Ladies and gentlemen, good morning. My name is Fani Titi. Thank you for joining us both here in Cape Town and those listening via the webcast. On the screen, you should now be seeing the biographies of Hendrik, my partner and Joint CEO, and the founder of the Investec Asset Management business. There we go. We now have the CVs of Hendrik du Toit, as I say, my partner, Joint CEO, and founder of Investec Asset Management, and Kim McFarland, the CFO and the COO of Investec Asset Management, and a Group Executive Director. Both of them will be leading today's presentation. We are also joined in the room by other senior executives of Investec Asset Management, including Thabo Khojane, the MD for South Africa.
Following the demerger in September, Hendrik and Kim are here this morning to provide a deeper dive into Investec Asset Management, focusing on the unique and highly differentiating characteristics of the business. There will also be a second IAM Capital Markets Day scheduled next year ahead of the listing to provide additional detail on IAM's strategy, business plan, and financial profile. Before I hand over to Hendrik, a few words on the demerger announcement. For obvious reasons, we will not be able to provide you today with any substantive new detail on the demerger process. I would like to briefly remind you of the rationale of the demerger. It will serve to simplify the current Investec Group structure. It will also focus IAM and the Investec Bank and Wealth business, the so-called remaining group, on their respective growth paths.
It will enhance the long-term prospects and potential for both businesses for the benefit of their clients, their employees and shareholders. We are executing the demerger in a clear manner, which we will note is still subject to regulatory approval. In fact, later this week, we will be interacting further with regulators as we progress the demerger. I'm pleased to say that we are making good progress, and we continue to maintain close dialogue with regulators, both here in South Africa and also in the U.K., and we also do continue to make contact and progress with other stakeholders. I'm very much looking forward to seeing you in February on the 26th, when we will hold the Investec Bank and Wealth Capital Markets Day.
I will now pass the baton over to Hendrik and Kim, who will be able to provide greater insight into how we have effectively built a leading asset manager organically over a period of just about 30 years or so. Hendrik, over to you.
Thank you very much. Thank you, Fani.
All right.
Ladies and gentlemen, good morning, and very welcome at our first Capital Markets Day. There are, Fani mentioned Thabo Khojane. There are a number of our other colleagues in the room as well who can help with any answers. We have John Green, Joint CEO. We have Hugh Herman, our Chairman, and many investor relations people who over tea will be able to talk to you. It's my privilege to give you an overview of the business, starting with an introduction in what this business really is. Often one reports numbers and it's dry, and it's just a result. Today is really to get you to understand the soul of Investec Asset Management.
Give you the market context, and I'm not referring to last night's market behavior, the market context within which we operate, and some of the highlights of this, or the key features of Investec Asset Management as an investment. Look at our investment platform in some detail, our client and distribution platform, as well as the operating model and the financial performance, which Kim McFarland will handle. Because Kim will also be post-demerger, Finance Director of the business. We'll have a break to talk informally, and then we'll come back for concluding remarks and questions. Let me just show you a picture. As they say, a picture tells a thousand words. This is the story of Investec Asset Management, a business organically built over 28 years.
There have been limited M&A involved, but we are actually at heart an organic business, and we're a business that has shown the ability to grow through various market cycles, and that's how we intend to go ahead as an independently listed business. We don't intend to be an M&A shop. Let me go one step back, because this business is at its very heart, a purpose-led people business. You motivate people not by short-term targets, but by clarity of purpose and an understanding of why they're there and what they're collectively supposed to achieve. In our case, we believe we are building a better firm to invest our clients' money better over time and make a positive impact on the world around us. It's as simple as that.
I can't think of many more attractive propositions when you come to the office every day to think about why you're there, what you're doing. That's what we will be doing, whether we're part of a group or whether we're an independent business. In the next decade, that's really what will drive and differentiate us in a world where these questions are becoming far more important. I'll refer to that in my wrap-up as well. At heart, a people's business. Many of the people here, I'm not going to name everyone, I'm not going to tell you everyone's CV. Many of these people have spent many, many years with us. If you look at the numbers behind the faces, you'll understand what makes this business different. It's actually all about people. Your cost base is people. Your potential is people, your talent.
This is a talent business. It's not an industrial business. I think it's really important. In asset management, you can make a choice. Hello, Neil. You can make a choice. You can be an industrial business, and you can run on cost logic, or you run on creativity and talent, and you strive to achieve that extra bit of return, not called alpha, or that extra bit of effort that provides a solution for a client that the client needs at a particular point in time. For that, you need people. When you assess these businesses, first and foremost, is the people management up to scratch? Is it good enough? Can they continue to attract talent?
