Morning. My name is Nicole, and I will be your conference facilitator today. Thank you for standing by, and welcome to the Janus Henderson Group first quarter 2019 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 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 first quarter 2019 earnings call for Janus Henderson Group. I'm joined by Roger Thompson, our CFO today. Roger will be taking you through the results for the quarter, after which I'll make a few concluding comments, and then we'll be happy to take your questions. As you know, we take a long-term view of our business versus the short-term view that is inherent in our quarterly reporting. To that extent, and similar to last year, Roger will be providing you with updates on the quarterly flow, performance, and financial results. We will use the second and fourth quarter calls to address these same items, along with a more robust discussion on the business and on our strategy. We believe this setup will help better align our calls with how we manage our business.
With that said, let me turn it over to our CFO, Roger Thompson, to walk you through the quarter's results.
Thanks, Dick, thank you everyone for joining us. The first quarter's results can be characterized by three points. First, near-term investment performance has improved across a number of key areas, and the long-term results continue to be strong. Second, despite the continued elevation in net outflows, we finished the quarter with 9% higher assets under management as markets rebounded from the lows we saw in December. Third, the financial results are in line with our budget, but as expected, lower both year-over-year and quarter-over-quarter, given lower asset levels exiting the volatile fourth quarter. Investment performance as at the 31st of March was strong, with 69% of firm-wide assets meeting their respective benchmark over the three-year time period, improving from the prior quarter. Total company net outflows are disappointing.
Looking ahead, we still anticipate outflows in areas of underperformance and some notable outflows from changes recently announced. In particular, the impact on the Global Emerging Markets team that will be departing, which I'll go into a little bit more detail in a few minutes. That said, we remain optimistic about future prospects across many areas of the business, given our global distribution footprint, good investment performance, and the breadth of our product offerings. Adjusted EPS of $0.56 reflects the impact of fewer days compared to the fourth quarter and lower performance fees. Finally, we returned $101 million of cash to shareholders during the quarter via dividends and share repurchases. Moving to investment performance, which is on slide three. Overall, investment performance relative to benchmark is strong, with all time periods showing improvement compared to the fourth quarter.
We saw continued strength in the performance of our equity and multi-asset capabilities across the one, three, and five-year time periods and short-term improvement in our fixed income and alternative capabilities. INTECH performance remains challenging. However, year-to-date performance, albeit a very short time period, has been encouraging. This quarter, we've also included the % of mutual fund AUM in the top two Morningstar quartiles, which was previously included in the appendix. As you can see in the table on the right-hand side of the slide, performance against peers is very strong, with 78%, 72%, and 86% of our equity mutual fund AUM, which is our largest capability, in the top two quartiles on a one, three, and five-year basis. For the quarter, net outflows were $7.4 billion compared to $8.4 billion last quarter.
While the quarterly result is disappointing, we did see improvements compared to the fourth quarter across a number of areas. The better results was generated primarily by lower redemptions in equity and alternatives as market sentiment improved in the first quarter, along with the ongoing market share gains in our multi-asset capability. It's important to note that the first quarter result includes $1.9 billion of outflows related to management decisions and other one-time events, including the closure of the Australian equity business and certain cash management accounts, the retirement of Bill Gross, and the announced departure of the Global Emerging Markets team. Moving to slide five, which shows the breakdown of flows in the quarter by capability. Equity net outflows for the first quarter were reduced to $2.9 billion, compared to $4.1 billion in the prior quarter as a result of lower redemptions in our U.S. intermediary channel.
The favorable comparison versus last quarter was driven most significantly by nearly a $1 billion improvement in the Global Equity Income Fund, which posted net inflows during the quarter, and much improved redemptions in the international equity U.S. mutual funds, which, while still negative in outflow terms, were significantly better. Flows into fixed income were negative $2.8 billion. This resulted primarily from outflows in our U.S. intermediary business. Fixed income outflows included $1.3 billion of redemptions from our Flexible Bond Fund in the intermediary channel, in addition to redemption related to the timed goodwill growth that I previously mentioned, which resulted in roughly $700 million in redemption. INTECH outflows were $1 billion, which is flat to the prior quarter. Multi-asset flows continued to be driven by strong flows into the balanced strategy.
