Man Group Limited

Good morning everybody. Thank you for joining us.

I know you've had a busy morning. Well some of you have like other they were longer and shorter ones out there that you could have already done.

As usual I'll take you through an overview of 2018. Mark will take you through the numbers and then I'll talk a bit about the progress we're making on the overall business and then we'll take your questions about first quarter flows – sorry or anything else that you happen to want to ask about.

I'm sure it says that on that. So 2018 and the fourth quarter in particular, so a lot of downside volatility, pretty much all asset classes.

As you'll all be aware, it created a more difficult trading and performance conditions and investment strategies generally across the industry lost money in 2018. Against that broad backdrop, we did a good job of delivering results in the areas we can control, namely, generating out performance for clients, developing our client relationships and managing our costs while investing for growth.

We outperformed our peers by 1% on average, and we think that's a pretty reasonable result given the tougher performance environment. New business remains strong in 2018 with net inflows of $10.8 billion.

Fixed costs were similar to the prior year despite the cost increases from the lovely MiFID II and GDPR and us continuing to invest in our new talent and technology. We were though I must admit aided by a favorable FX hedge.

Despite the good relative performance absolute results for 2018 we'll lower given the market backdrop, equity market declines and FX moves, which affects us a lot on AUM and the weaker environment for factor particularly value broadly offset the stronger net inflows, resulting in the smaller small reduction in total FUM to 108.5. Adjusted management fee profit before tax was up 7% driven by the higher net management fees, which comes from the FUM growth in 2017 and in the first half of 2018 before the sell off.

The environment obviously impacted performance regeneration, so total adjusted profits before tax decreased to $251 million compared from the $384 million the previous year. We continue to manage our capital to benefit you, the shareholders with during the course of the year a very profitable sale of our stake in the filler and the repurchasing of $211 million worth of shares over the year.

In addition to this and in line with a dividend policy, the board has recommended a final dividend of $0.054 per share as a result of the growth in management fee profitability and also the reduced share count from the buyback programs. Our total proposed dividend per share is at 9% in dollars or 12% in sterling.

So I'm looking at the FUM movements in 2018. It's hopefully a pretty clear picture.

You could see the things we can influence, which are the flows and the relative performance we talked about before, they've shown in blue and they both go in the right direction. Against that, the bits that we can't control, the external factors went against us.

We're pleased with the $10.8 billion of net inflows during the year and that included $2.1 billion of inflows in Q4. In addition, generating $1 billion of relative outperformance for our clients, 70% of which was in the fourth quarter when it really mattered to clients, makes a significant difference.

But the macro environment and its impact on markets meant that with equity indices down and remember we have a decent amount of long only equity business these days reduced our FUM by about $9 billion. In addition, almost half of our assets now a non-dollar denominated, so the stronger dollar over the course of the year mentored FX translation was negative.

Together these macro factors more than offset the inflows as you could see. So moving on to performance, you could see our absolute performance was heavily influenced by the equity moves last year.

Overall relative performance across the group was solid as mentioned earlier, with the asset weighted performance against peers of over 1%. Absolute performance in the absolute return category was down just less than 1% with our current strategies holding up particularly well despite it being a weaker environment for momentum.

You could see it was a tough period generally for absolute return in the space. So the down 1% is actually a strong relative performance.

And it's particularly, we outperformed with AHL Alpha and dimension, both generating positive returns against a period where a number of CTAs had losses some of them quite significant. In the total return category, the alternative risk premia strategy did have negative returns, but EM debt strategy actually ended up the year positive despite selloffs in EM debt.

Both strategies again materially outperform their peers. Systematic long-only were down on average about 16% across the product category.

It's an area where we've had several years of very strong outperformance. So our relative performance this year I'm afraid was weak.

So we had an under performance of 2.8% and it's particularly because of the value bars at Numeric. Along long run performance here remains particularly strong in this category and it was somewhat inevitable after seven years of outperforming, not just the market, but also our target Alpha in that strategy that we would have a weak a year at some point.

