Good morning. My name is Nicole, I will be your conference facilitator today. Thank you for standing by, welcome to the Janus Henderson Group Third Quarter 2020 Earnings Conference Call. 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 factors section 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 third quarter 2020 earnings call for Janus Henderson. As usual, I'm joined by our CFO, Roger Thompson. Let me start by saying that I hope all of you, your friends, your family, continue to be safe and healthy. I'm really pleased to be back physically in our London office, taking this call at a safe distance alongside Roger. As we've said on previous calls, we like to take a long-term view of our business. That's somewhat at odds with the quarterly reporting cycle. To that extent, what we've done is to say on the first and third quarter calls, we'll run through quarterly results, and then we use the second and fourth quarter calls to do a bit of a deeper update on the business and strategy.
In line with this, in today's presentation, I'll just give a brief summary at the start of the quarter from my perspective, and then I'll hand over to Roger, who will go through the results in some more detail. Following our prepared remarks, we'll take your questions. Turning to slide one. Our third quarter results were strong. AUM increased 6%. Our long-term investment performance was solid. Adjusted EPS of $0.70 was better compared both to the prior quarter and to a year ago. Our balance sheet and cash flow generation remained very strong as we continued to return capital to shareholders during the quarter, both via dividends and also repurchases. Roger will take you through the financial details in more depth.
What I'd like to do is just try and tell you how I think about the quarter sitting in the context of our broader story, which really is about our strategy. If you turn to slide two, it's a reminder of our strategy, which is simple excellence. We're making great progress on delivering our strategy, building a strong and resilient foundation, which is designed to deliver organic growth and to increase profitability. Our path to achieving simple excellence is founded on the five planks referenced on page two. Let me just quickly turn to each one of those five planks. First, producing dependable investment outcomes. Our long-term investment performance remains solid. Some of our strategies took a hit in the change in markets and COVID-related beginning part of this year.
A number of our other strategies have done extremely well, and we've had the diversity and the resilience to continue to drive forward. Overall, long-term investment performance remains solid. The second plank is that we have to excel in distribution and client experience. We've seen a significant improvement in net flow in this quarter. We can definitely see those numbers moving around, particularly with lumpy institutional flows over time, and it's hard to draw sort of an extrapolation line from quarter-to-quarter. To me, I'm seeing good momentum in a number of areas in our business, and I'm seeing improvement in the execution. I think we are definitely getting closer to excelling in distribution and client experience. Which puts us on a path to achieve our objective of organic growth.
Just as an example, our fixed income retail flows were positive across the U.S., EMEA, and APAC, and have grown at double the industry rate in U.S. retail during the quarter. Another example is we're capitalizing on a strong list of global focus products, which has been for our Global Head of Distribution, Suzanne Cain, and her team. They've put in this Global Focus Products Program, and it's working well. We're focusing on products with high growth potential, and are pleased with the year-to-date growth in those particular products. The third plank is focusing on an increasing operational efficiency. In the quarter, we've completed some major projects that simplify the way we operate our business, and that also serve to free up capacity so that we can turn our attention not only to current BAU business improvements, but also generational steps forward in our infrastructure.
We completed back office systems lift out, we consolidated TPAs, we took a number of other important steps during the quarter that move us forward. We told you last quarter also that we'd be taking a hard look at our business model and expenses. We're doing that, taking a careful and thoughtful approach. We need to balance cost savings against appropriate levels of continued investment that are required to effectively drive our growth strategy and get us to simple excellence. We're making really good progress in the project. It's been a focus and gotten attention from our board as well as the management team, and we've had the help of some excellent third-party consultants. We are really making progress. We've identified some very tangible areas of savings that we'll be pursuing, and we also have a number of other ideas that we're continuing to work through.
I look forward to updating you on progress in this area as the work progresses, and I expect to be able to give you more detail about how we're doing this in the fourth quarter when we give you our expense guidance for the upcoming year. The fourth plank in our strategy is proactive risk and control environments. We further strengthened our team with some senior hires, especially our EMEA Head of Compliance, which is an important position for us. We're taking steps to further strengthen the control environment and relationships with the regulators around the world. I'm pleased at the progress in this area. The fifth point is to develop some new growth initiatives. We're focusing on areas of strength for us, combined with where we see our clients moving. Here, we're committed to delivering growth in a profitable way. Example, we continue to support growth in ETFs.
