Good morning, everyone, and on behalf of the company, welcome to the Magellan Financial Group Interim Results Conference Call for the half year ended 31 December 2019. I'm Sarah Thorne, and I lead investor relations at Magellan. The company's results will be presented today by the CEO of Magellan, Dr. Brett Cairns, and the Chief Financial Officer, Ms. Kirsten Morton. Hamish Douglass, Magellan's Chairman and Chief Investment Officer, is also in the room today and will join the Q&A session at the end of the call. An investor presentation has been lodged with the ASX and is available on Magellan's website. We are not planning to step through the presentation on today's call. However, it is available for further information.
For those of you who have joined through the teleconference, the teleconference administrator will advise you at the end of the call how you can ask a question. For those of you joining us via the webcast, you can submit a question by typing it directly into the webcast portal. Please note that today's call is being recorded, and we may also have media on the line today. Please note that some of the information you may hear during our discussion today may consist of forward-looking statements regarding Magellan. No assurance is given that the future developments will be in accordance with Magellan's expectations. Actual results could differ materially from those expected by Magellan. Thank you, and I will now hand over to Brett.
Thanks, Sarah, good morning, all, and welcome. Before discussing some business highlights, let me briefly touch upon a few financial highlights for the six months to the 31st of December. The percentage changes I'll refer to are relative to the corresponding six months in the previous year. The key driving number is a 29% increase in average funds under management, or FUM, as we like to call it, to AUD 92.8 billion. This, in turn, drove a 27% increase in management fees for the half to just under AUD 286 million. The slightly lower percentage increase in management fees reflects a small reduction in margin from the prior corresponding period due to a change in the mix of our FUM rather than any fee reductions.
Statutory profit after tax was up 13% to AUD 195.7 million for the half. After adjusting for non-cash items and costs relating to strategic initiatives, net profit after tax increased 23% to AUD 216.8 million. We have previously discussed our thinking behind these adjustments, and rather than go over things again, I would point those interested to the interim report for a full explanation. When viewed on a per-share basis, adjusted net profit rose at a slightly slower pace of 20%, primarily reflecting the additional shares issued as part of the institutional placement we conducted in August last year. The funds management segment profit after tax increased 24% to AUD 279 million. Without the impact of performance fees, it increased 30% to just over AUD 237 million.
This reflects both the increase in the average funds under management and indeed scalability, with the funds management cost increasing at a slower pace of 14% relative to revenues. In our other business segment, principal investments per share stood at AUD 2.09 after allowing for tax on unrealized gains, a 14.5% increase since the 30th of June last year. Also noting the increased number of shares on issue during that time. When viewed overall, we believe the business has had a solid six months and remains well-positioned. The directors have declared an interim dividend of AUD 0.929 per share, which represents a 26% increase over the prior corresponding period.
The slightly lower increase in dividends relative to the 30% increase in funds management segment profit before tax and performance fees reflects the increased number of shares on issue. As per our dividend policy, the dividend relating to crystallized performance fees after tax will be declared in August alongside our final dividend and therefore is not included in this interim dividend. Crystallized performance fees before tax at 31st of December 2019 stood at AUD 41.7 million. Before handing over to our CFO, Kirsten Morton, allow me to make some additional comments regarding the business and strategy. Our business continues to operate satisfactorily, underpinned by strong investment performance delivered over the period by Hamish, Gerald, Airlie, and indeed the entire investment team.
We've spoken often of the importance we place on looking after our clients and achieving the stated objectives for each of our investment strategies. Nothing has changed. This is paramount. With funds under management of AUD 97.5 b illion at 31 December, investment performance, both positive and negative, is a key contributor to changes in our FUM, with net flows now tending to be more incremental in comparison. You can clearly see this in this half, with AUD 7.8 billion growth in FUM coming from investment performance and net inflows contributing AUD 3.6 billion. Notwithstanding the focus we have on our existing clients, we do work on and think about other opportunities. The hurdle is high as we consider these opportunities, as we do not want to distract from what we are already doing.
I noted this time last year that we were at various stages of several new product developments, and that it was important that our offerings meet a need and help solve a problem. This takes time to get right, and it also requires patience and focus. We've made solid progress on a range of fronts in this regard, some of which we hope to be able to share more broadly soon. For example, after much discussion with a range of parties, we expect to make the Airlie Australian Share Fund available on the ASX in the coming weeks. We think this is a meaningful step, as it is not a new fund or a new class of units that will be issued on the ASX. Rather, the existing units of the currently unquoted fund will also be quoted for purchase or sale on the ASX.
