Good morning to everyone, welcome to Allfunds' first half results presentation. Thank you for joining us today in our very first webcast of financial results, following our IPO. Before we begin, I would like to remind you that our earnings press release, the results presentation, and the supplemental Excel information can be found on the IR section of our website. This call is being broadcasted live, and a replay will be available on our website, too. Joining me on today's presentation are Juan Alcaraz, our Chief Executive Officer, and Amaury Dauge, our CFO. Juan and Amaury will provide a company update and an overview of the H1 2021 financial results. After our prepared remarks, we will open the call to questions. I will ask you to please stick to one question, plus a follow-up. If you have any additional queries, you may go into the queue afterwards.
With that, I will hand over to Juan.
Thank you, Silvia. Thank you very much. Good morning to everyone. I'm really glad to be here with you today and be able to, with Amaury and the team, to walk you through our first half results, which I believe are pretty strong. Okay, let's jump into first slide, the 2021 takeaways, please. Okay, during the IPO roadshow, we talked about Allfunds as a growth company. I think that four months after our IPO, what you can see today and what you are going to be able to see during the whole presentation are even stronger trends, results, and financial performance. When we talk about assets under our administration, you see that we had a growth of 16.4% with an 11.5% growth of organic flows, which means existing clients and migrations, new clients, thanks to a strong commercial activity and really strong secular tailwinds.
When we talk about revenues, very strong revenues, upside 40% year-on-year, up to EUR 247 million of revenues first half of the year. This brings us to also a fantastic and record-adjusted EBITDA of EUR 181 million, with a 73% margin. A second important takeaway for me is that we keep on focused on our strategic pillars, the five strategic pillars that you can see on the right of the presentation. Subscription revenues, keep on diversifying our revenue stream, what we call the fund house harmonization program. Keep on implementing the new Allfunds fee across all the different fund houses that work with us. All the new business strategies like blockchain, digital sub-advisory. The fourth pillar is our migration, to keep on focusing on bringing new clients and gaining markets that are across the world.
Finally, the fifth pillar is working on the BNP transformational integration. It's a critical project for the company. The third main takeaway is regarding the customer proposition. We kept on investing in technology, innovation, people, and as you will see later in the presentation, we have launched a number of new products, new services, and new strategic partnerships that we have announced during H1. Finally, the famous flywheel effect. More fund houses, more clients, helps Allfunds to gain scale. Also, H1 has been a record period of onboarding new fund houses, onboarding distributors, something very important, not just coming from a couple of countries, but coming from 22 different countries. Also a record number of migrations. In fact, in this first half of the year, we have migrated more assets, okay, than the three previous years altogether.
Again, comparing first half of the three previous years. Record also on migrations. These are the main takeaways of today's presentation. Now I'm going to move pretty quick, okay. I will try to cover all the slides. Please, next slide. I think I have already touched many of these numbers. Scale, very important, EUR 1.348 billion as of end of June. This is the 16.4% growth that I mentioned before. Let's translate this growth, the 16.4%, into billions. We're talking about EUR 189 billion of growth. Which, just to give you some color and to contextualize, if this is a lot or not, just bear in mind that it took Allfunds 15 years, okay. From 2000, when we created the company, up to 2015, to reach the EUR 200 billion mark. In one semester, we have gathered the same.
EUR 247 million of revenues, which represents 40% year-on-year pro forma and 81% of growth. 81% of growth, compared to H1 2020 results. Net flows, I have already mentioned, 11.5%, which represents EUR 85 billion. This is excluding market appreciation. Regarding profitability, I already mentioned it, EUR 181 million, which, compared to H1 of last year, represents a 99% growth. Okay? When we see this number pro forma, so including all the correspondent bank, the business coming from BNP Paribas, the figure, the growth is 46%. 73% EBITDA margin, we come from 70%, more or less, end of last year. I think that all the metrics, all the financial KPIs, are really strong. In a minute, Amaury will touch these KPIs and some others. Just let me go very quick to what makes Allfunds special. Next slide, please. Well, our unique four selling points.
Scale, we are the largest B2B platform in the world. Glocal, we like to work in this combination of being close to our clients, 15 offices across the world. At the same time, having the support of the global framework. The one-stop solution, our integral solution, unique in the market. Finally, this fee-free model for distributors, which is still also unique in the market. These unique four selling points, combined with our historical track record, more than 20 years serving our clients. Founder-led business, I think is important. The top management, I think apart from my friend, Amaury, has been with me, working in this company, and therefore they are responsible of all these KPIs, all these metrics, all these numbers for the last almost 20 years. A proven global expansion through organic growth, and more recently through acquisitions.
This combination of these unique selling points plus this historical track record makes Allfunds to be a special company, without any doubt. Next, please. Very quick. Just two comments regarding our one-stop shop integral solution. From fund trading, custody, and execution, we do data and analytics, digital solutions, investment solutions, all under the bundle of our digital ecosystem called Connect. More recently, last year, we launched our Allfunds Blockchain initiative. We have a company called Allfunds Blockchain that is also bringing the new and disruptive technology to the fund industry market. Next slide, please. I mentioned a minute ago, Connect. What is Connect? It's the new digital way that we have to communicate, to interact with our clients. We launched this new digital ecosystem in 2019. Previous to 2019, all our relationships were through files.
