Thank you for joining us. Thanks for joining us on our first half 2020 result announcement. Today you'll hear from our CEO, Managing Director Shemara Wikramanayake, and our CFO, Alex Harvey. Shemara will go through the result overview. Alex will go through the detail as normal, and then we'll go back to Shemara for the outlook. We have questions at the end. We'll start with the room and then go to the lines. If I could ask you to turn your phones either to silent or off for the presentation, that'd be great. I'll hand over to Shemara. Thanks very much.
Great. Thanks, Sam, and welcome, everyone. As Sam said, I'll kick off with an overview of the half-year result. On this first page, you'll see we slightly adapted the presentation of our operating groups, reflecting the realignment that we've been doing over the last 12 months. Now we have four operating groups. It's streamlined down to a reasonably simple structure of the Global Asset Manager, Macquarie Asset Management, the Domestic Banking Business in BFS, the Global, Futures, Fixed Income, and Commodities Trading Business, CGM, which is also a banking business, and then Macquarie Capital, which is a Global Investment Advisory and Principal Investment Business. I might, given the changes we've done, just spend a minute reflecting on what's in each of those businesses.
Starting with MAM, which you see contributed 39% of our income in the half-year, we now have a Fixed Income Equities Business and then a Global Alternatives capability where we have the Legacy Infrastructure Business, where we're the largest manager in the world. In Real Estate, we bought the GLL Core Real Estate Business and put that together with, from Macquarie Capital, the Value Add, Core Plus type businesses in areas like logistics, manufactured housing, et cetera. We also have the Private Credit capability based heavily off our infrastructure debt capability. We have Agriculture, in which we are probably the biggest manager in agriculture as an institutional asset class, given the focus elsewhere is on timberland. We have moved the Aircraft Leasing Businesses into that asset management offering as well, the Alternatives Asset Manager from the balance sheet.
That is reflecting the fact that the investment opportunity is basically becoming bigger than we can support on the balance sheet. Our fiduciary investors would very much like, in the current environment, to have access to another asset class that is defensive yielding, a sort of real asset asset class. That positions us with a very good Global Alternatives capability to grow from in a world where savers are looking for a lot of these types of investments. That is MAM in the Banking and Financial Services Business. We have Greg Ward with us here who heads that group. That contributed 13% of our income in the half-year.
The main change we did there is we moved the Motor Vehicle Leasing Business from CAF into that business so that all our Australian retail customer-facing businesses are now under the one umbrella with our personal banking offering, our business banking, the motor vehicles, and the wealth offering. In Commodities and Global Markets, we moved the CAF Asset Finance businesses in there, which fit well with what the Commodities Business has been doing. That CAF Asset Finance, now called Specialized Asset Finance, so its acronym now is SAF, was involved in telecommunications equipment but also energy and mining equipment leasing, which fits very well with CGM's focus in those sectors. Together with the SAF business now and the previous lending and financing business we had in CGM, we have a component of CGM that also is annuity business.
That was 8% of our income this year. The other part of CGM contributed 32% of our income this year. It is a business, as I said, that operates in interest rates, in futures, in foreign exchange, and then a very big presence in commodities in terms of providing risk management services to customers, financing, and also storage and transportation solutions. Lastly, Macquarie Capital is a Global Investment Advisory and Principal Investing Business, a strong focus in infrastructure and energy but across all other asset classes. We moved the CAF Principal Financing Business into that group so that all our investing capability as well as our origination and structuring capability across the non-infrastructure and energy groups are now together there and position us well to respond.
Putting all of that together then, we have 60% contribution in this half from the annuity-style businesses and 40% from the market-facing. All up, the businesses were able to deliver an 11% increase in net earnings to shareholders, driven by 8% at the operating income level and 9% at the expense level compared to the prior comparable period. The tax rate was down slightly from 22.2% to 20.5%, and the ROE was up slightly from 16.3% to 16.4%. You will have seen that the Board has declared a dividend of AUD 2.50, up from the AUD 2.15 in the prior comparable half. That reflected the earnings increase on the prior comparable period, but also the desire to have the composition of our dividend over the halves better reflect the composition of earnings over the half. The dividend is up 16% versus earnings up just 10%.
Sorry, 11. Apologies, earnings up 11. Looking at the contribution from the operating groups, it was up 10%. The annuity-style businesses were up 15% on the prior comparable half and the market-facing up 4%. You can see there the composition of each of the annuity-style and market-facing businesses in the two columns. You'll also see on this slide now we're showing across the two rows the businesses that are in the bank and outside of the bank. That is because this presentation is intended for our equity and our debt investors. It gives a clearer articulation of the banking versus the non-banking businesses. If we look at the five past halves, including this half, you can see that our trend is upwards on operating income, profit, and earnings per share.
Absent, of course, the very large step-up we had in the second half of last year, we had a high number of realizations in Macquarie Capital and a very strong half in a particular part of the Commodities and Global Markets business. Absent that, trending up nicely. In terms of assets under management, we're at record assets under management. Again, Alex and I will speak in a little more detail about what drove that. It is at AUD 563.4 billion. The main contributors at a high level were foreign exchange made a difference, market movements in the MIM business, and also investments in the MIRA business, partially offset by realizations in the MIRA business and net flows in MIM.
Looking at the diversification by geography, this will be quite familiar to you that at the moment we're making about 30% of our income from each of the Americas, EMEA, and Australia, Australasia, and the balance from the Asian region. We've shown there our 15,700 staff, but we've also shown across our managed assets, there's another 120,000 people we're responsible for in those businesses. We've shown where they all work and where the assets are which they work on by region. You can see here in terms of that diversification that we've had, again, a nice trend in terms of growth, across all of Australia, the Americas, and the EMEA region over recent halves. We had a particularly strong step-up, obviously, in the last half, and particularly in Australia where we had those realizations.
What is interesting is that Australia is continuing to grow, but our weighting to the Americas and EMEA is stepping up even, you know, though they are growing at a similar rate because they are growing in much bigger markets in absolute terms. Asia contributes continually solidly, and it is a great source of capital for our global business as well as being the fastest-growing region in the world and the place where the biggest contributor to world GDP is. Over the medium term, we are very committed to growing that footprint as well. Looking then in a little bit more detail at the operating groups, and Alex will take you in greater detail through the impacts on earnings from those groups. I would just note a few things.
First of all, Macquarie Asset Management, the result was up 32% on the prior comparable half and, as I said, contributed 39% of our income. Some of the features of that is that the equity under management is at AUD 134.4 billion. We raised AUD 5.6 billion in this half, including hitting our hard cap on our sixth European Fund, MAIF6, with a EUR 6 billion raise. Just after the half-year closed, in our Macquarie Agricultural Fund, Crop Australia, we also hit our hard cap of AUD 1 billion there. Together with that raising, we also were able to invest AUD 8.7 billion in the half, which meant our dry powder now is down to AUD 20.5 billion. We also were able to realize AUD 7.7 billion. You saw there were good performance fees generated out of that, up materially on the prior comparable half.
