Thank you to be here for this presentation of the results. I will make a short introduction to these results. Nicolas will detail the figures for you. We are really satisfied with these results for three reasons. The first reason is the fact that when you look at the results, they are in line, roughly, with what we have announced in our three-years business plan, which has been presented here at the beginning of 2018. In line with the net income, slightly above. We announced in the plan an average increase of the net income of 7% per year. We are at 9%. In line with the cost-to-income ratio, we had said under 53%. We are 51%. Just a little bit under relating the target of AUM, it was EUR 50 billion. We have registered EUR 42 billion this year.
The fact that we have been able to be in line in a context of a difficult market, difficult environment, which was marked by two main features. A decrease in the valuation of all asset classes, or nearly all asset classes during this year. 2018 has been the mirror of 2017. In 2017, all the asset classes were up. In 2018, all the asset classes were down. It means that capacity to generate absolute performance, which is more difficult. The second is volumes. The global market for UCITS funds in Europe was an amount of inflows, of net inflows of EUR 800 billion in 2017. This year it was, to be simple, nearly flat. To have been able to generate this result shows, that's my second reason of satisfactory, the solidity of the business model of Amundi.
When you look at our results since the creation, each year we posted an increase in net income. It was in good year and in bad year. This year it was again the same. It's a result of the solidity of our business model, the diversification between different expertise: passive, active, monetary funds, the structure, the products, real estate. Diversification by client segment: retail, institutional. Diversification by geography. This year you see that net inflows were at 100% coming from outside France, especially from Asia. Concerning this level of activity, for me, there is a figure which is very significant in our industry, which is a ratio between net inflows and AUM. For Amundi this year it's 3.2%. When I look at the asset managers which have released their figures, it's nearly zero.
That means that we have been running faster than the others. It's all the more remarkable that during this time we have done the integration of Pioneer. We can really say now that it's a very big success, a tremendous success. When you make an acquisition, the first point is to make no mistake about the quality of what you are acquiring. With Pioneer, the quality was excellent, because we were reinforcing our business model, our industrial model in 3 dimensions, which are distribution capacities, expertise, and talent. The second key parameter to be successful is to be able to execute, to implement the merge or the acquisition successfully. That's what we have done. In 18 months, we have fully implemented the merge. Decreasing the staff, realizing all the merge of legal entities.
Transferring all the operation of Pioneer from Aladdin, the IT of BlackRock, to ALTO, the software of Amundi, and without any operational problem. That's the reason why we now are saying that the amount of synergies is higher than announced. We announced EUR 150 million of cost synergy per year, and we will deliver EUR 175 million. So the amount of synergies is higher. The pace of delivering in the income statement, this synergy is also faster. In 2019, nearly the totality of the synergies will be in the income statement, and it was phased differently in the past. A year which is a major year in the strategy of development of Amundi. We have implemented this merge. At the same time, we have begun to reinvest part of the synergies, so new additional teams. Amundi is really ready to accelerate its pace of development for the coming year.
We are now all turn only to business, and not more to integration. That's the reason why also to a question yesterday evening of a newspaper journalist, we said that the central objective or our plan is EUR 1 billion net income. I say EUR 1 billion. For me, the income, this parameter is the key parameter after net inflows, cost-to-income. It's second. We confirm this with the assumption that we will be at the same level of market than we use at the time of the plan. We're not saying the present market, but the market at the time of the plan. Okay. You remember that at the time of the plan, the assumption was stabilization of the market at the level of the beginning of 2018.
That's the word that I wanted to tell in introduction. Now I pass the word to Nicolas.
Thank you very much, and good afternoon to all. I would start with a little reminder about the market condition in which we operate. I think you all know well, but it's important to remind what it was. 2018 was, from this point of view, a very special year. It's a year where almost all asset classes delivered negative absolute performance, and basically, it's a reverse from what happened in 2017, and it's the first year since the big 2007-2008 crisis that it happened. It was particularly noticeable, of course, for equity market. You remember we had the first market correction around February or March last year, then a very volatile market. Then last quarter, a sharp decrease in basically all the world index market by 10%-15%, depending on the market. At the same time, interest rates remain low.