We believe the renewed position or the new position as an independent business will substantially strengthen our ability to attract and retain talent, and very importantly, doesn't put a cap on the equity ownership that people can have in the firm. Let me be very clear, this is the moment at which the management of Investec Asset Management is buying in, not selling out. We'll come back to that later. Turn this into numbers. Most of you are numbers people. 28 years of heritage. This business has successfully operated for the past almost 28 years. I was fortunate enough to be here right in the beginning, a few blocks away from here in Cape Town. Many of the colleagues who sit here have been here for most of the journey.
Kim McFarland, who presents with me today, has worked with me for 25 years, and it's only been a great privilege. Our Executive Committee, which includes some new people, has been with the firm on average for 20 years, and they're not all as old as I am. Most of them don't have the same amount of gray hair. 20 years average at senior leadership. If you look at each of your three pillars of the business, our client group leadership, 13 years on average with the business. If I look at the CIOs and the investment team heads, 12 years on average with the business. That's not 12 years experience in the industry. That's 12 years with the business. If I go to our operations backbone and platform, the leaders there, 14 years on average with the business. Staff, we have 170 dedicated investment professionals.
If you add risk and support people, you get to 235. A substantial investment platform able to provide clients with the kind of solutions at the level of sophistication they need. Since 2013, we've also been not only profit participants but equity owners in this business. I may remind all of you, we bought the shares with our own money, and at the moment, staff own about 18%, and that will be rising in due course. How do you capture Investec Asset Management? Because it's very easy to capture parts of Investec Asset Management, i.e., a business started in South Africa or a business with a big U.K. platform, et cetera. No, it's a global asset manager with an emerging market heritage. That already starts to differentiate us from the very large competitor landscape.
It was founded in 1991 by current leadership, it today runs about GBP 109 billion. I'm not sure today. At the end of 30 September, it ran GBP 109 billion. The markets have been quite rough since then. It's a high-conviction business in the sense that we only engage in specialist alpha manufacture or specialist investment offerings aiming to deliver alpha and in solutions for clients. I think you see in the business a consistent track record, a long-term track record, having gone through many cycles. From an organizational point of view, I'll try to explain to you that we reach our clients through five regionally defined client group platforms where we serve clients where they are, not where we come from. Of course, we these days have a substantial global presence also on the investment side, which I'll explain to you.
It's a highly diversified business in terms of asset class and in terms of source of money. Let me go back to the core. What does this business really try to do? We offer organically developed investment capabilities through active segregated mandates and mutual fund wrappers to sophisticated clients. It's as simple as that. We don't do much else. Little bit on, but not much else. That's our core business. We operate globally, both in the institutional and the advisor channels. We don't deal direct with clients. We also have an approach to growth that is driven by structural medium to long-term client demand, and that's very important. We don't invent or try and sell people what they want to buy now. We think what is relevant to savers for the long run.
We try and develop that because the gestation of a good investment, many of you know that who work in very good investment houses, the gestation of a good investment capability is at least a decade. Then a decade after which you can probably commercially harvest that, and by then you need to innovate again. We're a patient, organic, long-term, and very important, intergenerational business. We think about the next generation, we try to plan, and we think this move will allow, and as Fani explained, this is all about simplicity, focus, and facilitation of growth. We think this move will help with that intergenerational bit, i.e., make the business attractive for new generations of management and leadership, but also put it on a growth track which is an even more compelling one than its current. Let's go look at the market context.
There's a great deal of negative narrative around the active management industry. I'm not here to defend, to say that active management is as good as it used to be in the '80s. It isn't. No industry is as good as it used to be in the '80s, except tech. We have a structural growth wave as investment managers in the sense that the demographics of the world and the increased wealth in the world has radically expanded the pool of professionally invested money. Just look at the numbers. GBP 39 trillion estimated in 2008, GBP 79 trillion-GBP 80 trillion estimated in 2017, and GBP 109 trillion estimated or +GBP 100 trillion estimated in 2022. Now, most of these numbers, there are footnotes explaining each number. Most of them are BCG numbers, just to be consistent.
There are some other marginally different numbers quoted by other consultants and industry observers, essentially they tell the same story. Secondly, there's a big rebalancing of flows globally about to happen and actually has started. Most of the institutionalized and pooled savings of the world sits in the advanced countries of the developed world. Half of the world's money is in America. Of course, Europe being pretty big, Europe and U.K. together over a quarter, and then the rest, rapidly growing pools of money in Asia. If you started in South Africa in 1991, you were serving, and Thabo said to me this morning, well, [as for me], it's big enough, you were serving about 3%, maybe a little less then, now about 3% of global professionally managed AUM. Well, you can still make a very good living, as evidenced by many of the firms in the room.