The total inflows for the capability in the first quarter was $700 million, an improvement over the prior quarter. The balanced strategy continues to be a great example of a cross-selling strategy across all regions of the globe. Alternative net flows were negative $1.4 billion, driven by outflows in the U.K. absolute return fund and the property fund. Finally, I wanted to say a few words about the recent announcement concerning the departure of the individuals overseeing our Global Emerging Markets strategy. At the end of the quarter, that strategy had roughly $5.1 billion in assets under management, and our current expectation is that we will see the majority of those assets to be at high risk of redemption in the second and third quarters. So far in the second quarter, we've received notification of redemptions, $2 billion for the strategy.
We remain fully committed to the emerging market asset class and are actively pursuing various options, including recruiting new talent to our investment team. Slide six is our standard presentation of the U.S. GAAP statement of income. Turning to slide seven for a look at summary financial results. First quarter results compared unfavorably versus last quarter and the same period a year ago, as we expected, given the lower AUM level the firm had entering 2019. Additionally, we also see the impact of lower performance fees and seasonally higher compensation expenses. That said, the market returns experienced in the first quarter will benefit revenue and cash flow generation for future quarters. Average AUM in the first quarter increased 1% over the fourth quarter, driven primarily due to the market rebound beginning in January.
Total adjusted revenues for the quarter decreased 6% compared to the fourth quarter, due to two fewer calendar days in the quarter and lower performance fees. Adjusted operating income in the first quarter of $143 million was down 13% over the prior quarter, primarily as a result of the lower revenue, seasonally higher compensation expenses seen in the first quarter, and the impact from mark-to-market on long-term incentive compensation. First quarter adjusted operating margin was 34.4% compared to 37.3% in the prior quarter and 40.1% a year ago. Finishing up on the financial results, adjusted diluted EPS was $0.56 in the first quarter, compared to $0.59 in the prior quarter and $0.71 a year ago. On slide eight, we've outlined the revenue drivers for the quarter. Performance fees and fewer calendar days were the biggest drivers of the quarterly change in adjusted total revenue.
Management fees decreased 2% from the fourth quarter. Net management fee margin for the first quarter was 42.9 basis points, which was down half a basis point compared to the fourth quarter, driven by a mix shift in the business, primarily from outflows in higher fee equity products. As we did in the first quarter last year, we provided the net management fee rates by capability in the appendix. We'll disclose this metric on an annual basis going forward and hope that you find it useful. Compared to the prior quarter, performance fees were lower, primarily from segregated mandates, partially offset by better fees on our U.S. mutual funds. Despite positive returns year-to-date, the U.K. absolute return funds didn't earn performance fees during the first quarter, as the investment performance remains modestly behind its high-water mark.
Regarding mutual fund performance fees, the first quarter improved to a negative $9 million from negative $12 million in the prior quarter, as weak performance in the first quarter of 2016 rolled off and was replaced by much better performance in most cases. If we're successful in continuing to add alpha in the second quarter, this will further improve these performance fees going forward. Moving to operating expenses on slide nine. Adjusted operating expenses in the first quarter were $274 million. Adjusted employee compensation, which includes fixed and variable staff costs, was down 7% compared to the prior quarter. Fixed staff costs were up slightly, as expected, due to annual pay rises and seasonality of payroll taxes resetting and 401 matches.
Variable compensation costs were lower than the prior quarter, due primarily to the lower profits, as well as reflecting the final adjustments to the 2018 bonus pool that took place during the first quarter. Adjusted LTI was up 50% from the prior quarter, primarily due to $15 million of mark-to-market adjustments as a result of the market change. In the appendix, we provided further detail on the expected future amortization of existing grants. The first quarter adjusted comp to revenue ratio was 45.4%. This revenue is higher than the guidance we previously provided due to lower revenues, seasonal compensation expenses, and the mark-to-market of adjusted LTI. Importantly, for the full year, we still anticipate a comp ratio in the low 40s. Turning to adjusted non-comp operating expenses, collectively, there was a decrease of 9% quarter-over-quarter.