Again, negative market context in the sense that you have absolute performance negative for almost asset classes. Waiting, of course, on our asset management and our revenues, but also waiting on the capacity to generate performance fees or financial revenues. Leveraging our capacity to have inflows. In this context, risk aversion rise significantly, and it is clearly visible on the following slide. You have for the whole European market the inflows in 2017. Two elements. First one, as Yves indicated, we had in 2017 more than EUR 800 billion of inflows for the full year. In 2018, it was only around EUR 60 billion , a sharp decrease, first element. Second element, the inflows we saw on the market last year were all concentrated in the first quarter on EUR 150 billion .
Following the first market correction flows that became, let's say, flattish for the second and third quarters, on a significant outflows close to EUR 90 billion on the fourth quarter. A market environment that clearly weighted on the appetite from clients for asset management products. In that context, how Amundi did perform? Our total asset management remained basically stable between the end of 2017 and the end of 2018 at EUR 1,425 billion , with on one side, positive inflows of EUR 42 billion , and on the other side, negative market impact of EUR 43 billion . What is clearly noticeable on this graph is that the inflows were mainly concentrated on the first quarter, in line with what we saw on the market, where the negative market impact was very strong on the last quarter, in line with the decrease in basically all equity markets.
To comment a little bit more in detail on the inflows, EUR 42 billion of total inflows, a good level of inflows. Of course, lower than what it was in 2017. That was a very positive year with a very favorable market context. You can notice on this graph that the decrease in inflows came mainly from treasury funds, meaning that on the long-term asset, we had a very good level of activity overall over the years, EUR 36 billion , more or less the same level as in 2017. Second element. Most of the inflows continue to be driven by retail, with especially a good contribution from the JVs. Our two businesses, they were positive inflows, EUR 22 billion for retail and a little bit more than EUR 11 billion for institutional.
If we go a little bit further in these two segments, first on retail, strong net inflows over the years, but of course, with a slowdown at the end of the year, again, the backdrop that I already mentioned, increased risk aversion in Europe. If we go business line by business line, very strong inflows momentum in our Asian JVs, primarily in China and India. If we look at the rest of the business, in the French network, we saw inflows that stood well and were resilient and mainly concentrated on long-term assets. Positive inflows of close to EUR 3 billion for the year. It is around EUR 4 billion on long-term assets, and which remain positive in the first quarter, despite the environment I mentioned. Regarding international networks and third-party distributors, they are clearly more sensitive to the market context with some outflows on the last quarter.
Overall, on the year, they continue to deliver a positive performance around EUR 3 billion for the distributors. If we exclude the exceptional one-off the end of the termination of the FinecoBank mandate that we already mentioned, that happened in July last year. For international networks, close to EUR 5 billion, especially with our new partner in Italy, UniCredit. Regarding institutional and corporate business line, here also strong annual inflows despite the outflows we posted on two significant mandates at the end of the year. What is interesting is that the inflows were concentrated on long-term inflows. It is true for institutional on sovereign mandate, a bit more than EUR 12 billion on inflows, despite these two termination mandate at the end of the year that represented around EUR 6 billion.
For corporate, you have on one side significant outflows on treasury funds, but on the other side, a good level of activity on long-term assets, mainly coming from our activity with corporate pension funds, where we continue to develop and attract new clients all across Europe. Finally, regarding employee savings schemes, a good year, EUR 2.7 billion of inflows in 2018 compared to EUR 1 billion in 2017, which confirms the strength of this business line, where we have a very strong position in France and more than 40% market share, and which potential, by the way, will be reinforced by the tax law to be adopted fully in the months to come. Regarding asset classes, as Yves already mentioned, the good thing is that first inflows were concentrated on long-term assets and were driven by all areas of investment expertise.
We had positive inflows in multi-asset, significant like last year in bonds, but also on equities and even more than in 2017, or in structured on real asset products that also are developing rapidly. Last but not least, activity seen from a geographical point of view. We can see here that more than 100% of our inflows came from outside France, with, of course, a strong contribution from Asia, coming mainly from a joint venture in China and India, but also good level activities in Hong Kong or Taiwan, for example. Solid inflows also in Europe, in Italy, but also in other European countries such as Germany, Netherlands, Spain. In France, we have net inflows slightly negative, but with on one side, a good level of activities for long-term assets, on the other side, outflows on treasury products, mainly coming from corporate clients.
