for the year. Ali will provide further details on the progress we've made in U.S. intermediary later in the presentation.

Institutional net outflows were $2 billion for the fourth quarter compared to $400 million in the third quarter. In line with our previous comments, after large mandate fundings in the first half of the year, we were not anticipating large fundings during the quarter. We are pleased, though, with the work our distribution team is doing to build a sustainable pipeline. But as we've said, it will take time.

Net outflows for the self-directed channel, which includes direct and supermarket investors, were $1.1 billion compared to $900 million in the prior quarter. The increase in net outflows is primarily due to seasonal year-end tax planning in the U.S.

Slide 8 is flows in the quarter by capability. Equity flows were negative $3.2 billion in the fourth quarter compared to negative $2.3 billion in the third quarter and negative $7.5 billion a year ago. The environment for active equities remains challenging across all regions.

Net inflows of Fixed Income were $1.7 billion, bringing total net flows to a positive $7.2 billion for 2023. We're encouraged by the improvement in short-term investment performance to go along with our solid longer-term investment performance in Fixed Income, and we believe we're well positioned to capture flows if an industry rotation into fixed income occurs in 2024. Several strategies contributed to positive Fixed Income flows, including our fixed income ETFs, which had positive flows of $3.2 billion in the quarter. Other strategies contributing to positive flows for the quarter were multi-sector credits, U.S. buy and maintain credits and global multi-sector fixed income.

Total net outflows for the Multi-asset and Alternatives capability were $1.4 billion and $200 million, respectively.

Moving on to the financials. Slide 9 is our U.S. GAAP statement of income.

And on Slide 10, we explain the adjusted financial results. Adjusted revenue increased 12% compared to the prior quarter due to higher performance fees, partially offset by lower average AUM. Average AUM in Q4 was $315 billion, but period-end AUM was $335 billion, giving a tailwind into Q1. Fourth quarter performance fees of $42 million include annual performance fees of $58 million generated primarily from a number of funds and capabilities with December 31 crystallization dates, the largest of which is our health care franchise. Partially offsetting this revenue was negative $17 million from the U.S. Mutual Fund performance fees.

Net management fee margin was 48.7 basis points, consistent with the prior quarter. Our full year net management fee margin of 48.9 basis points was down by less than a basis point compared to 49.6 basis points in 2022. A slight decline was primarily due to large lower-fee institutional fundings in the first half of the year.

Continuing on to expenses. Adjusted operating expenses in the fourth quarter were $299 million, an increase of 7% compared to the prior quarter. Adjusted employee compensation, which includes fixed and variable costs, was up 4% compared to the prior quarter as higher incentive costs on higher revenues was partially offset by lower fixed compensation. Adjusted LTI was up 18% compared to the third quarter, largely due to mark-to-market on mutual fund awards. And in the appendix, we've provided the usual table on the expected future amortization of existing grants along with an estimated range for the 2024 grants for you to use in your models.

The fourth quarter adjusted comp-to-revenue ratio was 42.9%, and our full year comp ratio was 45.8%, in line with expectations, which we previously provided. Adjusted noncomp operating expenses increased 8% compared to the prior quarter primarily due to higher G&A expenses. On a year-over-year basis, adjusted noncomp expenses increased 2.5% compared to our revised expectation of percentage growth in the mid-single digits, reflecting our commitment to strong cost management.

Adjusted operating income increased 25% over the prior quarter to $156 million in the fourth quarter. And our fourth quarter adjusted operating margin improved over 300 basis points to 34%.

Adjusted diluted EPS was $0.82, up 28% from the prior quarter and up 34% from the same quarter a year ago. Fourth quarter adjusted diluted EPS primarily reflects higher operating income, coupled with a lower tax rate.

With respect to 2024 expense expectations, having fully delivered on our Fuel for Growth targets, we've identified further fixed compensation and noncompensation operational efficiencies. And as a result, we anticipate a compensation ratio in the range of 43% to 45%, down from almost 46% in 2023. For noncompensation, we anticipate percentage growth of mid- to high single digits as a result of investments supporting our strategic initiatives as well as inflation and amortization. To offset where we can, we'll continue to be mindful of our discretionary cost base and be disciplined in our cost management. Net-net, we're comfortable with external expectations of our 2024 total operating expense dollar costs. Finally, we expect the firm's tax rate on adjusted net income attributable to JHG to be in the range of 23% to 25%.

Skipping over Slide 11 and moving to Slide 12 and a look at our liquidity profile. Our capital position remains strong. Cash and cash equivalents were $1.1 billion as at the 31st of December, which is roughly flat to the end of last year as excess cash flow generation was used to fund our quarterly dividend and to repurchase 2.3 million shares for $62 million in the fourth quarter. 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 28th of February to shareholders of record as at the 12th of February. In summary, 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.

Finally, Slide 13 looks at our annual return of capital to shareholders. We've been disciplined in consistently returning excess capital to shareholders as this historical data reflects. Since 2018, we've returned over 70% of our cash flow from operations or $2.5 billion to shareholders in the form of our quarterly dividends and accretive share buybacks. Our dividend has increased 11%, and we've reduced shares outstanding by 18.5% since our first accretive buyback program commenced in the third quarter of 2018. In 2023, we returned 73% of our cash flow from operations to shareholders, including $259 million in dividends and $62 million in buybacks.

