Good morning. My name is Alex, and I will be your conference facilitator today. Thank you for standing by, and welcome to the Janus Henderson Group fourth quarter and full year 2021 results briefing. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer period. In the interest of time, questions will be limited to one initial and one follow-up question. In today's conference call, certain matters discussed may constitute forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements due to a number of factors, including, but not limited to, those described in the forward-looking statements and risk factor sections of the company's most recent Form 10-K, and other more recent filings made with the SEC. Janus Henderson assumes no obligation to update any forward-looking statements made during the call. Thank you.
Now, it is my pleasure to introduce Dick Weil, Chief Executive Officer of Janus Henderson. Mr. Weil, you may begin your conference.
Welcome, everyone, to the fourth quarter and full year 2021 earnings call for the Janus Henderson Group. I'm Dick Weil, and as usual, I'm joined by our CFO, Roger Thompson. Before we get into results, I wanna take a moment to welcome Nelson Peltz and Ed Garden from our largest shareholder, Trian Partners, to our board of directors. The company looks forward to benefiting from their valuable insights and fresh perspectives. In today's presentation, I'll give a brief summary of our 2021 results. I'll then touch on progress we've made towards delivery of our strategy of simple excellence. I also wanna provide you with an update on INTECH and the transaction that we've announced today. As usual, I'll then hand it over to Roger, who will take you through the results with more precision, and then, following our prepared remarks, we'll take your questions.
Turning to slide three. Our full year results show significant improvement over the prior year. Our financial results for the full year were very strong. Our adjusted diluted EPS increased 42% over last year, which was a record for Janus Henderson. Also a record AUM of $432 billion, and our full year adjusted operating margin of 43.5%. Our increased profitability led us to generate almost $900 million in cash flow from operations in the last twelve months. This significant cash flow enabled us to reinvest both in the business as well as to continue to return capital to shareholders. Over the year, we returned approximately $630 million to shareholders through a 4% increase in dividends per share and by repurchasing over 6% of the total shares outstanding.
We also invested an additional $175 million in seed products, bringing our seed book to over $500 million. Investment performance for us remained solid in a volatile year. We certainly have some challenges that we're working on, but 54%, 58%, 78%, and 86% of our assets beat their respective benchmarks over the one-, three-, five-, and 10-year time periods. With the benefit of markets, AUM ended up at $432 billion, as I mentioned, despite challenging headline flow for the year. That said, we had good momentum on our flows compared to the prior year. The improvement is even more marked if we exclude the impact of flows from INTECH, given our near-term aim of positive net flows excluding quant equities. I also wanna update you on INTECH in a moment, as I've previously said.
Excluding Intech, net outflows were $4.3 billion in 2021 compared to $15 billion in 2020. We're not where we wanna be, but it is a significant improvement year-over-year. Flows into our fixed income and multi-asset capabilities were positive, which was offset by net outflows in equities, and our intermediary channel was positive for the year, driven by strong client demand in Asia Pacific, EMEA, and LatAm. Turning to slide four. Let me update you on the management buyout of Intech we announced this morning. As you know, Intech has experienced challenges in flows and investment performance for a number of years. We made the strategic decision to sell that business to its management and employees in a management buyout. We're pleased to have reached an agreement that benefits both firms.
It provides Janus Henderson with increased operating efficiency and focus on our core business of fundamental active investment, and it fulfills INTECH's desire to operate independently, delivering quantitative investment solutions and gives them the best opportunity to grow their success in the future. We've resolved the challenge from INTECH, and we're optimistic about growing our strengthened and simplified platform. Turning to the strategy of simple excellence, I wanna talk you through some of the accomplishments of the year, in each of its five pillars. We continue to produce dependable investment outcomes. Investment performance remains solid. There are pockets of mixed performance, and we continue to invest in people and technology, to strengthen our risk-adjusted returns for clients. We also enhanced our leadership and distribution and client experience.
We made a number of critical senior appointments globally in sales and consultant relations and client experience that should serve to deepen our relationship with our clients going forward. Another very important appointment for our firm was the addition of JR Lowry, who joined in the newly created role of Global Chief Operating Officer in October. He's already made significant contributions in strengthening our infrastructure and helping us run our business, and he's added further strength to our very talented executive committee. Operational efficiency continues to be a key focus for our business. We continue to make substantial investments in technology and data architecture in our CRM and in our order management system. These are transformational projects which are expected to significantly improve the way in which we work. We've also continued to make enhancements to simplify and strengthen our platform in order to deliver future growth.
