Janus Henderson Group plc (JHG) Earnings Call Transcript & Summary

All right. Hello, everyone. Welcome to our next session here. I'm Ben Budish, Barclays' analyst covering the brokers, asset managers and exchanges. And for this session, we've got Ali Dibadj, CEO of Janus Henderson. Ali, welcome. Thanks so much for being here.

Thanks very much for having me.

Maybe just to start. So for some context, you joined the firm as CEO about 2 years ago. Maybe walk us through some of your strategic priorities since then? How have these materialized so far? What is your longer-term outlook and focus for the company at the moment?

Sure. First, thanks very much for having me up here. Thanks very much for a very well-run conference, good meetings all day long, packed room, so I appreciate that. You're right. I led to Janus Henderson about 2 years ago now. And the benefit is that I arrived at a firm that had an extraordinarily good foundation, about 90 years worth, I guess, at that time, 88 years worth of an extraordinarily good foundation for that firm. Foundation was built on effectively 3 elements. Everything can always improve, but it had a really great 3 elements. The first one was extraordinarily strong investment acumen. So our portfolio managers, our analyst teams, everyone in the organization, 340 people work on the investment side of things, really understand what they're investing in better than anybody else, I'd argue. They do a lot of kind of deep underlying work. Now performance can always get better. In fact, for the 2-year period, it's gone a lot better and we hope that, that continues, but that was a very strong foundation. Number two is client service, very focused on our clients, both in terms of developing our strategy, which we'll talk about in a second but also just in terms of how we serve our clients. We need to serve more clients, but the clients that we do serve are very, very loyal to us. That client service mentality was very strong. The infrastructure, point number three, is also quite strong. And I don't mean only, although it's quite important in the IT and operations infrastructure and the people that we have in the firm, almost half of the firm is focused on making sure all of our businesses [ usually ] works but also all the risk and compliance and legal, finance, human capital, all of that piece from an infrastructure perspective was quite strong. And that's, as we all know, very important these days and make sure they're on top of regulatory changes and compliance and everything. So that was a really strong foundation I was fortunate to walk into. However, we didn't have several things. One is we didn't really have an articulated strategy, and the strategy that we articulated very clear, both internally and also invited clients into articulating that strategy, which is to protect and grow our core businesses, to amplify our strength and to diversify where clients give us the right to win. That was not just brought in from external folks in terms of clients, but everything else we've done very much internally as our strategic leadership team is about 40 people from across the organization. We developed this strategy. And in doing so, we developed a buy-in. This is not a consultancy from the outside world coming and tell us what to do. Clients didn't put it, but we developed that. We're creating buy-in for the strategy of protecting, growing, employing and diversifying. And gladly, we're seeing some proof points of that in some of our earnings over the past couple of years. And hopefully, that certainly continues. Now the last thing that I'd say that was very important is you can have the strategies as much as you want. You can be all singing, all dancing, we have to execute on it. And not only was there buy-in that we developed across our organization, but also with our clients' input, it's very important to have a cultural change to make sure that we get that strategy executed. We did not have enough accountability, enough urgency and enough collaboration across the firm. And so with a program that we call our mission value purpose, or MVP, our purpose is investing in a brighter future together. We have set of mission statements, which is what we do and how we do it, our value statements are really important. There are 5 of them. I won't go through all of them, but they include things like execution supersedes intention. Clients come first always. Truth builds trust. Those types of elements to really make sure that we execute appropriately. We're still in that cultural transformation with the firm, but again, a great foundation and knock on wood, so far so good.

Perhaps before digging a bit deeper into the company, maybe just talk about what you're currently seeing in the broader macro environment. With rate cuts on the horizon, an upcoming election, heightened geopolitical risks, how could this impact the economy, your business? How are investors thinking about it? What does it mean for flows, asset classes, et cetera?