The main drivers of the decrease were lower marketing expenses due to the seasonally higher spend in the fourth quarter and lower G&A costs. Compared to the same period a year-ago, non-comp expenses down slightly when adjusting for the $12 million legal outcome during the first quarter of 2018. Reflecting on the strategic priorities we laid out last quarter, we continue to focus on simplicity and operating efficiency, and some of the business decisions that were made during the first quarter were done with this in mind. In addition to those, we expect to deliver further efficiencies in the future. We're maintaining the guidance on 2018 non-comp expenses that were provided last quarter, which is that excluding the $12 million legal outcome in 2018, we'd expect to see non-comp expenses flat year-over-year.
Finally, our recurring effective tax rate for the first quarter was 22.8%, which is just below our prior guidance. For the full year, the firm's effective tax rate is still expected to be 23%-25%. Lastly, slide 10 is a look at our capital management. As we said previously, we remain committed to returning excess cash to our shareholders, and on this slide, you can see those results over the last eight quarters. During the first quarter, we paid approximately $70 million in dividends to shareholders, and today have declared a $0.36 a share dividend to be paid on the 29th of May to shareholders of record as of the 13th of May. During the first quarter, we also purchased 1.3 million shares of our stock for $31 million. It's important to remember that this activity only reflects one month of execution.
In the first quarter every year, we purchase shares on market to grant employees shares of company stock as compensation, and therefore, we do not execute our accretive buybacks until this program is completed. Going forward, we've had to pay $50 million-$60 million of share repurchases per quarter, depending on share price levels, as part of a $200 million authorized share repurchase. With that said, I'd now like to turn it back over to Dick for some final thoughts before we open it up to Q&A.
Thanks, Roger. Before getting into Q&A, I want to address one big question that you all probably have. Why isn't our strong investment performance that we've talked about translating into better flows? The real answer is that despite some recent improvement, we continue to face pockets of longer-term underperformance in a number of material areas of our business, including European equity, U.S. flexible bond, and our INTECH business, which are each driving meaningful net outflows. The better performance we have experienced year to date must be sustained for longer periods of time before it will begin to gain client attention and materially impact their behavior and flows. In addition to these, we've made a series of business decisions and have faced a number of special events which have resulted in and are expected to result in additional outflows over the next couple of quarters.
The sum of these factors accounted for roughly 80% of the outflows in the first quarter. This result is disappointing, and we own that. It does mask a number of encouraging results across areas in our business. For example, we continue to take market share in our U.S. retail channel in our U.S. equity strategy. Our multi-asset capabilities are growing well. Our fixed income teams in the U.K. and in Australia continue to prosper. Our U.K. absolute return strategy has returned to above-benchmark performance year to date. There are no quick solutions. We are focused on building the right firm for the future. We retain our focus and our discipline through shorter-term challenges. Thinking on a tactical level, the effects of our business decisions and some of these special events will pass in a relatively short time.
The best leading indicator of our long-term success is our investment returns. Today, overall performance at our firm is strong. Thinking more strategically, we have great people, and we're focused on taking the right steps to build the right culture based on putting clients at the heart of everything we do, succeeding as a team, and acting like owners. Going forward, we will continue to prioritize our investments and our focus on producing dependable investment outcomes, delivering excellence in client experience, building a more simple and efficient infrastructure, and maintaining a proactive risk environment, and finally, developing our small slate of new growth out. By keeping these things in focus and not getting too distracted by some of the shorter-term challenges and quarterly results, I'm confident that we will deliver success for our clients, for our owners, and for our employees.
With that said, I would like to turn it back to you, operator, to take 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 *1 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 *1 to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal for questions. Our first question will come to us from Daniel Fannon from Jefferies.