We were not a digital company. Since then, since we have Connect, I think we have enhanced the relationship of Allfunds with both distributors and fund houses in a much more efficient way. These are the famous five components of our Connect digital ecosystem, fund information, data analytics, all type of digital solutions, the digital investment center, and finally, the digital, what we call online trading execution system. Next, as I said at the beginning, when we went and when we talked during the IPO roadshow, we talked about growth. Allfunds is a growth company. Four months later, what I can tell you is that the growth is even bigger than during that roadshow. I see these secular market growth trends increasing. The fund industry in Europe, first half of the year had record numbers.
We see that this platform outsourcing, open architecture penetration is still there. What we see, and you see, is that everybody now talks about investments. It's not so much about savings, so cash accounts, bank deposits, but real investments. The second pillar of our building blocks of growth are the continued share gain. This is what I think we have been doing for the last 22 years. The flywheel network effect. Keep on growing, keep on bringing clients, keep on onboarding fund houses, keep on making the cake bigger and bigger. The strategic growth initiatives is also an important lever of growth through Connect, sub-advisory, and Blockchain. Finally, the strategic M&A. Which, what I can tell you without disclosing, of course, any deal is that we are working in the two M&A strategies that we have. The platform M&A strategy.
Seeing if there are opportunities around the world to incorporate B2B platforms to Allfunds, local champions, okay? The second strategy is what we call product M&A, which is all about bringing to Allfunds or enhancing Allfunds' value proposition with bolt-on acquisitions. If we move to the next slide, very quick commercial update. When we talk about regional updates, I think all the countries are performing extraordinarily well. I think, especially, Spain and Italy, booming. Also, in the Nordics, very powerful pipeline since we bought NFM a couple of years ago. The model is working extraordinarily well in the Nordics. I also think a great job in the U.K., number one purely B2B platform with EUR 75 billion. Asia, in Asia, we got the approval from the Board, three days ago.
I think it's not in the presentation, but what is, because it happened two days ago, the approval to open in Shanghai, which means that we will have three offices, okay, in Asia. Our Singapore office, Hong Kong office, and now our Shanghai office. As you can imagine, our commitment in the region is huge. 47 new distributors, as I mentioned before, in 22 different countries, which means that the business model works, but it works all around the world. This is extraordinary for it. Migrations, EUR 34 billion, as I mentioned before, record migrations, in the first half of the year. As I said before, when you sum 2018, 2019, and 2020 migrations first half of the year, we don't even reach this EUR 34 billion mark. When we see fund houses, also record number in fund houses onboarded, more than 100.
I believe that this year is also going to be a record number because remember that last year, I think we had around 185 new fund houses onboarded and, first half of the year, we are already 100. In Connect, revenues, plus 42% revenues, okay, and as you see there, 35% increase in year-on-year new contracts. It's also performing pretty well. We are really pretty happy with our subscription revenues. Which as you know, are pretty new. We started to diversify this, or to bring these new revenues to the platform in 2019. Just a couple of years ago when we launched Connect. Finally, this is one of the hottest questions during the IPO presentation, which was, okay, and what about the BNP Paribas opportunity? We thought this famous client migration and conversion. Converting those hundreds of distributors to our global distribution agreements.
Well, during the IPO, we did not have any number to give you. The good news is that now, we have some numbers, and I think they are pretty promising numbers. As you can see here, we have converted 20 new clients that accounts for EUR 20 billion, okay? We are in advanced negotiations, as you see there with another 15 clients that if we finalize these agreements in the coming weeks, months, we will add to the EUR 20 billion another EUR 38 billion. Next. Well, I think I have covered- next. Thank you. I think I have covered almost all these points. Powerful flywheel effect. Fund houses, record number of fund houses, record number of distributors, exceptional growth in assets. The three levers of growth. Remember that how we feed Allfunds, when we talk about AUMs, assets, we always see it in three, with three levers.
One is organic growth, existing clients buying, EUR 51 billion. Migrations, new clients that join the platform, EUR 34 billion. Market appreciation, EUR 49 billion. This accounts for EUR 134 billion of growth, and that if you include on top of this the EUR 55 billion that comes from what we call BNP Paribas, other businesses, other flows, is what it take us to the EUR 189 billion and the EUR 16.4 billion growth. How is the BNP Paribas integration going? I think pretty good. We expect to finalize all the AUM migration for Q1 of next year. We also expect, although it's very challenging to migrate all the IT system, the Flask system to host, to Allfunds host infrastructure also for Q1 2022. Six months.
