Thank you, and good morning, everyone. Thank you for joining us today as we present our financial results for the 2021 financial year and an update on Navigator's business. My name is Amber Stoney, and I'm the Chief Financial Officer for Navigator. Presenting with me today is Sean McGold, our Chief Executive Officer and we also have Ben Browning, Executive MD of Lighthouse, who joined the group during the year Ross Zachary, who is our MD of Strategic Corporate Development and Scott Perkins, who is also an MD of Lighthouse. I'm going to hand over to Sean shortly to provide an introduction and an overview of where Navigator's business is today.
This will be followed by a business update on our 2 divisions, Lighthouse Investment Partners and NGI Strategic Holdings, after which I'll walk you through the 2021 financial results. So after Sean provides some closing remarks, we'll open it up to questions. So with that, I will hand it over to you, Sean.
Thank you, Amber, and thank you, everyone, for joining us this morning in Australia and this evening in the U. S. And other parts of the world. So sorry, again, we can't be together for the 2nd year in a row, but hopefully this will be the last year that that happens. So I'm going to start on Page 4 and I'm going to open up with some just general comments and talk a little bit about the earnings on Page 5 as well.
And then I'm going to turn it over to my colleagues to go through the business in more detail. So looking at Page 4, just a couple of points that I want to make there. First off, in the year, we had very strong investment returns, which certainly helped the financial results. So it was a very good year from July to June, very pleased with the strong rebound in our performance in the multi strategy funds and continued strong performance in the equity funds. So I think that made a big difference this year.
The second major activity of the year was the Dial transaction, which we closed in February, and the partnership that we have with Dial going forward. And I really feel that sets NGI up on a different path going forward. And we'll go into a lot more detail about that transaction and the resulting earnings drivers from it. 3rd, we believe we have a much more diverse and more stable earnings stream with the interest in the companies that we purchase with Dial, and those companies continue to perform well. And as I mentioned, we'll go into more detail on that.
4th, we continue to organize the business to focus our employees and their talents on specific areas, such as NorthRock, Mission Crest and our platform services business, which we will also be rebranding and creating a new name for shortly. But we've really tried to organize, our employee talents around very specific products and tasks, and we believe the greater focus allows for more control and the ability to make quick decisions, which we view as vital to the future of our success. Our balance sheet is in great shape. It has been for a while. So certainly, we plan on using the strength of our balance sheet to acquire interest in other firms with Dial's help as well as launching new products.
So we're excited to have a good balance sheet. We certainly feel like we are poised for growth both at the Lighthouse business level and at NGI. And I think that will come through in the presentation as well, a number of initiatives in both areas underway. And I'm very happy with the progress that we have made. So we're very proud of the financial results over the past 12 months.
Amber is going to focus on that a little bit more towards the end and go through them in more detail. But we're very excited about this past year and looking forward. So as Amber mentioned, I have several colleagues joining me today
who are
going to walk through different parts of the business. And again, we continue to build a very deep bench of talent, both Lighthouse and NGI, and certainly want our shareholders to hear directly from individuals responsible for the different business lines. And returning to Page 5, I'm just going to quickly highlight some of the results. So we had $31,600,000 of adjusted EBITDA, which we're very happy with and was at the upper end of the range of guidance that we provided. So again, very happy with the results.
Part of that certainly due to strong investment performance, and we hope that that continues. 2nd, the dividend at $0.06 per share. So again, reflecting that higher payout ratio, we realized the dividend for the 1st 6 months of the year was lower than what we had done previously, but that was really part of the Dial transaction and what we needed to do there and very happy to see the dividend come back up to these levels. And then finally, just the group AUM approaching 21,000,000,000 dollars so continuing to increase. And both Ben and Ross will talk about some of the changes on the Lighthouse side and also on the interest in the portfolio that we purchased from Dial, but both showing growth over the last year.
And again, very optimistic going forward. So with that, I'm going to turn it over to Ben to talk a little bit about Lighthouse and the investment products and returns that we had there. And with that, Amber, we'll go to Page 7.
Thanks, Sean.
So, and with like 8 months and as Sean alluded to, one of the key elements that we wanted to get done in these 1st few months was really to segment out our different business lines,
to so that it
would be easier for both our clients and prospective clients to understand the range of services and capabilities that Lighthouse could deliver, but then also for our shareholders to better understand as well. As we think about the 3 business segments that you see listed on Page 7 here, our traditional hedge fund solutions business, really embodied by our multi strat and global long short products as well as our customized solutions business. See that business today sits at around $7,100,000,000 Areas where we're really excited about some growth potential are as we move to the middle and right side of the slide, our hedge fund business embodied in our NorthRock and Mission Crest businesses that today are around $1,700,000,000 And certainly, I can talk I'll talk in a few minutes about some of the potential growth opportunities we see there. And then lastly, our managed account services business, which is essentially our infrastructure oriented business where we deliver to institutional clients. The infrastructure that Lighthouse has leveraged for years to implement its hedge fund programs.
And certainly there, we've seen a couple of interesting and really positive developments from a wins perspective and certainly expect to see some growth into the future. As I go on to the next slide, Slide 8, and Sean alluded to our current AUM or the year end AUM is $13,900,000,000 and that's really representing around an 18% increase versus the previous year end AUM. Three main highlights for you to focus on here, and Sean alluded to our strong performance being a key driver of our AUM growth in the fiscal year. As you can see, we added about $2,300,000,000 worth of AUM purely based on performance. And that performance was across the different products across the firm, whether it was the multi strat business that Sean talked about, but also our hedge fund business with NorthRock and Mission Crest really generated positive returns during the fiscal year.