Yeah. Hi, this is actually James Steele filling in for Dan. You mentioned some sort of controlled outflows related to the EM team departing and Bill Gross' departure. I think the number was $1.8 billion. Just hope that you can maybe add a little more color to that and what the extent of outflows that we might expect related to some of these events in subsequent quarters is.
Hi, James, it's Roger. I think the number I gave is 1.9, but. There are a number of things that we've regarded as one-off in the business in the first quarter, and one that carries on into the second and third quarters, probably. That 1.9, we closed our Australian equity business in the first quarter, which we talked about on the last call. That resulted in about $500 million of outflows. In addition to that, we were doing some cash mandates in the U.K., and we also closed the retirement of Bill Gross. We talked about the beginning of some flows we expect to see from emerging markets. That adds up to the 1.9. In total, the emerging markets franchise is about $5 billion of AUM.
As you said, that's a franchise that we're committed to, and we're looking at as to how to replace that team. We do expect to see significant risk of outflows into Q2 and Q3.
Okay, thanks. Then maybe just any color on INTECH and the institutional backlog there.
INTECH had some tough numbers at the back end of 2016 and the back end of 2019. As I said, investment performance in the first quarter has been strong, but that's a very short time period. INTECH flows will be lumpy. We had $1 billion of outflows in the first quarter. We're obviously watching that very carefully. It is an area of risk in our business, but we're obviously pleased to see the strong investment performance in the first quarter.
Our next question comes to us from Kenneth Worthington with J.P. Morgan.
Hi, good morning. Maybe to follow up with the departures. There have been a number of departures and also retirements out of Henderson. You mentioned the EM team, there have been others. Can you talk about maybe the catalyst that you see driving this turnover? Maybe while numbers might not be higher than the industry average, there's definitely some higher profile managers that have left or retired. Where are we in the seasoning of whatever the catalyst is for these departures? Maybe, well, we'll leave it there. Thank you.
Yeah, sure. Thanks, Ken. Yeah. Since the merger, I think we've had a lot of stability on our investment teams. Recently, we've seen a little pickup, and obviously the high profile one we're talking about most at this point is the EM team that Roger mentioned. In terms of the catalysts, look, Bill Gross retiring is a completely separate and unrelated catalyst to what the EM team is deciding. I don't think I can sum a reasonable description of catalysts, because they're all pretty different. They're all pretty unique circumstances. Overall, we see a very stable investment team, and we don't have any other departures to disclose. People do get older. They do retire. We do have folks who decide they want to build their own firm, and make other life choices. We'll continue to face that on an ongoing basis.
I don't think there's a special description underpinning these. They're just sort of individually unique decisions. We feel overall that the investment team remains pretty darn stable.
That's all for me.
Our next question comes from Nigel Pittaway with Citi.
Hi, guys. First of all, a question on these margins by asset class. There have been some quite significant movements if you do look now compared to 12 months ago, but most notably in fixed income, where it's come down from 31 basis points to 26. Presumably that's a mix within fixed income, but I'm just wondering whether you could elaborate a little bit more on why that's occurred.
Yeah, you're quite right, Nigel. I think it's slide 14 of the deck. We've given you those margins, which we said we'd give every year, split out by capability. The biggest change is, as Nigel's pointing out, is in fixed income. I think there's two big pieces in there. We've lost some retail fixed income money. We highlighted on the call in the remarks earlier that the outflows from the Flex Bond Fund. Retail outflows at higher fees. We've also got some institutional fee pressure in fixed income, particularly.
Maybe just secondly on the dividend. You previously talked about sort of wanting a progressive dividend policy. Yet obviously it is flat and presumably now stays flat for the next 4 quarters. I appreciate you are doing a buyback as well. Can you sort of maybe just give some color behind why I guess we didn't get progressive this time around?