Our capital allocation philosophy has not changed. We reserve cash for our regulatory capital requirements and liquidity needs and then set aside capital for contractual obligations. We then look to utilize cash flow organic and inorganic reinvestments in the business and then consider returning excess cash via dividends and share repurchases.

Our return of capital reflects our positive financial outlook, our cash flow generation and a strong and stable balance sheet. Our buybacks and stable dividends do not impair our ability to execute M&A should the opportunity arise, and we 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 an update on our strategic progress.

[Ali Dibadj, executive]

Thanks, Roger. Turning to Slide 14. 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. Over the next few slides, I'll highlight the progress being made across the 3 pillars.

Moving to Slide 15, which describes the investment and efforts in the U.S. intermediary channel, which are leading to improved business trends. In Protect & Grow, we've talked previously about the importance of protecting and growing our U.S. intermediary business, which is Janus Henderson's largest client segment. In 2023, we set the foundation for this channel. We made several investments, including launching an award-winning national brand campaign, selectively upgrading talent and aligning compensation with our growth strategy. We've also increased the pace and quality of client engagements. These changes are allowing us to be on the front foot with our intermediary clients and their clients.

The progress in U.S. intermediary is tangible. Net flows were positive for this channel for the first time in 7 years, resulting in a 1% organic growth rate, a tremendous result given industry headwinds. Very importantly, we're capturing market share in both gross sales and net flows, reversing a trend of losing market share for many years.

While there's always much work to do, the U.S. intermediary business is a great example of our ability to create and execute on our strategic plan in a specific area to drive culture change and improved results. As we move into 2024, we'll expand our strategic efforts to the EMEA and Latin American intermediary segments.

Slide 16 details the meaningful progress made under the strategic pillar of Amplify. Within Amplify, we've previously discussed our institutional and diversified alternatives businesses and our product development and expansion efforts. In the institutional business, flows are positive for the first time since 2018 at $7 billion of net inflows compared to $14 billion of net outflows in 2022. This improvement was driven by increased gross sales and reduced gross redemptions. We've restructured coverage to be more aligned to different client types, helping us to serve their needs better through greater specialization, and we're seeing a number of consultant-advised wins, which is critical to the future growth of the institutional business over time.

Diversified alternatives, which includes multi-strategy hedge funds and enhanced index funds, generated positive flows and over 35% AUM growth in 2023.

Our suite of active ETFs experienced a very successful year. Net flows were positive $6 billion, and AUM finished the year at $12 billion, equating to an annual growth rate of 65% since 2018. With this growth, Janus Henderson is now the fourth largest provider of active fixed income ETFs in the U.S. Impressively, during 2023, roughly $1 out of every $5 net invested into an active fixed income ETF went to Janus Henderson. We have momentum in active ETFs, and we aim to do more in this space in 2024.

In 2023, we established several new products and vehicles based on what our clients are telling us. We launched Global Life Sciences and the Global Properties Equities Funds as OEICs, a Securitized Income ETF and a Sustainable Credit ETF and Emerging Markets Innovation Fund in a SICAV and additional SMA strategies in the U.S.

Turning to Slide 17, our third pillar of Diversify. We continue to look to actively buy, build or partner to diversify where clients give us the right to win. The M&A pipeline is active with several opportunities, and we're going to be very disciplined in our approach.

In 2023, we began a joint venture, Privacore, that looked to take advantage of the democratization of private alternatives into the retail channel. Privacore's mission to partner with the best-in-class managers of alternative investments, paired with extensive relationships at wire houses, broker-dealers and RIAs, creates value on both ends of the value chain, accelerating GP fundraising and bringing differentiated institutional quality investment opportunities to a set of clients that are notably underallocated towards alternatives today. I'm excited to say that we remain on track with building out the Privacore business, and Privacore will be distributing its first product this quarter. Privacore is drawn to 21 employees and have hired its regional distribution teams serving the U.S.

Finally, our Emerging Markets Debt team, which was brought into Janus Henderson in September 2022, had positive flows in 2023. And AUM has grown to more than $1 billion.

Another focus in 2023 was the reenergizing of our culture through our mission, values and purpose, or MVP, that we rolled out company-wide and as shown on Slide 18. I'm a firm believer that strong MVP is essential to the success of a company. My experience and the facts prove it. We introduced our MVP to define who we are and what we stand for as a collection of individuals and as a firm, not just for today but for what we want to be in the future. It gives us a clear North Star, and this is critically important as we augment our culture of performance, collaboration, urgency and accountability built upon our stable and client-focused DNA at Janus Henderson.

Our MVP, coupled with our strategy on a foundation of cost efficiencies, guides our decision-making and prioritization and allows all colleagues to move together in the same direction to help us win in this competitive landscape. I've been extremely encouraged by how quickly colleagues have embedded our mission, values and purpose into the work and by the clear signs of progress across the firm.

Moving to Slide 19, which is an illustrative view of our strategy and where we believe it can take us. We are executing our strategic plan and believe our strategy will lead to organic revenue growth over time. Success will not happen overnight, and progress will not be linear. Even so, there's real progress in all 3 pillars of our strategic framework as evidenced by U.S. intermediary in Protect & Grow, institutional diversified alternatives and product development and expansion in Amplify and Privacore in Diversify. The undeniable advancement of our strategy, culture and execution in 2023 had Janus Henderson squarely on the path to delivering desired results for our clients, shareholders, employees and all our other stakeholders.

