Good day, and welcome to the Amundi Third Quarter and 9 Months 2018 Results Conference Call. Today's conference is being recorded. And at this time, I would like to turn the conference over to Anthony Miller. Please go ahead, sir.
Yes. Good morning to all of you. Thank you to be with us. Our CFO, Nicolas Calhoun, will present the results, and we will then hand over the floor to Q and A as usual. Nicolas, up to you.
Thank you, Anthony. Good morning to everybody. So we are here to present you the year to date results on this result of the Q3. So just to introduce, I would say that these results are very satisfactory, showing a strong continued Strong increase in our net result and resilient business performance in a market environment, which is clearly less favorable than What it used to be. Main indicators being for me, of course, the increase in the net results, 41% For the accounting results, on a comparable basis, plus 11% compared to last year and the strong net inflows of £48,000,000,000 for this 9 1st months of the year.
So to answer a little bit more into detail, I would start, I would say as usual with a few words about the environment. As I said, clearly less favorable. The equity markets In average, for the 1st 9 months are more or less stable compared to last year. You can see the overall stock is 1% plus again in average 9 months to 9 months. Interest rates are still low, but probably what is more important come?
Since the beginning of the year, since the first market correction of February March, we are in a much More volatile environment with rising risk perception of political or geopolitical risk, higher risk aversion, which is clearly visible on the market. Just to illustrate, if you look at the market of the open ended funds in Europe or the whole of Europe, Last year, the net inflows for the full year, which was a very good year, was €800,000,000,000 more or less €200,000,000,000 every quarter. And this year is around €100 and €50,000,000,000 for 9 months and almost all of these being done in the Q1 basically over the last 5, 6 months. The net inflows in Europe, at least on open ended market, are close to 0. So in this environment, Amundi continued to grow and I'm on the Following slide, Page 8, with assets under management that reached at the end of September count?
€1475,000,000,000 so an increase by 0.6% compared to June of A bit more than 5% on a yearly basis with, as I indicated, €48,500,000,000 of net inflows since the beginning of the year and a bit more than €6,000,000,000 for the last quarter. Following page, an important element which Noticeable is the fact that this net inflows was primarily driven by long term assets. As you can see, out of this €48,500,000,000 on the 1st 9 months of the year, €42,000,000,000 were on long term assets. And for the last quarter, we had almost 0 flow on treasury products. So Almost all the inflows were on long term assets with one exceptional one off, Which we already discussed at our loss conference call is the fact that Fineco, an Italian distributor, decided to internalize Management of some mandates, a range of fund of funds, we presented an outflows of 6 On exceptional outflows of €6,500,000,000 Except this element, we had positive inflows over the quarters of more than €12,000,000,000 almost 100% on long term assets.
Following page, in terms of clientele, you can see that this solid net inflows were generated both by the Retail and A bit more than €36,000,000,000 of inflows, excluding Finneco, but also with a good level of come. Activity in the industrial segment, especially on the last quarter with more than €10,000,000,000 of inflows from. Just for the last quarter on the Insignol business. If I run now into more detail on the 1st on retail, Page 11. As I indicated, strong inflows since the beginning of the year, which is interesting is our driven by all distribution channels With the French networks, but also the international networks and especially the Italian network, 3rd party distributors, if you exclude the Finneco mandate and the joint venture, all posted positive inflows since the beginning of the year.
If you look more precisely at the Q3, it shows basically a good resilience of the business on long term assets in more unfavorable environment. What we have started to see on the Q2 In Europe, as I indicated, net inflows close to 0 in Europe. And to some extent, Atamundi is But despite the environment, we managed to continue to post positive inflows. So again, if you exclude the internalization of the Fineco mandate, So net inflow on retail amounted to a bit more than €2,000,000,000 for the quarter. And if you look just at Long term asset positive inflows of €3,500,000,000 generated by the French networks, €1,500,000,000 on long term asset.