It's exactly as you say, Nigel. We're talking about a progressive dividend. We've got earnings, which are flat to slightly down on last year. We've got a dividend yield, which is in the top quartile of our peer group. As you know, we don't target a payout. At $0.36, I think we're a little bit above 50% payout. The combination of those, I guess, got the board to a position that $0.36 was a very good number. In addition to that, we will continue to return excess cash to shareholders through the buyback. The intention of a progressive dividend is to grow over time. As we see earnings growth, we'd want to be pushing that up.
Our next question comes from Patrick Davitt with Autonomous Research.
Hey, good morning. Thank you. Just one quick follow-up on the Flexible Bond Fund. It does look like there may have been one very large redemption there. There's about $5 billion left. Are there a lot of chunkier mandates in there? Even though it's kind of a retail mutual fund, it's surprising to see that big of a redemption in one month.
You're right. There were two big decisions made in the month of March. There was a little more coming out in April, and you'll see that when the Simfund data gets released this month. That's the end of one of those decisions. They are the biggest single decision-makers in that fund. As you said, it's a very sizable fund. It's a very important fund for us and has been a stable and strong fund, and we expect it to continue that way. There are a lot of smaller decision-makers after that. No more, as such, large single decisions.
Great. My follow-up on LTIP compensation. You called out the $15 million mark-to-market. It looks like from your guidance that it's still kind of mid-40s per quarter for the year. Why wouldn't that come back down after the mark-to-market?
Yeah, the $15 million is the move quarter-on-quarter. Last quarter, we were low in LTI as that number was effectively marked down with the awards being worth less. This quarter is up. The actual number in this quarter is, I think, about five or six. Yeah, you're right. In the appendix, we've given the guidance for the rest of the year at a slightly lower number than Q1.
Michael Carrier from Bank of America has our next question.
Good morning. Thanks for taking the question. Just a question on the sales. I think when we look at the redemptions that improved in the quarter, sales just looks still a little bit muted. Dick, I think you talked about some of the products that are pressuring the net flows, just wanted to get a sense on what you think can shift that over time. Just any update on the head of distribution as well. That might have some impact on the sales side.
Right. Thanks. Taking the second one first, we don't have anything to say on the head of distribution at this time, but we will soon. On your first question around the flow picture, I'm trying to think of what's a reasonable answer. Roger, I don't think I understood his question perfectly.
I think what you say, Michael, is looking at gross flows.
Yeah.
Gross flows are down compared to the first quarter of last year. I think there's probably two or three areas to highlight there. First is European equities, which is the story we've talked about performance. Although we've got some short-term performance improvements there, the performance that came through over the last year has meant that we've got lower gross sales this year over last year. The economic environment is obviously also part of that, particularly in the U.K. We are seeing improving sales on the continent. The second is in fixed income. We had a sizable win in Australia, the first part of which funded in Q1 last year. The institutional business obviously a little bit lumpier. I guess offsetting those is the continued sales in multi-asset. Our balanced fund continues to be very strong.
On the downside of gross flows, I would probably point to intermediary sales in Europe driven in equity and in institutional in fixed income.
We will take our next question from Simon Fitzgerald with Evans and Partners.
Good morning, everyone. Thanks for taking my question. Just the first one, I just wanted to talk about the trajectory in management fees. If you look since the first quarter of 2018, management fees are down about 12%, yet costs have been fairly stable, down around 2.4% over that period of time. I am just wanting to know why a more aggressive cost approach hasn't been considered, if it has at all.
I guess we take a long-term approach. We are taking a long-term view of the business, Simon. We are here to grow this business. We have obviously delivered all of the merger cost savings that we talked about. We expect, as I have said previously, to continue to look for efficiencies in the business. I do not think we are fully done yet. Equally, there are things we want to do to continue to grow this business. We are investing in the business, and we will continue to do that. We think we manage the costs on this business pretty carefully. We will continue to do that. We will continue to drive out costs where we can, you would also expect, and I hope want us to continue to invest to grow the business.
Good. Thank you. Just the final question, I just wanted you to clarify on the emerging markets. Did I hear you right that you're saying that there's been $2 billion worth of redemptions that will fall due in April, was it?
We've been notified of two.
Yeah, okay.
That will come out as the clients redeem.
