Man Group Limited

Welcome, everybody. Thank you for joining us and for coming out in the rain and with everything going on health wise.

There is lots of hand sanitizer on the side of the room for anybody who would like it and for those who are finding the week a bit stressful, there are flak jackets outside as well. So as usual, I am going to start with an overview of 2019, Mark will take you through the numbers, then I will come back and spend some time on business momentum as much as anything else.

Obviously, markets are moving rather quickly this week. The presentations on last year’s results and honestly forward-looking comments are increasingly difficult to make with any confidence, but we will try to help where we can and then we will open it up for questions and we will try to duck all of the ones about what’s going on in markets today.

2019 from a market point of view was obviously much more supportive for most asset classes, complete contrast to the end of 2018 and the last few days. Together with our clients, we benefited from the bullish environment.

We were able to deliver $10.1 billion of investment gains, particularly from the long-only obviously, but from the trend following on from the total return strategies. Performance across the technical strategies which in the end drive most of the performance fee generation were particularly strong.

However, it was a period where the valuation-focused strategies tended to under-perform, didn’t change from the first half of the year, which led to the negative asset-weighted performance of 1.1% across the whole thing given the proportion of our assets that are in a generally high tracking era of valuation type of strategies. Funds under management increased 8% to $117.7 billion.

That’s mainly from investment gains obviously. We saw inflows into our alternative strategies, but an overall small outflow driven by the long-only side.

Adjusted PBT increased by 54% to $386 million driven by the strong performance fees. Adjusted management fee PBT reduced by 21% as a result of both the non-operating headwinds Mark outlined at the halftime if people were listening and lower management fees during the course of the year.

We continue to manage the capital actively to the benefit of shareholders. In May, we completed what we think of a rather important corporate reorganization providing us with more flexibility in financing the business.

And in October, we completed our buyback – well, the last buyback and we started a new one, $100 million one. Consistent with the policy of the last 2 years, the Board has recommended a final dividend of $0.051 per share, which when taken together with the interim dividend, amounts to a full year dividend of $0.098 per share.

So, if that’s the main bits you could have read. So I have had the privilege of leading Man for more than 3 years now, well, Mark and I and I wanted to highlight some of the progress we have made over that time.

Today, Man is a really diversified active investment management firm empowered by deploying the latest technology across all of our business. It’s a demonstration of the quality of the solutions that we can deliver and our deep client relationships that we have generated more than $22 billion of net inflows over the past 3 years and funds under management have increased by 45%.

For our shareholders, we have completed the transition away from Man’s legacy earnings stream delivering in 2019 our highest core PBT since the crisis. We have returned $900 million to shareholders over the last 3 years and we continue to reinvest in the business, in particular into the innovation that will drive growth from here with material success coming through in the alternative risk premia space and the TargetRisk strategy in particular.

We have put a huge amount of effort and energy into creating a strong and diverse culture across the firm. We want our staff to enjoy coming to work and to be proud of the firm they represent.

This is a people business and if we achieve that, that’s what will allow us to continue to succeed and outperform in the future. So looking at the FUM movement in 2019 in more detail, you could see we made good progress in the alternative strategies, but were impacted as obviously most of the street was by clients reducing their active long-only equity exposure.

At an industry level, clients increased significantly their allocation to bonds. That’s an area where we are currently underrepresented.

So, we weren’t fully able to benefit from the industry flows. But over recent years, we have been building out our credit offering and we have built strongly performing strategies now covering the strategic bond sector, the high yield sector and real estate debt.

Had these strategies had longer track records with us, mostly they have been with us for not much more than a year I think the overall flow picture for Man in 2019 would have looked quite different. Now, let me take you through the performance of the strategies in a bit more detail.

2019 was characterized by a rebound in equity markets and most other asset classes as central banks grew more accommodative. It was a strong period for momentum and growth strategies, but a more difficult period, as I mentioned, for valuation-focused strategies.

Against this backdrop, absolute performance across our product categories was positive. The absolute return strategies were up 7% on average driven by strong performance from our major quant alternative strategies.

Within the total return strategies, Man AHL TargetRisk delivered a very strong performance, up 28.4%, meaning it’s delivered 25% of outperformance of its 60-40 benchmark over the last 4 years. Emerging market debt total returns valuation focus meant it couldn’t or wouldn’t buy the frothy EM bonds that were around and it wanted to show overvalued EM currencies, so it lost 2.8%.

