Good morning. My name is Andrew, and I will be your conference facilitator today. Thank you for standing by, and welcome to the Janus Henderson Group Second Quarter 2021 Results Briefing. All lines have been placed on mute to prevent any background noise. Conference call.
After the speakers' remarks, there will be a question and answer period. In the interest of time, questions will be limited Q1 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 ks 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 Q2 2021 earnings call for the Janus Henderson Group. I'm Dick Weil and as usual I'm joined by our CFO, Roger Thompson. As we said on previous calls and in line with taking the long term view of our business, we used the 2nd quarter call to run through a more robust discussion on our business as well as our strategy. We also include the usual updates on quarterly flow performance and financial results. In line with this in today's presentation, I'd like to start with a summary of our second quarter results and then I'll touch on progress we're making towards delivery of our strategy of simple excellence.
And then as usual, I'll hand it over to Roger, who'll take you through the results with some more Precision in Detail. As always, we'll follow our prepared remarks with taking your questions. Turning to Slide 2. Here's the story of our quarter as I see it. First investment performance, it's solid with 66% of our assets beating their benchmarks over 3 years.
2nd, net outflows of $2,500,000,000 is an improvement over the Q1. Markets were strong and lifted our AUM 6% to a new high of $427,600,000,000 3rd, our financial results. These are very strong and better than our strong prior quarter. This is mainly driven by a combination of higher markets extremely strong performance fees. Roger will take you through that.
Adjusted EPS was up 27% to $1.16 compared to $0.91 a quarter ago. We generated more than $260,000,000 of cash in the 2nd quarter 2nd quarter dividend of $0.38 per share. And today, given strong earnings and cash generation, we are also announcing the Board has authorized a new $200,000,001 accretive share buyback, which we expect to complete by April 2022. Looking a bit deeper at the net flow result, let me call out some positive underlying trends to highlight. 1st net flows in our intermediary channel were flat with positive flows in EMEA and LATAM and Asia Pacific regions.
This was offset by U. S. Intermediate outflows, particularly in mid and SMID cap growth equities from our team in Denver, which has experienced some pockets of underperformance that we've talked about in recent quarters. 2nd, looking at institutional, we're continuing to win business from across a very diversified list of strategies, Reinforcing the breadth of our investment capabilities. Quanta Equities remains challenged.
Next, as I've told you in prior quarters, our path to organic growth starts with net flows going positive outside of our quant equity business. We're aiming for consistent growth, which we achieved in the Q4 last year, but in the first and second quarter of this year, we've fallen short and that's not okay with us. However, the underlying trends and the pipeline make us confident that we have a good chance to deliver our goal of more consistent positive flows outside of the Quant Equity in the second half of the year. Turning to Slide 3. We've continued to make significant progress executing our strategy across the first four planks that you can see on this page.
For example, we've continued to hire excellent talent and strengthen team of our already 1st class teams. Last week, we announced the appointment of James Lowery, who will be joining our executive committee in a newly created role of Global COO. This will help strengthen our leadership team and he'll contribute on building the infrastructure as well as firm wide leadership and hopefully strategy. We've also continued to significantly enhance our risk and control environment moving towards our best in class approach. Importantly, this has been evidenced by lower regulatory capital requirements, which are assisting us in delivering this further return of capital in the first four planks of our strategy, which remain key to strengthening and running our day to day business and ultimately delivering organic growth.
But with progress in those first four planks, we're now able to develop new growth initiatives with greater energy and focus. And this is going to include some additional investment over time, both organically and potentially inorganically as well. Turning to Slide 4, we lay out the 5 areas on this slide that are in focus for us as we think about our growth initiatives. Within those areas, let me call your attention to some of the recent highlights. In ETFs, we have a small but successful franchise, particularly in active fixed income ETFs such as our short duration vanilla and our mortgage backed securities JMBS ETFs.
The first half of twenty twenty one marked the 10th consecutive half of positive net flows in our active ETFs. We have an innovative pipeline of products such as the AAA CLO ETF JAAA, which we launched at the back end of last year. In June, we launched a U. S. Real estate ETF JRE, which is a natural extension of our existing U.