Importantly, this quotation will sit alongside the existing traditional application and redemption processes. Although this may appear to be a subtle enhancement, it effectively represents the convergence of listed and unlisted open-ended funds into a single entity and single unit, and we believe this brings significant simplifications and other benefits to our clients as well as Magellan. We intend to build on this approach to further simplify our funds over time. We have made further progress in developing a client solution for retirement income. Whilst there are still some issues to be fully resolved, our confidence is growing that we will be able to launch the Magellan Retirement Fund before the end of the financial year. Our sustainable strategies have now passed their three-year anniversary and are performing well, outpacing benchmarks.
We intend to launch the Magellan Sustainable Strategy as a retail fund, utilizing the approach we have developed for Airlie towards the end of the calendar year. We continue to assess and are making progress on a number of partnership initiatives, which we believe will strengthen the business over time. In this regard, we were very pleased with the launch of the Magellan High Conviction Trust, MHH as it's known, during the half. Investment performance since launch, coupled with the loyalty and foundation unit issuance in mid-January this year, has resulted in a good investor experience to date. Trading in units has shown excellent liquidity at prices generally at or very closely around the net asset value, feedback has been positive as investors have utilized MHH to help build and diversify their portfolios.
Before handing over to Kirsten, I would also like to touch upon another important part of our advisor and client engagement, and that is our upcoming investor events, which commence on the 21st of February. Hamish and team will be visiting seven cities across Australia and New Zealand discussing global markets and investments. Much work has gone into these events with the aim of producing insightful and relevant information for our investors and their advisors. These are large undertakings. Some 12,000 tickets have been purchased in aggregate, and if you are going, we're all looking forward to potentially meeting you at the cocktail reception that follows the presentations. With that, let me now hand over to Kirsten to run through some of the financials.
Thank you, Brett. Magellan's had a strong first half with a net profit after tax of AUD 195.7 million, up 13% compared to the prior corresponding half. Included in that net profit are non-cash items of amortization expense and unrealized net gains from our risk or investments portfolio, along with one-off transaction costs related to the Magellan High Conviction Trust IPO and the six-monthly funding cost for the DRP discount in both the Magellan High Conviction Trust and the Magellan Global Trust. We have previously outlined that we make these adjustments to provide meaningful performance information of our business. After excluding these items, adjusted net profit after tax for the six months to the 31st of December 2019 rose 23% to AUD 216.8 million.
Diluted earnings per share was AUD 1.082 per share, and adjusted diluted earnings per share was AUD 1.199 per share, which reflects a 20% increase from the prior corresponding period. As Brett mentioned earlier, the interim dividend for six months to 31 December 2019 is AUD 0.929 per share, an increase of 26% on the 2019 interim dividend. This dividend reflects Magellan's dividend policy to pay out 90%-95% on net profit after tax on the funds management business, excluding crystallized performance fees. The interim dividend is ranked at 75%. As we previously flagged, given our payout ratio and the interplay with our status as an offshore banking unit, dividends are likely to be partially ranked. Our effective tax rate for the six months to 31 December was 22.3%, and that continues to reflect the benefits of our offshore banking unit license.
Moving on to the financial results of our core operating business, funds management. Funds management revenue increased 22% to AUD 333.9 million for the six months to 31 December 2019. This increase reflects a 27% or AUD 60.1 million increase in management fees, crystallized performance fees before tax of AUD 41.7 million and as we have also previously flagged, performance fees will fluctuate materially period to period. Service fees and advisory fees from our U.S. distribution business, Frontier, along with interest in other revenues, which together have increased modestly by AUD 1.5 million.
Expenses in the half-year increased by AUD 6.6 million or 14% to AUD 54.9 million, with the increase primarily resulting from higher employee expenses up 17% to AUD 36.2 million and higher fund administration and operational costs up 14% to AUD 9.1 million. Brett mentioned earlier that some fund administration costs are variable and increase with higher funds under management.