The systematic long-only strategies were up on average 19.1%, benefiting obviously from the beta and equity markets. Returns in the discretionary long-only strategies were 14.2%.

Within that, Japan CoreAlpha was up 9.2%. But the UK and the European-focused strategies delivered strong returns with the continental European strategy, that’s Rory Powe, up 30.7% and the UK undervalued assets strategy, that’s Henry, up 19.3% in the year.

Relative performance across the firm was slightly negative. Relative outperformance in the absolute return category was driven by the quant strategies, up 2.3% versus peers.

Again AHL continuing to deliver strong recent performance as it’s done for the last few years. Across our total return strategies, TargetRisk not just outperformed its benchmark, but outperformed peers.

But that was more than offset by the underperformance from emerging market debt due to that bearish positioning. I’ve to say the bearish positioning feels slightly more appropriate today.

Relative performance of the systematic and discretionary long-only strategies was soft with underperformance of 2.2% and 2.6% respectively. As you can see on this slide, there we go, amazing how that happened, it was our larger valuation focus strategies that led to underperformance during the year and that picture is basically the same as the one we showed in the mid-year.

It’s worth noting, for example, that despite the relative underperformance of discretionary long-only strategies, if you took Japan CoreAlpha out, which is obviously very large for us, then relative performance is actually positive. I’m not going to predict when valuation strategies will start outperforming again, but I do believe having a diverse set of high quality strategies across the firm results in outperformance for our clients and for the firm over time.

So with that as a background, let me pass over to Mark.

Thank you, Luke, and good morning, everyone. I will start with an overview of our P&L and then take you through FUM revenue costs and capital.

Net management fees were $753 million, a decrease of 5% from the prior year. That reflects both the market moves at the end of 2018, which meant we ended the year at a lower run-rate and some margin compression due to mix during the year.

Net performance fees were $325 million and came from a range of strategies. AHL’s Evolution, Dimension, and Alpha were the largest contributors and we made a gain of $20 million on our seed book, mainly from some credit strategies.

Total cost was $710 million, up 8%, with that largely as a result of higher performance fee compensation and then some from higher fixed compensation due to increases in headcount including the FX headwinds I mentioned this time last year. Overall, we saw a very healthy 56% increase in earnings per share driven by those performance fees.

As Luke mentioned, FUM increased to $117.7 billion during the year. We saw a return to net inflows in Q4 with $900 million for the quarter.

Over the whole year, we saw inflows into our alternative strategies, but a net outflow is $1.3 billion, given the outflows from our long-only. Absolute return FUM increased by 6%, largely due to positive investment performance with outflows from GLG’s alternative products partially offset by inflows into various AHL strategies.

Total return increased by 20%, primarily due to inflows of $4.6 billion. That included $2.8 billion into alternative risk premia and $1.5 billion into TargetRisk, with both of those strategies also generating positive absolute performance during the year.

Multi-manager solutions increased by $0.5 billion, driven by positive investment performance, partially offset by small net outflows. Systematic long-only was up by 11% to $27.5 billion, again driven by a positive P&L, with net outflows of $1.8 billion from various institutional clients, reflecting some of that short-term performance that Luke discussed.

Discretionary long-only FUM ended the year basically flat. Net outflows of $3 billion were primarily from our Japan CoreAlpha and U.S.

equity strategies. And then equity market moves were the main driver for absolute performance of $2.6 billion.

It’s also worth highlighting we saw net inflows from North American clients during the year. And we are pleased to see ongoing process in growing those relationships.

I wanted to briefly discuss here the impact we have seen from the coronavirus given it’s obviously a real concern both for our employees as well as markets and governments around the world today. As you would expect, our first responsibility is to our people and we’ve taken the appropriate steps to protect them, including office closures, reduce business travel, more working from home and then various monitoring exercises.

From a client perspective, we haven’t seen clients change their allocations to date. But as Luke said, things are clearly moving very quickly.

And our day-to-day focus has been upon managing their assets and the market moves that everybody is seeing. And turning now to revenue margins, here you can see many of the same trends that you all have heard us discuss previously.

So discretionary long-only and total return margins are basically flat, bouncing up and down slightly over time with mix shifts. The absolute return margin decreased as the continued growth in our institutional business and some of the outflows from the historical retail business continued, particularly AHL diversified.

