Ashmore Group PLC

Hi, morning. Thank you for coming.

We're talking -- my name is Mark Coombs, CEO of Ashmore. This is Tom Shippey, Finance Director.

And we're updating you on our full year results to end of June '25. So this is sort of a high-level overview.

Performance has been pretty good this period, actually. We are an active manager.

It's working. The last 12 months have been very good -- we've seen very good emerging markets returns full stop on the indices, and we have outperformed as well.

So that's all been pretty good despite a lot of noise in the U.S. and elsewhere.

We're now -- our outperformance now is we're up to 70% outperforming over 3 years, which is the kind of place you want to be, 81% over 5 and generally in a good place for people to invest when they decide they want to get back to the marketplace. Our AUM is now at $47 billion, which is down 3%.

Net redemptions have slowed down pretty dramatically. We're now in net inflow in equity, the local businesses and in investment grade.

So the only shoes that we need to drop are in the high-yield space. In terms of our operating model, it still does what it's supposed to do.

So revenue is down 22%. We have less average AUM and less performance fees in the prior year.

Our operating costs are down 14%. EBITDA is now at GBP 52.5 million adjusted, which is 33% down year-on-year.

Our margins at 36%. Seed capital investments continue to contribute.

We contributed GBP 40 million to profits this year. Our diluted EPS is down 13% year-on-year to 11.8p, and we're maintaining the dividend per share at 16.9p.

How are we doing strategically? We're getting the benefits of the diversification that we've said -- we've always said we wanted to be.

Our local businesses are growing. Our equities business is growing and has continued to over the last 5 years.

Our alternatives business is also growing. And our local platforms, we've established 2 more in the year, we'd expect to do more of those over the next 2 to 3 years.

So we've got everything in place. Happily, people -- Liberation Day has liberated people from a lot of cash.

And so people are starting to think seriously about whether it is so smart just to stay in U.S. rates and sit quietly.

So we're even having those conversations. We're having those conversations very actively in Europe and Asia.

In the U.S., it's just beginning. The Americans are still what do we do here, and we're quite happy to be paid some money for cash in the short end.

But the U.S. dollar trend isn't strong at the moment.

The U.S. dollar trend is weaker.

It won't be in one direction. They will move around, but it will -- if the trend is weaker, that tends to be highly supportive for what we do.

So EM grow better, as you know, better policy now, frankly, and risk-adjusted returns are higher now. So we're in a pretty good place here to start capturing the flows when they come.

This is a bit more detail on EM performance. Once we got through the U.S.

elections, it's performed pretty well. The top right bar, I point -- I can't point.

The top right graph, bar graph has the different things that we have fun in. And in terms of index returns, this is -- these are financial quarters.

So you'll see that once we -- once we got through to Q3 and Q4, all the index returns are pretty strong. So people are pretty comfortable in returns.

return isn't the reason that they aren't investing. Happily, we outperformed most developed markets, EM.

EM is a very broad statement, but most of EM outperforms most developed markets. Dollar weakness is positive for us.

It's been very good for returns in local currency. 15% returns year-to-date in local currency and equity is very good as well, which all helps.

And as I say, we're definitely seeing allocation shifting. The conversations are happening everywhere, beginning to happen in the U.S., which will be the last and actually happening in terms of investment, a little bit in Asia and Europe.

Investment performance, this is a bar chart we show all the time just because it kind of make sense to us. So the fixed income businesses, as you can see, in the short term, local and corporate are performing pretty strongly.

Our corporate business is out -- all our money is outperforming the index in corporate, which is good in the 1 year. In the 3 and 5, everything is outperforming with the exception of corporate.

So that track record is sort of improving from the front end, which will wash through. We've moved from 40% outperforming a year ago to 57% outperforming over the 1 year from 50% over the 3 year to 70% and from 62% over the 5-year to 81.

These are the numbers that you sell, the 3- and 5-year numbers. So we -- our salespeople are feeling pretty good.

They're feeling pretty good about the pipeline, which is good because they come out of a period where everybody was just diving into the U.S. and putting their head under the blankets.

But yes, so I think that sort of covers that. How are we doing strategically?

We're a little bit back where we were sort of -- in terms of people thinking about investing, we're back to when I first started messing about we're trying to do an Ashmore. The conversation in the U.S.

is a little bit like it was then, which is, listen, just to be clear, you know that having all your money in one market is risky, right, even if you live there. And for the foreign investors, it's particularly risky.