Before moving to the net results, maybe a short focus on a few, I would say, significant growth drivers for the latter, but still this year. First one being the development of the passive and smart beta activities, EUR 14 billion of inflows in 2019, a very good level of activity. For example, on ETF, close to EUR 4 billion of inflows and a positioning for Amundi that moved from the fifth to the fourth position in terms of assets in Europe. Also, a good contribution from, I already mentioned, from real assets, despite the fact that we still had at the beginning of 2018, I would say, the last outflows coming from the fund of hedge funds activity, which was in runoff. This activity and these outflows are over.
Despite that, we have a good level of activity for real assets overall, driven again by real estate, a bit more than EUR 3 billion inflows in 2018. Also by private debt on private equity, where we had EUR 1.6 billion of inflows over the year. Amundi Services, which is a way for us to expand our presence on the value chain and benefit from the administrative operational capacity that we developed internally. Amundi Services is continuing to develop, attracting new clients, close to a bit more than 20 new clients onboarding during the year, with especially two significant ones that we already mentioned, Fineco and Goldman Sachs.
Finally, I already mentioned it, the joint ventures continue to deliver very strong contribution to our results in activity first, but also in terms of results, with a global contribution to our P&L reaching EUR 50 million, an increase by 50% compared to last year. We clearly now are in the phase where the growth of the activity in these joint ventures is translating in the growth of their contribution to our net results. See a good transition to present our results. As Yves mentioned, our pure bottom line accounting net income increased by a bit more than 25% compared to 2017, benefiting from, of course, the integration of Pioneer, which was, if you remember well, consolidating starting mid-2017, but also from the own business momentum of the business.
That's why, as you know, we also present our numbers on a pro forma basis, combined on adjusted net income, which reached EUR 946 million in 2018, an increase by 3% compared to last year. If you exclude the exceptional financial revenues posted in 2017 and linked to the acquisition of Pioneer, where we released capital gains on our investment, it's an increase by a bit more than 9%. It's above the target that we gave to ourselves in average for the three years in our 2020 plan, which was on average 7% a year. Where does this result come from? First, the revenue. If you look at the total revenue, you see a decrease by 5%, but you have to take into account the fact that there's, of course, a very unfavorable basis of comparison for financial revenues.
As I said, 2017, an exceptional level of revenues coming from this capital gain, where in 2018, due to the market context, the yield of our investment portfolio was slightly negative. Since the implementation of IFRS 9 in a mark-to-market valuation, an impact on our P&L, a negative impact of EUR 24 million. If you exclude the financial revenues, our net asset management revenues stands well. They are almost stable at EUR 2,606 million. Thank you. They did well because the management fees are up by close to 2%, so that our total management revenues, excluding performance fees, increasing by 1.9% to be exact, in line with the increase in our activity. You can observe there's a slight decrease in our average blending margin. Where does it come from?
The average margin of our main segment of activities are continuing to see a slight decrease year after year, which is not a surprise, something that we are seeing for a long time, which is due to continued pressure on fees in a low interest rate context. This is continuing, and this is partially, but only partially offset by an improvement coming from the business mix. We have a relatively good level of inflows in retail, almost no inflows on the insurance mandate, which improves slightly the mix, but since this year, the overall inflows were a bit lower than expected. That explains why the average blended margin is slightly decreasing. Bottom line, the net management fees are still up by close to 2%. Regarding performance fees, they are, of course, clearly affected by the market context. They amount to EUR 115 million.
Of course, a decrease compared to 2017, which has been, on the opposite side, an exceptionally good year in a very favorable market context and where we reached EUR 180 million. Overall, net asset management revenues that are almost flat. On the other side, costs, which are significantly down by 7% compared to 2017. This is clearly the impact of the synergies linked to the integration of Pioneer. As Yves mentioned, the integration of Pioneer is working well. We will be delivering more synergies than we initially expected, EUR 175 million and not EUR 150 million as we expected. And as it is implemented faster than expected, they are delivered at a faster pace than expected. So today, in 2018, we have already EUR 110 million of synergies visible in our P&L.
