Bye, welcome to the Navigator Global Investments Limited FY 2023 annual results briefing. All participants are in a listen-only mode. There will be a presentation, followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by one on your telephone keypad. For now, I'd like to hand the conference over to Mr. Sean McGould , CEO. Please go ahead.
Thank you very much, and thanks everyone for joining this morning or this evening, wherever you're, are located around the globe, for the 2023 annual results update for Navigator Global Investments. We have had another busy year, a lot going on, very positive in terms of both transactions and just AUM flows. We're excited to present tonight, and I'm gonna start on just by going to page 2 here, and just talk about the agenda and what we're gonna go through this evening. First is, I will give just a brief introduction on the overall business and what we've accomplished at NGI over the past year. I will talk specifically about Lighthouse and give a business update on what we're seeing there.
I will turn the meeting over to Ross to talk about the NGI Strategic investments update and also the strategic portfolio transaction. We'll then turn it over to Amber for some financial results, and then we'll have some closing Q&A. If we could turn to page 4 in the presentation, just wanna go over some highlights. You can see on this page, we believe that NGI is uniquely positioned to deliver earnings growth now through all types of market environments. I think we proved that in calendar year 2022, when the markets were quite choppy, both equities and bonds were down. The portfolios held up very well.
This year in 2023, we've seen a rebound in equity markets in a number of places, but we still think that markets are gonna be quite difficult. We think that some of the low interest rate environment that we saw over the previous decade is now reversing. We think that interest rates have normalized, will stay a little bit higher for longer, and that the impact of that has not quite been felt across the globe yet. We think that the firms that we own and that we've partnered with proved in 2022 they can thrive through more difficult environments, thrive through better environments like we saw in 21 and 23. But we do think that the financial markets are changing, and again, we're uniquely positioned to drive results for our clients.
When we look at what we've accomplished, we now have a partnership with 11 alternative asset management firms. Again, globally based. We'll show in a few slides just how broadly based we are. The AUM, total AUM of these firms is now at $71 billion. That's up 16% over the prior year. Our Ownership-Adjusted AUM, which is obviously what drives the economics of NGI, is at $26 billion and is up over 11%. We're very happy with that growth. We have a nice growing base of diversified assets and earnings, very well diversified across strategies, across the firms, across geographies, so that's very important to us. Driving that AUM growth and succeeding for our clients is very important.
Our Adjusted EBITDA of $48.9 million was about a 5% increase over the prior period. We're happy with the growth in EBITDA, and again, expect a very stable, you know, growth from here, a very stable base of earnings with some nice upside potential. We're very happy when you go back a few years ago to NGI, when it was really just Lighthouse. You can see how much we've broadened the firm from where we started. Again, going from one firm now to 11 firms from a few years ago, about $11 billion in Ownership-Adjusted AUM to $26 billion today, and EBITDA now of about $48 million-$49 million U.S. Very happy with the progress that we've made.
If we turn to page five, this is something that's critical to the success of our firm. Again, AUD 26 billion of AUM, you can see that we are operating across the globe. One of the things that's been most important to me in the asset management business has been to have not only research across the globe, but also to have clients across the globe, and to have offices across the globe. We want to operate in the markets that we're investing in. We also want to be present in the markets where our clients are, so we know those markets well. I think I'm, I'm, you know, very proud to say we are covering all the global financial markets that we think are important right now.
There's still room for growth. I'm sure we'll be able to fill out this chart over the years in places like India, Latin America. There's still opportunities for us to grow and expand. When you look at this page, we've really covered the globe from both a client perspective, a product perspective, and a research perspective. We've got nice scale in terms of that, and I think that is critical to the success of any asset management firm going forward. You need to have, in my opinion, a global presence and you need to have research on the ground and be able to service those clients on the ground. I think we have all three of those things going for us.
Talking about diversification, you can see at the bottom of this page, we have 173 different products. We have 37 different strategies. Our growth and our earnings across NGI are coming from all of those strategies. They have a fairly low correlation to each other, and we believe that we can operate in all different types of environments. If we contrast that to a traditional asset management firm that might be focused on equities, or just bonds, if you're focused on equities and you're just a long-only firm, then certainly the market is gonna have a fairly significant impact on your results from year to year. Same thing with bonds. The yield that you're earning and how bonds do are obviously gonna impact the results.
We think that the returns that we'll generate off of our asset base are a little bit more consistent, a little bit more stable, again, we think we are positioned in the fastest-growing part of the asset management marketplace. If we can turn to page 6. Just looking at some of the trends that we've seen across the across the business. When we go back to 2021, we've seen a nice progress from there. Again, that includes the addition of the portfolio from Dyal, now Blue Owl, then adding on our add-on acquisitions that we've done, Marble and Invictus, Longreach Alternatives as well. We've seen some nice growth since we've done that. As I said previously, we've really transformed the firm.
When you look at it from June 30, 2020, really just being Lighthouse and the Lighthouse business, we've more than doubled the AUM that we have, and certainly, we, we've massively diversified the products, we've diversified the strategies, and the strength of the firm. When we look at the specific attributes of the firm, the 11 firms, they are all very mature in their experience and in their growth and the respect that they have across the marketplace. We've really taken what was originally Lighthouse and added on to that, even more experience, even more products. Again, the products themselves have a low correlation to each other, and we really feel that the total portfolio can produce results across a wide range of market conditions.