It's an end network clear slowdown, but it's still positive including in Italy. The Italian networks of In Credi and Credi Agricole Italia posted €700,000,000 inflows despite the environment. And 3rd party distributors, Again, excluding Sineco, €1,800,000,000 inflows over the quarter. So Decent good level of inflows considering the market environment despite the fact that on this quarter, the contribution of the JVs It was minimal. You remember that we have very, very strong inflows on the first half of the year.
On this quarter, the flow is limited. Cam? Nothing any source of worry. We continue to have positive inflows in India. In China, after very strong inflows, you know that the market is more volatile.
We have some limited inflows, but nothing worrying. If I come to the Institutional business, Page 13. As I indicated, a good level of activity, €18,000,000,000 since the beginning Page 14, if you will look at Expertise, as I said, most of the inflows coming from long term assets. And what is interesting is that it continued to be generated by more or less all the our main expertise, all our asset classes, Global asset classes all positive results both from 9 months and for the Q3, again, if you exclude Thanks, Nico. And we continue to grow both on active and passive management and administration on passive management.
You know that in Europe, we are the 5th asset manager in terms of asset under management. On inflows, we were the 2nd one in Europe for the since the beginning of the year. So we continue to gain market share. And last element on activity, Page 15. The continuation of what we have seen over the recent quarters and recent years, most of the inflows continue to be driven by activity outside France.
In Asia, of course, very strong inflows in the JVs, but not only, also continued positive inflows in Italy. Regarding France limited net inflows, but with 2 different movement, Positive inflows of more than €9,000,000,000 in medium to long term assets coming from retail, coming from Employee selling scheme and so on, offset by some outflows on treasury products. Moving now to the net results. And I am Page 17. Important element, our accounting net results over the 1st 9 months of the year is An increase of 41% compared to the 1st 9 months of 2017 due to, of course, the integration of Pioneer.
Remember that they were they started to be integrated in our account on the Q3 of 2017, but also due to the good business momentum. And this good business momentum is visible if you look at the combined adjusted net results, which allow us to give An indication of the increase in our net results on a comparable basis. And we see that our adjusted net results increased by 11% compared to count? For 9 months compared to last year and for the Q3 an increase of 5.8% compared to the Q3 of 2017. What are the elements explaining this increase in our bottom line?
Page 18. First element is, of course, our net asset management revenues, an increase by 3.2% globally compared 9 months compared to last year, coming from 1st, sorry, from net management fees increasing by 3.5% on 9 months and performance is slightly decreasing compared to last year in a more difficult environment. When it comes to the financial income, of course, a strong difference compared to last year. Just to remember you, last year, we posted strong Financial income due to the fact that we basically sold most of our portfolio to finance the acquisition of Pioneer And we realized some capital gain. This year, first, we have the cost Of the debt issued to finance the acquisition, the portfolio is much more limited.
And under IFRS 9, The mark to market value variation of the value of this portfolio goes to the P and L and continuing the market conditions, This mark to market evolution is slightly negative. That's for the revenue. On the cost, we continue to see clearly the impact of the integration of Pioneer with costs that are decreasing by 4% compared to last year, thanks to the rapid implementation of The synergies related to the integration of Pioneer. You have the indication by Page 19. Can consider that around €170,000,000 of these synergies are already taken into account in our P and L.
And regarding the headcount reduction, around 85% of the staff reduction are already done. So quick and Efficient implementation of the integration, delivering quickly the synergies. One last element maybe to notice on the cost. Remember that from the beginning of the year, We accounted on our P and L the cost of external research related to MiFID. That's the element explaining that the Non staff costs are not dukiling or stable compared to last year.
So Revenues that are increasing, excluding financial income, costs that are decreasing. The consequence is that our Cost income ratio is decreasing by close to 2 points compared to last year at 51.2 percent for the 1st 9 months of the year. And given So the contribution of the increased contribution of the joint venture, our net result increased by 11% compared to last year. Maybe a word more specifically on the Q3. Main element to notice Is that the net management fees continue to increase in line With the increase with our assets, an increase in net management fees of 3.6% compared to the Q3 of 2017, so well in line with the increase of assets under management.