There's a huge amount of net liabilities from the U.S. now overseas.

So the conversation in the U.S. is a little bit look, just if your global equity index is now at 2/3 U.S.

weight, that's a massively risky thing to just slavishly follow. And the last people to lose that thinking will be the Americans.

I'd say Europeans and Asians and Latin American even are now sort of saying, well, hang on a minute. We made a lot of money in the max 7, now what do we do?

So that is definitely happening. Our fundamentals are pretty good across most of EM.

You get the old thing that isn't, but generally, they're pretty good, better growth, better -- pretty good real rates. And so that is attracting capital, certainly attracting crossover capital now.

Increased dedicated capital is happening again, as I say, in Asia and Europe, not happening yet in the U.S. So Phase 2 is okay, fine.

First of all, teach people that we should do it. You get out of DM.

That story is -- we're selling it again. Phase 2, which is diversified through a variety of things for us.

Well, the equities business is now 16% of our assets and is continuing to grow. It's growing year-on-year.

And feel very good about that. That will -- I feel very comfortable that is going to steadily grow and become a bigger part of our business and a much bigger business.

Investment grade is also growing, particularly driven by Asian clients in particular. Alternatives have increased.

We've raised some new capital in alternatives in private equity and debt. We've got quite a lot going on in themes that we've done a lot in over the years in EM, which is in infrastructure and in health care, and there's a huge amount more of that to do.

So we feel quite good about that. And we've done some new product launches and seeds.

In the equity business, we've started to find people who want ex-China in the U.S. So we've set up ex-China product.

Americans have decided they want ex-China. We've taken advantage of what we do in Frontier equity to do frontier debt.

We've also -- which is working pretty well. We've set up something in the impact debt space, and we've set up single country equity funds because people have begun to start thinking, I don't just buy EM, I buy India because I don't want the Chinese part of India or I do EM equity ex-China or I buy something dedicated like in Indonesia, where I see an opportunity that's specific.

And the final phase of our strategy, which is -- and the strategy doesn't change, is just where we're at. So we're now at 38% of our assets from emerging market clients.

I see that steadily growing, frankly, as a number and as a percentage. Our local offices grew again.

So now at $7.8 billion. So they're 5% -- 16% of group's assets.

So that part of our strategy is working. And as I say, I would see more of that happening over the next 5, 10 years.

Distribution is getting deeper where we have domestic businesses, local businesses, because gradually build out relationship networks. So we're getting better at selling in those markets.

And we've opened this year in Qatar in Mexico, and we'll plan to do further as we find the right people. It's really a people.

We know the demographies are want to be, we have to find the right guys. We're very comfortable with the guys we find for those 2 markets.

Leave it to you?

That's fine. Carry on.

No, no. Over to you.

Thank you.

Okay. So just carrying on, on that Phase 3, a more detailed update on some of the local office businesses.

As Mark says, total AUM across the network increased by 5% to just under $8 billion in the period, demonstrating the benefits of having a network of largely uncorrelated businesses in terms of investment performance, client behavior, capital flows and therefore, asset levels and profitability. The net flow picture was notably strong in Colombia with top-ups into the now well-established listed equity strategies and capital committed to the second private debt infrastructure fund.

India also continued to perform well across domestic equity strategies with additional capital committed from Ashmore's global institutional client base and also growth in both the local and offshore mutual fund products. In Saudi Arabia, the team successfully exited education-themed private equity assets, generating a performance fee and returned the capital to investors, subsequently launching new private equity funds focused on the industrial and real estate sectors.

Capital market conditions in India -- sorry, in Indonesia continue to be challenging, though for much of the period. Against this backdrop, the local management team focused on extending the product range, delivering investment performance for clients and enhancing distribution channels to increase client diversification.

All of the local offices benefit from using Ashmore's global technology infrastructure and thus a consistent global operating model. This means that in aggregate, as the local markets evolve and the offices grow, they're operating efficiently with a high EBITDA margin coming in the mid-40s and deliver a meaningful proportion of the group's profits of just over 1/3 this year.

In certain locations, however, the standard operating model needs to be adapted to cope with local regulatory complexity. In Saudi and Indonesia, recently introduced regulations prevent the transfer of certain types of data outside the country, and therefore, bespoke onshore IT infrastructure has needed to be implemented.