Returns in the discretionary long-only category were dominated obviously by Japan Core Alpha given it’s the larger strategy in the group. Relative performance was slightly positive and Japan Core Alpha was ahead of its peers and other strategies were, I mean, broadly in line in simple terms.

If I then look at flows, in 2018, we continue to see broad demand for our products and one of the things we're pleased with was 10 of our strategies generated net inflows of over $500 million. We saw continued interest in the alternative risk premia in the emerging market debt and actually in both our UK and European long-only strategies.

Alternative risk premia was the biggest contributor to that flows and remains a great demonstration of how the firm works when we all come together. During the year, we made further progress in strengthening relationships with existing clients and adding new relationships with strategically important asset allocators and distributors globally.

We continue to see the trend of clients investing across the firm, now 71% of our FUM relating to clients invested in two or more products and 48% relating to clients invested in four or more products. Those stats are marginally lower than last year, but that's just because we won several large mandates from new clients.

But interestingly, our top 10 clients now have an average of six and a half mandates with us. You can work that out by 65 mandates across 10 clients, which demonstrates the breadth of their engagement with the firm and one of our big opportunities is progressing other clients up into doing that number of things with us.

So with that I will pass on to Mark to do the specific numbers.

Thank you, Luke, and good morning everyone. I'll start an overview of our P&L and then take you through all the normal detail on FUM revenue costs and capital.

Net management fees were up 7% to $791 million driven by higher average FUM, which was partially offset by lower revenue margin. As Luke explained, 2018 was a more difficult performance environment, which reduced our performance fees and led to a small loss on our seeding book.

Performance fees were $127 million and we lost $5 million on seeding. Our adjusted management fee PBT was $217 million, up 7%, this was driven by the higher management fees and the limited increase in fixed cash costs partially offset by an increase in asset servicing costs due to MiFID II.

Core management fee PBT, which excludes legacy income was $203 million, up 14%. Total adjusted PBT was $251 million, 35% lower than last year, due to the lower performance fee profits.

The gain on the sale of Nephila, which Luke mentioned earlier, and a reduction in the Numeric contingent consideration liability, following the market selloff in Q4 means statutory profit was $278 million, which was up by $6 million from the prior year. Adjusted management fee EPS was $0.118 per share up 9% year-on-year, which is faster than the PBT growth due to the lower share count following the buybacks and the tax rate on the adjusted profit was inline with last year at 14%.

As Luke mentioned, turning to FUM, FUM was down slightly at year end. Net inflows in Q4 were $2.1 billion with strong inflows into alternative risk premia and systematic long-only partially offset by outflows from absolute return and discretionary long-only.

The outflows were driven by redemptions from discretionary usage strategies, which are typically more sensitive to short-term performance plus a couple of redemptions from a few larger institutional mandates. The negative investment movement of $7.7 billion was heavily concentrated in Q4 as you can see with the majority of it coming from our long-only strategies as equity markets fell.

FX moves reduced FUM by further $2.7 billion as the dollar strengthened and other movements reduced FUM by a billion, which includes CLO maturities and negative leverage movements, which was partially offset by $400 million increase as the strategic bond assets came in as the Sanlam team joined in Q4. Turning now to the revenue margins.

You can see our standard chart here, so you can see the same trends that we've discussed previously. Long-only and total return margins are basically flat bouncing up and down one way or another period by period.

The absolute return net margin decreased as a result of the continued growth in our institutional assets and the outflows from some of our historical retail business, particularly AHL diversified. As we've said previously, we expect that gradual decline to continue.

The multi-manager solutions margin decreased to 36 basis points and as we've described many times before, we continue to expect this margin to decline as the business shifts towards large infrastructure mandates and managed account mandates and then the rest is clearly just mix across the group, which gets you to the blended margin at the group level. Bringing together FUM and margin, you can see that the bulk of the growth in core net management fees this year was driven by the growth in total return and discretionary long-only strategies, absolute return fees we're flat year on year reflecting the fact that assets were also broadly flat.