Now wrapping up on Slide 20. I'm proud of the progress made in 2023, and I want to thank each and every one of my colleagues at Janus Henderson for their hard work and dedication as we continue to show real progress on our strategic path to deliver consistent organic growth. We are not in our destination yet, but we are clearly on our way.

Progress is evident across several aspects of the business. Net flows improved markedly over last year. We reinforced our culture by introducing mission, values and purpose and embedding it company-wide. We achieved run rate cost savings efficiencies of over $50 million sooner and at a higher dollar amount than expected. And this Fuel for Growth allows for reinvestment in Janus Henderson's strategic initiatives on behalf of our clients and their clients. We simplified our operating model. We have a strong balance sheet and good free cash flow generation, which enables us to return cash to shareholders and reinvest in the business.

Looking ahead, our focus continues to be helping clients define and achieve superior financial outcomes and to deliver desired results for our clients, shareholders, employees and all our stakeholders.

I'll now turn the call over to the operator for questions.

[Operator]

[Operator Instructions] Our first question comes from Dan Fannon of Jefferies.

[Daniel Fannon, analyst]

Ali, I was hoping you could expand upon the Fixed Income or the active ETF strategy. Obviously, a lot of success this year in terms of growth. Can you talk about where those products are being sold through in the intermediary in those channels? And then as you think about the road map for additional products, what does that look like within that active ETF framework?

[Ali Dibadj, executive]

Dan, thanks for the question. So our active ETF franchise right now just crossed over around $12 billion in assets under management, a very good success in a relatively short period of time. That allows us to have come in, in fourth place overall on the league tables for active fixed income ETFs in the U.S., and really, that means in the world.

And the strategy that we've employed there is democratizing a set of institutional-level investment skill sets and bringing that to the retail channel, both in the wire houses and in the RIAs, to your question. And that strategy has been, obviously, fairly successful. And so we want to continue down that path. We launched a new ETF last year called JSI, so securitized. And we think there's a lot more opportunity to continue down that path of democratization as a broader theme.

Remember, these are active fixed income ETFs, and we're always going to be client-led. So we do a tremendous amount of research to understand what our clients' needs are before we launch these. So we think there's more potential.

[Daniel Fannon, analyst]

Understood. And then I guess, just shifting to the inorganic opportunity. Your statements have been consistent. You've obviously looked at a lot of properties over the last year plus. Can you talk about what's been the biggest holdup in terms of actually getting to the finish line with the transaction? And has your priority shifted at all during this time to maybe thinking more about lift-outs and smaller-scale transactions to broaden your product offering versus something maybe a little bit more sizable?

[Ali Dibadj, executive]

Yes. So I wouldn't say our strategy changed at all on this. We've continued to be very active in thinking about buying, building and partnering in terms of M&A to support our strategy, whether that be protecting and growing our core businesses or amplifying our strengths or, of course, diversifying where clients give us the right to do so.

We're always going to be client-led in the M&A. So even when we find something that could be interesting to us, we often figure out whether it's the right thing for our trusted set of clients. And right now, there's a very active pipeline, several opportunities out there, both large and small that we're looking at. And we're going to remain very disciplined in our approach from a valuation perspective and, importantly, from a cultural fit perspective. And sometimes, to use your words, that's the holdup is trying to make sure we have the best teams that will fit from a value perspective and a culture perspective.

Look, as everybody on this phone call knows, timing M&A is very difficult to predict. You could get a slew of no activity for quite some time, a slew of a lot of activity for some period of time. And we just want to be sure that we're making the right decisions. We're looking for the right partners who want to grow with us and are, again, the right cultural fit.

[Operator]

Our next question comes from Craig Siegenthaler of Bank of America Merrill Lynch.

[Craig Siegenthaler, analyst]

I had a follow-up here on Fixed Income. So there was a nice improvement in sales in the quarter. That's not unusual just given typical seasonality for 4Qs. But I wanted to use this as an opportunity for you to update us on your own view for the potential for inflows in your Fixed Income business as your clients extend duration to fixed income.

[Ali Dibadj, executive]

Yes. Thanks for the question, Craig. Look, our Fixed Income performance and breadth and depth of product is quite attractive. We're trying to be quite attractive to clients.

If you think about Fixed Income more broadly, there is now a reason to own fixed income according to our clients. That's obviously yield, number one. Number two, it's actually providing diversification. And number three, perhaps a theme that has always been there for a subsegment of our client base, is the regulatory reasons to do it. It's lower capital charges for insurance companies, et cetera. And those reasons are much more important today for our client base, and we're feeling a little bit of an industry-wide inflection point here.

Again, gladly, we are in a lot of great performing sectors of Fixed Income. We're well positioned on multi-asset credit, for example, our multi-sector income for folks who want kind of more income-themed products. We have the ETF suite where, again, we've taken something that is an institutionalized quality and level of investment strategies, and we've turned that into a democratized vehicle that can reach many, many broader audiences that are underexposed to those types of categories. We have a lot of really exciting regional strategies as well. Australia is an example of that. There are others. And of course, we've done a lot on the emerging market side in the Fixed Income world as well, and we think we could have potential to do more in emerging markets as well.