All right. Thanks, Roger.
Our next question comes from Craig Siegenthaler with Credit Suisse.
Thank you. Just a follow-up on the elevated turnover on the investment side of the business. There's also a Bloomberg article out, I think about two hours ago, where it mentions that two of your credit managers are also departing, and I think the strategy internally is to replace them with quants. I'm just wondering if you could provide us a little color on this situation, which I think is separate from the EM departures.
Yeah, Craig, it's Roger. That's just a change that Jim, as the head of the fixed income team, has made. We're looking at the overall credit team. We produced in one area and increased in another area. That's Jim really looking at that fixed income team and continuing to build and improve it.
Just as my follow-up. The backdrop for the industry is more on the challenging side here, industry consolidation's going on. I'm just wondering, have you thought about any changes to your retention and compensation strategy on the investment side of the business?
This is Dick. No, thanks for the question. No, we haven't. We're happy with our retention and compensation strategies. Fundamentally, we don't believe people stay for retention packages. Trying to create economic hostages generates a fair amount of friction. We have a sort of a normal amount of deferred compensation as part of a regular compensation, other than that, we don't have a big retention program. We think people should stay because they like the work, they like the people, and they're optimistic about the success. Frankly, if they're not in that camp, they probably shouldn't stay. Particularly on the investment team, we see that we've got some changes, yes. We'll probably always have some changes, overall, we feel pretty darn stable. As Roger highlighted numerous times in his comments, overall, the investment performance is quite good.
Over time, that will be an increasingly defining feature of our success. We've got some stuff to work through, and we will work through it. Longer term, we think the strong investment performance is the best indicator of where we're heading. We have terrific people on our investment teams, and we feel just fine about where we are. We don't feel the need to make changes.
I will take our next question from Alex Blostein with Goldman Sachs.
Good morning. Question for you guys back on the EM strategy. I think the U.S. lead is a little bit over 100 basis points in management fees. I'm not sure what the exact same, but can you help us on what the blended fee rate is on the $5 billion of AUM managed?
Sorry, Alex, you were very muffled there. I think you were asking what the blended fee rate is on EM. I think you said something about 100, which sounds very high. We're probably talking in the, again, I don't think we disclose it overall, but I'm happy to say it's probably in the mid-60s.
Got it, mid-60s. Okay. The balanced product continues to grow really nicely for you guys. It's one of the strong areas of growth, obviously. Can you just remind us on what capacity is for that product, both on the front side and across other vehicles?
Yeah. This is Dick. That product invests in the most liquid markets in equities and fixed income, so it's not seriously capacity constrained. You can see some other competitors in balanced space are even larger, substantially larger. We're nowhere near close to a capacity limit in that product.
Next question comes from Andrei Stadnik with Morgan Stanley. Please go ahead, sir. We're unable to hear you.
Good. Can you hear me okay?
Yes, I can.
Yes, we can hear you.
Good morning.
Andrei.
Sorry about that. Just wanted to ask, in terms of the situation in Europe and U.K. around Brexit, do you think some kind of resolution on Brexit would lift client sentiment and help in at least industry-wide flows from Europe and U.K.?
Yeah, without a doubt, particularly in the U.K. As I said, we are seeing some improved numbers coming through on the continent. The U.K. remains a challenged industry. The data that came out yesterday for March, I think it was yesterday for March, showed a continued significant industry outflow. The investment sentiment is pretty low in the U.K. Yeah, I think any resolution would be viewed positively.
Thank you. My second question, around any flows you've seen in Japan, any flows you saw in the quarter, and how that Dai-ichi relationship is progressing.
No notable flows in the quarter from Dai-ichi. Dai-ichi remains an incredibly important partner and very valued partner. The relationship continues to build, whether that be around, obviously owning 15% and a bit of the stock, but on top of that, we've got the business that's continuing to grow in Japan. In the second quarter, Dai-ichi will launch in a new area for us. In Dai-ichi Life, the Adaptive Asset Allocation product. That could be quite sizable. We'll see over time. We're pleased with that. We've got a continuing developing relationship in Australia with TAL, the affiliate of Dai-ichi down there. We're very pleased with that relationship, and the team down there are doing a great job in building that relationship. We hope to see more money come through there in the future as well.
