Janus Capital Group (JNS) Richard Maccoy Weil on Q2 2016 Results - Earnings Call Transcript

| About: Janus Capital (JNS)

Janus Capital Group, Inc. (NYSE:JNS)

Q2 2016 Earnings Call

July 26, 2016 10:00 am ET

Executives

Richard Maccoy Weil - Chief Executive Officer & Director

Jennifer J. McPeek - Chief Financial Officer & Executive Vice President

Analysts

Daniel Thomas Fannon - Jefferies LLC

Kenneth B. Worthington - JPMorgan Securities LLC

Jack Keeler - Citigroup Global Markets, Inc. (Broker)

Adam Q. Beatty - Bank of America Merrill Lynch

Robert Lee - Keefe, Bruyette & Woods, Inc.

Operator

Good morning. My name is Melody, and I will be your conference facilitator today. Thank you for standing by and welcome to the Janus Capital Group Second Quarter 2016 Earnings Conference Call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers' 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.

During today's conference call certain matters discussed may constitute forward-looking statements. Actual result could differ materially from those projected in the forward-looking statements due to a number of factors including, but not limited to, those described in the forward-looking statements and risk factor sections of the company's most recent Form 10-K and more recent filings made with the SEC. Janus Capital Group assumes no obligation to update any forward-looking statements made during the call.

Now it is my pleasure to introduce Dick Weil, Chief Executive Officer of Janus Capital Group. Mr. Weil, you may begin your conference.

Richard Maccoy Weil - Chief Executive Officer & Director

Thank you, operator. Welcome, everybody, to the second quarter 2016 earnings call for the Janus Capital Group. As normal, I'll give a little bit of an introductory summary and the perspective on the quarter, Jennifer will take you through the results in more detail, and we'll have a special topic pulled from some questions that we've received during the quarter and then we'll take your questions.

So turning to the story of the second quarter from my perspective. I think there are really three key parts to the second quarter for the Janus Capital Group. The first one is around flows. Given the very challenging global market dynamics and, in particular, how that affected active asset managers, we were particularly pleased to have slightly positive flows for the quarter and very encouraged by the strength of the flows in our U.S. mutual fund business where we gained market share in both fundamental equity and our fixed income business.

The second theme of the quarter was that we have a number of strategies which are particularly designed to help clients in periods of market stress, in periods of high market volatility. In the most recent quarter these strategies performed pretty darn well. They did their jobs and that includes the Defensive Value strategies from Perkins, INTECH's Managed Volatility strategies, Bill Gross's Unconstrained Bond strategy, the Diversified Alternative strategy, which is our Liquid Alt strategy and our recently launched adaptive allocation strategies run by Myron Scholes and Ashwin Alankar. And each of those strategies, again, specifically designed to help in periods of market stress and volatility, I think, did a good job recently and that's important for us.

It's also worth mentioning that our exchange-traded products, primarily exchange-traded notes, which have the characteristic that they tend to do better also in conditions of market stress and high volatility that business did well. Actually our ETPs were up to $3.8 billion at the end of the last quarter; so that's gratifying.

And the third piece of the quarter from my perspective is over recent years we've made significant investments in building our businesses outside the United States. And in that perspective, our non-U.S. businesses have and continued in this past quarter to deliver strong growth. I think when you look at a company the size of the Janus Capital Group, the size of the investment we've made in building businesses outside the United States is a little bit unusual compared to peers, and we're very gratified that that significant strategic bet is succeeding.

Taking just to look in a little more detail at those pieces. Active managers in the first two quarters were experiencing extremely challenging environment in 2016. Industry outflows for active mutual funds, equity and fixed income are on pace to post one of the worst years in more than 25 years of history. Despite these market headwinds and industry conditions, total company net flows for the quarter were slightly positive, compared to $300 million of outflows in the first quarter. We're encouraged that we continue to grow momentum and market share in fundamental equity business, which posted $300 million of positive net flows during the quarter, which is an annualized growth rate of approximately 1%, compared to overall organic losses for the broader active management industry.