I'd also note the Aircraft Financing Business, as I mentioned, has come into that business. We've brought in PGGM as a 25% investor. The intention is to continue to bring fiduciary investors into that asset class because it's a good offering for our investors. We also see a lot more opportunity to invest beyond the capability of the balance sheet. With the MIM business, AUD 361.1 billion of assets under management, driven, as I said, mostly by market and effects, offset slightly by net flows. After the end of the half, we had the Forrester acquisition close, which is AUD 12 billion U.S. of assets, as we've mentioned previously. I'd also note that the Aladdin program, which is our global platform investment to help portfolio managers across that business, has now completed the U.S. phase and is rolling out around the rest of the world.
With Banking and Financial Services, basically good result there as well. It is up 2% and contributed, as I said, 13% of our result. Volumes are up in our deposits, our personal banking mortgage loan portfolio, our business banking book, the funds on the platform in our wealth business. That is slightly offset by a reduction in volumes in our motor vehicle leasing business. Alex will talk more about the contributors to result there. The underlying growth, again, just like the asset manager, is looking good in terms of the metrics that drive that for the medium term. Commodities and Global Markets, which, as I mentioned, contributed 40%, and 8% of that was annuities from the annuity-style portion of it, 32% from the balance. It is up 32% on the prior comparable period.
That was because the annuity-style businesses, the SAF book was broadly consistent, but the lending and financing businesses were down slightly. It was mostly agricultural lending where the demand was a little bit less. The rest of the business was basically up across the board. We had better results in foreign exchange and the interest rate business, driven by client activity across all regions. Also, in futures, we had a strong result, primarily driven by the U.S. In equities, we had a strong result as well, again, driven mostly by trading activities, this time in the Asian region. The only place where we've had challenging market conditions in that business is in the cash equities business in the U.S. and Europe. We're focusing now on our core capability in the Asia Pac region in that business.
Lastly, the commodity markets part of that business, very strong result across the board, in oil, global oil, both in physical and financial, and then in gas and power in the EMEA and the European region, and also in agriculture and metals and mining. We experienced favorable market conditions across all our businesses in CGM in this half. Importantly as well, we saw our customer base continue to grow, which is what drives medium-term growth. Just like the other three groups, very good underlyings in terms of medium-term trend. Lastly, Macquarie Capital, in this half only contributed 8%, and the result was down 56% on the last prior comparable half. The main drivers of that were, even though our M&A activity was up, that was offset by our DCM earnings.
You may recall in the operations briefing, we talked about how, as we grow into North America, we have a big focus on the sponsors as a customer base. They were very active in LBO activity in the first half last year and this year much less compared to that. The DCM earnings that we had in this half were much less than a strong half last year. We also had the CAF Principal Finance business move into the advisory and capital solutions part of Macquarie Capital, as I mentioned. That business is now pivoting from debt weighting more to equity weighting. It means the stable income that we had when the investments were more debt in nature have now moved to more equity-style income where the timing of realizations can vary more. We still saw good opportunities to invest there.
We made the PTSG investment, which is a fire and safety monitoring services business in the U.K., which we're very pleased about. In Dovel, which is a defense business that we had there, we made a follow-up investment in Ace Solutions. We're seeing good opportunity to keep investing, at attractive terms. In the infrastructure and energy vertical of that division of that Macquarie Capital business, we still continue to see great opportunity there, particularly in green energy, where we have 250 projects in development and construction and AUD 1.3 billion book there. We made another AUD 800 million of investments in Principal East Anglia One. We had about AUD 400 million of realizations, which were the offshore wind investment in the U.K. and the Covanta waste-to-energy asset in Ireland. Continuing again medium term to see good drivers of opportunity there.
The reason the result was down was because we had some development expenditure and also specific impairments in some assets in that area. That was Macquarie Capital. That was performance from the operating groups. In terms of the balance sheet, funded balance sheet is still strong. We had the AUD 1.7 billion equity raising in this half. We really appreciate the support we had from institutional and retail investors in that raising. It means our equity position is stronger, as you see on that graph. Also in terms of our debt position, our term funding well exceeds our term assets. We did AUD 10.8 billion more of new term funding. Alex will give you further detail of that. Our retail deposits are sitting comfortably, up 5% at AUD 58.8 billion. In terms of capital as well, the position is stronger over this half.
We had AUD 6.1 billion of surplus capital under the APRA bar three basis, at the end of the last financial year. We then paid out AUD 1.8 billion in terms of the dividends, for the full year last year. We've earned AUD 2.1 billion this year in the half. We have had the step-up of AUD 1.7 billion for the capital issuance, offset by an absorption of AUD 1.4 billion into our businesses, giving us an AUD 6.7 billion APRA bar three surplus at the end of the half. In terms of where we invested that AUD 1.4 billion, you can see on this chart that, half of it, roughly AUD 700 million, was largely comprised of the SACCR changes, the introduction of SACCR from the 1st of July, which impacted the Commodities and Global Markets business. In Macquarie Capital, we had a AUD 700 million increase in capital into that business.
Part of it is the DCM book at the point in time on 30 September had some larger balances we were holding. It is also investments of AUD 1.4 billion across IEG and ACS, net of realizations of AUD 700 million. We were expecting the foremost of two transactions also to close in that period, which would have lifted that AUD 700 million to AUD 1 billion and the AUD 3.9 billion across the year to AUD 4.2 billion. The foremost of two actually closed in October, so it is not included in these numbers. Our regulatory ratio is also sitting well above the regulatory minimums. In particular, the CET1 ratio is sitting well above the strict regulatory minimum of 7%, at 11% or 14% on a harmonized level at the bank group. The last thing I mention again is that our dividend was AUD 2.50 that the board declared for the first half.
That's up from the 2.15. It's a 61% payout ratio. I explained the factors that drove that step-up. With that, I'll hand over to Alex, who will take you in much more detail through the operating results by group and across the whole Group.
Thanks, Shemara. And good morning, ladies and gentlemen. As Shemara said, I'll take you through a little more of the detail of the financial statements for the half. Starting with the income statement, operating income for the period was up 8%, driven by an 8% growth in net interest and trading income. A similar growth in our fee and commission income across the Group. We had a 38% step-up in our investment income, offset by an increase in credit and other impairment charges, as you see coming through the P&L there. Overall, operating income up 8% for the half. In terms of operating expenses, up 9% for the half for where we were this time last year. Largely, that reflects an increase in the employment expenses. There's a couple of things happening there.
The increase, the negative effect of foreign exchange depreciation of the Australian dollar. Also we had an increased profit share based on the operating performance of the Group, and also an increase in accelerated share-based payments expense as a result of the retirement of key management personnel through the half. Operating expenses up 9%. From a tax perspective, income tax expense flat for, broadly, where it was this time last year. Overall net profit up 11% for the period. In terms of the income statement by operating group, you can see the big contribution there from Macquarie Asset Management, up 32% from where we were in the first half of 2019. Similar increase for CGM, again up 32% for the period, offset by that result in Macquarie Capital down 56%.
