Good morning, everyone, and welcome to Magellan Financial Group Limited's 2024 full year results briefing. I'm Parnal Da Silva, and I work in the Strategy and Investor Relations team at Magellan. Before we commence, I'd first like to acknowledge the traditional owners of the land on which we meet today, the Gadigal people of the Eora Nation, and pay my respects to their elders past, present, and emerging. Turning to today's agenda, presenting first will be our Executive Chairman, Andrew Formica, who will touch on the highlights of the financial year and our key achievements. You'll then hear from Sophia Rahmani, Managing Director of Magellan Asset Management, who will provide an update on our funds management business. Magellan's COO and CFO, Kirsten Morton, will then go through our financials for the year in more detail before handing back to Andrew, who will provide an update on the business.
We'll then open to Q&A. Please note that today's presentation is being recorded, and a replay will be available on Magellan's website. I'll now hand over to Andrew.
Thank you, Parnal. Firstly, can I just apologize with my voice. I've come down with a bit of a cold, and so it's a little challenging, and hopefully, you can hear me. Thank you all for attending Magellan's 2024 results briefing today. I will start today's results presentation with some of the key highlights of the financial year. First and foremost, the 2024 financial year was significant for Magellan in restoring stability to the business for our clients, staff, and shareholders by addressing a number of legacy issues. This started with the successful implementation of transitional leadership arrangements, with Sophia Rahmani commencing as Managing Director of our asset management business in May.
We also resolved the share purchase plan loans for our team, and in July this year, completed the conversion of the Magellan Global Fund Closed Class units into the Open Class units. With these important matters behind us, we've now been able to turn our attention to the future of Magellan and the forward-looking growth strategy and continue our focus on delivering long-term excellence to our clients. Our clients have a choice as to whom they trust to manage and protect their wealth, so we were pleased to see funds under management flows start to stabilize, with outflows falling quarter-on-quarter over the period.
This stabilization of outflows and meaningful inflows resulted in our funds under management at the end of July of AUD 38.4 billion, being higher than our average funds under management for the 2024 financial year, which was at AUD 36.8 billion. This reflects early signs of a turn in our fund under management profile back towards growth, underpinned by recent client wins, especially in the institutional channel, which demonstrates the renewed confidence new and existing clients have in Magellan returning to consistently delivering for clients, and support they have in the progress we have made on this front. In 2024, the business generated over AUD 19 million in performance fees, primarily as a result of strong investment performance in the second half in our global equity strategy, which returned over 15% in the period.
Our focus remains on sustaining strong performance across all of our strategies consistently over the long term. This is critical to our ongoing success, adding value to our clients, which will, in turn, add value to our shareholders. Client engagement within our global equities and infrastructure strategies has also improved, and our Airlie business continues to go from strength to strength, building momentum with both retail and institutional clients. We are also pleased with the continued growth of our associates, with a positive contribution to our net profit after tax and a significant improvement year-on-year. Finally, I will share further details shortly on today's announcement. Magellan has entered into a strategic partnership with Vinva Investment Management, a high-quality, systematic equities investment manager based here in Australia.
This is an important development for the future of our business and highlights the embedded strength and attractiveness of our platform to leading investment firms and teams like Vinva. Vinva can see the benefit of our leading distribution capabilities, which allows them to focus on what they do best, creating value for clients through sustained outperformance. The strategic partnership with Vinva highlights the unique pathways available to Magellan for growth through either investments in stakes through our established associates business or wholly owned opportunities, with both pathways allowing investment firms to access and benefit from our strong operations and extensive global distribution platform. Magellan announced its intention to become a diversified fund manager of choice for clients, and I believe our strategic partnership with Vinva, announced today, demonstrates we can achieve this and diversify the high-quality product offerings we bring to clients in doing so.
Magellan's equity stake in Vinva ensures alignment between the parties and will allow Magellan shareholders to benefit from any valuation uplift of Vinva that may be derived from the success of the distribution agreement. This transaction also underpins the planned investment in Magellan's distribution platform for full year 2025, which I will touch on later. Now, turning to what we have achieved during the financial year across our three pillars: colleagues, clients, and capabilities. Starting with colleagues, during the financial year, we continued our board renewal process and were pleased to welcome Deborah Page and Cathy Kovacs to the board. Non-executive Director Hamish McLennan has also indicated his intention not to stand for re-election at Magellan's 2024 AGM.
I would like to thank Hamish for nearly nine years of dedicated service as a Non-Executive Director of Magellan, including stepping in as Non-Executive Chairman at an important time for the company. At the executive level, we successfully implemented a transitional leadership structure, which comprises myself as Executive Chairman and Sophia Rahmani as Managing Director of our main operating subsidiary and asset management business, Magellan Asset Management, with a view towards Sophia becoming the group CEO within the next six to nine months. Sophia joined us in May and has already had a positive impact across the business, bringing new ideas and perspectives that benefit from her extensive experience in the industry. I'm really pleased with the contributions she's already made, and I'm extremely confident Sophia will succeed and deliver for our clients, staff, and shareholders.
I will continue as Executive Chair for the transitional period, focus on Magellan's diversification strategy, global distribution, and our new remuneration framework, before returning to my previous role as Non-Executive Chair upon Sophie's appointment to CEO. We made important progress on our remuneration framework in full year 2024, having established an equity-based program with both short-term and long-term components, with outcomes based on both qualitative and quantitative measures. This was designed following time spent listening to shareholders, proxy advisors, and our staff, and incorporating feedback on design and structure. There is still work to do, but I believe the work undertaken this year sets a strong foundation for the future in incentivizing, motivating, and retaining our high-quality team and aligning their success to that of our clients and shareholders.
The first step in this process was to resolve the share purchase plan loans held by our staff, which we did through the announcement of additional retention payments in October last year. During the year, we saw the total loan balance of current employee loans reduced by 42%, and this will continue to reduce as the retention payments are made in September this year, before closing out the majority of those loans of current employees by September 2025. Today, within our annual report, we announced details of the update to our new remuneration framework, which includes equity-based incentives for all staff and equity-based long-term incentives for key management personnel and senior management from the 2025 financial year onwards. Finally, from a people perspective, we are highly focused on creating a work environment where our people thrive.
Of course, to do this, we need to listen to and understand the feedback of our people, which we are now doing in a more formal, meaningful way through our regular employee surveys. This allows us to track our progress, but also to compare our results with that of peers. Our engagement score in our most recent staff survey in June 2024 was 55%, a slight increase from the first survey in December last year, but still well below where we would like it to be. Evidently, there is much more we can do for our team, and improving these scores are top of mind for our senior leadership team, who will be accountable for improved engagement scores as a KPI, KPI in our new remuneration framework. I'm confident we'll make meaningful positive progress on this front in full year 2025.
Turning to our clients, the center of all we do as a business, last month we completed the conversion of the Magellan Global Fund Closed Class into the Open Class, which has been received positively among our client base. We've also restored confidence in our client base, which is reflected in the recent funds under management flow trends and an improved sentiment from our client discussions on our global equities and infrastructure strategies. However, there remain challenges with turning this into positive flows in the short term. Our Airlie funds management business, led by Matt Williams and Emma Fisher, has been a key contributor over the last 12 months. Their following the market has continued to grow as a result of sustained investment performance and has led to client wins in both retail and institutional channels.
