Thank you very much. Good morning to everybody, and thank you for participating to this call, which is dedicated to our first quarter results. I will start directly on these results to simply say, as an introduction note, that overall, they are good results, both in terms of activities and results, a very good level of activities. Results that are in a significant growth compared to last year, and an integration process with Pioneer, which is going well. Before going into the details of the numbers, just a very quick reminder on the market environment in which we work for this first quarter. As you all very well know, this first quarter was a little bit more contrasted and complicated compared to what we had last year, with a return of some volatility on the market, on the downturn on the equity market starting in February.
In a nutshell, for business, I would say that clearly, compared to the end of 2017, we have a negative market environment, negative market impact. Still, if we compare to the beginning of 2017, we still have overall some positive impact on the market compared to, again, to the first quarter of 2017. This element having been reminded, start with the activity. As I said, good level of activity on this first quarter, with assets under management that reach EUR 1,452 billion at the end of March, increasing by close to 2% compared to the end of the year, due to strong inflows of close to EUR 40 billion, EUR 39.8 billion to be precise. Partially compensated by a negative market impact of EUR 13.5 billion, in line with what I just said about the market environment compared to the end of 2017.
To go a little bit more in detail regarding this activity, I think the main element is that it's a good level of inflows, but good quality with very well-diversified sources of growth. First, in term of client segments, you can observe that both our retail division and our institutional division posted strong inflows, close to EUR 22 billion for retail and EUR 18 billion for the institutional and corporate clients. If I dig again a little bit more in detail regarding retail, here again, what is interesting is that all our main client segments continue to post positive growth. First, our historical French networks continued, as we have seen over the last 18 months, to be in a positive mode. EUR 2.6 billion of inflows on the quarter, mainly in majority driven by long-term assets and driven especially by the continued inflows within Unit-Linked.
We continue to see that trend that we were expecting and started to be visible for the last 18 months, which is no flow within the life insurance to go more on Unit-Linked with higher margin for us and less on traditional euro contract. Regarding international networks, also very robust net inflows driven mainly by Italy, just EUR 2.7 billion of inflows in Italy, reflecting the success of the partnership with UniCredit. The relationship is good, well-established, a lot of work being done between the Amundi teams and the UniCredit teams to develop the business, launch new initiatives, and we can see the result with more than EUR 2 billion inflows in the UniCredit network in Italy, and also some positive inflows with the Crédit Agricole network in Italy.
Regarding third-party distributors, here again, a good level of inflows, strong inflows, a bit more than EUR 4 billion on the quarter, driven by Europe and Asia, and Europe especially Italy and Germany, that are very positive. In Asia, Japan, but also Taiwan, thanks to the ex-Pioneer entity in Taiwan as well as in Hong Kong, for example. Finally, regarding our joint venture in Asia, very strong inflows. I can say for this segment, clearly exceptional level of inflows, EUR 12 billion, driven primarily by China, where we benefited, I would say, in addition to the continued level of inflows with the retail network from a mandate coming from our partner, ABC, which can be probably considered as a one-off. Overall, the underlying trend is also very good. Regarding the institutional business, here again, solid inflows, EUR 18 billion. More than last year, EUR 16 billion.
You have to remember that on the first quarter of 2017, we recorded an outflow of close to EUR 7 billion, due to the termination of the mandate that was given to re-internalization of the mandate that was given to us by the ECB. If you include this effect last year, slightly lower inflows, but good level of inflows. What is interesting is that this year, on this first quarter, the flows are more or less evenly split between treasury products that remain very attractive, especially for our corporate clients. We know they are more volatile. Also long-term, so evenly split between treasury assets and long-term assets, which tend to be, of course, more stable. In terms of expertise, I would say again, the key message is diversification and quality of inflows.
In a nutshell, almost all our expertise business line posted positive on inflows and contributed to growth. If you look at the total inflows of EUR 40 billion, more or less almost evenly split, I would say, in four elements. In terms of long-term assets, EUR 9 billion of inflows on active management, with especially strong growth for example, on multi-asset expertises or emerging market expertises. EUR 7 billion for passive management that continue to grow very impressive growth, both in terms of ETF, where I think we were the third collector in the open market, for the first quarter. For, I would say, index funds and index fund on mandates or smart beta strategy.