The second is in a
really a challenging fundraising environment just given the pandemic and stay at home. We saw actual growth from an asset raising perspective across our hedge fund strategy, NorthRock and Mission Crest during the period, as well as on our managed account services side. But really to highlight on the hedge fund side, we're really bullish about some future prospects for growth there, just given a couple of factors, including, again, the strong performance, which continues to persist. 2, there is demand for the strategies that we are executing. And then 3rd, certainly the competitive landscape that those products operate in is really conducive to one where we can actually see some strong relative growth.
So again, we're hopeful we're very hopeful with that with the strategy the sales strategy that we're looking to implement that we can execute on that. The third comment is more on the outflow side. And certainly, in the traditional solutions business, you see around $2,000,000,000 of outflow during the fiscal year. That's really, I would say, 2 main components of that. 1, kind of the remnants of the Mesirow transaction.
And certainly, the positive is that we think those outflows moving into the future are effectively done. And then second, certainly coming out of March 2020 in the multi strat business, certainly we saw some outflows as a result of performance there. But with the great performance that we've seen in the 15 ensuing months, we've certainly stabilized that business and we think we've actually positioned that to have some incremental growth as well. So all in all, as we look at the what happened during the previous fiscal year and how we're set up for next year, we're quite positive. With that summary, I will hand it over to Ross.
Great. Thanks, Ben. So turning to Slide 9, this provides an update on the performance of the NGI strategic portfolio. As a reminder, the portfolio is comprised of 6 passive minority stakes in well established and leading alternative investment managers. The portfolio is highly diversified with roughly $39,000,000,000 of AUM today across 25 strategies and 114 products.
You'll see on the chart on the top left of the slide that portfolio AUM is at its highest level over the past 5 years following both strong performance as well as client flows into products across the portfolio. We're very pleased to see AUM is up substantially from when we announced the transaction a year ago. When comparing like for like numbers to reflect the recent sale of certain assets by one manager, total portfolio AUM is up 17% year over year and 9% over the last 6 months. And on an ownership adjusted basis, AUM is up 18% year over year and 8% over the last 6 months. The sale of these assets, we do not think will have an impact on the earnings going forward.
We wanted to provide the historical trend for you to reference versus a year ago. But even if you were to compare the current $38,900,000,000 across prior stated AUM, you would see it up 10% from $35,400,000,000 at the time of the transaction or up just over 2% from $38,000,000,000 as of December 31. We've seen strong investment performance generated by these managers over the fiscal year, including some notable very strong results 2021 calendar year to date. In addition, as we emphasized when announcing the transaction a year ago, these managers continue to exhibit a very low correlation with one another. All six businesses were managed well through a challenging year, actively managing their expenses and personnel throughout the pandemic, while they invested in growth as opportunities did present themselves.
This past year only reinforced our view that these proven businesses are well positioned for continued success. Dollars 28,900,000 of profits were distributed over the past year by the portfolio. Of this, dollars 19,500,000 will benefit Navigator after the agreed upon profit sharing agreement with Dial. Amber will review the impact of this on our fiscal 2021 earnings later in the presentation, but I would emphasize that fiscal 2022 will be a much cleaner year from an accounting perspective. And as you see on the bottom of this slide, we currently estimate $20,000,000 to $22,000,000 of distributions benefiting NGI next year.
We've been very encouraged by our partnership with Dial, which is now firmly in place. As a reminder, Dial received all equity or equity like securities in exchange for the portfolio as a way to align their interest with us and you and to provide their investors the opportunity to benefit from the long term growth of NGI. They have no need to provide liquidity to their clients and have been very supportive and engaged demonstrating a shared focus with us on creating long term shareholder value. We expect this partnership will continue to accrue to our shareholders' benefit through the monitoring support, our businesses' continued engagement with their business services platform, as well as Dial lending their deep expertise and sourcing capabilities to our growth efforts. If you turn to Slide 10, we also want to quickly highlight some of the unique characteristics of our earnings in the coming years as a result of the acquisition.
Although we understand the transaction structure was relatively complex, it impacts our earnings in 2 very important, clear and simple ways. First, as you will see on the left hand side of the slide, NGI will receive a stable and well covered earnings stream over the next 4 years. There is a built in 3% growth rate and through the profit sharing mechanism in place, we will receive a relatively consistent level of earnings in almost any scenario. This structure was specifically designed to ensure we generate high quality and steady earnings while pursuing additional growth opportunities. You will see here that should the portfolio distribute between $30,000,000 to $40,000,000 in fiscal 'twenty two, NGI will receive the $20,000,000 to $22,000,000 highlighted on the prior slide.
Secondly, as you will see on the right hand side of the slide, we will use excuse me, we will purchase Dial's remaining share of the profits following December 31, 2025, using a defined formula resulting in a meaningful increase in earnings in 2026. It is noteworthy that given the nature of this earn out formula, we will have an increasingly clear sense of what this settlement payment will be in the years leading up to payment and most importantly, we expect NGI will see a material pickup in earnings immediately after settlement. If you flip to Slide 11, we wanted to spend some time providing a bit of background on how we approach new opportunities and the types of groups that we target. As mentioned on our half year results call, the pipeline remains consistently robust and we are very active in pursuing new investments and acquisitions, which we believe will increase shareholder value over time. Without taking too much time to walk through each point here, our philosophy is centered around identifying the highest quality managers who we feel not only are positioned for long term growth and profitability, but importantly those groups where a partnership with NGI can be sustained and mutually beneficial over the long term.