Over the course of the year, we've also held our investment strategy advisor roadshows across the country. These events drew over a thousand attendees, a strong indicator of the continued value our clients place in our relationships and continued value add. We also launched our new look Magellan website, which went live early in the year and refreshed the feel of our brand and greatly improved user's experience of our website. ESG is also an area of the business where we are making solid progress. Today, alongside our annual report, we published our inaugural Climate Report, aligned to the recommendations of the Task Force on Climate-related Financial Disclosures, an important milestone for the business. The Climate Report, alongside our Corporate Sustainability and Responsibility Report, outline the important work our team is doing on environmental issues, but also across social and governance issues at both the corporate and investment levels.
We were pleased to see these efforts recognized by an improvement in our 2023 Principles for Responsible Investment assessment score, as well as an improvement in our CDP rating as a business. Turning now to our capabilities as a business. As I've mentioned previously, late last year, we established a strategic product group to drive product decisions and our organic growth agenda. This group of senior leaders from across the business has been meeting regularly to analyze, review, and debate elements of our existing product suites, as well as new products that we could consider bringing to our clients. Sophia will take over leadership of the strategic product group and drive its agenda looking forward. Another area of growth that I'm extremely excited about is our U.S. distribution platform, which has considerable scope for growth.
I'll provide more detail on this and plan for the group's broader distribution platform a little later. As I mentioned earlier, and we'll touch on again shortly, through the strategic partnership with Vinva, we have expanded our capabilities to enhance product offerings to our clients. This will be an important limb of our growth in the future. Finally, on costs, we remain disciplined with our expenses, and for the 2024 financial year, delivered fund under management operating expenses of AUD 102.4 million within our previously provided cost guidance range. Looking forward to the 2025 financial year, we've guided to fund management business operating expenses to see a modest increase to AUD 105 million-AUD 110 million, which includes investing in our global distribution platform.
Expected revenue from the strategic partnership with Vinva has allowed us to bring forward planned investment to strengthen our global distribution platform. Bringing forward anticipated future investments to this year will lead to a negligible impact on our earnings per share in full year 2024, 2025, before it's expected to be accretive in future years. We believe bringing forward these planned investments will benefit the success of the Vinva partnership, as well as our existing platform and other strategic partnerships or acquisitions we may enter into over the longer term through funds under management growth and diversification of revenue streams, which will in turn create long-term shareholder value. Kirsten will provide more detail on our cost outlook when she speaks later on. Now, on to our strategic partnership with Vinva Investment Management.
Today's announcement of Magellan's strategic partnership with Vinva is a significant step forward in our strategy to diversify the business through attracting high-quality investment teams to our business, through aligned strategic partnerships that leverage the strong capabilities we already have in our business. This will benefit our partners by allowing them to focus on investing and creating value for their clients by reducing the distraction of growing supporting business functions at a time when they are established and ready for global distribution. Vinva is a great example of the high caliber teams and opportunity we can attract to our platform, thanks to the quality of our brand, our operations, and distribution teams.
Vinva benefits from long-tenured, stable team with a strong culture, employee alignment through their equity ownership, and a long-term track record of delivering alpha for clients, which is very scalable and has growth potential with further upside through performance fees. The team at Vinva is led by Managing Director and CEO, Morry Waked, and they are specialists in systematic equity strategies, and have accumulated knowledge investing in global equity markets for well over 30 years. Their strategies are high quality and insight-driven, investing in the Australian and global markets across the risk spectrum, with their product suite, including both long only and long-short strategies. Vinva's investment process and business is underpinned by significant investment in intellectual property, which they continue to innovate around. Vinva is an independent, majority employee-owned firm and will remain so post our investment.
As can be seen on the slide, performance in Vinva's key strategies is excellent, with strong alpha generation across its Australian equities and global equity strategies. The business has approximately AUD 22 billion in funds under management, with a leading position in Australian systematic equities, managing approximately AUD 17.7 billion in these products, as well as a growing global equities business, which currently manages approximately AUD 4.3 billion of funds under management and has significant runway for future growth. The majority of Vinva's existing funds under management is from Australian-based institutional clients. Partnering with Magellan on distribution will allow Vinva to focus on what they do best, investing for and generating superior return for clients, while growing their client base outside of Australia and adding new investment product for existing and new clients.
We are excited to have been chosen by Vinva to partner with them and given the opportunity to bring Vinva's innovative investment solutions to our clients, who are increasingly demanding greater choice and breadth in their investment options. If we turn to Vinva's investment performance in a little more detail, the slide on the screen here shows Vinva's investment performance over rolling periods since inception of the Australian equity long-short strategies. It is clear that Vinva has an extremely impressive investment performance track record and clear and demonstrable alpha. It also highlights the true benefits and also the pitfalls when looking at active management. Despite demonstrable alpha, when you look over rolling monthly periods, Vinva delivered alpha on 62% of observations. As you look to rolling one-year and rolling three-year periods, this increases, delivering alpha on 72% and 91%, respectively.
So while still good in very short-term time period, the value of active management and the alpha generated come to the fore when you look at longer periods of time, when the noise in performance numbers is reduced. When you look at rolling 5-year and 10-year measurement periods, it increases to 100%, with the average alpha delivered greater than 3%. This consistency of delivering alpha, as well as its quantum, is truly special and is a function of Vinva's insight-driven, active, systematic investment approach, which the team is continually improving and developing. Vinva's long-term track record of delivering our performance to clients is one of the key reasons we've admired their business for a number of years, and with our strategic partnership, which I'll now move on to, we're excited about the opportunity to bring this investment excellence to our clients.
As mentioned, under the strategic partnership with Vinva, Magellan will distribute Vinva's systematic equity products globally and to certain retail and wholesale clients in Australia, excluding Australian institutional clients, with Vinva already well-resourced. Magellan will receive distribution fees for these services, and our businesses will collaborate on new markets and product extensions to maximize the probability of success. As part of the partnership, Magellan has also taken a long-term, 29.5% strategic equity stake in Vinva, paying cash consideration of AUD 138.5 million and aligning Magellan shareholders to Vinva's success. We have acquired our stake from existing shareholders on a pro rata basis across the shareholder base, which means the founder and team at Vinva remain significant equity owners and aligned to the future success of Vinva. Importantly, Magellan is downside protected with a preferred dividend for the first two years.
I will also join the board of directors of Vinva as part of our equity stake and look forward to working alongside the Vinva team in this, their next step of their journey together. Finally, the minority investment will sit within our associates business, which I'll provide more detail on later, meaning we will equity account for Vinva, similar to our other associates, recognizing their share of after-tax profits in our P&L. Our strategic partnership with Vinva represents the coming together of two culturally aligned businesses that are firmly focused on delivering for clients. With the quality of Vinva's investment capabilities, strong research and consultant ratings, and a history of delivering strong investment performance, Magellan now has the opportunity to bring Vinva's innovative, systematic equities product suite to our clients, alongside the high-quality active equity strategies we already have across global equities, infrastructure, and Airlie.
We see significant potential for our highly regarded distribution team to distribute Vinva's products to clients globally and to certain retail and wholesale clients here in Australia, which we see as a key lever of future growth. The growth opportunity for both businesses is substantial, with Vinva having significant capacity across its strategies, making this partnership a truly long-term opportunity. Importantly, our minority investment allows Vinva to retain their independence and protect their unique culture, while providing the support of a long-term strategic investor who is aligned to their success. We envisage this relationship as one based on partnership, alignment, and collaboration, where Magellan can bring not only our distribution capabilities, but also access to Magellan's expertise in product innovation and launching, for example, exchange-traded managed funds, access to seed capital, and future opportunities for Vinva to leverage the operational excellence of Magellan's functions.