The potential is vast, and a significant part of that will be deployed in active strategies and will be deployed in solutions-oriented strategies. If you then look at the revenue opportunity, you'll notice that, yes, passive has increased, from the call it GBP 300 odd billion revenue pot, which is estimated to be GBP 375 billion. I don't know where they get the five from, GBP 375 billion in 2022. That pot, about less than 10% will be passive. Actually, that's where we see the price war in the industry. In the rest of the industry, there is growing demand for alternative, growing demand for high alpha and solutions. Of course, competition is just getting tougher and tougher, and that's part of the rules of this game, and we need to understand that and live by that.
Finally, in spite of all the narrative, in spite of all the pressure, and yes, there is top-line pressure in this industry, especially when beta is not there, it's one of the highest return on equity industries in the U.S. I've shown you the numbers here put together by Thomson Reuters, and you can see that actually tech is getting increasingly equity intensive because people do so much M&A. This is a business where you can grow largely organically, and we'll go back to our numbers and explain that to you. Bottom line, the prize is worth the effort. What makes our business different? Now I am in selling mode, excuse me, but I have to explain that properly. What makes our business different? We are differentiated in a sense, not only because we're a global manager with an emerging market heritage.
We have a unique culture combined with growing employee ownership. I think the emphasis should be on the culture, not the ownership. These two are self-reinforcing. We have been organically and sustainably built over almost three decades, which means there is something in here which allows us to create the conditions for alpha, and that's really the business we're in. We're creating the conditions for investment managers to thrive and for clients to be served well. Thirdly, we're distinctive specialist active strategies. We try to be distinctive. We try to have very clear sense of where we can add value. Finally, our emerging market heritage is an advantage because the world is the global center of gravity, of economic gravity, is shifting east. I think when I was born, it was somewhere to the west of the African coast.
Now that center of gravity is somewhere east of Indonesia or somewhere around Indonesia right now. That means there is a significant emerging market opportunity, one has to understand that, and one has to embrace that rather than see that as a marginal risk addition to a portfolio. I think we've also got some attributes which differentiate us. Firstly, for our size, I don't know of another firm with the same global reach. We have genuine global reach to our target client base, and we built it at great cost. The cost we built it at was, in a sense, moving away from the operating margin of a single country business, which can make super profits but then struggles to grow across borders. We embraced that challenge in the late 1990s, and we can talk about it over tea.
I think because we pursue the sophisticated institutional and advisor client base, we feel our clients keep us match fit. They help us manage our business, and it's a positive cycle, and it reinforces the proposition of the business. Seventh, we believe we have significant growth potential across our skill sets. Some areas we do have capacity constraints. In terms of our skill sets, and we are organized around skill sets, we think we can continue to grow the client traction of those skill sets substantially. By the way, we don't see growth as a one-year exercise or a year-to-year exercise.
When you talk to us in year-to-year numbers, I may sometimes not even know the answer because growth is really a 5 to 10 year exercise in this industry, and you have to always retain focus on the long term and not be distracted by the short term, even though financial discipline is really important. I think in the end, we do display attractive financial characteristics. Obviously, this is an industry with strong cash generation if you don't over-leverage your balance sheet, which we don't do. Let me come to the culture and the ownership. Firstly, I'd like to just say we organize our business around three core activities: investments, client group, and operations. If we look at those, our people are quite well distributed across, and our average tenure across those three platforms, between six and seven years. That's reasonable.
We have an experienced pool of people. We're not a revolving door business. We hang on to people. We apply them differently, or we give them different opportunities if they struggle because we believe that experience is what helps you through tough markets. I will refer you to the great crisis of 2008. We came through there very, very strongly by not having a revolving door, but by actually focusing on clients. We had some of our best growth years shortly after that because we were focused on investment performance and clients. I think it was also important, we really want our people to own the problem. We talk about an ownership culture. When you talk to someone at Investec Asset Management, he or she wouldn't refer you to someone else who caused the problem.
They will deal with the problem, and they will own it because we're all owners of the outcome of the result, which is ultimately client satisfaction. Here's the story, in a different way, the chart in a different way of how we've built the business. I didn't use a log scale, those of you who are mathematical, because it would have flattened out. Now it looks as if it's growing towards the end. It just tells you that we had our most substantial nominal growth phase, i.e., in raising assets under management since the financial crisis, even though we had some of our faster compounding periods when we were a single country business in South Africa in the 90s.