S. Real estate equities strategy. We also filed a preliminary registration statement with the SEC for 5 sustainable active ETFs for investors in the U. S, which we expect and hope to launch in September. This includes 3 equity and 2 fixed income sustainable active ETFs.
Again, if approvals are granted, we expect to be the only firm offering active sustainable ETFs including both equities and fixed income in the U. S. Turning to ESG. I just mentioned some of the sustainable investing products we're developing and you should expect to see more ESG focused product launches in the coming quarters, including in Australia. We have already an excellent track record in our dedicated sustainable equity strategy.
For example, our global sustainable equity strategy is celebrating its 30th year anniversary next month and it's ranked in the top Morningstar decile over both 3 5 years. We have a strong background in ESG, but we recognize there's an awful lot more work to be done. We're excited about where we are in our growth phase We're making investments in our central ESG support available to investment teams growing from 4 people to a team of 15 people. We are also building a cloud based approach to ESG data management, ensuring delivery of consistent central data standard to support all of our front office applications. We're also targeting more than half of our Luxembourg domiciled fund range measure by AUM to be an Article 8 or 9 designation by January 2022 under the EU Sustainable Finance closure regulation.
As you can see, we're making great progress in ESG. Finally, in Asia, We have recently further strengthened our leadership in Japan. This is really important to us. Earlier this year, we welcomed Shinichi Aizawa, As we've talked about before, a very senior Daiichi executive and he's now Chairman of our Japanese business. Last week, we also announced the appointment of Tomayasu Tanamoto, who's new Head of Distribution in Japan.
We think these two leaders have the chance to really energize and strengthen our efforts in Japan along with the continued excellent support from our partners at Daiichi Life. Before handing it over to Roger, let me briefly wrap up. We continue to focus on excellence and growth in our business. We're confident that we're on the right path and that Simple Excellence is working to deliver a stronger, organically growing, more profitable and more resilient business, but we have an awful lot of work left to do. Let me now turn it over to Roger to take you through the results
Thanks, Dick, and thank you everyone for joining us. Turning to slide 6. Investment performance remains solid with around 2 thirds of the firm wide assets beating their respective benchmarks on a 1, 3 5 year basis as of the 30th June. Relative performance compared to peers reflects 33%, 67% and 55% of AUM represented in the top 2 morning style quartiles on a 1, 3 and 5 year basis. As called out in the bullet at the top of the page, 42% 41% of our AUM is in the 1st Morningstar quartile on a 3 5 year basis.
These longer term metrics tend to be the better indicators for flows. Now turning to total company flows on Slide 7. For the quarter, net outflows improved to $2,500,000,000 from $3,300,000,000 last quarter. The outflows marked some good underlying trends that we're seeing in the business, which I'll talk about on the next few slides. Slide 8 shows the breakdown of flows in the quarter by client type.
Net inflows for the intermediary channel were flat. By region, intermediary flows were positive in EMEA, Latin America and Asia Pacific, and these were offset by outflows in the U. S. Looking closer at the regions, for EMEA and Asia Pacific, 2nd quarter flows Reflect an annualized organic growth rate of 6% and 11%, respectively, and mark the 5th consecutive quarter of positive flows in each region with momentum carrying into Q3. Within EMEA, Continental Europe saw $1,000,000,000 of net flows in the 2nd quarter equating to a 17% growth rate.
It's important to note that the management fee rate in the EMEA, Latin America and Asia intermediary business is higher than the other areas of the business and these flows are contributing to our strength net management fee rates that I'll talk about in more detail later. In U. S. Intermediary, we're seeing a diverse set of products in inflow, including multi sector income, contrarian and developed world bond, offset by the impact of the performance challenges in our SMID and mid cap growth strategies.