I think that's gonna become much more important going forward. As I said, one of the keys to, I think, the next decade of investing is a normalization of interest rates. I don't think that it's taken hold yet fully in the financial markets. I think it'll be felt for years to come, and I think that the NGI portfolio and the 11 firms can really benefit from that type of environment. We look at at page 7 just talking more specifically of how we're gonna position ourselves and support growth. One of the biggest things that we did and that we announced back in June, and we were down in Australia speaking about it was basically the unlocking shareholder value and settling the 2026 redemption payment.
kind of the four keys here, which are pointed out on this page, we're to accelerate the 2026 redemption, payment. We will have the acquisition of the remaining profit distributions over that portfolio, so we think that accelerates, basically our earnings. It cleans up the balance sheet. That second point, you'll see, it removes any uncertainty around that 2026 redemption payment. We had certainly heard in the marketplace that, there was some, concern around the 2026 redemption. That is now removed as well.
It's gonna provide us with a meaningful increase in cash earnings from fiscal year 2024 on, which is important, and it's gonna result in a strengthened balance sheet and position us well for future growth initiatives, as well as the pipeline of opportunities that we're looking at right now. This has really been, you know, a vision of NGI and certainly a vision that I've wanted to pursue really since back in, you know, 2009, I would say, pushing this forward, and now it's really becoming a reality. We have found the right partner in Dyal and Blue Owl, which is great. The firms that NGI owns now, again, are leaders in their field. They're mature.
We're finding new opportunities, and we're gonna have a strong balance sheet to go ahead and do this. In order to do this properly, as we've said, we do wanna bring on some resources. As we mentioned at the bottom of this page, we'll certainly have a new senior executive to help with Ross, who's done a great job in helping to build out this portfolio and working with Dyal, Blue Owl on these transactions, as well as Amber. We definitely need someone more full-time. I certainly have my hands full with Lighthouse. I am not going anywhere from the NGI front and will remain on the board and help with that going forward.
I certainly have my hands full running one firm, and now we have 11 firms to help support and grow, and we wanna do that properly. I'm excited to bring on another resource to help us do that, and again, to continue to further push the expansion of NGI. I think it's very exciting times. I think we are well-positioned to continue to grow here going forward. I think the speeding up the redemption payment is a good idea. I'm certainly fully supportive of that, and we're gonna kind of have a clean slate here to move forward with. I think all those things are very important. Just summing up the introductory piece of the presentation here.
NGI, what do we think is the value proposition for NGI? Something that I think about as, as a significant shareholder of the firm. What is our value proposition? What are we trying to achieve? Certainly we want exposure to leading global alternative asset managers. Why do we want that? Because we think that alternative asset managers and that industry are gonna continue to grow, and we wanna be part of that growth. It's an industry that NGI has known, has, has been involved in since its inception. Lighthouse now is over 25 years old. I've been doing this now my career for 29 years as well. This is a space we believe in, we believe there's growth there.
Most importantly, we believe that these products drive value for clients, and that's why they're gonna be attractive. Second, we have established managers with proven track records. While some of the managers may be launching new products within their specialties, these firms are all proven, they're built out, they're scaled. They have the human capital that they need, which is a critical component to the success of these firms going forward. They have the embedded human capital. We think they're well-positioned, again, to execute on growth, and to enjoy, some of the growth that we believe is gonna happen within the alternative asset management space. We have diversified, and have a growing earnings mix.
Just going away from Lighthouse, which was one business, and a good business, something I'm very proud of, to having 10 other engines, to fuel NGI. Not all the firms are gonna have a great year in one year. Some may have more mixed results, others are gonna have fantastic years, but the portfolio, we believe, will produce consistent results, and again, has a highly diversified mix of earnings. We have, again, one of the best, you know, value-added strategic shareholders that we could, you know, hope for, in Dyal Blue Owl. They are the leader, $55 billion in AUM in terms of buying interests and minority interests in alternative asset management firms. It has been a great partnership and a pleasure to work with them.
I would say we continue to strengthen our relationship together. I think their willingness to look at the 2026 payment creatively as well, and come to a conclusion on that, just shows how strong the partnership is. Their pipeline, their reputation that they have certainly helps us with NGI. Them being a major shareholder, I think is fantastic, and obviously, they've agreed to continue to lock up their shares because they believe in this business. Fifth, I think we've got, you know, proven and experienced management teams across the board. I'm really proud of the team that we have at NGI. It's not easy pulling all these things together.
The transactions that we've done over the past three years have taken, you know, a massive amount of time and effort across the whole team to get this done, and have a lot of vision and conviction to go do that. The amount of work that Amber and her team has to go through to put together the financials, the presentations, all of those things, there's a tremendous amount of work that goes in, and we're very experienced in doing this. Amber and I were just commenting before we got on here, she and I have been doing this now for about 14 years.
We're always, you know, excited to do it, but I would say we're both really excited for how the firm is positioned today, and what we believe we can achieve going forward. Last but certainly not least, we have an active pipeline of new opportunities, and we're excited about that. We're excited to continue to diversify our product base, diversify the earnings mix, mix that we have, and position ourselves for success going forward. I'm super excited about the future. I'm very proud of what we've accomplished here over the last three years. Again, I'm equally as excited to see what we can do over the next three years.
With that, I'm going to switch to a little bit more of a Lighthouse update. And I'll keep this fairly brief, as we discussed this, you know, in June in some detail, and it's really only been about a month and 1/2 since we discussed this again. But I'll keep this brief so I can turn it over to Ross. If we flip to page 10, right now, Lighthouse is at about $15.4 billion in AUM. I would consider this a new peak in assets for Lighthouse. As some of you may recall, we acquired the business of Mesirow.
Actually, we, we did not end up paying anything for that acquisition. Technically, our assets at one point were slightly higher than probably $16 billion. We knew that there would be some redemptions from the Mesirow assets. When I adjust that, the way I really think of it, we're, we're really at a new peak in assets at Lighthouse. I'm very proud of that. Again, I'm proud of how we have diversified our business over time. If you look at this central part of the page, kind of the wheel, when you look at what we're doing, and really the top part of it, is our hedge fund business. We have our managed account services, which is Luminae. We have our customized solutions.