Multi-manager revenues fell as assets in margin dropped. The FUM drop in particular reflects the infrastructure redemption we mentioned at our interim results.

The headwind from the runoff of our legacy products, which you'll have heard us talk about over the years, is nearly over. And if anyone hasn't already done so, please remove any associating income given we solely fill up [ph].

This slide is again just summarizing the moves through the year and particularly the run rate net management fee. So it reflects the fact that we had strong growth generated from flows, but those have been more than offset by the market headwinds.

In particular, the selloff in Q4 more than offset our progress earlier in the year and this leaves us with lower run rate revenues as we enter 2019, despite the inflows we saw from clients during the year. Turning now to performance fees.

As I said, we earned $127 million and performance fees in the year. $92 million from AHL, of which $43 million was from Evolution and $35 million from Dimension.

GLG earned $31 million, the majority of which were from the European long-short distressed, and then a range of the smaller equity long-short strategies and then FRM and Numeric, each contributed two million. This e-book lost $5 million as I said earlier, compared to a gain of $44 million last year.

The risk management and hedging of our seating positions cap losses to about 1% which we think is a creditable outcome given the backdrop. At year end, we had $39.5 billion of performance fee earning FUM.

Of that $4.7 billion was June crystallization, which was at peak. So please bear that in mind when thinking about the H1 performance fees.

Evolution is the main strategy that crystallizes in the first half and it's currently slightly above high watermark. I'd also highlight that the netting risk from ELS we've discussed previously is elevated given the FUM starts the year about 5% below high watermark.

The bigger point I want to reinforce as I always do on this page is about the performance fee earning capability over the cycle. We've said this every year, but we cannot control performance outcomes in any one year.

What we're focused on is improving the quality of the strategies year by year and growing the performance fee capability over time. Turning now to costs, the compensation ratio was 48% up from 44% last year.

That's in line with what we've said previously. And just to reiterate, we expect to be at the higher end of the range in years when performance fees are low and the proportion from the American GLG is higher and conversely we expect to be at the lower end of the range when performance fees are high and the proportion from AHL and FRM is higher.

Fixed cash costs for the year were $325 million below our guidance of $330 million. They were cost increases from the investments we told you about into our investment management and technology capabilities.

These were partially offset by real estate cost savings and buy a favorable FX hedge rate, which was a $10 million benefit year on year, compared to 2017. The new lease accounting standard that everyone is becoming familiar with is now in effect.

That brings our leases onto the Group's balance sheet, but it also changes the P&L treatment from now on. Although this change does not impact our actual costs or cash flows, the P&L treatment will be different and it's going to increase net expenses by about $5 million in 2019.

That will normalize and then eventually decrease over time. But please be aware for the 2019 modeling and as usual we've got all the details in the appendix.

Our 2019 guidance for fixed costs including leases on the new basis is $350 million. In simple terms that's the 2018 costs plus the $5 million change from leases, plus $11 million from the FX translation to the 2019 hedge rate and then adding on the impact of annualizing the investments we made in 2018.

Please also be aware that we're no longer planning to hedge the fixed cash costs from 2020 onwards. Asset servicing costs were $51 million, $14 million higher due to the MiFID II costs and higher average assets.

Going forward, guidance remains about seven bps of FUM, excluding the American GPM. Before turning to capital, I wanted to explain the rationale and mechanics of the proposed corporate structure change we announced in Q3.

We've seen significant growth in our business over the past five years and we're now a much more global business. As a result, we're proposing to adjust our structure and our governance.

We're proposing a Jersey incorporated holding company and we'll be increasing our senior management presence in the U.S. The structure should provide greater flexibility in future and support the effective and efficient management of our business.

It would give us more flexibility in financing, including, for example, the seed capital program that supports innovation in our international businesses. We also believe it's a structure that is consistent with other global asset management firms and helps us compete over the long-term.

At the moment, our U.S. and Asian businesses are regulated by both the UK and their local regulators.