You can also see the increase in corporate reflecting share-based payments expense and profit share expense across the Group. Turning to a little more of the detail for each of the operating segments, you can see Macquarie Asset Management up 32% from where we were in the first half of 2019. Base fees up 8%, largely reflecting the investment through the MIRA business, the investments we made in the first half. Really strong performance from a performance fee perspective, nearly double what we had this time last year. The interesting thing about the performance fees is just the breadth of where they're coming to. We are seeing performance fees out of our European funds. We are also seeing performance fees out of the United States, and also here in Australia through some divestments we've done down here.
It's great to see the breadth of that performance fee income coming through. In terms of the net operating lease income, down a little bit on where we were last year, that really reflects the completion of the sale of our aviation portfolio into the joint venture with PGGM. That happened at the end of July. We had a small decline in the net operating lease income coming through that portfolio, partly offset by an increase coming through from the rotorcraft acquisition that we made and we announced to the market at the end of our full year results for 2019.
You see expenses up, a little bit, suffering from the foreign exchange movements, as well as an increase in headcount, largely the full year period effect of GLL and the value invest acquisition that we made across the MIRA and MIM business respectively, that we talked about last year. Overall up 32% for the period. In terms of the drivers, assets under management, up 2%. Largely that reflects the deployment of capital through the MIRA business. You can see nearly AUD 12 billion increase in assets under management through that. From a MIM perspective, flat on where we were last year. We had outflows across small fee earning, fixed income, and general insurance account, balancing, favorable impacts from an FX viewpoint and market movements that we saw coming through the markets over the course of the period.
In terms of the key driver in the MIRA business, equity under management, as we've talked about before, up 5% to AUD 134.4 billion. A strong period of capital raising, AUD 5.6 billion of capital raised during the period. Primary drivers of that were the completion of the, of the MAIF6 raising at EUR 6 billion. A very pleasing result, in terms of our sixth European fund. We also saw capital raised in our real estate asset management platform. We've talked before about our desire to increase our, our focus and, and exposure to the real estate asset management business. We also sold out a 25% interest in our aircraft portfolio, which is coming through, or partly a 25% interest coming through, equity raised during the period. We ended the period with AUD 134.4 billion. Of course, that's a key driver of the performance of the business on a medium-term basis.
In terms of the second of our market annuity style businesses, the Banking and Financial Services business, up 2% from where we were this time last year. A continuation of the strong result in our personal banking business. Our mortgage volumes on average basis were up 14%. We saw our business banking down AUD 15 million from where we were in the first half of 2019. Largely that reflects a few small impairments in our business banking book that we had to take during the period, partially offset by the increase in volume that we saw in loans to our SME clients across Australia. We also saw a decrease in the contribution from the wealth management business. That reflects the reposting of that business to the high net worth segment. We saw some revenue come out of that business.
You see also a decrease in costs. The headcount in BFS has come down from about 2,900 this time last year to 2,600. That largely reflects the, again, the focus on the high net worth segment, and therefore the headcount's come down. Overall up 2% from where we were this time last year. In terms of the underlying drivers, as Shemara mentioned, really strong result across mortgages, across the business loans, the funds on platform up at AUD 91.5 billion now, and deposits. Partial decline, a little bit of a decline in our mortgage, in our motor vehicles business. I think as everyone will be aware, new car sales in Australia obviously down, so that's partly coming through.
We also saw the continued run-off of the Esanda Portfolio that we bought in 2015, as well as a smaller, lesser exposure to dealer finance across the country. In terms of the first of our market facing business, the Commodities and Global Markets business, really strong period, up 32%. Continuation of the strong performance that that business has had over several periods now. I think reflecting the scale of the platform that the team has put together. A pleasing result from the commodities perspective, up AUD 243 million. Notable, I think, is the increase in income from risk management products. That is where we are providing hedging, price management solutions across the commodities complex.
We saw a strong period of activity there, reflecting the growing customer base, reflecting also the environment that that business, or our clients around the world are experiencing. Good contributions from global oil, good contributions from our European gas and power business, our North American gas and power business. Also we saw an improved performance from agriculture, metals and mining, gold, gold hedging in particular coming through during the period. Strong result from risk management viewpoint. In terms of FX interest and credit, we saw a continuation of that growth story we've seen over the last little period where we're providing largely FX type solutions to clients around the world, working a lot more with corporates and also private equity.
We saw an increased contribution from a number of regions, you know, Asia, the U.S., and also Europe. It is good to see that business building out. In terms of equity, as Shemara mentioned, we had a better period for our warrants business in Asia in particular, I guess reflecting the volatile nature of markets up there. There is an improved result from that. We also saw some opportunity in our index arbitrage business in Asia, and we saw some revenue coming through from that activity as well. Expenses were up during the period. We are investing in technology, in compliance, in regulation to support the growth of the CGM business and obviously meet our obligations around the world. We saw some headcount step up there.
Of course we saw the impact of unfavorable FX coming through that business as well. Really strong performance overall. You can see, we put this chart up for the last few results. Underlying driver of this business, of course, is the growth in the customer numbers. You can see that continued growth in commodities. You can see the continued growth in financial markets, and in futures. That's a good sign in terms of dealing with more clients across more products in more geographies and underpinning the medium-term outlook for that business. In terms of the specialized and asset finance portfolios, the business we moved from CAF into CGM, you can see the book is largely flat there from where it was this time last year.
We'd expect a consistent performance from that business going forward. In terms of Macquarie Capital, a more challenging path, down 56% from where they were in the first half of 2019. I'll take you through a little bit of the detail of the movements. In terms of the investment income, you can see down AUD 23 million for the half. We had a lower contribution from interest income on the debt book that we moved from principal finance into Macquarie Capital. We also saw a larger share of losses coming through joint ventures, including, as Shemara mentioned, one asset in particular where we've had to take an impairment through an associate. That was offset, or partly offset, by a really strong period of realizations in our green energy investing business in particular.
See the returns from that up, 20% in terms of realizations. We had a couple of very significant realizations during the period, including the Dublin Waste to Energy asset, as well as a portfolio of U.K. offshore wind farms that we acquired as part of the green investment group acquisition back in 2017. We have now been able to divest that successfully during the half. In terms of fee and commission income, you can see down AUD 111 million. Largely that reflects a more subdued environment for our debt capital markets business in the U.S. As Shemara mentioned, the LBO market, particularly the private equity activity in the second and third quarter, was a little lower. That has come through our DCM business, partly offset by an improvement in our M&A business, particularly here in Australia.