EUR 9 billion active management excluding JVs, EUR 7 billion for passive management excluding JVs, close to EUR 12 billion of inflows coming from the JVs with, as I said, contribution from China, and close to EUR 12 billion for treasury products that continue to be very attractive and continue to grow on the first quarter. Again, we know that this same amount of activity tends to be more volatile. Finally, in terms of activity, geographic approach. Here again, good diversification in the source of growth with, again, close to two-third of our growth coming from outside France. Continued development in all our geographies with, in particular, good inflows in Asia. Of course, there's a strong contribution from the JVs, but also, as I said, good level of activities in Japan, Taiwan, Hong Kong, for example.
In Europe, especially Italy, a bit more than EUR 4 billion of inflows just in Italy on this first quarter of the year. It gives us a picture for activity. Consequences in terms of results. Just a word about the accounting result, I think it's important to remember that. Total bottom line, net result of EUR 221 million, taking into account the integration cost. It's a growth of close to 55% compared to the first quarter of 2018. Reflecting, of course, integration of Pioneer. As you know, integration took place on the third semester. Here we have the full effect of the integration if you compare to the first quarter of the year, but also the strong intrinsic gross momentum, I would say.
If we come now to combined adjusted results, which I will develop a little bit more, which allow us to analyze, I would say, the results on a comparable basis. Adjusted net results, before excluding integration cost and excluding the amortization of the distribution contract. Adjusted net result of EUR 240 million, growing by 15% compared to the first quarter, the combined numbers for the first quarter of 2017. I will develop this element. Just maybe one element of comment. The net results of this quarter are slightly below the fourth quarter of 2017. You have to remember that on the first quarter of 2017, we recorded exceptionally high level of performance fees, more than EUR 80 million. We also recorded a very high level of financial revenues, due to some capital gains on minority participations.
If I come back to the analysis of the main component of the results, comparing them to the first quarter of 2017. Net asset management revenue generated by the activity, are growing by close to 7%, 6.8%, in line or even a bit more than activity, with net management fees increasing by close to 3% and performance fees by close to 100%. We recorded a very high level of performance fees, EUR 52 million on this first quarter, which are due to the fact that a good number of products with their anniversary date coming on the first quarter of 2018 posted very good performance on the last 12 months. One word maybe about the financial income, which are negative, which is relatively new for Amundi if you compare to previous quarters and previous years. Reason is very simple.
First one is following the acquisition, we now incurred some interest charge due to our debt, senior and subordinate related debts that we issued to finance partially the acquisition. The second element is that now since the beginning of the year, we are under IFRS 9, a new accounting regulation, by which all the mark to market change in the valuation of our investment portfolio goes through the P&L on this first quarter. The market environment being negative, we have a slight decrease in the mark to market value of this portfolio. Of course, this is not comparable to the first quarter of 2017. We have posted a significant financial income due to the fact that to prepare the acquisition of Pioneer, we started to release some investment portfolios that we had and realizing some capital gains. That explains the good level we posted last year.
Things are not comparable. Regarding cost, clearly, costs are, say, very well under control and decreasing by a bit more than 5% compared to the first quarter of 2017, reflecting the implementation of the cost synergies. I can take this opportunity to say a word about the integration of Pioneer, which is going very well. In terms of departure plans, already a bit more than 50% of the planned workforce reductions have already been completed at the end of March 2018. The IT migrations are going as planned. We already have Germany and Czech Republic that migrate. As a reminder, the idea here is to have all the Pioneer platforms to migrate to Amundi platform, with a rollover plan, which takes place between the end of 2017 and the first semester of 2019. It is going as planned.
As I said, Germany and Czech Republic already moved to the platform. The main other European platforms are in the process of moving to the Amundi platform, and it will be done before the end of the year. The last one, which will be the U.S., will move to the platform on the first half of 2019. IT migration going smoothly. Most of the legal entities that have to be merged are already merged in Germany, Italy, the U.S., and so on. It was reflected by what we discussed about the inflows with UniCredit, cross-selling of expertise started, especially with the UniCredit network. Overall, integration plan is going as scheduled. We are clearly in a position to confirm the amount of synergies, EUR 150 million of cost synergies, but also to consider that they will be implemented faster than that we had previously expected.