So we think we have the right breadth of product. Our clients are clearly looking for these opportunities. And so look, I think us and everybody else are looking forward to serving our clients and delivering Fixed Income products that fit their needs.

[Craig Siegenthaler, analyst]

Just for my follow-up, it's on the insurance channel. So I know the insurance channel is quite attractive. And you actually have a lot of experience in this channel from your prior role. So I wanted to get an update also on what is the current appetite to form strategic relationships with a third-party insurance company. And are there any recent successes in expanding this channel, which you haven't really highlighted yet?

[Ali Dibadj, executive]

Thanks for the question again. Look, insurance is a very large portion of our Fixed Income and institutional book here at Janus Henderson, and we have the right skills to broaden that and take that to more clients and ideally more strategic partners as well in that field. We have historically had strong strategic partnership here with insurance companies that are global in nature, and we want to continue down that path.

You're right that I happen to have had a little bit of experience in developing relationships with insurance companies and developing the right product for themselves, for the insurance companies and their policyholders very importantly. Remember, that's the cultural tie-in for us. We think a lot about our clients and our clients' clients. The insurance landscape is an area that fits very culturally with us at Janus Henderson because we do want to deliver better performance for those policyholders and for the firm.

So we do see opportunity there. We have a great base to start with. And we do think that it's a place that we have potential to grow in both organically and inorganically.

[Operator]

Our next question comes from Ken Worthington of JPMorgan.

[Kenneth Worthington, analyst]

You called out the improvements in the intermediary platform and the achievement of breakeven flows in 4Q. It looks like these improvements are largely being driven by the success you're having in the CLO and MBS ETFs. I think the $1.3 billion improvement in intermediary sales this quarter equals the increase in sales in those 2 ETFs. So first, how broad-based is the progress in U.S. intermediary since it seems like the success you're having is concentrated in the 2 ETFs?

Second, outflows seem to be rising in the retail equity fund business or at least they did in 4Q, where fees are 2 to 3x higher than the ETFs. So what is the outlook for fee rate based on the mix changes here?

And then lastly, can you compare the margins of the ETF business as it scales compared to the fund business? So basically, if the ETF business continues to succeed here, what happens to Janus margins?

[Ali Dibadj, executive]

Great. Thanks for those questions, Ken.

First, from a U.S. intermediary perspective, it is very broad-based success. We are gaining market share and growing across the board and absolutely being able to deliver something like an active fixed income ETF just increases both that product breadth and growth, and we still have a long way to go, by the way, but also increases our relevance with the client base to bring them other products as part of the suite of products that we bring to bear.

The changes that we've made in U.S. intermediary are quite apparent. They include investments in technology and data. They include selectively changing talent, upgrading talent. They include changing the incentive plans so that they're aligned with growth exactly as you would think about it, Ken, both from a revenue perspective as well as a profitability perspective. And so the improvements are pretty broad. And of course, there are sometimes some stars in those areas, and we're happy to have one, but they're very broad-based.

Taking a step even more broad than that, if you think about where we've had the highest inflows, they are exactly half in Fixed Income and half in Equities of our top 10 inflows, call it, over the course of the period of time. So we feel like they're pretty broad-based.

I'll start with the Equities piece and then maybe hand it off to Roger for the performance fees element to that and the margins element. Even in Equities, you are aware and we are all aware, for better or for worse, that the trend in flows in the U.S. intermediary channel has been negative from a flow perspective. So we would be having to gain a ton of share, not just a little bit of share, which is what we're doing, but a ton of share to change that trajectory. That is our intent over time. That is certainly what we're gunning for. But right now, we are gaining share in that marketplace as best as we can tell, even on the Equity side. And overall, we're gaining share, obviously, if you then include the active fixed income ETF suite that we have.

Roger, do you want to talk about the revenues and the margins?

[Roger Thompson, executive]

Sure. Yes, as you say, the fee rates on the fixed income ETFs, as Ali has pointed out, they're active products. So they are -- they have real fees on them. They are lower than equity mutual funds, yes, but they are certainly products that have scale to them. So from a margin point of view, as we grow these, then very much they add to the bottom line.

And again, as a reminder, as Ali has just said, it's a mix of products that we're selling. And our overall fee rate is something that I think does differentiate us. Our overall fee rate year-on-year was down less than a basis -- less than a percentage point -- sorry, less than a basis point. And that's a trend that we've seen over a few years of a very stable fee rate. And that's because of the mix of products that we sell.

And again, what will drive that in the future, in the short term, it's most driven by markets. If equity markets go up, our fee rate will go up probably. And over the longer term, it depends on the mix of products that we sell, probably the biggest opportunity we have is following the success that we've had of turning around, and hopefully, there's more growth to come from U.S. institutional. And broader, as you say, it's turning around the EMEA business, which has been really tough in the marketplace generally. But obviously, that's also a higher-fee business, the EMEA and Lat Am and Asian businesses.

So there's a mix of products that we've got out there with a mix of fees. But yes, we're very -- it's a strong product with a strong profitability as we add assets to it, and we have to continue to add assets to those fixed income ETFs.

[Operator]

Our next question comes from Patrick Davitt of Autonomous Research.

[Patrick Davitt, analyst]

So you've been talking about rebuilding the pipeline for a few quarters now. Could you maybe update us on how that process is progressing? And is there any idea when we could see more tangible or visible progress rebuilding that pipeline and, more specifically, any known big wins or losses coming through in the first half of the year?