Underlying these results, I think there are two distinct stories I would call your attention to. First, Janus managed equities continued to gain market share, with inflows for the quarter of $480 million, which is a 2.3% growth rate. Second, Perkins outflows really ameliorated to $100 million, which is the lowest level of outflows for the last five years. So they're getting back towards health, which is very important for our business. Our fundamental equity business is growing at a time when the rest of the market is dramatically shrinking, and that for me is the real headline. We're very pleased with those results.

On the fixed income side, our fixed income had net inflows of approximately $400 million, which reflected positive contributions both from our Global Macro team and from our fundamental fixed income business. Similar to the market gains that we're seeing on the equity side, we're also seeing market share gains in fundamental fixed income in the U.S. mutual fund business. Fixed income mutual funds have been gaining share relative to peers, outpacing growth of the industry by 140 basis points in the second quarter, according to Simfund.

We remain very optimistic about the outlook for both of our fundamental fixed income business and our Global Macro Fixed Income business. They both seem to have a strong future ahead of them.

Lastly, let me turn to INTECH flows. INTECH experienced net outflows of $700 million during the quarter, compared to inflows of $700 million during the previous quarter. That was a disappointing result, driven primarily by one institutional account of $900 million that terminated its mandate in the closing days of the quarter. That frustrating occurrence really turned the story on what otherwise had been a positive and very successful quarter.

We're seeing continuing strong momentum from INTECH outside of the United States, where the business posted net inflows of $600 million during the second quarter. And we continue to see building momentum in the U.S. intermediary channel with the Managed Volatility Funds, which had north of $200 million of net inflows for the second quarter, which follows $130 million of net inflows in the first quarter. So they're gaining important momentum in the U.S. retail business.

Let me turn to the second thing I mentioned, which is performance of the strategies that are designed to perform in difficult market conditions. INTECH's Managed Volatility Funds are providing really dramatic outperformance. 100% of INTECH's managed vol funds were in the top two Morningstar quartiles relative to peers for the one-year, three-year, five-year, and ten-year periods.

Turning to Perkins, Perkins' performance is taking a meaningful turn for the better, both on a relative and an absolute basis. On a one-year and two-year basis, 100% of the assets are in the top two quartiles relative to peers. And on the three-year basis, comparable metrics are much improved. Over the last year, Perkins' two largest funds, Mid Cap Value and Small Cap Value, are beating their benchmarks by 74 basis points and 352 basis points, respectively. The Global Unconstrained Bond Fund managed by Bill Gross is beating 86% of its peers over the last year.

Our Liquid Alts business is putting up strong returns with our institutionally sold Global Diversified Risk Premia strategy and the Diversified Alternative Mutual Fund strategy, both performing very well. The Absolute Return Income strategy, which was acquired when we acquired Kapstream and is managed by the Kapstream team, which is now an integrated part of our Global Macro Fixed Income business, is also performing very well, and we're starting to see significant market interest around the world. Finally, our Adaptive Asset Allocation strategies, as I mentioned, managed by Myron and Ash, are performing positively and we look forward to their bright future.

As I mentioned, the third piece of the story for the quarter for us is non-U.S. markets. This has been one of the key pillars of our strategy, and we're very pleased to report that it's continuing to work for us. During the second quarter, we had $600 million of net inflows, which is an annualized organic growth rate of 5% for our non-U.S. businesses. Importantly, this marks three straight years of positive quarterly flows for businesses outside the United States.

So the takeaway for the quarter – I want to underline, we're gaining market share in fundamental equity and fixed income, and we're encouraged by these results. The strategies that are designed to do well in difficult market conditions are doing their job. And we've had three straight years of positive quarterly net inflows in our businesses outside the United States, and a very strong contribution to that result from INTECH.

With that, let me turn it over to Jennifer McPeek.