We saw an increase in credit and impairment charges over the period. A small number of positions across the Group which are underperforming our expectations. As a result, we had to take some impairments during the half. You can see an increase in operating expenses. Partly that's the effect of foreign exchange coming through, but also the Group is investing in additional resources, particularly in our advisory and capital solutions business in the U.S. and Europe, where we've added teams of people to focus on sectors where we think we have comparative advantage. We've also been adding headcount to our infrastructure and energy group. You know, one of the things we're seeing here is that the business is moving, I guess, more toward the development phase of activity. You can see there are 250 developments that the team are working on around the world.
In the IEG business in Macquarie Capital, they've been adding staff to support that development activity in all sorts of parts around the world. We saw a step up in operating expenses to support that activity. Pleasingly, we saw an increase in the capital that the Group has invested in Macquarie Capital alongside Macquarie Capital's clients. We increased the capital by AUD 700 million. You can see in the block above, investments, you can see where a large portion of that activity is occurring. It's really coming through the green energy portfolio, particularly East Anglia One, which is a large transaction the team did for a U.K. offshore wind asset during the half. You can see those realizations coming through again. All of the realizations have been in that green investment area.
Overall we have AUD 3.7 billion invested alongside Macquarie Capital at the end of the period. Obviously that cycle of investment and realization is something we've talked about before. The AUD 3.7 billion should augur for good results in terms of future periods for Macquarie Capital. In terms of the group activity, maybe just to summarize a little bit of that, cost of compliance, a slide we put up now for a few years. The finance industry does continue to see an increase in compliance, in regulation, investment in technology and data, and so on to support our activities around. We're no different from the broader industry. We did see an increase in compliance spend of 15% from where we were in the first half of 2019.
My expectation is that we'll continue into the medium term. In terms of balance sheet highlights, a strong period of fundraising, nearly AUD 11 billion of term funding raised during the period. Unlike in the prior halves where a lot of the activity's been in the Group, the last six months we've seen a lot of activity in the bank supporting the growth in our BFS business, in the lending activity in BFS together with the activity in CGM. Well supported by a whole range of investors around the world. A familiar story. We continue to diversify the sources of funding supporting our Group. In terms of the weighted average maturity across the Group, 5.1 years.
We have funded ourselves, we think, conservatively and with some length to support the activities of the Group around the world. In terms of the deposit growth, up 5% on the period. If you sort of wind this back to 2013, about an 8% per annum growth rate in deposits. Very pleasing to see continuation of the deposit growth across the Group. In terms of loan and lease portfolio, down a little bit on where we were this time last year. If you look at the middle of that page, you will see operating lease assets down from AUD 8.9 billion to AUD 1.6 billion. Largely that reflects the movement of the Macquarie Aviation business from an on-balance sheet business into the joint venture we formed with PGGM. That reduces our operating lease assets.
You can see that partially offset by the growth in the retail mortgages and in the business banking that we've talked about. I've talked about before in relation to BFS. In terms of the equity investments, up from AUD 5.9 billion to AUD 8.5 billion. The other side of that transaction we've done with Macquarie Air Finance is our remaining 75% interest in that business. You can see that on the second line down, the AUD 1.6 billion. That's our equity. We have invested in that, in that aircraft portfolio. As Shemara mentioned, that's now been moved into Macquarie Asset Management and is more of a fiduciary type offering for our clients. In terms of the regulatory update, there is a lot going on. APRA currently undertaking a series of reviews across the financial services industry of which we're a part in many cases.
I wasn't planning to go through in detail. This is a slide that we've had up for the last few results presentations. The only thing I would note is that based on our current, the currently available information, the strong surplus position that Shemara referred to before, we'd expect that any additional regulatory impost as a result of the reviews we can accommodate within that strong surplus. I would note, of course, that some of those discussions are still at an early stage of discussion and uncertainness of the outcome. In terms of the United Kingdom, I'm pleased to say we have now secured our banking license in Ireland. We now have all four licenses that we required to operate in Europe. It is a very, very pleasing result.
No update in terms of the disclosure we've made in relation to the German matter. As you've come to expect from a CT1 viewpoint, a strong CT1 ratio, 11.4% at the end of the year. The move largely reflecting the impost of SACCR that came in from the 1st of July, 2019. You can see that down 11.4% now with a strong CT1 ratio as you've come to expect. Similarly from a liquidity position, strong liquidity position across the Group. In terms of capital management, we raised just under AUD 1.7 billion during the period, AUD 1 billion from institutional investors, AUD 670 million from retail investors through the share purchase plan. We are very happy with the support we received during the period.
As Shemara mentioned, the Board today has declared a dividend, an interim dividend of AUD 2.50, franked to 40%. We are endeavoring to more closely align the interim and the final dividend, with the timing of earnings. Based on our guidance for 2020, it is likely to lead to a lower gap between the interim and final dividend per share for FY2020 than we have seen in recent years. The Board, of course, has maintained a dividend policy between 60%-80%. With that, I will hand back to Shemara. Thank you.
Thanks. Okay. Thanks. I'll now have a look at the outlook both for the short and the medium term. Starting with the short-term outlook, and again looking at it by operating group as we always do, Macquarie Asset Management, as you've seen, base fees were up on the prior comparable period in the first half. We expect base fees to be up over the full year compared to the prior year. On performance fees, investment-related income, net of impairments, and net operating lease income, we expect this to be broadly in line over the full year. Turning to Banking and Financial Services, we, as we guided at the beginning of the year, see higher deposits, loan portfolio, and platform volumes. We also see competitive dynamics continuing to drive margin pressure in that business.
For the Commodities and Global Markets business, you saw the strong customer base as well as the favorable market conditions driving results in the first half. We expect that strong customer base to continue to drive consistent flows across all of our businesses in fixed income, in futures, in foreign exchange, and commodities. With the Specialized and Asset Finance business, as Alex said, we expect the stable balance sheet to drive the results in that business. Now, the first half of this financial year, as I said, did benefit from favorable market conditions across the whole platform. We note that those have not persisted historically. Lastly, with Macquarie Capital, we are assuming market conditions will be broadly consistent with the 2019 financial year, and we expect a solid pipeline of investment realizations as well.
We do not expect investment-related income to be as high as last financial year where we had those big realizations of Pexa and Quadrant in the second half. At the corporate level, compensation ratio, effective tax rate, and mix of business, we expect to be broadly in line with FY2019. Putting all that together, we would note that the impact of future market conditions does make forecasting difficult. With that in mind, we continue to expect the Group's results for FY2020 to be slightly down on FY2019. Our short-term outlook, of course, remains subject to a number of factors which include the completion rate of transactions and period-end reviews, market conditions, impact of foreign exchange, potential regulatory changes that Alex said through tax uncertainties, and the geographic composition of our income.
For the medium term, we continue to remain well positioned to deliver superior performance. I have talked about the drivers in each of the operating groups, but basically we sum it up, the deep expertise we have in our key markets and the strength of the business and geographic diversity we have that gives us resilience. We also have an ongoing program to identify cost savings and efficiency initiatives. We also benefit from our strong and conservative balance sheet and our proven risk management framework and culture that we have had over the last five decades. The last thing for me is just to look at the ROE across the businesses over the last 13 years and in this half year. For the annuity style businesses, that was 22% for the last 13-year average and 24% in this half.