[Ali Dibadj, executive]

Patrick, thanks. You're right. We are rebuilding the pipeline. Remember that last year, we had around $7 billion positive in flows in the institutional pipeline or in the institutional numbers that we had in terms of net flows. All of that happened in the first quarter. So as we've talked about before, there was real pent-up demand to kind of figure out what Janus Henderson was all about in a transformation period, and that pent-up demand has been released. So since then, really in the back half of 2023 and ongoing, we're building up that pipeline again. And that, as you know, as everyone on the phone knows, takes quite a bit of time in the institutional channel.

The progress we're making is actually quite tangible. So if you think of leading indicators, meetings, as an example, with clients or consulting discussions that we're having, it looks quite positive. I mean the early to mid-stage pipeline, I would call it, looks good. But these things take time. We've talked about things taking 12 to 18 months or more, right, in terms of actually going from a concept or an RFP to actual delivery. And that's the time frame we should think about.

From an early wins or losses perspective, we're finding real areas of interest in thematics for us, in solutions. In areas of income, we mentioned Fixed Income in an earlier discussion as well as enhanced index and some Multi-asset areas, plus some regional kind of specializations that we have. So we expect that to continue as well for the pipeline as it builds over the next little while.

[Patrick Davitt, analyst]

And then for my second question, a higher-level question. BlackRock highlighted significant acceleration in passive ETFs and ETFs in EMEA on their call, and we can certainly see that in the numbers. And regulators, both in the U.K. and the continent appear to be very focused on value for money and asset management. So with all that in mind, how are you thinking about the EMEA business positioning if that region truly is on the same path as the U.S.? And are you concerned that could complicate your path to consistent net inflow?

[Ali Dibadj, executive]

Yes. Thanks for the question. Look, we're aware of what some of our competitors say, and we're obviously very much in touch with both the regulators and what happens in the marketplace. I would say maybe 3 things.

The first one is that we clearly have strengthened ETF franchises that we built in the U.S., and we do think that there is an opportunity to grow those over time in other parts of the world as well using some of the similar skill sets. Now what I would say is the nascence of ETFs in the EMEA and other markets is still early. And in the U.S., we're certainly getting to the party where there is a real resurgence of flows. So it's a resource allocation question, and certainly, the U.S. is a main place where we're going to focus for that activity for the time being.

The second thing that I'd say is that we have learned a lot in taking a strategic plan, executing it in the North American market, particularly on the intermediary side and seeing results that were broad-based so far, as you can tell. We think that there's a real opportunity to lift and shift those experiences into U.K., EMEA, perhaps, Lat Am, other areas that have not been as successful for us given some market trends for the past little while. So certainly, that is something that we're very focused on for that marketplace, and the teams here are very, very conscious of what's happened in the U.S. and how we can apply, with adjustments, some of those tools to lift and shift to success in the EMEA market.

The third thing that I'd say is for that marketplace, we are seeing some success applied there. So for example, if you think about our market share in some of the areas, take Latin America, for example, take the U.S. offshore market, for example, we continue to do well over long periods of time there and have a brand to build on. The -- as Roger was saying a moment ago, the headwinds of that marketplace have been quite steep from a market perspective, from an industry perspective. So when, hopefully, the headwinds turn a little bit more to tailwinds, we're in a really good position to grow those. And in that case, going to the first point, we should be very flexible and focused on bringing resources in the right vehicles for the right investment strategies that, that market in EMEA, in particular, would require. So last point effectively is to be agile and flexible as you see trade wins move and apply resources in different ways.

[Operator]

Our next question comes from Michael Cyprys of Morgan Stanley.

[Michael Cyprys, analyst]

Just a question on ETFs. You spoke about the Fixed Income side. Just curious how you're thinking about the opportunity with respect to active equity ETFs. And maybe thoughts on mutual fund ETF conversions? How you're thinking about that? Maybe what holds you back? And more broadly on launching more and driving more growth on the active equity ETF side, how you're thinking about that? What sort of products might make sense there?

[Ali Dibadj, executive]

Sure. Thanks a lot, Michael. So first off, from the ETF franchise in and of itself, I mentioned this a little while ago, but it's important perhaps to underline that the strategy we're putting in place with the ETF franchise is very much one around democratization of institutional-level investment skill sets. So taking those skill sets that we have, securitized is the first rendition of that, more broadly in the Fixed Income world and bringing that to our client base. That has been successful. We've learned a lot.

We think there are, point number two, opportunities to bring that to other areas of our business as well as long as they're -- along the strategy of democratizing things that are institutional in nature from an investment perspective. The good news is, as you know, Michael, we have a lot in our menu, a lot in our palette that has institutional-level investment strategies that we can bring to our client base.

And so leads to the third point, which is, well, how do you do that? Well, we mentioned ETFs for sure, but there's a broader palette of vehicles we can bring to bear. In other words, we want to be vehicle-agnostic. We said this before, we said this publicly several times, we want to be vehicle-agnostic and be able to deliver in different forms, again, to democratize and broaden the skill sets that we have to different client sets. So to Patrick's question earlier, EMEA could be an example of that. Other channels could be example of that, for example, in retirement to CIT, launch that we've had or SMAs that we've had, et cetera, along the way, how we want to broaden the scope, not just in ETFs but be more agnostic from a vehicle perspective and deliver on that client.