From a financial perspective, Vinva is highly profitable, and we expect to see an immediate contribution to Magellan's share of after-tax profits from associates, as well as dividends commencing from the 2025 financial year, including the potential for upside from their high level of performance fees. The board and senior management team at Magellan are really excited about the prospects of this partnership, and we thank the Vinva team for joining us on this journey. I'd now like to welcome and hand over to Sophia Rahmani, who will run through the performance of our funds management business over the last 12 months and provide her observations on Magellan's platform.
Thank you, Andrew, for the warm welcome. It's my absolute pleasure to be speaking with shareholders today and providing an update on our core business. I'll start by walking through the movements in funds under management for the year before diving deeper into each of our investment strategies, their flows, and performance. Starting with fund movements in FY 2024. As we review fund movements for FY 2024, you can see from the slide that the financial year concluded with FUM of AUD 36.6 billion as of 30 June 2024, with a client mix of approximately 53% institutional and 47% retail. The reduction in FUM over the year was driven by net outflows of AUD 5.9 billion and AUD 0.5 billion of distributions, offset by positive investment returns of AUD 3.3 billion. I will delve deeper into the flow trends shortly.
However, it's worth highlighting that the rate of outflows has slowed half on half. The slide also shows FUM at 31 July 2024, which marks a month of elevated retail outflows from the Magellan Global Fund conversion, but pleasingly, also saw significant institutional inflows into our early business, culminating in FUM of AUD 38.4 billion at the end of July. As noted by Andrew, this is higher than our average funds under management for the 2024 financial year of AUD 36.8 billion, reflecting early signs of a turn in our FUM profile back towards growth. Turning now to net flows across our retail and institutional channels. Quarterly retail net outflows continue to improve.
It's important to note that in Q3, FY 2024, retail outflows were partly offset by the exercise of MGF options prior to their expiry, which drove inflows of approximately AUD 0.2 billion. As we've already demonstrated with our July FUM number, we expect slightly elevated retail outflows for the first quarter of the 2025 financial year, as we see the impacts of the Magellan Global Fund conversion, which we'll come back to. Institutional client flows have also trended in the right direction, and it was encouraging to see the fourth quarter of the year deliver AUD 0.6 billion of net inflows, the first positive quarter of net institutional flows in over two years. This was primarily driven by our infrastructure strategy. We're also excited that our Airlie business secured AUD 1.4 billion of institutional inflows in July.
It's pleasing to see the support from institutional clients, both new and existing. Now, diving into each of our strategies in a little more detail, starting with our global equity strategy. Earlier this year, we were pleased to announce that Arvid Streimann would assume the newly created role of Head of Global Equities, taking on responsibility for managing the resources of the global equity team and the, with the objective of delivering outstanding client outcomes. Arvid has been at Magellan for almost a decade, is a portfolio manager of the Magellan Global Fund, and was most recently the head of macro. We continue to invest in this team, ensuring our analyst pool is well-resourced and well-equipped to deliver for our clients.
In terms of net flows, the global equity strategy was where we saw most outflows in FY 2024, with outflows totaling AUD 5.7 billion, AUD 3.2 billion of which came from institutional clients. However, the overall trend is moving in the right direction, as can be seen in the recent improvement in quarterly flows highlighted in the presentation. With respect to the Magellan Global Fund, the conversion of the closed class units into open class units was completed last month. The shift from a closed-end fund to an open-end structure has naturally led to some anticipated outflows as unitholders exercise their ability to redeem their investments at close to the prevailing net asset value.
With the transition to an open-ended structure, the Magellan Global Fund has seen outflows of AUD 0.8 billion in July and a further AUD 0.4 billion to 13 August, for a total of AUD 1.2 billion. With respect to investment performance, over the long term, the Magellan Global Fund has delivered on its goal of 9% net of fees through the cycle, however, has underperformed the benchmark over the medium term. Since the change in portfolio management in February 2022, the fund has shown improved performance in line with its objective and has delivered robust returns in a rising market despite the portfolio's defensive characteristics. Our high conviction and Global Opportunity strategies have also produced robust investment returns, and the diversity in these products will allow us to provide a broader menu of active global equity options for our clients.
With the Global Opportunities strategy coming up to its key 3-year track record in January, we're actively exploring distribution opportunities for each of these strategies as we continue to believe in the effectiveness of our quality-led investment philosophy. As noted by Andrew, strong performance in the six months to 30 June 2024 did crystallize AUD 19 million in performance fees, primarily from our global equity strategies, demonstrating their performance fee potential if we can deliver and sustain strong performance for our clients. Now turning to our infrastructure capability, which is led by our Head of Investments, Gerald Stack, and supported by a high-quality and stable team of portfolio managers and analysts. Flows in our infrastructure strategy have been mixed of late, with retail outflows in recent quarters, offset by some institutional client wins in the 2024 financial year.
While performance has been challenged over the medium term, it's important to recognize that the reasons for our underperformance against the benchmark are well understood in the market. Our approach to infrastructure investing is built on a strict definition of infrastructure, one that requires investments in monopoly-like assets that provide essential services, face reliable demand, and generate predictable cash flows. This approach intentionally differs from broader market definitions of infrastructure to exclude companies whose earnings are exposed to certain significant external risks, such as commodity price movements, competitive pressures, or sovereign risks. This proprietary definition and classification criteria is designed to filter out securities that do not meet our rigorous standards and ultimately ensure a portfolio of high quality, relatively stable assets that are less correlated with other parts of a client's portfolio, such as broader equity markets.
While this disciplined approach aims to achieve strong underlying financial performance over the medium to long term, it can lead to periods where the strategy underperforms common infrastructure indices, especially when sectors outside of our definition benefit from substantial gains. That has been the case in recent years. However, we remain confident that the infrastructure business is well-placed to deliver strong investment returns over the long term. We take confidence from the client conversations we're having, and in particular, the institutional flows that we have seen, which demonstrate that our clients understand the role played by Magellan's infrastructure strategies in their portfolios. Turning now to Australian Equities business, Airlie Funds Management, which is led by Matt Williams and Emma Fisher.
As can be seen on the slide, our Airlie business has enjoyed strong inflows in the 2024 financial year, signaling a strong recovery and forward momentum through the transition period following the leadership changes in the previous year. Airlie has seen consistent monthly retail inflows following strong ratings and key client wins, and our distribution team continues to have positive client conversations across both retail and institutional channels. The Airlie Australian Share Fund has delivered strong performance over the short, medium, and long term, and this has been a key driver of the positive flow outcomes we have been seeing. As mentioned earlier, our Airlie business attracted institutional inflows of AUD 1.4 billion in July 2024, reflecting the market's confidence in the team, their investment approach, and the strong performance they have delivered.
We also see potential for the Airlie Small Companies Fund, which was launched in 2023, managed by portfolio manager, Will Granger, which has delivered over 14% in excess returns over the last 12 months. We are looking to increase our support of this fund through the retail channel in FY 2025. In total, Airlie's fund was AUD 5.4 billion at the end of June and AUD 7.1 billion at the end of July, showing the continued momentum and interest in the team and their capabilities. Before I hand over to Kirsten to run through our financial results for the year, I'd like to comment on the resilience and strength of Magellan's core business as it stands today.