Moving to institutional,
here we saw $1,800,000,000 of outflows in the 2nd quarter, which was primarily driven by quantitative equity outflows, masking some smaller but significantly higher fee wins. As we said previously, quantitative equity flows will take longer to heal, but elsewhere, we're encouraged by the progress being made in globalizing the institutional team solid diversified pipeline. Finally, net outflows for the self directed channel, which includes direct and supermarket investors, $700,000,000 in the quarter. Moving to slide 9 and the breakdown of flows in the quarter by capability. Equity net outflows in the quarter were $1,900,000,000 The quarterly outflows were driven primarily in the U.
S. By the small and mid cap U. S. Growth As well as the liquidation of certain value strategies managed by the team in Chicago that we talked about in the prior quarter. Outside of the U.
S, equity flows were slightly positive, driven by European Equities and Global Real Estate. Flows into fixed income were negative $100,000,000 in the quarter compared to a positive $400,000,000 in the prior quarter. Whilst the overall result was negative this quarter, We continue to see positive flows in retail across a wide range of strategies, including multi sector income, global strategic fixed income, U. S. Buy and Maintain Credit and Tactical Fixed Income in Australia.
Total inflows for multi asset were $500,000,000 driven by the continued inflows into the balanced strategy across North America, EMEA and Asia Pacific. Quantitative equity outflows in the second quarter were $1,300,000,000 Finally, alternative inflows were $300,000,000 compared to $900,000,000 of outflows in the prior quarter. The inflows were primarily driven by the absolute return strategy and in our multi strategy product, which is one of our hedge funds, which is seeing momentum in several geographies. It's really pleasing to see the positive flows in our high fee alternatives business, which shows another benefit of our diversified product set. Slide 10 is our standard presentation of the U.
S. GAAP statement of income. Moving to slide 11 for a look at the summary financial results. As you can see on this slide, our financial results are extremely good with metrics up strongly quarter over quarter and year over year. The Q2 results reflect strong seasonal performance fees and higher average assets.
Average AUM in the 2nd quarter increased 4% Q4 and 30% from the same period a year ago, primarily from market gains. Total adjusted revenues increased 17% compared to the prior quarter, mostly due to higher average assets, seasonal performance fees and a further improvement to our net management fee rate. Adjusted operating income in the Q2 of $269,000,000 was up 34% from the prior quarter and 95% from the same period a year ago. 2nd quarter adjusted operating margin was 44.6% compared to 39% in the prior quarter and 33.5% a year ago. And lastly, adjusted diluted EPS was $1.16 for the quarter compared to $0.91 for the prior quarter and $0.67 a year ago, representing a 73% increase year on year.
Before moving on, I wanted to clarify the difference this quarter between U. S. GAAP and adjusted diluted EPS. There were 2 non cash items behind the difference. First, our proposal to increase U.
K. Corporation tax the 25% to 19% with effect from the 1st April 2023 was enacted and this requires the deferred tax liability to be re measured at the 20 5% rate. We recognized an income tax expense of $31,000,000 related to this remeasurement. And secondly, we recognized a $40,800,000 impairment on intangible assets related to certain investment management contracts. Turning to Slide 12, which outlines the revenue drivers for the quarter.
The biggest drivers of the quarterly change in adjusted revenue higher average assets, strong seasonal performance fees and an increase in net management fee margin. Net management fee margin for the 2nd quarter was 47.1 basis points, which was up from 46.8 basis points in the prior quarter and up from 45.7 basis points a year ago. This marks the 7th straight quarter of higher net management fee margins. The increase in the margin is due to both positive markets and changes in the underlying asset mix. We continue to be focused on high quality assets and that's showing up in the fee rate.
Inflows are coming into higher fee margin areas such as EMEA and Asia Pacific Intermediary and our multi strategy products that I just talked about and with outflows being in relatively lower fee margin areas including quantitative equities. Performance fees for the quarter were $77,000,000 versus $17,000,000 in both the prior quarter and a year ago. Given this exceptional second quarter performance fee result and the diversified mix of funds which have delivered it, I wanted to give you a little bit more insight into what drove this and I'll do that on Slide 13. Performance fees from the CCAP range Q2 were $50,000,000 compared to $12,000,000 in the Q1 $9,000,000 a year ago. The increase compared to the Q1 was the result of 2nd quarter seasonality as our CCAS pay annual performance fees in June.