Over the period, Ashmore has continued to invest in these local businesses. As mentioned, local product has been launched in Indonesia for local investors to complement its predominantly offshore institutional client base.

And both Indonesia and Saudi are broadening their distribution channels to enhance access for retail clients. As Mark mentioned, given the notable success in private markets across Latin America and the Middle East, the alternatives theme is now expanding across a number of EM countries through private equity investments in both health care and infrastructure.

We'll continue to support these growth initiatives with appropriate resources, including centralized group support functions, IT infrastructure and seed capital investments to underpin future asset and profit growth. And finally, as Mark mentioned, the office network has been expanded with the addition of Qatar and the establishment of a new business in Mexico.

The former will initially provide local investment research to Ashmore's global investment teams as well as assist in developing local institutional client relationships. In Mexico, the process is well underway to obtain regulatory approval for a domestic investment management license, initially catering to both global and local institutional clients, including the domestic pension funds.

Looking at the financials. As Mark mentioned, the EM asset classes typically performed pretty well over the last 12 months with indices up between 8% and 19%, but investor appetite reflected the uncertainty of global geopolitics.

While assets stabilized at just under GBP 50 billion, the higher opening level in the prior financial year meant that average assets were 7% lower compared with FY 2024. Adjusted net revenue of GBP 146.5 million reduced by 22% year-on-year, given the lower average AUM level, coupled with a reduced performance fee contribution of GBP 10 million and a modest headwind from a weaker dollar.

Ashmore's business model is designed to adapt to the revenue environment and our relentless focus on costs reduced adjusted operating costs by 14% year-on-year. Notably, the VC charge reduced by 25%, demonstrating how the model aligns the interests of employees with shareholders.

The resulting adjusted EBITDA of GBP 52.5 million represents an operating margin of 36%. Given the positive return environment, the group's seed capital program delivered mark-to-market gains of GBP 40.1 million across a range of strategies.

Ashmore's cash balances and a consistent yield of around 5%, delivering GBP 20.1 million of interest income, lower than in the prior period due to an increased allocation to the seed capital program. Noting that the prior year included some disposal gains, profit before tax of GBP 108.6 million is 15% lower year-on-year.

This results in diluted EPS of 11.8p or 7.1p on an adjusted basis. The group continues to maintain substantial financial resources of just over GBP 600 million, well in excess of its capital requirement, and the Board has recommended an unchanged final dividend of 12.1p to give total dividends for the full year of 16.9p.

Looking now at the progression of assets under management. As I mentioned, they stabilized over the year with positive investment performance and an improving net flow picture compared with FY 2024, ending the period at $47.6 billion.

Consistent with the market backdrop and Alpha delivery described before, Ashmore delivered $4.1 billion of investment performance over the 12 months with all themes contributing positively to this result. Subscriptions of 6.5 billion were at a similar level to last year with notable demand, especially in Europe for local currency and equity strategies from both existing and new clients.

There was also a continued focus on the growing IG space, particularly from Asian insurance companies. There was a marked improvement in redemptions, which declined 22% to $12.3 billion.

As reported, a small number of institutional decisions increased local currency redemptions in the third quarter. Now given Ashmore's local currency strategy delivering strong absolute and relative performance over 1, 3 and 5 years, these redemptions were the result of client-specific factors.

And as such, we do not expect these decisions to be representative of a broader pattern of client behavior. In each of the other fixed income and equity themes, gross redemption levels declined compared with the prior year.

Consequently, the net outflow for the year was 32% lower than FY '24. Equities, alternatives, investment-grade strategies and local offices all generated net inflow consistent with the group's strategic objectives.

And notably, in equities, progress has been delivered through a number of meaningfully sized institutional mandate wins. Given the positive market backdrop across EM and investors' increasing concerns about the direction of the U.S.

economy and its markets, particularly post-Liberation Day, including the value of the U.S. dollar, we're seeing broad-based and increasingly positive engagement across the client base.

So to give a sense of those activity levels, in equities, there's increasing activity in the Americas, across Europe and the Middle East. Demand for fixed-income product is also becoming more widespread with the exception of the U.S., where investors continue to focus more domestically.

And the attraction of investment-grade bonds is being broadly recognized by investors and leading to demand in Asia, particularly out of Japan as well as in Europe. Encouragingly, the industry mutual fund data shows a pickup in net flows into EM over the summer and demand is now shifting to actively managed product.