Each of these phases needed a new level of management maturity, needed us to reinvent ourselves, needed us to either cope with a bear market or a change in market. I think that's the bit that you can't easily explain to people in numbers. It's that conversation that you had at that point in time when the market was going against you, when your performance was bad, when your product was not what the market wanted, that you had to rethink or that you had to plan. One thing we always from very early stage plan is we wanted to build a global platform that competes with the best in the world and actually solves the problems of clients who want to invest and spread their capital globally whilst retaining the strong positions in the domestic markets where we are.
This is a healthy story, and I think just one number worth quoting. Since the financial crisis, we always say there was good beta. If you're in the debt markets, the beta was good for the first part, not that great all right through. We actually managed to raise GBP 39 billion of net new money over that period, which explained about half our growth. We can propel ourselves without significant market beta because we have reached to clients who have to deploy their capital in risk assets. Looking at our business differently, we see that on an asset class basis, we're about half equity exposed.
We have a predominantly emerging market, but also a fixed income solutions business running about GBP 28 billion, and then a multi-asset business, and a small alternatives business, which we think we should pursue and try to grow, and we'll talk more about that maybe when we come to the investment platform. We're essentially organized not by asset class, but by investment skill. That is really six teams of people, all with their clear leadership, various strategies that they run, and they reinforce the diversity of the firm and the diversity of revenue stream. In the end, what we do is the same. We do specialist high alpha investment strategies for clients who are willing to pay for those, and we deliver solutions and outcomes largely through the multi-asset or the income business.
What we have avoided over the last five or six years, there was a tendency in our industry to create super income products, many of which will be wiped out when the interest rates start rising aggressively. We avoided that because we also don't go for hot money in this business. From an investment performance point of view, and allow me here to just say why is the 10-year chart not 30 years long but only substantially shorter, because that's when it's 10 years from when we put in global investment performance standards and subscribed to that, GIPS. We only work on our GIPS databases, now I only show those. Essentially what I want to show is we do have some volatility in our performance track records, particularly this is the firm average, but money weighted. By size of mandate.
Putting all our mandates in a pot saying, did you beat the benchmark on a money-weighted basis? Okay? This is a very aggregate top-end. If you want to analyze our performance, go to the databases, buy eVestment, go and analyze, and you'll see the specific performance track record. This is just a sense to say we've done well over the long term. We have lived through volatility, and particularly about three years ago, two of our main capabilities had some volatility. We've come through and, yeah, we'll face volatility again. That's what we do. It's not always a perfect track record. That's the easy part of this business. The difficult part of this business, to take a client on the journey and go through the cycle with them. We have saleable numbers, as you've seen at the half year, net inflows of GBP 4.1 billion.
We can raise money, we can reach them, and we can defend the book we have. I think what's important also to show you is the fact that we are diversified. Although we have a very strong emerging market position, we are diversified. If you look at by client location, we've got about 50/50 in developed and emerging markets. We expect over the next 10 years, substantially more will be in developed markets before the Chinese become really old and rich and export a lot of their capital. That's going to take a while. I think the other part is from an investment strategy point of view, if you think of the beta underlying our business, 56% of what we invest is currently exposed to emerging markets and about 44% to developed markets only. Sort of 50/50 capital raised, 50/50 capital invested, little more in emerging markets.
Why? Because our fixed income business is by and large an emerging market business. Why are we happy with this? Every time we get an emerging market problem, people come and ask me, what are you doing to rebalance your business? It's a very classic thing in asset management. Often people go and they, after the event, buy boutiques or buy businesses to say they've got a balanced business, and then they pay goodwill at the wrong time. We don't do that. We are exactly what we are. We're very comfortable being slightly overweight with exposure to emerging markets because we think there's a huge reweighting going essentially from U.S. assets to global assets in the sort of post-U.S. outperformance period. We think we're well positioned for that, and we think it's big enough to make a living.
Also, you just look at the chart here, the GDP per capita difference, the blue line being emerging markets and the green line being obviously much larger, 4x the size, the per capita in developed markets. You can see the rate of growth is so much faster and it's structural. Of course, you see on the other side that emerging markets are underexposed in institutional portfolios globally. Whatever the argument, whether they, that it's right or wrong, you're going to see increased exposures. You've just seen China enter the benchmarks and that in a very modest way, and that will obviously increase, and therefore those skills are necessary to run global portfolios. I think if we look at our reach, which is our one big differentiator I explained, and what we've done here, please don't try and read this busy chart.
All I've shown is in each of our client group areas, what the size of the total prize is and what we manage and whether we've grown faster or slower than that pool. In all of them, except the U.K., where we've matched the market, and intentionally so. We can talk about that over tea time, intentionally so because in the U.K., remember when we arrived in the U.K., the ideal strategy would have been only to focus on South Africa and the U.K. That would be McKinsey's advice. That would be anyone else. Many of you asked me the question, why do you go the rest of the world? Well, actually, the U.K. institutional pot started de-risking itself. The DB guys were doing LDI strategies, giving their money to managers to match and not to active managers.