We should expect to have, at the end of the year, already 60% of the total synergies accounted in our 2018 results. 60% instead of 40% previously planned. This is clearly this good progress made in the integration plan are clearly the explanation for the significant cost reduction observed on the first quarter. The combination of revenue growing, cost decreasing, very logically, the cost-income ratio is improving and reached 50.7% on the first quarter, so it decreased by more than 3 points compared to the first quarter of 2017. Finally, on the results, good level of revenues, costs that are down, the contribution from our JVs, which is also growing. Tax charge, average tax rate, which is slightly decreasing, and which is mainly due to the impact of the tax reform in the U.S.
As a consequence, again, a good progress and a good growth in our net result, 15% for the adjusted net results. To conclude, and before giving you the floor for the questions you may have, first quarter is clearly a good start for Amundi. What is especially satisfactory is that even if some elements couldn't be completely extrapolated, I mentioned the inflows in the Chinese JVs. We know that money market funds are more volatile. Overall, what is interesting is that the momentum is good and driven by a very diversified set of segment expertise and regions. The other element is integration is going very smoothly and faster than expected, which allow us to generate the synergies as expected, but ahead of schedule.
All of this allowing us to confirm our growth strategy and make us very confident on our ability to reach our medium-term targets, even if the market environment is clearly less favorable as what it was, particular last year. Okay. We can switch to Q&A. Operator? Can we switch to Q&A session?
Yes, sir. Of course. If you would like to ask a question on today's conference, please press star one. That's star one on your telephone keypad to ask a question. We will pause for one moment to allow everyone to signal. We can now take our first question from Arnaud Giblat from Exane. Please go ahead.
Yes, good morning. I've got three questions, please. Firstly, on the revenue margins, I know you don't disclose the different segments, but assuming that institutional and insurance margins are fairly stable, it seems as though retail margins have dropped a fair amount versus H2 or even H1 levels. I think you were at 47 on a pro forma basis in H2. Could you give us maybe a bit more detail? What sort of maturities have you seen in structured products this quarter? Should we expect this to be a low level of maturities going forwards, or should we expect some sort of a recovery in retail margins? My second question is on the JV margins. Actually, those are stepped up from 3 to 4 basis points. Could you elaborate maybe on what the driver of that is and whether it's sustainable? Finally, on costs.
A strong cost to income, clearly. I'm just wondering if there's any seasonality in the cost base. Should we be expecting a cost to pick up in absolute terms? I know as well that you've earmarked some investment spend for ETFs. How are you getting on there? Is there any other areas where you're identifying investment potential? Yeah. That's it. Thank you.
Thank you very much. First, regarding margins, yes, as you already said it, we are not in a position, and we won't disclose the margins by segment on a quarterly basis. What I can say is that, despite a good level of inflows, that shows that our, I would say, our blended margins, if you exclude the performance fees, are slightly lower, very slightly, but slightly lower this quarter. I would say in addition to continued margin pressure, due to the fact that we have especially strong inflows on treasury or passive management, for example, which tends on average to have slightly lower margins. I think what is important to remind is that, first, only a single quarter does not necessarily reflect the sustainable level of our blended margins.
As you know, as you noticed, some elements of our revenues are not totally linear along the year. For example, the ones generated by a guaranteed or structured product. The second element is, and I think it's important to remind, that we do not manage our business with a fee margin target. We said that on average, considering, on the one hand, the improvement expected on the client mix side, on the other hand, continued pressures, we expect our blended global margins to stay more or less stable over the medium term, and we still continue to do so. That said, again, we don't manage our business with a fee margin target. We propose the expertise. We try to gain, as long as it's profitable, any new business.
We are happy if we do have very strong inflows, for example, in lower margin products such as treasury or passive management. We are happy to do that, as long as it contributes positively to the growth of our net result, and even if the consequence could be a lower overall average margin. Your second question regarding the JV, yes, they posted good significant growth. This quarter, yes, growth which has been higher than it was in terms of AUM. That said, it's just one quarter, and for some of the JVs, this quarter is the end of their fiscal year. Sometimes in the end of the year you have some accounting adjustments that have to be made. It cannot be completely extrapolated.
What I can say is overall, JVs are on a good track in terms of activity, but also in terms of margins. We should expect to see, on the medium term, the growth in net result more or less in line with the growth in activity. What I can say is that inflows we have posted in these JVs over the recent period are good quality, good margin inflows. The third question was about cost. First about seasonality. There could be some seasonality, especially on variable remuneration, and they change in line more or less with the change in the operating profit before variable remuneration and could be adjusted in the end of the year. No significant effect in terms of seasonality. Regarding investment, clearly over the recent quarters, we have been very focused on the integration and on delivering the synergies.