Jennifer J. McPeek - Chief Financial Officer & Executive Vice President

Thank you, Dick. I will start on slide five with a summary of our financial results. Average AUM increased 5% compared with the first quarter as a result of market gains. Second quarter revenue was $251.9 million. This is a 1% increase over the first quarter. Operating income was $67.9 million, and that is a 9% increase quarter-over-quarter. Earnings per share were $0.21 for the second quarter, which compares to EPS of $0.19 in the prior quarter, and $0.23 a year ago.

Now turning to slide six, we have our standard investment performance disclosure. Dick has already given quite a bit of color on most recent performance trends. I'll just touch through some of the three-year numbers, which are often the most cited client-focused time periods.

The three-year results for our fundamental equity and mathematical equity, as well as the overall Morningstar rating, all improved quarter-over-quarter. 64% of complex-wide mutual funds had a four-star or five-star overall Morningstar rating. And that compares to 59% at the end of the first quarter. At the end of June, 85% of our fundamental equity assets were in those top two Morningstar quartiles on that three-year basis. And that's a slight improvement over the first quarter, which was 84%.

And in mathematical equity, we had 61% of our strategies outperforming their respective benchmarks compared to 53% at the end of the first quarter. For fixed income, we saw a deterioration quarter-over-quarter, and that's due to movement from some of our larger strategies. Our largest fixed-income fund, Flex Bond, had three-year relative results that moved into the third quartile. But I will note that performance was only 10 basis points behind median over that time period.

Next, let's turn to slide seven, our standard flows presentation. Second quarter total company net inflows were slightly positive, compared to $300 million of outflows in the first quarter. Fundamental equity net flows improved to $300 million in, compared to $900 million out last quarter. Janus equity business continues to experience some favorable market share gains relative to the U.S. mutual fund industry. In the second quarter, our annualized organic growth in this business outpaced the industry by almost 2%. Additionally, Janus equities had about $800 million of inflows in the institutional channel, which we're very pleased with, as it's been a channel that we've spent quite a bit of effort trying to penetrate.

INTECH's outflows of $0.7 billion included one large mandate loss of $0.9 billion, but they continue to see strong demand outside the U.S., as Dick mentioned. Fixed income has $400 million of inflows in the quarter, compared to $100 million of outflows in the prior quarter. Similar to our Janus equity business, our fixed-income retail efforts are continuing to experience some market share gains relative to the actively managed U.S. mutual fund industry as a whole. In second quarter, annualized organic growth in this business was 4.5%, and that outpaces the industry figures we get by about 140 basis points.

Slide eight is revenue and performance fees. Our total revenue increased 1.4% over the prior quarter. Higher management fees reflect higher average assets, and they're offset by a decline in the management fee rate. Our weighted average management fee for the current quarter was 46.3 basis points, compared to 46.9 basis points last quarter. I'll give you a little bit more color on that longer-term trend later in the presentation.

Performance fees on our mutual funds were unchanged at negative $9.9 million. Private account performance fees were $1.6 million, compared to $7.5 million in the first quarter. That's consistent with the seasonal breakdown of private account performance fees we talked about earlier this year. The current AUM breakdown has about 80% of assets under performance fees paying their performance fees in the first and fourth quarter combined.

Turning to slide nine, a breakdown of our operating expenses. Our total operating expenses decreased $1.9 million, or 1%, compared with the prior quarter. Total comp to revenue was 40.7%. That's in line with our previous guidance. The guidance range that we've given still applies for the full year. We expect 2016's LTI expense to be in the $70 million to $75 million range, and that assumes a flat market for the remainder of the year.

This quarter, marketing and advertising increased, due to some opportunistic spend on our ETF launches, as well as several targeted marketing campaigns, including some focused efforts around our Global Unconstrained Bond Fund. Finally, G&A did increase slightly due to several smaller one-time items.

Now, slide 10 is our standard balance sheet presentation. Our total cash and investments increased approximately 7% quarter-over-quarter, and we returned roughly $44 million to shareholders via a combination of share repurchases and our quarterly dividend.

