All righty. 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, $380 billion, of asset management across a wide range of capabilities and active equities, fixed income, and expanding presence in alternative asset management, alternative asset management strategies. Janus made a really nice progress over the last couple of years. Since becoming the firm's CEO, Ali and his team 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.
That's right.
So welcome. Thank you for doing this. Looking forward to having this conversation.
Thanks for having me.
I wanted to kick things off with a question on just your high-level priorities. You know, the first time presenting at the conference, as I mentioned, but when you joined two years ago, you really kind of reframed the firm's strategic vision, and you talked about sort of three pillars: Protect and Grow, Amplify, and Diversify. I think I got that right.
Yeah.
You know, you've made significant progress 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 2025.
Sure. Well, first, thanks for having me here, Ali. 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, you know, 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 premises of our strategy. So Protect and Grow, Amplify, and Diversify. Protect and Grow is what we're gonna continue to do in 2025 and hopefully much beyond that.
And that's really, focused on our core parts of our business, our phenomenal U.S. equities franchise, our phenomenal fixed income traditional franchises that we're, expanding and growing. We're effectively protecting and 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 in our Protect and Grow bucket, 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 franchises, our technology franchise, our ETF franchise, some of the 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 strengths, and bringing those to clients. We're gonna continue to do that. And then lastly, on the diversifying bucket, to your point, we've diversified quite a bit so far. We still think we have opportunities to deliver on what our clients need.
Yep.
It's really important for us when we say diversify. Our tagline is, "Diversify where clients give us the right.''
Yeah.
It's only where clients give us the right. We're not gonna 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, etc., 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 that we can invest in things that 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 in 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 funds are still sitting at, like, record, you know, $6 trillion-$7 trillion, 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 2025?
So, 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've talked 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 the year of elections, not just in this country but in 50% of the population of the world.
Yep.
Lots of geopolitical changes. Just think about what's happened over the past 8- 10 days.
Yeah.
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 maybe retrenching. Over time, you're gonna see population starts 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, etc.? 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.
Mm-hmm.
It may come down a little bit over time. We get that, in the short term, but the cost of capital is not gonna be zero.
Yeah.
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 gonna sock things away and passive and kind of let it sit.
Mm-hmm.
To taking a much more active stance around asset allocation and around actually investing at a security level. By the way, that's good for us. That'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's gonna 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. You know, 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.
Mm-hmm.
We have a lot of interest on our Emerging Market Debt Fund right now. It's a Hard Currency Emerging Market Debt Fund. It's a team we brought on board as part of our diversification, part of the strategy. People are looking at finding better return streams with lower risk. Emerging Market Debt is really burgeoning quite, quite quickly.
Mm-hmm.
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 in that way on the fixed income side. We're also, though, seeing people look at where they wanna invest. There is a return for fixed income because the cost of capital is higher. So they're 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.
Yeah.
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 opportunity set. 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 ACWI, 82 of them were actually traded not in the U.S. That's kind of our bread and butter. That's what we really enjoy bringing to bear to folks. So equities are 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 were saying before, small and mid-cap becoming quite exciting. So we have a global small-cap product that is growing 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 global globalization of the equities business. Now, I guess a couple other buckets.
If you think about multi-strat or solutions, we're finding more interest in balanced as well. Our balanced 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 I'm gonna pair that up with 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, etc., in this complex world being very, very useful for clients. The last bucket that we're talking about a lot with clients is alternatives.
Yep.
That both fits into the hedge fund side of our business, whether it be absolute return or multi-strategy that we have, because if you can take advantage of the haves and have-nots by picking the haves, we can certainly take advantage by shorting the have-nots as well.
Right.
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, we're seeing a lot of interest on that side of the business as well, and I think that's gonna 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.
Yeah.
We are in these rooms. I think Janus Henderson's 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 in 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, two 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 gonna be most needle-moving as you look out into 2025?
Any other updates on the flow side of things you wanna share with us for Q4 specifically?
Sure, sure. So, great question. So I wouldn't first put 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.
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 four ETFs that are above $1 billion. Again, I'm just sticking to the ETF complex before.
Yeah.
We're broadening it out even further. So we feel very much that we have the right to expand on that success, even only in the ETF franchise. Oh, 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, think of our SMAs and CITs, right? Both of those are growing anywhere from the mid to very high single, sorry, mid single digit to 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 wanna digest them. The ETF is great for retirement channel. SMA is great for the private wealth channel.
Mm-hmm.
We're growing that quite, quite aggressively. Now, even if you think about sort of the Protect and Grow 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 they're gonna be haves and have-nots. Give me your best ideas.
Mm-hmm.
Our research franchise is a fantastic manifestation of that, which is growing quite well. And the teams are doing a fantastic job there. So there are many things on fixed income, the 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. We'll get to those in a minute. I wanted to double-click into the active ETF topic. It's kind of snuck up on the space, I wanna say, in the last 12- 18 months where it's been a theme. People sort of paid attention to it. In the last really year to year and a half, it's seen exponential growth and really in, you know, transparent active vehicles, right?