We've seen really good momentum in our VNLA and our JMBS ETFs in the U.S. Last week we launched a AAA CLO ETF called JAAA in the U.S. It was the 11th largest ETF launch out of 1,600 in the last 10 years. Outside of ETFs, earlier this month, we also launched a U.K. asset-backed securities fund. I think we're doing good work in continuing to develop targeted new growth initiatives. Before turning it to Roger, let me reiterate a commitment to delivering the benefits of our strategy to all of our key stakeholders, our clients, our employees, and our shareholders. We are driving forward in this regard with as much urgency as possible. We know that time is expensive and not always our friend, and we are really working as fast as we can to deliver on this strategy. Let me say just a word about Intech.
We've talked before about how we are facing some real challenges in our Intech business, driven primarily because of a couple of periods of underperformance in recent history in their investment strategies, and also facing the challenge that a number of our clients are barbelling their portfolios of space. They've been fighting this battle for a while. This quarter represents improvement. They had better investment results. They also had better flow results. As we work to face the challenges in the Intech part of our business, we know it's going to take time to fully heal and get back to health. This quarter does represent a step forward in our Intech business, and that's good.
As we think about the lumpy nature of that business and the large institutional account size that they deal in, it's hard to extrapolate from quarter-to-quarter, and it's fair to say there's still some very significant risk remaining in our Intech business as we go forward. It's difficult to predict exactly the quarter-to-quarter path on the return to health of that part of the business. Looking away from Intech, when I look at the rest of the business, I think we can see a clear path to continuing to drive forward towards organic growth perhaps a bit more quickly.
I'm optimistic that the rest of the organization can continue on the path and continue with the steps that we've made to this quarter, and I really believe we are on the right path to achieving organic growth and driving greater profitability and building our business for the long term. With that, let me turn it over to Roger to take you through the quarter's results.
Thank you, Dick, and thanks everyone for joining us. Starting on slide four with investment performance. Investment performance remained solid with 58%, 61% and 73% of firm-wide assets beating their respective benchmarks on a one, three and five-year basis as of the 30th of September. The one-year performance result in our equity capability is primarily from segments of our U.S. equity business, which we previously noted. We're encouraged by Intech's improvement in its one-year performance as Dick just mentioned. However, the longer-term performance will take longer to turn and hence remains a concern. Relative performance compared to peers is strong, with 68%, 74% and 78% of the AUM represented in the top two Morningstar quartiles on a one, three and five-year basis. Let's turn to total company flows.
For the quarter, net outflows were $2.9 billion, compared to $8.2 billion last quarter and $12 billion in the first quarter, and they're the best they've been in the time series that we show here. The quarterly flow number reflects lower redemptions primarily from the institutional business, which were partially offset by lower growth sales in the intermediary channel, as we typically see seasonally lower retail sales during the third quarter. We win across strategies and regions. Additionally, we're optimistic that we're through the majority of the redemptions that were likely as a result of changes in the investment management teams that we made over the last 18 months. The intermediary business saw positive flows in our fixed income and multi-asset capabilities, while outflows continued in our U.S. mid and SMID-cap capabilities due to short-term underperformance, which we identified as a risk on last quarter's call.
We're pleased with the improving flow trends and the broader business momentum as we progress through 2020, though we know there's still much work to do. As Dick just said, excluding Intech, which is likely to take longer to turn, we're optimistic about returning to positive organic flows in the near term. Moving to slide six, which shows the breakdown of flows in the quarter by capability. Equity net outflows for the third quarter were $5.1 billion, compared to $4.2 billion in the prior quarter. The quarterly outflows were primarily from elevated outflows in certain U.S. strategies due to short-term underperformance. Flows into fixed income were positive $1.8 billion in the quarter, compared to negative $700 million in the second quarter, primarily due to lower mandate redemptions, but also growing positive flows in retail. In retail, we're capturing market share and seeing positive flows across several strategies around the globe.