The proposed structure would result in the Group no longer being subject to those global consolidated capital requirements and would therefore provider us with greater flexibility, comparable, as I say with other global firms. As we said before, there's no expected change to our tax, we're going to remain UK tax domiciled and as a neat segue into the next slide, there's also no proposed change to our capital policy today.

One of the strengths of our business is its capital generation. And as Luke said, we continue to actively manage shareholders’ capital.

The sale of our stake in the filler generated net proceeds of $140 million were midway through the buyback that we announced in October, so you've seen us both pay a healthy dividend and return capital steadily to shareholders. Pro forma surplus capital is $340 million, which includes all the normal pro forma adjustments at year end, as well as the new lease accounting impact.

That’s slightly better than some forecast due to a lower lease impact and the drop in contingent consideration in the second half. As we previously outlined, we have a seed capital program to support new products, which is managed within a $75 million value at risk limit.

The seeding book increased during the year to $662 million, up from $480 million at last year end as we supported a range of new strategies. Before handing back to Luke, I wanted to pull together a few of the cyclical trends and longer term strengths we've touched on already today.

Run rate net management fees are lower as we enter 2019 as I said, despite the growth from net flows and relative performance during the year. Those two are the long-term engines of growth for asset management firms and we're pleased we continue to deliver on them last year.

Over time, performance fees are a very valuable earning stream for our shareholders. However, we are currently below high watermark for some of our funds.

Across our performance fee earning strategies at AHL dimension and evolution into 2019 largely are at high watermark, but Alpha is about 5% below. At GLG, ELS is also about 5% below high watermark and the majority of numeric strategies have some way to go before they're in performance fee earning territory.

This may or may not impact 2019 profits depending on markets. What it doesn't materially impact is the long-term value of that fee stream to shareholders.

I'd remind people that we entered 2017 with various high watermarks to make up and that was a very positive year for performance fee profits. Finally, as I said before, the FX hedge rate and accounting items are a headwind in 2019 although both of those will normalize in the longer run.

And then lastly, before handing back to Luke, I wanted to leave you with a chart illustrating one of the great strengths of our business. Whenever we stand up we naturally focus on recent performance, but I think the longer term strength shown on this chart, it's quite striking.

Over the last five years, we've returned over $1.5 billion to shareholders through dividends and buybacks. That is over 30% of our total revenues over that period and it's also over 50% of our market cap as we stand here today.

I think 55% as of this morning. Even more importantly, it's driven by the profitability and cash flow generation of the business.

So we have made these capital returns that you see while growing our management fees, and performance fee capability and maintaining a strong balance sheet. We are realistic that there is some cyclical headwinds for this year, but we are also realistic about some of the structural strengths of the business, and the cash flow generation and the capital return is a great, great strength.

With which I'll hand back to Luke.

Thank you, Mark. As Mark just highlighted, in the current environment it's natural to focus on short run performance particularly on flows.

And as we all know, there'll be lots of questions on that in a minute. But before we get there, I wanted to spend some time talking through why we think we are structurally well positioned for growth, organic growth and even if there are some short term headwinds at the moment.

10 years ago, Man's business and profitability was centered around retail focus guarantee products. Post 2008 clients either redeemed from these products, or didn't reinvest in the products matured.

So when people worry about the asset management business generally offering products that don't work for today's clients and the redemption pressures that average asset managers might face we don't shrug that challenge off. It's actually one Man has had to confront and to manage our way through over the past decade.

The benefit we have here is that we've already repositioned our business such that we now offer clients a much more modern, diversified product range with a much greater focus on research, innovation, technology and delivering for clients what they need. Please don't get me wrong, this transition was far from easy.

It took some successful acquisitions, numeric, FRM, and so on in particular have been hugely positive contributors in their different ways. But it's taken a huge focus on innovation and on building real client relationships.

And it took some material cost cutting as you'll see on the next page. We added up roughly the number of people that worked at Man, FRM, GLG, Numeric, and so on about a decade ago.

As you could see, there were around 2,500 people. Today there are roughly 1,100 less people working in the firm.