And as we have said before, we expect some of that mix shift to continue going forward. The multi-manager solutions margin decreased to 31 basis points.

And as we have described many times previously, we expect that to continue as well as the business completes its shift towards large infrastructure and managed account mandates. As we mentioned in our Q3 press release, the systematic long-only margin has declined following a longer period of stability.

That reflects two things: one, some redemptions from higher margin mandates, but also one large client where they have moved some parts of the investment process in-house. So they are using less of our Alpha capacity, but they are paying less in fees as a result.

The overall growth in FUM meant we had run-rate net management fees of $771 million at the start of the year. Turning now to some more details on management fees from last year, overall, core net management fees decreased by 3%, driven by that lower starting run-rate and some of those margin trends I just discussed.

We had minimal legacy revenue in 2019 as we have completed the transition away from guaranteed products to our core business of today. On the cost side, our compensation ratio was 43%, down from 48% last year, driven by those higher performance fees.

As a reminder, our compensation ratio is generally between 40% and 50% depending on the mix and the level of revenues. We expect to be at the higher end of the range in years like 2018 when performance fees are lower.

And we expect to be conversely at the lower end of the range in the years when like this, when absolute performance fees are higher. Fixed cash costs for the year were $324 million, slightly lower than 2018 and a bit below our guidance of $330 million.

Other cash cost decreased largely as a result of the new lease accounting rules. They would have been basically flat otherwise.

DNA increased by $23 million, mainly as we brought in the new lease accounting rules, as well as some continued capital investments in technology across the business. For 2020, the guidance on fixed cost is around $330 million using a FX rate of 1.32 for cable.

That includes incremental investment into technology, private markets and our U.S. distribution capabilities.

It also includes some project cost in relation to combining our presence in this office here in London. This follows one of our largest sub-tenants indicating they’ll move out shortly.

We expect some further impact in 2021 and we will update you as that process progresses. And then lastly, on the cost side, asset servicing costs were $55 million, $4 million higher than 2018.

Going forward, guidance remains the same at around 7 basis points of FUM, excluding Numeric and GPM assets. As a reminder, as we told people previously, we’re no longer hedging our sterling cost going forward and you can see just an illustration of the impact of that on this slide.

Turning now to the profit bridge, you can see the profit bridge here just to illustrate the key movements for the year. Adjusted PBT is $386 million compared to $251 million in 2018.

The increase in performance fees is obviously the largest single driver, with some offset from increases in the variable compensation. And you can also see the non operating headwinds we mentioned this time a year ago and then the reduction in the core net management fee that we just discussed.

Looking now in a bit more detail of performance fees and seed gains, you can see these were $345 million this year compared to a $122 million last year, hopefully you can see. There we go.

This includes $291 million from AHL and $34 million from GLG. The Evolution and Dimension were the two largest contributors, but Alpha and institutional solutions from AHL were also significant.

As we always remind you, we can’t predict the level of performance fees in any given year, but they remain an important and valuable earning stream over time. The 5-year average for performance fees here, excluding the seed gains, is $225 million.

And we’ve been growing that performance fee optionality over time. If you look at the next slide, you can see we had about $32 billion of performance fee eligible FUM, which was either in the money at or within 5% of high watermark at year-end compared to about $25 billion the year before.

The last weeks obviously had a short run impact on that. But if I can persuade you to zoom out a little and I say that we were in hope than in expectation, you can see we have grown normalized performance fees over time with performance fee earning FUM up by about 60% since 2013.

Finally, on our balance sheet, it remains strong and liquid with net financial assets of $674 million and we continue to be strongly cash generative. We have reduced our liabilities during the year following the repayment of our Tier 2 notes of $150 million as well as the final Numeric earn-out payment.

As we discussed at the half year, we are now using some more efficient financing techniques for our seed book, so we are using repos and total return swaps, as you can see on this slide. We have also entered into new RCF $0.5 billion.

That is an ESG RCF which commits us to a number of target scenarios that are important to us, including women in senior management volunteering across the firm and maintaining RU and PRI rating. As you will know from hearing from us previously, one of the strengths of our business is its strong capital generation and we continue to actively manage shareholders’ capital as Luke described.