Regarding performance fees, million, so a clear decrease compared to last year due to the fact that Given the market environment we are facing since the beginning of the year, The capacity to generate over performance is clearly Slightly lower. The costs are still under control, decreasing by close to 3% compared to the Q3 of last compared to the Q2. So as a consequence, our operating income amount to 2.90 €3,000,000 And the cost income ratio is at 52.8 percent. So the important the noticeable element here is that Despite the fact that we are on a quarter where the performance fees are low, they are low because we tend to have generally A lower level of performance fees on the Q3. And additionally, because this year is especially challenging in terms of capacity to All of these elements explain the fact that Compared to the Q3, our operating income is stable.
Main element are the performance fees and the decrease in the financial revenues. And considering the other element of our P and L, our net result is bottom line is still increased by 5.8% compared to the Q3 of 2018. So to conclude, we can consider that these results Both for the 1st 9 months of the year and the Q3 demonstrate solid business activity On the high level of on the rising level of profitability. So we consider them as a satisfactory result. We continue to be, I would say, in advance compared to our medium term target.
And believe that the results demonstrate that even in a more unfavorable environment, these Results demonstrate the robustness and efficiency of our diversified business model. Now we can switch to Q and A.
Thank come. We'll take our first question from Mike Weiner from sorry, Pierre Chaudhval from CMCIC. Please go ahead, sir.
Yes.
Good morning, good afternoon, I don't know. Two questions for my part. Regarding performance fees, who clearly are disappointing This quarter, we have seasonal effect. But do you think that we have entered, I would say, a new paradigm regarding the fact that, as You said the environment is less bullish for Asset Management Industry? First question.
2nd question, could you go a little bit deeper in your explanation regarding net outflows in China? Because, of course, we clearly understand that it was a huge performance during the first half, but you So I understand that the market today is not judging the first half, but the Q3. And probably there's a concern regarding this aspect of TV, Which was clearly a very good trigger for your company. And my last question It relates to a speak did by done by the CEO of BlackRock Saying that we would like in the 3 coming years, I think that Aladdin, which is the equivalent, I would The Amundi services would represent 30% of revenues Versus the 10% today, because you wanted to stabilize, I would say, the its business model. Is it something considering the current environment that you would like to accelerate in terms of development?
Thank you very much.
Thank you. So first question, are you really entering in a New Paradigm, new environment. I'm sure it's clearly that the environment has been very favorable over the last 2 years. Now the environment is more challenging, more difficult. If you remember at the beginning of the year when we announced our result And our targets, both in terms of inflows and results for 2020, many Commenters were saying that we were too cautious why should inflows be lower than what they were last year and so on.
I think a few months later, we probably are proven to have been right to be a little bit more cautious. What we said at that time is come? We didn't take any market environment any positive market effect. And we consider that, Of course, it would be good to continue to have €70,000,000,000 or €80,000,000,000 of inflows, But we cannot count on it on a medium term perspective. So we don't change our view.
Yes, the market is becoming more challenging, It's been going for more challenging for asset managers. We believe that in a more challenging environment, Considering the model, the diversity of the model, the level of operational efficiency as measured by the costincome Sure, we are more able to face this environment. We have Opportunity to grow in most and to gain market share in most of the market or almost all the market of the business where we operate. That's why even if the environment is more challenging, we are still fully confident in our capacity to meet our medium term targets. 2nd question Excuse me.
On the first question, my question was not about net inflows. My question was more specifically on performance fees. In the past, performance fees Represented more or less 7% and sometimes much above 12% Of net revenues, my question was, do you think that in the new context that you have described, we should see, for instance, performance This represented less portion of net revenues or do you think that It's too conservative to see things like that?
Well, As I said, clearly, it's more easy to have a good level of performance in a positive market environment. So yes, in the past, we have years where it was, I think, it reached 180 some years in good environment, in bad years Much less. So I would say, yes, it's impacted by the market. There will be positive years. There will be negative years.
But in average, there's no reason why it shouldn't in average keep the same we should not have the capacity to generate the same proportion of from? Yes, regarding China. Again, we had very, very strong inflows on the first half of the year. There are limited outflows this quarter. I mean, it's just linked to the character of the market, Which is very volatile in terms of inflows.