That improvement has primarily come from figuring out how to support the business more efficiently as we brought everybody onto one core operational platform. We did that.

It's not about making announcements about maybe one day we'll start trying to consolidate things. We've done this over the last 10 years.

Importantly, the number of front-line investors and sales people looking after real clients and their investments hasn't moved by nearly as much. That level of change is hard to deliver, but it's a necessary part of repositioning and we went through it and the rest of the asset management industry will need to go through that.

What we've seen in recent years is the result of a lot of hard work. We’re pleased with the diversified range of products we can offer clients today, though at the same time, it’s absolutely essential.

We have to keep innovating; otherwise, you’ll start to drift backwards. What you see from this chart is clients have now recognized our efforts to build the products and solutions they want and need today, and they’ve rewarded that work within flows into our core products.

We’ve now seen cumulative net inflows of over $25 billion over the last three years, or roughly a third of the starting AUM in that period. It’s not all about beta; it’s about offering products to clients that they actually need.

That’s about the strength of those products today, but yes, it is about getting rid of the headwind from the legacy products redeeming and maturing as we’ve repositioned ourselves. Before I finished with some comments on our outlook, let me run you through why we remained structurally well-positioned for long-term organic growth.

The whole industry is trying to figure out how best to use technology to help clients, whether that be to improve performance, manage risks or reduce costs. We’ve had that in our DNA for a long time now, over 30 years of quant development for AHL and Numeric.

We have a huge advantage compared to competitors as this becomes a more and more central part of what clients expect. One of the interesting things of quant development is you get a real compounding effect; because once you’ve done something in quant, you don’t have to redo it.

You can creep reusing it, in the discretionary world, you have to start every day a fresh, in the comp world you get a real compounding benefit. We have hundreds and hundreds of researchers and technologists and decades of experience.

Others will struggle to replicate what we spent decades building. It isn’t an abstract conceptual advantage.

It turns into real hard dollars. To give one very tangible example from this year, we estimate in 2018 we saved our clients about $140 million as we’ve deployed various technology tools including machine learning and other quant research to improve the execution across the firm.

Putting that in perspective it’s almost 20% of our net management fee for last year. So, the amount that we can save by making the execution better has a real value generation for our clients.

We’re a performance focus asset manager and to deliver performance at our scale, you need a broad range of strategies for clients. The breadth of what we do and the range of different and distinct approaches to investing at Man is compelling for clients.

There are very few firms with a breadth of solutions we can offer. It allows us to be relevant to a wide range of clients across the world and also importantly to remain always relevant throughout the market cycle.

It allows us to find collaborative solutions to client’s problems, because we have a diverse set of skills within the firm. We remain very proud of our diversified set of risk premia strategies and maybe, I go on about it a bit much, but they showed the value of collaboration across the firm and it’s been recognized by clients with over 10 billion raised and they’ve generated three-year returns more than 13% ahead of the benchmark cumulatively over that period.

Finally, we’re a client focused firm and by that, I don’t mean a distribution focused firm. Our industry tends to be very inward looking, focusing on the products people think they can easily build and then flog rather than focusing on solutions to the problems clients actually need solved.

We’ve made it a big priority for the firm to shift that mindset would be outward-looking, listened to our clients. We think you could see that difference in how clients interact with us.

Our 50 largest clients are invested in more than three products with all three solutions with us in average. And again, it’s demonstrating the depth of the relationships as well as the breadth of people that we deal with.

And lastly, I just want to – before I turned to that, I want to remind people why all this matters? We’re an institutionally firm, but ultimately we serve tens of millions of people around the world, all saving to meet their financial goals.

Our purpose is to help those people actually meet and exceed their goals and if we do that well our business thrives. Before we open up for questions, just a couple of comments on the outlook.

We’ve had a healthy number of mandate wins over the past few months, but as clients responded to the change in markets at the end of last year and adjust their portfolio, we have seen a pickup in redemptions in the first quarter. We’ve always talked about the lumpy nature of flows in the firm, and what we’re seeing in the first quarter is just the normal course of business that we expect to see, it’s not something we’re worried about in terms of the status of flows.