And additionally, this reflects strong performance in the absolute return strategy, which has a quarterly measurement period and payout. 2nd, Q2 performance fees in the U. K. OICs and Unit Trusts were $15,000,000 compared to $4,000,000 in the 1st quarter, driven by strong performance in the Absolute Return Fund. 3rd, performance fees in U.
K. Investment Trust during the quarter were $13,000,000 compared to 0 in the Q1. Again, this was driven by seasonality from trust that pay annual performance fees in the 2nd quarter, the trust earning performance fees of the smaller companies and European Growth Investment Trusts. U. S.
Mutual fund performance fees were negative $3,000,000 in the quarter compared to negative $4,000,000 in the last quarter. Finally, I want to point out that the absolute return strategy has already or will be switching from a quarterly measurement period to an annual measurement period in line with regulation. The U. K. OIC switched that occurred on the 1st June with the last quarterly payout in May.
The CCAP will payout if earned one more quarterly 3 in the Q3 and we'll then switch to an annual measurement starting on the 1st October. In the appendix, we've provided updated AUM eligible to earn the performance fee by quarter, which reflects this change and I'm happy to talk you through that offline. Turning to operating expenses on Slide 14. Adjusted operating expenses in the 2nd quarter were $334,000,000 which was up 6% from the prior quarter. Adjusted employee compensation, which includes fixed and variable costs, was up 10% compared to prior quarter, DIS on annual vesting in Q1.
The 2nd quarter adjusted comp to revenue ratio was 40.1%. For the first half of twenty twenty one, the ratio was 42% and for the full year, we still anticipate a range of 40% to 42%. Adjusted non comp operating expenses were 6% higher compared to the prior quarter, primarily from higher G and A. For 2021, the expectation of non comp operating expense growth of mid single digits remains unchanged. And finally, our recurring effective tax rate for the Q2 was 22.4%.
Turning to Slide 15, which is in the Q2 liquidity. Cash and cash equivalents were $965,000,000 as of the 30th June, an increase of $141,000,000 resulting from the strong cash flow generation from the profits we just mentioned. As a reminder, we now exclude cash and investments related to VIEs and VREs from this slide as it more accurately reflects our true liquidity. It also aligns with how we discuss our liquidity and capital resources in the MD and A section of our 10 Q and 10 ks filings. During the Q2, we paid approximately $65,000,000 in dividends to shareholders and declared a $0.38 per share dividend to be played on the 25th August to shareholders of record as of the 9th August.
Finally, as Dix previously mentioned, with our strong balance sheet, significant cash flow generation and reduced regulatory capital requirements, Board has authorized a $200,000,000 buyback, which is expected to be completed by the next AGM in April 2022. The $230,000,000 buyback completed in the Q1, the quarterly dividend including a 6% increase announced last quarter and the additional $200,000,000 of buyback that we've announced today demonstrates our commitment of returning excess cash to shareholders.
To the the operator. The first question comes from Dan Fannon with Jefferies. Please go ahead. Thanks and good morning. You both mentioned a diversified list of strategies that are taking inflows on the institutional side and I think you mentioned a solid pipeline.
So just hoping to get a little more color either at the fund level or maybe sizing some of that so we can think about some context.
Hey, Dan, it's Roger. Let me try and answer that. I think It's a mix as we say and it's also a mix of a continuation of the things we've just called out. So some smaller fundings in higher fee areas. So I think we've talked previously about the expectations and hopes we had in multi strat as an important area And we've seen some wins in that and expect to see continuation there.
And that's a good Hi Fi product. On the other end of that barbell, if you like, we've got some good opportunities for winning some bigger fee, bigger AUM assets in some lower fee products as well. So there should be a good mix both in terms of size we expect to come Drew, but the most important thing for us is obviously the growth in revenue and profits. So that mix product coming in, in fixed income, continuation of flows in equity in different areas And in areas like multi strat gives us confidence to both growth and that sustained management fee rate. Great.