It's a great question, and it's a question we get consistently across our businesses, and I talk to people all the time in our client base and this is a question they ask. The consistent theme across that question is everybody is looking at more volatility. They expect more volatility in the marketplace, they expect more volatility in the world. We think about it in terms of 3 large themes that we've spent a lot of time researching and putting out there, and we think they're sustainable, long-term themes. One is, as you mentioned, geopolitical changes, not just the elections that are going on right now, but social unrest, a shift of power around the world. That has real implications from investment perspective, right? Supply chains are breaking down. Where you invest depends on the political environment of where you're investing. A lot of things are very, very different. So number one, the geopolitical changes are clearly a foot in the world, and that's going to sustain for a very long time. Number two, demographic changes. We all know and have talked about for a number of years in different parts of the world where folks are getting older on average. And that's true in some parts of the world. Some parts of the world are actually getting younger. I will say that the biggest tailwind that we have had as a world and as an industry is a population growth. Over the next several decades, that population growth will actually become a headwind. Population will slow growth and then it will start to shrink. That's a very big change in the way one does one thermal values on companies. The last one is the cost of capital. We'll clearly see what happens during the course of this week, at the end of this week on cost of capital. But very clearly, it's not going to be 0 cost of capital and more. There will be cost of capital, which means that you have to think through the tide not lifting all boats across the board. And that's the theme that we hear about the most. The theme that we hear about the most in this context of complexity is that I can't just bet on the index. Can't just bet on passive. I have to make have and have not calls. I have to decide who's going to be a winner and a loser. That suggests active asset management. That's great for frankly, everybody in this room. That's great for 340 people at Janus Henderson, whose job is to differentiate good from bad. And we've been doing that quite well. Again, I mentioned our performance on the investment side is turning out to be quite positive. And we have a broad base of investment skill sets that apply in this much more complex world.

Great. So okay, digging more into Janus. When you talk about 3 strategic pillars that help guide the strategy, Protect & Grow the core, Amplify the strengths and Diversify, so I want to dive into each a little bit. But on which pillar are you most focused? What is expected to be the most significant driver of growth for the company over time?

So we're focused on all 3 pillars for sure. They're all working in parallel. They may have different time frames to the question was it impacting the business, but Protect & Grow, Amplify, and Diversify are all kind of equally important and clear focus of ours, and we're hitting on a few of them each. I'd say the most mature area for us is on the Protect & Grow side. So again, that's Protect & Grow our core businesses. U.S. intermediary business, for example, fits into that category for sure. What I will say is that Protect & Grow and Amplify together, we believe, over the long term, not overnight, but over the long term, will allow us to sustainably grow organically. The diversified piece, which we bring in new skill sets, brand new skill sets, that's essentially icing on the cake. That will take us to the next level of growth. But Protect & Grow, Amplify together, we believe, will allow us to grow. And look, we're on our way so far.

Right. You mentioned the intermediary business accounts for a little over 50% of your AUM. How is that business performing currently? Where else are you seeing success there besides the EPF franchise?

So yes, you're right. The global intermediary business is around 55% of our AUM. The U.S. business, which is the focus so far, the Protect & Grow part is the biggest chunk of that. We feel very pleased about what we've done in that business. If you think about what we've done over the past couple of years, they are very deliberate steps that we went through. First and foremost, we looked at the people that we had in the organization. We changed a lot of people in that organization in the U.S. intermediary business. It's not only the head of the organization and not only bring in a whole large new group of wholesalers to the organization from the outside, but also upgrading people internally, really allowing people internally in the organization who hadn't seen blue sky to be able to lead, be able to drive forward with the successes that they've been having. They were bottled up, so to speak, within the organization. We released that and that drove a big change in the people that we have in the organization. We then have to make sure we have the right product. I'll mention ETFs in a second. ETFs were part of that, making sure we have the right products. We have to make sure we have the right investment performance, which we certainly have done. We have to make sure we had SMAs and CITs, which were all growing as well, with a really focus on the right product set for clients in U.S. intermediary. We then ensure that we had the right incentive packages for people, align incentive package with clients and with the growth of the firm. We have to make sure that we're promoting and marketing our products appropriately. You'll see a big step-up in our marketing spend. You'll see some more over the course of the next few months as well from us. And very, very importantly, we have to use data to ensure productivity was there. We're calling the right people for the right products who have a pension to own some of the stuff that we may sell. So we really have changed that business really from soup to nuts. And the proof is starting, just showing the pudding. We have 4 consecutive quarters of growing the business. Our market share is significantly positive, and they as well [indiscernible] ETFs, they even pull out the ETF business for us, and we're growing market share. The U.S. equity mutual fund business is not a growing pie right now in this industry, but we're gaining market share. So we're doing better than peers even in that business, excluding the ETFs along the way. And our brand, our recognition has certainly gone up in terms of what the brand feedback is. And again, that's driven by marketing. So we feel pretty comfortable about that with the opportunity to take that and grow that into other parts of our geographical footprint, intermediary and institutional as well.