We remain really confident that we’re structurally well positioned for the future. We have compelling investment propositions, we have deep client relationships and we have a competitive advantage in our experience of using financial technology to drive investment returns.

As ever, we remain focused on delivering superior risk adjusted performance and the highest quality service to our clients. If we get those two things right, it translates into the delivery of value our shareholders.

So with that, we’ll open it up to questions.

Yes. Good morning.

It’s Arnaud Giblat from Exane. I’ve got three questions please.

Firstly on, you talked a little about being outward focused and looking to add value to clients. I’m wondering in terms of when you look at your product sets or your solution sets, where do you see opportunities to build out and how you’re addressing these opportunities?

Secondly, could you talk a bit about fees on the front book around the back book in your absolute return product set, in terms of the fees at whichthe gross inflows are coming in and the gross outflows are coming out? And thirdly, well, since you mentioned you’re seeing a pickup in redemptions, could you perhaps talk about which asset classes you’re seeing as redemptions pick up in?

Thank you.

Sure. And I mean I’ll leave you to do a phase one.

I’ll do the value for clients and the growth opportunity. There are lots of things we don’t do.

One of the things I’ve always talked about is, we only want to do things, where we believe we can generate Alpha for our clients or value-add. Alpha works is a very easy definition in something like equities, but in some of the other areas, it’s a bit more complicated.

But if you think of it in those terms, there are lots of asset management products, which don’t add value to clients and I think they don’t have a future over time. So, we are very much focused on looking wherever we can find things that we can add value.

We are – have been and will continue to invest in the quant businesses we’ve got to find new things that we can do with quant techniques that’s about both getting better at the things we do. You could see that in the outperformance of AHL Alpha, which is a very longstanding product, but it’s outperforming the industry, because of the fact that it’s – we’ve continued to innovate within that as well as new areas.

And then obviously, we’ll keep adding teams. I think last year, we looked at about 200 teams and we added two I think.

The bar is very high, but we added – well, two at the end of last year in the credit side in GLG. We added a team – they’ve got quite a lot of coverage this year, the beginning of this year in the GPM side.

We look at a lot of people before adding those teams, because we only want to add the ones, where we convinced they can generate Alpha, but there’s lots of room for growth from the point of view adding new capabilities.

On the fee side, the most important component at the back book is AHL diversified, because it’s about 3% management fee. So, it’s the runoff of that that causes the biggest of that mix effect within absolute return.

If you look at the front book, it’s pretty close actually to the blended mix. So, it’s this slightly counterintuitive thing, where the backpack crawls offered a higher rate, the front book was coming in not far off the existing and that actually causes a drop.

But the main thing to focus on is AHL diversified running off. There is no increase or decrease in the speed of that.

It’s just steadily been decreasing over time.

And I think the other question was other redemptions focused anywhere particularly and then sort of the short answer is no. I mean the – in the same way as the inflows on the balance of the book isn’t changing at all.

There’s just, you get some people reposition after a year like 2018.

Hi, good morning. Gurjit Kambo, JPMorgan.

Two questions. Firstly, you mentioned you’re basically positioning your business to meet the needs of clients and solutions that clients want.

What are the sort of key solutions that clients were asking you for in terms of discussions you’re having? Second one is really around, so the private market area, we haven’t really talked much about that in a house that going any opportunities there?

Sure. So, I mean on the solution thing, I think part of the bid is in asset management when people have a great tendency to talk very specifically about the thing they do.

So, they get very fast about whether you are a European income fund or whether you’re a European excluding UK income fund and think that that’s really significant. The reality is, when you sit with the CIO of $100 billion pension plan, they’re not bothered by that question.

They’re sitting there going look; I’m supposed to make 5% real returns. If it’s an American plan, I’m try to make 7.5%, 8%, they sit they’re looking at their bond portfolio and they sit they’re looking at their equity portfolio and they go, okay, that’s not going to get me there.