That's the element that explains the strong decrease in synergies, despite the fact that we had, for the first year in 2018, to account in our P&L the impact of external research following MiFID. We already forgot it, but one year ago, there was a lot of questions about it. We managed to absorb this cost, despite the fact that we started also to partially reinvest part of these synergies in a focused investment to nurture future growth. For example, reinforcing expertise lines or countries that are developing fast. Consequence of revenues that stand well and the significant decrease in cost, our cost-to-income ratio decreased once again, and reached, in 2018, 71.5%. It decreased by close to one percentage point compared to 2017.
If you add the contribution I already mentioned from the JVs, increasing by 50%, and the reduction of our average tax rate, which is in particular due to the tax reform in the U.S., that explains the increase of our net income by 9%, excluding the exceptional financial revenues posted in 2017. Maybe one quick word about the fourth quarter, which is basically in line with what I mentioned, which in terms of revenues, is particularly impacted by negative revenues on financial revenues. As you know, most of the market correction was concentrated on the fourth quarter, so impacting on financial revenues significantly during the fourth quarter. Performance fees were clearly much lower at the end of this year than at the end of 2017, where they reached a very high level of EUR 80 million.
If you exclude this element, you can see that management fees are only slightly decreasing compared to 2017 due to the market impacts, and costs are significantly lower, which allow us to post a total adjusted net income of EUR 225 million, a good level considering the low level of performance fees and the negative level of financial revenues. To conclude, a word about dividend that will be proposed to the general assembly to be held on the 16th of May. In line with our commitment, which was to distribute 65% of our net income, excluding integration costs. The dividend that will be proposed will be EUR 2.9 per share. It corresponds to an increase by 16% compared to last year's dividend. Based on last week's value of the stock, a yield of close to 6%, 5.9% to be precise. Very attractive dividend policy.
Before I conclude, maybe just one word about, it's not directly linked, of course, with the activity and the results of 2018, but with an important element of our identity and our development, which is our commitment and our actions regarding responsible investment. As you know, responsible investment has always been one of the, I would say, the founding principles, the founding pillars of Amundi since its creation, based on several complementary approach. The first one, of course, is applying ESG criteria to our investment policies, in addition to traditional financial analysis. For that, we rely on dedicated teams screening more than 5,000 issuers, and which allow us to build portfolios that take into account these criteria in addition to financial criteria. The portfolio managed according to this approach represent today around EUR 270 billion.
This approach has already been complemented by targeted investment approach dedicated, for example, to climate change and finance on the energy transition. They represent close to EUR 10 billion today. Also, a support for social and solidarity economy with a dedicated fund around EUR 200 million. Going forward, our ambition is to, I would say, develop and generalize this approach, with several commitments that has been presented a few months ago, for the three years to come. First one is to basically generalize explicit inclusion of ESG factors in our investment policies and the management of our funds, as well as generalizing also our voting policy, based on factors integrating the asset, the corporation which we are invested. Basically to make progressively responsible investment completely mainstream.
At the same time, as continue to develop specific initiatives dedicated, in particular, to the environment, to climate change, as well as to continue to develop our commitment to social enterprise. To conclude, just to repeat, globally, a good year continuing a market environment that progressively become more and more difficult during the year. Basically, we managed to continue to post a good level of inflows and to more than compensate the negative impact of this environment on management fees, performance fees, financial revenues by a strong cost control and delivering of synergies better than planned. Going forward, it allow us to remain fully confident to continue to develop and to benefit from what we believe is the strength of our model, resilience based on a very diversified approach, whether in term of geographies, in term of business lines, or in term of expertise. Thank you very much.
Jacques-Henri.
Yes, good afternoon. I have two questions. The first, Yves, I'm interested by the fact that you've put a little bit of a caveat on the target plan about market levels. The question to you is, how comfortable do you think the market levels will be at the level of beginning of 2018?
Recollect which was the market level that you will take into account the beginning of 2018.
For equity market, for example, if we take the CAC 40, it was around 5,300 roughly, and for European long-term interest rates, it was around 0.6 or around 47%. If you look, for example, at the [inaudible] .
Okay. The worst is never sure. That mean that an idea that CAC 40 in this period, remain at the quite clear at the present level, in fact, 5,300 or 5,000. It's not so different. I remember you that the impact for us in term of revenues is 10% of decrease of the stock market represent
EUR 85 million.
EUR 85 million pre-tax.
Pre-tax.