Although we are very encouraged by the number of unique and high quality opportunities we are seeing, we will remain prudent and disciplined as we have in recent years when executing on new opportunities. The target criteria you see here is designed to identify those businesses whose growth should outpace what is an already fast growing segment of the asset management market. At this point, I'll hand it over to Scott Perkins, who will cover a bit more about the industry landscape on Slide 12.
Thanks, Ross. And Amber, if you could move to Slide 12, please. Thank you. You can see on the right hand side that over 80% of investors that were surveyed expect to increase their allocation to alternatives over the next few years. And the reasons for this are various, but primarily, it's based on where we are in public markets globally, continued low interest rates, the expectation for outperformance in alternatives and lower overall correlations.
Because of this, you can look on the left hand side and also expected to grow to over $17,000,000,000,000 by 2025 growing at a clip of 9% a year, which is above trend line growth we've seen over the last 5 years of 8%. Now if you break that $17,000,000,000,000 down about 60% is in private markets and that's private equity, private credit, about 25% is in hedge funds with the residual in real estate, infrastructure and natural resources. Now if you break it down by geography, about half of that is North America and then 30% or $5,000,000,000,000 of it is in Asia, which is expected to be the fastest growing region over the next 5 years for alts. And that's more than double what they're expecting to see in Europe. Now the 2 primary factors driving that growth in Asia are 1, lower penetration rates and 2, as you might expect, faster GDP growth.
And I think this creates a target rich environment for us and we are seeing interesting opportunities across the spectrum of alternatives as well as across each one of these regions, both through our partnership with Dial, as Ross noted, as well as through our own efforts in own channels. And I would say that all of these opportunities that we're looking at have projected growth rates well above these trend lines that you see here. I do think it is interesting that Asia is expected to see the largest growth. And right now, we are seeing several interesting opportunities in Asia, which I would say are more growth oriented, but also strategic in nature as well. So we're really excited that this gives us the opportunity to tap into this growth, while further diversifying what we're doing more broadly.
So with that, Amber, I'll go ahead and turn it over to you to cover financial results.
Thanks, Scott. From a financial results perspective, I'm very pleased to say that we delivered an adjusted EBITDA of $31,600,000 which came in above the guidance that we provided back in February of a range of $28,000,000 to 31,000,000 dollars So on this slide, we've presented our statutory EBITDA against what we look at as our adjusted EBITDA or what we see as our core results. And against that, just some of the adjustments that we've made to that so that you can understand how we see the business versus how the accounting standards see the business, I guess. So just to step through briefly, so management fees and performance fees are obviously a core part of revenue and are in adjusted EBITDA and so too going forward will be the net distributions that we get from the NGI strategic portfolio that Ross stepped through earlier. What we just pull out from a revenue perspective are 2 items, which is the reimbursement of fund operating expenses.
So that's where the Lighthouse business pays for expenses that are on charge to the funds. The accounting standards require us to record both the revenue and an expense, but from our perspective, they actually net off and there's no markup. So we look to exclude them from our adjusted EBITDA result. And the same with the provision of serviced office space to some of our associates, that's a direct recharge with no markup. So again, we take it out so that we eliminate that noise out of the core result.
So that brings us to an adjusted revenue of $92,800,000 Against that, we have operating expenses of $63,400,000 So the key difference there is and can compare to the statutory operating expenses is that offset of the $17,000,000 and the $1,800,000 I just mentioned. The other thing we adjust for is some additional cash lease payments under the new accounting standard that came in 1 July 2019. Those costs that relate purely to rental are actually now considered financing costs. We believe they're operating costs and are a true cash cost to the business, so we add it back. So that brings us to a result from operating activities of 29 point $4,000,000 Also in EBITDA is some finance income.
So this is actually much larger this year from a statutory point of view because it incorporates some fair value movements on the assets and liability that we recognized as part of the Dial transaction. But if you strip that out, we're left with $2,800,000 which represents the increase in the fair value of the assets in lighthouse funds that the Navigator Group itself holds. So that was a good result and consistent with the fact that there was good performance across the lighthouse portfolio this year. We've also just pulled out non operating expenses. So they actually represent transaction costs as well as some write off of fixed assets that we did this year when we let go of the Chicago leased office.
So the one that the costs that are just staying in adjusted EBITDA is that write off. So that brings us to the $31,600,000 of adjusted EBITDA. So in terms of our key revenue items, obviously, one of the biggest is our management fees. So they were $75,600,000 for the year, so down 14% on the prior year. As Ben discussed, Lighthouse has done an excellent job in rebuilding AUM over the year.
There has been a change in the composition of that AUM though and that's reflected in the average management fee that's dropped. So it's gone from 66 basis points to 58 basis points and that reflects mainly the outflows from the commingled funds whereas we've got inflows that have come in more through the hedge fund and managed account services. The hedge funds also have some special fee arrangements too where we have some lower fees but management fees but performance fees that can be earned. So in terms of performance fees, that's $13,500,000 for the year, so up significantly on the prior year, again very reflective of the performance. The one encouraging thing from that is that performance has continued to be good.