Employee expenses represented 60% of our overall funds management costs for the half- year, and approximately half of the remaining expenses are variable in nature, either moving in line with changes in FUM or being a function of the number of investors we have in our funds. The other half of the non-employee expenses we would describe as fixed in nature, such as occupancy costs or IT costs. The business has been developed to build scalability, which is reflected in the funds management cost-to-income ratio, which for the half year was 18.8%, an improvement from 20.9% on the previous corresponding half. After including the positive benefit of performance fee revenue, the cost-to-income ratio reduced to 16.4%.
We expect that the funds management total expenses for the 2020 financial year to be at the top end of the AUD 115 million-AUD 120 million guidance range, which reflects in part expenses related to higher funds. Now turning briefly to capital management. The group maintains a strong balance sheet with net tangible assets of AUD 890 million. At 31 December 2019, investment assets, which comprises cash equivalents and financial assets, were AUD 848.5 million. Current receivables were AUD 126.4 million and cash reserves totals AUD 432.7 million, from which the group's interim dividend will be paid on the 27th of February 2020. The group's principal investment portfolio net of tabs was AUD 380.9 million, and it includes investments in both Magellan's listed and unlisted funds.
Consistent with prior periods, we aim to earn satisfactory returns for our shareholders, with the board setting a pre-tax return hurdle of 10% per annum over the business cycle for the principal investments, which to date has been achieved. Over the last one, three and five years, the pre-tax returns were 28.3%, 16.9% and 13.8% per annum respectively. Since inception from July 2007, excluding the group's investment in MFF Capital Investments, the portfolio returned pre-tax 11.5% per annum. One question has just popped up in terms of lease accounting. I just wish to confirm that the group's lease expense, rent expense explicitly, which has previously been included in occupancy cost, has not changed.
There has been a change in the accounting standard from the beginning of this financial year, and as a result, you will see that our rent expense is now presented in two different lines, being the depreciation expense and also within the finance costs. We hope we've done a reasonable job in explaining that in note 1C to the financial statements. With that, I'll now hand back to Sarah.
Great. Thank you, Brett and Kirsten. We'll now go to questions. Can the teleconference administrator please instruct on how people can ask a question?
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two,. If you are on a speakerphone, please pick up the handset to ask your question. Your first question today comes from Brendan Carrig with Macquarie Group. Please go ahead.
Good morning. Just a quick one on the balance sheet and the cash. Obviously there's AUD 230 million of excess cash following the raising relative to where you were at in the peak or in the last half, sorry. In the period, you've seen costs in the High Conviction Trust as well as a step-up in seed investments. With the AUD 50 million for retirement income still coming down the pipeline, are you able to give a bit more color around what you might do with the sort of AUD 150 million-AUD 200 million of excess cash sitting there, and plans for deployment of that and how long that might take?
Thanks, Brendan. As I said, we are continuing to work on some of these partnership initiatives. I don't think we want to put a timeframe on it. We're considering a number of these things. Not much has changed there. You're right on some of those numbers around retirement and MHH, et cetera. We're continuing to work on that. Hamish, I'm not sure whether you want to add anything more on that.
Yeah. Brendan, I think Brett kind of hinted at that we're working on a number of simplifications and partnership opportunities. We deliberately raised capital to give us the flexibility to do things. All I would say is we have got very good uses for that money and watch this space.
Sure. Maybe just specifically on the expenses. The second half run rate looks like it will pick up to get to that top end. Is there anything you wanted to call out in terms of where that catch-up is being allocated towards? Is it more just a combination of across most of the P&L line items?
On the expenses, you're right, the second half is a little bit more seasonal this time around. As we said, it's a function of relative to where we thought, at least in our budget, where the fund was worked out. Of course, there are expenses that come along with that, which is good news, frankly, because it was more revenue. The marketing that I alluded to, the investor events, a lot of those costs this time around are going to occur in that second half, and that will push it up towards that top end.
The biggest swing factor in the seasonality is actually the marketing expense line because we have a very large road show. Those expenses hit the second half. We also do an investor magazine where the expenses hit the second half, the rest is just sort of seasonality, which goes with fund trends. The average funds under management where we're sitting at the moment look like they're going to be higher in the second half than they were in the first half. There is, as Kirsten said, an element of our expense base that is variable related to funds under management. It's that trend line of what the average fund under management's doing six months on six months plus the marketing expense is pretty second half weighted.