As you can imagine, we are going to do all our best to keep on converting clients to our distribution agreements with fund houses throughout the whole 2022. This is a project that takes a lot of time, as you can imagine, because we have to visit client by client. Next please. I think I have already covered this. As you can see, again, record organic flows in first half of the year. Here you can see what the company did. In first half of 2018, 4% growth. H1 2019, not even 1%. Last year, 3.7%. This year, 11.5%. I think that the unbelievable growth of first semester is there. Before we enter into the financial update by our CFO, just let me talk very quick about some initiatives now that we have launched, because this is extraordinarily important.
We need to help our distributors, or we try to help our clients with bringing them new ideas. It's not just all about trying to solve the pain points that our clients have. It's also trying to bring new solutions and to anticipate our clients' needs. That's why we have closed this, I think, pretty extraordinary and unique agreement with iCapital . Now our clients, I think we will start in October, our clients will be able to buy all type of private market products, so private equity funds, private debt, infrastructure, real estate, through Connect and through Allfunds. Okay. That's basically why we have closed this deal with iCapital, again, trying to anticipate the need of our clients. We recently also closed this strategic agreement with Interactive Brokers in the U.S. Why.
Well, we have an interest, a special interest, as I mentioned during the IPO roadshow, in two countries where we need to grow, the U.S. and China. I think I have already mentioned our strategy in China, becoming local in China. In the U.S., we are already local, just for offshore business. Again, I hope that you will see news in the coming months regarding our U.S. business, because we have a lot of focus on this market. Finally, Blockchain. Okay, here you can see two initiatives that we launched just in the first half of the year, the sandbox with the Spanish regulator, and FAST, which is supplying our innovative technology to deliver efficiencies in investment fund transfers.
What I really like also of this FAST new product is that it is going to be the first initiative in which Allfunds Blockchain is going to monetize our technology. We will monetize our technology. It is not just all about new technology, disruptive technology, but it is also about making money with blockchain. I think that with this, I am going to hand over to Amaury Dauge. Please, Amaury Dauge.
Yeah.
Thank you very much.
Thank you, Juan. Good morning, everyone. We've seen, as Juan has said, a very strong set of results in the first six months. In this section, I will run you through the key financial figures and explain the main underlying drivers of this solid performance. We will begin with a zoom on our AUA. We'll then move to our financials. Before doing that, let's go to slide 16 and take a look at a couple of key metrics that you've already seen. I'm not going to go through them again. I'm going to try to move fast. I think it's fair to say that the performance has been highlighted in AUA, of course, translating into revenues, profitability, and of course, cash flow, as we will see later. Moving to the next slide, please.
AUA is a key performance indicator of our business, and the team is particularly proud of the amount and, more importantly, high-quality growth we have achieved this semester. Let me explain this in three points. First, we have grown by EUR 189 billion of AUA, or 16.4% since December 2020. This is against the actual AUA as of the end of last year and not the pro forma AUA, which included assets yet to be transferred. Second, growth is evenly split, as Juan said, across all of our three drivers. 4.4% came from flows from existing clients, 3% from migrations, and 4.3% from market performance. If we look at Allfunds' organic business, our net flows in H1 were EUR 85 billion. That represents an overall 18.1% growth and net flows growth of 11.5% over the EUR 746 billion of AUA, again, excluding the BNPP portfolio.
The BNPP portfolio has also performed well this semester with EUR 55 billion of flows. From this EUR 55 billion, EUR 42 billion were net transfers into Allfunds platform, and EUR 13 billion corresponded to an increase due to the flows and market performance. Let's look at the group's continued diversification. Our AUA continues to diversify in all verticals, client type, asset class, and geography, allowing us to withstand market volatility more comfortably. Looking at client types, private banks, asset managers, and banks represent around 20% of AUA each, with the remaining being custodians, insurers, and others. From an asset class perspective, our mix is still roughly 1/3 equity, 1/3 fixed income, and 1/3 mix of MM, multi-asset, and alternatives.
We're also well geographically diversified, in particular across Europe, but the rest of the world has also slightly increased since the beginning of the year, as you can see on the right-hand side. Following the acquisition of the activities of BNPP, France and Benelux now represent about 38% of the group AUA. Moving to slide 19 and focusing on the top line, our net revenues totaled EUR 247 million in H1, representing a year-on-year growth of 40% on a pro forma basis. Out of this, EUR 238 million were platform revenues and EUR 9 million subscription-based revenues. Therefore, platform and subscription-based revenues contributed 96% and 4% of total net revenues respectively. In H1, platform revenues year-on-year growth was about 40%, and this, again, was mainly driven by three factors. The first one is higher volumes of AUA.
Positive dynamics from the fund house harmonization program, as mentioned by Juan, that was initiated in 2020. We're going to discuss revenue margin dynamics in more detail in the following slide. Lastly, an increase in transaction revenues, given higher volumes of transaction in this period. Looking at subscription-based revenues, they also increased by 40% year-on-year, following an improved penetration from fund houses and distributors. There is, as you well know, still a significant potential to expand the current penetration. Fund houses, for instance, which currently generate 62% of subscription revenues, has seen only 24% of penetration rate versus 93% for distributors. Both have a strong potential for upselling. Let's now focus on the revenue margin evolution on slide 20. Thank you.