Actually, we decided to focus on the rest of the world as well. Of course, the U.K. advisor market is still a very good market. We matched the market, but we didn't put our full effort in there. We said we needed to build platforms to be able to reach the larger pools, and we have, and we have done that at a faster rate. Just to repeat, tell you in Europe, we've grown by 22%, at the rate of 22% our book, over the period, while the market's grown by 6% per annum, 21% per annum in Asia Pacific, while the market's grown 10%. In Africa, we pipped the market. The market didn't really grow because there was currency erosion, but we grew by 2% in sterling terms. Again, in the Americas by 28% per annum while the market grew by 7%. U.K., we matched it.
It just gives you a sense of the pool sizes, and it's quite clear, it's interesting now today, we have pool rates of growth. I'll show you the sizes in the next chart, and you'll understand, and you've seen it in the pie. What's interesting, we've now got equal-sized businesses in three of the really big areas, i.e., Americas, Europe, Asia Pacific, where we've got our largest market, single market is still Africa. Of course, in the U.K. we were slightly smaller, but that's our second biggest market because that's the second big place where we went when we started operating beyond the borders of Southern Africa. Really, you've got positions you can now grow off, you are not overexposed, and actually you can offer your investment capabilities to whoever at whichever point in cycle they want to buy it.
That's really the position we've reached. If you look at our client base, I said it's advisor and institutional. It's about 68% institutional, 32% advisor. We define advisor as not just independent financial advisor that we would know here in this market, but also financial platforms like banks and others who serve their clients but need manufactured input from specialists like us. I think what's interesting is within these, we know our niches and they're quite distributed as well. It's not as if it's just all one lump. Consultants and pension funds, for example, in institutional. Sovereign wealth funds are very significant government bodies. Of course, sub-advisory mandates, etc.
If you look at the potential across our skill sets, I'm just really blowing up the chart I showed you in the beginning by saying the revenue pool of this industry, the assets under management looks reasonably spread between passive, alternative, active specialist, and LDI. When you look at the revenue pool, the solutions, balanced, active, and alternative is the bulk. Core is the shrinking bit. That's the very low alpha kind of 1% above benchmark stuff that no one wants to pay fees for, and then passive. If you look at the passive percentage, as a part of the revenue, you see it's not really fast-growing. That's a war of attrition, which we believe only two or three people will win in the world, and we should stay as far away as possible from there because there's no chance of winning.
We're not going to play any game where there's no chance of winning. I think what's important, if you look at the CAGRs of the different pools, you can also see that passive is still going to be the fastest growing part, but not necessarily from a revenue point. I think if you want to understand our model, now I took a bat, and I apologize if you don't understand this chart. Go and read it slowly at home because it took us a few weeks to get it right, and I know the first one I drew, John Green told me it was rubbish. Then [Varony] told me it was rubbish, and we tried to explain how we grew from a single [Kale], I forgot to send it to you. You probably know better because you were right in the beginning.
It was how you grow from a single country, single asset class, which we expanded to another asset class, and then we just had a multi-asset because we had the two main asset classes, business to an international business and then a business where strategies from certain skill sets can grow and drive the firm rather than just adding an asset class. I think it's really important. We've navigated the most treacherous part of the growth journey of this business, and there are two really treacherous parts of the growth path. When you're a fast-growing domestic boutique which thinks it walks on water because you've had three good years and everyone showers you with money because they're tired of the old incumbents.
That's probably the most dangerous position a fund manager can be in because your operations platform is probably behind the curve, your client service is behind the curve, and you overpromise. We survived that phase in the '90s. Yes, Neil, we also had 25% market shares of the mutual fund market once. It was a long time ago, but we had it. We're going to try and get it back. That bit is your very dangerous bit. We survived it. We put in structures and systems. One of the things we've always said, which is deeply embedded in our DNA, we plan as if we are going to be one of the most sophisticated, most robust firms, and therefore also quite substantial in size in the world. Therefore we think like that.
That helps you to risk manage because you actually have people who stop you from doing things. That bit we navigated. The internationalization, which was a major challenge, and actually, probably if I had to do it now, I probably wouldn't. I'd say we were stupid to do it because just the complexity of going cross-border, the complexity of having multi-jurisdictional exposure to clients and to business and regulators, and worst of all, our group purchased holding companies which had an underlying business, which we had to reshape a platform of which we have one client left of that platform. It wasn't worth paying for anyway. The pain and aggravation of a decade to reshape a business and culturally integrate everyone and what we did in that phase is we didn't expand the product range.