And then as a
follow-up, Dick, the focus areas of growth, those five segments that you highlighted. You mentioned organic and inorganic and some of the things that are already happening. So could you maybe Alternative seems like an area where inorganic might be a potential opportunity. Could you talk about your appetite for M and A in this backdrop and maybe within these context of these segments where inorganic might make more sense.
Yes. So we first think about organic in these areas and I think we're doing a good job of adding alternatives adding to our alternative suite with organic efforts extending some of the strategies like our healthcare life science strategy in the U. S. And adding versions of that strategy that focus on the less liquid end of the spectrum and Push us a bit more into the alternative space from the base we already have, and that makes a lot of sense for us. We're looking for opportunities to do that both in equities and in fixed income.
As you do that, you also look in the marketplace and take a look at the inorganic opportunities that are out there. But like always, when we talk about inorganic opportunities, it's hard. It's hard to find a culture match. It's hard to find It's hard to find people who want to be part of an organization as opposed to be in their own little self directed area. And Finding the right fit is a non trivial exercise.
It's difficult. It's especially difficult probably in alternatives these days with very high prices for a lot of different parts of that business. We're actively looking at opportunities both organic and inorganic. We very much intend to grow Our presence in alternatives will push more into liquid alternatives. We'll also have some more less liquid elements, But those will be smaller and that's how we're looking at it.
I don't think I can be more specific than that.
Question comes from Ed Hennig with CLSA. Please go ahead.
Hi. Thanks for taking my questions. Two questions also just on the areas of growth. Can you just run through how you're measuring success here and how we should think about the key milestones. And then also just within that, if you look at the opportunities you highlighted, What do you think is the biggest near term opportunity and then also what's the biggest medium term opportunity, Clay?
Thanks, Ed. Taking the second part first, the biggest near term opportunities, clearly, we're most active in launching new products as I think Roger mentioned in his comments, we filed a registration statement for 5 new ETFs in the U. S. We're looking at additional things we can do down in Australia. And so ETFs, I think, probably in the near term, one area that we're very active.
We've talked a bit about what we're pushing Forward Already With an Alternatives that continues to be active. In ESG, we're putting an awful lot of effort into taking the right steps forward which includes strengthening the approach across the whole firm. It includes adding new products. It includes focus on product. Our Equity product in Europe focused on ESG is coming up on its 30th year anniversary and it's a remarkably excellent effort.
And so we've got things happening across the board. But like a farmer, you need to plant 2 different seasons. And so you want to do things that are paying today and you want to do some things that are planned today and hopefully pay tomorrow
I think on the measurement side, it's There's nothing super clever about that. For us, the important thing for us and we've talked about is about growing our business And we talked about how we get there. So yes, it's flow, but for us, it's really it's revenue growth And ultimately profit growth. So we look at all the areas we're investing in. Are they delivering what we wanted them to do?
Things run at different speeds as Dick just said. Some things you need to plant seeds now for and nurture those. But ultimately, It's about delivery of flow leading to revenue and profit.
Okay, thanks.
Just to close on that, I'm sorry to go back and forth on you. But these areas are areas where we're looking at additional investment. The great thing about having the strong financial results that we're having is it enables us to make the appropriate investments in delivering growth. So in each of these areas, we're taking a hard look at organic opportunities and we know we have the capability to make some additional investment in our business.
The next question comes from Patrick Davitt with Autonomous Research. Please go ahead.
Hey, good morning guys. First question is kind of on this idea that you see all these opportunities to invest and kind of gone through a pretty good period of you guys being pretty good at finding ways to offset that investment need with expense savings. How should we think about the tenure of expense growth And through the lens of all these investments you want to make and perhaps even without having the offset of more expense saves kind of beyond this year.