Now turning to the special topic section. This quarter, we wanted to highlight what's happened over the last 10 quarters to our management fee yield and give some insights into the drivers behind the decline.

Over the last 10 quarters, we've seen a gradual decline in our management fee rate, from 48.5 basis points at the end of 2013 to 46.3 basis points at the end of the second quarter. We characterized the cause of change here into two buckets, and they have roughly equal attribution to each. The first bucket is business diversification. Over this time period, we have seen fixed income grow to 24% of our business, compared to 17% at the end of 2013. And our fixed income assets, on average, have a lower management fee rate than our equity assets.

The second bucket refers to changes in the structures of fees, specifically moving to a greater percentage in performance fees. This is coincident with us increasing our share of large mandates largely outside the U.S., where performance fee structure is most common. Today, we have $25 billion of separate account assets that are subject to performance fees, compared to $14 billion at the end of 2013.

I will note that these institutional assets, while they may carry lower fees, are stickier assets, and by that I mean they tend to stick around longer. They have longer duration. On a net present value basis, they're highly profitable to us. They also tend to have higher operating margin contribution, and that's just purely a function of the math of having lower fee rates but also lower acquisition costs associated with them.

So when I look at this from a profitability perspective, I'm not concerned at all seeing 48.5 basis points go down to 46.3 basis points. Rather, on the contrary, I think it reflects successful diversification across asset classes and channels, and moving in line with what our clients are demanding in terms of fee structures.

So with that, we'll open it up for questions. Operator?

Question-and-Answer Session

Operator

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.

Our first question comes from Daniel Fannon with Jefferies.

Daniel Thomas Fannon - Jefferies LLC

Thanks. I guess just expanding on the topic you brought up at the end with regard to your fee rate. Can you discuss the products you're having most success with outside the U.S.? It seems like a lot of this comes back to INTECH. But maybe you could talk about institutionally outside of INTECH where you're seeing success and what products those are?

Richard Maccoy Weil - Chief Executive Officer & Director

Sure. INTECH definitely has been a major share of the success institutionally outside the United States. We've also had a handful of other significant wins in varying strategies. So I would say the balance of the flows, outside the United States, are diversified. We have fixed income flows from outside the United States for both our fundamental fixed income. We have a lot of interest, actually, going forward in what Bill Gross is doing and also our ARI strategy, both managed out of the Macro Fixed Income team. We've had some equity wins as well. And so, I think outside of the INTECH strategies, the balance of institutional flows outside the United States are diversified.

I'll just call your attention – and I think for the first half of the year, INTECH had about $2.2 billion of net inflows outside the United States. So, clearly, that has been an extremely important contributor to this success.

Daniel Thomas Fannon - Jefferies LLC

Great. And then I guess just as a follow-up. Jennifer, you mentioned the pickup in marketing and G&A. Should we anticipate that kind of continuing from here? Or a step down next quarter or the back half of the year? Just some directionality there would be helpful.

Jennifer J. McPeek - Chief Financial Officer & Executive Vice President

Yeah. The reason that I called that out is because there was an acceleration in the second quarter that was due to some really focused campaigns. So it's not a run-rate number. And I think if you look at our guidance for the whole year of a 10% increase for the full year, we're still looking at that. I mean, we're still committed to that number.

Daniel Thomas Fannon - Jefferies LLC

Great. Thank you.

Operator

We'll go next to Ken Worthington with JPMorgan.

Kenneth B. Worthington - JPMorgan Securities LLC

Hi. Good morning. So Janus has a number of funds that are still closed to new investors. They are smaller today than when they were closed, and the performance is reasonably good across a number of the closed funds. So what are the criteria you're considering when thinking about the timing of opening these previously closed funds?