For example, earlier this year, we made changes to our former Perkins team and brought them under the Janus Henderson brand umbrella. Today, we announced the strategic decision to sell INTECH. Our risk and control environment is not something I'm gonna spend much time discussing, but the work we've been doing is critical in building long-term growth foundations and enabling us to actively pursue expansion opportunities. This year, some of our work has been evidenced by lower regulatory capital requirements. This has assisted us in our efforts to return more capital to shareholders. During the year, we started to make real progress in developing new growth initiatives. We had our most active year in launching new products. These new products were spread across our focused areas of growth, including active ETFs, ESG, fixed income, and alternatives. We successfully launched 24 new products globally.
These included a suite of five sustainable ETFs in the U.S. and a U.S. real estate ETF. In Australia, we launched our successful Global Sustainable Equity strategy, including as an ETF. In Europe, we launched two Article 9 funds under the EU Sustainable Finance Disclosure Regulation, including a sustainable technology fund that we also extended to a U.K. vehicle. We continued to focus on the rollout of Article 8 and Article 9 funds. By the end of the month, we expect approximately 55% of AUM in our SICAV range to be designated Article 8 or Article 9. Globally, we extended the reach of our growing Multi-Strategy hedge fund. This product has gained momentum since we launched it in both SICAV and UCITS funds in June 2020. It has exceeded $1 billion in net inflows in 2021, and we look forward to its bright future.
We expect that growth will continue with the fine work of that team. In addition to our product launches, we had some early successes in growing relationships with model portfolio providers in the U.S. Again, we look forward to continuing to grow that success. We also continued to invest substantially in growing our ESG teams in both investments and products. We more than tripled the size of our central ESG team within investments to better support our portfolio managers in the delivery of sustainability across their investments. Finally, we made big strides in our ESG data architecture, which is a key foundation in building a credible and strong ESG platform. Last year was a year of real progress, strengthening our operating platform and gaining momentum and flows.
We've put the right building blocks in place to start capturing growth opportunities organically, and I'm very optimistic Janus Henderson is well-placed to deliver organic growth in the future. Let me now turn it over to Roger, who can take you through the results with more precision.
Thank you, Dick, and thank you everyone for joining us. Starting on slide six with the fourth quarter results. As Dick has already discussed our solid investment performance on our AUM at the end of the year, I'll touch briefly on flows and EPS. Net outflows were $5.2 billion in the quarter, primarily as a result of $4.2 billion of outflows of INTECH. The remaining outflows were driven by equities, which were partially offset by inflows into fixed income and multi-asset capabilities. The financial results continue to be strong, with EPS of $1.05 compared to $1.16 a quarter ago and $1.04 in the same period a year ago.
Before moving on, I wanted to make a few comments on how we will be discussing investment performance and flows in the light of today's announcement regarding the sale of INTECH. We've shown total investment performance and flows for the quarter, including INTECH. However, we will also show and discuss the investment performance and flow results excluding INTECH, as this represents how our business will look going forward after the transaction closes. Moving to slide seven on investment performance. Investment performance remains solid, with the majority of assets beating their respective benchmarks over all periods as at the 31st of December. Performance of fixed income, multi-asset, and alternatives is excellent and very competitive. Equity is more mixed, but with real strengths in some areas and significant improvement in strategies such as U.S. Mid-Cap Growth.
We're pleased that relative performance compared to peers improved again this quarter, and we now have over 60% of AUM represented in the top two Morningstar quartiles over all periods. Slide eight shows total company flows, including INTECH. Although I won't speak about the flow result, including INTECH, we've provided the fourth quarter flow results. Turning to slide nine to focus on flows excluding INTECH, which reflects how our business will look going forward. For the quarter, net outflows excluding INTECH were $1 billion, compared to $800 million last quarter. The flow result, while negative and not yet where we expect it to be, continues a much-improved trend compared to the prior year.
The net organic growth rate for the fourth quarter and for the full year of 2021 was -1%, compared to the -5% and 6% in 2020 and 2019 respectively. As I will show you shortly, our average fee rates remain strong as clients have been buying higher fee product than they've been redeeming. Slide 10 shows the breakdown of flows in the quarter by client type. Net outflows for the intermediary channel were $100 million. The quarterly result was impacted by the significant slowdown in retail flows in December that was experienced across the industry.