I think in our core business, Patrick, in what we're doing, we're always looking to be more efficient, But there's always investments to make and we're making a lot of investments in the business. I'm hoping to add that's included in the guidance I've given On where we're headed on margin and comp ratio. So That is a constant challenge to look at how we become more efficient to allow us to continue to make those investments in the business. I guess if we were to go and launch something sizable or buy something sizable, obviously the expense base is going to grow, but That's going to come with the expectations of revenue and revenue growth over time. So they would change They would change the size of the business, but we'd obviously be looking again, we're constantly looking at growing the business and growing the bottom line of the business.
So I think that's probably the best way of thinking about it. We're constantly looking at trying to run a more efficient ongoing business. If we make investments, you'd expect those to be adding to the revenue and the bottom of the business as well.
Okay, fair enough. And then on the performance fee, it doesn't really look like there was much of a comp Accrual, is that correct? And if that is correct or if not correct, is there kind of like a core compensation that's much lower than what you were running at this quarter.
You can see our comp and benefits is up 10% quarter on quarter. So as we've talked about before, we've got a relatively formulaic payout at top of the house. So obviously, higher profits results In a higher comp pool and you can see that in the 10% increase quarter on quarter. So that's there, Pat. Okay.
Thank you.
The next question comes from Liz Juliana Ramirez with Jarden. Please go ahead.
Hi. Thank you for taking my questions. I do have 2. Firstly, it seems it's fairly evident that you're really focusing on ESG and heavily investing I find it to be a little bit at odds with some of your commentary at last results where it seemed like you were taking a more cautious approach to ESG. Has something changed there as you're going into that a bit more aggressively?
And then my second question relates to tax. Your tax rate again seems to be quite low across now the first half. Should we assume that you should be falling in maybe the bottom end of your guidance given that the tax rate so far has been sort of outside of that guidance range. Thank you.
Hey, Roger, I'll take the first part from Liz and leave you to talk about the tax rates. But on ESG, no, and apologies If you have the sense that we've changed the tone, we haven't really intentionally done that. We continue to work and develop and make progress and strengthen our approach to ESG and that's been consistent in recent quarters and we're not signaling a turning point. We're signaling a continuation on the path that we've been on. And so apologies if we haven't communicated that perfectly, but that's the intent from our side.
And Roger, on the tax?
Yes, we were very slightly under our guidance in the quarter. I think our tax rate the current tax rate is 22.4%. The guidance is 23% to 25%. Yes, we pay tax in the places where we earn profits. So the guidance stays the $23,000,000 to $25,000,000 But you're right, we've been at the lower end of that in the first half.
Okay. Thank you.
The next question comes from Simon Fitzgerald with Evans and Partners. Please go ahead.
Hi, there. I'm just going to stick on the ESG side of things for a little minute. Obviously, you've highlighted the sort of growth potential from that. Do you see just looking sort of forward a few years or even sort of medium term, do you see this as being a fully fledged independent style such as sort of in tech is or do you see this as being just another sort of addition to your equity strategy, sort of looking more broadly?
Thank you, Simon. We're not thinking about it as a separate thing away from the rest of the firm. We're thinking about it as integrated into the core of the firm. And a lot of it is formalizing things that people have been doing For a long time and then gathering the appropriate data and making sure that the documentation and the evidencing of that is clear and that's part of it. Part of it is adding new resources, doing new research to strengthen the approach and we're really doing both.
We see that as part of the core franchise and part of who we are, not as a separate And distinct investment style. We're not we think about it both in terms of products, but also in terms of overall investment process and then also overall company core identity. We want to be at all those levels at firm, at investment process and at product. Simon, any other final question?
Simon, the only question I'd add to that as well is you said equity, but it's actually it's totally across the firm. So our fixed income business is very engaged with ESG. Our Quant Equity business is very engaged with ESG. Some of our Alts products, you'll see some of the absolute return products move to escalate Over the next couple of quarters. So again, I just wanted to clarify that it's not just equity, it's across the entire business.
Yes, that's clear. Thank you. And then just final question, just on the performance fee in terms of the restructure around sort of dates. Should we then think that the I guess the strongest sort of seasonal pattern will be in those sort of June year ends in the future.