That hedge fund business has really fueled the growth over the past five or six years, and I know we have another chart in the deck that'll point that out more. That's something that we decided to do strategically, you know, about nine, 10 years ago. We've certainly built it up. It's become a significant part of the business, and that's very important for us going forward, and that's again, something where our val-- our, our clients really perceive a lot of value in there. Again, our commingled funds and our customized solutions, our clients really appreciate that. We're able to mix things better for our clients within those businesses, and present some more unique opportunities for them.
That's one of the things that we're really pushing for, in the customized solutions and commingled funds, is blending, what we do internally in the hedge funds with what we see are the best opportunities and the best in class that we know we can't do internally, or that may be more opportunistic in nature. Finally, with managed account services, we've taken, we've taken what we have built as far as the pipes and plumbing of what we do in the hedge fund business and the customized solution and commingled funds, and offered that as a solution to external clients, to help them with their alternative asset needs. To help set up the accounts, to help manage them, to produce NAVs, to finance the vehicles appropriately.
I think the financing of these strategies is gonna become even more important. It was less important when interest rates were zero. It's more important now that you're probably-- proper- properly funding these strategies and getting credit for your short sales, making sure you're optimizing your cash and getting the optimal yields off of that. All of those things become more important now that interest rates are more normalized around the globe. Happy with how we're positioned right now as a firm and what we've done. Global footprint, that's always been important to me. And we continue to fill out offices where we need them. The change here would be Dubai and Singapore.
Again, continuing to attract talent in those regions, investment talent, as well as new client investments and servicing those clients. We turn to page 11. Just a quick update on how we are, how we've grown over the last year, so about 7% growth. The AUM composition, we remain nicely diversified. Still, the Americas, U.S., and Canada, are still, you know, a very important geography for us. About two-thirds of the assets come from U.S., Canada, and Latin America. You can see a nice presence here in the Middle East, in Europe, and then in Asia Pacific, which includes Japan and Australia, primarily.
I'd say we're making strides across the investor geography, and I would say we, we have a nice mix across the investor types. We can see some of the growth over 2023 and the movement within within there. Hedge funds, you know, saw some nice net flows within the business, which is good. Commingled funds and the solutions were a little bit more flattish in terms of flows, but performance was nice and strong. Managed account services, again, it fluctuates. I want to see this grow over time, but as I remind everyone, sometimes some of these outflows that we see are due to clients leveraging some of their portfolios a little bit more, which is actually a good thing.
They're using efficient funding, which, as I pointed out on the last page, efficient funding of these strategies is now more critical than it has been over the last eight years, because of where interest rates are. Again, I'm happy with the managed account services, and how we're growing there, and some of the recent wins, that we've had there also. On page 12, this is kind of a little bit of a repeat of what I just said on page 11, so I won't spend much time here. I'll let people look at that, but it just tells the story of where we're at from a flows perspective and some of the trends that we're seeing.
Finally, on the investment performance page, this year, the calendar year has certainly actually been a little bit more challenging for us. I would say the market, some of it going straight up in the equity space. We're a little bit more positioned for some choppy, more challenging markets. I'm not really surprised by the performance. I would say, we've definitely seen a change, and I've noticed a change here over the past three weeks in the markets, and the performance has certainly become much more normalized and seeing alpha production kind of across the globe. I think we're back on back on track here.
Just, you know, kind of straight up markets and some of the things that we've seen, particularly in the tech space and some of the more speculative names that we've seen, and whether that's related to artificial intelligence, or meme stocks, or other smaller speculative stocks, that have driven some of the returns in the market this year, hasn't been as conducive for some of the strategies. Again, I think that is, I think that is changing. I would point out that the vast majority of our products, with the exception of our global macro fund, are at or near high-water mark. I think we're in good shape to compound from here.
ith how the Lighthouse business is positioned today, how we're growing, what we're focusing on, some of the new, you know, strategies that we're bringing to the table, the pipeline of investments that we have, and the pipeline of potential investors that we have as well, is very, very strong. With that, I'm going to turn it over to Ross to speak about the NGI Strategic Investments and give an update there. With that, Ross, over to you.
Great. Thanks so much, Sean. I'm going to begin on slide 15. We're going to touch on some key objectives when it comes to NGI Strategic Investments. As Sean really highlighted in the intro, what we've done with NGI Strategic Investments, we believe provides a unique opportunity to access the high quality and growing earnings of the across the alternative asset management sector. In establishing the business line in 2020, we had three main objectives, which remain in our focus today. First, to expand our addressable market. The alternative sector continues to grow and develop across unique sub-asset classes and strategies. By gaining exposure to leading firms across the sector, we best position our business to benefit from both the industry's growth as well as a degree of downside protection and diversification benefit, which we believe is hard to replicate.
Second, we sought to broaden our exposure to alpha-generating and high earnings yield characteristics of the direct investing strategies across the sector. Throughout the alternative sector, there remains high margin and scalable businesses with pretty limited fee pressure due to the high value they provide their clients. By partnering with a group of established firms who themselves each focus on maintaining stable and well-diversified platforms, we have not only gained access to high-quality earnings of those businesses, but done so while mitigating several risks should we own or operate just one in itself. Lastly, we sought to use our financial resources, industry expertise, and relationships to establish a growth engine for the company. The company will continue to benefit from the growth of our existing partner firms as well as new complementary investments over time.