This is the assumption. The other assumption also is the fact that, which is even maybe more important, that we don't enter in a permanent context, creating a strong aversion to risk. We have the impact of the market about total AUM and the capacity to generate performance fees. We have also the impact on the market in volumes. When you have a lot of volatility, a lot of incertitude, you have an increase in aversion of risk and a decrease in the investment in mutual funds, in fact. You see what happens in Europe, this year compare to last year, and the change was at the end of the first quarter after the correction of the market of February. That at the same time, I'm quite confident. Let's say, to be simple, what I say is EUR 1 billion of net impact.
I'm confident with this because, of course, one side environment is more difficult, but on the other hand, we have permanently these new engines of development. For example, this year we have recruited nearly 100 people, which is a reinvestment of part of the synergies, but which will create additional development in the future.
Yeah. I had one more question for Nicolas. Considering the volatility in your financial portfolio, are you tempted to hedge it potentially or not?
Well, we look at it sometimes. It's not a general policy. Sometimes we do it, for example, for foreign effect, generally, no.
On the long term, it's my experience of previous chief financial officer. The cost of hedging, when you are the long term, is higher than the benefit of hedging. For this kind of capital days and so on. Time we can say after if we take, let's say, an option about the CAC 40, we have decrease in the valuation of revenues. It's so intelligent, so sophisticated that generally, it conducts to disaster.
Okay.
Good morning. It's Hubert Lam, Bank of America, Merrill Lynch. Two questions. Firstly, on fee margin. As you said, the fee margin fell slightly year-on-year. Should we continue to expect the fee margin to trickle down on the back of ongoing fee pressure? That's the first question. The second question is, can you just give a sense what your excess capital position is today? Again, refresh our views on M&A opportunities and what you see out there.
On fee margin. Fee margin, it's always a consequence of certain things that we control and other things that we don't control. The first is the mix of the products. Mix by expertise, equity versus fixed income, real estate say, versus monetary funds, by client segments, retail and institutional, and investment management style, active and passive. I don't know frankly, which will be the breakdown of this in the future. The objective of each head of business line is to grow as fast as possible. Then we'll see the effect. Having said that, there will be a continuing pressure on the margin in each kind of products, both active, passive, and so on, for a reason that I have often explained, which is a low interest rate. I think that we can resist, probably better than others, because our prices are right now cheaper than the others.
In the case, for example, for ETF, our brand has been smarter and cheaper. It's also the case, for example, in France, where we have made recently a survey to compare the prices of the Amundi funds, to those of competitors. We have done this in view of the implementation of MiFID to have arguments for our network to discuss with the customers. The conclusion was that our average price were on 20% under the average of the sector. That means that, even if there are additional pressure on the fees due to the competition, our present position will, let's say, put us in a better position to resist. All in all, I see a slight decrease of the average margin, but more dependent on the mix than other factors.
Yeah. There was a question on excess capital, I think. Regarding excess capital, as you know, following the acquisition of Pioneer, we didn't have any more excess capital. Progressively, we are and we continue to rebuild it. In terms of amount, not complicated. We distribute 65% of our results. It means that we have constituted capital by around EUR 300 million a year. We are just one year after. We can say we started slightly to build this excess capital, but we are still in a margin which is probably more something like a buffer compared to the minimal regulatory requirement. Going forward, yes, we will continue to rebuild this capital.
To be simple, at the end of the plan, roughly speaking, we will have again, without acquisition, EUR 1 billion of excess capital. This EUR 1 billion will be used either for acquisition, if we have good acquisition, or will be given back to the shareholders in the other case.
[inaudible]. Three questions, please. Firstly, on investments. You mentioned you hired 100 people this year.
We have? Pardon.
Hired. You made investments in 100 people. Could you talk about which areas you're trying to grow and what sort of quantum of investments we should be expecting in future years? My second question is on MiFID. Can you talk a bit about your experience on the ban on retrocessions that MiFID put in place in distribution? How has that impacted distribution? Have market shares shifted? Has pricing been impacted by MiFID? My third question is on corporate services. I think from your plan, you're targeting EUR 50 million of contribution from corporate services. Is that something you can reiterate? Where are you in terms of contribution from Amundi corporate services? Thank you.