We said that part of these synergies will be reinvested. So far we have not seen reinvestment, but progressively over time and over the next quarter, you will see some reinvestment, but it will be only a small part of synergies. You were putting ETF, clearly it's one area where we will invest to reinforce our, by the way, not that much our capacity in terms of managing ETF, but more the distribution or selling capacities for this kind of expertise. Again, you can be confident that this reinvestment will be clearly monitored and very reasonable.
Thank you very much.
We can now take our next question from Chris Turner from Berenberg. Please go ahead.
Yeah, thank you and good morning. It's Chris Turner from Berenberg. Three questions as well, if I may. Firstly, French retail continues to accelerate. Can you give us a feel for what proportion of those sales are wrapped up in Unit-Linked policies and what proportion are standalone in terms of independent sales of mutual funds? Have you seen any acceleration in those standalone mutual fund sales in response to the tax changes in France? Secondly, almost half of your flows this quarter went into passive funds, but I expect that has a strong bias towards the institutional channel. Can you give us a feel for how the active/passive split looks in your retail channel, please? Finally, taking a step back a little bit, you expect to complete the European IT integration within, what, 18 months of the transaction closing?
You're accelerating the recognition of cost efficiencies generally. Does that mean that some of the execution risk that people talk about in M&A in the asset management industry is overstated? Or is it more that Amundi just have a very scalable platform and therefore we should think of you as a kind of natural consolidator in the space? Thank you.
Thank you. First, regarding French retail, I would say that the vast majority of inflows went through Unit-Linked, clearly. You are mentioning potential impact of the tax reform in terms of inflows going outside, I would say, life insurance wrappers. For the moment, we don't see this phenomenon, but it's a bit early. It's just the first quarter of, I would say, implementation of the tax reform. It's a bit early to say that. For the moment, it's still mainly driven by Unit-Linked. Regarding passive management, inflows are not only in the institutional space. I think the majority of the inflows this quarter was in institutional space, especially through inflows on some passive management mandates. There's also flows in retail with third-party distributors for ETF mainly.
Overall, the margins, especially when you talked about mandate, clearly depend on the nature of the mandate and the size of the mandate. I cannot give one answer and I cannot disclose some elements. Yes, overall, let's say for a given size of a mandate for a given client, passive management, those margins are lower than active management. Probably it's the same in the retail space, ETF in average have lower margins than purely active retail funds. Again, they are a profitable business. The last question was about integration and which is going smoothly, which is true, and does it mean that integration risk overall in the industry are overstated? Well, I would say that it really depends on the transaction, on the actors that are in place.
What I can comment is about what we are doing, some of the elements can explain the fact that integration is going well, there's absolutely no negative impact in term of business is several elements, and especially for the business part. The fact that we are talking here about business that are majority, especially in Pioneer side, not exclusivity, but majority driven by retail and especially by the activities with the UniCredit network, which is, of course, sensible to change in term of teams that can manage a fund and performance and so on, less sensitive than some other business. That's one element.
The other elements are due to probably the experience that we have acquired at Amundi in the way to manage this kind of process, to the fact that our business model is very much adapted to be able to integrate new partners and new platforms. When I say our model is the combination of a very dedicated approach when we are talking about sales, marketing, I would say the interface with the client, combined with a very mutualized integration approach when it comes to operational platform, IT platform, that are conceived to be able to integrate new teams and new platform. That's the second element, the way we work on our experience. The model, I would say, on our experience.
Probably one third element is the fact that between Amundi and Pioneer, the Pioneer people and the Amundi people, of course, the cultures are different, the background are different, but I would say they are not that different and very much close in term of spirit and way to work. The cultural fit is there, which also helps to manage an integration process in a smoothly manner.
That's very clear. Thank you.
We can now take our next question from Alex Koenig from Natixis. Please go ahead.
Yes. Bonjour, Nicolas. A few question from my side as well. The first question is on the tax rate. It's come a little bit lower from the guidance you gave during the investor day. Is there any change in the tax rate guidance? Number two is on the synergies. I know you are a bit in advance of your plan. Is there any room to see a higher level of synergy by the end of 2020? Something above the EUR 130 million. In term of contribution from the JVs, I am not sure that I quite get the underlying behind the strong growth we have. Is that due to some kind of performance fees linked to in there, or is it only due to the mix? Can you just elaborate over there? Sorry if I missed the answer you gave before.