To date, we have added meaningful exposure to more direct hedge funds, both liquid and illiquid credit, commodities-based absolute return strategies, as well as real estate capital solutions. If we flip to slide 16, we can spend a couple minutes on the key attributes of our partner firms and why we believe they offer an attractive opportunity to build value for NGI shareholders. We partner with proven firms who, through their deep expertise and proven track records, are best positioned to attract clients and the crucial human capital required to build lasting investment firms. This strategy is designed to mitigate the risks inherent in the asset management business. By aligning ourselves with established and already successful and growing independent businesses, our shareholders are not overexposed to keyman risk or under-scale businesses that may be vulnerable to short-term investment or financial performance.
In addition, our capital is invested to bolster these firms' resources and support their growth. We see that investors value firms with the same attractive attributes and expect that they will focus on this criteria even more going forward. This is a trend that we have seen play out for the last 10 years in alternatives, and it will only continue as more established firms can take advantage of new opportunities within their specialty and quickly devote the resources needed to launch new capabilities and products that allow their clients to capitalize on opportunities over time. Leading institutional investors want to partner with those investment firms they can grow with, and the broader investor base often takes notice. Manager selection is even more important across the alternative sector than it is in traditional asset management. This is evidenced by just how wide the dispersion of returns are.
As an example, when looking at 10 years of returns, JPMorgan shows that roughly 200 basis point dispersion between the top and bottom quartile managers in traditional equities and roughly 100 basis points in the fixed income space. They see over 1,400 basis points or 14% across hedge funds and 2,000 basis points or 20% across the first and last quartile across private equity. Firms who have outperformed their peers and are operating at scale with all of the investment and non-investment resources required to grow, will capture market share over time. In addition to who we partner with, how we partner with them enhances the value proposition of NGI shareholders. If you can flip to slide 17, we'll touch on this approach.
When we've been evaluating firms who meet our criteria, we generally see that owning less than 25% of the business or a minority stake is the best approach. Over 200 of these passive minority stake transactions in the alternative sector have been executed over the past 10 years, and in large part, due to the leadership position in the market of our strategic partners at Blue Owl, independent, founder, or team-owned alternative managers are now well educated on the benefits of a minority partner and the role one can play in helping them achieve their objectives. After a period of success, many alternative managers face several key decisions to continue to grow their business and capitalize on their success.
For those groups who prioritize long-term, lasting success, they may explore raising growth capital while ensuring they preserve their alignment of interest with clients, they do not disrupt the attractive internal culture and incentive structures in place to retain their high-quality talent. Selling a minority stake to a long-term strategic partner like Navigator is a unique way for them to achieve these objectives while providing us and our shareholders attractive returns as a partner of theirs going forward. Given where today's industry and financial markets are, the growth opportunity for strong-performing firms in the alternative sector remains intact, our capital is in demand to help them achieve their objectives. We're very excited about the opportunities set going forward to add new partner firms to our portfolio.
If you flip to slide 18, we can take a look at how the current portfolio is performing and how these attributes have translated into portfolio-level success. Slide 18 provides an overview of AUM for NGI Strategic Investments. As a reminder, the reporting for this business line includes the six firms within the NGI Strategic Portfolio, our two most recent investments in Marble Capital and Invictus Capital Partners, as well as our Strategic Investments in Sydney-based Longreach Alternatives. The AUM of this diversified set of partner firms has grown from $39 billion to almost $56 billion over the past two years. On an ownership-adjusted basis, we have seen AUM grow from $7 billion to over $10 billion today. We have been pleased to see this growth driven by both investment performance as well as capital-raising activity.
In the NGI Strategic Portfolio, the businesses have seen inflows into flagship products as well as successful new product initiatives. In addition, Marble and Invictus have raised over $1 billion of new capital commitments into long-term, locked-up structures since our investments, and this has been done in one of the most challenging market environments for private market capital raising we've seen since 2008. The increase in this AUM base leads to higher profits, given the scaled nature of the firms we partner with and the strong alignment with senior teams. If you could flip to slide 19, we'll show the profit distributions to NGI over the same time period. As you'll see on slide 19, this portfolio has produced a stable yet growing set of profit distributions to date through a period of challenging performance for the broader asset management sector.
The distributions on this slide exclude our share of earnings from Longreach Alternatives, which is recognized on an equity accounted basis in which our share of these earnings come in as they are earned. We earned roughly $1 million in fiscal 2023 through that partnership. The $31.8 million of distributions in fiscal 2023 from our eight minority stakes were driven by strong performance of the NGI Strategic Portfolio, which contributed $26.8 million and $5 million from our two most recent investments. The recent investments in Marble and Invictus are expected to continue to contribute meaningfully as recent AUM growth is converted into revenues and the existing portfolios are monetized over time.
These two businesses have raised meaningful capital and are well-positioned as their differentiated investment strategies of providing private capital into two of the most attractive areas into the U.S. real estate market is even more in demand as compared to when we first made the investments. If you could please flip to slide 20, we'll dig further into the contribution of the NGI Strategic Portfolio. This slide shows the profit distributions over time since acquisition. The NGI Strategic Portfolio has delivered its second year in a row of very strong profit distributions to NGI. Through the existing profit-sharing arrangement, NGI was entitled to a $18 million minimum annual distribution in FY 2023. We then shared 20% over that level.
This resulted in us receiving $26.8 million of the total $61.9 million of distributions generated by the portfolio, while Blue Owl or GP Strategic Capital received $35 million. On average, over the past three years, we have earned roughly $25 million of profit distributions a year of the total $54 million average of the portfolio over that time. As we have previously highlighted, there is a lot of seasonality in terms of when NGI receives its profit distributions. Over the past three years, 10%-20% of the full-year distributions have been received in the first half of our fiscal year, with the remaining 80%-90% coming in during the second half.