We tried to make the core offerings better and evolve the platform around skills rather than around asset class, and build the culture and reinforce the culture. That took roughly a decade to reinforce the culture, put it in a position to grow properly. We came to the end of the 2000s, there was a great opportunity in the crisis if you weren't contaminated by any money fund that froze up or anything where you were put on watch by your clients, that gave us a way in, we captured that. How did we capture that?
We captured on the basis of good performance, very clear propositions, but also the fact that we were organized around skill sets and were evolving the strategies which we were offering, as opposed to just go and sell the same old thing than everyone else because the clients evolve their demand. It's off the same skill set. It's not doing new things, it's not hiring new people you don't know and then plugging your brand on it and selling it. That's not what we do. We develop the understanding and the insight in the business. We keep it in the business. The IP is here, the people who use those processes have our culture, understand us, and understand our client base.
Now looking ahead, we can try and scale those skill sets, not just on the same old strategies we've had, although some of them still should scale. We also can look at evolving. For example, in our multi-asset business, we really, in our fixed income business, we're moving to responsible income production given the risk appetite of clients. In the emerging market world, we've got phenomenal opportunity in the equity side, in the specialist equities areas, where whether it's our quality platform, whether it is a very specific China-related offering. That's going to be a huge market. We've got a fantastic track record we've built over time, but it's off a skill set that we've had since the early 2000s, which is our four-factor platform.
It's really important to understand that it's evolving your strategies off skills with client demand, but always keeping the IP in the house and not going outside the tramlines. What we're not planning right now is when you give some kind of value to our equities, to go shopping for all sorts of new skills that we don't understand just to chase growth. That is absolutely not our strategy. I think to summarize this whole thing, we've, over time, developed or built a reasonably attractive financial profile with consistent assets under management growth, high-quality revenue base, where we think also appropriately priced and therefore not under too much pressure. We had cost discipline, we do have, but we're not a bunch of cost cutters trying to optimize the cash flow over a two or a three-year basis. This is a living thing.
This cash stream that you discount to get to the value of the business is a living organism. It needs to be looked after. It needs to be watered and fed. It needs to be invested in. We invest through the cost line, therefore, you'll see our cost growth not far behind, and sometimes it's more than the revenue growth because we know, we anticipate needs, operational needs and people needs, and systems needs for the business we want to conduct in future. We've tried to be a fairly consistent profit grower rather than extremely volatile business because of the construct that I explained to you. Again, in rough markets, in times of bad performance, you can't guarantee these things. These businesses are what they are, but they are very good businesses over the cycle.
Here's the contribution we made to Investec Group over the last decade, GBP 1.1 billion of dividend while delivering a 90+% return on equity. We think we've done our bit there. We want to continue to pay out dividends to our shareholders, we can't give you a dividend policy today. Obviously, it's a new Board that will have to look at that. The characteristic of the business is that it does return, should return cash to shareholders. I think come back to where I started. This is a differentiated manager with some attributes of industry leaders that is aiming to be a successful global asset manager whilst not denying, but capitalizing off its emerging market roots. Let me go to the investment platform. We don't have investment people all over the world. We used to keep them only in Cape Town and London.
We would have preferred to keep them only in Cape Town. I remember in the '90s, people said, you're mad. It's not possible. Only John Templeton can sit on an island and run money. Actually, what was really exciting was the talent pool in London to access that when we started employing people. We've really managed that investment team in a team way and molded and wanted the people to operate like a team. What's happened of late is the capital market of the world is distributing. As economic power distributes, as the world becomes multipolar, you just simply miss out. If you're a really good credit manager, you don't have U.S. skills or don't understand the U.S. market, you're behind. You'll miss out on issuance in Asia, particularly in China, because they can now issue and recycle, and find capital locally.
If you're not there, therefore, we've now got investment people in Singapore, Hong Kong and New York as well, besides spread over southern Africa, but essentially two large platforms. We make very sure that when we hire people, we don't hire them just there. We put them into London and Cape Town first. We make sure they understand our people, our culture very well, and then they'll go out, and there'll probably be someone with them who's been a core team member for a long time. In the end, if you want really good Chinese talent, you're not going to find that in Cape Town. Most likely find it in China. We will be building a distributed investment platform, but in a very different way. Also linking our teams together in a sort of single systems platform.
