January 23, 2023

Dear Friends,

I hope this letter finds you well. It’s been nine months since Intech’s management buyout from Janus Henderson. The move was quite the opposite of industry trends, of course, but we believe it is far more beneficial to our clients. We are making the most of it, and you deserve an update on our progress.

We inherited a team eager and ready to embrace change, unshackle the decision-making, and move Intech into the 21st century with a fresh mindset. The team knows that we have one – and only one – focus: to deliver added value over a benchmark to our clients, thus fulfilling the needs of teachers, municipal employees, labor unions, endowments, and governments worldwide. This is important stuff, and we are reinvigorating that commitment.

Our bet: an employee-owned firm with a culture of decisiveness can more efficiently allocate resources and better serve our clients, which we believe will result in stronger investment performance and a better client experience. Having co-founded and built another world-class quantitative asset manager from zero to $100 billion in assets (with both devastating times and exuberant times), I knew that with strong leadership and a loyal, supportive client base, we should be able to do this.

Bolstering Our Core Competency
We embarked on this adventure by placing a visionary, hard-working CEO, Jose Marques, at the helm and allowing Adrian Banner to focus full-time on our investment process. That change alone has had an enormous impact on clients and couldn’t have come at a better time.

Last year’s markets were very challenging, and the gravest days may be ahead as we see worsening daily volatility, more frequent and severe drawdowns, and rising asset class interdependency. For our clients, such markets translate into increased contributions, reduced payouts, and dimming hope that private assets are realistically marked to market. In light of this new market paradigm, Adrian’s intensified focus enabled us to invest heavily in our core capabilities to address clients’ challenges.

New Alpha Sources
Process improvements started immediately after the MBO in Q2 2022 with the Enhanced Volatility Modularization (EVM) implementation. Developed, tested, and realized in just months, EVM recalibrated Intech’s optimization process and made the investment process far more extensible by allowing us to add new alpha sources rapidly. Adding implied volatility as an alpha source (with help from Dr. Myron Scholes, one of our Board members) is just one example of that extensibility – and it’s just the start.

Intech’s renowned trading process also had room for improvement, as Jose’s trading expertise came to bear last year. The former Head of Trading at both Bridgewater and Deutsche Bank rolled up his sleeves and worked closely with the Intech trading team to quickly uncover ways to reduce performance drag on client portfolios.

It may go without saying that our relationship managers are more than excited this year to share early results from these enhancements with clients and consultants.

New Talent
Of course, new alpha sources require new eyeballs – fresh eyeballs. That’s why we promoted Dr. Jian Tang to Portfolio Manager and began attracting world-class investment talent, starting with hiring Dr. Ryan Stever as Deputy Chief Investment Officer last September.

Ryan and I worked together for many years at my previous firm, and I think the world of him. Since those days, Ryan spent some time at Citadel and subsequently at Aperio, a small innovative quantitative firm later acquired by BlackRock. He was ready for a new challenge, and Intech needed to be challenged – serendipity reunited us.

Immediately seeing the need for more robust data feeds, Ryan hired his right hand at Citadel, Henry Meng, who is charged with updating Intech’s research platform and helping uncover novel alpha sources in the scientific method. Henry brings us a boatload of engineering know-how, which, in my experience, leads to breakthrough outcomes.

New Solutions
Extensibility didn’t end with our investment process. To address the realities of today’s equity markets, our clients are asking for more alpha resiliency; they want alpha across all risk regimes. But long-only equity solutions fall short of this need and require complementary capabilities. Today, unencumbered by the prior labyrinth of corporate decision-making, Intech accessed those capabilities through a partner. We looked outside of Intech to serve our clients better.

Intech has teamed up with Welton Investment Partners, a 34-year-old alternative investing expert, to jointly deliver an all-season equity strategy with a risk-return profile superior to what either of us could create on our own.

The result is the Intech U.S. All Market Core Equity strategy, which we designed to deliver the results today’s equity investors are seeking:

• More positively skewed investment returns
• Reduced systemic risk exposure
• Improved diversification
• Higher risk-adjusted returns

The Intech team is excited to introduce this new, innovative investment solution to clients and consultants in the coming months.

Increasing Our Accountability
Since the MBO, we said that a high level of employee ownership is the best way to keep Intech employees motivated and their interests aligned with our clients’ interests. It places the company in the best position to deliver long-term investment performance. So, last year, management crafted a new equity ownership plan for Intech employees, and effective this month, every Intech employee has been offered a genuine equity stake in the company.

Modernizing Our Service Capabilities
Disentangling our operational infrastructure from our former parent allows Intech to enhance our clients’ experience and modernize our operating model. After an exhaustive search in 2022 with help from our friends at OPCO Advisory, Intech selected SimCorp as a partner to deliver front-to-back investment operational services.

Implementing this modern, innovative platform gives Intech a holistic overview of business operations, seamlessly managed processes, and transparent access to data across post-trade operations and reporting. That means stronger investment decisions, more visibility into our results, and scalability for our future growth aspirations – all benefits for our clients.

Implementation is already underway, with an expected go-live in Q3 2023.

Ready for Tomorrow
Decision-making certainly picked up in 2022, including some hard decisions about employees as we reallocate resources to serve our clients. But we believe these considerable changes are transforming investment outcomes and firing up an employee base ready to take on any challenge.

We sincerely value our clients and the consulting community, who have shown remarkable resiliency and stuck with us through this transition. Indeed, almost 90% of our year-over-year AUM change has been market impact or reallocations. We are very grateful for your continued confidence in us. With stronger performance and enthusiastic employees, the growing excitement around Intech is contagious and limitless.

Congratulations on navigating a challenging 2022, and, on behalf of everyone at Intech, we wish you a healthy and prosperous 2023.

Sincerely,

Churchill G. Franklin
Executive Chair
Intech Board of Directors

Past performance cannot guarantee future results. Investing involves risk, including the possible loss of principal and fluctuation of value. There is no guarantee that any investment strategy will achieve its objectives, generate profits, or avoid losses. Before investing in any investment strategy, please carefully consider the investment objectives, risks, fees, charges, and expenses.