Since the year-end, Ashmore has continued to deliver alpha across fixed income and equity and is therefore well positioned as momentum and interest in the asset class build. Looking now at revenues.

Adjusted net revenues were 22% lower versus the prior year at GBP 146.5 million. The main component was a 19% reduction in net management fees to GBP 129.7 million as a result of lower average AUM levels, a 2% headwind from higher average sterling dollar rates and a net management fee margin of 35 basis points.

On a like-for-like basis, excluding the positive effect of catch-up fees last year, the management fee margin came in 2.5 basis points lower year-on-year. As usual, there are a number of predominantly mix-related factors underlying the headline move, including a positive impact from investment theme mix with inflows and asset growth in equities, offset by higher average overlay AUM, which naturally increases in a period of strong asset class performance.

Higher-margin private equity realizations impacted alternatives and other factors such as the ongoing competitive environment. I expect that the broader industry environment will continue to exert some downward pressure on the reported margin, but also that the group's strategic initiatives to grow in higher-margin products such as equity and alternatives, which, together with the growing contribution from the local offices will provide some support to the margin over the medium term.

And finally, given the positive returns delivered, performance fees of GBP 10.2 million was successfully achieved across a range of both liquid fixed income themes and also in alternatives following the exits in Colombia and Saudi Arabia. While such fees are inherently difficult to predict, particularly given the lumpy nature of the fees generated from realizations, based on current market levels, I would expect performance fees for the liquid themes in 2026 to come in at around GBP 5 million.

Turning now to costs. The business model continues to operate efficiently and, importantly, has the flexibility to adapt to the operating environment.

In this period, operating costs were reduced meaningfully to mitigate the impact of lower revenues on profitability. Overall, adjusted operating costs of GBP 97 million declined 14% year-on-year.

Costs before variable compensation were reduced by 6% with a 2% reduction in salary costs based on broadly stable average headcount and a 12% decline in other operating expenses, primarily due to lower premises-related costs and third-party fees. In recognition of the revenue environment, variable remuneration was reduced by 25% to GBP 39.5 million.

As a proportion of profit, this represents 35% at the upper end of the range signaled previously, given strong ongoing performance, high client activity levels, improving flows and the continued realization of profits from the seed portfolio, which totaled GBP 5.2 million on a life-to-date basis. Looking ahead to the '26 financial year, we'll continue to maintain our strong focus on controlling expenditure globally while investing in key medium-term growth initiatives.

Overall, including the impact of moving to a new head office in London, I would expect only a modest increase in non-VC operating expense somewhere around the current U.K. inflation level.

Looking at the seed program. Since 2010, the program has supported growth in assets and delivered returns to shareholders.

To date, this has contributed approximately GBP 200 million of investment gains, of which 3/4 have been realized and added $5 billion to assets under management. Mark-to-market profits in the current year were GBP 40 million, approximately double the prior year level with GBP 7.5 million of the gain being realized.

Consistent with the investment performance delivered for clients, the seed capital returns were spread across a broad range of underlying funds. The total seed capital program value increased to GBP 350 million over the year, primarily due to new investments of GBP 113 million.

These were made to facilitate the launch of new funds and to support them while establishing their track records. For example, Ashmore launched a Frontier debt product, as Mark mentioned, to provide clients with exposure to this subset of smaller, higher growth and uncorrelated countries.

Seed capital was also invested in existing funds to add scale and thus facilitate access for intermediaries as demand for EM increases. And finally, investments were made to support the development of funds in the local offices, including the GP commitments for the alternative products.

The seed capital continues to be actively managed and GBP 46.6 million was recycled in the period, predominantly as a result of client flows, notably into investment-grade product and following the realizations from alternatives. We'll continue to use the balance sheet to support our strategic growth initiatives, for example, as mentioned, into private equity investments, building on the group -- sorry, and I would expect the alternatives allocation consequently to increase both in absolute terms and as a proportion of the whole.

Finally, on the P&L, the interest income on the group's cash was GBP 20 million compared with GBP 25 million in the prior year. The yield achieved was consistent at around 5%, but the average balance was lower and starts the current year at GBP 340 million compared with the GBP 505 million at the end of financial year '24.