Slide 20 is showing you the platform aggregated margin that is looking at the ratio between average annualized revenues and average AUA over the period. Platform margins stood at 3.8 basis point versus 3.3 basis points in December of last year. The increase was mainly driven by a stronger contribution from Allfunds portfolio, excluding BNPP, which has a higher margin than BNPP operations. During H1, the contributions of Allfunds standalone portfolio has been 64% versus 57% during 2020, as you can see in the peak bubble. The second, and also very important driver for the positive margin evolution, is the positive individual evolution of both portfolios, which is another highlight of the semester. The margin of Allfunds standalone increased from 5.4 basis points to 5.5 basis points due to several factors.
High amount of new clients onboarded, usually at a lower margin, which is offset by higher transaction-related revenues, and our ongoing effort and successful implementation of contract harmonization. Three, a slowing shift to clean share classes. The BNP platform margin has also performed positively at 0.6 basis points versus 0.5 basis points in December 2020. The slightest increase is driven by a good progress on margin initiatives in the BNPP operations. Moving to next slide into cost, we can see that total adjusted expenses increased by 24% year-on-year on a pro forma basis. This is mainly driven by an adjustment of perimeter, as expenses are now reflecting BNPP support functions as well as the Paris office. In the period, we've also onboarded 43 new employees, a 5% increase in headcount, taking our total number of employees to 908.
Staff cost also includes a higher bonus accrual in line with year-to-date performance and some one-off items, such as the end of the deferral of bonuses for some employees. Finally, with regard to bulk of BNP integration, this is ongoing and in line with our plan. The synergy plan should allow for further savings and headcount reductions going forward. Moving to the next slide. EBITDA was EUR 181 million in H1 versus EUR 124 million for the same period last year, representing a 46% year-on-year growth. The EBITDA margin stood at 73% for the semester versus 70% last year. The positive Jaws effect is a result of the strong AUA performance in H1, translating into higher level of revenues, while cost increased at a lower rate despite the level of activity due to the scalability of our platform.
Next slide is showing you the exceptional items, which stood at EUR 77 million for the period. In line with our guidance, IPO cost stood around EUR 20 million and EUR 21 million, and TSAs from Credit Suisse and BNPP acquisitions stood at around EUR 30 million. Other one-offs include sign-on bonuses paid by pre-IPO shareholders to some employees, and these are non-cash items. Most of the other one-offs affecting adjusted net incomes are the PPA amortization charges of EUR 69 million, which increased following the acquisition of the BNPP business. From a capital expenditure perspective, they stood at EUR 10.4 million in H1 versus EUR 8.5 million last year, out of which EUR 10 million were maintenance CapEx. Which means that the maintenance CapEx over net revenue ratio is about 4.1%, which is in line with the figure we had last year.
Finally, we see on the next slide, thank you, that the free cash flow for the period was EUR 114 million from an adjusted EBITDA of EUR 181 million, proving the strong cash conversion of the business on a normalized basis. Looking at now, quickly moving into outlook and financial guidance in slide 28. Thanks. We have included a reminder here on this slide of the midterm and near-term financial guidance we had presented at the IPO. The performance we've seen in H1 gives us strong comfort to reaffirm this longer-term guidance, and we believe it is the best proxy to model the performance of our business in the long term. Special mention, though, to some parameters in which we've outperformed this longer-term guidance in the first half of the year. The first one is platform margin.
As already discussed, the 3.8basis points platform margin is the result of the solid growth, combined with a positive mix effect and the action undertaken on harmonization. For the rest of the year, we expect the overall platform margin to stand between 3.3 and 3.8 basis points, depending, of course, on the level and type of market activity in the second half. The second one that you can see on the table, which is a bit different from the guidance, is the effective tax rate, which sits on the top of the range of the guidance we provided. This is mainly the result, again, of the strong performance of H1 and country mix.
It's worth noting that this effective tax rate excludes the optimization that we've carried out recently, which needs further evaluation, which we will share with you in due course, most probably when we present our full-year numbers. From a tax perspective, it's important to note that the effective tax rate going forward would probably sit at the lower end of medium-term guidance, with potentially some further upside to that. Thanks for your attention. With that, let's now open for Q&A.
Thank you, Juan. Thank you, Amaury.
Of course. Ladies and gentlemen, if you would like to ask a question, please press star followed by one on your telephone keypad. If you choose to withdraw your question, please press star followed by two. When preparing to ask your question, please ensure that your phone is unmuted locally. Our first question today comes from Antonin Baudry of HSBC. Antonin, please go ahead. Your line is open.
Yes. Thank you very much, and good morning. Antonin Baudry from HSBC. Two questions, if I may. The first one is on your geographical expansion. Could you give us more color about your expansion in Asia on the opportunity you have four months after your IPO? I saw it was a strong contributor in H1. What should we expect in the future for Asia? My second question is about M&A strategy. Can you remind us the strategy of the company in terms of M&A, and if you have some acquisitions in the pipe currently? Thank you.