The way it works in China is you launch a new product. So in a few weeks, you can have Very strong inflows measured in €1,000,000,000 of euros and when they come when the product is not attractive anymore, you can have strong Flows and then the new products to be launched and the inflows. So overall on the JVs, a reminder, we our target was to have €10,000,000,000 of inflows per year. Okay. On this quarter, the net inflows is €300,000,000 I think on 9 months it's still €24,000,000,000 So clearly, let's not extrapolate just on 1 quarter.
3rd element, yes, Aladdin and so on. Well, I won't comment on what BlackRock intends to do, but clearly for us what we launched Only 2 years ago, Amundi services is something very, very important for us. It's still small. We are still in, I would say, the
come?
In the takeoff mode, so of course, we cannot say that we Target this activity to represent 30% of our revenues in the foreseeable future, but we Clearly intent to develop this activity to generate more revenues and progressively this activity to become, I would say, a third business along the retail business and the usual business. But again, we are still in The takeoff mode. But so far, the takeoff is going well.
Thank you very much.
Thank you. We will now take our next question from Mike Werner. Please go ahead, sir, from UBS.
Comp. Thank you. It's Mike Warner from UBS. Two questions, please. We saw a very good mix shift towards those medium and long from assets and away from treasury assets.
And I think what was missing from my perspective in the presentation, which you had put in Q1 and Q2 was In Q1, you had put in the mix between active and passive flows. And in Q2 or the first half, you provided total ETF flows in the first half. So I I was just wondering if you could get a little bit more color when it comes to kind of these medium and long term asset inflows as to what portion was going into Active products versus passive products, particularly for the retail segment. And then second, We typically see a bit of an uptick in costs in the Q4 for Amundi and I assume this has to do with the Variable compensation. And I was just wondering, should we expect kind of normal seasonality when it comes To costs in the Q4 of this year.
And I also know that you'll be using equity as part of the variable compensation for the first time really for a large number of fund managers, 200, I believe. And I was wondering if that's going to have an impact as to That typical seasonality. Thank you.
On medium to long term assets, so globally, as I We had positive inflow both in active and passive management. So let me I can give you the indication, I'm sorry. Passive Management, I think we are around It's more than €10,000,000,000 of inflows, it means that It's continued to be a good contributor, but the majority of the inflows are still on active management. And when we're talking about active management, It's also quite diverse. Equity, fixed income, but also multi asset that are, of course, still very attractive in retail, if If you take out the impact of the Finneco exit, which was in multi asset, It's also a structured product and it's also real assets.
For example, we had I think €2,000,000,000 of inflows for just real estate and for Private Debt, Infrastructure and Private Equity, more than €1,000,000,000 if I'm correct. Well, overall, our target is to have a variable remuneration to represent between The internal rule that we are applying is between 14% 20% Of the cross operating results, pre bonus. Comp. So in average, clearly close to 17%. So this line of the cost So it should more or less evolve like the pre bonus operating income.
Thank you. And I guess just a quick clarification on the $10,000,000,000 of inflows that you had mentioned on passes. Is that 9 months from? Or is that Q3 only? And is that for the group overall?
Or is that for retail? Thank you.
Sorry, no, no, it's for 9 months. Of course, it's for 9 months. I think it's close to €13,000,000,000 in fact. And it's both retail it's both retail and institutional, probably relatively evenly split. Maybe a little bit more in distribution than retail.
Okay. Thank you.
Thank you. We'll now take our next question from Jacques Goulard from Kepler. Please go ahead, sir.
Hi, guys. It's Jacques come from Kepler. Just two small questions for me. The first one is, you have a €12,000,000 positive on your cost of risk and other. So I was wondering if you could just Tell me what that is composed of and if there is any sort of, I would say, cyclicality or seasonality or any way we can effectively forecast this or It's just an adjustment line.