For the market-facing businesses, that was 16% for the last 13 years and 18% in this half. After allowing for our surplus capital at the group level, at the full group level, it was 14% over the last 13 years and 16.4%, as I mentioned, in this half. With that, I'll hand back to Sam to take questions. I would note that here in the front row, we also have a few of our executive committee members and group heads. Nicole Sabara is the Head of our Corporate Operations Group, Michael Herring, the Head of our Legal and Governance Group, Greg Ward, as I mentioned, Head of Banking and Financial Services, and Florian Herold, the Head of our ex-CAF Principal Finance business but now running the Principal Investing in Macquarie Capital in ACS and a fellow executive committee member.
As you know, with a very global leadership team now, the rest of our executive and management committee are in places like Houston, New York, London, San Francisco, and Hong Kong as well. They sadly are in Philadelphia. They sadly are not with us in the room. Alex and I will try to cover on their behalf. Thanks, Sam.
Thanks, Shemara. We'll start with questions in the room. I'll start with Andrei.
Good morning. Andrei Stadnik from Morgan Stanley. Can I ask two questions? They're slightly related. The first one, in terms of performance fees, there were a number of funds that dropped performance fees in this half, you know, in particular MAIF1 and 3. The funds that dropped performance fees in this half, are they still open for business so they could drive further performance fees in the second half? Specifically, MAIF2 was missing from that list. Is MAIF2 getting closer? The second question, just thinking more broadly about the asset realization outlook, some of your global peers, in more of the parametric side, have struggled to complete the realizations recently given some market volatility around value versus momentum.
How are you thinking about, you know, the asset realization outlook, you know, in the period ahead, you know, given, you know, some of the recent changes, on, you know, investment appetite?
Yeah. First of all, covering the question on performance fees and where they've come from, what's been pleasing about this result is we've had a huge range of where performance fees have come from, not just in the infrastructure funds but also across real estate, et cetera. This half, you mentioned MAIF1 and MAIF3, the Brussels realization, which we had recognized largely in the prior half, was finalized in this half. We had some performance fees from that that impacted MAIF1 and 3 that hold that together. Our first North American fund, MAIF1, sold its final assets, so Puget and the ports that it had, Halterm and a Pennsylvania port. We had performance fees from that fund, which is pleasing because it was invested at the time of the global financial crisis but still delivered a performance fee result for investors in the fund.
There is one small port left in that Fraser Surrey Docks. We also in MAIF2, the second North American fund, had realizations that delivered performance fees. That fund has got a few assets left in it. I'm just gonna have a look to remind myself, Midtown Tunnel, Broad Rock, Renewables, Leith River, and still a portion of the WCA waste asset. MAIF2 was also a GFC period fund. It will be touch and go whether we have performance fees in that. The APRR road is in there. Archive is in there. I think the check towers are held between MAIF2 and 3. There is a really broad range of funds now delivering performance fees across the whole platform.
I think, you know, as we mentioned in the outlook, we expect in this full financial year to have performance fees and investment-related income, net of impairments, in line with last year, which was a good year of performance fees. In terms of realization of assets, you can see that we're managing to realize assets very well, particularly the MAIF1 result where that was a fund where at one stage was not gonna hit its hurdle for performance fees. We're actually managing Puget was exited there, being Washington State Utility. There was very strong demand for that. Part of the driver is there are a lot of other infrastructure funds with dry powder that need to get investors. We see interest from them. We're also seeing strategics and direct investors show a lot of interest in these.
You know, it's a world where there's AUD 300 trillion of savings where returns are low in terms of traditional fixed income and equity returns as equity markets taper off as well. There is a lot of appetite for these long-duration defensive yielding assets, which you're seeing in the huge amount of money flowing to funds in this area. We haven't had to pull any realizations over the last years. We're seeing good demand for things that we bring to the market. You know, we also had, I should mention, realizations in Australia with the GIF funds. Hobart Airport was realized. We've had performance fees come through in those series of GIF funds as well, which are Aussie funds. Again, really good demand for those assets. Gdansk was another asset we realized in GIF as well, the container terminal in Poland.
Jon, thanks for coming front. Thanks.
Thanks, Jon Mott from UBS. I'm gonna follow on just from a comment that you said then. A lot of infrastructure funds have dry powder and want to buy. If you then compare that to the chart that you've put up, especially for NATCAP, you can see that there's a lot less equity investments going into traditional infrastructure, especially when you compare to that slide that you would have put up two, three, four, five years ago. It's now moving more and more into green energy. I wanted to get a feel when you move out of infrastructure more into green energy, what are the IRR opportunities that you're seeing now? Is it much? Is this a less competitive area, less developed, an area that you think you can get higher IRR in green energy than traditional infrastructure?
Is there also a different risk profile given you're going more into development in green energy? You're therefore taking more risk as to get the higher IRRs?
Yeah. What I do first is distinguish between investments we make on the balance sheet and investments we make in the fund. The funds have a mandate from our investors to invest in more operating-type assets that are moderate return but certainly much lower risk. Further along the development curve, to the extent we're looking at renewable energy in the funds, we're looking at operating assets. On the balance sheet, we're much more a developer and creator of assets. We've always done that. In green energy, the balance sheet historically was investing a lot in construction phase of assets. We're still continuing to do that where, because of our deep presence in that sector, we're sourcing good construction assets still. We're doing more development investing as well.
That's where we're finding the best returns for the balance sheet are at the moment in development. The checks are smaller and the hold period shorter, but the complexity of execution is greater. That's why Alex mentioned we're investing a lot more in people and headcount and growing that expertise. We had a very deep expertise initially in Europe. Then we had the Green Investment Group team come on board. We have about 350 people in that area at the moment. We've been growing more into Asia and into North America. Here in Australia, we've done two wind projects and one waste to energy. Basically what we're finding is we need to pace our growth with how much we can build the expertise and the team.
We are being patient about that and learning our way as we go more into Taiwan, Japan, Korea, across the U.S., et cetera. There are different risk-return offerings on, you know, for the funds versus the balance sheets of funds. Funds are just raising our renewable energy fund, and that will be focusing on operating assets. Previously, the infrastructure funds invested in that space. For developed assets, the returns have come down because there is a lot of demand for renewable energy assets. We have raised a pool of money from fiduciary investors who want to invest in developed assets at the return that is available now. In the meantime, the balance sheet is creating assets there. We are finding, you know, with all the dry powder that is in the world, exit is easier at this time of realization. Investment is what is challenging.
Ultimately, it comes back to the capability of our people, whether it's on the balance sheet or in funds, to source investments that are not seen by others and where our expertise, our human capital side can be delivering superior return on the balance sheet or sourcing them for the funds as well. You'll see the funds are still managing to get well invested. In Asia, there's less competition. In North America and Europe, we're having to focus in the areas where you get better returns. You know, a lot of communications assets in the Americas, fiber optic networks, data centers, carrier hotels. Anything, Alex, you wanna add?