Speaking of geographic expansion, you recently closed on the acquisition of in Tabula Investment Management, a leading European ETF provider. So maybe touch on what your growth plans are in and outside the U.S., particularly outside the U.S. with this acquisition. Similarly, in terms of growth, you've talked about launching a number of new active products in the back half of this year. I guess kind of 2 questions, one, but on the active side, what are those kind of look like what kind of products we would be expecting.

Yes. We're very, very excited about this Tabula acquisition. And just to reiterate a little bit of what it is, it is an ETF platform currently based in Western Europe like for outside the U.S. The different logic of this is that we're seeing the exact same patterns in ETFs, particularly active ETFs outside the U.S., particularly in Europe than what we've seen in the U.S. You just shifted by, call it, 7 or 8 years. Exact same patterns that you're seeing in terms of growth and uptick in the European market. So we want to skate where the puck is going, so to speak, and so we partnered and acquired Tabula to roll out ETFs in that marketplace. Building on our very, very strong ETF franchise in the U.S., little known we're fourth largest in terms of active ETFs in the world, mainly based on our U.S. business, I want to expand that overseas. We found the Tabula team because their team that has great experience in ETFs outside the U.S. there in 15 different countries, 10 different exchanges. They have 9 right now ETFs. And to your point, we're going to add a lot more of those for their markets. What's been really exciting as well is we're starting to see interest not just from Western Europe, but from Latin America and from Asia in the same form of ETFs that are applied in Western Europe. So we think there's an opportunity to grow there. We're going to be active only in our ETF landscape. We think that's what we have as a competitive advantage to bring to bear. And we expect to see a significant growth in that business going forward. And that, by the way, have been tied directly to our strategy of amplifying strengths that we have. Our strength in the U.S. ETF business, active ETFs and beyond, we can expand globally as we launch new products as well.

Got it. Can you talk a little bit about your institutional channel. It's about 20% of AUM. Can you can you give an update on the current pipeline? What region's strategies are seeing sort of the most strength right now?

Sure. So we don't talk about our pipeline publicly yet. But what we talk about is frankly some of the leading indicators being quite positive. We have continued to see growth in RFPs come from institutional channel across the world. Our U.S. business is still small, but it's seen real resurgence in growth there. Our RFP team is kind of feeling the bulge right now and trying to manage through that and they're doing extremely good job at that. But consultant meetings are up quite significantly. The level of meetings we're having with consultants is higher and higher, quite frequent as well with all sorts of folks. And so we found that the leading indicators are quite positive. Now remember, we had a big resurgence in institutional flows in 2023. That was a lot of pent-up demand, and we're in the process of rebuilding that pipeline with those additional clients. And again, leading indicators feel pretty good. The lagging indicators, I guess, last quarter, felt okay, too. We had over 10 different mandates at $100 million to $400 million, so kind of in a middle sweet spot, mostly consultant driven with some new clients as well. So that suggests that we certainly are on the path to improving it. I would not argue that we're kind of steady flowing on the institutional side. We're still building the pipeline, but you're hearing a lot of the right noise from the field and certainly right noise from our clients. It's kind of sometimes a shame when I talk to some of these institutional players and the consultants that they rely on, but they don't know the 15 or 20 things that we are just literally the best in the world at. Sometimes I know about 1 or 2 of them. They really need to know about 15 or 20 things that we are the best in the world at, and they need to bring those to their clients. It's something that we have to deliver. And it fits very much where the consultants are telling us because they're clearly seeing a shift from passive to active right now going to your earlier question. Consultants are very concerned about just relying on passive right now. They're looking to active. And again, that [ falls ] squarely what we do at Janus Henderson with our investment performance and with the 15 to 20 things we're world class on, but then many other things that we can deliver for our clients.