Look, it's not going to be materially different to that AUD 120 we don't think at this stage. As I think I've made the point in the report, and I think I've said it last year, with that 18%, whatever it is, cost-to-income ratio, the expenses aren't driving the profitability. It's the top line.
Trying to find the note. Typically, the other funds and mandates looks like it was sort of a key driver, again, in half with this and also the new High Conviction Trust. Are you able to just give a bit of Obviously, you can't speak to too much detail of that line item, but just a bit of a detail in terms of the strategy that was driving that performance fee within that line of other funds and mandates.
Yeah, I can tell you, it's largely related to the global equity strategies. The reason why people miss this is our mandates don't necessarily have strike dates at June and December year-ends . Some of them may have April and September year ends. Really, the performance you have to look at it at that point in time. Some of them may have slightly different benchmarks as well in terms of how they get triggered. There are different time periods in which the mandates get measured versus where the funds get measured. Many of those mandates were probably getting measured closer to 30th of September rather than 31 December, and that's why people may have missed where performance fees could have kicked in in that six-month period.
Yeah, it's a tough one because there are a number of ways that performance fees are expressed. Some, as Hamish was saying, are different periods, some are actually off average performance over a number of years rather than a more spot period.
Okay. That was the crux of my question. Obviously, you can't give the exact numbers for us, but no, that makes sense. I understand. Cool. Thanks for that.
Your next question comes from Lee Kadish with Bank of America. Please go ahead.
Hi. With regards to the retirement fund , are you able to provide any color as to how you plan to distribute it and how long it will take to get on the platform?
How we distribute it and the nature of the way that it's going to be put is really one of the reasons I was describing earlier. We see this as both listed and unlisted, if I can put it that way. How long will it take to get to platform? We'll work through our usual processes on that. I don't want to go too far down and sort of raising too much of an expectation, as I've tried to say in this, we are making progress on this, and we're very hopeful we can launch that fund prior to the year end.
Okay, thank you. One last question. Should we expect a crucial flow versus after slow down given capacity constraints?
Handball that one to Hamish.
Yeah. It’s a hard one. They’re not that large in the scheme of things to start with. We do have a number of accounts that still have open capacity in their sort of flow accounts. The reason it’s hard to answer the question, the answer is yes, we have a number of accounts that will continue utilizing capacity that has been granted, and that’s sort of multi-year. You can get redemptions out of an AUD 70 billion book. You can get redemptions that will kind of offset. We don’t give you the gross and the net numbers there.
It's very hard to predict on a large book exactly what the net flows. We could probably predict what the gross flows are going to look like, but it's much harder to predict what that net flow number would be, because that's behavior of people making internal decisions across 140 accounts. They may reallocate 10%. If we perform really well, sometimes they just decide to rebalance and take some money away from us, but actually not take our weighting in their strategy down at all. We don't get that sort of underlying visibility. The difference between gross and net is incredibly hard to predict in the scale of our business. On a gross basis, we still have some meaningful account relationships that have multi-year reserved capacity.
Yeah.
Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Your next question comes from Nicholas McGarrigle with Forbes. Please go ahead.
Hi. This is a bit of an open-ended question. Please elaborate as much as you like. Can you describe the way you see the retirement market in Australia? Maybe comment around some of the products we're offering and strategies generally that you see and where you think that there's opportunity to improve the outcomes for the end investor.
That's a small question.
Yeah.
I'll sit back and listen.
Well, I'm glad it's open-ended because I prefer not to run through all that. Look, I think that the nature of the products and the income that's being demanded obviously aren't quite there. Again, I don't want to get too far into this. What we're looking to try and do is to come up with something that rationally helps fill that gap. We're not going to promise, obviously, that's going to solve everyone's problems on all that. A number of these solutions tend to either involve portfolio only type solutions where there's different variations of how you address a portfolio.
Some tend to obviously involve more insurance like solutions, which tend to be, in my view at least, quite expensive and come with other liquidity issues. We're trying to work within. Amongst that, if I can put it that way, to come up with something, as I've said before, we see this as being a listed product, and accessible, as someone pointed out also, on a platform. I'd really like to leave it at that. I'll add a few comments of what we're seeing and why we're seeing the opportunity. First of all, we've seen annuity markets.