The only thing I was gonna say, Jon, is that, in the infra, there's still quite a lot of activity in the traditional infrastructure space within Macquarie Capital. It's obviously small. It tends to be smaller check sizes because it's tend to be us developing PPP-type activity. We refer to the Silvertown Tunnel and the A9. That's traditional infrastructure investing. It tends to be a small dollar amount, what you're seeing coming through the balance sheet. East Anglia One, for the sake of example, is a construction-savage asset. It's a bigger dollar commitment there. Most of that development activity, whether it's infrastructure or renewables, a lot of that's certainly early stage. We're expensing that so that, you know, you're obviously at a point where you're developing the asset.
At some point in that development phase, it gets to a point where you start to capitalize those expenses when you feel like you've got an asset. A lot of what we're seeing coming through the P&L is actually expenses on development activity.
We mentioned at the half, at the operations briefing, there's another AUD 4 trillion of capital by 2030 estimated to be needed to be put into renewable energy projects. There is a lot of capital needed. There is a lot of expertise needed. That is probably where the constraint is because we really are originating these projects around the world, having to, you know, set up the regulatory framework, get permitting, get grid connections, bring operators in, debt providers, equity, et cetera, go through constructions.
Brian, just on the front. Thanks.
I had two questions if I may. The first one is we talk a lot about MIRA, which no doubt is a powerhouse. But MIM, once again, the AUM basically looks flat. And there's one area of disappointment is that it hasn't, it just doesn't seem to grow the way it should. Could you just run us through why and what can be done about it? The second one is I'd just be interested to find out because your equity account, these development projects, when you go in principle in green energy and they're presumably making an accounting loss in the early period, the investment is basically going down but the expense goes through the P&L. Is that correct? The carrying value ends up being quite conservative?
Maybe I'll take the second and then we can talk about the first. Yeah, certainly, those early stage developments, Brian, where it's an idea or where we're in early stage of development, typically that's been expensed through the balance sheet. Partly that through the P&L. Partly that's coming through equity accounting losses. And so where it's equity accounting losses, we'll have a, it'll be, we'll be in partnership with somebody developing an asset. It's also coming through other expenses because in some cases we're actually doing this development on our balance sheet. Generally speaking, in early stage, we're expensing those development expenses. Obviously, at some point along the way, you get a CFD, you get a feed-in tariff, you get to a point where you actually start to create an asset.
Generally speaking, yeah, it's being expensed through the P&L, certainly for early stage investment.
With MIM, it's basically a multi-boutique business. We have equities teams. We have fixed income teams. The place where we've had the outflows is in fixed income, a large insurance account, as well as a large fixed income mandate in particular in this half that are single-digit basis point fees compared to the equity strategies that are 60s, 70s. If you look in the MD&A, you'll see the equities portion in MIM is up. The fixed income is down. Even though we have net flows that in AUM are negative, you know, the main focus, I guess, is on the fee revenue and base fees are up. MIM is impacted a lot by each of those boutiques and what's going on. There are areas in which, you know, U.S. large-cap value, emerging market equities, we have some large equity boutiques.
Fixed income, we have the big team in North America, the team here, and we're integrating the team much more globally over recent years with the team in the U.K. and Austria as well. Did you wanna comment?
The only, only other thing I was gonna say, Brian, on the, on the MIM piece is that at the end of the day, it's performance of the underlying teams. We look at the three and five-year performance. About 80, a little over 80% of the strategies that we have in place are actually outperforming their benchmarks over three and five years. The team's very focused on making sure you deliver good return to investors. We're making some investments in the, in the platform to ensure, to ensure that the operating platform, you know, is, is fit for purpose and delivering to our investors. At the end of the day, you know, that performance of the underlying, portfolio management teams is, is we think are key to driving the success of that business.
Because it's small, that is the driver rather than the cyclical flows to growth or value, et cetera.
Okay. Andrew?
Thanks. It's Andrew Treats from JP Morgan. Just a few interrelated questions on NATCAP, please. Firstly, if you could just sort of help us with an idea of what the medium-term ROE profile looks for that business, given continued capital deployment in a sort of disappointing period this period and some restatements, inclusions into that group as well. Two questions on the green energy space. Firstly, you mentioned some underperforming green energy assets. Just a bit of a flavor for the nature or geographies of those underperforming assets. Just the, an update on, I guess, the competitive nature of the market. I'd understood that the offshore wind market had become quite competitive. I do know that's a couple of areas of recent investment for the Group.
Yeah. Okay. There were questions in terms of the ROE for NATCAP, what the green investment opportunity looks like. And what was the third one? Was, where the underperforming assets were. Was that right? Just in terms of the NATCAP business, there are so many elements to it. In the infrastructure, infrastructure and energy and the ACS, there's a fee-based element to it, in both of those businesses. And then there's a principal investing portion of it. In the fee-based side, this half's impact, as we said, was impacted by what happened in DCM, where we had a strong LBO performance in the prior comparable half for our sponsors. And that did not happen in this period.
Also in terms of the fee-based side, the CAF principal business, which was earning a lot of debt returns as the book has weighted more to equity, has less of that ongoing income. Both of those were factors in the NATCAP result. If you have a look at the page where Alex mentioned the period-on-period movement, a lot of the step down was in that fee and commission box. It was AUD 111 million. I do not know if you have the page handy to put up. Whereas the investment-related income was only a AUD 23 million turnaround. There is the page there. Yes, AUD 111 million. The operating expenses were up as well, which is AUD 89 million of the turnaround. I mentioned we are investing for the medium term. The headcount is up in both of those verticals.
The investment-related income, which is where the impairments come in, Alex mentioned it was particularly one asset that we had that offset some of the gains that we had on realizations of things like the offshore wind asset in the U.K. and the waste asset in Ireland, and the devics that we expense there as well. In terms of that specific asset, are we compared to share?
As Andrew said, a position we've got in one of the Asian assets.
It's one of the reasons that.
Yeah, it's regretting to the particular asset. You know, we continue to work on these things. Even when we take the impairment, obviously the team, you know, is in there trying to make sure that we achieve the return we expect in the first place. It's an Asian exposure.
The timing of realizations is impacting that half within half. That is why in this half, you know, we had less realizations versus the prior comparable half. You were asking about competition in offshore wind assets. For developed assets, it is very competitive now. The required returns have come down basically to single-digit levered IRRs in developed assets. In the developing and the construction phase, there are still very good returns to get, particularly, I mean, East Anglia One, we came in late stage in construction. There is not long left to run. We have come in at returns that we are very happy with and with a partner we are very, very happy with. Hopefully we will continue to see some of those late stage construction opportunities just because of our relationships and what we bring to partners.