Intech outflows improved in Q3 to $100 million. The result includes a $1 billion funding out of Australia. We're pleased with Intech's improving short-term performance and the better flow result this quarter. As we've said previously, Intech is mostly institutional and the results will likely be lumpy and fluctuate from quarter-to-quarter. total inflows to multi-asset were $600 million, driven by inflows into the balanced strategy. Alternative outflows were $100 million. Slide seven is our standard presentation of the US GAAP statement of income. Moving to slide eight, which shows a strong set of summary financial results. There's a lot of green on this page. Adjusted third quarter operating results were up compared to the second quarter, primarily from a 10% increase in average AUM.
Total adjusted revenues in the quarter increased 9% compared to prior quarter due to higher average AUM, partially offset by seasonally lower performance fees. Adjusted operating income in the third quarter of $162 million was up 17% over the prior quarter, driven principally by higher revenue, partially offset by higher expenses. Third quarter adjusted operating margin was 36% compared to 33.5% in the prior quarter and 37% a year ago. Finishing up the financial results, adjusted diluted EPS was $0.70 for the third quarter, compared to $0.67 for the prior quarter and up from $0.64 a year ago. On slide nine, we've outlined the revenue drivers for the quarter. Higher average assets were the biggest driver of the quarterly change in adjusted total revenue.
Net management fee margin for the third quarter was 45.8 basis points, up from 45.7 basis points in the second quarter and up significantly from 44.4 basis points a year ago. The margin remains resilient and the increase of 1.4 basis points over the past 12 months reflects the ongoing mix shift and our focus on quality flows. Performance fees were $7 million in the quarter versus $17.2 million in the prior quarter, where there are more accounts eligible for fees, but up from $1.4 million in the same quarter of last year. We currently expect Q4 performance fees to be ahead of Q4 last year, but that will obviously depend on final performance for the year. For mutual fund performance fees, the third quarter was a negative $5 million. Turning to operating expenses on slide 10.
Adjusted operating expenses in the third quarter were $288 million, which was a 5% increase compared to the prior quarter. Adjusted employee compensation, which includes fixed and variable staff costs, was up 6% compared to the prior quarter, predominantly from higher profit-based incentive compensation. Adjusted LTI was down 13% from the second quarter from the impacts of the mark-to-market adjustments in both quarters and Social Security taxes on vestings in the U.K. that occurred in the prior quarter. In the appendix, we've provided the usual detail on the expected amortization of existing grants. The third quarter adjusted comp to revenue ratio was 43.9%, in line with our mid-40s guidance. Adjusted non-comp operating expenses were up 12% compared to the prior quarter. The increase is primarily related to marketing, FX, and professional fees. For the year, we anticipate our non-comp expenses to be down low single digits compared to 2019.
Finally, our recurring effective tax rate for the third quarter was 21.3%, below the statutory rate guidance of 23%-25%. The lower rate in the third quarter was impacted by a U.S. state refund received during the quarter. Lastly, slide 11 is a look at our capital management. Cash and cash equivalents were $927 million as of the 30th of September, of which Janus Henderson's portion was $909 million. As a reminder, you should think about the amount of cash we have on the balance sheet as what the board and management are comfortable operating the business with due to regulatory requirements, a conservative working capital buffer, and cash set aside to meet the 2025 debt maturity. As we said previously, we remain committed to returning excess from future cash flow generation to our shareholders.
During the third quarter, we paid approximately $66 million in dividends to shareholders and today have declared a $0.36 per share dividend to be paid on the 23rd of November to shareholders of record as at the 9th of November. In the quarter, we purchased 2.4 million shares of our stock for a total of $50 million. Since we started our buyback program in Q3 2018, the buyback program has been 9% accretive. I'd like to turn it back over to Dick for a few comments before we begin Q&A.
Thank you, Roger. Before handing over to the operator for questions, I'd like to briefly address the elephant in the room, Trian's recent investment in our firm. As you know, Trian has made a significant investment, holding approximately 9.9% of our shares. Look, we value input and good ideas from all of our shareholders. If Trian has specific views or suggestions to share with us, we certainly will consider them as part of our broader thinking and take that seriously. We are deeply committed to driving shareholder value creation. Like most public companies, we can't really comment on market rumors or speculation. Our board and management team will act responsibly and will act in the best interest of all our Janus Henderson shareholders. Our plans and focus, though, remain centered on delivering simple excellence, which we believe is the right path forward.