So you'll ask the annual performance fee from the OIC version of the absolute return fund will now be in Q2, And the annual performance fee from the CCAP version of the absolute performance fee will be Q3 actually. So again, should that That will smooth us a little bit, I guess, because Q3 is normally our lowest quarter in terms of what's eligible. So that will smooth a little bit.
Okay. Thank you.
The next question comes from Alex Blostein with Goldman Sachs. Please go ahead.
Hi. This is actually Brian on behalf of Alex. I was wondering if you could speak to the strategic hire James Lowry, as Global CEO, as you mentioned. What are your hopes for him to look at, particularly given his experience at State Street Alpha? And then is this more of an aggressive hire to focus on investments or to focus on expenses and financing fees.
Hi, Brian. Dick here. I haven't done as good a job as I should do from my seat in uniting all the different parts of the firm to push forward in infrastructure and data stewardship and architecture and a lot of that side of the firm. And in order to be excellent in investing, in order to be excellent in client experience, we need to have Ourselves really aligned and tied together and executing very efficiently in those infrastructure areas. And so the first responsibility that our new COO will have is to take all the different pieces and parts of that effort and make sure that we're being efficient and effective and aligned and urgent in how we deliver those things.
Of course, he'll also be welcome to contribute across broader firm leadership strategy and other things as he spends time and I know he brings a lot of skill and is capable in those areas as well. But initially, 1st and foremost, the job one will be Really making sure that everything we're doing, all the investments that we're making across the piece and infrastructure simple, most excellent, most aligned infrastructure to deliver excellence for our clients and our internal investors and teams.
Thank you. Maybe just a quick one for Roger. Just wondering if you could help us Think About What was the driver of the impairment of the asset management contracts and just if there are any implications from that going forward?
As you probably know, Ryan, we recognize intangibles in a number of different very specific places. So some things grow and some things don't grow as fast as you'd originally thought when you write those things up. You can never write up a balance. So when things go better than you expected, you never take the upside. When things are not when individual pieces don't grow Exactly as you thought they were.
To start with, you need to look at those and look at the fair value of that So there's just one particular area that we needed to look at the intangible that we when we did that fair value, the intangible was
The next question comes from Nigel Pizzo with Citi. Please go ahead.
Hi, guys. Just first of all, a question on the mid- to mid cap strategies. I mean, they have been underperforming for a while now and there is a big chunk of So just wondering, how worried are you about those strategies if you don't see a sort of turn in performance in the near future?
Hi. Thanks, Matt. Nigel Dick here. How worried are we? Sort of in the short term, we're In the short term, we see that performance isn't where we would like it to be and that's clearly going to have effects on flows and revenues.
It's a high fee wonderful business. And so obviously it has the potential to cause some pain and is indeed causing some pain. But these teams have We've been stable and strong and performed super well for decades and they're some of our absolute best investors. And I don't mean to heap more pressure on them by saying this, but when you look across Jonathan Coleman and Brian Demaine and the folks who are really leading and managing those products, they are as good as anybody in the world. So do we have long term Concern, no, we don't.
We're really long term very confident. But in the short term, the The results have been weaker than we would like and we'll just have to see what market effect that has and it certainly has created some pain and will create some more. But those are absolutely the best in the world at what they do and that will turn out in the long run.
Thanks for that. And then sorry to sort of hop on the core areas, but also, obviously, the balanced fund still looks as if it's in the slightly lower quartile. And my understanding is that may have turned slightly Negative recently, is that sort of are you sort of fairly relaxed about that or is that another area where there is some concern?
The balanced fund is one of our largest growers and strongest things. And so we watch it very carefully. It had some softer months and then it had some stronger months. I don't actually know where it is as of the most recent public data. Maybe Roger does, but no, we're not we're very pleased with the transition.
We're pleased with the leadership. We like the process. We like the manager. It's Going to move around a little bit as these things do. It's not an easy job to manage that fund, but we have a superb Manager and his team and we're really confident.
And it's been really our biggest business driver for a while now and We don't see signs of that abating. Roger, anything you want to correct or add on that?