So we'd expect to see good results again next year, all things being equal. And we also have a higher proportion of our assets that can earn performance fees. So again, that's a positive going forward. In terms of revenue, the other revenue item, which is obviously this new year this year, is the distributions that we have from the Dial portfolio. So the accounting for this one is a little tricky.
It doesn't quite match the profit share. And so we really wanted to step that out to make it clear. So one of the things we agreed with Dial as part of the transaction is that we would actually share the distributions that were received all the way, that related to calendar year 2020 as well as anything received up to 30 June 2021. The total of that, as Ross mentioned, was $28,900,000 and we would like when we apply the profit share arrangement, dollars 9,400,000 goes to Dial and $19,500,000 is retained by us. The confusion or I guess the trickiness this year is that in an acquisition year, we can only include distributions that were received post 1st February, which was the transaction date.
So from an accounting perspective, dollars 15,800,000 of that $28,900,000 is accounted for as acquired cash and is recognized in the balance sheet. Dollars 13,100,000 was received in cash post 1 February. So if you offset the $9,400,000 Dial share, that's the $3,700,000 that ends in the P and L for us. So if you take into account the cash and the $3,700,000 you come back to the same benefit of $19,500,000 So we're in the same place. It's just not represented the same way as a pure revenue.
The good news though is from 'twenty two onwards, it's much simpler and everything received will go through the P and L. And so I can tell you from an accounting perspective, I'm very much looking forward to that. So in terms of the strategic portfolio as well, it was obviously a very big transaction for us. We went through the purchase price accounting for the transaction and came out at a result where we were comfortable that the assets and the liability that we took on for when we buy back the remaining interest in 5 years is equal to the fair value of those assets. And so there was no goodwill or bargain recognized for the transaction.
The assets are fair valued at 30 June as well as that contingent consideration or redemption liability. So we revalue those each balance date. Both of those actually increased and so the net result of that was 8,000,000 dollars As you can see, we actually exclude that from our adjusted EBITDA though. In terms of operating expenses, I'm not going to go through each one of these, but this slide just summarizes or provides the key operating expenses of the business. I will just note for anyone who sums that column, it doesn't add to the $63,400,000 So apologies.
But these are just the key items, and I've also put in the non operating expenses being the transaction costs at the bottom there. The key expense for the business is obviously our people. So the cost for people was $47,900,000 this year, up 8%. Our salary or our fixed cost was relatively flat and the increase is largely driven on a variable compensation side, particularly because our performance fees are higher and part of our remuneration policy is that 50% of performance fees are allocated to a bonus pool. And lastly, I'll just look at the balance sheet.
So we ended the 30 June financial year with $52,100,000 of cash. I will point out that $9,400,000 of that cash is actually owing to dial, so that isn't paid until post-thirty June. The other big shift on the balance sheet is obviously the $252,000,000 of investments. So that represents the Dial strategic or the NGL strategic portfolio assets. And there's the offsetting liability of the $80,000,000 dollars for the amount that the fair value of the amount that we'll be paying in 5 years' time.
So that has created a large increase in our net assets, and that's due to that acquisition of that portfolio. So all of that sums up to the fact that we're able to pay a really good final dividend. I'm very pleased that we've declared a $0.06 dividend. When you add that to the $0.035 from interim, the combined dividend comes out to an 80% payout ratio. And so with that, I will actually just in terms of the guidance, we have put out some guidance.
We're expecting our FY 2022 results to be CAD 40,000,000 to CAD 42,000,000 dollars And just to note that that's anticipating the gross strategic NGL strategic distributions of $22,000,000 as part of that result. It does include a normalized level of performance fees in that number. Obviously, performance fees are variable. So the final result might have some downside, but definitely some upside should performance continue to go well. And so with that, I will hand it back to you, Sean.
Okay. I'll just make a few closing comments before we open it up for any questions or discussions. And I'm just going to focus a little bit on Page 23 and cover some of what's been presented here. But we certainly believe that NGI's earning profile is now highly diversified between Lighthouse and the 6 other firms that we hold interest in with the NGI strategic portfolio. We have the earnings that come from the NGI strategic portfolio as we have talked about we believe are very well covered And we have a preferred earnings stream there with an adjustment each year.
So we feel very good about the prospects of fully earning that and hopefully more. And as we pointed out, in aggregate, those assets are growing and have grown, as Ross pointed out, are at some of their peaks in the past 5 years. So that's certainly a trend that we want to continue to see happen. Also the management fee generating earnings again, Lighthouse has a very diversified client base and product set that we continue to add to. And Ben and Scott touched on that a little bit, which is important for our future growth.
We also maintain a very active pipeline and certainly with Dial's help of opportunities. So I would say, it's been very, very robust. I think that our long term shareholders understand how seriously we take capital allocation decisions, so either making new investments or paying dividends or any of the activities we've done. So, we've got a very tight filter on what we're looking for and what we're trying to do. But certainly, we have a very big pond to fish in and we believe the best partner in the world to do that with Dial.
The Lighthouse business, we touched on that, well positioned for growth across the products, the hedge fund product, the platform certainly in the traditional business. So we're excited about what's happening there and again how we have transformed the business over time and we'll continue to do that and continue to bring on new talent to help us do that across the board. So I think despite COVID and all the distractions that go with it, we have increased the human talent that we have at Lighthouse really globally. That can be hard to do in a pandemic when you're not working or working all together on the same roof and can't visit some of these locations. But I think we have taken advantage of some of this chaos and picked up some really good people.