The last question is basically on the cost-income guidance compared to what you have today and in Q4. For the time being, Amundi is trending somewhere around 50%-51%, which is significantly below the 53% of guidance. Should we also think about revising a number over here? Thank you.
Okay. Far the tax rate blending is around 29.5%. I think it's in line with what we said on 29, 30%, especially thanks to the tax reform. In the U.S., to be clear and to remember, in our guidance, what we didn't take into account is a change in the tax rate in France, in the corporate tax in France. I know that there is a tax decrease, which is scheduled, but not for this year, starting next year. At the same time, there are some works being done, and I think there's a consultation, by the way, that has been launched by the Ministry of Finance regarding, I would say, the tax base. Let's see where all this come before taking into account any change in the tax rate in France. For the moment, for 2019, there's no tax change.
As we said two months ago, in our guidance going forward, we do not take into account any change in the tax treatment in France. Regarding the synergies, as I said, we confirm the amount of synergies. Say, the phasing is quicker than expected. We don't change the target. It's too early to say if we could or not, but we can say that we clearly confirm our target. Regarding the JV, I understand the question about the contribution to the results and what is accounted in the line equity. Sorry, equity-accounted entities. There's an increase in the contribution of 50% compared to last year, but 50% is EUR four million.
What I was just saying is that the underlying trend is good in terms of activity and in terms of margins, but I wouldn't necessarily just basically multiply by 4 what we have seen on the first quarter. The reason is not that there are some exceptional elements, such as performance fee. It's just, again, that this is, for us, it's the first quarter, but in China and India, it's the end of the year. Sometimes at the end of the year, it can be some adjustment. It can be minor, but if you look at them, again, we're talking about EUR 4 million, that can lead to a significant change in percentages. Again, the trend is good, and going forward, we would expect contribution in line with activity. In terms of last question was cost income, sorry, cost income.
Let me again clarify what we said regarding the guidance. We said it should be below 53%. It doesn't mean that we target 53%. It means that we should stay below 53%, even in a lower environment. Clearly, the direction is not to go up to 53%.
Understood. If I may have a request, could we have your assets under management in Italy on the quarterly basis as well as for France network? Thank you very much.
Italy accounts for what, three quarters of the assets? I think they are. By the way, they're on page 13.
Oh, thank you.
You have in Italy, EUR 178 billion of AUM at the end of March.
Total Italy. Thank you very much.
Italy, including institutional and third party.
Oh.
We can now take our next question from Anil Sharma, from Morgan Stanley. Please go ahead.
Hi, guys. I just have a couple questions. In terms of the JVs, I think you mentioned that there was some sort of exceptional flows in there. Just wondering how much that actually was, that you think was kind of one-off. Obviously, for the last couple of quarters, you've been flagging that the profitability in the JVs was going to come through and the leverage would be better, which seems to be happening. I'm just wondering, is there any more catch-up to you in the coming quarters? Could there be slightly better operational leverage still to come? On the third-party distributors, just quite curious, because you've had really strong growth there for about 12-18 months, and I think in this particular quarter, you said a lot of it came from Italy and Germany.
I'm just curious as to why you're not capturing those flows through the UniCredit network and why you're getting them through third parties. If you could just help elaborate that for me and what change in behavior you've seen from distributors following kind of MiFID II, if you've seen anything, or if everything just kind of stayed the same. Thank you.
Okay. Regarding JVs, for question regarding the inflows, yeah, the exceptional part, the mandate we got is around EUR 8 billion, that's the part that can be considered as, I would say, slightly exceptional. I'm not sure to have understood the question about the revenues on the JVs.
I was just saying, obviously, if you look at the last two years, the JV assets have been growing very nicely, but the sort of amount that you capture has not grown as quickly. I think in the last six to 12 months, you've been saying that should improve. It looks like this quarter it has improved, but I'm just wondering, is there a bit more of a catch-up so that actually the leverage will be even better as we look forward?
No. As I said, going forward, we should expect revenues growing in line with activity. We don't expect to see what we saw, as you mentioned, in the past, with lower contribution was lower than activity. That said, it all depends. If as for Amundi, they are small Amundis, I would say, the JV. If, I don't know, at some point they gain a very significant mandate or funds with a very high level of AUM, but Our fees on average, it could lower the average margin. Again, what is important is the bottom line. Regarding third party, just to clarify one point. The activity with UniCredit Network, whether the UniCredit Network in Italy or HVB in Germany, these assets are classified in International Network.