By region, intermediary flows were positive in Asia-Pacific and Latin America, which were offset by outflows in the U.S. and EMEA. In the U.S., which is our largest pool of assets in the intermediary channel, the outflows were dominated by our U.S. SMID and mid-cap growth strategies due to 2020 performance challenges in those strategies. Pleasingly, investment performance in those strategies has improved dramatically, and we're optimistic that the pace of outflows will slow in 2022. In the APAC region, the fourth quarter marks the seventh consecutive quarter of positive intermediary flows.
For 2021, the organic growth rate for the Asia Pacific intermediary business was 19%. To continue and accelerate that growth, we're delighted that Andrew Hendry has recently joined Janus Henderson as our head of distribution in Asia. Moving to institutional, which had $100 million of outflows in the fourth quarter, excluding Intech. In 2021, we've taken further steps in globalizing the institutional team and infused the business with new leadership.
Our diverse pipeline resulted in the top 10 mandates in 2021 occurring in 10 different strategies, and we remain confident that this strong and diverse mix will continue for 2022. Net outflows for the self-directed channel, which includes direct and supermarket investors, were similar to prior quarter at $800 million. Slide 11 shows the breakdown of flows in the quarter by capability. Equity net outflows in the fourth quarter were $3.2 billion. The quarterly outflows were driven primarily by U.S. mid-cap growth strategies in U.S. retail. As I've mentioned, investment performance in these strategies has improved significantly, which is encouraging for the flow trends in the future for these strategies. Areas of flow strength included Global Sustainable Equity, Global Real Estate, U.S. Small Cap Enhanced Index, and UK Enhanced Index.
Flows into fixed income are $100 million in the quarter. Fixed income continues to see positive flows in retail across a wide range of strategies, including our AAA CLO ETF . We're pleased to have launched our BBB CLO ETF this quarter. Total net inflows into multi-assets were $2.1 billion, driven primarily by inflows into the Balanced strategy. The quarter has also benefited from a sub-advised mandate win in the insurance channel for the adaptive portable alpha strategy. While performance remains strong and we continue to see strong flows into Balanced from all geographies, I do want to provide an update on an outflow in the first quarter of 2022. Structural changes within one client will result in a $2.3 billion redemption from our $52 billion Balanced strategy.
Finally, alternative flows will break even for the quarter. Slide 12 is our standard presentation of the U.S. GAAP statement of income. Moving to slide 13 for a look at the summary financial results. First, for the full year's results. A 20% increase in average AUM enabled improvements across all adjusted financial metrics compared to 2020. The higher average AUM, coupled with a higher net management fee margin, led to a 21% increase in adjusted total revenue for the year. Full year adjusted operating margin improved 5.5 percentage points over 2020 to 43.5%. As Dick just mentioned, this is a record for the firm. An adjusted diluted EPS for the year was $4.28, up 42% on 2020. Now looking at the quarter-to-quarter comparison.
Management fees are very similar to the prior quarters, with a 1% quarterly increase in total revenues due to seasonal performance fees. Adjusted operating income of $240 million was down 5% compared to the third quarter, primarily due to the planned reinvestment in the business during the quarter, as we guided in the third quarter call. Note that Intech contributed roughly $5 million operating income in the quarter, which hopefully will help you with your modeling. Fourth quarter adjusted operating margin was 43.6%, roughly equal to the figure in the full year. Finally, adjusted diluted EPS was $1.05, compared to $1.16 for the third quarter.
During the quarter, we recognized a non-cash, non-recurring impairment on intangible assets of $77.5 million related to certain investment management contracts, which represents the main difference between our U.S. GAAP and our adjusted diluted EPS. On slide 14, we've outlined the revenue drivers for the quarter. Adjusted revenue increased slightly quarter-over-quarter due to seasonal performance fees. Net management fee margin for the fourth quarter remained at 47 basis points and is up from 45.9 basis points from a year ago, demonstrating an improved fee margin during a period when the industry is seeing fee compression. At the bottom of the page, we've added a table to show the 2021 net management fee margin by capability on this slide and compare that to 2020.