Great. Maybe that kind of last pillar of the 3 diversified. You recently entered into an agreement to acquire Victory Park Capital with Global Private Asset Manager. Can you give a little background on that deal? Why is that a good strategic fit? How did the deal come about? And maybe talk a little bit about more what that company looks like.

Yes, absolutely. So importantly for us, M&A is not a strategy unto itself. M&A is only a tool we use to support our strategy, right? That's very important when you talk to companies, obviously, to ask that question. And so we do M&A to support Protect & Grow, to amplify and to diversify. The beauty of Victory Park Capital that it supports actually 2 pillars, amplifying and diversifying. From an amplify perspective, what it does is it allows us to have a lot more access to insurance clients who are in the private credit field where Victory Park Capital is very well established for the past couple of decades. Secondarily, it allows us to amplify our $36 billion securitized platform that's on the public side of stuff that we already have, they do it on the private side, those pieces of the industry can work together. It also then diversifies as extra point to get us into private credit to add to what we've done with NBK Capital, which is our emerging market private credit, again, kind of going where the puck is going as well as Privacore, which is democratization of private. So we think it fits very squarely and diversify. We looked long and hard for the needs of our clients. We're very client-lead in our M&A. And these of our clients were to look for private credit, but something that diversified relative to direct lending. Direct lending has effectively become a broadly syndicated loan market at this point. They want something that's a little bit differentiated, a little bit of [indiscernible] performance perspective and asset-backed finance, where we are with Victory Park Capital is very much where they're focused. These are, again, as the name will suggest, asset-backed loans secured on those assets, which have enormous complexity, enormous differentiation from an origination perspective that Victory Park has developed over the past 20 years. Importantly, we also want to make sure is the cultural fit. We look at many, many, many, many deals and almost all of them before we get the price, we kill because of cultural impact. And the motto of Victory Park Capital is who cares wins. That ties exactly to the Janus Henderson mission value purpose. We were very fortunate to bring on board a great business that aligns with a growth trajectory and a culture that fits us and we want to grow that business together. So we feel very comfortable with that and our clients are already interested in making sure we deliver for them in the asset-backed space. By the way, it's also to be in a very good company. Given what's happened over the past little while in the asset-backed financing land. You've seen what [ Burel ] did. You saw what Brookfield did. Those are M&A deals that they've done, which are exactly in our competitor space now with Victory Park Capital. We feel pretty pleased about that.

Great. Same kind of topic. Can you give us an update on Privacore? You mentioned you've kind of democratized vehicle. Probably one of the biggest topics across the pure-play alternative asset managers is democratized private wealth products. So can you give us an update what does that business look like currently? And how do you think about how it evolves over the next few years?