While market yields have fallen recently, the book overall is still earning a rate of around 4.7% and new sterling term deposits are being placed at approximately 4.5%. The group's effective tax rate for the year was 21.6%, which remains below the U.K.

rate of 25% due to the geographic mix of profits and also the impact of revaluing deferred tax assets relating to share-based compensation as well as the treatment of seed capital gains and losses. In terms of tax guidance for the current financial year, the geographic mix today implies a tax rate of approximately 22%.

And finally, before I hand back to Mark for his thoughts on outlook, a brief summary of the group's financial resources. We continue to have a well-capitalized balance sheet with total financial resources of GBP 604 million, significantly in excess of the assessed capital requirement of GBP 93 million.

The balance sheet is not only well-capitalized, but remains highly liquid with GBP 340 million of cash and a similar value of seed capital investments, of which more than 70% are in funds with at least monthly dealing dates. In terms of cash flow, the group's operations generated approximately GBP 75 million after having paid tax.

This funded the bulk of the ordinary dividend. And additionally, the group invested a net GBP 66 million in the period in seed.

The Employee Trust bought shares worth GBP 35 million, taking advantage of lower share price levels during the year to acquire shares ahead of granting employee equity awards. In summary, therefore, the financial resources of the group continue to enable investment in our strategic objectives and help underpin future asset and profit growth.

With that, I'll pass you back.

Thanks, Tom. Thank you.

So outlook. Yes, the macro is volatile.

People are worried about wars, wild politics, all that good stuff that keeps life interesting, but that actually gives you opportunity. And if people eventually notice consistently strong absolute returns and alpha on top of it, eventually, the capital starts to flow.

In terms of EM, a couple of slides, little graphs we put on the right. One is about rates, which the basic message there is that you've got pretty high real rates on the top right.

And that tends to give you 2 opportunities: one, a sensible carry, but also the opportunity for rate cuts. And we think that, that is a nice backdrop to be sitting on, looking out a year to 3.

In terms of the bottom right graph, basically, earnings momentum is positive for EM equities. And we see there's more upside in terms of earnings momentum there than there is in terms of the S&P.

I think people really are focusing on how biased cap-weighted benchmarks can become. And especially in Europe and Asia, every conversation is we don't know what else to buy in -- we've done the big stuff.

We've done the trendy stuff. We've done the -- is it another Internet bubble?

We don't -- we've now done a lot of U.S. private credit.

And even we -- even I'm talking about what people are saying to us, are thinking there is no mark-to-market in private credit, there's a huge amount of cash sitting there, so that keeps refinancing it. But where do we go from here?

So there's a real challenge for people, and they're looking to figure out what they should be buying. And certainly, in Europe, that's pushing people towards local currency in particular, I think, in investment-grade dollars in what we do and some equity.

And in Asia, ditto, probably more investment-grade dollars than local currency at the moment in equity, but equities -- sorry, it's more investment grade and equities than local currency bonds in Asia in terms of conversations we're having. We're also having people who are going, well, maybe I really do need to focus on other than just buying EM.

If I think India wins, I need to buy India. So do you have an Indian product?

And of course, the answer is, of course, we do. So we're getting a lot of interest in that kind of thing.

Dollar is under some pressure. The domestic policy suggests it should be.

Things look better for Europe in terms of the fiscal expansion than they have done for a long time. Look, what we do, this is a pretty good environment for us.

So where are we at? We've done this for a while.

We keep being specialists. We have a team-based culture.

we're delivering alpha. We're 81% over 5 years.

People can see that. That includes all the little crises they can think of.

That includes what's been going on and that includes the COVID action, that includes Russia, that includes Trump, left, right and center. So people can see that and begin to focus on that.

The model works. We have a decent amount of financial resources.

We don't have any debt. We don't plan to have any debt.

We believe our interests are pretty well aligned with shareholders and clients. We still own 38% of the company.

And we see pretty significant opportunities to grow. So when the reallocation comes, if your performance is good and if your salespeople are still talking to people, and one of the things we do, as you know, is invest in people.

So we don't fire 1,000 salespeople and they don't sell anything for a year or 3. We invest in them and we say, okay, we're keeping you going.

So let's make sure when people think about what we do, you guys are front and center. Intermediary retail AUM will -- very volatile.

It's not volatile so much as it's directionally -- it's quite slow in the -- well, is it that slow? It's medium slow in the way it adds to asset classes and then sells them.