We are approaching 40% through the buyback we announced last October, and you’ve seen us both pay a healthy dividend and return capitals to shareholders steadily when we’ve not found better reinvestment opportunities. That approach to capital management remains unchanged today.

With that, I’ll hand back to Luke.

Thank you, Mark. It sometimes feels like the outside world finds it a little hard to see the underlying progress we’ve made in the firm in recent years.

The runoff of Man’s legacy business and the volatility of performance fees, at least viewed from a very short-term perspective seems to confuse the picture. What you can see here is our core profitability.

We are focused on growing our core management fee profitability and then normalized across cycle performance fee profitability. And we would encourage all of you to focus on that.

As a firm, we continue to enhance our strategic differentiators by investing in technology and talent, enriching our culture, diversifying our capabilities and developing deep client relationships. The cumulative result of these actions can be seen on the slide.

Core profitability has been on an upward trend and I am delighted to say it reached a new post-crisis peak in 2019. For Man, it really is onwards and upwards.

You see in the details on short-term flows, but I thought it was important to reiterate the change in our approach to clients over time. If you look back to the 2011-2013 period, we had an intermediary focused distribution model on our legacy focus product set.

We saw large net outflows, low gross inflows and a high churn rate. It’s not a very pretty picture.

As we built out the direct institutional sales capability through 2014 to ‘16, you saw net flows turn positive and gross inflow start to pick up and the churn rate reduce. And in the last 3 years, where we’ve put a huge focus on relationships and understanding what our clients actually need, you’ve seen a further material improvement in our sales productivity with 8% net annual inflows, over $30 billion a year in gross inflows and the redemption rate reducing further, slightly less or prettier picture.

Our focus on deep client relationships, have driven these improvement and that’s going to remain our focus from here. We’re investing this year in increasing our client relationship footprint as we see many extra clients where we could work with them, but where we haven’t had the time to develop a relationship.

Bandwidth has been our constraint, not productivity or receptivity from clients. There are still people, I bump into them regularly, who knew Man Group a decade ago and associate us with a single strategy of AHL diversified.

You’ve seen on the previous page how much broader Man is today than any one strategy. But the same is true even within AHL.

Today only $1.7 billion of AHL’s FUM comes from diversified. You could see the strong growth into other large AHL alternative strategies: Evolution, Dimension, and Alpha, and more recently the development of total return strategies, including the ARP and TargetRisk.

That growth is driven by our investment into our research, on our technology, on our execution capabilities to preserve and, yes, expand our lead in this space. Not only can we adapt and grow our business organically, we have also been able to invest capital profitably in acquisitions when a clear opportunity presents itself.

Creating value through acquisitions requires disciplined sourcing and structuring a potential investment. And we have a team constantly assessing future opportunities, saying no to overpriced acquisitions is key.

However, when you find a sensibly priced opportunity, much of the value creation is really about successful integration and that is a challenge people seem not to get right in our industry. We acquired Numeric in 2014.

At that time, its funds under management were $15.2 billion. That’s more than doubled over the past 5 years, reaching $35.8 billion today.

Obviously some of that reflects strong equity markets since the acquisition, but we’ve been able to deliver very significant growth from inflows. 4.7 of inflows were into Numeric’s traditional long-only products, thereby reflecting our ability to retain both the existing clients and deliver the strategies across Man’s broader client base.

What I think is even more interesting is the $5 billion of inflows into absolute and total return strategy, which reflects new strategies that are a result of collaboration across Man. We’ve been able to develop these strategies because there has been a real integration and a real collective innovation.

This is what resulted in the launch of the ARP strategy, which now manages over $8 billion across Man. The next area is to talk about technology.

Technology is in the DNA of this firm. We’ve been using data science for over 30 years to evaluate in trade markets and investments.

Python is Man’s second language. There are more than 600 people with Python usage within the firm.

Everyone in the firm wants to integrate technology into their process. We don’t need to even encourage adoption.

It comes naturally across the firm. Our challenge is the overwhelming number of ideas across the firm and how to prioritize within those.

Yesterday I was asked by a former colleague, why isn’t Man Group valued as a fin-tech business rather than a diversified financial? Well, maybe because we make a profit.

But also within our industry, look, we are not going to launch a software-as-a-service business line just to try and boost the multiple, right. We believe that our technology delivers huge value to our clients.