What do I do? And they’re not looking to – yes, when you get down to the individual analyst picking the individual fund, there’s always a certain amount of discussion.

But the reality is they’re trying to deal with the big picture problem and are always amazed how much asset managers only want to talk about the tiny detail. And so a lot of the conversations are about how can we use skills we built up.

One of the things that the firm is, when you look at core skills, we’re so used to managing large risk positions. We just sort of take it as second nature.

We similarly – we used to trading large volumes over the course of the year, so expect that’s why many of you are here. And that means that we can look at the big picture problem that clients have rather than just the micro one.

And we can apply some of those skills we’ve got, because when you sit and talk to a $50 or a $100 billion pension plan and you talk about how they manage their risk between equities and bonds, they sort of sit in and go, okay, but we can’t, we can’t do anything about it, because we can’t possibly change our asset allocation, because markets are too illiquid. Yes.

We think nothing about moving $10 billion, $20 billion from one part of the market to another, because we do it every day with our normal risk management. And as you start to bring those ideas to bear for clients, they really understand you’re trying to help them.

They may use those techniques directly. They may thank you for the advice and use it themselves.

They may then just decide to buy something else from us, but you are helping them solve their problem and through that you build a differentiated relationship. That makes sense?

[Question Inaudible]

Yes. Yes.

Look, I mean some of it was, so we don’t do – we don’t offer execution services for our clients. We’ll leave that to the banks to do.

We run money for our clients. But as many of you work in organizations, where the reality is if you help your clients, they will find a way of paying you.

They may pay you directly for the way you help them. They may buy a service, which looks exactly like the thing you’ve talked to them about, or they may buy something over here to pay for something over here.

We all know how that works across different parts of finance and it really works with clients. And when you look at the flows, what’s very clear is the vast majority of the flows come from places, where we have a dialogue with the senior people, the CIO or equivalent or that organization.

And we are helping them think about how they get to 7.5%, in dollars or how they get to 5% over CPI as one of our clients has. That makes sense?

There was a second one at the beginning. GPM, I think we haven’t talked too much about GPM here, because from a pure results point of view, it’s still a small portion of the firm to a couple of percent of the assets.

We are making good progress there. We are going in a considered fashion.

So, we’ve grown assets within the thing. We’ve had good client reception.

I think there are lots of parts of the private markets world, where assets are expensive and boys, some of the businesses that are investing in those expensive assets have very high expectations of the value of those businesses. And we don’t want to try and chase that at all.

So, we continue to look for niches, where we think either there’s value or we can create value. So, the bit around affordable housing is a good example of that, where we can all imagine how many pension funds in the world are looking for things, which meet a responsible investing type of banner, but also generate some sort of reasonable return.

And we think that’s an interesting opportunity there. So, we are finding things to do, but we are going steady rather than rushing.

That makes sense?

Thanks. It’s Haley Tam from Citi.

I’ve got three pretty technical questions actually. So, by promise not about flows.

The first one was just actually on the reason for moving away from hedging FX in the fixed costs on what the thinking was behind that, whether there’s some significant saving in terms of hedge costs, because I think 60% of those costs are still sterling. So, that’d be great to understand.

Secondly, in terms of the move to Jersey, could you help us maybe sort of frame the potential benefit from not having to do global consolidated capital requirements in the future or if you can’t, then maybe tell us when you can. That would be great.

And then the last thing was just on the ELS netting rescue. If you could help me again, think about the quantification of that, maybe some reminder of the four million volts.

That’d be great. Thank you.

Sure. So, on FX hedging first.

So, there’s effectively some execution costs associated with that. And the only real benefit that we see given it’s a one-year hedge is helping the outside world understand one-year costs.

It makes no real difference to the long-term profitability of the business. So that that just feels like a bad trade-off for us, paying the execution costs each year for something that just has a one-year benefit.

And we’ll obviously explain to you how the costs will move relative to FX in each year. So, you can understand it.

So, I think that’s relatively simple. And Jersey, so the – as we said, the change post that is moving out of a setup, where our international businesses are regulated both by the UK and the rest of the world.