We will be doing a lot more at the development stage. So the, you know, the two wind farms and the waste project we did here, we started from blank dirt and built those.
James? James Ellis.
Just two questions. Firstly, effective tax was a little bit lower during the half. Just wondering if that was merely compositional mix or are there other factors driving it? Then secondly, the compensation expense ratio was higher in the half compared to both two sequential halves. Just wondering if you sort of stripped out the accelerated amortization of executives for retiring executives, whether there was any underlying movement.
Yeah. I'll let Alex comment further on the ETR, but it was composition related. On the compensation ratio, there were two main contributors, as you pointed out. It is the amortization in terms of the senior retiring executives where, you know, we had a big lineup between Nicholas, Ben Brazil, Andrew Down, Gary Farrell. The other contributor was our headcount is up, because we are investing a lot. I mentioned in Macquarie Capital, we're investing to build our capability, but also in BFS and CGM. We're investing a lot in terms of technology at the businesses' behest. I don't know, Greg, if you want to comment, but in the environment we're in today, technology is a big part of how you compete.
Nicole, I do not know if you also want to comment on CGM, but that is driven, the compensation ratio because we put on a lot of headcount in those areas like tech finance projects that we are doing, regulatory, et cetera. Do you want to?
I guess we've, a technology piece that we've reinvested. Headcount is down, but we've reinvested in the technology space where, a lot of the headcount there is more expensive. So that's probably had a little impact on our comp to revenue ratio.
Yeah. The direct headcount in BFS is down, but the tech teams that sit in Nicole's world is where we've been investing.
That's right. From a CGM perspective, there's a lot of investment around regulatory compliance, data architecture as well, more automation, front to back.
Yeah. Like, I mean, like all our peers in the industry, we're investing a lot in these areas. That was another driver of comp expense. If you think about.
In terms of the, yeah, in terms of the ETR, we operate in a range of different markets around the world, James, with different tax profiles around the place. The primary driver this half was a combination of where the income's being generated. Some of those markets offshore have lower effective tax rates than here, but also the nature of some of the income coming into the group as well, where there's different tax regimes that are applicable for different jurisdictions around the world. A combination of those two things.
Richard?
Good morning. Richard Wiles, Morgan Stanley. Shemara, yesterday, ANZ told us they're lowering their hurdle rate, partly because interest rates are lower and partly to make sure they don't miss out on any, any growth opportunities in their institutional bank. I'm interested in how you're thinking about your hurdle rate. You clearly are getting good returns. You also seem to be finding plenty of growth opportunities. Would you consider lowering your hurdle rate in order to accelerate any of those growth opportunities?
Yeah. ANZ, a part of our business overlaps with ANZ's business. That is principally the business Greg does in Banking and Financial Services. I think in that sector there are challenges. Greg is still managing to generate very good returns, partly through, as he talked about, the investments we are making in technology, and the service we offer to our customers. I think, Greg, you have had very good growth in your mortgage and your business banking book, basically because of agility and ability to service customers. We are not dropping hurdle rates in BFS. Did you wanna?
Yeah. No, we're not dropping hurdle rates in the retail part of the business. I think ANZ's ROE is about 10.9 or something like that. I suspect on the retail side it's higher than that and might be a bit lower on the institutional side, but I haven't looked in detail. We're finding really strong growth as you saw in mortgages. We'd like growth to be faster in business banking. We think we can do a better job of growth there. The returns on equity and wealth are very good. Where it is lower is in the motor vehicle space. We are finding some good efficiencies there, and we think we can lift those returns over time.
At the moment, you know, we think, we do not think we are missing any growth in the retail space through our prices at this point in time. There are no plans at the current point to lower ROE hurdles.
So.
Charges more broadly.
Yes, I was gonna say. Greg's business, and, you know, it stepped up really impressively bringing the motor vehicle leasing business in and aligning that to customers. We have seen very good growth in that business. As you saw, it is 13% of our income. The other businesses around the world, we are not changing our ROE targets in this environment. We still are seeing, you know, the MAM business is very high ROE because it is not a capital-intensive business. We are continuing to grow assets and earnings-based fees and performance fees. The capital required for that is basically to seed and bridge investments and then to align our investment. We are getting much greater leverage as the business grows. For example, MAIF6 was a EUR 6 billion fund, and we co-invested EUR 60 million. We used to put in EUR 50 million when the funds were a billion.
We're getting much better leverage of our capital in that services business. In the commodities business, that is more a balance sheet-based business. Again, we're able to leverage in terms of the service income that we generate there, the returns much better. You saw that the market-facing businesses between them generated 18% in this half. It was up on the 16% average over the last 13 years. We're still finding that we're able to invest capital at similar attractive returns. You know, we're very disciplined about looking at our returns as well when we put capital out of the door as well. Anything further on this?
I'll take one from Ed, and then we'll go to the line.
Thanks. It's Ed Henning from CLSA. Just a couple of quick questions. Just following on that, on BFS, you mentioned a lot of investment in systems there. Can we expect continued costs to drop out of BFS once the investment's done? Just secondly, a clarification. In the CGM outlook statement, you removed the comment, reducing impact from impairments. Can you just touch on where the impairments are coming through in the CGM business, please?
Yeah. Sure. I might let Nicole and Greg first, talk about technology. Either of you or both of you, do you want to?
Yeah. No, we do expect to see costs continue to come out. You have seen that, in this prior half and in this half in employment costs. Now, part of that is, as Alex explained, the concentration in wealth to the private bank, higher net worth segment. Part of that is just efficiencies, as well. About 300 headcount reduction. We see that continuing over time as we have just got the first release of an originations platform in business banking. That has taken 55 weeks to build. That is the first part of that. That will improve over time the efficiency of our business bank operations and credit areas, which means we can do more volume with, you know, a less number of people. There is a continued investment in the personal bank.
We've had these very big volume increases in mortgages, with less headcount in the personal bank overall. That's from the origination and core banking platforms that we've invested in there. That's been a positive thing. Likewise, in wealth management, we've just started, and we're three or four application releases into replatforming the wrap platform. We think when that is done, eventually that will also generate further efficiencies in the wrap business. Likewise, might I say, in the leasing business, we have identified many manual bespoke processes in our motor vehicle leasing business that we think we can automate and make that a much more efficient platform as well. In this period, we've seen our cost to income reduced by two percentage points, and we think that trend should continue.
Then technology stuff, where the projects will come off. Nicole, did you wanna comment?
I think Greg will see a sustained level of investment in technology because it is great, resulting in a lot of the savings that Greg is talking about. Also, we are accelerating our infrastructure program. We continue to move to the cloud, so there's a level of investment there, but then the ongoing run costs will come down.
Yeah. We're basically investing to reduce the long-term investment there. You asked about impairments in CGM. I think we took them out because they're immaterial now relative to the other factors. I think we had, in the prior comparable half, it was an 864 result, and we've had a 1.138 in this half. We focus more on what has driven the step up and what will impact the full year in terms of where we see outlook. The impairments are just now immaterial in that context.