And B, while we're in questions like that, it's very interesting, Nicolas, what you mentioned about the mark to market impact On what's left of your securities portfolio, could you give us roughly a sensitivity to equity market evolution And how much this portfolio evolves for, say, 5% going up or down in the equities market? I guess It's not part of your whole sensitivity to the Equities business, but just to have an idea for this line in particular. Thank you.
Okay. So on the cost of risk, on the Q3, it just revealed some Provision for personal risk, there's no it's really just an adjustment and there's no cyclicality or, I would say, rule Regarding this kind of line, regarding the portfolio, Most of this portfolio part of it, minor part is composed of SIM Monet And the majority is still, I would say, voluntary investments. So the vast majority is invested either in the treasury funds or come. The share that can be invested in equity also depend on the composition of the semoney and It can be from time to time depending on the kind of products that are launched. But overall, The sensitivity to equity is small because the majority is in treasury or fixed income.
Okay, very clear. Thank you very much.
Thank you. We will now take our next question from Hubert Lam, Bank of America. Please go ahead, sir.
Good morning, everybody. Just three quick questions. Firstly, on the management fee
margin, it seems like it fell quarter on quarter.
I was wondering if there is It seems like it fell quarter on quarter. I was wondering if there is some seasonality around that or some mix shift on that and whether or not we should expect the fee margin, And everything else being equal, do we come up in Q4 because of that? Second question, just some clarification also on performance fees. I just wanted to check, did you also say that performance fees are also seasonally weaker in Q3 because of fewer funds crystallizing the fees in the quarter, Maybe they should that would naturally depress before fees in the quarter as well. And the last question is on excess capital.
Maybe you Give us an update in terms of how much excess capital you currently have. Thank you.
Okay. So first point on management fees. There is a little bit of cyclicality marginally, I would say, in the revenues. Typically, in Q3, we have a little bit of less Of some revenues coming from transactions or advice One mandate. But important thing, if you look at the number for the Q3 compared to Q3 2017, I can see that the revenues excluding performances are increasing by 3.6%, which is pretty much in line with the increase in the asset.
I think the average asset under management excluding, Of course, the joint venture increased Q3 to Q3 by a bit more than 4%, 4.2%. So I can say that increased revenues is up is pretty much in line with the increase in the assets. Regarding second question, on performance fees, Yes. Clearly, here it's, of course, more variable because from 1 year to another year, it's not necessarily The same funds that performed, so sometimes it will be found that anniversary date in the first half of the year that will perform well. Sometimes it will be on the second half.
So it's difficult to make a rule, but we know that in Q3, we have A bit less funds that do come to maturity date in the 3rd quarter than on some other quarters. That's why I was mentioning that usually but again, no rule, usually Q3 In average, a bit lower. Clearly, this is accented this year because, again, considering the market evolution since the beginning of the year, the come. Capacity to generate performance fees were lower and maybe also performance for managers were not that good compared To last year. And excess cap, yes.
So as you know, Following the acquisition of Pioneer, we didn't have any excess capital when we closed the deal. It was 1 year ago. So progressively, we will constitute a capital base basically, Thanks to the revenues sorry, the results which is not distributed, so which, let's say, over the Next year, we represent roughly €300,000,000 should represent €300,000,000 per year. So You are just 1 year after the acquisition, so we can consider that we have our constituents at least we have our constituents around €300,000,000 of capital. Is it excess capital or not?
That's a judgmental part since we are still in a limited margins compared to the overall regulatory requirement. Well, it's a beginning of reconstituting an excess capital. But the idea is basically within 3 years, We should have reconsidered around €1,000,000,000
Great. Thank you.
Thank you. We will now take our next question from Hailey Tam from Citi. Thank you. Please go ahead.
Afternoon, gentlemen. So just two quick questions, please. Firstly, on the Pioneer cost synergies.
It looks to me that
the €71,000,000 you did at the end of Q3 is around 47% of the €150,000,000 total target. So It looks bang in line with your previous guidance to get 60% by the end of this year. However, it does look as though you're running behind your guidance on the €190,000,000 pretax cost to implement the synergies over 2017 2018. So I just wondered whether that It is something you haven't done yet that you would have thought and whether we should interpret there's perhaps some scope for more cost cuts at this stage. And the second question was just on the Sensitive Markets.