With AUD 38.4 billion in FUM across three asset classes, with a diverse mix of retail and institutional clients globally, Magellan continues to be a prominent fund manager of scale. Across all parts of the business, we have a high-quality team who are collaborative, dedicated, and entrepreneurial. We have a client-first culture and are focused on delivering investment excellence to our clients. I've been extremely impressed with the institutional-grade quality of the platform also, a view which is supported by conversations we are having with our clients. This is characterized by the culture of operational excellence and the efficiency and scalability of the platform. The platform also has depth with our mutual fund platform in the U.S. and our UCITS platform in Europe, and this is all underpinned by a strong risk management framework. And thirdly, to brand strength.
As I spent the first three months meeting with clients, consultants, and other stakeholders, the strength of Magellan's brand has been noteworthy, with significant inbuilt brand equity in Australia and offshore, recognition of our strong investment capabilities, and continued value in the long-standing relationships of our people across the market. It is these characteristics that have made Magellan an attractive partner for a high-quality business such as Vinva. We're excited to be leveraging these strengths of Magellan and adding a fourth set of high-quality investment capabilities, which we can bring to our clients, both in Australia and offshore. We are confident in the benefit that this will bring our shareholders. Thank you, and now over to Kirsten.
Thank you, Sophie, and good afternoon, everyone. I'd first like to take you through Magellan's financial results from the 2024 financial year before going through the group and the funds management business results in a little more detail. Then finally, I will touch on our expense outlook and our funds investment portfolio. Starting with our financial highlights, Magellan's financial results for the year demonstrated resilience and stability. The group's adjusted net profit after tax for the year was AUD 177.9 million, which represented a 2% increase on 2023. While management fees were down for the year, which I'll touch on shortly, the contribution from performance fees was AUD 19.2 million, the highest since 2021, and that supported the group's adjusted revenue results.
We also saw a strong contribution from associates with our share of after-tax profits totaling AUD 11 million, a material increase on the AUD 11.5 million loss of last year. In line with the increase in adjusted net profit, our adjusted diluted earnings per share was also up 3% on 2023 to AUD 0.982 per share. The business maintains a substantial financial strength in the form of our robust balance sheet, which comprises AUD 912.2 million in net tangible assets, and we also have no debt. This profitability, strong operating cash flows, and broader balance sheet strength has allowed us to pay total dividends to shareholders of AUD 0.651 per share for the year.... Turning now to the group's reported earnings.
The group's adjusted revenue for the year ended 30 June 2024 was AUD 345.7 million, and the group's adjusted net profit after tax for the same period was AUD 177.9 million. As I've mentioned, adjusted net profit after tax was up 2%, which was driven by a number of factors, including higher other revenue and income, and higher performance fees, offset by lower management fees. Management and services fees were AUD 257.9 million for the year, down 22% year-on-year, and broadly in line with a 25% decrease in average funds under management over the same period. Performance fees were meaningful at AUD 19.2 million. However, as we always mention, these fees are lumpy, and they have the potential to fluctuate significantly period-to-period.
Other revenue of AUD 68.5 million was up materially on 2023. Now, this revenue typically comprises dividends and distributions we earn on investments in our funds, the realized gains or losses on those investments, foreign exchange movements, interest income, and advisory income of our U.S. business. The biggest contributor to other revenue this year was AUD 38.1 million from the sale of investments in our proprietary fund investments portfolio. As we have said previously, we actively manage investments in the group's portfolio with a view to maximize shareholder value, and as a consequence, sales of investments can vary from period to period. The gain is larger this year compared to past years, and that was derived mainly from the sale of a portion of our holdings in the Magellan Global Fund Open Class.
Now, with regards to our investments in associates, and notwithstanding challenging market conditions, we were very pleased to see our share of the financial result in Barrenjoey and FinClear generated AUD 11 million profit for MFG for the 12 months to 30 June 2024. We continue to view adjusted net profit as providing more meaningful performance information of our business and comparability of results period to period. Just by way of a reminder, adjusted net profit is the group's statutory net profit, excluding certain items. These items are actually shown on the slide and comprise the following adjustments: The first adjustment is a AUD 42.7 million net benefit to the P&L, arising from the acquisition by MFG of the Magellan Global Fund options. Now, that amount comprises a few different items.
AUD 75 million expense for acquiring 750 million MGF options at AUD 0.10 per option, along with some related transaction costs. This was more than fully offset by a AUD 138.3 million reduction of the MGF discount funding liability, which we recognize on the balance sheet, as a result of MFG and some other option holders not exercising the options prior to their expiry. The movement in that liability is explained in more detail in Note 14 of the financial statements. The second adjustment is a non-cash item of AUD 1.4 million, and that relates to the amortization expense on intangibles from the Airlie and Frontier businesses that we acquired in 2018. The next adjustment is AUD 1.7 million, which relates to the non-cash accounting remeasurement of share purchase loans.
Now, as a reminder, while the accounting for these loans remains unchanged, there is P&L volatility due to changes in repayment assumptions and changes in loan terms for departing staff. These changes differ for each employee, and that can make the period-to-period net P&L impact a little less predictable. Considering the increased volatility on the loans, which reduces the comparability of results to period-to-period, we've excluded that non-cash interest income and expense. AUD 3.1 million relates to non-cash employee share option expense, which relates to share options to employees that we issued in April 2022 as part of the staff retention program. We're making that adjustment, as it's a non-cash item. The expense was lower in 2024 compared to 2023, due to the forfeiture of options when staff leave.
The non-cash gain on dilutions and disposals of associates was modest at AUD 0.1 million, and that relates to one of our associates issuing additional shares at a higher price than our issue price. That resulted in a small gain and negligible dilution of our holding percentage. The final adjustment to statutory net profit is AUD 21 million, which relates to unrealized capital gains in the shares and units that we hold in the fund investments portfolio. As we record market movements of those equities directly in the P&L, it's meaningful to remove the unrealized market volatility from our revenue, whether it be a gain or a loss. Please just note that all the adjustments that I've just mentioned are after-tax amounts.
Now, if those adjustments were not made, the group's statutory net profit after tax for the year ended 30 June 2024 was AUD 238.8 million. Diluted earnings per share was AUD 1.318 per share, which is in line with the movement in statutory net profit. Adjusted diluted earnings per share was AUD 0.982 per share, also in line with the increase in adjusted net profit after tax. The group's effective tax rate for the year was 29.2%. As I mentioned, total dividends for the year were AUD 0.651 per share, franked at 50%. Now, let's turn to the financial results of our core business, our funds management business, and the driver of the group's profitability and dividends.
Funds management revenue for the year was AUD 279.9 million, down due to lower funds under management. The average base management fee at 30 June 2024 was 70 basis points, up 3 basis points on 2023, and that actually reflects the change in the mix of funds under management towards higher margin retail FUM, following institutional outflows of AUD 3 billion in 2024. Consistent with prior years, our main operating expense, aside from tax of course, is employee expenses, reflecting the fact that our people are fundamental to delivering value for our clients. Employee expenses were AUD 68.7 million for the year, down 20% on 2023.
