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

All right. Well, thank you. Good morning, and thanks, everybody, for joining us. It is my pleasure to introduce Ali Dibadj, CEO of Janus Henderson Group. With $380 billion of assets under management across a wide range of capabilities in active equities, fixed income, and expanding presence in alternative asset management strategies, Janus has made a really nice progress over the last couple of years. Since becoming the firm's CEO, Ali and his team have made a really nice progress in improving the firm's organic growth and profitability while maintaining strong investment performance culture, which is, of course, very critical to any of these businesses. This is Ali's first time at our conference, at least in this capacity, so welcome. Thank you for doing this. Looking forward to having this conversation.

Thanks for having me.

So I wanted to kick things off with a question on just your high-level priorities. The first time presenting at the conference, as I mentioned, but when you joined 2 years ago, you really kind of reframed the firm's strategic vision. And you talked about sort of 3 pillars: protect and grow, amplify and diversify. I think I got that right. You've made significant product on a number of them. So as you look out into next year, talk to us a little bit about your kind of high-level priorities for '25.

Sure. Well, first, thanks for having me here, Alex. It's great to see you. Great to be here, it's a well-run conference, lots of activity, so we appreciate that. Great meetings all day long. So look, our driving objective continues to be to deliver for our clients and thus, our shareholders and employees out of that. And that's aligned with our mission, value and purpose, which we spent a lot of time designing and to your point, how do we deliver on that is our strategy. And you mentioned the core pretenses or core premises of our strategy. So protect and grow, amplify and diversify. Protect and grow is what we're going to continue to do in 2025 and hopefully much beyond that. And that's really a focus on our core parts of our business, our phenomenal U.S. equities franchise, our phenomenal fixed income traditional franchises that were expanding and growing. We're effectively protecting growing those. And how do we do those? Well, we invest in delivering the best investment performance we possibly can. We've been blessed by having a phenomenal analyst and portfolio management team around the world and are protecting row buckets, and we continue to deliver great investment performance. And we couple that with really fantastic world-class client service. We're expanding that as well and bringing that to new clients, and that's the growth part of it. But our core is protecting and growing our business. The next stage of it, as you mentioned, is amplifying our strengths. The wonderful thing about being at Janus Henderson is we have very strong pockets of investment strategies and skill sets that we just haven't brought to clients yet. They haven't really burgeoned and brought to bear client benefits. And that's what we're doing right now. We're developing adjacencies to things. You can think about our healthcare franchisees, our technology franchise, our ETF franchise, some skill sets that we have, for example, in solutions businesses that we have right now. We're actually just amplifying those, bringing things that we have that we're really good at our strength and bringing those to clients, we're going to continue to do that. And then lastly, on the diversifying bucket. To your point, we diversified quite a bit so far. We still think we have opportunities to deliver on what our clients need, it's really important for us when we say diversify. Our tagline is diversify where clients give us the right, it's only where clients give us the right. We're not going to be all things to all people. We know what we're good at, and that's why we went down the path, for example, on the private market side. But if you notice where we've gone down, we've gone down to places where we have the right to play. For example, Victory Park Capital, for example, our National Bank of Kuwait acquisition, Tabula, et cetera, down the line. And we're trying to do all of those things while we maintain great financial flexibility, both on the balance sheet to potentially do inorganic things along the way, but also great P&L flexibility so we can invest in things to have a good ROI and continue to grow on behalf again, of our clients and thus our investors and employees.

Great. All right. Well, let's unpack a handful of these. So starting maybe with a little bit more of a macro question, but when you think about asset allocation trends over the course of 2024 and then leading up into 2025, the macro backdrop has generally been really constructive, right, like U.S. equity markets and near all-time highs, credit spreads are pretty tight, a little bit of a divergent story outside the U.S. But despite all of that cash balances kind of generally continue to grow throughout the course of the year. Money market fund is still sitting at like record $6 trillion, $7 trillion or something like that. So as you think about client rotations into next year, what are the themes you're hearing from your investor base? And how is Janus Henderson positioned to ultimately capture some of the money in motion that hopefully will accelerate into '25?

So great news for all of us in this room and a lot of people listening. There is a significant amount of money in motion. There's no question about that. You talk to clients, I talk to clients all day long, at least for parts of my days pretty much every day. And they talk about a few things. They talk about big themes that they're seeing manifest themselves both in 2024, but also in 2025 and arguably beyond. So we all know geopolitical changes are happening in the world. 2024 was a year of election, not just in this country but in 50% of the population of the world. Lots of geopolitical changes. Just think about what's happened over the past 8 to 10 days in different parts of the world. So a lot of geopolitical changes that are adding complexity to people's allocations. Demographic shifts are happening as well. We all know we're getting older. I'm certainly getting older. But this kind of constant tailwind of population growth is looking like it's peaking and actually may be retrenching. Over time, you're going to see population start to actually shrink. What does that mean around what healthcare needs are? What does that mean around how people go to work, what technology needs are, et cetera. There's a real shift that's happening there as well. And then lastly, and perhaps most importantly to everybody in this room more directly is the cost of capital has gone up. It may come down a little bit over time. We get that in the short term. But the cost of capital is not going to be 0. So you're seeing a lot of complexity in the market, a lot of kind of questions, a lot of -- in our minds, great opportunities for knowledge sharing in terms of how we think about the world, bringing that to our client base. Now, what we're seeing more and more is an interest in terms of moving from this view that the tide will lift all boats. So I'm just going to suck things away and passive and kind of let it sit to taking a much more active stance around asset allocation and around actually investing at a security level. By the way, it's good for us. It's good for the 350 people at Janus Henderson, who do this type of thing selecting wheat from chaff all day long. Within that, we're also finding broadening of interest levels. So broadening not in terms of everything is going to do well, but broadening in terms of finding opportunities long or short, positive or negative within many different parts of the investment ecosystem. So take that and kind of break that down a little bit. Start with fixed income as an example. Fixed income for us, what we're finding is our client mandates are looking at different things, for example, geographical differentiation. So we have a lot of interest on our emerging markets debt fund right now. It's a hard currency emerging market debt funds. The team we brought on board as part of our diversify part of the strategy and people are looking at finding better return streams with lower risk. So emerging market debt is really burgeoning quite quickly for us. By the way, we just launched an ETF on it as well to bring a different vehicle to it. So we're seeing geographical expansion on that way on the fixed income side. We're also, though, seeing people look at where they want to invest. There is a return for fixed income because its cost of capital is higher. So looking to where to invest. If they go to corporates, what they'll find is corporate credit spreads that are the tightest they've been in decades and decades and decades, right? However, if you go over to the securitized place where we're very, very strong, we have about $36 billion of public securitized businesses right now or AUM right now, you're seeing them below their average over the past 10 years in terms of opportunities. So people are looking at the securitized areas much more so. So again, this broadening is happening in fixed income. On the equity side, we're seeing very similar global trends. So people are looking to us. We're a very global company for our roughly $400 billion AUM size. People are looking to us for global opportunities. So in our equities world, they're looking at European investments. They're looking at investments in our Japan business, for example, that too, we launched an ETF in Europe though, on the Japan fund that we have. So they're looking for other than U.S. investments. I mean people, I think, started to notice that last year, of the 100 best performing stocks in Aqui, 82 of them were actually traded not in the U.S. That's kind of our bread and butter. That's where we really enjoy bringing to bear to folks. So equity is changing from that perspective as well. Emerging market equities is interesting to us too. But within that, you're also seeing similar to what we're saying before, small and mid-cap becoming quite exciting. So we have a global small cap product that has grown gangbusters because the performance is good. It's U.S., Western Europe, U.K. and Asia put together, right, that we all have sleeves for those, and those are -- that's growing quite well. So we're finding some globalization of the equities business. Now I guess a couple of other buckets. If you think about multi-strat or solutions, we're finding more interest in balanced as well. Our balance fund is quite a big fund for us, really great performance there. You're seeing people say, okay, I want this balanced and now return stream, not just diversification, but return stream of fixed income and pair that up equities on the other side of things. How do I do that? Well, balance is a great way to do that. We're finding our solutions business more broadly, that has dynamic asset allocations, looks at option signals, et cetera, in this complex world being very, very useful for clients. And the last bucket that we're talking about a lot with clients is alternatives. And that both fits into the hedge fund side of our business, whether it be absolute return or multi-stress that we have. Because if you can take advantage of the haves and have nots by picking the have, we can certainly take advantage by shortening the have nots as well, that we're seeing quite a bit of success with, but also, obviously, on the private side of things and so the private side of things with Victory Park Capital with this NBK Capital business that we've bought, with what we're doing with Privacore, and we're seeing a lot of interest on that side of the business as well, and I think that's going to continue for a long time. So broad story, a lot more complexity in the world, a lot more interest in terms of looking for help from folks like us, and I'm sure other people who you cover and are in these rooms. And I think Janus Henderson is pretty darn well positioned for that world.

Great. Let's take this broadening concept and apply that to organic growth with a little bit more specificity. If you look at Janus Henderson's flows and organic growth over the course of this year, really nice improvement. Right? I mean you guys went from substantial outflows the last couple of years to now positive flows for the last, I think, 2 quarters. If you look at Q4 results from just the public data from the fund complex, it looks like you guys are tracking positively as well. That said, everything is still pretty much concentrated in a pretty heavy way in JAAA, the CLO ETF that you guys had a lot of success with. How are you thinking about broadening the flows across maybe some of these products? What do you think is going to be most needle-moving as you look out into 2025? And any other updates on the flow side of things you want to share with us for Q4 specifically?

Sure. Sure. So a great question. So I wouldn't first put too, too much emphasis on the public data that you see out there because it's a sliver of our business, but certainly, it looks reasonable. You're absolutely right. We're very proud of the complex that we've built on the fixed income active ETFs that we have. And JAAA is the star of the show for now from an AUM perspective, but it is no longer the growth leader anymore. There are others that are coming up and growing much more quickly. In fact, 11 of our 13 ETFs are growing in the businesses that we have. So that's very, very strong. We have 4 ETFs that are above $1 billion. And again, I'm just sticking to the ETF complex before broadening that out even further. So we feel very much that we have the right to expand on that success even only in the ETF franchise. And by the way, we're taking that to Europe, which we can talk to you in more detail. We're taking that to Europe with some of the launches that we have done and anticipating in that region. So even within the ETF concept, we're broadening it out in areas because we're delivering, again, great investment talent, great investment performance in a form that is more digestible, more easily digestible by a whole range of clients who want an ETF form. So that's certainly the path that's happening. But to your point, there are other things that we're doing as well. So think of our SMAs and CITs, right? Both of those are growing in the -- anywhere from the mid- to very-high-single -- sorry, mid-single digit, high-single digits to even double digits in some instances. Granted from small bases, but we're growing quite well there. Again, we're taking our businesses, and this is in the amplified buckets or the ETFs, businesses and investment strategies that we have, and we're putting in forms where people want to digest them. The IT is great for retirement channel. SMA is great for the private wealth channel, and we're growing that quite aggressively. Even if you think about sort of the protect and growing area in some of our core businesses, you're seeing our global small cap business, I mentioned before, growing quite well. Healthcare is growing quite well. Technology is growing quite well. Our research franchise, which is sort of our best ideas, which fits a little bit with your earlier question, a lot of our clients are saying, okay, I know there are going to be haves and to have nots. Give me your best ideas, our research franchise is a fantastic manifestation of that, which is growing quite well. And the PMs are doing a fantastic job there. So there are many things on fixed income and multi-sector income business. There are many different drivers that are starting to show some growth. And this is even before we bring in some of the acquisitions that we've made to grow those businesses even further.

Right. And we'll get to those in a minute. I wanted to double-click into the active ETF topic. It's kind of stuck up in the space. I want to say, the last 12 to 18 months where it's been a theme, people sort of paid attention to it. But in the last, really, year to 1.5 years, it seemed exponential growth. And really in transparent active vehicles, right? It's not just [indiscernible] products, which has been kind of dominant for us in that part of the market. So you alluded to that a little bit, but I was hoping we could double-click on how you're thinking about expanding your active ETF franchise further. Do you see an opportunity to either convert or launch kind of a side-by-side strategy or most of these would have to be kind of newer initiatives, new strategy and new ideas, what reception are you hearing from various distribution channels when it comes to active ETFs and then hit on Europe because as you think it is going to be an interesting trial for you guys given where you're going?

Sure. [indiscernible] honest if I missed anything in there. Look, I think the first thing I'd say is we're not hearing our clients clamoring for copycat investment product. So we're not hearing a lot of our clients say, hey, you have a mutual fund here. I wish you had an ETF there and I'd put more money in, that's not really kind of the discussion that's going on. What we're hearing a lot is how do you use your investment talent, use your U.S. equities business, your fixed income business, your multi-strat business, whatever it is, now our alternatives businesses. How do you use that talent that you have to really put it in a form that manifests your belief about where the world is going. How do you do that? And so a lot of what we're doing on these ETFs is we're taking some of the skill sets and we're putting it in a concentrated form or we put it in a form that was more accessible for people for tax reasons in the U.S. and for kind of liquidity reasons outside the U.S. as an example. So the discussion isn't -- and I don't think it should be and sometimes it is in this industry, let's take whatever this product that isn't good and sticking to ETF and loan behold is going to grow. No, that's not going to work. And that's not our philosophy. Our philosophy is let's take things that we think are unique and different and we can put an ETF form that meets the clients' needs. And that's exactly what happened with our active fixed income ETF. We had a great securitized platform, phenomenal performance. We're knocking effectively on institutional doors, and there is a desire to bring this to the private wealth channel and ETFs was the right forum to do that, and that's taken out. What's really exciting is that kind of ecosystem I talked about on the active fixed income ETFs, the 4 over $1 billion certainly led by JAAA at this point, but I think there'll be others coming up behind them as well. Those have given us the right to talk to clients about other things, too, in ETF and otherwise. And so, and I mentioned this a moment ago, we're going to be continuing to launch ETFs in the U.S. that we think deliver unique capabilities in the right form in ETF form to our client base. We just launched a few. So I mentioned the emerging market debt hard currency business we just launched. We also launched a mid-cap strategy in the U.S. on the equity side. We launched JIII. I think we filed for JIII, so it's public. We're going to launch it soon, which is an income strategy. You go down the list, we have a REIT strategy that's out there. We have a very short duration fixed come strategy. We're launching a lot of things in the U.S. that have client demand that we're delivering on. That's going to continue to be, we believe, a driver of our growth. But again, it all starts with that investment talent. To the second part of your question or the other part of your question, Europe also is becoming a really exciting place for us. And that's why we made this acquisition of Tabula. Tabula has been in this market, in the European market, delivering ETFs for decades. They know the business very, very well there. They're registered in 15 different trading environment. They have a phenomenal sales force that is just dedicated and known for sailing ETFs almost kind of like a specialist sales force. And so look, we -- could we have built this thing? I guess we could have, but it would take it 3 or 4 years. And we're seeing the exact same trajectory that we saw in the U.S. on active ETFs, transpire in Europe, but just maybe delayed, call it, 8 years or something, 8 or 9 years. So we were catching up here. We've caught up in the U.S. We want to not be playing catch up in Europe. We want to be ahead of the game, and that's why we bought Tabula. So they have a set of now we have a set of ETFs that Tabula is already built, but then we're launching many other ones. I mentioned the Japan one that we launched. We launched a concentrated European one just recently. And there are going to be more that we're launching, you'll see many more of these things. We're not throwing spaghetti at the wall to see what sticks. We know what the clients are asking for and we're driving those. That doesn't mean all will be successful, but we're driving those through the business. So we feel like there, too, just within that ETF set of franchises, we're broadening it out, we're delivering on our clients' needs, and we have this strong set of investment capabilities that we're putting in a digestible form for that client base.

Yes. Got it. So still pretty targeted, which is great to hear. All right. Let's pivot to the institutional business. On the last couple of quarters, over the last couple of quarters, you've talked about just rebuilding of the institutional pipeline. It takes time. We know it tends to be lumpy. But maybe just kind of give us an update on what's informing your sort of enthusiasm around the top of mandates that you're competing for, the type of mandates that are coming in into the pipeline and then ultimately, your sort of outlook into converting some of that pipeline into flows in '25.

So you're right, we are rebuilding the pipeline. And it's one of the things I said very publicly, I wish we could rebuild it faster. I was hoping we could do that. Now remember where we're coming from, back in 2023, we had a lot of pent-up pipeline that just wasn't funding, just wasn't funding because the clients weren't comfortable with the firm at that point, I guess, and all of a sudden, they funded because they got a little bit more comfortable. That pipeline went effectively, I'm exaggerating, but went effectively to 0 and so we're rebuilding that pipeline. That takes a long time. It takes a long time because if you think about it, there are steps to the process. You have to get the consultants on board. And then when you get the consultants on board, then you have to have the RFPs on board. And then RFPs coming, you got to win a greater percentage of those and kind of go on that pathway. So as we're looking at the leading indicators of this, we feel the pathway is certainly getting better. I'm not promising tomorrow, we'll all of a sudden be positive in high fiving but you're clearly seeing it. And in fact, on the lagging indicators, a couple of quarters ago, would suggest that things are in motion. We were positive a couple of quarters ago, and that was across 12 different mandates of $100 million or more, right? So you're just trying to feel things are going okay. Some of the leading indicators from a pure metrics perspective that we watch are the percentage of RFPs year-on-year. So in the U.S., I guess, I'd say North America, we're up around 35% year-on-year on the number of RFPs we're involved in. That doesn't mean our gross sales are going to be up 35%, but that means that we're in the mix now. Clients are paying attention to us on the institutional side and consultants importantly are paying attention to us. They know that we're doing what we're saying and we're delivering. Outside the U.S., in Europe, we're up about 30% year-on-year on RFPs as well. I'm hiring, we are hiring people to support the RFPs that are coming in the door and trying to help automate those because they're coming in fast and furious, which is great news. Again, I don't know what that means when exactly we're going to turn positive on a consistent basis, but it certainly feels like people are paying much more attention to us. Now what I would say, and we're being very, very conscious about this, and I welcome always investor feedback at all times on this type of stuff. We're also being very, very conscious about the fact that not all AUM is created equally. So we're very, very careful about what we bring on board. Yes, we're sensitive. I get that. But we're trying to bring on board stuff no matter what fee it is, that is profitable to us. That is incremental to shareholder return and shareholder value. There are mandates out there that we could have taken, no matter what fee they were. Some of them were high fees, something were low fee, but they're just more profitable for us. We're very, very focused on the profitability of AUM. And look, honestly, if that stalls our institutional pipeline growth a little bit, I'm okay with that because that's the right thing to do, frankly, for that client because we have to actually be able to deliver appropriately for them, but also and importantly, for this room for our investors as well. Right.

On the flip side of this, you guys had some of the redemptions in the institutional channel, those also tend to be pretty lumpy. Anything that you're aware of that could skew things one way or another, either in the pipeline or kind of coming up around the fourth quarter, et cetera?

Not at this point. And look, there are several big drivers of that. We talked about a few of them. One is investment performance is actually pretty good. I kind of hope that continues. Two is our client service level has increased, and we've started to really have a better dialogue with some of our clients and saying, look, here's how our performance performs and here's why it performs in this way. And then, of course, to your earlier point on the macro piece to it, when there's a lot of uncertainty, people look for active asset management. And so I think the overall macro environment is also helpful for us on the redemption side.

Yes. Got it. All right. Let's talk about the third bucket, which has kind of expanded in your things. And you were fairly targeted here as well with your focus on private credit, it's a big space. It's grown very quickly. Clearly, there's a lot of momentum behind traditional managers and alternative passengers getting into the space with new capabilities. You've acquired Victory Park Capital, as you mentioned earlier, expanding really more into the asset-backed finance part of the market which does seem to be quite a bit more dynamic than direct lending at this point. Maybe just update us on how integration is coming along. What are some of their maybe competitive strengths that attracted you to the platform? And how are you planning on scaling their growth via your distribution network, both on the retail side, maybe new product launches as well as institutional?

Yes. So you're exactly right. We were very, very targeted about this, and we've spent a lot of time looking at all sorts of acquisitions. Clearly, we see everything, we look at everything that comes through at all times. That's the mandate of our M&A team. And we end up being very, very targeted. And so Victory Park Capital was an intentional acquisition, exactly your point within the private credit realm but also very specifically not direct lending. What we found over and over and over again, I think you used the appropriate word, the dynamicism of that environment is clearly a little bit different today. What we found in that environment is that, that was becoming basically a broadly syndicated loan market. So very little diligence on the actual end on the end companies that you're lending to, and not what we do for a living. On the flip side, on the asset-backed side, we found that to be quite interesting and exciting. What we found with Victory Park Capital is that there are very few people able to get to access to those companies that you could lend to. And there are really 4 or 5 of them, and now all of them have effectively been bought. And more importantly, there's a moat around it, which is really around the origination. And that's what we have really enjoyed about Victory Park capital from a business perspective. The origination capability they have are bar none some of the best in the world. And that's what's unique. And that's what we underwrote and that's what we looked at. And of course, you can see it in the performance, which is very, very strong. Now of course, there are other elements that we want to make sure we have appropriate like any acquisition. We want to make sure that the culture is the right culture. And to part of your question, I want to make sure that we could grow the business. And so again, we're being client-led on every piece of acquisition that we do, including Victory Park Capital, our clients who are asking for asset backed. They weren't asking for direct lending as much. They're asking for asset-backed. And so again, we think we found the best partner for us to deliver on those client needs. And we're seeing that interest manifest itself. Not yet to be fair, Alex, on here's $100 million, go invest it today, but the number of meetings we've been able to book for these guys is much higher than I would have expected among our client base around the world on the institutional side and growingly on the intermediary side as well, particularly as we think about it in partnership with Privacore, which is part of this ecosystem, part of this plan to deliver alternatives into the private wealth channel. So you put all that together from an ecosystem perspective that we are trying to develop -- we think, again, Victory Park Capital was a great acquisition, will turn out to be a great acquisition for shareholders and most importantly for our client base as well.

Great. Well, let's talk about acquisitions a little bit broadly. You've done a number of smaller transactions which I think the market generally like. I mean with bigger deals, there comes a lot of integration risk which are not easy deals to integrate and implement, it's a people business as we all know. So when it comes to your acquisition philosophy, what are some of the key financial considerations? And maybe talk to us about capacity and the appetite for more deals over the next 1 to 2 years?

Sure. So we have a very stringent, very disciplined way we look at M&A. We have a [indiscernible] construct, we call it. We certainly look at the performance. We look at the process and make sure it's a repeatable process very importantly, and this is missed by a lot of people, you do whatever you want on a spreadsheet. You got to make sure that people fit. Like I'll tell you going back to Victory Park Capital or NBK, same sort of thing. We spend a lot of time with the people. Victory Park Capital is best to work with in cranes in Chicago. Their motto is who cares wins, very aligned with our motto, right? So we spend a lot of time on the people part to it. We want to make sure that there is a potential to grow the business. And of course, all that has to come at the right price. So we think through that philosophy quite well. We're very IRR driven in the way we make acquisitions. And again, our philosophy is if you come to us, we are probably not going to be the highest bidder in terms of a pricing perspective. But what we're going to do is we're going to grow you and partner with us to grow together. And that's the way we talk to companies. Many of the deals that have gone off and you all know them, are not in the price range where we think that our business can actually grow them to match that multiple range. But we're building businesses, and that's what we want to partner with these folks for. We have your capacity question, a lot of capacity. We're net cash on the balance sheet. We have a lot of flexibility from a balance sheet perspective. And for the right deal, certainly, we are willing to deliver growth for those firms. And that's what we want to do again for shareholders and over time. I think folks will be pleased with the acquisitions we've made so far.

Great. Well, we have about 5, 6 minutes left, so maybe we'll shift from some of the strategic questions to some of the financial points for the next couple of minutes here. I wanted to start with performance fees. It tends to be a little volatile, but like you guys have definitely seen a very nice improvement in performance fees over the course of the year. And a lot of it is coming on the back of stronger returns in the mutual fund complex, but also some of the absolute return strategies have done quite well as well. How are things shaping up, I guess, for Q4? I know that tends to be a big quarter for you guys, but also more importantly, how do you think about sort of the breadth of performance fees over time and consistency that investors could anticipate from that revenue stream?

Yes. So what we said last quarter is that we anticipate Q4's performance fees this year to be higher than Q4's performance fees last year. We still think that's the case. We're very pleased, and you can see it about the performance of our teams. Again, it goes back to the core of who we are in terms of investments, investment strategies and investors as a firm. So we feel that, that should, to your point, continue to persist as a stream for us to deliver. We are broadening it out. If you think about going into a private market that will the performance streams associated to those typically speaking. But again, right now, we're focused on Q4 and what we know today is what we know when we give the guidance.

Got it. Shifting to profitability. Janus Henderson are on track to deliver solid margin improvement this year. I think year-to-date margins are up something in tune of 400 basis points for the first 3 quarters of a year. As you budget for next year, what are your early expectations for G&A growth, I guess, in comp rates as you sort of think about and your early thoughts for 2025. But also, as you think about profitability for the firm as a whole, longer term, you guys think we're in peak margins of like closer to 40% or something in that range right now, you're in the mid-30s or so. With things you're building, with momentum you're seeing in the business, with how you're scaling different products, is that the destination? Can we get back to those levels of profitability? Or is there something more structural around the business that will just make it harder?

We are finding really good ROIs in what we're investing. So we're going to continue to put fuel on the fire. We've given you a sense of what Q4 should look like relative to the rest of the year in terms of investments, higher because we're seeing ROIs. We certainly hope those ROIs continue to pay out. We're very ROI-focused. And if the ROI start to peter off, we'll pull that back. And so right now, we see a lot of improvement from where we're investing. Now I think about it in a couple of buckets. There are some investments that we're making that are purely variable and can be variablized. And what we've tried to do with our overall cost structure, to your point, for example, on compensation and other areas, we're trying to make our compensation structure and our broad expense structure much more variablized than it has ever been before. That allows us much more flexibility. Whether we like it or not, this industry is very much in tune to what happens from a market perspective. Market goes up, market goes down, your margins go up, your margins go down. But if you can variabilize a lot more then it makes us be much more of a consistent investment for your clients for the folks in this room and certainly allows us to invest consistently over time. So that's what we're trying to do with our expense base. We'll give you obviously a lot more detail when we report Q1 coming up in the new year, but that's how we're thinking about it. Over the long term, should we be able to lever our business as we grow the top line and not spend as much on the fixed cost? Yes, absolutely. We expect to get some leverage on that, the pace of which we're going to be very, very conscious of. Again, as long as we continue to deliver ROI, we're going to continue to invest in the business.

Great. Let's touch on capital returns as well. It's become increasingly more important part of the story. We talked about M&A for a couple of minutes and the balance sheet remains in really good place. But you've resumed share repurchases, you've been more active on that front. I guess, it sounds like acquisitions could still be part of the story, but even in that context, does more recurring durable share repurchase plan? Does that still -- is this kind of part of the EPS algorithm that clients should be thinking about, investors should be thinking about over the next few years?

So since 2018, we bought back around 21% of our market cap. As you said, we put back in a repurchase plan. We're going to continue to do that. We think of that as a way to deliver shareholder value to our clients on top of the dividend. Our priorities though, in terms of our capital spend are very, very clear. Number one, we are going to have the right regulatory capital where we need to be. We're going to have the right working capital where we need to be, that's just to run the business. That's a top priority. That's what we have. And gladly, right now, we have enough to do that and to then invest organically and inorganically into the business. We talked about some of those organic areas, whether it be marketing, whether it be technology or other areas. But also to your point, we have the flexibility currently, both on balance sheet but also just from a cash flow perspective, to invest on an inorganic basis as well. And then after that, building the company for today and for the future and the first 2 points, we are very much believing that we have to return cash to shareholders, both on dividends and a share buyback perspective. I think what you've seen so far from us is very shareholder-friendly on that front, and we certainly hope to continue to do that, again, with that priority of the list intact.

Got it. Okay. Well, we've got about a minute left. So maybe we'll take a look if there's any questions in the room? All right. If not, we'll leave it there. Thank you very much. Thanks for joining us, appreciate it.