2021 was a strong year with all capabilities outside quantitative equities, showing an increase in net management fee margin versus 2020. This increase in each capability is being driven by inflows coming into higher fee margin areas such as EMEA, LATAM, and Asia Pacific intermediary. Turning to operating expenses on slide 15. Adjusted operating expenses in the fourth quarter were $310 million, which was up 6% from the prior quarter. Adjusted employee compensation, which includes fixed and variable costs, were down 4% compared to the prior quarter. Primarily as a result of lower variable costs, given lower pre-bonus profits compared to the third quarter, and the impact of finalizing the cash and non-cash payout mix for the annual compensation program. Adjusted LTI was up 22% from the third quarter, mostly due to mark-to-markets.
In the appendix, we've provided the usual table of expected future amortization of the existing grants, along with the estimated range for 2022 grants for you to use in your models. The fourth quarter adjusted comp to revenue ratio was 36.9%, which reflects finalizing the variable compensation program. For the full year, the total comp to revenue ratio was 39.5%. Adjusted non-comp operating expenses were up as we guided compared to the prior quarter, primarily from higher marketing and general and administrative expenses. For the full year of 2021, non-comp operating expenses were up 8% compared to 2020, which is in line with our guidance. Finally, our recurring effective tax rate for the fourth quarter was 24.1%. For the full year, the firm's effective tax rate was 22.4%.
Switching to expectations for 2022 expenses. As a management team, our philosophy has always been to maintain strong financial discipline while reinvesting in the business to deliver against our strategy of simple excellence and position us for growth. As we head into 2022, areas of focus for reinvestment are in our investment teams, including still more in ESG, distribution, technology, and increased spend in such areas as T&E, where we plan for pandemic-related restrictions to ease as 2022 progresses. With that said, let's walk through expense expectations for 2022. First, looking at compensation. With the investment we've made in our people in 2021 and the impact of anticipated higher LTI amortization in 2022, we'd expect the adjusted comp ratio to be in the low 40s. Secondly, for non-compensation expenses, we'd expect to see a low teens% increase.
This increase is due to the investments being made in the business that I've mentioned previously. Finally, the firm's statutory tax rate is expected to be similar to 2021 at 23%-25%. The overall effective rate will be impacted by various differences which arise quarter to quarter. Finally, turning to slide 16 and a look at our liquidity. Cash and cash equivalents were $1.1 billion as of 31st of December . This is virtually flat compared to last year as robust cash flow generation has been used to fund dividends, buy back shares, and importantly, invest in new products through further investments in seed capital. The JHG portion of the consolidated seed book is over $500 million and represents our largest investment in seed capital ever.
During 2021, we paid $256 million in dividends to shareholders, and today declared a 38-cent per share dividend to be paid on the twenty-eighth of February to shareholders of record as at the fourteenth of February. For the year, we purchased 11.4 million shares of our stock for a total of $372 million, and we have $58 million of the current $200 million accretive buyback authorization remaining. Since we started our buyback program in Q3 2018, it has been roughly 16% accretive. Now, I'd like to turn it back over to Dick for some final thoughts before we open it up for Q&A. Thank you.
Thank you, Roger. Before handing it over to the operator for questions, let me briefly wrap up. This is my last set of quarterly earnings with Janus Henderson before I retire at the end of March. It's been a tremendous opportunity over these last 12 years. It's been an honor to lead Janus and now Janus Henderson. The firm that we are today is so much better positioned and more powerful. I'm proud of the progress that we've made, although frustrated that we haven't delivered the consistent organic growth which we've aspired to. I know that's in your future. Really the thing that I'm most proud of is the quality of the team here. We have exceptional people doing great work, and I know that the future for Janus Henderson is very bright.
Thank you for allowing me the time and honor to be the CEO over these last 12 years, and I wish you all the best going forward. That said, now I'd like to turn it back to the operator for your questions.
Thank you. We will now begin the Q&A. If you'd like to ask a question, you can press star one on your telephone keypads. If you would like to withdraw your question, you can press star two. Please ensure you're unmuted locally when asking your question. Please note we will be limiting questioners to one question and one follow-up question only. Thank you. Our first question for today comes from Ken Worthington of JP Morgan. Ken, your line is now open.