This portfolio remains well-positioned to attract investor capital and generate strong investment results, and we're excited about taking full ownership two years before the profit-sharing period was originally scheduled to end. If you could please flip to slide 22, we wanted to review, we'll start to review some of the specific details and rationale behind the transaction that we announced in June, which will assume this full ownership of the portfolio. Earlier this month, we entered into definitive transaction documents to settle the 2026 redemption payment and acquire the remaining distributions from the NGI Strategic Portfolio. This transaction has compelling strategic and financial rationale, which repositions NGI to unlock shareholder value. On the strategic side, we are deepening our already successful partnership with GP Strategic Capital, the global leader in investing in the management companies and of market-leading alternative asset managers.
Their increased conviction in the company, in addition to the continuation of their support by engaging with our underlying partner firms, is a key differentiator and a competitive advantage for us as we focus on executing our growth initiatives. This transaction provides the opportunity to broaden the shareholder base through an entitlement offer as we focus on making progress towards our goal of index inclusion over time. Key outcomes of the transaction include that most immediately, we will generate increased cash flow due to the full ownership of the NGI Strategic Portfolio's profit distributions starting on July 1 of this year. If you looked at the fiscal 2023 distributions, this would have resulted in AUD 35 million of new incremental profit distributions or cash flow to NGI.
If you consider the average of the last three years, which we just reviewed on slide 20, NGI would have received $29 million of additional cash flow with little incremental expense associated with that. This step-up in cash flow next year will result in greater flexibility to meet our obligations, to provide our two most recent partners the growth capital they are putting to work, and position us to explore growth opportunities in the near term. Slide 23 provides an overview of our current and pro forma shareholder base. The funding structure of the transaction is one of its most exciting features. To recap, we are fully settling the redemption payment due to GP Strategic Capital for a total consideration of $200 million.
GP Strategic Capital will receive AUD 120 million in NGI shares at AUD 1.40 a share or a 40% premium to where we were trading when the agreement was struck. Our existing shareholders will have the opportunity to participate in an AUD 80 million equity offering to be executed closer to that trading level when we struck the agreement. This transaction structure was designed to present a compelling opportunity for our shareholders to invest alongside GP Strategic Capital as they increase their own investment in the company. As a result of the transaction, GP Strategic Capital will be increasing their ownership in Navigator. Their existing 36% fully diluted ownership, which is split between ordinary shares and mandatory convertible notes, will increase to an estimated 51%, still split between shares and notes.
Assuming a 100% take-up rate of the entitlement offer, they will have a roughly 45% ordinary share voting interest, as compared to 19.9% today. As a result of the transaction, Navigator's current fully diluted shares will increase from 304 million to roughly 555 million outstanding. If we go to slide 24, we can provide a bit more background and an update on the equity raising itself. The $80 million equity raising will launch after completion of the required regulatory approvals and other closing conditions related to the deal, which we estimate will be in late October or November. Navigator's CEO, its board of directors, and GP Strategic Capital have all committed to participate in their full allocation of the equity raising.
It is currently expected that our equity raising will be run on a pro rata, fully diluted basis or based on that $304 million share count that I just mentioned earlier. To facilitate this pro rata issuance, the equity raising will comprise of a non-underwritten, non-renounceable rights issue of ordinary shares, alongside a placement of ordinary shares to GP Strategic Capital on a pro rata basis for their existing mandatory convertible notes. Please flip to 25, we can talk about some of the financial benefits of this transaction. We've touched on much of this already, the impact is clear. We will have increased financial resources for Navigator going forward.
You will see here that using FY 2023 as a pro rata basis, we would have had $84 million of EBITDA as compared to the $48.9 million we just reported. In addition, our overall margin is expected to increase substantially as the acquisition only comes with limited increase in expenses to manage and account for the portfolio going forward. Importantly, our leverage profile is also greatly improved. Our current net debt ratio, shown here of 1.8x, includes deferred consideration for Marble and Invictus, as well as drawn debt on our existing credit facility, but excludes the redemption liability. We will emerge from the transaction at roughly 1x debt to EBITDA, with resources in place to fund our near-term obligations and pivot our focus to growth going forward.
This step-up in cash flow next year will result in greater flexibility to meet our obligations and position us to capitalize on the pipeline that we've continued to foster over time. Lastly, we remain on track to close the transaction in the fourth quarter of this year. Please turn to slide 26, and we can quickly touch on this full indicative timetable. As you can see here, we aim to send a notice of meeting and an explanatory memorandum in early September, in advance of holding the AGM in late October. Following required shareholder and regulatory approvals, we currently expect to launch the entitlement offer with a target close of the transaction by the end of November. Amber, I'll turn it over to you now to talk about the fiscal 23 results.
Thanks, Ross. Sean and Ross have already discussed the operations of Lighthouse and NGI Strategic Investments in detail. I'd now like to take you through how this is reflected in this year's financial results. As previously noted, Ownership-Adjusted AUM as at 30 June 2023 is $25.5 billion, an increase of 11% on the prior year. This growth over the year has translated into a 5% increase in revenue and other income, and that came in at $119.1 million and a 5% increase in Adjusted EBITDA at $48.9 million. Pleasingly, the Adjusted EBITDA result of $48.9 million has come in a little above the most recent guidance range of $47 million-$48 million, which is 3% above the midpoint of that range.
Turning to slide 29, this sets out the key revenue and expense line items that brings us to our Adjusted EBITDA total. I'll discuss each of these in more detail in the next few slides, and just note that the operating margin is consistent with the prior year at 41%. Flipping to slide 30. This sets out a reconciliation of how we get from our Statutory EBITDA of AUD 54.7 million to our Adjusted EBITDA of AUD 48.9 million. Our Adjusted EBITDA looks to adjust for non-cash and unrealized items to reflect a more cash-based result, which we think represents the true results of the business. In particular, to get there, we offset fund reimbursement and sundry revenues against relevant expense items as they're direct reimbursements of costs incurred with no additional markups.