We're making progress against the five planks of our strategy, and we're moving towards fully unlocking the growth synergies from the Janus Henderson merger. Achieving excellence takes time, and that can be frustrating, but it's the right path that we're on, and our priority remains to deliver simple excellence and growth. As we turn to Q&A, please keep your questions directed on the quarterly results, as there really isn't that much more we can say about this Trian situation. We appreciate your understanding. With that, let me turn it over to the operator for your questions.
Thank you. Ladies and gentlemen, at this time we will conduct the question and answer session. In the interest of time, questions will be limited to one initial and one follow-up question. If you would like to ask a question, please press star one on your phone now and you will be placed in the queue in the order received. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, please press star one to ask a question, and we'll pause for just a moment to allow everyone an opportunity to signal for questions. Okay. We'll take our first question from Ken Worthington with JPMorgan.
Hi, good morning. Thank you for taking my questions. Thank you for your prepared remarks. I think consolidation remains a theme today for the industry. When Janus merged with Henderson, you indicated that you had the size and scale at the time to compete, but if you looked out over the next few years, that you might not be in a position, or your position would be dramatically enhanced by the merger with Henderson. As we think about Janus' size and scale today, do you think you have the size to effectively compete in the global asset management business over the next decade at your current pace of growth? Does Janus benefit from pursuing acquisitions, to better position the company again for the next decade?
Hi, Ken. Dick here. Thanks for the question. Size by itself helps a few things, right? It helps your ability to capture economies of scale. It helps your ability to invest in a breadth of ideas, and it helps your ability to invest in your infrastructure. It probably also helps you build a broader brand with key clients. There's some really good things that happen with size. There's some challenges with size. It typically doesn't help alpha, and it typically doesn't help excellence. Getting through consolidations or size accumulating inorganic transactions involves a huge amount of disruptions, which frankly clients penalize very heavily. I think our priorities are clear. Our first and highest priority is to deliver excellence for the existing clients that we have. Our second priority is to drive growth organically.
If we have the excellence and the platform well established through those two things, there probably will be inorganic things that may well fit, that could enhance the scale and add qualitatively to our business, in a way that more than offsets the disruption. The key is you've got to be delivering that excellence. Size without the excellence is just a bigger problem. We're pursuing that appropriate level of excellence first as our highest priority. We'll keep trying to drive to get to organic growth. I think that firm that has established itself in that space is frankly a better acquirer, and is more ready to take on the challenges of some future consolidation. Right now, our focus really more is delivering on the excellence.
If you think about how pressured we are to consolidate in the near-term future, we have a margin this quarter of 36%. That's pretty good. I don't think we're desperately missing out on economies of scale at the moment. I think our priorities are correct, focused on delivering on the existing simple excellence strategy, getting to organic growth. With that said, we always have an ear open to opportunities. We're always listening and talking to people about potential ideas. If we find something very special that would more than offset the disruption that it brings, we'd certainly be interested in something like that. The odds of something like that coming along that's such a great fit, that doesn't happen very often.
Okay. Your comments were really helpful. Thank you very much.
We'll take our next question from Nigel Pittaway from Citi.
Oh, great. Thank you very much. Just first of all, obviously with the flows that you're trying to sort of get organic growth in, what do you think is going to be the biggest driver of that? Is it going to be equity outflows diminishing? Is it going to be stronger growth in fixed income? Where do you have the greatest hope that the improvement will come to push you into a growth situation?
Hi, it's Dick again. Thanks for that question. With us, we're a complicated story when it comes to something like that. We have so many products operating in so many parts of the world, and they're moving in different directions against different market backdrops. It's hard to give you a really simple, pithy answer to your question. We've seen our traditionally extremely strong Denver equity franchise face some challenges through this market environment this year, particularly small and mid-cap investing, which has been right at the heart of the very best of our investing, has taken a challenge. On the other hand, fixed income, European investing, some of our absolute return strategies have all taken the opposite tack and have demonstrated really substantial outperformance during the period.