It's at a cyclical low for us, intermediary retail AUM at the moment. So that will -- and the retail tends to knee-jerk react quicker in both directions.

So one of the places that we're seeing a little bit of interest in both EM equity, Frontier equity and EM ex-China is the American market. It's very much an equity market, and we're seeing a little bit of interest there in terms of the 40 Act product.

And one of the challenges for us there is to make sure we have the right conduit to attract that capital. So we'll be thinking about the structures of how we take money there.

We have a few targets in terms of where we'd like to be in the local markets if we find the right people and our alternatives business will naturally grow. We see there's a big opportunity there in terms of long-dated assets with long-dated opportunities.

Summary, we're outperforming. Our flows are getting better.

The operating model is working, mitigates the impact of less money. We have some progress against strategic objectives.

The fact they've been strategic means they've helped us in terms of growing the equity platform, growing the local businesses over the last 5 years. We're pretty much everything in place for higher and allocations.

So that's it for the formal talking bit.

Happy to have questions, take any questions to me or Tom. Tom's answers will be much more interesting.

It's Angeliki Bairaktari from JPMorgan. We have been talking about increasing EM allocations for a while, but I do agree with you that now it feels like we're getting closer to actually seeing that being translated into inflows.

In your opinion, you said you've seen some traction with European and Asian clients. In the current quarter, has that translated into inflows in some of the maybe debt strategies and as...

Since the year-end.

Yes. So July and August.

I understand.

And maybe just for the whole year, fiscal year '26, is that finally going to be the year where we have a plus instead of a minus in terms of the net flows?

So I'm holding my crystal ball here. We've seen this -- we've seen this a lot before.

It all tends to be doom and gloom for a period of time and people think of what just happened, not what might happen. And every single time, in the end, outperformance as in absolute and relative is what starts the money coming.

In the nicest possible way, the money doesn't always come at the best time for it to maximize its returns, but that's life. So it feels to me like we're kind of at the bottom.

But maybe -- I mean, we are seeing 2-way flow. So there were periods of time where we didn't see much of that.

Obviously, in mutual funds, it's not very big numbers, but the fact you're seeing that, the fact that we're seeing a much better pipeline in the sales force, much more RFP action, much more final pitches. We -- there was -- at the peak of what we did, we might have a couple of final pitches a month across the business.

And then it became a couple of final pitches every 6 months. Now we're somewhere in between that.

So things are beginning to move, not yet where we'd like it, but they're beginning to move. So I'd love to say, yes, for sure, it's all going to be fabulous and going to raise GBP 20 billion of assets this year.

But I can't quite say that without being incorrect. -- either we'll raise way more or way less.

That's just how life is in the asset management business. What was the other part of the question?

I think I was going to flip that to you.

I think there was a near-term flow and an annual flow question. I think you covered both bits.

Okay, good.

And I asked something on the management fee margin as well, which fell year-on-year. And you mentioned, among other things, competition.

Is that coming from passive? Like are you seeing some substitution from active to passive, which is a trend that we're seeing in DM, we've seen it for the past 10 years very strongly.

Is that coming from some of your EM active competitors? Where is the competition coming from?

A little bit of both. Probably not.

I think in terms of our active competitors, probably not so much. I think we're very competitive there.

I mean, but there is always active man. There's -- one of the things people always try and do is drive you down on price.

Passive is -- it's gone from none to some. So it's not in everything, but in the easier things to replicate, the indices that are easy to replicate, there's definitely some competition from passive.

But what we've tended to find has happened to us in passive because passive has been around for a long time and what we do, too. It tends to be a first reaction to get something in.

So what we've seen -- so for us, it's a bit of a leading indicator. So when passive funds start to see flow in what we do, 3 to 6 months later, we do because they sort of -- I've got to slam the money in and then I go find a manager, unless you have an existing client relationship.

So it tends to be a bit of a leading indicator for us. So we watch that quite carefully.

It's Hubert Lam from Bank of America. A few questions.

Firstly, on -- you talked about flows going into IG and equities. And I guess high yield still remains outflows.

Just wondering, is that due to your performance? Or is that just a general risk appetite not yet wanting high yield?

I think it's due to a whole series of things. I don't think it's due to performance now.

People might have gotten very nervous around '22, '23 on that kind of thing. But now as you can see, the numbers are pretty strong across all the pieces.