We reduced the EBITDA for the cash rent paid in relation to our office premise leases. Under the leasing accounting standard, this amount is not recognized in operating expenses. However, we consider that it's better added back to be a true representation of the cost of running the business. We also adjust for unrealized gains and losses on the assets and liabilities that are held at fair value through the P&L, as these are unrealized amounts, we want to focus more on the cash earnings of the business. Consistent with prior periods, we adjust our transaction costs. For FY 2023, these amounts were incurred in relation to the proposed transaction to early settle the redemption liability.
Lastly, we adjust out our share-based payment expense, and this is the non-cash expense that relates to the issue of the performance rights during the year to particular executives. Turning to slide 31, I'll just run through our key revenue items. Management fees are the fees earned by the Lighthouse business, and they pleasingly showed a 4% increase on the prior year. As the average management fee rate has remained steady at 52 basis points over the past two years, this increase has been driven by a 5% increase on the average AUM, which reflects the $14.8 billion average for the full year, and brings us up to the $15.4 at year-end. Those flows obviously increased the average over the full year.
Our performance fees also relate to fees that are earned by the Lighthouse business. They crystallize at the end of each calendar year, so in December, we recognized AUD 6.1 million of that revenue in the first half and some additional revenue in the second half. This level represents some, the challenging conditions that Sean discussed in more detail earlier, come in a little bit lower than the previous two years on that basis. As Ross had previously highlighted, the NGI Strategic distribution income for the year was AUD 31.8 million. The NGI Strategic Portfolio itself had another excellent year, and although not quite as high as the FY 2022, our share of distributions was AUD 2 million lower than in the prior year.
However, with the additional income from Marble and Invictus, we did see an overall 10% increase in the strategic distribution income. Moving to the next slide, this sets out our key operating expense items for the business. Employee expenses are our largest expense driver, and these came in at AUD 54.8 million for the year, so it's excluding the share-based payment expenses. The increase is largely due to increases in variable compensation. The competition for talent in our industry remains high, and the increase in variable compensation recognizes the higher cost of attracting and retaining talented staff. The data protection and cybersecurity remain a key focus across the business, and the AUD 800,000 increase in costs in relation to professional and IT expenses, compared to the prior year, is largely due to a number of projects undertaken in these areas.
Other expenses were AUD 300,000 higher. The main reason for this was an increase in travel as we get back to pre-COVID levels of doing business and being able to meet people face to face around the globe. Turning to our next slide, we just wanted to set out a couple of the other key items that are impacting the profit and loss this year. The increase in the fund reimbursement expenses to AUD 94.5 million is obviously a significant amount compared to the AUD 42.6 million. This is reflecting the growth of the North Rock and Mission Crest businesses as they continue to bring in-house dedicated portfolio managers and staff. As noted previously, these expenses are recovered from the funds.
There's an offsetting revenue item, and that means that despite the growth, there's minimal overall impact on NGI's financial result. In addition, financing and income costs are higher this year, so the slide separates out those items that are cash and realized items versus those items that are non-cash and unrealized. Of key note, the increase in the bank charges and interest paid on loans reflects the $70 million credit facility that we entered into at 30 June last year, and it reflects an increase in commitment fees due to the higher facility capacity, as well as some interest paid on drawn amounts throughout the year. The other key difference on the prior year is the $3.6 million expense in relation to the unwind of the discount on deferred consideration, these amounts recognized in the balance sheet.
We still have $103.6 million of deferred consideration to be paid over the next two years, and this is recognized at a discounted amount on the balance sheet of $97.9 million. We still have an additional $5.7 that will be unwound through the P&L as we pay that out over the next two years. I'll turn to the next slide. This shows a breakdown of the results across the two business lines, being Lighthouse and NGI Strategic Investments. The Lighthouse operating result is $21.9 million. It's down $1.5 million on the prior year, and that's largely reflecting the lower performance fee revenue as compared to the prior period.
The NGI Strategic Investments business delivered an operating result of AUD 28.3 million, that's up AUD 2.1 million on the prior year. The higher distribution income has been somewhat offset by some additional expenses that relate to getting some external valuations on the investments, as well as building out two new staff members over the last couple of years. The other group, income costs, represent head office expenses as well as financial and income expenses, such as FX gains and losses, which can vary between years. I'll turn to the next slide, which just sets out the balance sheet. It shows that as at 30 June 2023, Navigator Group has net assets of AUD 421.5 million.
Of the $67.8 million cash balance, $35 million is owed to Blue Owl for their profit share, that profit share for 2023, and that is included in the $40.6 million of trade payables on the balance sheet in the liability section. As mentioned, the deferred consideration balance is $97.9 million, and that'll be paid out over the next two years. Excluding the 2026 redemption payment, which will be extinguished under the proposed transaction, our net debt as at 30 June is $86.6 million or 1.8x Adjusted EBITDA. This ratio has been tracking down since the acquisition of Invictus in August 2022, as we continue to generate cash flows and pay down deferred consideration.
Finally, I'll just move to the, the last slide in my section, which is the dividend, and confirm that the board declared a U.S. $0.03 per share dividend, which will be paid in early October 2023. This is in line with the dividend policy announced last August and represents an implied yield on yesterday's closing price of 3.3%. With that, that's the end of my part, and I will hand back to Sean.
Thanks, Amber. Just in closing, before we open it up, for any questions or comments, we really do. We think that the business is very well positioned to deliver results across a wide range of market environments. The business is exclusively focused on what we believe is the fastest growing segment and most profitable segment of the asset management industry, which is the alternative investment management space. As I said, I, I believe that the next decade within the financial markets will be different than the previous decade, and most notably just because of the normalization of interest rates. I think that alternative investments will perform quite well in that environment. You know, four things just to close with. One, is the acceleration of the strategic portfolio transaction.