An annuity is effectively providing people a guaranteed income. It's often very capital intensive and very expensive. Particularly about the residual value you can get out of that, there's often very little to pass on to future generations there, but people are wanting absolute income security. For those people who have limited amounts of financial resources, that can be a very important product for them. We're in no way being critical of the annuity market, but we actually regard the annuity market being a very small subset of the total retirement market.
Where the larger part of the retirement market has been is people really just shifting their asset allocation and moving out of equities and much more into sort of fixed income and deposit and hybrid style instruments in their portfolios, often in an incredibly simplistic way. In that part, which is the larger part of the market, there's been very little innovation there. Now, in this world where we've headed to sort of super low interest rates, it makes that large part of the market very hard to solve ultimate desires to get a decent income out of your retirement assets and keep your assets for passing on to the next generation there. It's become a very difficult dilemma, and the dilemma is people may be increasing their risk profile from a credit point of view to try and maintain their income.
Our challenge has been is, can you effectively take more equity risk into retirement? I don't want to go into too much detail, but that is an area where we think ultimately is how can you take equity risk into retirement, without exposing yourself, to enormous what is now sequencing risk. That if markets go down, you could actually have a massive erosion of your capital, and if you're keeping wanting to take a fixed amount of income out, you're actually drawing down your capital to satisfy your income retirement need. How do you solve it? It's kind of the holy grail in terms of how do you actually take a decent amount of equity into retirement without exposing yourself to excess sequencing risk.
I'm not going to tell you how we've solved that problem, but it's kind of a holy grail issue that's going on, and with this very low interest rate environment, it's becoming even a bigger issue for people. If it was an easy problem to solve, lots of people would have already solved it. By definition, what I've seen is a lot of people involved in this space understand this problem very well. There hasn't been much innovation trying to solve that actual issue. You could think of a product that you can take more equity style risk into retirement without exposing yourself to excess sequencing risk, to maintain your income that you want, and then hopefully at the end of the period, then leave a substantial legacy to your beneficiaries as well. That's what we're trying to solve for. We think it's a massive unmet retirement need.
We all understand the demographics and the baby boomers, what's happening to people putting more and more assets into the retirement pot. It's a very large pot to go around, and hopefully what we're doing is going to bring some innovation and new thought to the table. Beyond that, I don't think we should say any more. Brett, you've probably said it, so I shouldn't have said what I said.
Yeah, look, I think you've summed up the downside of it. The problem, of course, and you'd pin the nail on that, in my opinion, is that you can do so much within the portfolio itself to try and help solve some of this problem. There needs to be something else that needs to come to the aid to help mitigate that sequencing risk, which is really the heart of this issue. We talked a little bit about this, I think, at the AGM on this. The issue that I think that it's hard to grapple is, what is the balance between all these? What are really conflicting desires amongst all this? I think Hamish is absolutely right.
The demographics, this I think I saw a stat the other day, there's like 70 odd million moving out of accumulation into post-retirement every year. That's increasing, obviously, with the demographics. It is a very large problem, exacerbated, as you say, Hamish, with where traditional fixed-income securities currently are. Look, we're trying to balance up a lot of conflicting things here, including liquidity. Someone rightly asked how you can access this product.
As you rightly pointed out, the growth side of equities is built into that, also being able to draw what is essentially a fixed dollar amount coming out of that risky pool of assets. That inherently gives you the problem of sequencing risk. That's what we're trying to develop to help mitigate that. Having said all that, which we weren't going to say, we'll try and talk about it more fully into and before the end of June.
I appreciate the elaborate response. It was good detail I think that we haven't necessarily had in the past, so that's really nice. Probably one follow-on question from that is, do you feel like you've got the portfolio management capabilities across the spectrum of asset classes to deliver the outcome? There's this part of the partnership comment that you require some of those to have a fully rounded out offering in the retirement fund?
Yeah, let me just repeat your question. I'll paraphrase it because I understand that those on the webcast can't hear it. It was, do we have the portfolio I guess, tools and capability in-house to deal with this, or do we have to partner with someone and hence some of the partnership things we've talked about? The answer is no, we're going to deal with it with what we've got. We're sort of veering off now into the details of the product, but we see the portfolio being built around what we currently do.
Our internal equity capabilities are quite unique to solve this problem. Let's not say more than that, but the combinations of what we've got internally from an equity perspective are very nice in terms of some of the volatility and other risks that we need to deal with.