I think we're going to be a bit of a complex story in all periods, with some products moving better than others in different market environments. It's the balance. If you wrap those things with excellent client service, with excellent client experience, with a really strong infrastructure that delivers the right information at the right time to the right people internally and externally, then I think you have the opportunity to be resilient through those different parts of the market cycle. If everything you're doing is excellent, I think you'll win across time with that hand. That's what we're trying to accomplish. There'll be parts of our business that will go through challenges in every market environment. Hopefully we can consistently more than offset that with all the good stuff we're doing.
I think we're on the right path to delivering that. We're just not quite there yet.
Nigel, it's Roger. If I add a couple of specifics. Dick mentioned fixed income. The fixed-income performance you can see is in a totally different place than it was a few years ago. It's very strong across the board. In a market where fixed income is growing, we're taking market share. That's around the world. We're seeing outsized flows against the market in the U.S. and also around the world. In equity, the pipeline for growth in institutional equity, there's a number of interesting things there. Nothing funded in Q3. There are things there that we would hope and expect to come in the future. In new products, our ETF franchise is growing really well and really fast. Continued growth in VNLA and JMBS, as Dick mentioned earlier. We've shown that we can be a real player in that space.
The JAAA that we launched a couple of weeks ago, the 11th largest fund ETF launch over the last decade. We're pretty excited about what we can do in that space as well. There are plenty of areas where we're seeing growth. There are a couple, as Dick said, as there will be in a business as diversified as ours which have challenges short term, but they're fantastic investment teams.
Okay, thank you for that. Maybe just as the follow-up. Obviously, you seem to have deferred further detail on the cost efficiency program by a quarter. You obviously mentioned the need to balance off investment with actual savings. How are you feeling about that balance currently? Do you think that most of the savings that you're going to generate are going to be reinvested, or will there be some sort of relatively meaningful impact on the overall cost base?
Yeah, I don't think anything's changed there, Nigel. We're three, four years through the merger. As we said on the last call, it was the right time to be looking at our business, how we do it. Obviously, COVID has given us an opportunity to look at things in a different way. We're working through a detailed piece of work. As Dick said, this business, it's really important to do this right and not to disturb the momentum that we've got, because we are on the right track. We're working through that. We'll give you updated guidance as we normally do around Q4. We've been investing in our business. We will continue to invest in our business. There are efficiencies that will drop to the bottom line, yes.
Okay, thank you.
We'll take our next question from Brendan Carrig from Macquarie.
Hi. Just the first question from me. Just, Dick, just a clarification on the comments you made just around the flows for Intech. Is it fair to assume that the reason you're alluding to the potential troubles in those businesses isn't necessarily that there's a pipeline of outflows or redemptions that have been requested, but it's probably more likely that you do get a normalization back into outflows over the quarter, just given the performance track record?
Yeah, I think that's a fair thing to say.
Okay. The second question I had, just on the buyback. Obviously there's a fair bit of capacity left, about half of the capacity left to get done in the quarter. Is it possible to get through the entire amount in the quarter, or could we expect that there might be some capacity that was left as the year ends of that $200 million?
Yeah, Brendan, it's Roger. I think we're $103 million through the $200 million that the board authorized through April next year. We'll likely continue with the same structured buyback program that we've had before looking at market volumes and the like. I wouldn't expect us to do it in one quarter. You can see, at least in Australia, you can see what we're doing on a daily basis.
Okay, thank you.
We'll take our next question from Ed Henning from CLSA.
Thank you for taking my questions. Just two from me. Can we just start on equities and the gross sales? If you look at the last four quarters on slide 17, they've been trending down. Is this a concern for you that the sales aren't coming through as strongly as they were?
No, there's two pieces to that. Yeah, there's two pieces to that, Ed, one of it is what I just referred to on institutional. Q3, there was nothing big that funded in institutional, equities is part of that institutional pipeline I talked about. I think that's just timing. Two other, on the intermediary side, it's more in line with where we were Q3 last year. We are a little bit slower in the U.S., given that short-term underperformance in part of the U.S. strategy. I think, yeah, certainly not concerning on the institutional side and not concerning, we're turning the corner, as Dick mentioned, in what's been a very powerful franchise in Europe. Our U.S. equity capability is a very powerful engine. That has seen poorer performance over the last six months, which has slowed us down for a little bit there.