The reduction is actually a combination of a few items, mainly due to lower headcount and the 2024 financial year, including the full benefit of the organizational realignment that took place back in October 2022. Lower staff retention bonus expense in the 2024 year compared to 2023. But those reductions were actually offset by one-off payments to the former CEO and the head of distribution, who retired on 31st of December, as well as some additional executive talent acquisition costs, which related to sign-ons and forfeited remuneration for the Executive Chair and the MD of Magellan Asset Management, which we've previously disclosed. Just to be clear, funds management employee expenses includes the employee share option plan expense of AUD 3.1 million, which I discussed earlier. Excluding employee expenses, other expenses were down 4% on 2023.
Look, while we have actually experienced inflation-related cost increases across various expense lines, we just continue to manage costs prudently and drive efficiencies where we can. After adjusting for performance fees, profit before tax of our funds management business decreased 25% to AUD 177.5 million. Despite the reduction in the profit and genuinely challenging business conditions, our funds management business remains a highly profitable business. Now, moving on to expenses, there are a couple of items that I'd just like to touch on. Our cost-to-income ratio, excluding performance fees, was 39.3%, compared with 36.4% in 2023, and that increase is mainly a function of lower revenue from our fund during the period. We remain highly focused on prudent cost discipline and ensure expenditure has a view to supporting client-focused outcomes.
The funds management business operating expenses of AUD 102.4 million were within our previously provided guidance range of AUD 97.5 million-AUD 102.5 million. It's worth noting that these operating expenses included approximately AUD 4.8 million of expenses relating to retention payments to current employees, as well as an estimated AUD 1.8 million in expenses for executive talent acquisition, comprising sign-ons and forfeited remuneration payments. Looking forward to the 2025 financial year, we have provided guidance for funds management operating expenses of AUD 105 million-AUD 110 million. This expense guidance also includes an estimated AUD 3.8 million in expenses relating to retention payments and an estimated AUD 2.4 million in expenses for executive talent acquisition.
We explicitly call out those expense, those specific expenses, as they do not form part of the long-term ongoing expense base of our business. As Andrew mentioned earlier, our partnership with Vinva allows us to bring forward investment in global distribution, and in doing so, this sees some incremental costs as we look forward to launch product with Vinva. We consider these costs to be relatively modest, and our cost guidance of 105 to 110 reflects the expected increase to the cost base from both inflationary pressure as well as those brought forward investments. We, of course, expect incremental revenues from these initiatives to materialize through the fees we will earn under the distribution arrangements with Vinva, as well as dividends we'll receive from our equity stake.
Finally, turning to our fund investments, this portfolio is a subset of the group's balance sheet and an important aspect of the group's liquidity. The portfolio includes seed and co-investments in both Magellan's listed and unlisted funds. A summary of the funds investment portfolio is shown on the slide, and at 30 June 2024, the portfolio totals AUD 371.1 million, compared to AUD 392 million at 30 June 2023. Now, as I mentioned earlier, the sale of a portion of our investments drove the reduction in the fund's investments during the year. Consistent with prior years, our aim is to earn satisfactory returns for our shareholders, and Magellan has set a pre-tax return hurdle of 10% per annum over the business cycle for the portfolio's performance.
Investment returns for the 12 months to 30 June 2024 were at 18.1%, a pleasing result. Since inception from the first of July 2007, excluding the group's investment in MFF Capital Investments, the portfolio has reported a satisfactory pre-tax return of 10.8% per annum. With that, I'll hand back to Andrew.
Thank you, Kirsten. I'll now provide an update on the business, building on the strategy I outlined at our interim results in February. The purpose of this slide is to visually display our business as it stands today, which I'll elaborate on in the upcoming slides. As Sophia highlighted, our core operating business, Magellan Asset Management, is anchored by three investment capabilities: global equities, infrastructure, and Airlie. These wholly owned investment boutiques are supported by a highly regarded distribution team, which services retail and institutional clients here in Australia, New Zealand, the U.S., as well as the rest of the world. Additionally, on the right-hand side, we also have our associates. Select minority investment in high-quality businesses that we believe represent attractive growth areas for Magellan.
Previously, our associates comprised Barrenjoey Capital Partners, a full-service investment bank, FinClear, a provider of financial markets, technology, and infrastructure services. With today's announcement of our strategic partnership with Vinva, which includes a minority equity stake, we've now added a high-quality fund management business to our associates, which will be supported by our global distribution function, an important development in the future of our business. Turning to our distribution capabilities, Magellan's distribution platform stands out as a significant asset, characterized by the team's extensive global relationships, and it continues to strengthen Magellan's brand within the marketplace. Domestically, we have a collaboratively highly experienced and tenured team with deep stakeholder relationships covering both retail and institutional channels. For our retail clients in Australia and New Zealand, the team has end-to-end coverage of the retail service model, with specialists to manage brokers, research house, and platform relationships.
While in the institutional channel, the team prides itself on maintaining enduring relationships with major local institutions. Importantly, this domestic distribution capability is well-positioned to adapt and benefit from the changing industry landscape, thanks to its size, widespread geographic coverage in all major Australian cities, and the connectivity across the market. Looking to the U.S., which we see as a key growth market, given its size and scale, we are well-placed to strategically leverage and capitalize on our existing distribution infrastructure to penetrate this large market across retail and institutional channels. As announced in February, our interim results, where we highlighted the importance of this channel, we have spent nearly these early months reviewing the capabilities we have in the U.S. and are now focused on enhancing the platform for future success.
We are also actively exploring opportunities to invest in expanding the platform's capabilities further, particularly in the retail market. With our strategic partnership with Vinva, Magellan has a significant opportunity to distribute Vinva's strong-performing, innovative, systematic equity products to this market and drive growth. The U.S. remains a highly attractive market, and we are committed to investing in the U.S., where we see significant value-creating opportunities. Shifting focus now to our rest of world distribution capabilities, which span the U.K., Asia, Europe, and the Middle East. In these markets, Magellan has a highly experienced distribution personnel who have cultivated deep-rooted client relationships. Leveraging existing networks, the team is continually uncovering new opportunities in an increasingly number of locations.
As I mentioned at the outset, our distribution capabilities remains a key strength of our business, and importantly, it has been a key attraction for high-quality investment managers and teams that we talk to, such as Vinva, and is an area of the business we will continue to invest in. Turning to our associates, a segment of our business we've added to with our strategic partnership with Vinva. I've covered Vinva in detail already, so I'll focus here on Barrenjoey and FinClear. Let's start with Barrenjoey. We are very pleased with the progress Barrenjoey is making as it continues to grow market share and deliver strong financial results. As a reminder, Barrenjoey was established only four years ago, and so its achievement in a short period of time is outstanding. With all key businesses now established, Barrenjoey saw revenue growth across all businesses, particularly its fixed income business.
In full year 2024, this resulted in Barrenjoey delivering a net profit after tax of AUD 34.7 million, a result of record revenues as well as disciplined cost management. The business maintains a strong capital position, well above minimum requirements, and the strong cash generation within the business, have allowed all working capital facilities to be repaid. Given the growth in earnings, cash generation, and capital, Barrenjoey has indicated that they intend to commence paying dividends subject to their board's approval. In the 2024 financial year, FinClear's contribution to Magellan improved marginally as a result of revenue growth from a recovery in market trading volumes and new cash and FX products that target the changing needs of brokers. The business has a diverse client base with AUD 155 billion of underlying client assets and maintains a strong capital position.