We have six clearly defined skill sets. That's our largest one, which we started building in early 2000- 2001, is the four-factor platform. That's now I see, where's [Chris Roy]? I see you here. He's the leader of the South African version of the four-factor business, and Chris is a big contributor. Quality. Quality is another equity platform and value. Three global equity platforms or skill sets. Fixed income, largely in one team, mostly focused on emerging markets, but now going into the solutions business as well, particularly multi-asset credit business as well. Multi-asset business, you understand that, and then alternatives. Those are how our people are distributed. They operate in team context, but they also share. You'll see on the map where we have investment people. We are well-balanced as a business, as I said, by asset class and by investment strategy.
If you dig a little bit deeper and, yes, we haven't put specific figures in there because we will decide our way. The one and very important thing, we like to report consistently. We're not going to slice and dice our business in all sorts of ways. We're going to try and show it consistently from the second Capital Markets Day onwards, and we're in the process of figuring out exactly how we should do it so we can avoid any uncertainty and too much change. If you look at the equities platform, or the fixed income, you'll see there are different parts in there and different strategies or different skill sets inside each of these four asset classes.
Let me come to our approach, because it is difficult to understand if you come from a single product, single philosophy boutique, which is clearly, if you one day in heaven, I would like to run a business with very few staff, or no staff, no shareholders and no clients. That's really the heaven. Simplicity is always the best. In our business, we've chosen a diversified income stream, and we've chosen to work around the world and reach out to the same kind of client wherever they may live. We do offer a diversified set of investment skills. We firmly believe in the power of specialization, but we have more than one specialization in the firm. There are clearly limits to how many specialties we can have. We have well-articulated investment philosophies, not philosophy, philosophies.
In each capability or each skill set, we have its own philosophy. Well-defined investment processes and clear team leadership. I think the latter point is really important. No matter how, I see people in here who have very successful teams, and I know it's not just the philosophy, it's the leadership of that team. We really believe in that. We've invested in that. We develop organically over time, resulting into experienced, hopefully experienced and stable teams. That's a key part of our proposition and a key part of what we try to achieve. Then, of course, we believe in diversity, which within a culture of collaboration. People with different views and different philosophies often teach and enrich the other people's experience about markets. Hopefully, through that, we generate value for our clients. That's our investment approach.
Not a single philosophy, but a strict adherence to philosophy and to certain principles. Our model, specialist high alpha outcomes. I've explained that to you. I can back in what we offer, what our strategies are. I'm not going to go into that now. We'll have time. Coming back to our performance against benchmark over the long term. We've also just shown you our mutual fund range as a proxy on the right-hand side to see how we do against peers. You'll notice that by far the majority of what we do are first and second quartile, and particularly over the long term, it's over 90%. Of course, there's some survivor bias in these, but not a huge amount because we've been doing our things for a long time.
All we want to show is these skill sets have an ability and have the knack to churn out the kind of alpha clients have been willing to pay for in the past. A key takeaways on the investment team is we built differentiated skills patiently and organically over time. Across skill sets, we evolve our strategies in a disciplined manner, and that means the IP of each skill set, of each investment team is here within the firm, not hired in. We'll very rarely, we have done occasionally, but very rarely, dilute a team with too many new hires at a time, because that puts you at risk in terms of not only clients, but also performance.
We are favorably positioned towards the big structural transformations, I haven't spoken about all three of them in equal time, but I just want to remind you, the rebalancing of global portfolios, i.e., spreading across the globe, finding new opportunities in new capital markets, which means an evolution of the way you run global money. That's a big trend, and there's a vast amount of money gonna follow that trend. The rise of Asia, which is really the other side of that coin, particularly China. We're building domestic investment skills there. Simply saying, if we were sitting not in Cape Town today, but in Glasgow in 1870, we decided to send one of our partners to the U.S., undoubtedly the firm today would be dominated by the U.S. leg, not by the Scottish leg.
I think we've got one more chance like that in the world we live, which is the continuation of China towards the world's leading economy. We are definitely focused on that opportunity. Which right now, in the near term, when you do your models, is a pretty small opportunity. When you go beyond the horizon of your model, it's probably the opportunity. Finally, none of us can avoid, and should avoid, and should not position ourselves for the sustainability revolution, which is happening right around us. That means the way we run money is not just ESG on top of it. It's the way we run money. It's the way we measure impact.
It's the way we look at our investments and the way we engage with asset owners about that, because this is going to be the other big wave of the three big waves of our lifetime is technology, China. If you as young as most of you are, in other words, forget about the fall of communism, it's technology, it's China, it's a sustainability change. We are trying to position the firm for it. There isn't much near-term sort of stuff to put in your models. I can tell you we're working on that. If we look at our client group, here we have the size of the different markets. You can read it. That each of these pools are very large, which we can activate. You'll see the size of the boots on the ground or the people we have.