I know it's not something you've done for a while, but I did actually see a Reuters report this morning where I think Monsieur Perrier said that a 10% fall in global markets sort of an €80,000,000 to €85,000,000 impact on revenues. And I just wanted to hear you give us your thoughts on that or any more color by asset cost? Thank you.
Okay. So first on cost synergies, yes, €70,000,000 count. €71,000,000 for 9 months. It's of course, it's a pre tax. So it's represented a bit less than the EUR 450,000,000 which means that yes, we are in line if you analyze and utilize that to It's more than 60%.
We are clearly not behind what we indicated. Regarding the sensitive market, yes, I think that Decrease in all equity markets, I would say, of 10% represents a decrease in our The net assessment net management fees on an annual basis of around €80,000,000 €85,000,000 So on the top line, revenue line.
Okay. Thank you. And is there any comments on the fact that you seem to be running behind your implementation costs of synergies?
Behind? No, not behind. As I said, slightly in advance, 47 on 9 months, if you annualize. Sorry, the question is on integration cost. Is it Helene?
Yes. On the implementation associated, The confidence
Sorry, my mistake. I thought you were mentioning synergies. So not exactly. I mean, we on a cumulative basis, 20172018, We are at €100,000,000 because we booked €135,000,000 Pre tax €135,000,000 last year. On the 1st 9 months €29,000,000 So we are today At EUR 164,000,000 pretax again, and we guided for EUR 190,000,000.
So we are in line, let's say, we should be in line or maybe slightly below, but clearly, we want cost Integration costs, I'm sorry for my mistake in the understanding. Should So as I said, we should be in line or maybe start the video.
Great. Thank you very much.
Thank you. We will now take our next call from Arnaud Giblas from Exane. Please go ahead.
Yes, good morning. I've got count. Three questions please. Firstly on the management fee margin. I'll ask the question a bit differently.
Sequentially your management fees dropped to €28,000,000 Roughly it looks like €5,000,000 to €6,000,000 of that drop can be explained by Feneco, but there's still a drop. And when I look at your evolution of your AUM in Q over Q2 and Q3, AUM went up across the board and especially in the high margin retail and in equities, alternative multi asset, the high margin businesses Grew faster than your low margin businesses in many markets and in the euro contracts. So a positive mix shift in AUM, Are you up in absolute term in the high margin products yet management fees drop? So I'm struggling to understand comp. Can you give us what are the moving parts you might be missing to understand the volatility in management fee margins?
Thank you.
Okay. As I said, there is limited, but there is some There is some sort of cyclicality in the revenues. You can look at this last year or I think even the previous year. Come? So that's why, I mean, we always tend to look at it on a long term more long term basis Purely on a quarterly basis.
And as I said, if you compare this Q3 to last year Q3, the increase is The 3.6% as I said more or less in line with the asset under management. So I think that's the main element we on Q3, we have A bit less of transaction fees. You have probably this year also A bit less of number of days or accounting revenues, Which explain the slight decrease compared to the Q2.
Can I check what proportion Of total management fees or transaction fees? Can you give us a rough idea?
No, no, no. We don't disclose that. It's part of overall the fees that are That's part of the fee that are globally disclosed and charged to the fund and disclosed to the client, but we don't provide details.
Okay. And I've got 2 quick follow ups as well. On performance fees, can you tell us what the cost to income Associated to performance fees, Arndt, do the performance fees drop all to the bottom line? Or is it just like a 17% parity staff and no more? And Fineco, back in Last quarter, you said when you lost when you announced the loss of the contract that this would be broadly P and L neutral Because you would provide services to Finneco instead.
At which point should we be expecting these revenues to kick in?
So on the cost income and performance fees, there's no property cost income and performance fees because there's no direct In between automatically in between performance fees and bonus. What we have is globally a bonus pool, Which is sorry, bonus pool, which is set globally for the company at a level, as I said, Between 14% 20% of the pre bonus operating income. So if we have less revenues, we have Performing fees, all other kind of revenues, we have less operating results. So That potentially will have a bonus proof, which is slightly lower, but that's it. Regarding Fineco, the way proactively the business The loss of revenue generated by the end of the mandate will be progressively compensated by new businesses.