Sure. The democratization of alternatives is, to your point, a very strong secular trend that we see, others see it as well. Just think about the data in the private wealth channel, you're less than 5% allocated to privates over time, people talk about 50% to 20% allocated to privates. That's trillions of dollars of allocation going towards the private landscape. The challenge is how do you deliver on that? And Privacore for folks who may not know the story, it's exactly at the nexus of 2 needs. What Privacore is, is an open architecture delivery mechanism for institutional-level alternatives to the private wealth channel. And they sit in between a better private wealth advisers, wirehouses, RIAs, et cetera, who want to provide the best-in-class alternative performance to their clients, but is limited to alternative managers who are massive, like a Blackstone, like an Apollo, like a KKR to the ability to do things like Blackstone University or the ability to deliver distribution and servicing to all those advisers. On the flip side, right -- they're limiting their access. On the flip side, you have a bunch of GPs out there who are alternative asset managers, who are very large, and I'll get to kind of numbers in a second, who are very large but not large enough to develop their own distribution platform and have extraordinarily good performance. Many times, a specialist, better performance than these big kind of conglomerates of alternatives. Privacore sits at the nexus of that. That selects best-in-class, packages it, forms it and then distributes it with education to the private wealth channel. And what we are pleasantly surprised by is the caliber and the size of the GPs that we're bringing to bear. We just finished raising money for a $200 billion alternative asset manager. This is not a small asset manager. It doesn't mean everybody will recognize in this room and in the world, but isn't a trillion asset manager. So it doesn't have the ability to go into the private wealth channel, all the retail requirements that's there. We've done one with a, I want to say, $70 billion technology firm, one with a $50 billion, which we saw publicly on asset management firm. And there are more and more and more out there, $30 billion, $50 billion asset managers. These are very large, sizable best-in-class asset managers who don't have access. And so we definitely are able to bring that to bear to the private wealth channel. And we see this trend continuing to accelerate. And the success of Privacore is clearly putting us not just as a participant hopefully, over time, and a $1 trillion that plays there, but hopefully, a leader in the open architecture manner in that world. And so if you step back a little bit on the private side, we're setting ourselves up for a lot of the major trends that are out there. We think asset-backed finance is a major trend, while we have that with [ CPC. ] We think democratization is a major trend. We just talked about that. We have that with Privacore. We think the emerging market [ is ] private market with NBK we're set up to succeed there as well.

Great. Maybe coming back to -- we talked earlier a little bit about Janus' on M&A. Again, on the August call, you noted the pipeline remains quite active. So how are you thinking about the go-forward M&A strategy? What types of opportunities are you looking for? We talked about active ETFs. We talked about private markets. And how would you kind of characterize what you're looking at right now?

So yes, the M&A pipeline remains quite robust. We will always be client-led in everything that we do to make sure that this is not just something we're ticking the box on. This is something that we can get into that clients give us the right to win it. And that's what we've done with all of our M&A so far. We are very disciplined, however, in terms of M&A. We don't need M&A to get to where we want to be. We think we can got M&A to make it go faster and certainly deliver better for our clients. When we look at many, many, many things, we probably did over 100 -- certainly over 100 things over the past little while. We see almost everything that comes out of the marketplace. But we're very disciplined across many things. Number one, we want to make sure the performance is strong. We want to make sure the process is like any allocator any client would. The process is repeatable. I want to make sure that people culturally fit. We certainly want to make sure that there's potential to grow the business. Again, we're not just checking the box. We've got to make sure it serves the client need, but also the price is right. And once you go through that [indiscernible], we won't do anything unless we really think that's got an enormous amount of potential there. There is a lot to do still for us and a lot of opportunity in the marketplace. We've done a lot of great acquisitions. We want to digest them for a little bit, to pause and digest, but we're certainly not stopping. And the good news is we have enormous flexibility to do M&A. We have very strong cash flow, very strong balance sheet, and we have the distribution that's starting to really move forward and quite systematically be successful, so we can plug things into this chassis that we're building right now. We feel pretty good about it. We very much are going to be driven by growing, not for the sake of growing but growing with what clients want to grow with.

Similar topic. How do you think about balancing capital return, especially your buyback with further M&A.? So will the agreement to acquire Victory Park, will that impact the buyback strategy? And then just a higher level kind of the order of priorities in terms of M&A, capital return, as you see it.