Thank you. Dick, congratulations on the retirement. I think you made a real difference for Janus, and it was a pleasure working with you. Best of luck. I wanted to ask maybe Nelson and Ed Garden if they're taking questions. Trian has taken the big ownership position in Janus. I guess, what is your plan as board members to drive shareholder value for Janus? My understanding is Trian's thesis for asset managers has, at least in part, focused on consolidation. Consolidation is a theme here for Janus. Do you see Janus as a buyer or a seller?
Ken, Dick here. Thanks so much for the kind words you started with. Deep apologies to follow that up with a frustrating answer, but Nelson and Ed are not here with us on this call.
Oh.
They're board members, but they're not doing the quarterly call.
Sorry. When you said they-
I can't really speak for them.
They joined. I thought they were joining the call.
Give their answer.
Yeah. I apologize.
No, no.
I apologize. That's okay.
Apologies. Thanks. Thank you, sir.
Okay. Let me turn to Intech. As we think about the separation of Intech, can you disclose the margins on Intech, maybe performance fees generated in 2021 and multiple you sold it for? I'm assuming the deal is dilutive to earnings, and if so, how dilutive?
Hey, Ken, it's Roger. Quite a lot in there. I think in terms of performance fees, yeah, in terms of financials overall, you know, it's a relatively small part of our business as we've talked about before. We've given you in our information today the asset level at the beginning of the year, we've given you the fee rate, and I've said that it represents around $5 million of op income in the fourth quarter. So that hopefully is helpful. In terms of performance fees, I think performance fees in the fourth quarter for INTECH were about less than $1 million. So, you know, it's a. We'll spread that out.
In terms of consideration, the deal is gonna be accounted for in our U.S. GAAP figures on closing. The consideration will be less than the goodwill and the intangibles that we write off, but obviously, those are non-cash items and will be adjusted out from the ongoing business. As I said, the deal will have a minimal effect on our ongoing op income and on the guidance I've given, you know, in terms of future comp ratio and op expense guidance.
Okay. Thank you. Maybe Dick, there's been enough in the press to suggest that there may have been differences in the opinion on Janus' strategy going forward. Maybe if you could help us, if you weren't to retire, what would you have liked to have done with Janus over the next three to five years? Maybe where does your vision different from, what Trian's hope is for Janus over the next three to five years?
Thanks, Ken. Look, again, I think we're gonna run into the fact that I can't speak for Trian, and therefore, to compare one thing I know with one thing I don't is a rather hard thing to do. I've been transparent about what I think this business needs to do. You know, we've run a strategy of simple excellence, which is really foundation building. Now you reach the point where I think the foundation is getting solidly built. You've taken Janus and Henderson and put them, you know, really well together. The question is now, how do you develop that platform? We talked about it in the last call about the strategy work that we've done and the ideas we had to further develop the firm.
I believe those are the right direction. Otherwise, I never would have said it. I've been clear about what I think. You know, the driver today in my retirement is, I think the leadership team that makes that decision and carries that forward has to be the leadership team that stays and delivers that vision. That means it's a good time for me to step off and allow a next leader to come on and not only own that plan but own that result. A big part of why I felt like now was a good time to step off was that. You know, we're making some strategy decisions around, you know, do you diversify and how do you diversify and where do you invest?
In that context, I think it's appropriate for a new leader who will be here for a long time. I've already been at the helm for 12 years, and that's enough. You know, I'm proud of what we've accomplished, and I'm grateful for having had the opportunity. You know, I think this team has a very bright future in front of it.
Okay, great. Thank you very much.
Thank you, Ken. Our next question comes from Ed Henning of CLSA. Ed, your line is now open.
Thank you. I have a couple of questions, firstly on INTECH and then secondly on equities. Just starting with INTECH, did the management team approach you? Did you look externally to see if you could sell it? Could you just touch on how that transaction came about? And also, Roger, you mentioned that, you know, it's gonna be below the value of what's on the goodwill in your book. What is the goodwill in your book for INTECH?
Okay. I think, yeah, we've talked previously that we've been looking at options for INTECH, you know, working with the management team, you know, as to what the right outcome is. You know, we firmly believe that this is a good outcome for Janus Henderson and very importantly for INTECH and their clients. We very much hope that that leads to future potential success. The early feedback from clients has been strong. That's great. You know, yeah, we've been through a process as to what the best outcome is, and firmly believe that this is the right outcome.
In terms of the financials, the goodwill that's on our books is one big number. We'll need to agree that with internally and then with our auditors as to how much is ascribed to an individual piece. Again, we'll do that as we close the transaction in 2022.