With system rationalization in June 2024 expected to deliver cost efficiencies and their FCX expected to be fully operational in the coming, upcoming half, we continue to see growth potential for this business. Turning now to our capital management position. As highlighted today, we continue to maintain a strong balance sheet and capital base, which has provided important protection for the business against the challenges faced in the recent years. If we look at our balance sheet, at the 30th of June 2024, we had financial assets of AUD 854 million, which was comprising cash of AUD 325.3 million, net fund investments of AUD 371 million, and investment in associates of AUD 160 million.
With today's announcement of our investment in Vinva, which was funded from existing cash reserves on a pro forma basis, you will now see that our investment in associates has increased by AUD 139 million, and our cash reserves have decreased by the same amount. Once you remove the investment in associates, the remaining pro forma capital available to the business in the form of cash and net fund investment is approximately AUD 555 million. As I outlined in our investment interim results in February, as we think about our capital requirements, the board has regarded this capital in a few buckets. As you would expect, we have corporate requirements, which include regulatory capital and capital reserve for our commitment and operational risk purposes.
We also have cash held for the payment of the final dividend and performance fee dividend declared today by the directors and to be paid in September, as well as the bonus payment of bonuses to our investment teams. In addition, we maintain a bucket of seed capital, which we think of as capital required to develop and support the growth of funds and strategy on our platform while they begin investing and attracting flows. Looking over the next 12 months, we consider our seed capital requirement to be approximately AUD 50 million, which leaves us with approximately AUD 325 million of strategic capital and stability buffer. As I've mentioned, our strong capital position has protected the business from the challenges faced in recent years and given clients the confidence Magellan has the financial strength and capacity to provide the service level they expect.
It also provides shareholders the comfort that we will not be driven by short-term decision-making and will continue to focus on creating long-term shareholder value. Over time, we anticipate the business will require a lower level of protection. This capital also plays a pivotal role in realizing our strategic objectives, which includes continuing to assess strategic growth opportunities for the business, as demonstrated by the strategic partnership with Vinva we announced today.... We also continue to deliver strong returns back to our shareholders, as demonstrated in full year 2023, when the board declared a special dividend and our ongoing share buyback program, which we have recently extended to April 2025, with approximately 5 million shares bought back under the program since inception. Our dividend policy remains unchanged, allowing us to continue to pay attractive dividends to shareholders.
We intend to provide a further update to shareholders on capital at our interim results in February 2025. Before we conclude today's results presentation and move on to the Q&A, I'm excited to share our forward-looking priorities for the year ahead across our three foundational pillars of colleagues, clients, and capabilities. Within colleagues, we have commenced implementing our new remuneration framework, which will be rolled out to our staff and executive team for the 2025 and 2026 financial year. We continue to focus on providing targeted training and development to our team, which, alongside other holistic well-being initiatives, are aimed at delivering improved employee engagement across the business. We will also look to appoint Sophie as CEO of Magellan Financial Group during the coming year, with the board focused on ensuring a smooth transition.
We, of course, remain highly focused on delivering outstanding outcomes for our clients, and to do so, we must deliver strong investment performance across all our strategies. We're also excited about the prospect of broadening our presence and capability in the U.S. market and across the distribution team globally, which represents significant growth opportunities in coming years. Finally, a key focus of our attention in the near term will be commencing distribution of Vinva's investment products to our client base. A governance review is also on the agenda to ensure we continue to embody the highest standards of best practice across our business. It's been my pleasure presenting our 2024 financial results to you today. While we acknowledge the journey ahead, we are encouraged with the progress we are making and believe our business is strategically poised for future growth and to deliver returns for shareholders as a result.
I'll now take questions.
Thank you, Andrew. I'll just give some instructions on how to ask a question. For those who have joined the webinar via computer, you can ask a question. Ask a question by typing your question. Simply click on the Q&A icon that looks like two speech bubbles at the bottom of your screen and type in your question. I'll then read out the question for the speakers. If you've dialed in by phone, then you can raise your hand by pressing star nine on your keypad. I will let you know when it is your turn to unmute yourself and ask a question. We'll try to limit questions to two per caller to provide all participants an opportunity to ask questions. We'll start with the webinar questions.
The first question we have is from Brendan: Can you please provide more information on the expected net profit after tax contribution from Vinva? Based on their ASIC accounts and estimates of earnings, it appears you have paid a mid-teens EBIT multiple for the business.
Thanks, Brendan. I'd say, firstly, I just wanna highlight that the terms of the transaction are confidential. And as part of the transaction, we will, however, receive a preferred return for the first two financial years. Our share of Vinva's net profit after tax will be recognized in our P&L, like our other associate investments, and will also generate distribution fees and costs that will flow into our funds management business. As I also mentioned earlier, the transaction will have a negligible impact on our earnings per share for full year 2025, but then after that, expected to be accretive.
Thank you, Andrew. The next question is: What is the purpose of having MGOC and MHHT, being the Magellan Global Fund Open Class and Magellan High Conviction Trust, when the overall performance of the High Conviction Trust is below par? Why not merge the two?
Well, I'd firstly point out that the High Conviction and the Global Equity strategies have differentiated mandates in terms of the concentration of holdings, the downside protection that one seeks over the other. So they are actually very different products, and therefore, clients use them in different ways. I'd also point out that actually, both have performed very well in the recent periods, and both were a contributor to the performance fees that we were able to announce at our results. And if you look at High Conviction. For the, for the year to the end of June, it was up 23%, compared to the Magellan Global Open Class, it was up 19%. So you can see there that both offered strong results. They do have differentiated return profiles.
Okay, thank you. The next question is: What does the Vinva partnership mean for the MFG Core Series product suite?
I might ask Sophia Rahmani to look at that. I know she spent a lot of time in the business, looking at all our product suite, including the Core range.
Thanks, Andrew. Our Core series products have systematic elements. However, they're very different to the offerings from Vinva. The Core series products leverage our deep research of our investment teams and our proprietary investment process. Vinva's investment solutions follow a very different process and have different objectives. I would mention, you know, we are always monitoring our products. We're always making sure there's a market for them and that there's client needs that we're meeting with that. Certainly, we're undertaking a process like that, but I don't think the Vinva partnership impacts that and how we're looking at our core products in the future.
Thank you, Sophie. The next question is: So far, it seems there are outflows from Magellan Global Fund conversion to open-ended form of AUD 1.2 billion. Are there any further pressures?
Yeah, we, we did want to update the market at the time of our results, as we knew there were a large number of specialist managers who were looking to arbitrage between the closed class and when it converted. With today's announcement of the AUD 1.2 billion that you just highlighted and referenced, we believe all of those specialist investors have now exited the business. They hadn't all at the end of July, but they have over the last few weeks, and therefore, we'd expect that outflows to, or just flows in general to normalize to more normal levels that we've been seeing prior to the conversion.
Thank you, Andrew. The next question is: What is your outlook on retail fees into FY 25?
Kirsten, do you wanna take that one?
Look, I think we see strength in the retail market with clients recognizing the value of active management, and it's driven more by performance and returns than fees.
Thank you. The next question is: what was the trailing earnings of Vinva, excluding performance fees on a 100% basis? And what is the typical contribution from performance fees in an average year?