When we talked about Italy and Germany within third party, it means that the activities that we do, or the funds that we sell to either other banks or IFAs or private banks in Italy or in Germany.
Yes. I was just curious as to, why in Italy, why aren't you capturing that business via UniCredit Network? Why is it so strong with those other providers?
I'm not sure to give the answer. We work for UniCredit on one side, we also work with Promotori, other banks, and we go directly to the client. We don't need to have another distributor intermediated, as an intermediate between us and other distributors.
Okay. All right. Thank you.
You're welcome.
Next question comes from Jonathan Richards, from KBW. Please go ahead.
Good morning. Two quick questions from me. Firstly, have you seen any pullback in retail activity as the second quarter has started and the market volatility has picked up? That's the first one. Secondly, since 60% of Pioneer synergies have come through, or you're now guiding to 60% of Pioneer synergies coming through, in 2018, can we expect an uptick of that magnitude for 2019 as well? Thank you.
Regarding retail activity, as you have seen, the first quarter is very good. That's true that not that much with the retail network, but a bit more with third-party distributors, over the very end of the quarter, and probably the first week of April. We have some signals of some slowdown in activity. Yes, probably, in line with what we can feel on the market and, I would say, clearly as an effect of the increased volatility on the market. Yes, at least there are some signals that there are some slowdown with distributors. The good thing, again, is that we are very diversified in the source of inflows. In the medium term, again, very confident in our ability to meet our targets. The second question regarding the phasing in 2019. Oh, okay. Well, it's a bit early to say.
We still have some synergies to be done in 2018, and that won't have their full effect in 2018. I was, for example, mentioning that the IT migration in the U.S. will take place in 2019, the impact will not be seen completely in 2018. At the end of the day, would we account to 80% or slightly more than 80% in 2019? We'll see. It's a bit early to say, and it would not make a very significant difference.
Great. Thank you.
Next question comes from Hubert Lam, from Bank of America. Please go ahead.
Hi. Good morning. Just a few questions from me. First one is on the financial revenue line. If you can provide us a split between the mark to market as well as the interest cost on that line, as well as give us your thoughts in terms of how we should think about this line going forward. That's the first question. Second question is if you can give us an update on your excess capital position, if any. Third, if you can also give us an update on your U.S. business in terms of flows coming from that region and how that's developed over the last quarter. Thank you.
Regarding financial reviews, we've done a split, but I think on this quarter, it's more or less half market effect and half interest, sorry, interest charges. Going forward, what we are sure is that every month, every quarter, we will have the interest charge. Regarding the mark to market, it's difficult to make predictions. Overall, in average, we expect to have a positive net result over the year. If the market are difficult, again, since now that we are under IFRS 9 new accounting rules, we may have from time to time some negative results. Negative revenue, sorry. Regarding our capital position. We were at the end of 2000, so we have a good capital position. We don't have excess capital as we used to have before the acquisition of Pioneer Investments, of course.
We had, at the end of last year, EUR 1.9 tangible equities, including the dividend to be paid next month, by the way. In terms of solvency ratio, we had a Core Equity Tier 1 ratio of a bit more than 12%, 12.4% to be exact, on a phasing basis, and 11.9% on a fully.
Loaded
fully loaded basis. Say Core Equity Tier 1 around 12% on a total capital ratio, including the impact of the subordinated debt of around 15%. Solid capital position.
U.S. business?
Yeah. Sorry. Yes. U.S. business. From the beginning, overall, the activity was good last year. Just remind, I think we had more than EUR 2 billion in flows. On this first quarter, it's very slightly negative, but it's just one quarter. Market has been, as you know, more difficult. We are confident in our capacity to continue to develop, and we don't have still the effect on this part. It's normal to take place. We have a plan to develop, to export the expertise of the U.S. platform to our client base in all the world, in Europe, in Asia, in the Middle East. Say the plan has been designed, work has been done to promote and explain the expertise to our sales force a bit everywhere. We don't see yet the effect of this plan.
Great. Thank you.
We can now take our next question from Haley Tam from Citi. Please go ahead. Please unmute your line.
Hello. Hi, can you hear me?
Yes.