Just to clarify on the bit before that you went through a process, did you look at selling it externally?
We looked at a number of different things. Again, what is the right thing for the clients, what is the right thing for Intech, and what's the right thing for Janus Henderson. We're confident that this is a very good outcome for all of those people.
Okay. The second question, just on equities. If you look at the performance, it really fell back in the fourth quarter. Can you just touch on. You talked about the U.S. mid- and mid-cap coming back in performance. Can you talk about what drove that? Since December, how the performance in equities more broadly has gone?
It's a real mix. We've seen, you know, December particularly was an incredibly volatile month. And we saw, you know, you could see in the public data, you know, for example, our Forty Fund had a very tough month. And that gets reflected in some of the performance fee guidance that we've given in the deck and on. Or you can calculate on the Fulcrum fees. Some of the others had very strong quarters as the markets moved around and moved more towards them. So, you know, where we've seen, you know, where we'd had a tough performance in U.S. mid and SMID, the back end of the year was extremely strong.
We go into 2020 with the one-year numbers on U.S. mid and SMID, you know, really strongly positive, in some cases, double-digit positive for the one year, and moving positive for the three-year. Overall, really that's really quality outperforming in that fourth quarter. You know, some others, you know, Europe is good. We've got very good long-term numbers in our sustainable equity funds. We've had a tougher time in Asia. We've made some changes there that were announced a couple of weeks ago. It is a mixed story.
I think, you know, but again, in terms of flows, what you saw in the fourth quarter was a continuation of what we'd seen during the year, which is the equity outflows have been dominated by the outflows in U.S. mid and SMID. With the improvement in performance, and hopefully that continues, we've got great teams in place there, then we hope and expect that those flows will improve. It is. You know, we accept it's more of a mixed story in equities.
Just on the equities there, you ran through some of the positive, which was great. The only negative one was Asia. Was Asia the one that drove down the overall performance in equities above the one-year benchmark?
No, a good-
Falling quite dramatically?
No. No, not at all. There are a number of things. Contrarian is, for example, went in almost the other way around, had an awesome 2020, was certainly first decile, was possibly right up the top of its class and still is over three years, but had a tough one year. I mentioned the Forty Fund, which again is a very big fund, that had a tough back end to the year as well. They're probably the biggest. Yeah, there's some big funds that had tougher 2021s. As I said, it's a bit of a mix.
Okay. Thanks.
Thank you, Ed. Our next question comes from Nigel Pittaway of Citigroup. Nigel, your line is now open.
Great. Thank you very much. First of all, can I please just ask a question about the alts business? I mean, obviously, it's a very good performance against bench. It doesn't look quite so good if you look at the quartiles, and it does seem as if the redemptions have started to increase in that business. Given the strong performance, why is it so, sort of so hard to generate flows? Is the quartile performance relevant or, you know, what's going on there?
There's a number of things in there, Nigel. One of which is relatively small peer groups. You know, included in there as well as the property fund, which has been in outflow for a period of time, as you know. The biggest area in there is our U.K. absolute return, or absolute return funds, which have been very successful over a very long period of time. They turned positive inflows at the beginning of 2021, having had a tougher period in 2020. We did see, you know, I think, you know, the quarter overall was flat. You know, that's an area that we're investing in.
We've talked about other things like our multi-strat hedge fund, which is gathering some good flow as well. You know, again, there's a mix of things in there. U.K. absolute return is the largest one in there, and the property fund is about $1.5 billion where we saw some outflows.
Okay. Thank you for that. Then, just on the, I mean, the P&L is obviously you've guided to the cost, so there's nothing much to surprise there. But the one thing that is there is just a $7.3 million investment loss. Is there any color to provide on what that comprises?
That's in our core capital, or it's actually mainly in NCI. Again, you have to look at the other side of that as well.
Yeah
In terms of what's in NCI. It's a balance on seed. We do hedge our seed. Our seed book is hedged. Obviously, we don't hedge the NCI piece. That's what's driving that, Nigel. Again, we can take you through that offline.
Okay
If you want any more details.
Okay. All right. Thank you.
Thank you, Nigel. Our next question comes from Elizabeth Miliatis from Jarden. Elizabeth, your line is now open.