As I said, that's a great team doing great work, and they'll come back strong, I'm sure.
No worries. Just a second question. If we look at both the near term and the medium term, you talk about a mix shift that's been helping margin as you push more into and get more flows in for FX and ETFs. Can you just touch on how that'll shift your mix on your margin going forward?
Yeah, I think that's very fair, Ed. We've been winning more in higher fee, and some of the assets we've been losing, as we've mentioned before, have been lower fee assets. We have got a very broad church of product, and the pipeline is across that. We've always said we're not immune to fee pressure. You shouldn't expect that fee margin to improve forever. The fact that it's improved 1.4 basis points over the last year, I think sets us apart from a significant amount of the competition. Over time, you should see that flatten out and probably over time, we'd expect to see that fee margin come down a little bit, and that's why we need to run an efficient, effective, excellent business to look at some of those efficiencies to maintain and possibly further improve the margin.
Yeah, if we win significant mandates in some of our enhanced equity, some of our buy and hold fixed income type products that are obviously at lower fee.
Yeah. Okay, thanks.
Take our next question from Andrei Stadnik with Morgan Stanley.
Good morning, all. Good afternoon. I just wanted to ask two questions. Firstly, on the operating margin, it improved to 36% in the quarter. Is that some of the early wins on the cost transformation coming through, or is that better market conditions helping out as well?
Yeah. You've got this quarter, you've got a market that's improved. We've got less performance fees than we had in Q2. Q3 is a very light performance fee quarter. We're still relatively light in some areas from low COVID type spending, I guess you'd define it as T&E. Our marketing is up from Q2 still below where it was a year ago. It's a real mix of things. No, Sorry. Yeah, it's us running an efficient business. I guess what I want to differentiate on is we're not doing something that we won't do in any way. We are constantly looking at running an efficient business. There is a how do we fundamentally look at doing things differently? That's right. There are things that have come through this quarter.
Yes, I guess, but there will always be things where we're looking and driving efficiency. Yeah, 36% is the right margin for the quarter.
Thank you. For the second question, wanted to ask about progress in Japan and what would it take to accelerate the progress? Do you think there needs to be more product that's tailored or more popular with the Japanese market, or do you think your partners in Japan would need to push harder on sales and distribution? Because it seems like the Japanese progress outside of the Intech mandates has slowed recently.
Hi, this is Dick. Thanks for that. I agree with you. I think we had more momentum in Japan, and it's slowed. There's still some good things happening there, but I think it's a fair observation to say we need to re-energize and dig deeper on how we're pursuing that business because we had more growth earlier on, and it slowed a bit.
I don't have a simple magic answer for you on that one. We're aware of it, we're focused on it, and we're asking ourselves the questions about what do we need to do to reenergize and reinvigorate some of the stuff going on in that space. It's not an easy business, and it's very competitive in Japan. They're a very well-informed and sophisticated client base. We need to keep pushing to do better, and we are. I don't know, Roger, do you have more to add on that?
Yeah. I think there's a couple of things I think which are relevant. What we haven't had is a sort of blockbuster launch.
Right.
A $1 billion at a single go. There's a couple of things we've talked about over the last few quarters that I think are more flow product. As I always describe those things, they're more sort of the CFO's friend because that's money that just comes in the classic river of nickels over time, and is probably quite possibly even more valuable. We launched a year or so ago, in the summer of 2019, we launched our adaptive allocation strategy in Japan for Dai-ichi Life. At the end of last year, we launched a product for Dai-ichi Frontier Life, which we talked about. Those two have been raising money, little bits every day, every month. They're now around $1 billion between the two of those. Things like that are great to see coming through on that regular basis, but they don't stand out.
There's some positives there. I think the other piece which remains very positive from Dai-ichi is obviously the growth of the business in Australia with TAL which has happened over the last 18 months or so. Some real growth down there.
Thank you.