And by focusing on that client value add, the gap to traditional players grows and our shareholders benefit whenever our clients are happy. When we look at our quant and tech expertise, experience and resources, we think we have a huge competitive advantage as our industry becomes ever more technology-focused.

If you look across the listed asset management firms around the world, I would challenge you to find anyone with our capabilities and our leadership position in quant and tech. Our experience is unparalleled in quant investing, more than 30 years, both in AHL and Numeric, and we continue to invest in quant research and technology in particular to protect and grow that lead.

We benefit, our clients benefit, and our shareholders benefit from our technology leadership. I am going to take another chance to remind you of the other great strengths of the business.

We are very cash generative. We pay at 100% of the management fee profits as dividends every year.

But we also generate significant amounts of extra capital from our performance fee profits over time. We’ve reinvested capital profitably into the business in the past, Numeric acquisition being a great illustration of that.

But if we don’t find attractive reinvestment opportunities, we have and will continue to return capital to shareholders, with $1.5 billion returned through dividends and buybacks over the last 5 years. Overall, you could see the progress we have made in reengineering the firm to deliver what clients actually want and need today.

Back in 2013, the firm only made a management fee profit because of its legacy earning streams, particularly from the structure products and excluding those, the core business was actually loss making. We built our core management fee profitability materially over time and it will drive our growth from here.

We have also grown our performance fee earning potential and hence our expected average performance fees during a cycle, in particular as AHL has diversified the strategies it offers to clients, but also through the acquisition of Numeric and the development of a number of new cross-Man alternative solutions. We’ll inevitably keep adapting the business as markets change, but our technology leadership and the strength of our client relationships give us an excellent competitive advantage.

Before turning to our outlook, well, what little I’m going to say about our outlook, I’d like to say what we do in its wider context. Man exists to help our clients meet their investment goals.

We serve the biggest institutions around the world. But it’s easy to forget that those institutions represent real people the other side, somewhere between 50 million and 100 million people.

These people are saving for their retirement or their healthcare or their children’s education. Our purpose is to help them achieve their goals.

We do that in conjunction with a range of partners who we rely on every day to do our job. We’re also very conscious of the wider community we work and live in.

We’re proud of our charitable activities and we’re focused on improving the environmental impact both directly with a 19% reduction in our carbon footprint this year, and even more importantly in how we manage our clients’ capital with an appointment of a CIO for ESG and responsible investing this year. As you may have seen this morning, we announced some board changes.

That means at the time of the AGM, our board will be fully diverse. Finally, we can only do what we do because of our people.

We put a huge focus into building a firm where everyone is happy and proud to be part of that team. And as Mark mentioned, in an environment like this, looking after our people comes first.

2019 was a year of solid growth and continued strategic progress at Man. We delivered strong absolute investment performance, making $10 billion in investment gains for our clients and closed the period with record funds under management.

That performance drove a 54% increase in the adjusted PBT. We saw a return to net inflows at the end of last year and as we mentioned, that momentum has continued into 2020.

Okay. I wrote that bit at the end of the week, the end of last week, not sure what the momentum is this week, but clients are looking for us to help them understand what’s going on in the market.

And we are focused on looking after their capital and we are very confident in the breadth and the attractiveness of the solutions we can provide to clients as they decide what they want to do in this new or potentially new environment. Our strong performance fees last year, as Mark mentioned, means we have good performance fee optionality in 2020.

We set three key priorities for our further investment, all within the cost numbers Mark has talked about. First and foremost, we will invest in our quant and technology areas to maintain and grow our lead position there.

This obviously drives what we do in AHL and Numeric, but it’s also crucial to staying ahead with a differentiated offering in our discretionary GLG and private market areas. We want to keep pushing our quant and technology into areas of the market and investing where others don’t realize it’s possible to use quant skills.

Secondly, as mentioned, our relationship focused sales effort has lots of room for growth by covering a greater number of significantly sized institutions. It’s particularly true in the U.S.

where there’re just so many large potential clients. And so we’re growing our sales relationship footprint there.

And thirdly, we’re always looking to diversify the product set. As I mentioned before, we have very clear rules around this.

We won’t do something unless, a), we can deliver a repeatable source of value-add for our clients; b), we can do it while maintaining the quality of the people in the firm and the cultural standards of the firm. I have a shorthand for that, which I won’t use here in total and c), we don’t want to do something twice.