Thank you for taking my questions. The first one is just on cost. There's obviously a fairly big step up in the non-compensation growth that you've guided to in 2022. You know, all that spend in investing in the team and whatnot, is that all pretty much gonna be l imited to 2022 or will some of that trickle into 2023? How should we think about sort of those outer year cost growth numbers?
As we said, I mean, we are making some major investments in the business. We, you know, as Dick pointed out, we believe we're at a position for moving to growth. There are also some necessary investments in the business from a regulatory point of view. There's also a bounce back, you know, in terms of hopefully as we unwind from COVID, we may even be allowed into New Zealand one day, Elizabeth. I believe we're opening up from February. You know, areas of reinvestment are marketing and distribution more generally, where we believe we've got some bigger opportunities to go after.
Our investments in technology as well, you know, we've talked for a number of years about the investments we're making there. Some of those are now, you know, starting to come online in 2022. We, you know, and there are higher costs and cost of data and cost of running those systems. We're investing in ESG and again, data and information around ESG, and yeah, and you know, T&E, for example, being a raw one coming off the back of low spend in 2020 and 2021, off the back of the pandemic. There we will, you know, our expectation is to spend, you know, less than 2019, but more than 2020 and 2021. It's a combination of things.
In terms of, I think, you know, our increase year-over-year, you know, I wouldn't expect to see that repeat. We will continue to reinvest where it's necessary in the business.
Okay, thank you. That's all I had for today.
Thank you, Elizabeth.
Thank you, Elizabeth. Our next question comes from Patrick Davitt of Autonomous Research. Patrick, your line is now open.
Good morning, guys, and congratulations, Dick. It looks like the performance driven mutual fund fee rebates re-accelerated. As you look across kind of what is rolling on and off performance-wise, maybe, you know, if we have flat markets from here, can you give us a rough idea of how you see that tracking from this quarter?
Yeah, absolutely. You're quite right. The biggest one there I've hinted at, I guess, is the Forty Fund, which went from being a positive contributor of those fees that have moved slightly positive earlier in the year and has moved to a negative position. You know, it had a very tough December. What you can. You've, you know, again, we've talked about this in prior periods. Yes, you can model out its public data on what's rolling on and rolling off. These are 36-month rolling performance fees. So you've got 33 months of the data already.
You know, if there was zero performance in 2022, we'd expect the fulcrum fees to be about minus $55 million. That'll be, you know, the big swing factor there will be Forty. As I said, it had a-
Right.
It had a very tough December, and hopefully that can swing back just as fast. You know, that's probably the one to watch. It will be at its sort of maximum. You know, the numbers I'm giving you have it at its sort of maximum. If it improves in performance, that number will improve. That's a big fund.
Yeah.
If it adds alpha this year, that number will be better.
Got it. Makes sense. Thanks. On the expense guide, you know, obviously a lot more volatility this year. You know, how much flex do you have on that guide if markets keep correcting?
Yeah, I mean, I guess there's a number of ways of looking at that. The first is the natural flex in our business, given variable compensation. Variable comp, including LTI, is about 40% of our cost base. It's a very natural, you know, correcting device purely with variable comp. Taking that aside, you know, I guess first is we take a long-term view of the business. As I said, there are things that we need to do and want to do to invest in the business, 'cause we are wanting and expecting this business to grow.
The second is possibly, you know, sometimes those are opportunities to take advantage of markets and we may wanna move faster, but we'll obviously look at that. The third part of that, you know, is yes, you know, we obviously do look very carefully at our expense base. We have a pretty good reputation for that. We would look at, you know, what we need to do. Again, the most important thing is that this is a long-term business and you need to make the right decisions for the long term. Hopefully that's a combination of answers in there. First bit is 40% of our costs are variable. Second thing is we think long term.
The third thing is we need to make investments and want to make investments in our business to grow, but we'll do that very carefully. There are things that we can continue to do. I guess the last bit is, we are always looking to find efficiencies in our business. You know, just because we're not coming out with a major cost exercise that we're announcing doesn't mean we're not always looking at how can we be more efficient. There are always things we can do, and there's always things we'll want to do more about. I hope in summary, Patrick, that that adds up to something that makes sense to you.
Yep. Thank you.
Thank you, Patrick. As a reminder, to ask a question, that's star one on your telephone keypads. Our next question comes from Alex Blostein of Goldman Sachs. Alex, your line is now open.