So, global consolidated supervision, not applying, putting a number on that would be premature at this stage. We want to go through the process and we need to then put a submission into the FCA for the European business.

We’d expect to talk to you about it in more detail at the half year. And then lastly ELS netting.

I mean there’s quite a big distribution effect within that. So, put an exact number on it is difficult for context, you’ve seen it in double digit million dollars in the past.

It’s certainly capable of being that size of effect this year.

Good morning. It’s Hubert Lam from bank of America.

A couple of questions. Firstly on AHL, I was wondering if you can give a sense in terms of client risk appetite for your traditional trend falling products.

Secondly, on the capital, $340 million vexes capital’s probably little better than what I anticipated. If you can give us a feel for what you think about the M&A environment right now and also whether or not it – M&A if you can use that for buybacks if you’re – when your current buyback completes.

Cool. So, I think on AHL trend – those sorts of basic trend products, if you like, and again, you should just recognize basic trend is not that high or proportion of what AHL does today.

So, traditional trend is it’s probably 25% of what goes on within AHL today. The demand for that is I mean, it’s a sort of consistent AUM.

Is that a reasonable expression for it? The reality is people buy that content for the rainy day and if it comes around as a rainy day, it’ll be very important that it makes good returns out of that.

As you can imagine that wherever it was early in December, it was positioned for – to make a very large amount of money if this Alpha continued. But when power woke up and decided to blink to get repositioned the other way around.

The reality is so AHL Alpha was I mean, marginally positive last year, I can’t remember 50 basis points or something. And on a three, four year basis, again, it’s been about that.

And the reality is owning that as a hedge within a portfolio is something that a bunch of clients think is a sensible thing to own. You get a certain – you get the odd one gives up on it and you get new ones come in every now and again, but the sort of flows there aren’t particularly material will become so.

Again, if it makes good money yield, I guess if there’s a big sell off and it doesn’t make good money, I guess, does that make sense? But the flows across AHL, there’s many other things we do there.

And one of the really exciting bits over the last year – last few years has been the innovation going on in AHL has been the increase in content. We’re pleased to see dimension last year was up two and a half, I think something like that – three?

Okay, something like that. That’s – that in the context of what was going on is a nice outcome and clearly, is not driven by the deployment at the momentum at all.

So, I think it’s recognizing there’s a lot of innovation in AHL while keeping the optionality in the momentum, if that makes sense. The question on the M&A front and capital, look we have seen the value of public market businesses come down in asset management clearly, as you know, there’s a lot of execution risk in a public market business, public market acquisition or merger or whatever you want to call it.

And so the bar is very high for doing something like that. Private market valuations haven’t really changed very much as of now.

We continue to look on a very consistent basis at businesses. We looked at over 100 businesses last year, because a couple of times we got interested in, then nothing came of it.

We’ll continue to be disciplined. We’re in the middle of a buyback now and as mark showed you on the slide, we have been very consistent about returning capital in what I think are quite material amounts over the years and there’s no reason to think we’ll change that.

We’ll have to decide as we get into the air in the buyback side of the way and we’ve done the restructuring and so on how we want to position ourselves then.

Thank you. Mike Werner from UBS.

Just a quick question. I think you said at the end of 2018, the performance fee eligible AUMs were about 4.5%, 5% away from their high water mark on a weighted average basis.

We’ve seen a lot of movements in the markets here to date. I was just wondering if you have a little bit of an update as to where that might be today.

Thanks.

So the general pattern is numerics performance picked up a bit. So the gaps dropped.

There hasn’t been a huge difference on the AHL and GLG side. So, they haven’t done a massive amount so far.

So, there’s no dramatic change from year-end.

A lot of up a bit, down a bit, end up back, where you started. And remember when we talk about numeric, it’s all in relative performance.

So, there’s no – we don’t have a performance fee anywhere based on getting paid for beta in the equity market. Any more for any more?

Well, we made a pause for 25 minutes. Cool.