[Michael Cyprys, analyst]

Great. And just a follow-up question on the expense side. I was hoping you could elaborate a bit on the cost savings, where you're finding them, how you're able to deliver better than your initial expectations. And as you look to '24, maybe you could just elaborate on where you're looking for savings and efficiencies in '24.

[Roger Thompson, executive]

Yes. Let me start on that, and then Ali may want to pick up on it.

But yes, I mean we started the year and guided to -- I think it was low double digits on noncomp and have done a lot during the year to refine that. There are things that we worked out how to do cheaper. There are things that we paused where it didn't make sense to do it. And then there were investments that we obviously made.

As we pointed out, what we've done was very much under that Fuel for Growth banner. We've taken the money. We've taken it from one place and reinvested in a place where we thought we could see better returns. And the U.S. intermediary space is a good example of that. We invested in our brands for the first time in many years. A lot of people know of Janus Henderson, but a lot of people haven't -- really weren't considering investing with Janus Henderson, and building that brand is really important.

So there are a number of places we've done that. We did -- we achieved the Fuel for Growth, as Ali said, a little bit more and a little bit quicker than we'd originally indicated, which is pleasing. And we'll continue to do that. I mean, I think that's -- the important thing is, is that this is a business that you need to constantly manage. You need to constantly be looking at where should you be spending money and refining that. So we will continue to take some targeted actions and reinvest that money where we can see the strength and the results. And some of those things are hard results. It's flows. And some of them are things that we measure really hard, so a brand campaign is difficult to measure the results of, but we measure that really hard to determine, are we being successful and can we take that further. So that's something we've done in the U.S. so far.

We're starting to leverage that a little bit around the rest of the world, and should we continue to see success there, then that's something we do more. Again, all of that is built into the guidance that I've given. But yes, it's an ongoing management of expenses, both on the comp side and the noncomp side. And I think the other bit is around automation. As we seek efficiencies and we automate things, you do move a little bit from comp to noncomp. So again, you'd expect our fixed comp expenses are pretty flat year-on-year, including the inflationary element, and our noncomp as I said, we're guiding to sort of mid- to high single digits.

[Operator]

Our next question comes from Adam Beatty of UBS.

[Adam Beatty, analyst]

I wanted to ask about the retirement channel, which can be seasonally strong, especially here in the U.S. in first quarter and first half. Just maybe using Ali's construct of leading indicators, just wondering what you're seeing in terms of activity, maybe discussions with planned sponsors or other signs of momentum and how you feel you're positioned for the retirement contribution season.

[Ali Dibadj, executive]

Thanks a lot, Adam. It's certainly an area of focus for us, and that's in the U.S., in particular, part of our North America Client Group, which is newly formed and very much focused on, again, lifting and shifting, but within regions, some of the experiences that we've developed on the U.S. intermediary channel to that channel. We have strong relationships with some of the leading providers in the space. We see lots of interest from them to develop products that are new but also to support the products that we do have to bring to bear there.

One of the big drivers of where we've been successful in that channel and we are seeing some clear green shoots there, although to be fair, it is a small business for us at this point, we see potential, again, with this lift and shift is the CIT market, where we haven't been present in at least until relatively recently in the right areas. And so we do want to continue pushing on the CIT world where we do see some potential.

I don't have, Adam, kind of short-term beginning-of-year type numbers to give you, and I probably wouldn't anyway. But clearly, I think you've hit on an interesting opportunity for us to continue to grow.

[Adam Beatty, analyst]

Fair enough. Appreciate that. And just a follow-up. You mentioned products a couple of times in the broad palette that you have and obviously some recent success with product launches. So wondering how you're thinking about that for this year 2024 in terms of maybe more, same or less in terms of product launches, whether it's number of products or seed capital deployed or what have you and what areas might be the focus there.

[Ali Dibadj, executive]

Sure. We have had -- thanks for noticing some good successes in product launches over the past year. We've launched several products, for example, taking, again, core investment strategies that we have and applying them in other areas. For example, we do Global Life Sciences, a Global Property as an OEIC. We did Sustainable Credit and Securitized Income as ETFs, as you know. Obviously, Emerging Markets Debt that we have, we turned into a SICAV. We have plenty of SMAs. I just mentioned CITs. So we are on pace to continue to grow that in 2024 as well.

We don't actually think about it, and maybe we should, but we don't actually think about it in terms of number of launches. We don't have targets in terms of number of launches in the pipeline. We think about it very much as a portfolio of new products and a portfolio of new products that deliver on client needs. So client-led, I guess, is how we think about it. That's our filter for, frankly, everything at this firm but, in particular, for new product launches because we already have a great suite we want to scale, but we do see that there's more products to launch. We do believe that there's opportunities for us more broadly, and this could be organic or inorganic in some areas, in areas like ETFs, in areas like emerging markets as well. And again, that fits with client needs that we have.

[Roger Thompson, executive]

I guess the last point I'd add to that, Adam, is around seed capital that you mentioned. We have a good amount of seed capital. Our current expectation is we'll probably add -- there some things that we will harvest. As that have been successful, then we can -- and we can bring that seed back, and that's something we manage very carefully. But there are a number of other things to Ali's point that either we'll be seeding something new, or where we've got something which is very successful is a proven product but is not yet at scale. And we've got clients that are interested in investing in it and what we call ramp it to bring capital into it.