Yes. So look, our capital return policy hasn't really changed over the past little while. There's a certain amount of capital that we have to have on hand for booking the business, regulatory, et cetera. We then invest back in the business organically and to your point, inorganically as well, Victory Park Capital is an example of that. To answer directly to your question, that will not change. The Victory Park acquisition will not change anything for us from a return of capital to shareholder perspective. We think that's a very important thing for us to do in this industry, the industry at wide. But we have enough flexibility to invest organically and inorganically and then we're left with money to give back to shareholders, which we think, again, as I mentioned a moment ago, is an important crucial part of anybody in this industry, and we believe that, that's our responsibility to return cash back to shareholders. We, to the point earlier, have enough room to do both, invest back organically, inorganically and give back to shareholders, and that's what we continue to want to do.

Great. A few more like financial questions. You showed some pretty nice operating leverage in your Q2 results. How are you able to achieve this? Do you think it's sustainable? And how do you think about driving margin expansion over a longer-term period of time?

Again, we think we just have to continue to be very disciplined on our operating expense line. I think let's separate down to 2 areas. One is we have a philosophy of creating fuel for growth. So continuous improvement, continuous cost cutting, continuous improvement from using different tools like AI or otherwise, so that we can use that capital, use that money and invest it back for growth in the business. Now we've done that over the past couple of years, we're going to continue to do that, that in a continuous improvement mode. But we have to make sure the growth actually manifests itself. And that's why we think about ROI. We're relentlessly thinking about ROI. When there's an ROI, I'm willing to invest, that may increase my expenses in the short term, but we'll leverage our way through that as we grow in the business, but we are very disciplined on ROI. So it's creating a feel for growth and is being very, very focused on ROI. A lot of that has to do with our fixed cost base, IT operations. The teams there have done an extraordinarily good job on the infrastructure point before getting more productive, using tools out there, figuring out how to have a better system for operations or middle or back office, et cetera, and making sure that, that plays out. That's something that we'll definitely continue to do and invest back in the business to grow the business. Now remember, our guidance for this year are non comp expenses. We expect to still go up in the mid- to high single digits for this year. We haven't seen that so far this year, but we have a lot of interesting initiatives towards this quarter or next quarter that we think we can make up that gap and get a really good ROI on that business. We do expect, the last part of your question, that as we grow in AUM, right, we actually grow the business. I'm not only focused on AUM, but to be very, very clear. Sometimes we do things that aren't as much driving AUM as they are revenue and profitability. That's really, in the end, what you all care about, you all want me to do and that's something that we'll certainly deliver.

Why don't we unpack that a little bit more then. You've been able to sustain a relatively stable blended fee rate despite kind of industry-wide pressure. So what are the kind of the drivers there? How do you think this kind of continues? You talked earlier about the need for active ETFs or kind of demand there relative to passive. So how do you see that playing out in the medium term?

We are certainly not immune from the pressures in this industry. There's no question that this industry is feeling pressurized from a pricing perspective. By the way, that's true on privately, true on public as well. What I would say is that this industry is one of almost any, right, that is simple and complex in the same way. If you can deliver a product or a service to a client that they want, they will pay for it. If you don't deliver that, meaning outperformance, meaning lack of client service, what have you, you feel pressure. Again, knock on wood, our investment performance is very, very strong. It's what I was saying before, our client service levels are very, very high. So generally speaking, from a like-for-like perspective, we don't feel the pressure to reduce prices. Does it happen once in a while, I'm sure it does, but nothing major. For us, the big driver is mix to your point. And we have been fortunate enough to be able to try to manage that risk. You can only control what you can control between higher fee, getting businesses like our hedge fund business, as an example, like our retail business, as an example, relative to some lower fee getting things like our enhanced index business or our ETF business on the fixed income side of things. So that barbell is something we always try to manage. To be fair though, kind of alluded to what I was saying a second ago, we could get our business to be much bigger from an AUM perspective as we felt like it at lower fees. And I might be okay with that, we might be okay with that. But really, what I'm focused on is the portfolio profitability. I'm Very focused, yes, on fee rate. But if it's the right thing to do, that we can actually improve profitability quite significantly because we're doing something that for us is very profitable. The incremental margin is actually quite positive. I might be willing to do that. But again, we'll make sure we communicate that. For now, it's the fact that we have great performance, but like-for-like, we're not pressured, it's mix, and we're managing the mix as best as we can.