2 fold. The first one is that Sineco is using Amundi services as its IT platform. So it's already started, but So of course, small in terms of revenues, but still a positive impact. And then we'll progressively Generate new activity, which we, by the way, already started. We will generate new activities with Fineco, which will delegate some funds to us.
So it will be progressive and probably in, I would say, between 1 2 years to More or less compensate the loss of revenues coming from the end of the mandate.
Okay. Thank you.
Thank you. We will now take our next question from Flora Beka Kum from Deutsche Bank. Please go ahead.
Yes. Good morning. Three questions from me as well, please. So the first question is regarding Italy. You mentioned in your slide pack that Italy represents 12% of assets under management.
But can you tell us also how much it Represents of your profit and also run us through how the activity has been for you in Italy since Over the past few weeks after the recent events. The second question is regarding cost and more precisely the cost flexibility. You've talked obviously about the variable compensation. If your revenues were to disappoint given the current difficult environment, Are there some other costs on top of the variable remuneration that you can potentially work on? And the third question is just whether you would be ready to provide us with an update on the activity, especially in terms of flows since the beginning of this quarter?
Thank you.
Thank you. So regarding Italy, in terms of activity distribution, it represents Roughly €180,000,000,000 so around 12% of assets under management. We don't disclose the profit. The only thing I can Sales, the mix is slightly more geared to retail compared to the rest of The rest of
Amundi
business. Activity over the last A few weeks, it's too early to tell. But important to notice is that since the beginning of the year, the inflows in KALI, if we exclude If we exclude the Fineco exit, for example, a bit more than €9,000,000,000 euros under the flow of continuing on the continued basis positive for the last quarter. The net inflows excluding again Fineco were €2,500,000,000 in the Q3. Regarding cost flexibility, yes, of course, as you mentioned, Direct first element is variable remuneration line.
For the rest of the cost structure, there's no, So I would say automatically between revenues and costs, but we have the capacity to adapt our cost By adapting, for example, the salary increase, Monitoring the new investment we made on the recruitment, renegotiating some fees and so on. And I think we have demonstrated it in the past. But of course, in case of more difficult market environment, We don't necessarily immediately adjust all the cost structure. It depends on the view we have on the continuation of the business. That's why we said that our target when we announced our target The cost income ratio should be below 53%.
Again, target is not for it to be 50 3%, but we have the capacity to keep it below 53% even in a more difficult environment or for example on this quarter with a quarter where the level of performance is limited.
Okay. Thank you. And just on the October So the performance in terms of flows, you don't want to comment on that?
Okay. No, no. Same comment. Too early to comment. The month is not
come. Thank you. Thank you. We will now take our next question from Mr. Campbell from JPMorgan.
Please go ahead.
Hi, good afternoon everybody. Most of my questions have actually been answered. So just maybe a sort of high level question in terms of sort of flows. In terms of sort of joint ventures, I think you sort of I like that. The flows here can be quite lumpy.
What sort of gives you confidence looking forward? Is there any sort of new agreements you're looking at or anything in the pipeline you can discuss around that?
Nothing specific in the pipeline. The confidence comes from the That even if there is a slowdown, economy is still growing in India and in China with people saving. And we have a good partnership. We have a good products manager. So we continue to expect to have positive momentum In those JVs.
Then possibility to open new JVs, why not? It's a model that Work well in some cases, in some countries, as long as you have the right partner. So if there was a possibility to open new partnerships, we will of Of course, we will look at it, but nothing specific in the pipeline.
Okay. Thank you.
Thank you. We will now take our next question from Angeliki, Bayraktaray. Please go ahead.
Thank you for taking my question. Two questions on my side. When I look at your medium to long term flows in international networks, these were €200,000,000 Of which €700,000,000 in Italy, pointing to outflows in the other international networks. Could you please provide a bit of color on the geography where the coming from, are they in the UniCredit Networks in Germany and Austria, in Arizona or somewhere else? And my second question is a bit more general.