There's a number of areas where we expect to see growth, but nothing to talk about specifically in number terms in Q1.
Our next question comes from Robert Lee with KBW.
Great. Thank you, and thanks for taking my questions. Could we maybe just get an update on what you're seeing out of the Dai-ichi relationship in Japan, and then maybe as a second part, and if you maybe drill down a little bit in the U.S. intermediary business, maybe where some of the emphasis for investment may be there. Do you feel like you have the right product structures, whether it's SMAs or CITs, just how you're thinking about more deeply penetrating at least the U.S. intermediary. Thank you.
Robert, you must have just missed it. We just did the question on Dai-ichi, so I'm happy to pick up with you, or John can pick up with you on Dai-ichi after. Dick, do you want to pick up on U.S. intermediary?
Yeah. In U.S. intermediary, the opportunity that we have is we have some really strong investment performance. As you think about how you convert that into increasingly positive business flows, I think the area we look at for investment is really around technology and data. The smarter you can take your limited resources and apply them to opportunities, the more progress you can make. Our team in the U.S. is very focused on increasing the effectiveness and efficiency of their activities through the use of data and targeting their activities. We have invested substantially in increasing their tools to do that in the past, and probably will continue to do that as opportunities arise. I think that's the best way that we know of to convert the very strong performance in our U.S. equity platform into increasing flows.
We'll take our next question from Brendan Carrig with Macquarie.
No, sorry, mine's been answered, I'm all good. Thank you.
Thank you. Our final question will come to us from Ed Henning with CLSA.
Thanks, guys. Just a quick one from me. Can you just run through and talk about your channel mix and where you're seeing your gains and losses from there?
Yep. You've got us looking for the right page. What we're seeing is hard to describe in global channel space. We pretty much have to break it down regionally as we've tried to indicate. We're doing well in U.S. intermediary, particularly in balanced and in equities. We're suffering along with the market in U.K. retail, and we've had some ups and downs in institutional in various places. The exposure that we have to some performance challenges at INTECH and in fixed income has driven some negative flows. It's a little bit of a complex story, a little hard to summarize, but we've tried to give you the sense that the U.S. is doing well in intermediary. There are some challenges in other places, and institutional is hard to describe in the aggregate. It's a lot of lumpy individual decisions moving in different directions quarter-on-quarter.
I don't know that I can do better.
Are you seeing the channel mix be a headwind for you at the moment, or because your growth in your U.S. intermediary and also retail is hopefully a little bit of tailwind for you going forward?
Well, I think we've talked about the pain of the mix is we're losing some high-fee retail assets with the global EM team departure. That affects our mix somewhat. There's been pressure, as Roger mentioned earlier on the call, in institutional fixed income in particular. That has had some effects. I don't think we see a continuous story going forward in one direction or the other. It's not a question of huge long-term waves, but that's what we've seen. Roger, you want to-
No. I think in terms of fee pressure, we've talked about it being a continuous grind of a basis point or so a year. We saw two basis points in the last year. If you go back over the previous years before that, it's significantly less. It's slightly higher this quarter. The biggest changes is actually the business that's coming in the door and going out of the door. We've won some business at lower fees and lost some business at higher fees. I think the underlying fee pressure in our business remains there. We build our business expecting it to remain there. I think the other thing you got to remember is not all business is the same. We're very happy to look at business at lower fees. The institutional business has a longer duration.
You've got to look at the net present value of a piece of business. It's certainly not all about assets. Sometimes it's not purely about the margin and the ultimate revenue on those assets as well. You've got to look at the duration and the NPV.
Thank you. Ladies and gentlemen, that does conclude today's question and answer session, as well as today's Janus Henderson first quarter 2019 results conference call. We do appreciate your participation today. Have a good day. You may now disconnect.