Richard Maccoy Weil - Chief Executive Officer & Director

Well, as businesspeople, obviously we'd be excited to open previously closed funds. But our first duty is to take care of the clients in those funds. And so that's really an investment decision around what the portfolio managers are seeing in liquidity in the marketplace. And that simply has to be the first and highest priority. And so where we think we have opportunities to re-open funds, as recently we did in the Perkins Small Cap Value Fund, we go to the portfolio managers and we start a discussion which says, it looks to us like there may be an opportunity here.

And we just want to be sure that you're comfortable from investment performance and protecting the shareholders. And that's really the crux of the matter. You know, the business decision of opening a good fund is trivial. Any of us could make that. But the real judgment is from the investment side, given the liquidity in the market and the size of the positions and the number of the positions how confident is the portfolio manager that size isn't an issue, which will detract from the investor results.

Kenneth B. Worthington - JPMorgan Securities LLC

Okay. Maybe the obvious follow-up is, are those conversations happening right now?

Richard Maccoy Weil - Chief Executive Officer & Director

We don't go into the specifics of those conversations. When we have something to announce, we'll announce it. But you can be sure that we're commonsensical about it. Where we have opportunities, we're focused on those. And we have ongoing discussions.

Kenneth B. Worthington - JPMorgan Securities LLC

Okay. And then maybe second on marketing. Marketing spend went up. DOL is implementing its new rules next year. Any thought about if and how you would alter your marketing emphasis in light of the DOL rules next year?

Richard Maccoy Weil - Chief Executive Officer & Director

We're waiting for some more work done on the client side, frankly, to interpret what those new DOL rules will mean for their businesses. And then we'll follow along. We have, obviously, some concerns. We also see opportunities for us in the changing landscape. But it's really too early to have conviction. And to be frank, we haven't reduced that down to a strategy to change our marketing in light of that changing marketplace. It's still a little bit in flux, and it'll take us a little more time to have the right strategy in the face of those risks and opportunities.

Kenneth B. Worthington - JPMorgan Securities LLC

Okay.

Jennifer J. McPeek - Chief Financial Officer & Executive Vice President

And I'll add that we don't see anything at this point, in talking with our marketing folks, that would lead to a significant change in the overall level of marketing spend. But each year, the strategy adapts to market conditions.

Kenneth B. Worthington - JPMorgan Securities LLC

Okay. Great. Thank you very much.

Operator

William Katz with Citigroup has our next question.

Jack Keeler - Citigroup Global Markets, Inc. (Broker)

Good morning. This is Jack Keeler filling in for Bill. First question on non-U.S. business. The $600 million of net inflows, or 5% annualized organic growth rate in the second quarter, seems like a bit of a step down from recent trends. I'm just wondering if there are any specific geographies that lagged, that drew that number lower? And then I guess in contrast, that implies U.S. business might be getting a little bit better. And I guess particularly Perkins, if you could just comment on what you're seeing there, or a trend. Thanks.

Richard Maccoy Weil - Chief Executive Officer & Director

Well, thanks for the question. Outside the United States, we're seeing an important difference between institutional and retail. And that's the main thing I would call your attention to. That has reasonable implications, because the retail business is focused in some different markets than the institutional business. So you'll see some of that in regional. But really what's going on is it's been a tough period for retail outside the United States around the world. But we continue to make pretty good progress in institutional. And so, I think that's – from my perspective, that's the most important theme.

I wouldn't call too much attention to any particular regional trends. I think Japan continues to be one of our most important markets. Australia is very important for us, but it will be sort of a little bit lumpy in terms of how it comes in. And Europe is a balance between some inflows on the institutional side and pressure on the retail side.

Jennifer J. McPeek - Chief Financial Officer & Executive Vice President

Yeah. I'd add to that, if I'm looking at the breakout, that if anything this was a more balanced quarter than we've seen over the last few in that Europe was contributing as much as Australia and Asia and Japan. In the past, in the first quarter there was a little bit more concentration, but this quarter it was a little bit more balanced.