So I'm excited about that. And also similar to Lighthouse, in the NGI strategic portfolio, those managers, they also have their own aspirations and ambitions and are launching some very interesting products as well. So we'll continue to work and discuss with those managers, certainly want to continue to support each other across the NGI Group platform and are very excited about some of the things that they're doing. So overall, we're very pleased with the progress that we made this year, particularly in a challenging environment with COVID. But I can assure everyone we're very focused on continuing to drive results, both across Lighthouse and the products and the platform that we manage there and through strategic investments going forward.
So again, we appreciate everyone taking time this morning and this evening to listen to this. And with that, Amber, I believe we can open it up for questions or comments.
Thank
Our first question is from Phil Chippendale with Ord Minett.
Sean, first question is for you. Earlier, Amber mentioned the increasing proportion of AUM that's subject to performance fee. Can you give us a sense of the proportion of your current AUM where a performance fee is potentially applicable? And then can you just sort of elaborate on how that has trended over time and perhaps where you see that going to?
Yes. I think, Phil, I'm going to answer it a little bit differently because at the total NGI level, I would argue the way we're structured now. From a lighthouse level, yes, we've had an increase in performances or the percentage of assets that are subject to performance fees. And I would put that in about the 10% to 15% range, Phil. I would say overall, at the NGI level, it has probably actually decreased slightly if you believe there's a really high probability, as we believe, that we will hit the minimum payout that we will receive on the strategic portfolio.
So if you see what I'm saying, Phil, it's, yes, at the lighthouse level, that is true, but at the whole NGI level, I believe that our earnings stream is more stable than it has been in the past because of the way we structured the preferred payout with Dial.
Okay. Thanks. Yes, that's really useful. Just continuing down the Dial path. The pipeline with dial, it may be a question for you or for Ross or someone else on the team.
But can you talk to your level of confidence around potentially doing another deal down that avenue, say, in the next 12 months? Would you say that given what you're seeing at the moment, that it's more likely than not that perhaps you're doing something in the next 12 months or so?
And, Phil, I just want to make sure I understand your question. So is it of the magnitude of what we did with Dial or?
No, not necessarily. Yes.
Yes. More general comment.
Yes. So it's more likely than that, that we will do 1 to 2 types of investments. If not more, I really couldn't see doing more than 3 to 4 in a particular year, but it depends what comes up. And I think we have a very unique company now. And there are groups that know what we're interested in, that certainly could hold similar types of assets that Dial did.
So I think there's opportunities there. But yes, I would say it is more likely than not that there will be some add ons to this strategic portfolio over the coming fiscal year.
That's great. Thanks. Last question from me, and maybe this is one more for Scott. I'd just like to hear him sort of refer to the pipeline a little bit more. Scott, you mentioned sort of that there is quite a bit of potential work ahead for you.
I guess, is that really coming from existing clients and potentially expanding their current mandates? Or do you see more down the avenue of new clients joining the Lighthouse platform?
It's a little bit
of both. And historically, Phil, we've if I had to break down what we've seen from a standpoint of existing client additions versus new clients, it's normally been about sixty-forty. So 60% additions, which is good to see because what you tend to have are happy clients, good performance and they're making additions. We saw a fairly large allocation at the beginning of the calendar year this year from an existing sovereign fund that made a sizable increase to their account given that they were happy with performance at the end of last calendar year. So we like to kind of see that ratio and then 40% from new relationships.
So you have to be consistently out building those relationships, getting them into pipeline and ultimately getting them the various funds. And the nice thing, as well as going back to the one slide that Ben covered towards the beginning of our customized solutions and existing funds and then our hedge funds and then our managed account services team, we've got a little something once we get one of these relationships in where we can kind of move them along and kind of fit them in to one of those areas based on what their ultimate needs are.
Right. Thanks very much. That's really useful. I'll jump back in the queue.
Thank you. Our next question comes from Nicholas McGarrigle with Barrene Joey. Please proceed with your question.
Hi, thanks. Thanks for taking questions. Just one on the actual direct hedge funds businesses between North Rock and Mission Crest. Can you talk a bit about the growth that you've seen there? It's quite material in the last year and probably not overly well flagged.
So maybe just walking through the strategies there and how you're distributing them. And is that a synergy in terms of being able to market that into your existing allocations on the sort of hedge fund to fund side?
And Ben, I'll talk about it just from the investment perspective, and I'll let you talk about it from the distribution perspective. But from the investment perspective, I mean, NorthRock is a strategy that has been worked on now for 8 years, 8 to 9 years. We've been very patient in the growth of that. And again, focusing on just a very high quality offering in the marketplace. And that continues to grow nicely now with a very concerted effort when we thought everything was right and began taking external capital into that.
Mission Crest and NorthRock focuses, for those that aren't familiar with it, on the equity space and really in a market neutral format on a global basis and very sector focused. By contrast, when we look at Mission Crest, it is really focused on macro investing over multiple timeframes. So short term timeframes that are more systematic approaches and then longer term more fundamental approaches. When we look at those 2 fund offerings, they have very low correlation to each other. And when we look at the individual position levels, it's non existent, the crossover of the positions they would have.
So they offer very different opportunities for our clients. And Mission Crest, similar to North Rock, I mean, we've been investing in these strategies for over 20 years, but we are putting them together in more of a multi manager hedge fund format, which we have the skill and expertise and the platform to do that. So there are synergies across what we're doing and the platform that we've built and others have seen the value in the platform that we've built and are certainly using that for their own needs. But these are just two examples of products that we have worked on over a long period of time. And I'll let Ben comment just on the recent growth characteristics of each.