Okay. About new hiring. We have hired about 100 people. Part of investment side, but it concern all the areas of Amundi. For example, in the investment division, we have recruited a new head for equity, with a guy coming from Nordea, Mr. Kasper, who is a new head based on Dublin. In emerging debt, also, we have recruited. Also, significant number of people on the commercial side. For example, in the U.S., we have recruited people to target the institutional segment. Pioneer was purely on retail in the U.S. Amundi with MassMutual has a small franchise in the institutional side, and we have ambition to grow on this area. About MiFID, it's too soon to speak of the impact of MiFID. Have in mind that MiFID is implemented this year for funds. For life insurance, the equivalent in France is PRIIPs, it's implemented this year.
For the first time, the customers will have reporting in 2020. There is one year of delay. As you know, in France, most of the funds are sold through life insurance unit-linked products. I don't anticipate a direct impact of MiFID. You saw the fact that people see the fees about the funds. I don't anticipate also a major shift in the market share between the players about this. I think that MiFID also is a way, I see the discussion inside Crédit Agricole group with CACEIS regional, with the distributors, to be more conscious of the efforts to do to manage more efficiently the savings of the customers. We have launched a plan inside Crédit Agricole group to change the approach, to shift from an approach of product selling to an approach of permanent advisory of the customers.
The last point, yes, Amundi Services is developing and a target of EUR 15 million is totally feasible, in fact.
Do you see the contribution today?
No, we have not got much of this progressing.
No, but we said it's a.
In run rate, we are at this level today. For me, it's an additional. I think that the objective that I give to the people in charge of this, which is not only IT, but also funding, things like that is the objective in the next three or five years is EUR 50 million. EUR 50. At the same time, don't add the EUR 50 that I give them to our projection. It's a way to be more sure to do this projection.
Hi, thank you. It's Chris Turner from Berenberg. Two questions, if I may. Firstly, you've obviously done very well executing in terms of the cost synergies and the realization at Pioneer. From memory, you were also targeting EUR 30 million of revenue synergies. Can you tell us where you are on that, and whether you also see more room to expand on that?
We will do also this, of course. When we are speaking of cost synergies, it's simple. We know that. We can reduce synergies. It is more always complicated to identify. I can confirm you that this figure will be online, because I see the additional potential that we are doing. For example, it's beginning but exporting the U.S. expertise in Europe or in Asia, the potential is here, and we have begun. I can add, for example, what we are doing with emerging market expertise, which are very successful, for example, in Taiwan. The combination of a strong geographical presence, we are present in 36 countries, and the fact that we have nearly all the expertise, it provides, but probably it will be more at the same time as we are in a difficult environment.
It will be more, but also don't reevaluate, I'm saying, because life is made of good news and some bad news sometimes.
Thank you. Just one last question, if I may, which follows up on something Hubert was asking, which is, in terms of your geographical footprint, you have some very strong presences in France and Austria and Germany and in Italy. In those geographies, we have a much smaller presence or no presence. How do you think about entering, and do we need to wait until your balance sheet can let you do that inorganically, or do you look at markets like Spain or some of the Asian markets and see a way of doing that organically?
Well, we are in 36 countries. I know that there is in the world 200 countries, Africa is not mature enough, in fact. If I take Europe and Asia and Middle East, we cover nearly all the countries, except Vietnam, Cambodia, Myanmar, but some countries like that. Maybe we will open a joint venture one day in Vietnam because we are working for the future. We are present in the countries where we have to be present. What we have to do is month by month reinforce our presence, our penetration in each of these countries. I take the example of Germany. We are better off now after the acquisition of Pioneer in Germany. We manage, in Germany, more than EUR 50 million now. Frankly, we should be at the minimum of EUR 100.
That's the objective that I have given to the end of the man, in fact, it's a woman, covering this country. The problem is not to add more and more countries, it's to have a penetration more and more important in each country. We have a specific subject that we have to address. Presently, we have not find a good solution to address it. It's this country, U.K., because we are present on investment, there's an investment platform, but our presence in distribution, even if it's improving, thanks to the efforts of the people of London, I consider that we should do more.
Thank you. Mike Werner from UBS. Two questions, please. First, on the fee margins of the institutional business, we saw them at around 10.4, I think, for the full year. In your first half presentation, they were at 10.8. Can we assume that we've seen a significant drop in the second half, or is there something going on that we haven't seen in that calculation? Second, if we take a look at your inflows for 2018, excluding the JVs, they were about EUR 16 billion or so. You've noted that we've had about EUR 14 billion or so of inflows into passives. Can we make the conclusion that we've only seen about EUR 2 billion of inflows into active funds or actively managed products in 2018? Is there any way to get a breakdown of those passive flows between retail and institutional? Thanks.