Jack Keeler - Citigroup Global Markets, Inc. (Broker)

Got it. And then just as a follow-up. By distribution channel, it looks like, as you mentioned, you're gaining good traction institutional and regional intermediary seem strong. But on the self-directed channel, it seems like trends might be a little bit weaker. Just wondering what you're seeing there? Is that channel maybe more exposed to the shift towards passive? What's the dialogue there that's maybe being a bit of a struggle?

Jennifer J. McPeek - Chief Financial Officer & Executive Vice President

Well, I can answer that with some data that I'm looking at. The gross sales numbers in the direct channel have been pretty consistent over the last several quarters. So I wouldn't call out a trend at all.

Jack Keeler - Citigroup Global Markets, Inc. (Broker)

Does that imply that you saw some elevated redemptions in the last couple of quarters in self-directed?

Jennifer J. McPeek - Chief Financial Officer & Executive Vice President

I'm pulling up that data too. No, that actually looks pretty consistent as well. So recall that we put our self-directed channel includes retail direct, supermarket channels, and also our trading strategies in ETN. So you can't look at self-directed and extrapolate only one of those sub-pieces.

Jack Keeler - Citigroup Global Markets, Inc. (Broker)

Got it. Got it. Thanks for taking my question.

Operator

We'll go next to Michael Carrier with Bank of America.

Adam Q. Beatty - Bank of America Merrill Lynch

Thank you, and good morning. This is Adam Beatty in for Mike. First, I wanted to talk about the linkage between equity performance and mutual fund performance fees. The performance numbers overall have gotten somewhat stronger. And on the performance fee side, there was some improvement for a while and it seems to have maybe decelerated or flattened a little bit. So wanted to ask what you see as the outlook for those performance fees, given the better performance? And also whether you might consider adding more mutual funds to the performance fee lineup in the future? Thank you.

Jennifer J. McPeek - Chief Financial Officer & Executive Vice President

Well, I'll take the first part of that question and give you some data. It's really very difficult to look across our entire platform of funds and predict the mutual fund performance fees without building a model that weights the last three years' average assets into the formula. Because that can really drive the shift. So if you see some of the funds that were very large three years ago, they're going to be playing a much bigger role than their current AUM would proportionately indicate in those mutual fund performance fees.

So when I look on an asset-weighted basis going forward as to what's rolling off, I can't predict what's going to happen in the future, but I can see what rolls out of the calculation. The third quarter that's rolling off is a pretty good quarter. Not an extraordinary quarter, but a decent quarter. And then the fourth quarter that's rolling off is actually a poor-performance quarter. So if you build your model on a bottom-up basis, you can see those trends.

Adam Q. Beatty - Bank of America Merrill Lynch

That's very helpful. Thank you. And then turning to your ETF strategy and rolling out some of the niche-ier type products. At this point is that going to be the focus? Do you expect to accelerate the pace of launches? And how do you see as kind of the future of ETFs and Janus's role in that? Thanks.

Richard Maccoy Weil - Chief Executive Officer & Director

Thanks for that question. We're obviously trying to find a niche with some smart beta and unusual products that are sort of differentiated from what you find in the rest of this very complicated and crowded ETF market. And we're learning our way into it, to be very candid. So I would say, as suitable for a learning process, I think we're giving ourselves scope to make future decisions based on the information that comes in.

So I don't want to make grand predictions about the strategy going forward. I think we have a handful of really good ETFs out there and in-process. We're going to continue down the lines that you can see from what we've done. And we're going to learn from that and then evolve. But I don't think I can say anything too grand at the moment. It's a crowded marketplace, and I think it's key to get ideas that will generate liquidity in the early days and that are differentiated from peers. And that's obviously quite challenging. We're excited about what we've launched already, and we're optimistic that, given some more time, we'll find a good space in that marketplace.

Adam Q. Beatty - Bank of America Merrill Lynch

Got it. That's helpful. Thank you for taking our questions.

Operator

[Operator Instruction] We'll go next to Robert Lee with KBW.

Robert Lee - Keefe, Bruyette & Woods, Inc.