Yeah. Look, the sequencing risk itself, if you think about it, is a function of volatility. Hamish's and the firm's approach to think about capturing downside risk in that is very important in helping solve that. We think we've got the building blocks internally to leverage that.
All right, great. Thank you.
Your next question comes from Oliver Stevens with Hartleys. Please go ahead.
Hi, guys. Just I noticed you've seeded a couple of Frontier-badged products with about $26 million. Just wondering if you could provide some background and your thoughts and expectations with this?
Yeah, look, again, I'll just repeat it. You're right, we did seed a couple of Frontier funds. What are our expectations on that? Look, they're very small. One is the Magellan Sustainable Fund in the mutual fund in the U.S. for us, and another is a very small emerging markets fund that we've partnered with Frontier to seed.
With an external manager.
With an external manager. We have an interest in that.
Okay, thanks. One very quick one. I noticed there was a AUD 2.5 million loan to a third party. What's the background there?
Yeah. The question was, there's a AUD 2.5 million loan to a third party. That's literally a new project seeding.
Oh, okay. All right. Thanks, Brett.
Your next question comes from James Shorthouse with Credit Suisse. Please go ahead.
Morning, guys. Just a question on the Sustainable strategies. They've got their three-year track record now. Can you just provide a bit of feedback on how those strategies are being received in the institutional market?
Yeah, look, I'll hand this to Hamish, but I've sort of traveled around a little bit as well. There's a lot of interest, obviously, in ESG and the sustainable strategies generally, I would argue, and I think that's increasing. How institutions are looking at it varies quite a lot, I think, depending on who they are and what their sort of underlying business, if you like, is. We're seeing a lot of discussions. Indeed, we had some people through last week, I think, on doing some due diligence on the Sustainable Strategy. That's increasing in my view. Hamish, you have much closer discussions with a lot of the institutional investors maybe.
Yeah, I think the ball is really starting to shift on the whole sort of sustainable and ESG discussion. Before, it was probably a very small subset of institutional clients here. I think it's becoming much broader in terms of its acknowledgment and its importance for stakeholders and in terms of risk management here. For some large institutional investors, it's still very early days for them, but it's certainly getting on their radar. That is something that we were predicting, particularly when we started with carbon and expanded it to a broader sustainable side of that. There's a lot of pressure from regulators and other things, particularly on the carbon side of the sustainability topic, and we're very heavily sort of branded there when people go through what we're doing in carbon on sustainability. People are impressed and very interested.
Remember, we've only just come up with three years track record. As Dom moves around the world, he has a very full calendar of meetings whenever he goes overseas. There's a lot of interest. What I would say is from your first meeting to getting the money, it really, once you get your three-year track record, is when you're really starting to get meetings. When he's going overseas, the team, he's booked up. People seeing that. We've had a fairly large group out doing detailed due diligence in the last few weeks. We'll see where that heads. I think it's a space where the investor interest is growing. Some of it's still fairly early days for those institutions. The performance has been strong.
The three-year track record is up. Dom has a full calendar every time he goes overseas speaking to institutions, with people very interested in our approach and actually interested in the whole sustainability side within their organizations. Some of those organizations are building their own internal capability at the moment on sustainability, of understanding what they want to do in the space. Still early days, but I think us, developing this over the last four years or so, I think it's been the right thing to have done.
I think we're in a very nice spot in terms of where we are, particularly on the lower carbon within our sustainability here. From three years, people often take multiple meetings, and then they have to send people out to Australia. It takes them time to convert that interest into account relationships. I'm pretty pleased with how it's developing at this point.
All right. Thank you.
Your next question comes from Pierre Filger with Infinity Investment Management. Please go ahead.
Thanks. G'day. Hamish, just a quick one from my end in terms of the split between insto and retail. It remains relatively at sort of 70/30. Just interested in your thoughts on how you see that evolving, just given the fact that certainly in the retail market here locally, you've had an enormous uptick PCP from the first half of last year, do you think it's now getting to a critical mass where growth in retail, certainly percentage or even AUD terms might start to flatten out? Secondly, around that, on the institutional side, where are you seeing that evolve both domestically and globally? More interested in terms of the positioning of the institutional lockup on a global basis.