Regarding the margins in institutional, well, yes, they are decreasing. It's not new. It's due to the fact that competition is very strong and that in a low interest environment, to get sold to the clients, you need to propose products sometimes with lower fees. It's not something new. Something that we have seen for many years and that we basically expect probably to continue. Regarding the inflows. Yes, the inflows excluding the JVs amounted to, I made the calculation, EUR 15 billion. Significant contributions coming from the passive management. You have also to take into account that we had the outflows coming from FinecoBank, which were active management and EUR 6 billion, close to EUR 7 billion of outflows. The two big mandates that was terminated at the end of the year also were on active management.
Yes, net active management had a small contribution, but with a still good level of activity, especially if you include the FinecoBank deal. It was coming from also traditional active management, multi-asset, equity, and so on, but also from real assets.
Generally is that breakdown of passive flow between retail and institutional?
As a passive flow between retail and institutional, it's majority institutional.
Yes, when we are saying institutional, it includes the asset managers, for example, which buy it in fund to fund. At the end it's a retail customer, but our client is institutional.
Hi, it's Gurjit Kambo, JP Morgan. Just two questions. Firstly, can you perhaps give a bit of color on the U.S. business, what sort of trends you've been seeing in the final quarter and maybe just broadly in 2018? Secondly, just on the JV contribution, obviously you've seen a big ramp-up in 2018. How does that move going forward in terms of the scalability of those businesses?
In the U.S., it was a year, roughly the net inflows were net outflows of EUR 1 billion.
Maybe a bit more.
A bit more, maybe EUR 2 billion. I would say we were in the U.S. in a transition year, in the meaning that the U.S. market is difficult. The traditional mutual fund U.S. market is difficult and sees the different, in the industry, competitors, your JP Morgan and so on, but all. I see recently the results of Natixis, they had outflows in the U.S. We have a mutual fund U.S. market difficult. We have just begun to implement the strategy to reinforce on the institutional side and to export more the U.S. expertise through the product. That explains that all in all, the contribution to net inflows of the U.S. has been, this year, negative for us. At the same time, they have significantly improved their profitability, due to the cost synergies and through a better management.
That means that they have improved over seven basis points, their cost-to-income ratio.
Regarding the JVs, as I said, what we expect going forward is to have a contribution in term of activities and in term of results broadly in line. Of course, there could be some operational leverage, but you have to take into account that all of these three JVs already operate at cost income ratios that are close to 50%, pretty much in line with Amundi ones.
What's interesting, some of the questions on the recent period, last year, we had a difference between the pace of increase of the volumes and the pace of increase of the net income. You see that each year, the pace of increase of net income is equivalent or even better than the pace increase of volumes.
Hi, Angelique from Autonomous. Thank you for taking my questions. Firstly, when I look at the retail flows excluding JVs, those were around EUR 4 billion for the full year. This compares to a run rate of around EUR 20 billion that you had in the plan. Given that retail flows carry a much higher margin, a much higher fee rate, does that concern you for the future? Maybe related to that, could you please give us a bit more color on what happened this year with third-party distributors? Because we saw another quarter of outflows. Obviously, the market environment might have affected that, but is there anything more structural in that segment, like MiFID II or something in the U.S. retail segment? Thank you.
No, you are right in your analysis. We are not at the level that we would like this year on the retail, excluding JV. It's fundamentally linked to the context of the market that I mentioned. After the correction of the market of February, you had a major shift on the market. In addition to the increase in volatility has created a risk aversion and no more net inflows in Europe. There was also another reason to explain this, is the shift from American investor, which repatriates money from Europe to the U.S., linked to first, the Trump tax reform. Secondly, the fact that they consider that the potential of growth of the U.S. economy was better than in Europe, and also that there were less political incertitude in the U.S. than in Europe. It's clearly a concern, in fact, in our plan.
We know that we have to compensate for this.
On third-party distributors?
Third-party distributors, they are the same explanation. Same explanation, in fact. If you look at the figures of all the competitors in Europe, everybody is the same, in fact.