Absolutely. Thank you. Thanks. Thank you very much. Regarding Asia, there are two main countries in where locations. One is Singapore and Hong Kong. Hong Kong is China. Okay? In where open architecture, the business model is the traditional open architecture business model of Allfunds. Insurance companies, private banks, wanting to access plain vanilla, open architecture. Again, Hong Kong and Singapore for us is, in some ways, more of the same. Is promoting all our added-value services and our billing and execution platform to these type of entities. In the case of our near future Shanghai initiative, that is different, okay? As you know, Chinese institutions today, they have a limited access to offshore, open architecture. We will definitely focus on strengthening our institutional relationships with the main Chinese financial institutions.
We currently have 16 agreements with Chinese institutions, but for their offshore businesses or offshore units. Understanding by offshore, Hong Kong and Singapore, so outside China. It is very important for the Chinese market to be local, to see the commitment for funds for that country. What we are really going to do in mainland China is to focus on our added-value services, so basically investment services and digital services. Okay? Again, they have a limited access on the execution and dealing in third-party funds, offshore third-party funds. However, we see a fantastic opportunity to serve these institutions with our Connect value proposition. This is regarding Asia. Again, Singapore is core. We are there since, I think, 2017. Hong Kong, core. Now the new opportunities in mainland China. I think with this, we have covered the Asian question.
Of course, we keep on trying to onboard the top distributors in other countries, like in the region, like Thailand and Indonesia or the Philippines. Again, our main and core strategy is in these three locations that I have mentioned before. Regarding M&A, I think I already mentioned it. We see M&A as
As two different types of strategy. One is to keep on increasing our scale. Identifying local champions, in Europe, but it could also be in Asia, that could contribute with assets, with business, with clients, and could help Allfunds to penetrate in a new market. Okay. We are always going to be very active with this strategy. Is what we did with NFM, for instance, in the Nordics, or what we did with InvestLab in Switzerland. Yes, there are opportunities, and we are on top of these opportunities. The other strategy is completely different. Is what we call product M&A strategy, which is more about identifying mid-size or in some cases not mid-size, but even big fintechs companies, wealth tech companies, that could enhance our Connect value proposition. Okay. As I mentioned during the roadshow, we have two strategies.
One is to partner with these entities, through the Open Connect project, remember? Bringing third-party vendors to connect. We do not necessarily need to do everything in-house. Okay? The other strategy is not just to partner, but to acquire that company. Yes, we are currently analyzing around five deals on the bolt-on acquisition, and fintech space. Thank you.
Thank you. If I may, a quick follow-up on your platform margin. I see the guidance for H2, but should we assume that this guidance for H2 2021 can be a new guidance for 2022, 2023 on some years? Thank you.
Yes. Hi, this is Amaury again. No. The idea was to try to, again, to show you where to put things in context of where we stood for the first semester of the year, and to try to guide you a bit for the second half, right? To make sure that people kept in mind the relationship between the margin, and the mix, the growth of the activity, and so on, right? We feel that what I was trying to say, and hopefully it's clear, is that, we're very happy with the results of H1. We've seen some very strong growth. All the three levers have grown exceptionally well, and which led also to a margin that has been very strong, right? Hopefully, it's clear to explain how the 3.8 basis points move compares with the 3.3 basis points at the end of last year.
We think that we're not coming back on what we were saying and, if you were there at the IPO, you remember probably that we were explaining that we found that the margin would stabilize and potentially increase a little bit. That's what we've seen here. We think that this is still the case, but we're not going to be talking about. This is not the moment and the place to start talking about near-term and mid-term guidance update. We'll do that at a later stage. For the moment, we are reconfirming our guidance on all the lines. On this one, providing a bit of more color of what will happen in the second half.
Thank you very much. Very clear.
Thank you.
Thank you. Our next question comes from Andrew Coombs of Citi. Andrew, please go ahead. Your line is open.
Good morning. I'll have a couple as well, please, if possible. Firstly, just a repeat, I guess, to some extent, the previous question. When you look at the improvement, in the platform revenue margin, as you said, you provided very specific guidance on the second half between 3.3-3.8 basis points. When you dig into the improvement from 3.3- 3.8 basis points, you provided a list of reasons. You talked about the results of the harmonization program, the transaction revenues, we can obviously calculate for ourselves. You've also talked about some of the BNP other portfolio platform margin improvements. I'd be intrigued if you could split out the 0.5 basis points improvement between some of those items that you flagged. Is there any way you can provide for the quantification of each of those drivers? Was one driver much bigger than the other? That would be very useful.
Then the second question, just on Interactive Brokers, in the U.S. and Canada, can you just provide a bit of detail on how the economics are going to work for that? Thank you.
You want to start with the margin, Amaury?