We don’t believe in having two of anything. Overall when we look at our capability set today, there are lots of new things that we could add in.

But we’re focused somewhat on areas which benefit from growth in economies and markets, that’s obviously particularly the long-only equity world, and things that benefit from significant change in the market, that’s particularly in the quant technical stuff. We are on average somewhat light on strategies that generate reasonable returns either through income or when not much happens.

And so we are working hard to develop, grow, and integrate those strategies whenever we can find things that meet criteria A and B. I would now use my lovely concluding sentence apart from – that’s a bit of paper which I must have left downstairs.

So I think we’ve got one. We might as well have the final paragraph, it’s the big bill.

The – look, we continue to enhance our strategic differentiators by investing in the talent we have here, innovative new technologies, enriching our culture because that makes people want to work here, diversifying our capabilities and developing these client deep relationships. In doing so, we are very convinced we are well positioned to meet our clients’ needs and if we do that, to deliver sustainable value for our shareholders.

So with that, we will take some questions. Thank you.

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

Firstly, on flows, Q1 flows. And so in the specialized press, it seems as though you might have one day an AHL mandate in a U.S.

pension fund. Could you – they’re talking about $650 million for Oregon.

Could you confirm in whether that funds – the timing of the funding? Also I think you disclosed that Mr.

[indiscernible] has got a $500 million mandate. If that’s going to be in the numbers for Q1 and TargetRisk seems to be doing extremely well and flows into the listed product continue.

Is there capacity for that product?

Of course. That was a lot together and I will try not to go beyond what a client has already said publicly about their thing.

So the Oregon in the way of that process made a public announcement which got picked up in the press. That strategy, basically you can think of as being TargetRisk in a bespoke format.

And timing of that will depend on the client, if that’s a way of doing it. But, I mean, they made the announcement, it wasn’t us.

So, and I think generally in TargetRisk, the performance has been remarkably strong for 5 or 6 years since we launched it. We were somewhat amazed how long it took before people noticed, in part because it is quite differentiated, in part because its performance has been frankly so good.

People couldn’t quite believe what was going on. In the last 12 to 18 months, you could see the momentum of flows into that has picked up significantly, and we have plenty more headroom to go in terms of capacity.

So we have to be very careful about the other question just from not restricting us from a U.S. marketing point of view.

But there was a Bloomberg announcement about – sorry, there was a Bloomberg story. It was nothing to do with us announcing it, they would have got it from somewhere in the street, about the launch of a new multi-strategy fund from Man where Sandy is the titular fund manager.

I keep looking at the compliance team on the front row to make sure I don’t say the wrong thing. Look, as you all know, if you say too much specifically about the product, you can’t then go and market it in the U.S.

for 3 months. And if we had that product, it would be very attractive to U.S.

institutional clients and so restricting our ability to go market it for 3 months will be a bad idea. But I think we are very confident of our ability to build cross-Man solutions, which are differentiating and attractive to clients.

Yes, good morning. It’s Chris Turner from Berenberg.

Just two questions for me. The first is really taking that last question and if you can take it more broadly.

In fact, very strong performance from your absolute return products hasn’t yet translated into flows. Is that a lagging issue, is that just a time lag there, is it a capacity issue and then if it is a capacity issue, in regards to your seed portfolio, all the things that was the kind of phrasing in building what track records there that would help?

And then a fairly dual question, I’m afraid, secondly in comparison, it has taken you, I think, 4 months to do about 35% of the share buyback. So would it be right to think that it would take pretty much the rest of the year to do that?

Associated with that, what’s the current surplus capital position? And then taking those two together, what’s your – or how do you think about returning that capital if the liquidity in your shares is a binding constraint on doing more buybacks?

Thank you.

Yes, I mean, on the latter, you are right, it has been going relatively slowly. That’s primarily just a function of liquidity in the market.

So we are trying to buy at an appropriate pace and not move the share price around as you’d expect from business that trades for a living. So we get constrained primarily by the market side of that.

Surplus capital is not the right way to think about the balance sheet anymore. So the red cap position is not how we describe it and it’s not how you should think about it.

So you can see, whatever it was, Slide 16, which is the – whatever number it is, which is the net financial assets. So, the balance sheet is strong, liquid, low on gross liabilities, and has a chunk of flexibility there.