Yeah. I'm very happy. To repeat the question is, our retail business in the last six months had a very strong growth, PCP. Are we hitting a maturity point in our retail business and are we expecting the sort of flows to taper off there? How are we looking at our institutional business? That's a very broad question. First of all, in understanding our retail business, in terms of our global equities retail business, it's really split into two markets. One is the advisor market. We are very heavily penetrated in the advice industry in terms of our representation in model portfolios across the spectrum. If you looked at our infrastructure business, we are still partway through penetrated, mainly because not all advisors are currently using infrastructure as an asset class as part of their overall portfolio construction.
As they start to adopt infrastructure, we tend to get a very high representation of those model portfolios. That is something that's still developing, and we see a lot of interest in that space. The other side of our business is really the more broker and self-directed side of the business, which is really our listed product that we've launched over the last four years or so. I would still say the opportunities for people to continue to increase their global equity exposure and actually their infrastructure exposure as well in seeking income in the infrastructure space, we still see enormous opportunity in that sort of listed, more self-directed space. I think we now have 80,000 direct unit holders across our sort of listed investment trust.
Part of why we're doing this much larger sort of investor roadshow with 12,000 people is increasing the whole awareness amongst the community in what we're doing. We're very happy with the progression there. We see very nice flows and increase in unit holder numbers there. Brett has often said we've got 80,000 direct unit holders. He'll be happy when we're at half a million. I don't think that's unrealistic if you take a medium-term view. I think there's a lot of penetration to go in that space, but it is very hard to scale because we're having to communicate with individual people. That is a very difficult thing for the funds management industry to do. I don't think anyone has really scaled in this space at all. I think what we've done in the listed space has been second to none so far.
All I would say in terms of that, Brett has referred to simplification, this single unit, trying to converge unlisted worlds and listed worlds together. This has been a whole strategy we've been working on for multiple years, and all I would say is watch this space. There is still more to be done there. We are obviously trying a completely new roadshow format this year. We have gone from 3,000 - 12,000 people. That side of the business, I think, has a lot of upside. The one area that probably doesn't have a lot of incremental upside is the global equities advice space. That is fairly mature. Do not forget, in the first six months of this year, we did the Magellan High Conviction Trust, AUD 862 million. We are not going to do an AUD 862 million closed-end trust every single six months.
The high uplift was somewhat affected by that. We'll be doing more partnership things in the future. Then, of course, we've got retirement product. Brett has actually slipped out in his speech that we'll be launching the sustainable, the Magellan Sustainable Fund later this year. You can probably think we're working on a few other things that I'm not going to go into. In terms of the institutional business, we are closed for new institutional accounts in the core global equity space, but we still have a number of multi-year relationships with reserve capacity. We still have capacity existing in our infrastructure strategy. Then, of course, we've got our sustainable strategies that are launched in that space, but just gone on their three-year track records.
If you look at our business, the fundamentally largest part of fund movements by far and away at the moment is change in investment performance. We're giving you the breakdown there in our long-term objectives for the strategies, if you blend them all together, we get our objectives with we're aiming at 8% per annum sort of fees. Any new funds flow on top of that is increment above that 8% per annum. We think we've got a whole series of things that are incremental in terms of new flows. Predicting what happens in a six-monthly period, it's actually incredibly difficult to do.
Thanks, Hamish.
There are no further phone questions at this time. I'll now hand back to Ms. Sarah Thorne.
Thank you. Just before we final up, we will just ask one question from the webinar, which is: January looks like a pretty good month for MFG. Can you comment on outperformance this half so far?
Outperformance this half, I don't actually have it in the middle of the month. January we were over 200 basis points above the index for January net of fees in the global equity strategy, which is the most material one to performance fees. Things can move around a lot. Performance fees for the main global fund crystallizes on the 30th of June. It actually matters what happens in that unit price from the 1st of January to 30th of June. Whatever happens in between is kind of irrelevant.
Yeah.
If you looked at today, there would be material performance fees across the business sitting here today, but they can move very materially with movements in investment performance. Yeah. We've seen very substantial shifts within a month occur on sort of accrued performance fees, if that's why you're asking the question. We are meaningfully ahead of benchmarks at the moment this far into the year.
Great. Well, thank you, Hamish, Brett, and Kirsten, and for everyone joining us today. We look forward to seeing you again for our full-year results in August. Thanks very much.