Let start with the margin. Look, this is what you see on slide 20 of our presentation. You've got the main blocks of which contributed to this evolution. It's very, very hard and in fact, it's not possible, not that we don't want to share it, but to attribute some clear points between those various impacts because, of course, they accumulate, right. For instance, migration can be done with different types of asset classes, flows as well.
It's very hard to say, okay, this is what's coming from asset class versus migration and so on, because they will be cumulative to some extent. What I can say, though, is, again, as we've described, the biggest contributor here of the margin evolution, of course, is the fact that the Allfunds organic, if you go back to slide 20, which accounted for 57% as of end of last year and now 64%, and given that it's coming with a higher margin, of course is going to drive the overall platform margin, right. Don't forget that, and this is what I was trying also to make clear, the fee structure and the way the yield management of Allfunds is quite complex, right. Of course, it's not like we have one fee covering everything.
This is more of a theoretical margin to help you see how the business is evolving and what are the main angles. I would say that the main drivers, if you want to, is the one I've just mentioned, the fact that transaction revenues or transaction-related revenues stood quite high during the period, and the impact of harmonization. The offset of this was additional migration, which came sometimes from countries where the average margin is a bit lower. Clean share classes evolution, which as we said during the IPO, moves up and down, but has kind of stabilized around the level that we were talking about already a couple of months ago.
Probably, Amaury, just to add the product mix.
Yeah.
Very favorable product mix. Bearing in mind you know how bullish is the market, obviously this means that our clients have appetite for equity products, and equity products have higher management fees, are more expensive, and therefore, our margin is higher. Very quick, regarding Interactive Brokers, this is an agreement with a fantastic distributor client in the U.S. Always remember that we do not do any onshore U.S. business. This is all about offshore. Okay? Our first goal in the U.S., now that we are local, is to become number one provider of offshore funds to U.S. entities, and second, to explore how can we become an onshore provider. The same as with China, as I mentioned before.
Is there a revenue-sharing agreement between yourself and Interactive Brokers?
Revenue-sharing agreement is no. We have a revenue-sharing agreement with iCapital, but with Interactive Brokers, we have a normal revenue agreement.
Okay. Thank you very much.
You're welcome.
Thank you. Our next question comes from Greg Simpson of Exane BNP Paribas. Greg, please go ahead. Your line is open.
Hi. Good morning. Thank you for taking my questions. The first one is on the BNP business slide. Slide 11 shows a EUR 20 billion converted. It seems like a EUR 38 billion near-term pipeline. That's about 12% of the original book size. Is there any sense of how far this can go in terms of conversions, given the work you've done since closing the deal? If the revenue margin you're capturing on these converted clients, is that comparable to the 3.5 basis points you show for Allfunds organic? That's my first question. Thanks.
I'm going to try to answer the first part, because the second part of your question, we were not able to hear you, okay? We had some problems.
It's revenue margin-
Of this business.
...both-
Of this business.
...is comparable with the one that
Okay. It was me, it was not.
No, it was hard, but
Okay. I will answer the first part, and I will let Amaury to cover the second part. Well, I think we were, if you remember, during the IPO roadshow and all the meetings, we were extraordinarily conservative, extraordinarily cautious with this client conversion. Why? As I said before, we have to go client by client, okay? Knocking at the door and trying to convince that client to join our distribution agreements with the fund houses, and then make that client that today is just trading and execution, full service, Allfunds client. Unfortunately, and I said that four months ago, we are not able to give you any guidance. What we will do, and of course as you can imagine, for us, it's very, very important, what I can guarantee you is that we have a specific team working on this conversion program, this conversion project.
I'm really glad and happy with what we have achieved in the first couple of months, this EUR 20 billion. I cannot, unfortunately, give you any guidance if this is going to move to EUR 50 billion or to EUR 100 billion. We have converted EUR 20 billion, and we have a very good pipeline, almost done, of another EUR 40 billion. That's all I can say really at this point.
Maybe to add on what Juan was saying, this is a point that was mentioned a couple of times during IPO. Now that we have a semester under our belt with numbers to show it, I think it's important to again emphasize the fact that Allfunds is not dependent on this from a migration perspective, right? We've had a record semester in terms of migration, without taking this into consideration, right? In the business plan and the numbers we gave, in the guidance and so on, this is what is going to be important, is the level of overall migration of the group. In terms of margin, yes, there's no reason why they should not be in line. Again, with the caveat, of course, that the 3.8 basis points is a blended margin. It includes many different things.
There's no reason why the EUR 20 billion that we just mentioned should perform differently than the rest of the AUA.
Thanks. The follow-up would be on the private markets initiative, which sounds quite interesting in terms of being able to offer distributed access to private markets. Since it's in partnership with iCapital, is this more about enhancing the offering of Allfunds, or is there a specific revenue angle? For example, do distributors need the premium version of Connect to access it, or is it in the standard free version for distributors? Thank you.
Greg, apologies. The line was cut off. Can you please repeat the last part?