Yes. In terms of growth and where we see this going, it's really we find it's really a positive environment for the firm in terms of how we can potentially grow this. 1, there's a the key performance is obviously relevant to any ability to raise capital and certainly performance across these strategies has been quite attractive. I think second has been just really investor appetite for these types of strategies. If you look at NorthRock, which is again, it's low beta type product, market neutral product, where you do see clients, whether they're looking for an outcome that's more absolute return oriented or a just a low net equity outcome, there's just a lot of demand for those types of strategies and we're seeing it just in the conversations that we're having currently.
And then as it relates to Mission Crest, I mean, there's obviously a lot of demand for strategies that provide diversification from equities as well as can be a substitute as well for fixed income. In terms of where we're seeing appetite, it really spans different channels. Certainly, the buyers for these sort of multi PM platforms typically are private banks, sovereigns, as well as large institutional clients that understand the sophistication of these strategies and how to use these strategies. So across all those channels, we're actually having conversations and moving those conversations through a pipeline, which is which again, we're pretty pleased about how that is moving along. And the last thing I would just mention, Scott mentioned that you like to see at least 40% new client conversations.
And certainly, I think we're seeing that manifest in our multi PM hedge fund conversations across both NorthRock and Mission Crest. And again, we just have a really, really strong opportunity there to grow the business going into this fiscal year.
That's really interesting. And in terms of just the overall strategy to be doing more of that internal management yourself, is that are there plans to offer or hire further managers to run direct hedge funds internally? And in terms of what types of asset classes do you think that would be across?
Yes.
Go ahead, Ben.
Yes. So look, I think we think
there's a legitimate opportunity for us to move into additional asset classes as well as additional regions, as well as leveraging some of the sourcing talent that sits in our traditional business to access additional asset classes and strategies as well. Look, I think we will look to we typically look for strategies where we that can be alpha generation generating strategies or alternatively, those that have a lack of correlation to traditional markets. So certainly, we are actively looking at adding teams, whether it's commodities focused strategies or even Asia focused strategies, we're constantly looking for ways to build out the platform.
Cool. Maybe one last one for me. Just on the strategic portfolio, you flagged $20,000,000 to $22,000,000 of expected contribution in FY 'twenty two. I mean, given the profitability and the timing of distributions, is it what's the visibility level like on that distribution? Obviously, that assumes a $30,000,000 to $45,000,000 portfolio level contribution less the performance fee pay away.
So it's obviously a reasonably tight range, but how much visibility do you have around that outcome?
Hey, Nick, it's Ross. I can start on that one. I would say we have good visibility. The way that there's no set pattern to how the distributions come out of these managers, but given how we see kind of the calendar 2021 investment performance and financial performance of the firms so far. We would expect them to kind of continue to perform within the historical range.
And it's a bit old now, but when we announced the transaction, we had shown kind of some historical portfolio level profitability, which averaged about $36,000,000 in the 5 years prior. We have no reason to think that they can't be kind of around that range this upcoming year. But to your point, it will depend a bit on timing of profit distributions as well as kind of performance throughout the remainder of this year.
Cool. Thanks for taking the questions.
Thank you. Our next question comes from Tim Lawson with Macquarie. Please proceed with your question.
Hey, guys. Just two questions for me. Maybe a follow-up to that question on the visibility on the dial distribution. So has historically there been a sort of any particular seasonality to when you get distributions or when the I'm sorry, I haven't got them before, but when they would normally distribute those managers?
Yes, Tim, it's Ross again. And Amber or anyone else, if you could chime in. We would expect to see more distributions come out the second half of our fiscal year or the first half of the calendar year for prior year profits, given as we've shown on the slide here on Slide 9, that 74% of AUM is performance fee eligible. Although as Sean highlighted, our earnings slice office portfolio is not really sensitive to performance fees. The way that these groups manage their business and kind of manage your company cash flows is somewhat sensitive to the timing of recognizing those revenues.
So you do see more profits distributed out following the end of the calendar year. So I think when we come back to market in 6 months or so, we'll hopefully be able to reaffirm or update the full year guidance, but you probably may see a slightly lower amount of distributions in that half year result than you'll see in the next half.
Okay. And just thanks, that's very clear. In terms of the survey, you've included there in terms of people's intentions across the sector to allocate to alternatives. Can you just talk to whether that those intentions have changed versus previous surveys? So has there been a shift?
Or has that been pretty consistent historically?
It's Ross again. I can start on that one as well. It has increased. I think the biggest change and I would have to go back to prior prequin actual surveys, but I would say from a market sentiment standpoint and what we're seeing as we diligence kind of the pipeline is probably that increased significantly piece. What you're really seeing in the market, especially on the illiquid alternative side are institutional investors and sophisticated investors who have already allocated heavily to the space are increasing.
And then you have large pockets of capital in retail, smaller institutional investors, insurance and others that are a bit behind and are actually needing to catch up now given how long the low rate environment has gone. And also quite frankly, the strong returns from last year on the liquid equity side, you see people allocating money knowing that those returns can't last. So I think we can check the data for you, Tim, but I think you would definitely see pickup and that will increase significantly. And my sense is the increased number is also higher. So that collective 80% that Scott highlighted was probably not as high last year.
So the sentiment is getting there's more conviction in that trend.