Good morning. This is actually Ryan on behalf of Alex. I was wondering if we could come back to INTECH quickly. Could you help us think about at least maybe the multiple that you're selling the business for?
As I said, Ryan, you know, that's, you know, it's a relatively small piece of a business that we're not disclosing the individual piece that's been agreed with the management. We're not disclosing that. Sorry.
Okay. All right. Maybe is there any way you could give us color on what you potentially think you'll do with the capital? I guess your point on it's a relatively small piece of the business. Is there any thoughts on the use of capital at all, maybe?
I think no different than everything we've talked about before. Dick's talked about some of the areas that we want to grow in. Obviously we've been a disciplined returner of capital over a long period of time. We started the buyback program we had in 2018. We've returned 16%, although that's been 16% accretive over that time period. We've always said that is a you know there's a hierarchy of capital needs, and where we've got uses of capital they would come first. We've added $175 million of seed capital in 2020, 2021. We've got some good ideas. As I said, we launched over 20 products this year.
There are areas of inorganic activity that we've been looking at. Again, we've hinted at some of the ideas that we've got there, but there's nothing to tell you about today.
Okay. Thank you. To Dick, congratulations on the retirement as well.
Thank you.
Thank you, Alex. Our next question comes from John Dunn of ISI. John, your line is now open.
Hi, guys. Could you maybe give us a little more color on what you're seeing in the institutional channel? You gave some comments, but do you think it could possibly be a positive contributor in 2022?
Yeah. The answer, yeah. Can it possibly be positive? Absolutely. We have made considerable investment in that team over the last few years. You know, with Nick Adams becoming head of that team a couple of years ago, globally, we've brought in a new head of the U.S. business, which is a business that we are just too small in and always have been. We brought in a new global head of consulting in Richard Graham, new head of U.S. consulting, Debbie Drachman. So we've made big investments in that space. We talked a little. You know, as I said, we've had you know of our 10 biggest fundings this year, they came in 10 different strategies.
There are a number of things, both at the lower asset, higher fee level, but also at the higher asset, lower fee level. You know, I think, you know, I don't wanna. You know, in Q1, you know, we'll, you know, INTECH will be in our numbers in institutional. I've told you about, you know, a single client outflow in our very strongly performing and strongly selling Balanced strategy. We do have one institutional client, which I wanted to notify you about. I don't wanna promise anything for Q1, but in terms of your question around, do we see potential for success or do we believe we should be there? Absolutely, yes.
Got it. Just a little more maybe on the ETFs. You're coming up with some interesting ideas, but you know, it's a tough area to break into. Maybe how many launches do you think you might do in an average year and maybe a little more on the plan to get some scale there?
Yeah. We've been in that business for a number of years now. Again, remember we're talking about active ETFs. So we're talking about a piece of business which is smaller, but is growing faster than any other segment. We've launched our five ESG ETFs in the U.S. in Q3. We launched a real estate ETF in Q3. We've launched two, I think, in Australia this year. We still have no ETF presence in Europe. That's something we'll wanna look at in the future. But that is a business that we have grown. We've shown we can be successful there.
You know, our AAA CLO ETF, which we launched last year, beginning of last year, I think, was the 11th largest ETF launch, so we can launch them. That now is $several hundred million. We've just launched BBB. You know, these things are about getting the right ones rather than, you know, there's more than enough ETFs in the market. It's about us launching the right ETF. You know, our aim is to be selective, but we've probably launched. I haven't got the number in front of me. We've probably launched eight or 9 ETFs in the year. That shows what we certainly can do.
We want to scale those most importantly, but you will also see us launch new things in 2022.
Thanks very much.
Thank you, John. Our final question for today comes from Alex Murray of KBW. Alex, your line is now open.
Good morning. Thank you for taking my question. Congratulations, Dick, and best of luck. I'm curious if you could maybe give us an update on the CEO search and any progress being made there.
Sure. Hi, this is Dick again. Yeah. The search is being run by the board, and so you really don't have the right people on this call to comment on it being management. You know, I know the board has been very focused on it, is working hard, is making good progress. I'd have to leave it for them really to comment further.
Great. Thank you. Best of luck again.
Thank you, Alex. We have no further questions, so that concludes today's Q&A session and today's conference call. Thank you for joining today's call. You may now disconnect.