Yeah.
It's not just, you know, quant-oriented products, which has been kind of dominant force 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, you know, either convert or launch kind of a side-by-side strategy where most of these would have to be kind of newer.
Mm-hmm.
Initiatives, new strategies, new ideas? What reception are you hearing from various distribution channels when it comes to active ETFs? And then hit on Europe 'cause I do think it's gonna be an interesting channel for you guys given where you're going.
Sure. Keep me honest if I miss anything in there.
Yeah.
Look, I think the first thing I'd say is we're not hearing our clients clamoring for copycat investment products.
Mm-hmm.
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.
Mm-hmm.
That's not really the kind of conversation 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 alternative 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?
Mm-hmm.
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 putting it in a form that is 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 it is, product that ain't good and stick it in an ETF and lo and behold, it's gonna grow.
Right.
No, that's not gonna work. And that's not our philosophy.
Right.
Our philosophy is let's take things that we think are unique and different and we can put it in an ETF form that meets a client's needs.
Mm-hmm.
That's exactly what happened with our active fixed income ETF. We had a great securitized platform, phenomenal performance. We were knocking effectively on institutional doors, and there was a desire to bring this to the private wealth channel. ETFs was the right form to do that. That's taken off. What's really exciting is that kind of ecosystem I talked about on the active fixed income ETFs, the four over a billion dollars, 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.
Mm-hmm.
In ETFs 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, ETF form, to our client base. We just launched a few, so I mentioned the emerging market debt hard currency business.
Yeah.
We just launched. We also launched a mid-cap strategy in the U.S. on the equity side. We launched JAAA. I think we filed for JAAA, so it's public. We're gonna launch it soon, which is an income strategy. You go down the list. We have a REIT strategy that's out there.
Mm-hmm.
We have a very short duration fixed income strategy. We're launching a lot of things in the U.S. that have client demand that we're delivering on. That's gonna continue to be, we believe, a driver of our growth. But again, it all starts with that investment talent.
Yep.
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.
Mm-hmm.
Tabula has been in this market, in the European market, delivering ETFs for, you know, decades. They know the business very, very well, there. They're registered in 15 different trading environments. They have a phenomenal sales force that is just dedicated and known for selling ETFs, almost kind of like a specialist sales force. And so, look, we could have built this thing? I guess we could have, but it would've taken three or four years.
Right.
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 eight years or something.
Mm-hmm.
Eight or nine years, so we were catching up here. We've caught up in the U.S. We wanna not be playing catch up in Europe. We wanna be ahead of the game, and that's why we bought Tabula, so they have a set of ETFs. Now we have a set of ETFs that Tabula has 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 gonna 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.
Mm-hmm.
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.
Yeah. Got it. So still pretty targeted though, which is great to hear.
Yeah.
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 type 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 2025.
Totally. So you're right. We are rebuilding the pipeline. And it's one of those things I've 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 because, you know, the clients weren't comfortable with the firm at that point, I guess.
Yeah.
And all of a sudden they funded 'cause they got a little bit more comfortable.
Mm-hmm.
That pipeline went effectively, I'm exaggerating, but went effectively to zero. And so we're rebuilding that pipeline.
Mm-hmm.
That takes a long time. It takes a long time because if you think about it, there's 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 come in. You gotta win a greater percentage of those and kind of go down 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 will all of a sudden be positive and 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.
Mm-hmm.
We were positive a couple of quarters ago, and that was across 12 different mandates of $100 million or more, right?
Yeah.
So you're just trying to feel things are going okay. Some of the leading indicators from a, you know, a pure metrics perspective that we watch are the percentage of RFPs year-on-year. So in the U.S., I guess I should say in 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 gonna be up 35%, but that means 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 gonna 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 you know 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.
Yeah.
Yeah, yeah, yeah. So, we've, we're very, very careful about what we bring on board. Yes, we're fee sensitive. I get that. But we're trying to bring on board stuff no matter what fee it is that is profitable to us.
Mm-hmm.
That is incremental to shareholder and shareholder value. There are mandates out there that we could have taken no matter what fee they were. Some of them were high fee, some of them were low fee, but they just weren't profitable for us. We're very, very focused on the profitability of the AUM. And look, honestly, if that stalls our institutional pipeline growth a little bit, I'm okay with that 'cause that's the right thing to do, frankly, for that client 'cause we have to actually be able to deliver appropriately for them, but, but, but also, and importantly for this room, for our investors as well.
Right. On the flip side of this, you guys had, you know, some of the redemptions in the institutional channel. Those also tend to be pretty lumpy. Anything, that you're aware of that could, you know, skew things one way or another, either in the pipeline or kind of what's coming up around the fourth quarter, etc.?