Yes. And maybe from that with a specific question on Navigator. Just the balance of conversations of the inflows versus redemptions across Europe. I think you talked a little bit about the pipeline, but maybe sort of breaking that out into the sort of gross elements?
Ben, did you want to take that one maybe about like sentiment around flyers?
Yes. Could you clarify that one? I'm not sure what you were getting at on that question.
Yes. Okay. So I mean, you talked a little bit about the pipeline and trying to win new clients and get money from existing clients. But the net flow numbers, obviously, a calculation of gross outflow and a gross inflow. So just trying to think about those two elements.
The business has had gross outflows significantly over the past several years, just sort of seeing where those conversations are at now. And on the flip side, the conversations you're having where there might be inflows, where are they sort of sitting?
Yes, sure, sure. So as we look at outflows or where we think that may go, I think we're now kind of removed, as I mentioned,
from the negatives associated with
March 2020 in our Multistrategy business where there has been some stable there's been real stabilization there. And then Mesirow, the Mesirow transaction, the legacy remnants of that, I think we've got to a point of stabilization there. So really, to the extent that we see redemption activity, perspective redemption activity, you're going to see it for one of a couple of reasons. Maybe there can be a performance driver, but again, across the platform generally, we're seeing solid performance. The second one could be simple portfolio reallocation by a client, an institutional client.
We've seen some prospective outflow as a result of that as well. But ultimately, all of that kind of combines to I try to budget a certain amount of outflow on an annual basis, whether that's somewhere between 6% or 7% of your assets, and hopefully we can do better than that in terms of protecting assets, but that's how we think about it. 2nd, in terms of the inflows, look, the pipeline, our pipeline is pretty good, looks pretty strong right now. We have some objectives for the business that are well in excess of growing well in excess of that projected redemption amount. Yes, we've got to still execute the sales strategy to get there, but that's certainly the objective.
Thank you. Thank you. Our next question comes from David Allingham with EGG. Please proceed with your question.
Good evening, guys. Thanks for taking my question. Just wanted to clarify, maybe it's one for Ross on the acquisition opportunities. Just could you give us some sense for if you were to complete 1 or 2 this year, what kind of potential earnings impact that could have on that baseline of $40,000,000 to $42,000,000 you've guided to? Are these the kind of acquisitions that can be incrementally a couple of $1,000,000 of EBITDA that can be done accretively for the group?
Or just some flavor on sort of how that capital allocation, what it might mean for the P and L rolling forward?
Sure. Hey, David. I would say that unfortunately, it's not going to be a great answer. They're a little bit all over the place to be honest. I think as we kind of walk through on Slide 11, the characteristics we're looking for, we really do take a long term view on these.
We're highly sensitive, especially given we're hoping to continue to grow and have the resources to do so. Then near term earnings accretion is important and that we are looking at businesses that are already hopefully profitable and distributing cash flows. I think you hit the nail on the head where you say, can they really be done with the strongest managers with the strongest outlooks at an immediately accretive price. And I think in today's environment with the trends that Scott covered, sometimes that can be tough. With that said, I think you're also correct.
The managers that we're looking at are of the size that I would think it is probably in that single digits of contribution in the 1st full year post completion that we're looking at. So if you think about how Sean highlighted the number of transactions, I would say they all won't be the same size. But hopefully in a given year, we can execute enough where we can contribute at that pace. But they unfortunately, they really are a bit all over the place and given both how competitive the market is and also the nature of these businesses and various structures and objectives of the sellers and kind of people looking for investment in certain cases, it just varies widely.
Yes. Thanks, Ross. And just to follow on, I think I read that Dial Group's been responsible for 50% of all GP sort of state acquisitions in the U. S. So just curious what they bring for you guys.
Is it simply are they bringing you exclusivity as well in some of these transactions that they might be looking at? Is that part of what they offer you? Or is it just a pipeline that's getting shown effectively around the market?
It's mostly the latter right now and that can obviously evolve over time. But if you think about if they're capturing 50% now and they've been doing this formally since 2020 excuse me, 2010, when there was really only 2 people in the market, they do, as Sean has highlighted in prior calls, have the deepest source and capabilities. So not only do we or have we been able to see opportunities that are kind of off market, we're also getting a better insight into what it really takes and what people are really looking for in terms of trying to find a partner and if we can provide the right capital and investment to do so. So it's mostly just that high quality and very hard to replicate sourcing funnel, which they have. And just one nuance to that, dial for their clients today given their size and given their strategy are really focused on extremely large managers.
So the nice thing is that they continue to see deal flow that would not apply to their current mandates. And therefore, it's an easy conversation and a very collaborative one to hop on a joint call with a manager or an advisor to a manager looking for a new partner with them and kind of an easy and easy thing. And I think that's why at least to date, what we're really encouraged is I highlighted with the partnership so far.
And just to be clear to finish, Dial have moved clearly, I think, in their fund number 5. They're moving more into it's much more private equity real assets away from the liquid alt space. Are you is NGI also looking at those kind of assets? I think you referred to that in the presentation, but this will be private equity. It will be property.
It will be credit. It will be quite a diverse range, it's not just the liquid hold space. Is that right?