Thanks. Good morning, everyone. Just wanted to – and I apologize if maybe this was asked before because I got on a little bit late. But had a question around DIAM. It seems like that's been relatively subdued in the last few quarters after a pretty fast start. Maybe just update us on kind of the new business trends you're seeing from that. And do you feel like you've seen some slowdown there? Maybe it's around DIAM going through its own structural changes with its partners?

Richard Maccoy Weil - Chief Executive Officer & Director

Yeah. Thanks for the question. And no, it hadn't been asked before, so you're on fresh ground. Our relationship with DIAM, obviously supported by our relationship with Dai-ichi, has been terrific. But I think the thrust of your question is right. Right now we're managing approximately $2.2 billion of Dai-ichi assets and $4.9 billion of assets in partnership with DIAM. And that's terrific business, but it hasn't changed a whole lot in the recent quarter.

DIAM is of course going through a structural integration with other parts of the Mizuho Bank Group Asset Management team, and they're creating this asset management one company, which I think will be the largest asset manager on the ground in Tokyo. And that's an exciting opportunity for us to carry on the partnership forward with an even stronger and better partner in Tokyo.

So I think we're optimistic. We believe the relationship between us continues to be very strong. We're excited about partnering with them in the future. And we acknowledge on a quarter-to-quarter basis that number will move around a lot. But we continue to be very optimistic about what we can do in partnership with them.

I would also point out that, recently, Dai-ichi Life announced a special relationship, a strategic relationship, with Japan Post. And that is potentially a very important member of the extended family that we look forward to building relationships with and partnering with equally as Dai-ichi Life, DIAM and Mizuho. So we're excited about the growing set of relationships and possibilities in Tokyo. But obviously it remains up to us to deliver on that promise.

Robert Lee - Keefe, Bruyette & Woods, Inc.

Great. And maybe just a quick follow-up on going to modeling question and comp. The comp ratio was, I guess, similar to a year ago levels, and I guess was more or less in line with what you've guided to. But could you just refresh our memory – kind of the range you're expecting for the year? And should we be thinking that with solid performance, good new business trends, there should be some upper bias to the comp ratio?

Jennifer J. McPeek - Chief Financial Officer & Executive Vice President

Sure. I'll take that one. The biggest driver of our comp ratio is markets. So as you build your model's stress test around different markets, then you'll see that move. If we have flat markets for the rest of the year, which is kind of an easy assumption to make, but probably not what we'll experience if history proves correct, then we'll have low 40s%. And that's been our guidance. The hypothetical that you posed around if we see a lot of new business. That actually tends to depress our comp ratio, because in some of our channels we pay upfront commissions. But still, that's a very positive long-term business trend, so I wouldn't be discouraged by that ratio.

Robert Lee - Keefe, Bruyette & Woods, Inc.

Great. Thanks for taking my questions.

Operator

Ladies and gentlemen, that does conclude the question-and-answer session. I'd like to turn the conference back to Mr. Weil for any additional or closing remarks.

Richard Maccoy Weil - Chief Executive Officer & Director

Thank you, operator. In conclusion, I think the message is clear: we're seeing market share gains in the U.S. mutual fund space for both Janus equity and fixed income, we're seeing exciting growth in INTECH Managed Volatility products. And this is all during a very challenging period for active managers. So we take a lot of comfort in that. INTECH continues to grow well outside of the United States with $2.2 billion of net inflows year-to-date outside the U.S., and that's exciting for us.

Third, the products and strategies that we've built to be important and successful for our clients during volatile and challenging markets – you know, these strategies seem to be working quite well, and give us a real important set of tools that we can use to help our clients during difficult times. And we're working on doing exactly that.

And lastly, our non-U.S. business has seen three straight years of positive quarterly organic growth. And that is particularly important and gratifying given that it's been a huge strategic focus, and a focus of investment for us in having a pretty darn extensive network outside the U.S. But we're very pleased that that's working. Thank you all for your time today.

Operator

This does conclude today's conference call. Thank you for attending.

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