We spoke about that. Simplifies the balance sheet, increases our financial resources, increases cash earnings, and really positions us to continue to execute on our pipeline of growth. We had strong financial investment results across a challenging environment, and I think that demonstrates just across the products and strategies that the underlying firms employ, that there's resiliency there across a wide range of market conditions. We're happy about that. We continue to add high-quality earning streams, additional incentive fees, and carry, which we believe will accrue and generate shareholder value over time. Last, certainly not least, Lighthouse.
You know, we've got a proven track record, high demand for multi-PM hedge funds, and we continue to evolve the firm from where it was at its beginnings over 20 years ago. When you add up all those things, again, we think we're positioned for growth and to deliver earnings. It's been quite a transformation of the business now over the past three years. Again, I think there's even more to come in the future. Appreciate your time this morning, this evening, and with that, we can open it up for any questions or comments.
Thank you. If you wish to ask a question, please press Star and then 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press Star and then 2. If you are on a speakerphone, please pick up the handset to ask your question. The first question we have is from Nicholas McCarrel of Bernstein. Please go ahead.
Thanks for taking the questions. Maybe just, and an initial one on the outlook for across allocators based on feedback that you've had around the way hedge funds look for, particularly tend to perform in a, in a rate environment more so kind of to a fixed extent?
I'm sorry, I didn't, I, I didn't quite hear the question. I'm sorry, it's a little bit jumbled.
Can you hear me better now?
I'm still having. If Ross or Amber, if you heard it, just if you could let me? If you could translate it for me or? I'm sorry, I just couldn't hear it.
Nick, I think just maybe, Nick, let us know. I think what you said was, some feedback or some color in the market on how allocators are viewing hedge funds in the higher interest rate environment. Is that right?
Yep, that's right.
Oh, perfect. I can hear you better now, Nick. I'm sorry, how they're viewing it. I think that when you look across the alternative asset kind of spectrum, there's a couple different focuses. One is on hedge funds and, and driving results there, and the second is more on private assets and opportunities that are coming up because of regulatory changes. One example of the benefits of regulatory changes for alternative investments would be in some of the mezzanine lending space, some of the credit space, the mortgage space.
As banks in the U.S. have to exit these businesses or are forced out because they need higher, you know, capital, they can't do certain lending that they've done, that has left room and opportunities for firms like Marble and Invictus to go in. When you look at the growth within the private debt space globally, it's really been quite significant, and it's just taking over from vacating of banks due to regulatory pressures across the globe. We don't think that's gonna abate. I think that that trend leads to a more stable financial system because these private vehicles aren't using the leverage that banks use. I don't think we'll have to de-lever at inopportune times.
I think allocators are looking at what hedge funds were able to do in 2022. I think they're looking at private markets as well and saying there's an opportunity there because of regulatory changes and continuing regulatory changes. I think that they're still very optimistic about that part of their portfolio and looking for strategies that can deliver results across all different market conditions. It certainly doesn't mean they're getting out of traditional, you know, equities and having a bond portfolio for liquidity and cash and those sorts of things, which all of the, those investing styles and why they're important, I, I certainly believe in.
There is strong interest in high quality alternatives to continue to diversify their portfolios and create more stable earning streams for their pension plans, you know, for high net worth individuals, for endowments, foundations, for hospitals within the healthcare space. Really, across our client base, there is a need for more stable earning streams.
Great. Thanks for that. Maybe just to, while you're talking about Marble Capital and Invictus, can you just comment on the returns generated in those two managers in the year? I guess it's not quite, you know, versus where the capital that you've deployed. How does that compare to where they are on their trajectory towards your expected return from that investment?
Sure. Sean, I can take that if.
Sure. Yeah, go ahead, Ross.
I do think, as we mentioned, they've been operating in the most difficult capital raise environment for private markets that we've seen. As Sean said, not because allocators have lowered their level of interest or have less conviction in the return streams for their long-term liabilities related to those strategies, but just rather that things are taking longer. When you think about the premise of both those transactions in April and August of last year, it was to provide them capital to go GP commitment to their next fund, as well as other products. All of those efforts are, have been successful, and as we've said, they've raised over AUD 1 billion since our investments cumulatively. Things are taking slightly longer.
I would say, you know, just being, you know, very straightforward, which I think Amber can attest, we always are, they're slightly behind schedule, but we feel really good about how those firms are being managed. They are generating meaningful income to us, and the portfolios and the strategies they deploy are still really well positioned, in fact, perhaps even more well positioned. We feel good about the, the component of income that was gonna be coming out of the carried interest out of, especially Marble. That was a focus when we first announced that transaction. And as Sean said, longer term, the strategies are both even better positioned than when we did invest in them.
The regional bank pullback in the U.S. has created even a bigger opportunity set for Marble, so their 13%-15% priced capital is even more in demand, for even higher quality, partners and borrowers, which is great. For Invictus, there's a wider financing gap in higher coupon, higher return yielding, Non-QM mortgages, of which they're really the leader and the most, you know, have the strongest presence in the space. The thesis for both we feel great about, but from an asset raising and therefore a kind of year one income perspective, they were slightly behind.
Nick, I would just add there, these are really experienced long-term operators that now have locked up capital to go take advantage of opportunities in the marketplace. They have regulatory tailwinds for what they're doing behind them, and these are gonna be very good businesses. They're good businesses today. They're gonna be even better businesses over time. I'm excited for the investments that we have in them and how they're positioned. As we've talked about, you know, across the portfolio, we're gonna have some things that do fantastic in certain environments and other things that aren't gonna do as well. The portfolio itself, I think is what's really important.
These 2 businesses, no, I, I like it for, you know, all the features and all the things that we look in, for these businesses, I think the attributes are there, and I think the results will come over time.