Have you perceived any change in client behavior month to date or in the last couple of months In terms of asset allocation, for example, a preference to hold more cash or a pull out of equity funds? Thank you very much.
Thank you. So on the first question on the retail international retail network The Q3, yes, so positive inflows in Italy, slightly negative in other geographies, mainly Japan Resona and AGB. Resona, it's a context which is a bit difficult. So we are working with them. But at the same time, We have positive inflows with other distributors.
Regarding SVB, they are still in the process of there are some restructuring of the comp? Under the network. But here again, for the quarters or years to come, We are positive on what we can do and there are good reliefs in terms of new offers to be delivered to a GB network. Your second question regarding change in client behavior. And for the what happened over the last few days or weeks, It's a bit early to tell what we have seen.
If I take a little bit more perspective, More risk aversion and from especially in retail, it has been The positive inflows, but slowdown. From Investor Investors, come? They come to us to discuss what are the opportunities and So one that they continue and they have the money to invest, they continue to invest. And what it's a bit early to say, but what we can say is that for some of them, The market question we just saw over the recent years be considered by some of them as come. Sorry, a good entry point.
Thank you. If I may just follow-up on Rizona, you said the context is a bit difficult. Come. Could you please elaborate a bit further on that?
No, it's a Vermillion five. There's no With Resona, which is a network with we believe has some potential, But it's also restructuring its network, absorbing Some new regional banks. So that's just a question of the context of the network itself.
Thank you. We will now take our Next question from Anil Sharma from Morgan Stanley. Please go ahead.
Hi, good morning guys. I just had two questions actually. So in the past, in the ETFs, it looked Pretty strong market share numbers there. Just wondering what is it that's driving you to increase the market Is it that you're cutting prices? Or is it something's changed on the distribution side there?
And then similarly, in Equities, again, a very strong quarter. I'm just Curious as to what products you're actually selling and how sustainable you think that is, especially given what's going on at the moment. So if you could just help us think through that, that would be helpful.
Sorry, on the second question, in which area?
With equities. Equity, sorry.
So regarding passive on ETF, so yes, we are getting market share obviously, come? Not by cutting fees and there have been no initiatives, but we continue to, of course, to monitor our positioning. And I can remember the motto of the ETF business line when it was launched was smarter, cheaper and We continue to, of course, to monitor our pricing to ensure that It remains, I would say, a competitive edge, but no specific initiative To be mentioned in terms of cost cutting, I think that we continue to benefit from first the fact that we are competitive. We have a good range of products and we have also an increasingly powerful sales force to promote for this activity. And by the way, when I mentioned passive and ETF, I would say passive and smart data, Which is also developing well.
2nd question in terms of equities. There's of course, a part of it, which is done through passive VTF and smart beta, especially, That took through some active so it's relatively well balanced.
Okay. So just a quick follow-up then. So does that explain some of the margin pressure that's been going on, the fact that the XT flows are actually into lower margin products?
Not I mean, it's both active and passive management. So if you look at overall and if Overall, our margins, they are more or less stable globally, very slightly decreasing compared to last year, we'll again, a different element. We have continued Sure. Both on retail and institutional due to the market context, due to the competition, due to the low interest rate environment, Partially due to this compared to the stock, which is slightly more geared Capacity management, but it's still compensated by the fact that the overall client mix is improving With no or very limited inflows in the insurance mandate and positive flows in retail And the rest of the digital business.
Okay. So very last question then. Could you give us a sense as to how much of that equity flow, what percent is active, what percent is non active?
Frankly, I don't remember. Again, it's both active and passive management.
Okay. All right. Thank you. Conference.
Thank you. Conference. It appears there is no further questions at this time. I would like to hand it back to the host for any closing remarks. Thank you.
Okay. Thank you to all of you. And the next results publication will be the full year 2018 release, which is scheduled on the 30th February 2019. Thank you. Bye bye.
Thank you. Thank you to all. Bye bye.
This concludes today's call. Thank you for your participation. You may now disconnect.