So I don't think it's -- I mean, maybe one, but I don't think so. I don't think now it's that.

It's about a whole series of things. So all the Americans panicked and ran home after '22.

So some of them have just been slower at doing that, but they are kind of out now in terms of the way they think. I think they're where they want to be and their next allocation will be up.

But in terms of the Americans, that can take a while, a, because they can be quite slow the institutions there, but b, they have this big home country bias thing. They're obsessed.

It's just their whole life, they're thinking about that. But it does tend to happen.

And I think all the while U.S. rates are quite high, there's a tendency not to take much fixed income risk outside the U.S.

because I'm getting paid, and I'm getting paid to be in the short end. And so it's a little bit hard.

I can get fired for -- or you can get a whole -- I get in the press with the wrong comment from the wrong guy if I'm investing in the wrong place. And U.S.

is naturally an equity market. Americans like to buy equity.

So I think we'll see flow from the U.S. And I say we're just tiny bit is beginning to happen in equity first, actually in this cycle because this time around, we have some very strong equity product.

So we're highly competitive in terms of performance in the equity space, and we're bigger than we were. So I kind of like that, actually for my U.S.

optionality, but it's still got to start. And as I said, there's a little bit in the retail space, just beginning.

We're seeing that in some of the wealth managers. They're beginning to put allocations back into EM.

So we're beginning to pick up some EM equity money there. What was the rest of the question?

That was it, wasn't it?

Yes, on high yield.

High yield. Why people are not doing it?

Okay. The second part of it is it just reminds me of, again, 10, 15 years ago, there's this obsession with private credit.

And it's an obsession all over the place. And happily, it's now got to the [ credit ] I've actually got quite a lot of this.

But for the last 5 years, it's all been EM's alternative. So instead of EM fixed income and instead of other U.S.

bond-related stuff with duration, why don't I do private credit, not least of which because it takes a long time for people to find out, it doesn't mark-to-market? So there's been a big allocation of Americans into private credit.

But actually, the Asian markets have gone into private -- the guys in the Middle East, they've got big private credit buckets. So there was definitely -- at various times, depending on where EM is seen, if it's seen as something a bit off the run, the other off-the-run thing can knock it out.

And certainly, people have been redeeming not because of performance, but they say, I need to be in U.S. private credit.

Is -- I think that wave is over as in the big wave, people will still allocate. But I'm not -- it's not -- the conversation now is I've done private credit.

What do I do, which is not with everybody, but with some -- which is great. That's okay, thank God.

So a lot of people sold EM for private credit. And that's not just the Americas.

Some people in Europe did it, some people in Asia did it. Some people in Japan did that.

And a couple of questions for Tom. Firstly, on the fee margin, what's the exit rate?

And are you still expecting about a basis point decline per year?

Yes. So second half average was 35%.

So that gives you, simplistically, an exit rate of just above 34%. And the comments I've made before, I'm afraid, hold, right?

It's all dependent on the mix of assets and that can be influenced by performance as well as flow and a bit of erosion, the sort of 1 basis point guide every 12 to 18 months holds for the liquid side of the business. But if I think looking over the medium term, there is some upward pressure or support to the margin, right, around equities, which is high margin, more alternatives capital and the local market business is becoming an increasing proportion of what we do.

And finally, on performance fees, you mentioned that $5 million for the liquid portion of it, how about the illiquid is...

That's a really difficult bit. So I mean, that all depends on the realization profile.

We've been realizing assets in Colombia and Saudi. There's still a tail of those earlier vintage vehicles that we will realize over the period, but the timing for that is uncertain.

So maybe there'll be a little bit of that on top, but I don't want to call it now.

Mike Werner from UBS. Just one question.

We saw pretty good performance from your managers over the past 12 months and yet, obviously, due to the negative flows, we saw variable comp come off, I think, about 25%, which is, again, that 35% ratio is at the top end of your guide. Can you just give a little bit of color as to kind of the morale, whether there's going to be -- comp discussion is going to be a bit more challenging this year?

Are you worried about a little bit more turnover? Have you seen any increase in turnover?

Morale is outstandingly good. People understand what we do, right?

But we don't have -- we don't set ourselves up where we hire and find vast amounts of people at any one time. We try and progressively grow and make sure that we do things in a sensible manner.

So the people who work with us understand that. They're there for a reason that tends to encourage longevity.