Not at this point. And look, there's several big drivers of that. We talked about a few of them. One is investment performance is actually pretty good.
Mm-hmm.
Knock on wood, that continues. Two is our client service level has increased and we've started to really have 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.
Yep. Got it. All right. Let's talk about the third bucket, which is kind of expanded into 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. You know, clearly there's a lot of momentum behind traditional managers and alternative managers 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 some data 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 spent a lot of time looking at all sorts of acquisitions. Clearly, we see everything.
Yeah.
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 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.
Yeah.
What we found over and over and over again, I think you used the appropriate word, the dynamism 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.
Mm-hmm.
So, very little diligence on the actual end, on the end companies that you're lending to, and, you know, 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, particularly with Victory Park Capital, is that there are very few people able to get access to those companies that you could lend to. And, you know, there are really four or five 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 really enjoyed about Victory Park Capital from a business perspective. The origination capabilities they have are, bar none, some of the best in the world.
Mm-hmm.
That's what's unique. That's what we underwrote. That's what we looked at. Of course, you can see it in the performance, which is very, very strong. Now, of course, there are other elements that we wanna make sure we have appropriate, like any acquisition. We wanna make sure that the culture is the right culture.
Yep.
And to your point, to your part of your question, we wanna make sure that we could grow the business. So, again, we're being client-led on every piece of acquisition that we do, including Victory Park Capital. Our clients were asking for asset-backed. They weren't asking for direct lending as much.
Mm-hmm.
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've 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.
Yep.
So you put all that together from an ecosystem perspective that we were 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.
Yep. Great. Well, let's talk about acquisitions a little bit broadly. You've done several number of smaller transactions, which I think the market generally liked. I mean, with bigger deals, there comes a lot of integration risk. These 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 one to two years.
Sure, so we have a very stringent, very disciplined way we look at M&A. We have a, you know, several P constructs, 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 gotta make sure the people fit. Look, I'll tell you, going back to Victory Park Capital or NBK, same sort of thing. We spent a lot of time with the people.
Yep.
Victory Park Capital is based in Chicago.
Mm-hmm.
Their motto is, "Who cares wins?" Very aligned with our motto, right? So we spent a lot of time on the people part to it. We wanna make sure that there is a potential to grow the business. And of course, all that has to come at a right price. So we think through that philosophy quite well. We're very IRR-driven in the way we make acquisitions.
Mm-hmm.
Again, our philosophy is, if you come to us, we are probably not gonna be the highest bidder in terms of a pricing perspective. But what we're gonna do is we're gonna 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 wanna partner with these folks for. We have, to your capacity question, a lot of capacity. You know, 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, you know, growth for those firms.
That's what we wanna 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 five, six minutes left, so maybe we'll shift from some of the strategic questions to some of the financial few points for the next couple of minutes here. I wanted to start with performance fees. You know, it is, 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. You know, a lot of it is coming on the back of stronger returns in the mutual fund complex, but also s ome 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?
Yeah, 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.
Yep.
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 should, to your point, continue to persist as a stream for us to deliver. You know, we are broadening it out. If you think about going into private markets, there'll be 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 you guidance.
Got it. Shifting to profitability, Janus Henderson is on track to deliver solid margin improvement this year. I think year-to-date margins are up something in the 400 basis points for the first three quarters of the year. As you budget for next year, what are your early expectations for G&A growth, I guess, and comp rates as you sort of think about any early starts for 2025? But also, as you think about profitability for the firm as a whole, you know, longer term, you guys, I think, were 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 there's 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 gonna 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.
Yep.
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 ROIs 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'll think about it in a couple of buckets. There are some investments that we're making that are purely variable and can be variabilized. 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 variabilized 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, 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.
Sure.
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 costs?
Mm-hmm.
Yes, absolutely. We expect to get some leverage on that, the pace of which we're gonna be very, very conscious of. Again, as long as we continue to deliver ROI, we're gonna continue to invest in the business.
Great. Let's touch on capital returns as well. It's become an increasingly more important part of the story. We talked about M&A for a couple of minutes, you know, and the balance sheet remains in a 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 a more recurring durable share repurchase plan, does that still, is that still kind of part of the EPS algorithm that clients should be thinking, investors should be thinking about in the next few years?
So since 2018, we've bought back around 21% of our market cap. As you said, we put back in a repurchase plan. We're gonna continue to do that. We think that that is 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 gonna have the right working capital where we need to be. That's just to run the business. That's top priority. That's what we have. And gladly, right now, we have enough to do that.
Yep.
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, whether it be other areas. 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. Then, after that, building the company for today and for the future, and the first two 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.
Mm-hmm.
And we certainly hope to continue to do that. Again, with that priority of the list intact.
Got it. Okay. Well, we 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 will leave it there.
Great.
Thank you very much.
Thanks, Alex.
Thanks for joining us.
Yeah, appreciate it.
Thanks.