Yeah. I hope you can hear me. The private markets initiative with iCapital, is there a kind of a revenue angle for Allfunds? I'm wondering, if you're a distributor, do you need the premium version of Connect to access it, or is it less about revenue than about enhancing the offering more broadly? Thank you.
Well, as always, the main reason why we always bring these new services or these new initiatives is in order to satisfy the needs of our clients. That's the main driver. Okay. We realized that there was appetite across many of our clients in many different countries for accessing, in an efficient way, to private market products. We were not able to satisfy that need. That's basically why we closed this strategic agreement with iCapital. Of course, we will also monetize this agreement, because this part of the business was not going through Allfunds, and therefore, we were not making any money out of assets, volumes that were not trading through Allfunds. Now, thanks to this initiative, we will monetize also these type of assets.
Okay, thank you.
Thank you. Our next question comes from Arnaud Giblat of Exane BNP Paribas. Arnaud, please go ahead. Your line is open.
Yeah, good morning. Thank you. If I could start, going back to the 3.8 basis points margin. Clearly, there seems to be some transitionary elements contributing to the element, I suppose, those are transaction costs. Should we regard a period of high inflow activity as bringing in exceptional levels of transition costs or transaction costs, sorry, and that pushing up the margin finally, and if flows were to normalize, that that would bring the margin back down, and that's probably why you're guiding to 3.3- 3.8 basis points rather than around 3.8 basis points for H2? That'd be my first question. Following up on the same topic, actually, I was wondering if you could comment as well, in terms of how the shift to non-rebate models has impacted the fee margin this half, if at all, and what the outlook is for a continued shift to non-rebate models amongst your clients? Thanks.
Yeah. Arnaud , I'm sorry, but I just missed one word and I think it was the important one, which is-
Transaction revenues, I think.
Okay. I think I've got everything now. Yes, definitely, the transaction revenues sat quite high during the semester. This is because of FX, it is because, as you know, we have some of the LPA or the correspondent bank activity, which sits in the transaction revenues, and we've seen a lot of volume. Where I'm not quite sure, and please follow up if I'm not spot on in the answer, is this is not because of a transition, right? This is, of course, due to the underlying activity, the mix, and so on. There's a bit of cyclicality on some of those metrics in transactions, such as, for instance, FX. We know that FX is the money we make when we obviously trade in another currency and do the conversion for our client.
We've seen in the past that this tends to have some cyclicality elements in it. Apart from that, it's more activity-based, and which is hard to predict, right? That's why we see a bit of movement. Again, yes, the reason why we think that it makes sense to guide towards a margin for the second half, which, again, I would like to reiterate, as we said in the IPO, would be flat or above 3.3 basis points. This has not changed. We think that the current level definitely has been impacted positively by the strong level of activity. The second half may be a bit softer, right? That's on the first part of the question. With regard to the second one, the mix between clean share classes and rebate shares has moved a little bit.
If I'm not mistaken, and Silvia, correct me, it was sitting at 18% at the end of last year, and it's now at around 16%.
Correct.
Again, this is in line with what we had said during IPO. We reiterate the fact that we feel that the evolution, which was driven from a regulatory angle, is done, and then you'll see a bit of change or variability, again, depending on the product mix and what clients are looking for at a very specific moment.
Yeah, from where the clients come.
Yeah.
Sometimes we gather a client with a big book of direct distribution. This is very good margin, and in that case, the percent of our assets in registered classes might increase. The trend is clear. It's keep on reducing.
That's very clear. Thank you.
Thank you. Our next question comes from Philip Middleton of Bank of America. Philip, please go ahead. Your line is open.
Good morning, and thanks for taking my question. I wondered, could you talk a little bit about the level of conversions you achieved in the first half? Your guidance at IPO, I think, was for about EUR 100 million over several years, so you seem to be running well ahead of that. Is this a sustainable level? Do you think this is something that will revert to the mean? What lies behind that really strong number?
We are talking about client conversion and understanding. We understand client conversion just for the book. The FDS book and the correspondent bank book in Italy. Correct me if I'm wrong, Silvia, but I don't think we gave any specific guidance.
No, we did not.
Because-
I think it's probably-
Please.
a mix between migration and conversion, which is onboarding of new clients. Is that the question, or
There can be a confusion, yeah.
Yeah.
Well, there are two different things, as you know. Migrations for us is our plain vanilla and our business as usual. It's what we do. It refers to new clients, new distributors, new banks onboarding the platform, and this is a EUR 34 billion H1 number, which is, yes, it's a record figure, okay, in the history of the company. A different thing is this client conversion, that is the name that we use to explain the conversion to our distribution agreements, okay, that we have with the fund houses of all the FDS and all the BNP Paribas correspondent bank institutional clients, again, to our global distribution agreements with fund houses, which are the EUR 20 billion of 20 clients. That is the figure that we have closed as of 30th of June.
The only guidance that we can give there is the one that we have already given, that we are in advanced negotiations to convert another EUR 40 billion of 15 clients. Apart from that guidance, at this point, as I answered to a previous question, we prefer not to give any other number, because, again, this is not really included in our business plan. It's not really included in any guidance, and we are extraordinarily conservative and cautious with this figure. We prefer to be cautious with this figure.