That's 100% correct. I think we think the cash flow and earnings dynamics of those businesses are very attractive. The secular growth trends, as Scott highlighted, especially in those businesses are very attractive. And the asset classes themselves are at a place in their evolution that we saw the hedge fund industry, call it 7 to 10 years ago, where you really be able to see dispersion not only in products and return, but how people manage their business and where businesses are going in the future, which is a really kind of target rich environment. With that said, we still do see a lot of interesting opportunities on the more liquid side, but we think diversification for Navigator adds a lot of value, which is why we're looking kind of throughout that whole spectrum.
That's great, Ross. Appreciate it. My
Our next question comes from Mark Hancock with Precept Investment Actuaries.
I just wanted to try and get a bit more color on the guidance for 2022. You're saying $40,000,000 to $42,000,000 of which $20,000,000 to $22,000,000 would come from Dial, which obviously leaves $20,000,000 from the rest of the business, which appears a fairly modest contribution, albeit I appreciate performance fees were particularly strong last year. But I was just wondering if you can explain what assumptions or things you're taking into account there with respect to say, firm growth or net flows, market movements, investment gains. I assume all of these are really not assumed to contribute much, but you would be coming off a record high level run rate. So it just seems that it seemed fairly conservative unless there were some other negatives I wasn't aware of.
Mark, I'll take that. The 20% to 22%, that's the gross distribution number from NGI Strategic. So just one thing to keep in mind, there will be some cost to that business. So probably ballpark about $2,000,000 of our costs would relate to running that particular portfolio. So you can kind of think of it more I guess as $18,000,000 to $20,000,000 in that range.
So the other side is that whilst we do have some growth certainly from asset growth and performance factored into the lighthouse side of the business, we are aware that there's been a change in the asset mix. So some of those commingled assets that were redeemed early last in the fiscal year mean that we've replaced them with assets that generally have a lower management fee and sometimes they have a lower management fee plus a performance fee component. So it creates a bit more volatility into that result. So we'd expect our management fee earnings to probably be fairly steady or modest growth for 2022 compared to 2021, and hence the performance fee component. That $40,000,000 to $42,000,000 doesn't assume that we replicate the performance fees from this year.
We'd expect a reasonable amount somewhere in the range maybe normalized of $5,000,000 plus, and there is obviously an expense component that goes against that.
Sure. Thanks, Amber. Just one if I've got time, one other question. Just in terms of there's been a bit of discussion around the pipeline of acquisitions. I'm just wondering what do you see as the funding capability for Navigator to undertake acquisitions in terms of size and form of funding to be able to finance an acquisition, be it via existing cash reserves, equity debt or scrip exchange?
Obviously, you can do a scrip exchange like you did with Dial. But I was just wondering outside that, where do you see the sort of resources available for funding inside Star's Quantum and Form?
Ross and I have spent a lot of time talking about this. So I don't know. Ross, did you want to start or would you like me to?
No. Feel free to, Amber. And if I can add, I'll try to.
Sure. I mean, we're looking at transactions of various sizing and really the funding for those will depend on the size of the transaction and the structure of the transaction. So for the smaller ones, we've certainly got some cash on the balance sheet. And then for larger ones, we'd look at a combination of external debt financing and potentially capital raising. It is really going to be very transaction specific though.
Okay, Emma. Thanks for that and thanks for the great presentation from everyone. Great to have contributions from Ben and Ross on the call today or this evening, I should say.
Very welcome. I'm thankful that they all stayed up to do it with me from the U. S.
Thank you. Our next question comes from Stuart Dodd with Renaissance Asset Management. Please proceed with your question.
Hi, thanks. Hi, everyone. Just in relation to Dial, when is the $9,400,000 payable to them?
It was paid in July. So we work it out as at 30 June. It is in the balance sheet as part of the payables number and then the cash flow comes out in July.
Right. Okay. And then Slide 10, I'm going to ask a pedantic question, but don't misconstrue that. That's very good that you've included that slide to really help us try and understand how that acquisition will play out over the time frame. So the first question is just a simple one.
So reading that table you've given us on the left hand side, we're pretty well at that 30% starting point now. So if the world stays as it is right now, if we then move across the right hand side of that slide, you'd be expecting to pay $53,000,000 payment on the 31st December 2025. Yes. That's right.
It stayed at the current level. Correct.
Right. Now just the pedantic part though is you say your earnings are going to go up in fiscal 2026. Is that just a misprint? Because if you settle on in December of 2025, you won't get a full year impact until calendar 2020 6, right?
We do do it on financial year and it actually works out on 1 January 20 26. That's halfway through the 2026 fiscal year.
Yes. I was just going to add, there's a mechanism similar to how Amber walked through the fiscal 2020 nuance, there's a good build mechanism as well when the 5 years ends in 2025, there may be a catch up due to dial following fiscal 2025, but we should start to see 100% of the distributions to us slightly before the redemption payment is made, although it could be within the same period as Amber highlighted.
Okay. So just to be clear You're
right, Stuart. I think we probably tried to give a simplified example. I didn't pro rata it this year. Yes.
And it is And you'll see it on the slide there where you see that the settlement is calculated on calendar year 2021 to 2025 earnings, while the profit sharing mechanism was really calendar year 2020 to $2,049,500,000 the first half of 2025, if you will.
That's great. And I appreciate you giving that information. Thank you.
Thank you. There are no further questions at this time. I'd like to hand the call back over to Mr. McGold for any closing comments.
Well, thank you again for everyone listening again this morning and also overseas. So we really appreciate the time. We appreciate the questions and the interest in NGI. And with that, we can close the call. And again, very much hope to be back in Australia in person at this time next year.
But thank you again.