But there isn’t a sort of one number that says here’s the surplus capital. We’ve got plenty of capital that we can choose to either return or reinvest.

And the approach to that is completely unchanged. So we are trying to maximize returns for shareholders.

If we have a reinvestment opportunity that is more attractive than returning capital, we will do that. Otherwise, we will continue to return capital steadily over time and you can obviously see we have done that in significant size over the past 5 years.

In terms of the absolute return, capacity, and flows, so I think that the – so we have a very strong view that everything that is about Alpha is capacity constraint. And then if you take too much money into something, it’s not that the Alpha decays a little bit.

If you take too much money, the Alpha falls off a cliff. And it’s almost impossible to climb back up that cliff.

So we are and we’ll continue to be prudent about shutting things because we think that’s the right way to maintain returns for clients and that’s the right way to maintain those relationships and it’s the right way over time to maximize the rewards you get for doing it. All of our efforts in the investment world go into trying to create extra capacity in some form or another, either by finding new things to do, new signals to trade, new markets to trade, new ways to trade things or invest in things as well as improving our execution because the easiest way to increase capacity is to reduce your slippage, which then gives you more ability to do things and particularly to avoid letting anybody see your footprint.

We are very active in terms of the stuff. We try it across the firm and what you don’t want is the – I was going to call it bottom fishes, maybe that’s not the right thing, but the market is clearly full of lots of people trying to find a footprint and try and get in front of you.

And so we spend a lot of time and energy on making sure our execution is both outstanding and continuously getting better. I think we are confident of our ability to keep creating absolute return capacity across almost everything we want to do.

We’re not confident of our ability to keep creating evolution capacity ahead of evolution’s ability to generate returns. But that’s a nice problem to have given its historic returns have been double digits, if that make sense.

So it’s quite a lot of work to create the capacity to just stop us having to give money back to clients.

Hubert Lam from Bank of America. Just one question on M&A, you haven’t done deals for a while.

I think your standards, you spoke of, are pretty high and previously you spoke about valuations also being unattractive. I was just wondering if you can give us a few thoughts on the M&A outlook and backdrop?

Sure. I mean, look, we continue to look at things actively, but we do it in a hopefully dispassionate way against those criteria.

The way I would characterize it is, we have a view about valuation that make sense and a view about structure which ensures that the deals work well for our shareholders. What we saw for a couple of years is that there were people in the market willing to pay materially more than we thought was a sensible price to pay for things.

And we see absolutely no reason to chase those things. Does it feel like the average price somebody will pay for businesses coming towards us?

Yes, but it’s coming down to us, not us chasing up to that. But it’s got to be something where we actually see Alpha buying a business that’s got some AUM, but doesn’t have any Alpha, doesn’t move the firm forward.

So it has got to have Alpha, it has got to deliver value for clients. And they have got to culturally believe in the things we believe in and not just doubling up something we have already.

Anytime we can find that combination and we can make the structure work, well, that would be brilliant and, as Mark talked about, we have plenty of flexibility to do that. But we’re not going to chase price just to say, hey, we did something.

Does that make sense anymore? More than two, I am quite proud.

Paul McGinnis from Shore Capital. Just a question around distribution policy, obviously in what’s been a very strong year because the policy was implemented in terms of paying out exactly the level of the management fee EPS rather than at least that level, it meant that dividend was quite substantially down year-on-year.

I’m just wondering that given the buyback was announced before the ultimate performance fee outcome was known therefore you have ended up probably in an even better position. Whether any consideration might be given to sort of tweaking that policy from – I mean, it seems that the words at least don’t seem to ever actually come into the equation – as to whether it could actually be made more progressive and therefore open Man up to – I mean, part of the reason why I say income investors might not consider Man is because of their lack of predictability in that dividend by introducing it in a different way, it might open it up to another class of investors?

So we obviously consider the appropriate dividend policy, we consider that regularly. We’ve always concluded that the existing policy is appropriate for this business at this point in time and that the significant majority of shareholders agree, although clearly there’s people that have different opinions, dividend policy and buyback returns have strong minority opinions at both end of the spectrum.

The underlying idea of, are we committed to returning capital through either buybacks or dividends, if we don’t have a better thought to reinvest it, I think and I think the numbers demonstrate we are at the unusually committed end of businesses, both in terms of what we can generate and what we’ve returned. But we’ve always concluded that the existing form is the right one for us as a business and the plurality of shareholders.