Yep. Sorry. I thought I turned it off. Apologies. Three quick questions from me, please. Firstly, just in terms of your fund flows, could you confirm how much of your EUR 7 billion passive flow was actually into ETFs? Also just wondered whether you've been seeing any margin pressure there more recently. I think Lyxor announced a range of fee cuts or a new low-cost range last month. Secondly, in terms of your cost synergies, obviously, you said you're running ahead of schedule, and I think an extra 20% would be about EUR 30 million extra this year. I just wondered how much of that is already in your Q1 run rate. The third question on performance fees, could you remind us what proportion of your performance fee eligible AUM crystallizes fees in each quarter of a typical year? Just to give us an idea of the likely seasonality.
Those are my questions. Just, I think there was a previous question, another analyst asked about MiFID II, whether that had any change on distribution behavior. I just wanted to remind you of that as well. Thank you.
Okay. Regarding ETF, sorry, passive management for a total of EUR 7 billion, out of which I think it was EUR 2.5 or a bit more than EUR 2.5 inflows on just on the ETFs, which makes us the third collector in terms of inflows for this quarter. In terms of assets, we are the fifth player in Europe, of course. In terms of fees, no major change on the last quarter on the fee structure. Having in mind, our motto for ETF business has been for a while, and remain smarter and cheaper. I don't know if we are really smarter. Not me to judge, but when we say we try to always be competitive, and that's the way we manage to develop the business and make it profitable. In terms of performance fees, the question was about the eligible AUM?
Yes. Sorry. We have more than EUR 250 billion of assets that are eligible to performance fees. I think one of your questions was basically how much every quarter. It's difficult to say. From one quarter to another, it's not the same fund that do deliver the performance fees from one year to another. The good thing is that we have quite a large asset base, quite a large number of funds that can generate performance fees. We don't always generate the same level of performance fees, but every quarter we do generate performance fees. The question regarding MiFID and the change in distribution. Well, it's a bit early to tell, but we do see some effect. We do see, for example, on the Italian market, a move to Unit-Linked or segregated account.
We start to see some, if it's not fee pressure, some thinking, including on pressure on fee overall, especially on distributors. We also see in this change some opportunities to try to address new clients and to develop new activities. For example, I was mentioning segregated account, Unit-Linked, that clearly some areas we are managing them, for example, for the UniCredit network, and we work intensively with the UniCredit marketing and sales team to develop the adequate range of products to cope with this and to seize these opportunities.
Right. Thank you.
We can now take our next question from Angeliki Bairaktari from Autonomous Research. Please go ahead.
Hi. Thank you for taking my questions. Two questions, please. The first one, just to follow up on what my colleague asked before, could you please let us know how much of the synergies are accrued in your Q1 cost base? Could you provide a bit more color on how sort of the cost decline year-on-year on a combined basis is split? Is there any impact of synergies? Is there any impact of effects or anything else? My second question, last year you had seasonality in terms of institutional flows with big inflows in Q1 and outflows in Q2. Should we expect something similar this year? Thank you.
Okay. Yes. Sorry, I forgot the question on the cost synergy in Q1 and basically the change in the cost compared to last year. Clearly, the decrease in the cost on the first quarter compared to first quarter of 2017, the decrease by around 5%, are due to the synergies. All clearly due to synergies. We have other effects. We have, for example, foreign effects, which has been, for the cost, positive in the sense of decreasing the cost, considering that we have part of our costs that are, for example, in the U.S. or in Asia. On the contrary, we have some effect that increase the cost, such as some price effect or the fact that for the first quarter we took on our balance sheet the impact of the external research that we use.
These various effects, the exchange effect, price effect, the cost of research, more or less balance each other. You can consider that the decrease you have in the cost structure between Q1 2017 and Q1 2018 are the impact of the cost synergies. The second question was seasonality in the institutional business. There is some seasonality for treasury expertise, so there are nothing completely scientific in it. We know that overall flows on a treasury product can be volatile by nature because they are the way institutional or corporate clients invest some available short-term cash as they may have. So by nature, it's volatile. It's generally we tend to have a good first quarter. It was the case this quarter. Relatively often the second quarter, the flows are lower, sometimes negative.