So you probably expect our seed capital to go up a little bit this year, net of those things. Again, given that pipeline of satisfying client interest and putting what we've got good and making that available in the marketplace.

[Operator]

Our next question comes from Brian Bedell of Deutsche Bank.

[Brian Bedell, analyst]

Great. Maybe just on the back of the continued success in the intermediary channel, Ali, if you could comment on, going back to Slide 19, that path to getting to more sustainable organic growth, where you think you are in that journey? I think the -- on a prior call, you mentioned, obviously, it's still nonlinear, but you thought maybe 1 to 2 quarters a year could have positive flows. Do you think we're in a place now in 2024, where that might improve to, say, every other quarter? I know it's really hard to predict, but just trying to get a sense of how you feel you're on that some more sustainable organic growth.

[Ali Dibadj, executive]

Brian, so Janus Henderson is at a point of the transformation where I think we can say we're squarely on the right path. We're making tons of progress. And you mentioned flows, we'll get back to that in a second. We're making tons of progress in many areas. And overall, we're probably a little bit ahead of our own expectations at this point.

But it's still -- we're still not in our destination down that path, to continue the analogy. We have lots of potential left. We have lots of room to go. And look, that's potential for our clients, that's potential for our shareholders, our employees, our other stakeholders. So we have -- we do have a long way to go. We are quite proud of having gone from negative $31 billion in outflows in 2022 to $0.7 billion in outflows in 2023. You're right that the U.S. intermediary business was a great example of that. It was a great example of our ability to create and execute a strategic plan, put that into place and get some good results out of that. We do want to lift and shift that to more areas around the firm, whether that be EMEA, Lat Am that we talked about before, whether it be institutional that was raising a question before as well.

Look, we don't give guidance in terms of -- on an annual basis or on a quarterly basis, for sure. But I would argue that it's not going to be linear. We still have to fix the pipeline, and we're getting good leading indicators, to Patrick's question earlier, but we still have to fill the pipeline on the institutional side. We still have to make sure that we can improve on EMEA and Lat Am, maintain the progress we're making in the U.S. So we're not there yet is what I would say on firing in all cylinders or being in our destination.

[Brian Bedell, analyst]

Yes. That's great color. And then maybe one for Roger, just on the performance fees. Obviously, a very strong quarter in the fourth quarter. Just as you think about moving into 2024, I think on the Janus fund side, I believe that's still trending more consistently. Maybe just your view on that, the sort of a steady but -- slow and steady improvement. But any other view on any potential lumpiness in 2024? And then also just if you can just remind us the comp ratio on performance fees, I'm sure it differs by product, but it looked like it wasn't particularly high in the fourth quarter on the health care space.

[Roger Thompson, executive]

Yes, sure. Thanks, Brian. Yes, I guess, first of all, we're obviously really pleased that our teams have delivered on behalf of clients and delivered so well, and that has resulted in some strong performance fees in the fourth quarter, particularly with performance in the second half of the year and the fourth quarter, particularly.

As you say, performance fees are incredibly difficult to predict. It depends on future performance, and I certainly can't do that. The only thing that we can at least give an indication of is the U.S. mutual fund fulcrum fees, which are 3-year rolling, and we obviously know what's rolling off. So an indication of that, if you add flat performance for this year, or historical performance for this year, then the $66 million, I think, we were for negative fulcrum fees in 2023 is sort of mid-50s in '24. Really pleasing to see improvements in things like the research fund that's got some really good numbers since added -- since some changes in that were made around a year ago. So moving in the right direction there, but you would expect that still to be negative for the year.

For other things, honestly, like I say, it's -- your guess is as good as mine. We've got some great teams. I hope they deliver performance for clients. If they do, we'll deliver performance fees. From a -- when does that happen? As a reminder, the vast majority of our performance fees are annual. We have about $37 billion of assets subject to performance fees. About $3 billion of that, our quarterly performance fees. The rest is annual. The vast majority of that is Q4, and Q2 has a lump as well, which is really the European SICAVs. So don't expect much in Q1 or Q3, but like I said, I can't predict.

On the comp ratio point of view, yes, we don't provide specifics on compensation. But as you say, it differs by product. And obviously, there's also discretionary elements in there. And -- but remember that comp has deferrals in it. So some of the performance fees that we've recognized in '23 has some tail into future years as those comp deferrals come through. But again, that's all built into guidance. It's built into the table on LTI that we've given you at the back of the deck. So again, you can see that, and that's built into that lower comp guidance for 2024.

[Operator]

Our next question comes from John Dunn of Evercore ISI.

[John Dunn, analyst]

Could you just frame how much cash is available cash? And then you mentioned seeding, but just maybe a quick force rank of the rest of the capital management hierarchy.

[Roger Thompson, executive]

John, so yes, I mean our cash as it looks is about $1 billion. But within that, there was a piece of reg capital and a piece of working capital that we need. So there's probably -- it's a few hundred million dollars of -- you can call it surplus cash that we really have.

In terms of seed, as I said, that's also baked into that chart on Slide 12. And as said, if anything, that we'll harvest some this year, we'll invest some more that make up a little bit in 2024.