As I highlighted earlier, the terms and business performance of Vinva remains confidential, so I can't go into the detail of the trailing earnings there. And as you know, around performance, in particular, they obviously do fluctuate from year on year. But the Vinva strategies, given their recent performance, are all pretty much at or above their high watermark. So we expect a healthy contribution from performance fees, but not all of their mandates have performance fee in them, it's really client-driven. The clients are always offered the choice of a flat fee or a lower base fee and a performance fee. But they do have a number of performance fee opportunities, and they're well positioned to continue to generate from that.
Okay, thank you. The next question we have is on our associates: when do you anticipate that you will start receiving dividends from your other associates?
Yeah, well, as outlined, we have a preferred dividend arrangement for full year 2025 and full year 2026 with the new Vinva investment. So you'll definitely see dividends coming paid through that side of our associates. And as I mentioned, the Barrenjoey have announced their intention through the board, once it's approved by the board, to pay a dividend. So I'd expect a dividend from Barrenjoey in full year 2025. Though I'd have no idea at this point of the size or quantum of that. FinClear, where it is in its development, is unlikely to be paying a dividend in full year 2025.
Speaking of Barrenjoey, the next question is: what is the end game for Barrenjoey? Is it to float an in-specie distribution?
At the moment, I just, we aren't really focused on an end game or where this business can go. I think if you look back over what they've done in four years, it's an absolutely incredible outcome of what they've delivered. It's a pretty outstanding result and a really success story in the Australian financial industry of what they've achieved. We're excited. We're now through the early three-year sort of start and build-up. You're seeing such significant growth across all their investment lines. You know, I mentioned the fixed income line doing well. It was up over 100%. It was the last part of their business line they introduced, and their revenues were up over 100% in the year. That growth will continue, and it's, we know it's been a difficult market for investment banking.
When you look at what they're achieving, it really is outstanding. So for us, I think from a shareholder's point of view, we are very pleased with both the business of what's being created, but also for that potential. And we think shareholders really benefit from the long-term holding that we have in that, that position.
Great. The next question is on U.S. distribution: what does work in progress mean, and does this need to be addressed first before expanding the multi-boutique with overseas firms?
I might ask, Sophia Rahmani to pick up on that.
Thank you. Thanks for the question. As Andrew said, we plan to continue to invest in our offshore distribution, which includes the U.S. The U.S. is the biggest market in the world and also a very complex one. So we've had an established U.S. distribution platform in the U.S. for almost seven years, when we acquired our distribution partner, Frontier. This platform has been historically exceedingly successful and predominantly institutional clients. What we're talking about is we'd like to increase our network through the retail and wholesale channels in the U.S., which will take time, it will take investment, and we're certainly engaged on both of those things.
Thank you. The next question is: What are the considerations for capital management versus strategic growth?
As I highlighted when we talked around the capital slide. You know, we are undertaking a review of what our capital position will look like. We'll give more detail in our half-year results in February. What I would say is, if you look back over the last 2.5 years, there's sort of 3 elements of what the capital's provided for us. We've provided additional returns to shareholders through special dividends and share buybacks. It's also provided a significant stability buffer, and people shouldn't underestimate how helpful that's been to stabilize the business with clients and the people in the business. And then it's enabled us to do what we see as a fantastic partnership with Vinva.
So all three aspects of what the capital can provide for us have been in evidence over the last 2, 2.5 years. But as I said, we'll come back with further detail in February.
Thank you, Andrew. Next question is on Barrenjoey: can you confirm that the Barrenjoey profit of AUD 34.7 million does include a tax charge at the Barrenjoey level, not a zero charge, given past losses?
Andrew, would you like me to take that one?
Yeah.
Sure. Look, Barrenjoey's recognized net profit after tax does, in fact, include their own tax charge. Just like any profitable business, they would obviously apply the appropriate tax rate.
Thanks, Kirsten. The next question is: with reference to slide 27, so that would be our capital management slide. What do you think is an appropriate level of buffer versus the current AUD 325 million?
I think that's quite similar to the answer I just gave before.
Sure.
We'll provide further update in February at our half year results.
T hanks. The next question is: Can you please give us some color on FUM by institutional retail breakdown, potential fee margins by each, and historical flows over the last few years?
Can we take that offline and give you the breakdown. We do, we do publish these, these details, but I'll have to go back and check them. I haven't got the numbers here in front of me, so we'll. I'm sure you've got the who asked that. We'll come back to you after this, if that's okay.
Thanks. Yes, we'll do that. The next question: does the Vinva investment include any option to acquire additional equity in Vinva and or preemption rights?
No. In terms of the agreement, this is, it's very important that Vinva remain majority owned by their employees in the business. And therefore, there is not an agreement to purchase additional equities. As a holder, of course, we have the ability to, should there be funding rounds or if people are looking to exit, and be something we would consider at the time. But there's nothing envisaged in the current agreement that we would be incrementally increasing our holding from here.
Thank you, Andrew. Will we get Vinva flows monthly going forward? Are there any clawback terms if there are large redemptions?
No, because Vinva is equity accounted, you won't see the monthly flows. Where we launch products under our RE, that are Magellan managed, then you will actually see those come through in our funds. So as we enter certain retail products, you can see the benefit of those flows coming through on a monthly basis, and they'll be highlighted. The question of whether they're clawback terms in large redemptions as well, no, we've-- there's no adjustments to the price we've paid in terms of the business performance from this point, going forward.
The next question is: Can you please confirm the investment in Vinva is shares in Vinva Holdings Limited and not Vinva Investment Management Limited?
Yes, the investment is in Vinva Holdings Limited.
Great. We have a question, I believe, on our dividend policy. What is the dividend payout ratio target?
I'll answer that, yeah. So the dividend policy is unchanged. The policy is obviously 90%-95% of funds management NPAT. And the dividend announced for the 30 June 2024 six months is at 95%. By for... I should clarify that, both for the final dividend, which is at the base and also for the performance fee.
The next question is: are there any other plans for strategic acquisitions in FY 2025?
Given the Vinva transaction and the opportunity or partnership, and the significant opportunity it presents, that's our real focus with that and the existing business. Of course, if other opportunities present themselves, we would and should look at them as a board and a business. But, as we said here today, no, there's nothing that we're focused on or looking at or feel that we need in our business outside of what we now have.
On the U.S. distribution, you've mentioned investing in retail distribution. What would this involve?
Yeah, sure. I'm happy to answer that, Andrew. Look, that could involve a number of things. As I said, the U.S. market, as we all know, is very wide and deep. So much of it is about the number of selling agreements you've got and that access points into the big broker-dealers in the U.S. There's various ways you can achieve penetration into that market, building it yourself, and certainly we've got some high-quality people in our U.S. business there, or acquiring a business or partnering a business that has access to those. So, you know, we're open to options on how to best achieve that and certainly spending some time assessing that now.
Thank you, Sophie. The next question is on Vinva: can you provide some color on the fee model for the distribution agreement with Vinva?
Look, like the other terms of the, the transaction, it's confidential. What I could say is I believe it's within, market norms. We will benefit from the success of what we do, through our distribution efforts. But equally, and probably more importantly, we'll also benefit from the value created through those distribution efforts as a, equity holder in the business. So I think there's a very strong alignment, to the success that we look to bring.
Thanks, Andrew. It looks like the question we had earlier from Liz at Jarden was actually on Vinva, and she was asking for some color on FUM by institutional, retail, and fee margins, and that kind of thing from Vinva. Is that something you can provide, Andrew?