Understood. I wanted to ask you some more kind of tactical questions on flows. But just since you mentioned AI and we were chatting earlier about other like big themes across the conference. The AI has come up quite frequently. How do you think about the use of AI in the business either in the research process and the optimization process? Is it the cost saver? Is it a top line grower? Where are you currently with that?

So this is something we spent quite a bit of time on quite a lot of many people's times on -- under our Head of Innovation, we've put together what we call our legal finance team, which thinks through the opportunities that AI and other things on the horizon, call Horizon 3, are things that can bring to bear to us. Our view is that we think about AI in particular in effectively 3 big buckets. One is how does it improve the investment process. If you think about what AI so far does really, really relevant and [ ingests ] a whole lot of information and spits out patterns. And that's something that we can certainly leverage as we look at a whole lot of information. Again, we are a very active set of researchers of 340 people around the world, how we bring that together, how we bring that to bear. So that's something that we're very, very focused on. Number two is how we deliver better for our clients. How do we make sure that the client data that we get is farmed in line that we deliver what our clients want, when they want it. That's not just reporting it, but that's also things that we can find outside our firm that allows us to target different clients and different client need states along the way. And then thirdly, you mentioned it is how do we become more productive. We have a part of our organization right now that's going through our productivity work, including AI. It's the part of our organization that is the largest user of AI if you think about who uses some of the internal versions of ChatGPT and otherwise that we use. And they're finding that they can save significant, call it, double-digit type percentage of their time. That's really compelling for us, and we have to figure out how to blow that out elsewhere. So look, we are big believers, and we continue to believe that AI will change things for this industry for investment processes for clients and for our internal cost structure. Very, very importantly, we strongly believe also that AI plus human is much better than AI alone or human alone, and that's the track that we're taking.

Great. So maybe a couple more like tactical questions on flows. Just thinking about the third quarter, any update you can provide on what you're seeing quarter to date? I know we're not that far into it, but what sort of is on the come?

Look, we don't give inter-quarter guidance. We're trying to continue to put on front of the other and deliver. Look, what I will say is it seems like folks on the sell side consensus has broadly seen that there's a tougher environment in terms of flows in this quarter than the last quarter. I think that's broadly apparent given some of the sell-side numbers there.

What about in terms of the potential impact of rate cuts? Where do you think the buildup of money market fund balances over the last several years ends up? Is it kind of flow back into fixed income into a riskier assets? Is this a similar magnitude as the several trillion dollar build that we've seen over the last few years? What are your thoughts there?