And then the hierarchy of needs, if you like, from a capital point of view is very -- hopefully, very well understood at Janus Henderson. We have reg capital that we need. We hold capital aside for other things. And then there's really investment in the business, which is really in this business is either seed capital, which we talked about, or M&A. And if there isn't an immediate need for cash for any of those benefits, we then consider returning excess cash to shareholders. And you've seen that over the last -- or since 2018, we've reduced the share count by 18.5%. So again, that hopefully is very well understood. We follow that pretty religiously.

[John Dunn, analyst]

Yes, I think you're right. And then just maybe sometimes we skip over, but the Privacore relationship, can you just go in a little more about it and just some of the milestones we should be looking for over the next 2 years?

[Ali Dibadj, executive]

Sure. Look, we're very excited about this relationship we have with Privacore. Just as a reminder, because we haven't talked about it a lot, as you say, it fills a really big need in the value chain for privates. You have a set of GPs who selectively have externally good performance and want to get access to the wealth channel but can't service that channel. And these are not small GPs. These are some of the larger GPs as well. They're not the top 6 or 7 private GPs in the world. It's really difficult for them to reach that channel with the right levels of service and understanding of products, et cetera.

And then you have the wealth channel, wire houses, RIAs, others, who want to have access to differentiated higher-performing products than the kind of behemoth that are out there, but can't get access to them because they know that their advisers won't be serviced and their clients won't be serviced. And so Privacore sits at that nexus and really closes that gap of needs between those 2 pieces of the value chain. And we've been, I guess, surprised is maybe the wrong word, but pleased about the level of interest that we've had from both sides of that nexus, both the clients as well as the GPs to broaden that relationship. So we're pretty optimistic about that.

We've talked about the market opportunity a little bit. But just to give you a sense of it, I remember that this is a largely underallocated part of the wealth channel. The expectations are that depending on who you're talking to, 3 to 5x current allocation is what you should expect over the next, call it, 5-ish to 10-ish years, and that suggests there's trillions and trillions of dollars of opportunity here that we would love to be a part of at Janus Henderson to leverage our brand and our intermediary relationships along that way. And that's how we work with Privacore.

We have a milestone, which is this quarter to launch our first product with Privacore in the channel. That seems to be going well. We look forward to giving you more details about what that product is and the successes of that product, we hope, over the next earnings calls. We're not quite there to talk about it publicly at this point.

[Operator]

Our final question comes from Bill Katz of TD Cowen.

[William Katz, analyst]

So Ali, just to sort of circle back, certainly great progress under your helm and stewardship. As you think about where we are in terms of the flow trajectory of sort of becoming more sustained to the positive, what's sort of the time line from here? And the reason I'm asking, just listening to all the -- your commentary as well as your reaction to the Q&A., it really seems like passive and fixed income are the primary areas of growth. And just trying to understand like when do you think you can get to more of a positive net organic growth rate?

[Ali Dibadj, executive]

Look, it's a step at a time. We think we're definitely, again, squarely on the right path. You're seeing real improvements across the board. You're absolutely right, Bill, to point out that they've been so far focused on areas that are not yet on the Equity side of things or the higher fee rate side of things overall, but as you can imagine, that's certainly an area of focus for us. It's tough for me to give you the timing for it.

Look, we're ahead of plan today, but I wouldn't anticipate, again, the same type of results as in 2023 from a flow perspective in 2024. What we see from external expectations' perspective is probably roughly in the right realm of things, but we'll get some more sense of it as the year goes on. Improvement is clearly there. Tons of progress is clearly there, and we're not blind to exactly trying to broaden the success across a broader piece of our palette of products, channels, geographies, et cetera.

[William Katz, analyst]

Okay. Just a follow-up, another big picture for you. Just as you think through the M&A model from here, and obviously, you have great experience in your previous role, what is the right model in your mind, just given sort of the blurring between traditional managers and alternative managers. You mentioned insurance a couple of times. Is an Apollo or KKR model intriguing to you? Is a Blackstone model intriguing to you? Or is it more of a -- some of your contemporary peers that are much larger in terms of traditional platform that sort of make the most sense in your mind?

[Ali Dibadj, executive]

Given the successes that Blackstone and Apollo have had, it certainly is something that's intriguing to us on behalf of our shareholders and delivering for client results. We are open-minded to how we can grow this business, again, on behalf of shareholders and clients. We don't close doors. We have a priority list of things, which, again, some of which you mentioned, some of which we've talked about, some of which you've seen our recent successes in different vehicles, for example.

So we do have a priority list, but we're not blind to opportunities that may arise that are more opportunistic in nature that we might want to tackle. Again, we're going to continue to be very, very disciplined on culture, on valuation, our potential for growth and, most importantly, very, very client-led in the way we bring things in-house or partner with different entities.

[Operator]

With that, I'll hand back to the team for any closing remarks.

[Ali Dibadj, executive]

Look, thanks, Jordan. Janus Henderson, at this point of this transformation is feeling squarely like we're on the right path. We're making tons of progress ahead of our expectations. I still don't think we're at our destination yet. So there's lots of potential for shareholders and employees and our other stakeholders and clients. And hopefully, this quarter starts to manifest some of those proof points.

So thank you all for your interest in Janus Henderson today, and have a nice rest of the day.

[Operator]

Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines.