Ladies and gentlemen, thank you for standing by. Welcome to the BrightSphere Investment Group earnings conference call and webcast for the first quarter 2022. During the call, all participants will be in a listen-only mode. After the presentation, we will conduct a question and answer session. To be added to the queue, please press the star followed by one at any time during the call. If you need to reach an operator, please press the star followed by zero. Please note this call is being recorded today, Thursday, May 5th, 2022 at 11:00 A.M. Eastern Time. I now would like to turn the meeting over to Elie Sugarman, Head of Strategy and Corporate Development. Please go ahead, Elie.
Good morning, and welcome to BrightSphere's Conference Call to discuss our results for the first quarter ended March 31st, 2022. Before we get started, please note that we may make forward-looking statements about our business and financial performance. Each forward-looking statement is subject to risks and uncertainties that could cause actual results to differ materially from those projected. Additional information regarding these risks and uncertainties appears in our SEC filings, including the Form 8-K filed today containing the earnings release and our 2021 Form 10-K. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update them as a result of new information or future events. We may also reference certain non-GAAP financial measures.
Information about any non-GAAP measure referenced, including a reconciliation of those measures to GAAP measures, can be found on our website, along with the slides that we will use as part of today's discussion. Finally, nothing herein shall be deemed to be an offer or solicitation to buy any investment products. Suren Rana, our President and Chief Executive Officer, will lead the call. Now I'm pleased to turn the call over to Suren. Suren?
Thanks, Elie. Good morning, everyone. Thank you for joining us today. I'll start off with the financial highlights on slide five of the presentation deck as usual. We reported ENI per share of $0.52 for Q1 2022 compared to $0.27 for Q1 2021. The increase in EPS compared to Q1 2021 was primarily driven by share repurchases, including the large tender offer we did in the fourth quarter of 2021. Also, performance fee was stronger in Q1 2022 compared to Q1 2021. Turning to our investment performance, we're pleased that our multi-factor quant investment process continued to produce outperformance for our clients across most of our strategies through what was a very challenging macro and geopolitical, equity alternatives, and China, and these strategies have secular tailwinds that we expect to drive long-term growth for us. Turning to capital management.
In Q1 2022, we bought back about 9% of our outstanding shares for $100 million. We also completed the previously announced redemption of $125 million of senior notes, which now leaves. As of March 31, 2022, we did [audio distorted] in Q1 2021. The increase in EBITDA compared to Q1 2021 was mainly driven by stronger performance fee of $10 million in Q1 2022 versus $4.6 million in Q1 2021. The EBITDA in the prior sequential quarter, Q4 2021, was $87.6 million, which was driven by seasonality, as we typically earn majority of our performance fee in the fourth quarter, and that quarter included $56 million of performance fees.
Given our continuing strong investment performance and the stronger performance fee we are seeing in Q1 2022 compared to Q1 2021, we're optimistic about our performance fee for the full year 2022, a majority of which is expected to accrue in the fourth quarter. Turning to slide nine briefly. I would just like to highlight that our investment performance is very strong across short and long-term horizons, and we believe this performance will generate positive flows in due course. I wanna end my prepared remarks with slide 14 to summarize some of our ongoing initiatives that we expect to drive growth over the medium to long term, and then we can move to Q&A. First, as we discussed last quarter, institutional investors around the globe are looking for yield, but with downside protection and low correlation to broader markets.
We are very well positioned to meet this secular demand, and we had seeded some strategies a few years ago which are now getting ready to be marketed more broadly. One example of that are our systematic macro strategies, such as Multi-Asset Absolute Return and commodities absolute return strategies. With these strategies, we basically apply our multi-factor model, including macroeconomic factors, across asset classes like equity, fixed income, currency, commodities, and others to generate uncorrelated absolute returns. We've been getting very good reception from clients and consultants for this strategy, and the pipeline is building up well. Another example is our group of equity alternative strategies, which includes a few different strategies that use new signals, alternative data, and unique portfolio construction techniques to produce uncorrelated returns.
We're pleased with the investment results and the momentum we're building here. Secondly, we continue to see a growing demand for ESG-focused mandates, and we expect this to be a secular trend for a long time. We're very well positioned to be a big beneficiary of this trend. ESG factors are anyway a key part of our core investment process because ESG factors such as sustainability are often not given due consideration by the markets and are mispriced, allowing our models to generate excess returns. Additionally, and importantly, we are seeing an increasing demand from clients to customize their portfolios to match their ESG values. For example, on the environment factor, in some cases, they want to make their portfolios carbon-free, or in other cases, it's a three or a five or a 10-year glide path to getting to zero carbon.
Our big advantage in helping clients customize their portfolios to match their ESG values is that we can leverage our data and technology to explicitly measure their carbon exposures today and then decarbonize their portfolios by the desired targets with precision. We can also measure the associated impact on risk and return of the portfolio. We're increasingly deploying this capability for clients across our strategies and expect this to help retain existing assets and win new assets, especially with regards to ESG-focused mandates. Lastly, I will touch on China market, in which we seeded a strategy a few years ago for China A Shares market, which is coming along well. China market is of course, large and liquid, but quite rich in opportunity since it's retail-driven and is often inefficient. We expect the strategy to scale in due course.
These ongoing initiatives underscore our ability to leverage our unique quant platform into new areas. Over time, we expect to similarly apply our quant edge in other parts of the market that we haven't yet touched on, such as credit, and we expect to distribute our products in newer channels, such as retail, where we're not present today. In summary, we are very excited about our longer-term growth prospects. Now let me turn the call back to the operator, happy to answer questions at this point.
At this time, those with questions should lift their phone receiver and press star followed by the number one on their telephone keypad. To cancel a question, please press star one again. Please hold for a brief moment while we compile the Q&A roster. Your first question today comes from the line of Kenneth Lee with RBC. Your line is now open.
Hi, good morning, and thanks for taking my question. I was wondering if you could just share with us in terms of the net flows that you saw in the quarter, were there any particular contribution from certain strategies either positively or negatively? More specifically, what have you been seeing across your managed volatility strategies in terms of net flows recently? Thanks.
Yeah. Good morning, Ken. Thanks. Yeah, we're not seeing, you know, any particular patterns yet in, you know, in terms of first quarter. It was just idiosyncratic, is probably the best way to describe it. There are, of course, you know, a couple of larger outflows that determined that number. I guess specifically on your question about the managed vol, yeah, we did have some outflows from managed vol, but that again is sort of as we've touched on last quarter, that has been reducing. There were some lagged numbers from managed vol. We believe managed vol is, has mostly played out and is done.
Now actually, as we, you know, when we turn to performance, as you see that, you know, more than 85% of our strategies are beating their benchmarks on a longer-term basis. If you look at it one year, it's 96%. Of course, that includes managed vol. Performance in managed vol has been great, at least in the near term, beating core benchmarks, because this environment produced a rather, you know, good environment for managed vol. We would expect, you know, given the performance that at some point that should actually be inflows. So we'll see. As I mentioned earlier that essentially if you go...
If you look past one or two quarters, then the base is loaded well in the sense the performance is good, pipeline is healthy, so we would expect the flow situation to be better. Then, looking out even further, we have these, you know, the growth drivers that we expect to kick in. Specifically this quarter, nothing specific to really point to, that it was just a few idiosyncratic things that sort of determined the outcome.
Gotcha. Very helpful. Just one follow-up, if I may. Wondering if you could just give us a bit more updates around ongoing cost reduction efforts. Thanks.
Yeah, certainly. Yeah. We think going forward our focus is, you know, a lot more on growth, and we're actually looking and have been investing in our, you know, in these new initiatives. It's reflected in our OpEx, P&L. We would also be seeding the, you know, new, these newer strategies. One area where we are looking to continue to be disciplined in expenses and reduce is, as we have touched on, the central, and that we continue to evaluate, and they're looking probably more, you know, at kind of towards the end of the year or beginning of next year when we would sort of see that fully baked in.
Gotcha. Thanks very much.
Thank you, Ken.
Your next question comes from the line of Michael Cyprys with Morgan Stanley. Your line is now open.
Great. Thanks. Hey, good morning, sir, and thanks for taking the questions here. Maybe just going back to your last point just around organic growth, talking about investing in the business there around organic growth, seed strategies that you're deploying into, can you just maybe help quantify how much of the overall cash flow of the business you see putting into the seed book, which I think is maybe around $53 million today? How do you expect that to sort of grow and trend from here versus how much cash flow would you envision being available on a go-forward basis for buybacks?
Yeah. Thanks, Mike. Yeah, that's, we don't sort of, you know, allocate any specific budgets. Those two are definitely the primary uses, you know, the seeding new strategies and repurchasing our shares. We ended the quarter with about $89 million total cash. As we sort of, you know, continue to go forward as cash builds, it will build up more, we will look to spend it on organic growth and repurchases. It's hard to say sort of a specific allocation at this point.
The timing could vary, and we'll also, you know, generally, you know, be opportunistic in both with regards to repurchases and also with regards to opportunity to deploy capital towards growth, in the sense if a great team becomes available for a new asset class that could build where we could leverage our quant capabilities, that could be interesting. We'll hold a little bit of war chest to support organic growth and seed new strategies, but we'll also look to repurchase shares opportunistically.
Just as we think about the cash flow generation and the ability to buy back stock and use that for organic purposes, I guess, how should we think about the cash flow generation here? It looks like about $48 million of adjusted EBITDA from the Acadian business. Maybe you could just help flesh out sort of what costs we should be thinking about would be sort of counting against that and sort of getting down to a run rate cash flow generation that would be available for use for buybacks and for organic initiatives.
Yeah. Generally, our ENI is a pretty good proxy for, you know, the cash generation, because of course we do have to pay interest and taxes, you know, so that ENI is a fair proxy. That of course, you know, for this Q1 was about $23.4. You know, the fourth quarter is generally, you know, higher because of the performance fee, the Q4 event. Those are probably a couple of data points to keep in mind.
Got it. If I could just maybe sneak in another one here. Just on the buybacks, maybe you could just a little elaborate a bit on, you know, what sort of buyback program you have in place. Is that a 10b5-1 program, and when might you be able to be in the market next?
Yeah. The repurchases we did in Q1 were open market repurchases, you know, because there was enough time in the entirety of the quarter to put that capital to work. We felt we didn't need anything else. We think that's clearly a good option, open market repurchases to take advantage of, you know, whenever levels are very attractive. The tender offer we did in the fourth quarter, it was just that there was simply no other way to put that large an amount to work. Right. Open market's not the right method.
We think we could do open market or, if there's capital building up and levels are attractive when we're going into an earnings window, we could, there's 10b5-1 safe harbor available as well. Between those two, we think we have good tools.
Great. Thanks. I'll get back in queue.
Thank you, Mike.
Your next question comes from the line of Girard Sweeney with KBW. Your line is now open.
Hi. Good morning. Calling in for, on behalf of Robert Lee. Just wanted to ask about back on share repurchases. Any restrictions you see for the rest of the year in terms of debt levels or excess capacity? What could, you know, restrict any repurchase plans?
Yeah, I guess, you know, there of course are closed windows during the earnings period. For example, April was a closed window after we closed the quarter and before we released earnings. There could also be times if we are having any partnership type conversations with potential partners when we get restricted. Now, that's a possibility that has happened, you know, in the past, over the last few years as we've been selling affiliates. But other than that, no, there aren't other restrictions that could prevent us from repurchasing our shares. Those are the primary ones.
Great. Thank you. Just a quick follow-up to that. Could you share your ending share count for the quarter?
Yeah, certainly. I guess it'll be in the 10-Q, which should be upcoming shortly. We have about 41.4 million basic shares, and the loaded count would be about 42.
Perfect. Thank you very much.
Your next question again comes from the line of Michael Cyprys with Morgan Stanley. Your line is now open.
Hey, thanks for taking the follow-up. Just on, broadly thinking about strategic actions, you mentioned the possibility of maybe adding a team. Just curious how your views on M&A and strategic actions, whether strategic alternatives, but similarly on potential, additions to the platform, how that thinking is evolving.
Yeah, certainly. Thanks, Mike. It's a good question. You know, we're basically focused on really leveraging our unique platform, right, to other asset classes, to really fully, you know, monetize what we have. We have lots of opportunities, you know, in front of us right now. I mean, we touched on a few, which we've invested in, you know, for a long time. Our ESG capability, for example, is new. It sort of goes really right along with the quant capability. We've been investing in it for a while. Similarly, our uncorrelated returns, where we've seeded these strategies and built the teams and the capabilities, as well as China.
There are others where we haven't invested as much historically, but these are great opportunities, and that align well with what we are able to do and what our capabilities are. Credit is one example of that, for example. Similarly, in terms of distribution, we can, you know, increase our distribution on the institutional side, but, you know, retail or RIA, things like that are new. We are investing organically, both through our P&L and seeding strategies, to access these areas. If there was an opportunity to, if there was a team available, to accelerate these things, we would look at it. What we are not looking at is, you know, the legacy multi-boutique, kind of M&A, right?
Where you add an unrelated, you know, affiliate, you know, to the business. We're essentially looking at, you know, basically purely from a monoline, staying focused on our quant platform and adding capabilities that, where we have that fit well in our culture and where we can get synergies. By definition, they would be generally smaller things like a team is a good example of that.
Great. Maybe just on the retail point, I was hoping you might be able to elaborate a bit how you think about accessing the retail channel. Would that require an acquisition or partnership, such as maybe sub-advisory? I guess, how do you think about accessing that channel, and what sort of actions would you need to take there?
Yeah, I guess a bit of it is opportunistic when something, right, becomes available. Yeah, it could take many forms. It could be a JV or, you know, a revenue share relationship with somebody who has that or, you know, if it's a merger type partnership, of course, that's one of the things that can be very synergistic. We're looking at it from multiple angles, and it would just depend on what sort of comes through. There's a little bit of, you know, clearly an opportunistic element to it.
Great. Thanks so much.
This concludes our question and answer session. I'd like to turn the conference call back over to Suren Rana.
Great. Thank you, everyone. Thanks for joining us today. We look forward to seeing everyone next quarter.