Yes. So look, there's a significant amount of cash as everybody knows, basically on the balance sheet, returning anywhere in the 5-ish percent range. I think that's a threshold for people. And what we've seen around the world, given we're a very, very global operation, you've seen pockets of areas where rates have fallen. So in Canada, as an example. In Brazil, it's fallen. Some parts of Western Europe, U.K. Western Europe, it's fallen. You actually do see a shift in money flow coming first and foremost, to riskier assets. So for us, that's a benefit because of equities. We're seeing a lot of interest in those parts of the world flowing into equity. So we do think that plays out. But we then think if the curve obviously normalizes a little bit, and it will go into longer-dated fixed income as well. We're not quite seeing that yet, I would argue. We'll see what happens in the U.S. at least towards the end of this week, as I mentioned. But we do think that there's a threshold point here we get to somewhere below 5% range on what typically one could get and you start seeing some closing to other areas. We believe we're fairly well set up because we have products both in the ETF suite and otherwise, across the full range of time frames on the fixed income side. We think we clearly have the right to play and the right to win and anybody who wants to re-risk whether it be on the pure equity side, we're also in areas like a balanced fund that we have. I think that there's going to be a really interesting resurgence in balance because you have the balance of fixed income that still gets you a pretty [ down ] good rate and the [ operating ] equities. We're very bullish on what a balanced portfolio could give and certainly in areas like our enhanced index product where people can step into equities, right, but still have some guardrails, given option overlays in terms of what the upside downside capture could be. So we think there's real opportunity there. I would go back to the earlier point, though, at the outset, the uncertainty in the world, whether it be around rates, whether it be about geopolitical, whether it be around demographics, whether it be whatever, right? That's here to stay and what you're continuously seeing from that is people are looking to move away from passive and get much more active with their money. I think that's going to happen on the cash on the sidelines as well, but then we go not too passive necessarily but a much more active management of their capital and their [indiscernible].

And you mentioned earlier, you think -- and maybe this is a Janus investment view, but a view around demographics and slowing population growth in the U.S. Do you think that has something to do with it? Is that a view share with your clients? Does it have anything to do with the dispersion of performance against the Magnificent Seven and the rest of the SP 500? What are the other kind of drivers there that you think are going to result in sort of outperformance from a flow perspective of active?

So demographics is actually more of a global comment. The U.S. seems to be a little bit better right now from a demographic perspective. But for sure, the demographics on a [ goal ] perspective, some will debate whether it's 20 years from now, 30 years from now, we have to be longer-term thinking for a lot of our clients that we look at. But over time, you're actually going to see a decline in growth and in fact, retrenchment of population and negative growth of population. That changes all sorts of different terminal values for a lot of our companies but being able to look at something, let's say, your passive, let's say you're more quant-driven and look at history not being the best foreteller of the future is really we're active management. So that, I think, is a broad team. Again, there will be haves and have-nots in every industry and we haves and have-nots in every single geography of the world. And our duty collectively, frankly, our duty and the responsibility that we have as an asset management industry -- an active asset management industry to be able to pick those goods [ against ] the bads and then deliver that for people's retirements for people savings, as we call it, to overrun people's brighter future. So that's something that's very, very important to us. We do think that our time as an industry has come to be able to deliver that for our [Technical Difficulty].

Maybe one final question on the same kind of topic. I mean how do you think about the launching of new strategies versus sort of the existing product suite across active? How do you feel like the current fleet stacks up to what you think client demand will look like for this sort of trend you're describing?

Yes. So look, again, our strategy is to protect and grow our core businesses, which are very, very broad-based. Again, I think we have 15 or 20 things in the world that are absolutely the best relative to anybody out there for performance from longevity, from fee rate, et cetera. So I think those are broad-based enough to deliver across a spectrum of client needs. We have things that we can amplify that we're very strong in that we haven't grown enough on. I'd argue our institutional channel is one of those. Our biotech fund is one of those, our health care fund more broadly. I think small mid-cap, you have some opportunities there, and the list goes on, ETFs as well and then diversify to your point where we bring in new things, new things like privates, but also new things like different categories that we want to get into. The beauty is when these things kind of coalesce, so one of the examples you may have seen that we publicly followed is our emerging markets debt ETF. We have a great emerging market debt team that we brought on board about a year ago now. And we believe -- actually, it's probably about 2 years ago now. We grew that business quite significantly. And now we think that there's a real demand among our clientele who are thematically asking for better returns from a yield perspective, but not more risk and looking to emerging market debt on that. We could bring that to bear in a form, which is [Technical Difficulty] we think there's some potential that's been under there. So all this to say, we have a great talent of products to bring to our clients. We certainly want to add to that, but the core of our business will continue to be our [indiscernible].

Great. And with that, unfortunately, we're out of time. But Ali, thank you so much for being with us. Pleasure to have you.

Thanks for questions.