But it is a regular conversation and we understand that there’s a particular group in the U.K. that might have a preference for a different form.

Yes. And I think look, just to reiterate what we have always said, we are not going to sit on capital just for the hell of it forever, right?

It’s – if we don’t have a good use for the financial flexibility, then we will return capital to shareholders, it feels like quite a good week to have some financial flexibility, but it’s only a week.

It’s Haley Tam from Credit Suisse. Two questions.

First one, please forgive me given the current market conditions I hope I am okay to ask this. I wouldn’t normally ask about performance of your funds over the last week.

But could you maybe give us some idea of how perhaps your absolute return and total return strategies have done in the current environment? It would be good to know.

And then the second question – I’ve now completely forgotten what that was because I got too embarrassed, hang on?

Okay. Let me try and answer the first while you think about it.

Well, getting daggers from the team on the front row on the left. So, look, the good thing for looking at us as a firm is that there are lot of strategies which have daily reporting funds in the absolute return and total return space.

So you can see quite a lot of information with the Bloomberg screen. What that will broadly tell you when you do your own research, not because I’m telling you the number, is that coming into or put – at Friday evening of last week, there was a remarkable amount of green across everything.

There was some very positive numbers across basically everything. And it would tell you that this week has been tough in almost anything you want to do in markets.

And so the different colors on things have changed. The reality, again, looking at available public information is that on a year-to-date basis, it’s all – if you don’t spend time looking at daily returns or weekly returns and you just looked at the year-to-date returns, you sort of go on okay, whatever, if that makes sense.

Is that alright? Sorry.

And the second question was just very quick. I think I heard you say at end, Luke, that when you’re looking at the third possible route for excess capital, so M&A, you mentioned if you’re looking at things that would benefit from growth in economies and markets, for example, long-only, I just want to make sure I didn’t mishear that?

Sorry, no, I was saying if you look at – so we will look at anything which is – meets the criteria of being and this is whether it’s starting something new internally, whether it’s hiring a team, whether it’s looking at buying a business. First is, we have to believe it as a repeatable source of value-add for the clients.

Second, it has to be a cultural fit. Third is, we don’t want two of the same thing.

When I look at our overall product offering, we have today, as you could see, we have a bunch of our assets are in essentially long-only equities, both discretionary and quant, that benefit from growth markets in some form or another. Not necessary grow stocks, but growing economies, growing market.

We obviously have a big market neutral and technical CTA business, both of which do well when things change and go somewhere. We don’t have a particularly big footprint in income type of things.

So you could think of it as credit related things, income related things, things that make money if markets don’t really go anywhere. And so it will be nice, that’s part of the – it will be nice if we would have been better for our flows last year if we had had more credit products that were high quality performing and have been around for long enough that you can get the big flows into them.

So what I was talking about is, as a natural thing of focus over time is to increase the number of things we have in that, I’ll call it income e-space, but it’s a sort of going when worlds go sideways as opposed to up or down a lot. But that is not about acquisitions, that’s about – it could be through developing new things, it can be internal, it can be discretionary or quant, it can be through hiring teams and it can be through, yes, if we saw the right opportunity through an acquisition if that makes sense.

Sorry, it was not specific about acquisitions at all.

Just a quick follow-up, since you disclosed core management fee number now, which is equal roughly to your management fee, could you indicate what proportion of your revenues come from non-core management fee revenues and the fact that it’s equal in terms of PBT, does that mean when those revenues eventually fade, they’ll cost that fade with it?

So they basically have all gone now. So if you look in the past, there was a big gap between the adjusted PBT and the core.

This year is essentially the completion of that transition. So that jewels are basically gone.

There’s $40 million of guaranteed product at year-end, so it’s rounding to 0 on all of these. Yes, it’s rounding to 0 here and

$40 million left out of what was a peak, something like $40 billion. So it’s¦

Yes. And then the other key PIP was the associating company we obviously sold, the filler, whatever it is now, about 18 months ago.

So that’s – that also has gone. So the 2 are essentially converged today.

So it’s more about looking backwards question because today we are – I mean, today core is the firm. But looking back in the past, it really wasn’t and so sort of associated with what’s left.

Actually there were never very many cost association with those income. There just were a lot of nice income.

So, thank you very much, everybody. Good luck out there.