My personal view is you expect turnover to be higher after difficult markets for 2 reasons. One is the lights go out with some people, and they need to turn the lights on somewhere else, and that can happen.

And the other one is you get opportunities to get value risk to buy some interesting people in. So you get the chance to hire people that suddenly -- I'm not going to name it, but they're a very big shop that does lots of things.

The salespeople don't sell anymore because it's hard. They sell what's easy.

that's what young people -- that's what salespeople like to do. And that's good.

That's what they should do. But they're just not getting any airtime.

So we usually find in dips that we find some pretty good people. And we found -- so we're buying people and people are being bought and sold.

So turnover is going up on both sides. And that's happened this time, too.

We picked up some people in some of the new products. So we're happy to have done that.

Yes, I mean, it is what it is. The business is what it is.

We've seen these cycles before. We would expect the key people that want to stay and do that.

The one for whom the lights are less bright than they used to be will almost certainly move on and new ones will come in.

It's David McCann from Deutsche Numis. Just to follow on to that question on the variable comp ratio.

So obviously, 35% for the full year at the upper end of the guidance range, as you say, although quite a lot more than you accrued in the first half. Can you sort of categorically confirm 35% absolutely remains the cap, obviously, bear in mind, it was only changed a couple of years ago.

And is that -- should we still see this as a variable cost? Or is there sort of really an element of fixed cost that goes into that number in your way of thinking?

That's the first question.

I've been here before again. So as the business shrinks, if you've got really good performance, you've got a high-class problem.

And this is that time in the cycle. So if people are performing, we want to be paying them.

So that gives us the flexibility to have that ability to go to 35%. I'd much rather that the problem continues.

And as we regrow the business, they're performing spectacularly, and we're still paying 35%, that would be fantastic. If they perform less well, we might pay less than that.

It does move around. It's not set at a number permanently.

One of the reasons we suggested that we would change it was we understand this is almost certain to happen this kind of thing if your asset base shrinks because people are off your asset class. The whole point of our model is to have the flex to cope with it.

And so we wanted to be sure we did have the flex to cope with insure enough. We've needed to use the flex to cope with it because a high-class problem, people have performed, but the business is a little smaller, so now we have to pay them.

So it's not -- it will move around. It will move around.

But it won't go above 35%. That's the clear...

Not without telling somebody. We wouldn't do something sneaky and not tell you.

It's very important to us to do what we said we were going to do.

Okay. Noted.

Second question is probably for Tom. Just another more technical point on that run rate fee margin.

The alternatives yield in particular looked like it dropped a lot in the second half. So at the fee level, is that the second half rate something we should extrapolate going forward?

Or was there something unusually low in the sort of revenue number there?

There's a couple of things going on there. One is some of the realizations were at a higher rate.

So those have come out of the margin as reported. The other is that the private credit capital raising in Colombia is a lower margin product than the private equity capital.

So is that roughly GBP 400 million of committed capital gets drawn down and invested, that will drag the margin down a little bit.

Okay. So the second half does feel more like the run rate then rather than the first, okay?

There'll be a little bit more give as more of that private credit gets invested, but that's your starting point.

Just one question from my side. It's Laura Gris Trillo from Jefferies.

I have noticed that your cash balance has decreased a bit year-on-year as you made some investments on the seed and also made the purchases for the EBT. I'm just wondering, in terms of balancing further seed investments and paying the dividend as your flows recover, how should we think about future dividend payments and future seed investments while your dividend remains uncovered?

Yes. So this year, assuming the dividend is approved at the AGM, it will use about GBP 35 million to GBP 40 million of cash.

So that's the forward-thinking number. The future direction of the cash balance depends on how much we're able to recycle from the seed book basically.

So we will continue to invest in things like the alternatives initiatives. So that will draw down some incremental capital.

But last year, as I mentioned, we put in GBP 113 million into seed to support and provide new growth avenues. I would expect to see a slightly higher recycling than the GBP 46 million that we got back this year as some of those strategies hit either the size thresholds that we've targeted for them or the time horizons for their track record.

So we typically expect somewhere around 1/3 of the seed book to recycle in any given year. So we were a little lower this period.

I'd like to expect certainly 12 months out that we'll be back closer to that 1/3 long-run average.

Thank you. Anybody else?

No other questions. Well, thank you very much for coming.