No, like you say, it's yes, it's strongly outperformed its benchmark Even over 1 year. It is I think you're right, Nigel, it is I think Q3 over 1 year, but it's top decile over 35 and probably Even better than top dead satellite at 10. So it's in a very good place, but the very short term relative performance is a little weaker, agreed.
Okay, thank you.
The next question comes from John Dunn with Evercore. Please go ahead.
Hi, thank you. Since fund launches are a priority, do you guys have kind of a rule of thumb for
I don't think we don't have that. We're constantly looking at What clients are looking for, what we can deliver and making sure we've got that in the right place. So we've done a lot of work over the last few years Of making sure that we're fully leveraging the product set that we've already got or the capability set we've already got by making sure that we've got vehicles around the world. So we've been launching things like Global Sustainable, which originally was only a U. K.
OIC. We've been launching that around the world. We just as Dick said in his comments, we've just filed for 5 new ETFs having already done one. So we have a lot of capacity. The teams are working hard.
There is a lot of capacity around the world for us to launch multiple products in multiple places. So there isn't a number. We probably haven't done as much new product Over the last few years, because we've been making sure that we're leveraging the vehicles around the world and making sure we've got the right things in the right place, and we've seen some real success with that. So Sustainable would be a good example. Strategic bonds that was again was a U.
K. Fund that we're selling around the world and balanced obviously. Yes, we just talked about that was something that we're selling in the U. S. And now we sell very successfully in multiple markets.
So we've probably done more in the last few years of launching vehicles of existing We've now got a number of things that we're looking to launch in the future. But yes, we'll try as much as we can to satisfy client demand if we've got products out there. And I guess The final part of that is seed capital. We will continue to put seed capital to work. So There are probably some there is probably some seed capital which will add in the remainder of this next year as we launch some raw product.
Makes sense. And then what are some of the products that you might anticipate Catching some more demand in a rising rate environment.
I guess it depends on sort of what kind of rising rate environment It is. There are rising rate environments which cause equities to be repriced lower. You'd expect value and more value ish kinds of strategies to do better in that environment than the more growth strategies. You can see a rising rate environment, which just part of a bullish cycle where it doesn't really cause a big downdraft in equities. There's all kinds of rising rate environments.
If you go back And look in history, you can see up and down equity markets with rising rates. So I don't know exactly. We've got a pretty good mix of conservative and more aggressive, more value, more growth On the equity side, similarly, I think we have a pretty good mix on fixed income and our alternatives Should offer some nice protection from some of the cycles as well with some absolute returns. So That third part of the business is obviously a place where we're focused on increasing our presence. But I'd expect that we would have parts of the business that could do well in equities, parts of the business can do well in fixed and our alternatives could continue to grow.
Got you. Thanks very much.
We'll take our last question from Andrey Stednik
Can you talk a little bit about the kind of investments you're going to be making in Asia, particularly around China? And what kind of results and outcomes you expect over time.
Yes, we've looked hard at China. And our view is we don't think we are capable uniquely as a small company of just hiring 5 or 10 people in Shanghai and taking team on the Chinese market. We probably need the right sort of partnerships and relationships with the right folks on the ground. We've looked at that over the years and we haven't found the right thing to do. We've come close actually a couple of times.
We continue to be open to that circumstance. But I don't think we're going to make a huge investment and just go it alone in China. And so we'll probably continue to service that market as we have been consistent with past practice. For the most part, until such time as we can identify the right opportunity to go in with a partner Who makes sense to us, which may or may not happen. But it's a part of the world, that we've looked at a lot.
We continue to be interested in it and we'll see whether we get the opportunity to make a big step forward there Or we don't. It is of great interest to us, but also to every other company with whom we compete. And so there'll be no guarantees given about our ability to find that right opportunity, but We're certainly interested in it and have done a lot of looking.
Thank you. Conference call. This concludes our question and answer session and the Janus Henderson Group Second Quarter 2021 results briefing. Thank you for attending today's call. You may disconnect your line at this time.