It was the case last year, simply due to the fact that many big corporate clients, which are an important part of the client base for this product, do pay their dividend on the second quarter and use their cash available to pay these dividends. Overall, yes, in average, we would expect to have lower inflows on the second quarter. Again, it can be compensated by some exceptional effects, such as corporate that do raise money to finance a future acquisition, it can be significant amounts, it's difficult to predict. Again, second quarter tends to be lower than first quarter.
We can now take our next question from Michael Werner from UBS. Please go ahead.
Thank you. I've got two questions here. One on the performance fees, apologies if you covered this earlier. What's the mix or a general sense of the mix in terms of the performance fees realized in Q1 between legacy Pioneer products and Legacy Amundi products and also any breakdown by asset class would also be very much appreciated. Second, getting back to a question that was asked at the early stages of the Q&A session with regards to management fees. Rather than looking at management fee margins, just looking at management fees, we saw about a 3% decline in management fees quarter-on-quarter. While you were discussing that you'll take mandates even if they result in a dilution to management fee margins.
What we actually saw was the decline in the absolute management fees booked by Amundi, despite what was a very strong quarter for inflows. I was just wondering if you can help bridge that quarter-on-quarter change. Thank you.
Okay. First, regarding performance fees, what we booked in first quarter comes from both from, I would say, Amundi legacy firms and Pioneer legacy firms, and especially there was a good contribution from some Pioneer firms where the anniversary date came in the first quarter, which explained partially the increase compared to the first quarter of 2017. In term of asset class, it is quite diversified with especially a good contribution from, I would say, multi-asset products for the first quarter. Regarding management fee margin, as I said, in comparison quarter-to-quarter has to be taken with cautious. First, because some of the fees are not completely clear, especially structured product. That is two issue compared to the last quarter.
In addition, if you again compare to the fourth quarter of 2017, also bear in mind that the market effect has been negative if you compare first quarter 2018 to last quarter of 2017.
Perfect. Thank you very much.
We can now take our last question from Jean Sassus from Oddo. Please go ahead.
Jean Sassus from Oddo. Just coming back on the margin issue. Maybe to get a better view about what is the effect of competition pressure on pricing, could we discuss about the split about the impact of change in business mix on asset mix there, by difference, what is actually the, I would say, the competitive pressure on the pricing. Second question regarding third-party distribution. Did you sign up new contracts in terms of extending the distribution networks or accessing new distribution networks in Q1? To what extent Pioneer would help you or is helping you, by your broader range of products, to conquer and to sign a new distribution agreement there? Thank you.
Regarding margins. What's the question?
Pricing. The question is, we have actually, well, this kind of margin pressure as a whole with assets growing faster than revenue, to put it like that. To understand what is the impact there in terms of change in the asset mix, which would weigh, or the categories of assets, which would weigh on the average margin, by difference, what is the actual competitive pressure?
The change in assets, of course, the fact that we, it's true for this quarter, it's true also in that we had good inflows in money market fund or passive management, the rate of growth, I would say, in passive and money market fund was stronger than in active management, does have an impact on the margins. The effect of the competitive pressure, it is not measured quarter. It does happen. There is not suddenly a cliff effect or change for the initial space. We know that it's there, we know that new mandates coming in tend to be, on average, slightly lower in terms of margins that, I would say, the back book. On retail, it's more a question of asset mix, going forward, it's a bit early to assess it could have an impact it's a bit early to exactly measure it.
Regarding third-party business, third-party distributors, new contract. Yes, I would say kind of continuously we try to enter in with new contracts, and in the recent period, I think it was especially the case in Asia, where we regularly sign new contract with new distributors. These things take time and when you sign a contract, you don't necessarily see the impact in the coming months. Sometime, progressively, it's the reason. The fact that, for example, we had good level of activities on the recent quarters in Japan or more recently in Hong Kong or Taiwan, is a consequence of some relationship we entered sometimes a few months ago, sometimes a few quarters ago. In that regard, is Pioneer helping? Yes, but it helps, or it can help, the fact that we increase the breadth of our expertise.
It can help both for new contract, but also to reinforce the relationship we have with existing clients, by being able to add new expertise to what we already promoted to them based on the legacy Amundi expertises.
That's something you already feel in the business now?
In the relationship, yes. In the numbers, it's a bit early to tell.
Right. Thank you very much.
There are no further questions in the queue. I would now like to turn the call back to the host for any additional or closing remarks.
No additional remark, just to thank you very much for your participation, and next rendezvous in the 2nd of August. Thank you very much.
Thank you.