We'll go to the line. We've got a caller on the line, and then we'll come back to the room.
Thank you. The telephone question comes from Brendan Sproules at Citi. Please go ahead.
Good morning. I've just got a couple of questions. Just firstly, on your business capital requirements for slide 18, you've actually had quite a bit of investment across the businesses, particularly Macquarie Capital and the commodities business over the last sort of two or so years. You have also had a high period of realizations. Could you maybe talk to the outlook for that gross investment looking forward, across the business lines? I have just got a second question on tax.
Sure. Principal investing is a large part of Macquarie Capital's business together with the advisory services. I think we'll constantly see investment and realizations just by the nature of what we're doing there. There are a whole range of sectors we invest in. As we discussed, in terms of the renewable energy sector, we're probably going to see smaller checks, shorter-term holds as we move more from construction phase to development phase. The average hold there is about one and a half years. You know, Alex can expand if he wants to, but one and a half to two years. It is quite quick holds, and the balance sheet's turning quite quickly. We are looking for pretty attractive returns because it's at the higher risk end of the curve.
Equally, we invest in things like Quadrant Energy that we realized last year, which was held for about four years, four to five years as we work through redeveloping and repositioning that asset for sale. We have other things like Pexa, which was there for six or seven years where we were looking at rolling out e-conveyancing nationally. Could have held it a bit longer but received an offer that we thought was attractive at the time. The hold period will vary, but there will be constant investment and realization. The check size will vary as well by sector. We really focus on where we have deep expertise. Infrastructure and energy is one of those areas. With the CAF principal moving into Macquarie Capital, we are looking at a whole broader range of sectors where our bankers are deep in sectors originating and structuring.
The CAF principal team have expertise alongside with the Maccap ex-principal team in due diligence and investment. Florian, I do not know if you want to comment briefly on investments versus realizations because we have got Florian here as well. We will move on to your second question.
Not much to add, other than to say that we've had a decently strong origination, last 6 to 12 months. That'll take some time until realizations follow from those investments. Our current focus and activity level has been weighted towards the northern hemisphere as opposed to,
Yeah. You're probably seeing a lot more opportunity now with the two teams together as well, I presume.
Yeah, exactly. The, sort of bringing the teams together, integration has started off really well with new opportunities coming out of the advisory network and the client relationships that exist around the firm, which benefits us greatly.
Your second question?
Yeah. Just on the tax, it's just the, some of the benefits we've seen in this result of performance fees and obviously commodities had a very good result, you know, in that broader markets business seem a little more offshore. To get sort of a broadly aligned tax rate, you'd have to, it would have to shoot up in the second half. What are some of the factors? Should we be forecasting a sort of a 24% tax rate to get back to the average of 22% in the second half?
Alex was reading your mind 'cause he just wrote me a note in the second questions on tax. I'll let him, I'll let him answer.
I think I didn't read your mind. I think you telegraphed it. I mean, obviously the, obviously the, you know, when you think about the tax rate across the group, it's, it's a reflection of, I guess, where we see the, where we see the income coming from in terms of geography and also just the nature of the income. You know, as I was saying before to an earlier question that, that James was, was asking, you know, we operate in a range of different tax environments around the world. And the treatment of the income that we, we generate around the world varies from jurisdiction to jurisdiction. You know, it's a combination of those two things.
I think it is what we, you know, from what we see in terms of the outlook, you know, based on the nature of the income we expect to receive, for the rest of the year and the geographies, we'd expect a broadly aligned tax rate for the year.
Okay. Thank you.
All right. Thanks, Brendan. Brian.
Brian Johnson at Jefferies, if we have a look on slide 37 and 38, we can see the operating lease assets have gone from AUD 8.9 billion down to AUD 1.6 billion. The narrative says that's because of the transfer of the aircraft leasing business into the new JV.
Yeah.
If I have a look at the next slide, I can see AUD 1.6 billion of equity appearing there.
Yeah.
My understanding, perhaps I'm wrong, was that those aircraft leases were effectively in Macquarie. What's happened to the debt? The second leg of that question is the AUD 1.6 billion of residual investment, you've got 75%. It's pretty chunky. What is the likelihood you could sell that down for a gain? How quickly could we expect you to sell that into a MIRA fund?
Yeah. Yeah, I was high level gonna say we were providing the debt, but now we have third-party debt, if you want to elaborate.
Yeah. On page 37, Brian, that's effectively a reflection of the assets. We had AUD 8 billion worth of assets, aircraft assets sitting on the balance sheet under operating lease.
Yeah.
It was obviously funded by on-balance sheet debt. We moved, you recall, about 12 months ago, we raised limited recourse debt against that portfolio of about AUD 5.5 billion.
Moved to the JV, not obviously balance sheet.
We moved the debt to the JV.
Yeah.
In terms of we've sold down 25% interest in the joint venture, which you can see coming through the increased equity under management in MAM. The residual interest being our 75% is sitting in MAM as an equity investment inside the MAM business.
That AUD 1.6 billion is the equity investment in it?
Correct.
Yeah.
With the new fund that you create with that, would you anticipate it would grow? Is there a chance of a gain when you flick it into the fund? Also, do you anticipate it growing, or is this just a one-off solution to basically get rid of the asset?
The intention, as I was saying earlier, is we're seeing a lot of opportunity to invest in the aircraft space. We have a team of 62 people who are very experienced in originating and maintaining those assets, exiting them, et cetera, but they have capacity to invest now beyond our balance sheet, which is why we've brought partners in. They'll come in originally by buying into the existing portfolio, but then we'd like to grow that portfolio together. We have PGGM in for 25%. Yes, our intention very much is to bring a couple of other investors in initially alongside us. As they come in, we're not really looking to sell down the assets as a profit.
We're looking to bring in asset management income is the intention, is that we partner into these assets and they pay us asset management fees going forward, which is what PGGM is doing, paying us for our expertise in, in this asset class, by coming into the assets and agreeing to pay us fees for managing the portfolio.
I suppose it's worth observing though, Shemara, that a lot of that probably goes back to the AWAS days.
To the, what was that?
To AWAS, isn't it?
I mean, it's a combination of AWAS and.
It was done enough.
That debt was bought at an incredibly high yield, basically as distressed debt. So isn't there a, basically an uplift on the valuation when you transfer it in?
We have sold assets now for quite a long time. They have been running off. We have actually been having to invest in new leases. The original book had a life, but we have continued to invest more over that time. People are basically coming in at market value today. The big thing is that we are creating an annuity business, which will be a very good fee business because it is, you know, it is a high-return business. We get high, high fees on it.
Thank you.
Base and performance.
Okay. If there's no other questions, thank you all for attending. We'll likely see some of you as we go around. Thanks very much.
I also wanted to say thank you, everyone, for coming again. Also, thanks again to the finance and Investor Relations teams for all the all-nighters that have been put into it.
Thanks, everyone.