We'll take our next question from Patrick Davitt with Autonomous Research.
Hey, good morning. Thanks for taking my questions. I appreciate your candor on kind of the risks at Intech. Could you remind us of the concentrations there? I think a few quarters ago you mentioned a handful making up a plurality of the assets. Also remind us kind of the seasonality of that. Are those decisions more of a 4Q event or kind of spread throughout the year?
I think the decisions aren't necessarily Yeah. Clients are looking at mandates over the course of the year. I don't think there's any real seasonality there. You're right. Intech is an institutional business with some substantial mandates, and should any of those This quarter we've won a billion-dollar mandate, but we have several multi-billion dollar mandates in the existing book. The five largest strategies of Intech make up almost 60% of their business. Yeah, there is a concentration there.
Great. Thank you.
Does that help, Patrick?
Yeah. That's very helpful. Thank you. Then the U.K. real estate strategy has been getting some press. I don't know if you can give us an idea of what the pipeline of redemption is there or any kind of view to when that might reopen.
No. We've said that that is unlikely to reopen until the first quarter of next year. We're still building liquidity in it. The material uncertainty clauses that were across the industry have been raised. The fund is top quartile in what it does and its performance. The asset mix in there, I think is pretty strong. We are cautious about opening that fund and seeing outflows, therefore we need to make sure that we build the right amount of liquidity in it. What there is at the moment, despite the material uncertainty clauses being withdrawn, is that there have been very few transactions going on in the market. Selling properties is taking time. That's what's going on there. There will be some outflows when that reopens in Q1 next year.
We'd like to be Q1 next year because at the moment it is still soft close.
Okay. Thanks very much.
The fund is about $2.5 billion.
Yes. Thanks very much.
I'll move on to John Dunn from Evercore.
Hi. Thank you. Can you talk a little bit about some of the investments you're making in the intermediary channel, potentially looking at new vehicles and also how those relationships are evolving?
The product launches that we've made over the last few years, and continue to make, particularly around getting the right instruments in the right vehicles around the world. We've seen success. Interestingly, when we were at the board yesterday, we were looking at where flows have come from. A lot of flows are from products that didn't exist a few years ago. The products we launched over the last few years, whether they be vehicles of existing products. Take something like Strategic Income, is a great product that's been sold in Europe. We launched this in the U.S. a year or so ago, a developed world bond. That is now the third-largest selling fund in the U.S. We've talked about our ETF franchise, which is growing from a low base.
I think we've now got around $3.5 billion in ETFs and JAAA, we're pretty excited about that being another substantial product. Our biggest local staple product launched in the U.S., obviously, where there is a lot of interest there, our multi-strat product. There is plenty of work going on, both in terms of new product, but also making sure that we've got the right vehicles in the right places.
Got it. Kind of a corollary to that, you mentioned customer experience, which is becoming more and more important. Could you give us a flavor of what differentiates you guys in the different distribution channels in that game?
Yeah. I think customers want investment excellence consistently. Second, they want the right information at the right time. Third, they want access to the real thought leadership of your firm in a convenient and easy format that makes them better at their jobs, that enriches how they engage with their bosses and their clients, and makes them better. If they have a problem and a question or a complaint, they want you to deal with them as efficiently and friendly and effectively as is humanly possible. At every stage of that, we've been investing in improving the technology to enhance our ability to do that.
Got it. The increase in G&A and professional services quarter-over-quarter, did that have to do with this efficiency plan? Just because some of your peers we've seen been flat to lower in this COVID environment. Just wondering if we could get a little more detail on what drove that.
No, sure. There's a couple of things in there. Partly that's FX. Sterling strengthened in the quarter against the dollar. That comes through on the revenue line and the cost line. A part of that is that, and a part of it is some one-off consultancy that's around there, but not really around the investments that Dick's talking about. We've been investing, and we will continue to invest in the business. That's built into the guidance we've got around us being lower than last year. Again, like I say, we'll continue to update guidance, and we'll give you that at the end of the year.
Great. Thank you.
We have no further questions at this time. Ladies and gentlemen, that brings us to the end of our conference today. We do appreciate your participation today. Have a good rest of your day.