Questions from the phone line. Can we please take a question? Sorry, can we please take the questions from the phone?
The first question comes on the line of Pierre Cherizet from CICC Markets. Your line is open. Please go ahead.
Yes. Most of my question has been raised, but just to be a little bit specific regarding what you say that there is problem in net inflows regarding the general context, and you say that you will have to balance this effect of this forecast. What do you have in mind regarding this aspect? You talk about the market context, et cetera, but you don't talk about the economic context, which is going to be probably a little bit more tough than expected initially, in terms of GDP growth, for instance, and also recent events. Clearly, as analysts, one part of our job is to make prospects. We could be a little bit surprised to see that you didn't change any figure of your plan, particularly regarding net inflows, having in mind that you have reaffirmed that a continuing pressure on margin will continue.
At the end of the day, if net inflows, it's more difficult, pressure on margin is more difficult. Your cost income is excellent and will be difficult to lower it below 50%, I guess. I don't see where you can, excepting external growth, continue or reach all your targets in your plan. What is your view on that?
My view, that is life, firstly, it's better to be optimistic than pessimistic.
Clearly
Because you are not sure to be right, but you live better. The second reason, I am looking to my friend Domenico, I have one of my preferred word is Formula of Antonio Gramsci, who's not an Italian soccer player, he was a philosopher. Say we need to have the pessimism of intelligence and optimism of the will, which is really the way we manage Amundi. Of course, you are right, times will be more difficult. The question of the economic growth is not decisive for us. For us, which is more important is the question of volatility risk aversion. That's the key question in the future, and it's difficult to assess like this.
What I'm saying, in fact, when I say we will roughly, I say roughly because I know that now at 1% or 2%, people are very happy to, or proud to make a projection at three years. Roughly, we think that we can do EUR 1 billion of net profit. Okay. We think like that because we see what you are seeing, at the same time, we see that we are investing in some areas and that the return is good. We see that we are able to deliver more productivity gains. For example, the costs, this year benefit from them. Sometime, who knows, the tax rate can be better. We have not been used like this. What I ask to you, consider that it's a target of trajectory when I say EUR 1 billion .
We are not in a, how would you say, the automatic. The management is not to pilot a plane concerned with sleep and so on. Permanently we adapt. There is a difference between of execution. That's the life, sometime between different management. I would say in term of soccer, I would say is playable. At the same time, it's not sure. I would say that you should ask to the management to give their objective with an interval of confidence. I would say that at the beginning of 2018, when we give the 1 billion plus, the interval of confidence was very high.
Yes, I remember.
Now it's less high, but it's always manageable. Okay. Any other question?
The next question comes from the line of Haley Tam from Citi. Your line is open.
Morning. Can I ask two questions, please? The first one on slide 18. If we compare this to the same one from your Q3 presentation, it looks as though you've seen EUR 5.5 billion of net inflows from countries in Europe, excluding France and Italy. I'm hoping you could give us some more color on if there are particular regions there or anything unusual happening in Q4. The second question was actually, the tax in Q4. Could you give us some idea of why that was so much lower, and how we should think about this going forward? Thank you.
For the inflows in Europe, excluding Italy, I would say it's a bit everywhere. It's in Germany, it's in Spain, it's in Netherlands, it's in the U.K. also, even if we would like to do better. It's quite diverse in term of source of inflows. I would say significant contribution, particularly in Germany, Netherlands, and Spain. Regarding the tax rates, as I said, the annual tax rate, the main impact is the tax reform in the U.S. On the fourth quarter, don't look too much at the fourth quarter. It's always like this. At the end of the year, you adjust. You know exactly what is your result country by country, and there are adjustments. The reference one you should look at is the annual one, not the one of the first quarter.
Thank you.
Okay. Just to roughly summarize, in fact, in order that things are very clear between us, what we continue to manage to, it's this EUR 1 billion, equivalent to the 1,050. That's this kind. At the same time, the objective is here. Don't consider that the inflows are an objective, because with the time, I would think that inflows were even more important than net income. No. What the real commitment is on net income. Inflows, they will depend on the environment, this aversion to risk and so on. We maintain the objective of under 53% of cost-to-income ratio. Okay? Thank you very much. It's always a great pleasure to see you.