Can you just remind us the total capital invested in those two? Was it about $185, is that right?
Yes. It's AUD 85 on Marble and AUD 100 on Invictus.
not invested.
They're contributed by.
No, not day one, but that's the total amount to be paid over the two to three years.
No, Ross, to talk about what we have invested, yeah, if we could clarify. Yeah, I mean, Amber, you can give the exact number. I think it was on the balance sheet slide related to as of June, but, but yeah.
Yeah. There's, as at 30 June, there was AUD 103 million of that AUD 185 million still to be paid. Working backwards, yeah, roughly about AUD 80 million has been paid.
Yep, great. Thank you. Then, just a question, maybe just to clarify on the entitlement issue. Is Dyal's, Dyal don't participate in that entitlement, is that right? It's just the entitlement across the shares outside the Dyal ownership?
No, it actually does include Dyal. They're gonna be participating on a pro rata basis for their diluted 36% of that $80 million as well.
Okay, understood. Thanks. Maybe just a question around the sort of new organizational structure. Does that sort of facilitate anything, particularly in Sean's, in your view, Sean, in terms of the way you manage Lighthouse being so solely focused on that?
I think that. No, I mean, there's, there's certain plans that I have for Lighthouse again, that, you know, I can devote full attention to, and it's not that I've been distracted from the Lighthouse business. It's just when you look at how NGI has transformed itself, when NGI was just Lighthouse, it was kind of one and the same. Now with what we're doing and what we're trying to achieve, it's important that, you know, we have another, a full-time resource on, you know, sourcing, looking at transactions, all those things, to help, you know, Ross from a day-to-day perspective, to communicate effectively with our shareholders, and in a more timely, you know, manner.
It really feels like for the past, you know, kind of, two years, I've had, you know, two jobs. Again, you know, both Ross and Amber have done an incredible, job, but we need another resource to do this. Again, I'm not going anywhere. You know, Ross and I, you know, speak about, these investments and what we're doing, on a daily basis. I don't think that's gonna change, but we do need some more resources. This, this, NGI deserves, to have someone wake up every day and think about these 11 businesses, and how we, you know, and how we grow them.
Again, if I can, you know, focus on Lighthouse and keep driving things there and still participate at the board level, and, you know, helping source things, helping with my knowledge across there, that's just what we think is the best thing now. It's really just a choice of, we need another resource. You know, it's a choice of where to spend time, and I, I would rather, you know, bring someone in new that's experienced, that can do this and work on that NGI portfolio and, you know, and move forward from there. No, it's not a, it's not a negative in my, my mind at all. It was a suggestion of mine, so which is probably quite unusual in a lot of company circumstances.
Again, I want NGI to be successful, and it's not really about the role I play. It's about, you know, the team that we've got, the human capital that we've got, and we need some more human capital to take NGI, where, where I think it can go.
Cool, thanks. Maybe just another question on, on the kind of business post Dyal in terms of the deal flow that they're seeing? How do you how do you think you'll go about funding that post once the, once the deal is complete? Do you feel better positioned to take on more debt, given your own 100% of the earning stream, or do you think you'd, continue to potentially look at equity funding?
I think that it, it, it's gonna be, I, I think there's gonna be a combination of, of things that happen. One, we'll have a greater earning stream. The, the commitments that we have out right now to Marble and Invictus, you know, clear a path towards funding that. We'll have additional capture earnings over time to fund new investments that we make. Certainly, we will look at debt, and as we've said, part of our business strategy is to have an EBITDA debt to EBITDA ratio of 1 to 1.5x . We'll prudently use that debt to, you know, to basically structure the business model appropriately, and then we'll selectively use equity.
Some of the equity usage depends on what we are buying on the deal that we've constructed to buy that. I envision a time, you know, certainly in NGI's future, where, you know, these transactions are accretive on day 1, and we can, we can use a combination of cash, debt, and equity to go do that. We have 11, you know, strong firms right now. We've got a pipeline. There's some, you know, other creative things that we can do with transactions going forward. You know, again, I, I feel like we've got a good base of business, a good earning stream, and now it's up to us to use that earning stream and debt levels effectively to grow the business.
Ross, I don't know if there's anything you want to add there?
Nope, completely agree.
Obviously, given us the pro forma, $84 million of EBITDA for the two businesses or for all the businesses and everything combined. I guess just to circle back to Marble and Invictus, if, if you put $185 million to work there, let's say it's over a 3-year view and your cost of funding, that's close to 10%. I mean, do you, you expect to be making kind of close to a $20 million U.S. contribution from those investments on a medium-term view?
Yeah. I think, Ross, you might want to comment, but certainly we're expecting, you know, part of the, the investment thesis is that these businesses generate the base earnings as well as potential carry. As they actually pick up in the medium term, as Ross outlined, I think that that's not an unreasonable expectation.
Yeah, exactly. I think you need to break.
The next question we have is from Lafitani Sotiriou of MST Financial. Please go ahead.
Hi, guys. Just one follow-up question. Is it still anticipated that the entitlement offer issue price will be around AUD 1 a share?
Yeah, we, we haven't had any change in terms of what we discussed at June on that one. We, we did caveat that obviously we have to wait till we actually launch the offer to set the price, but that was the indication we gave in June.
All right. Thank you.
That's all for the questions at this time. I'll now hand back to Mr. McGould for closing remarks.
Okay, thank you for everyone, listening in and watching, this evening. Appreciate the interest in the company. As always, if there are questions, anything you want to follow up in more detail, please let us know. Happy to talk about anything in more detail. You know, very grateful for the attention this evening. Again, we're very happy with how the business is positioned right now and again, what we've achieved over the last three years. Appreciate your time, and thank you very much.