Yeah. Thank you. That was helpful. It was really the EUR 34 billion I was asking about, and you highlighted how strong and extraordinary this was. Really, I was trying to ask, is this a level you think is sustainable, or do you think there are one-off factors in the half that made that particularly high?
Okay, super. Well, as I mentioned before, we did in six months what we did in three years. First half of 2018, 2019, and 2020. It is exceptional. Absolutely. However, the company is much powerful than in 2018 and 2019. The fact of being bigger, the fact of being a listed company, the fact of having new offices around the world, the fact of having new products, the fact of having Connect, makes the flywheel effect. This scale business of the bigger we are, the more chances and probability we have to gather new clients.
Yeah.
Well, makes at least me to be pretty optimistic with the migrations figures in the future. Okay? It's a record figure. You cannot keep on beating records every semester, I guess.
Okay. Thank you. That's helpful.
Thank you. Our final question today comes from Angeliki Bairaktari from Autonomous Research. Angeliki, please go ahead. Your line is open.
Good morning. Thanks for taking my questions. Just a follow-up on the migrations that we were just discussing. You had released a number of EUR 26 billion in Q1 at the time of the IPO. Based on the EUR 34 billion for H1, and I hope those two numbers are comparable, the Q2 level of migrations has slowed quite a bit. I think, as you mentioned, there is an exceptional element to the Q1 migration flows. I just wanted to ask you, do you have a sense of how the migrations are going to evolve in Q3 and Q4 in H2 of this year, also based on the current pipeline, is the around EUR 8 billion-EUR 10 billion number that you seem to have printed in the second quarter, a better sort of run rate for us to expect?
Just a clarification, are the EUR 20 billion BNP conversions included in the EUR 85 billion net flows for the first half? Thank you.
Okay. The answer to the second question, which is easier, is no, okay? They are not included. Regarding the EUR 34 billion of migrations, yes, of course, at this point, we have a clear pipeline for a second half of the year for migrations.
No, no. Juan, if you don't mind, just to be clear. What you're saying is factually correct. Yes, when you're looking at Q1 versus Q2, Q1 was stronger. You should not read, again, migrations, they come in different shape and forms, right? It's not like we're signing, whatever, EUR 24 billion or EUR 34 billion migration deals of EUR 1 billion each, right? Of course, depending on the client that we migrate, you will see some variability, right? These are not standardized contracts. It depends on the activity of the client. I think it would be a mistake to look at the trend on a quarterly basis. This is way too short. I think you need to look at it a bit with more time, and then it makes sense.
Juan was comparing H1 of this year to last year, and to what we've done in six months compared to the last three years. I think this is probably easier.
to look at it this way. With regards to forward-looking, again, as I've said when we were talking about the guidance, we are reaffirming the near-term and mid-term guidance we gave at the IPO. We've started very strongly, and so, which provide us with a lot of comfort to be able to reaffirm that guidance. We're not going to talk more today about guidance or give you any additional updates.
Sorry. Bear in mind.
[crosstalk], is it to end?
Yeah. For a business like Allfunds, which is similar in some ways to an asset management, in the sense that starting assets are really important. So, it is very important, for the numbers of Allfunds, for the P&L, a very strong H1.
Yeah.
Again, remember, it's all about assets, times basis points. It's very important to start first quarter, specifically first quarter of the year, with very high and powerful assets that helps to navigate throughout the whole year.
Thank you. Could I just add one more question since I am the last one on the line? The partnership that you have announced with iCapital and also Interactive Brokers, is it fair to assume that any incremental revenue that comes from those is already included in your mid-term sort of revenue growth guidance? Or is that something on top that you didn't envisage at the time of the IPO?
Well, I think these are agreements that came. For instance, the iCapital, we closed it Q2, so it was not really a topic that we included in the discussions during the IPO roadshow.
Yeah. This is definitely fueling the continued growth of the company and so on, right? It's a way to expand our offering, to reach out to new clients, to offer new ways of trading to our existing clients and so on. We talked about what we're doing on the Connect side. This is fueling the growth and the potential of the company.
Yeah.
Now.
Specific agreement.
Correct.
No, because was not closed in those days.
Correct. Again, if you're trying to model, we're not giving numbers. We don't expect this in the very short term to have a strong contribution to the P&L, right? Again, it's part of all the efforts we're making, but you should not assume that this is going to drastically change-
No, no.
...revenues number for 2021. Of course, in due course, and that's probably going to be early next year, we will, of course, go back to you guys with a revised guidance, include all of what we've done, and see what's the impact.
Well, thank you very much. Unfortunately, we do not have more time. I know there are plenty of questions that have been unanswered. We will take them from the Investor Relations team. Bear with us in that sense. It has been a pleasure to host you in our very first set of financial results presentation. We wish you well, and see you next quarter for the trading update. Bye-bye.
Thank you very much.