I can't do it. Sorry, I can't provide that at this point, but the majority of their business has been institutional, like it's, it was nearly all institutional up until about a year or so ago, where they've started to move into the wholesale market. Their AUM has fluctuated. If you look over the last three or four years as being 100% Australian institutional business, they are exposed to the same trends of any investment manager investing into the Australian institutional market, particularly super funds, bringing in-house managers or consolidating. They've benefited some of those. They've been impacted by some of those.
I think it's that trend where Australian institutions or super funds tend to focus much more on cost rather than the value created by their managers, is a large driver from the Vinva perspective, where they've acknowledged they now need to move away from that distribution channel, that distribution market, into both the rest of the Australian market, but also globally. So that's been really on their mind, that the channel. They've got fantastic products that, however, the Australian, as we've seen with many super funds, focus has much been bringing in in-house rather than recognizing the value that what I see our Australian investment management industry is very, very high quality, but that's not always reflected in either the fees paid or the, the way clients have looked to sort of utilize those expertise.
T hanks, Andrew. Just touching on that, are you able to provide a view on capacity for Vinva?
In regard to capacity, it's not really something that we would need to worry about. Like, the Vinva capacity, which is one of the real attractions for us, is significant. Their Australian equity capacity can be significantly larger than where they are today. And on their global strategy, it'd be a nice problem to even be talking about capacity. And I think that's one of the real highlights of what this opportunity is. Their investment performance and the process is so sound, so strong, and the capacity constraints on this business are so small. There's so much growth potential, not just in the years to come, but when we look forward on a decade or more, it's a huge opportunity for us as a business.
Thank you, Andrew, and thank you all for your questions. We'll now move to the phone. So we've got a few questions from those who've dialed in. We'll first go to Julian from Goldman Sachs. If you can press star six to unmute yourself and ask your question.
Go ahead, Julian. Hi, can you hear me?
Yes. Thanks, Julian.
Okay, perfect. Good morning, all, and thanks, thanks for, for taking my question. Look, just an initial one, Andrew, just, you mentioned, I think, EPS, probably EPS neutral in, in FY 25. I just wanted to clarify, does that include the distribution fees expected over FY 25, as well as the earnings contribution from Vinva and, and also the comments on FY 26?
Yeah, it does. We are bringing forward investment in distribution and also product launches, which impacts full year 2025. And the full benefit of the selling of what you know, the distribution agreement that we would get from that will take a little while to sort of materialize, but it's very, very modest in 2025, its impact. So whilst our cost guidance that Kirsten went through is above what it would be if we hadn't done the Vinva transaction, there will be additional revenue supporting that as well through the distribution agreement. But it's a modest impact on EPS. But as you move to 2026 and beyond, it becomes quite accretive.
Okay. And just to clarify, the movement from 25 to 26 is also related to the drop-off of some of those upfront related costs that you're taking in FY 25 to stand this up?
Yeah.
Correct.
Yes.
Okay, understood. And then maybe just a question on Barrenjoey. So now look, it's quite a sizable percentage of your adjusted NPAT now. So just interested in understanding how you are thinking about this business going forward, and just sort of the run rate earnings at this juncture where we're at the moment. Should we expect this to stabilize or just how you're thinking about it?
So I expect the growth in Barrenjoey to continue. You know, the first three years were heavily impacted by the build-out, and the infrastructure they put in place. You know, it's quite remarkable, the business they've built. And now that that's through, we're now getting to the benefit of that build-out, and you're seeing that in some of the lines. The growth they're seeing in areas like fixed income, equity financing, and the like is significant. And obviously, they've got very strong corporate financing fees in a market that's been probably below historical averages as well. So the potential is very, very large, and that's why we see it as a very attractive business and opportunity. And for our shareholders, we think they're well-serviced by it.
We're very pleased with what they do, and we're pleased to be associated with them. If you're looking to invest in Barrenjoey, really the only way you can get direct access to it is through Magellan, because the rest is either owned by Barclays at a lower stake than us, or the employees are the majority owners.
Got it. Okay. And there's a last, last question, final question. Just, in terms of just the, I know previously you flagged, investments in the U.S., just multi-boutique equity investments with, with, strong performance. Just how should we be thinking? I think it sounds like it, that's, that's taking a bit of a pause given the investment in Vinva. So just, if any clarification around that?
Kirsten?
Yeah, I mean, I'm happy to answer that. I think, yes, our priority for now is the Vinva business, given the significant investment we've just make, made and the potential opportunity with that. Secondly, as we've covered, you know, U.S. distribution continues to be a focus. Through that, depending on how we approach the U.S. and whether we acquire a business there, there may be multi-boutiques that come with that as a result. But I would say that's not the key focus for us most immediately.
Got it. Thanks so much for your time, guys. Appreciate it.
Thank you.
Thank you.
Thanks, Julian. We'll now go to Shaun from Morningstar. If you can press star six to unmute yourself.
Hi, can you hear me?
Yes. Go ahead, Shaun.
Hi. Hi, look, everyone, thanks for taking my questions. I've just got two quick questions. Firstly, I'd just like to quickly follow up on the Vinva partnership. If I simply apply your EV to FUM multiple, it looks like you're buying the stake at a reasonably expensive price. I'm curious, you know, if their performance is so strong and the economics are so good, I'm curious, you know, why are they content with selling to you at this price and not more? You know, are there some other issues that we should know, or is it because most of the fund is in-store, like, like what you alluded to? And my second question is just I wanted to clarify how you're thinking about medium-term expenses.
Is it, you know, all systems go from here, we can expect more growth expenses to chase more volumes, or will you also manage costs based on how the core fund management business is performing? Thank you.
Okay, it's a little hard to hear the question, but I think I'll answer it. I'll answer the first one and I'll ask Kirsten to give any color on future expenses. In terms of the price and how we came to a price between both parties. Look, this is about a long-term partnership as well. So it was looking for a fair and reasonable price for both parties. And you've got to remember that they are ongoing shareholders. They've sold a proportion of their—they're 100% owned by the employees or ex sort of founders of the business, and those people have continued on. So this was a—I think we've paid a fair price for the business and for its growth potential.
We will both benefit by the partnership, in particular, the distribution agreement, in that way. And that I think because of that ongoing partnership and that long-term focus, we got to a very, you know, very sensible position. Now, look, I think, and Morry and the team over there at Vinva have been incredibly good to deal with. You know, they are focused on their clients. They're focused on investment performance. They're focused on getting the best outcome for the clients. You know, they put clients first, business second, employees third, and you saw that when they went through it. They believe this will be better for their clients and for their business, and they're trying to get the right partnership.
So, and I can only thank Morry and the team for how well they conducted the negotiations that we had. It was, you know, actually a pleasure to work with them on that, through that. And, Kirsten, there was a question on-
Yes.
-forward guidance-
Yeah.
on the forward expense, how we should look at it.
So, Sean, you know, as you know, we don't provide cost guidance, you know, beyond the FY25 year. But perhaps I, what I could say is that the costs, obviously, in relation to the Vinva transaction, are within our FY25 guidance. I guess it's fair to say that we don't consider there are any sort of long-term ongoing costs of that business. Fair to say that we're balancing that obviously with our continued investment in other growth initiatives and we obviously invest in people. So hopefully that's somewhat helpful, but yeah. Matt...
All right. Thank you. Thank you.
Thank you, Sean. I think that's all the questions we have. So, I'd just like to thank you all for dialing in to our FY 24 results briefing. Thank you very much.
Thank you.
Thank you.