Just to give you a sense, in North America, we have 32 people on the ground. Sorry, 28 people. In the U.K., 32 people because we've got a deeper of a mutual fund business, a bigger mutual fund business. Europe, 20 people spread across. We have 21 client group offices. We have 23 offices globally, but 21 client group offices. In the Asia Pac region, 28 people. Here, Thabo needs a lot of people to compete with all of you. We have 55 people on the ground. Our institutional channel, again, look at it. Just look at the colors. GBP 74 billion running in four institutions. Pretty balanced by region. Although with Africa, very big still because we've got a very successful business here. By client type, you can see pension funds are the largest, followed by public bodies, largely sovereign wealth funds.
Of course, asset class, I've already shown you. It sort of resembles the asset class mix of the whole business. If you look at the advisor business, the advisor channel is one change. In our asset class map, in our GBP 35 billion advisor assets, we have added the IMS or the fund platform that we have here. We've added the fees we charge on funds run not by ourselves. The funds run by ourselves, that book is inside our mutual fund business. Just for you to understand, because although the fees are a different kind of fee, they're not a high alpha fee. We do have this business here because the mode, the way mutual funds are distributed in South Africa is quite unique by global standards.
If we look at by client type, you'll see we're in the upper end wealth manager and large financial group platform. Those are the two key hunting grounds besides individual financial advisors. If I look at our source of flows in the channel, it hasn't actually changed as much as one would have thought over the last five years. These things take longer to change. We're trying to build a balance between advisor and institutional. Why? Because the institutional pots are not getting the net flows they used to get. The oil price has to be high for the sovereigns to grow, and the pension systems have to be open not closed. In the West, they're closing the pension systems, and they're passing the responsibility to the DC world, to the individual, and that you capture through the mutual fund business.
Then, of course, if you look at our gross flows by region, we show gross rather than net because it gives you a sense of the market relevance you have at any point in time. It does change, but it doesn't change as much. I think we would expect our Americas business to grow and our Europe business to grow relative to the others, but you can see it's fairly well-balanced. Then, of course, if you look at our client group by snapshot slightly differently. If you want to understand not only what potential, what percentage of the total it is, but also the channel split. You'll see that some of our client groups are very institutional. Others, where we've had longer presence, we start seeing the advisor participation.
If you look at the purple and the blue blocks, the advisor participation grows, particularly in the U.K., I think there, where the pension business is largely de-risk, the advisor market will probably take over and drive our business. We keep the balance because we think it's a good balance. Each of our client groups, there are points which we're not going to discuss now. I just want to tell you that confirm that the firm is Brexit ready. Why? Simply because we've created the legal structures within Europe and within the U.K. a long time ago because we saw them as very different markets. That therefore, it wasn't an earth-shattering revolution to prepare for any additional requirements by European authorities after Brexit, whenever it may happen, if it will ever happen.
I think the other part is we need to work away, and we're working very hard to build market access to the growing Chinese pool of savings. That's early stage. There are a lot of complex legal structures people go in. Some of them are meaningless. We're definitely not going to do joint ventures in the traditional sense of buying a minority stake in a firm you can't control. There are other partnerships we can pursue, and one of the things we've been very successful at over time is pursuing partnerships with strong distribution organizations on the ground. For example, in Latin America, we work with a partner firm. They do most of the distribution. We provide the product.
In many other countries, and we've got a very successful, even partnerships in this country, where we learn to work with people who own clients, because ultimately we are the manufacturer. We are not the owner of the end client, and we are not going to try to be that for a very long time. We know there's great value in that, but it's a different business from the one we are building and pursuing. What we do have is we have made the investment in fund ranges and fund structures so that we can reach clients who want wrapped investment expertise around the world. 80% of our fund structures are three big ones, our Luxembourg structure, SICAV, which is the biggest, our U.K., and our South African fund families.
We have other structures appropriate to certain markets to reach either institutional or mutual funds, mutual fund buyer or institutional or advisor buyers who want to buy wrapped investment expertise. That is quite an expensive investment and needs a lot of work to maintain. That is done. Key takeaways, we focus on the large pools of capital. We have established our global distribution in two very clear channels, and we are going to stick to those channels. We have experienced and capable local teams who are close to their clients, and we have well-developed infrastructure to reach and service clients, particularly in product wrapping. Finally, we think we have a proven ability to anticipate appropriate investment demand and serve it over time.
Now, I would like to hand over to Kim McFarland, who has been a very good colleague, or is a very good colleague of mine for 25 years, and she has maintained discipline in this business because without her, I think maybe I would have just driven the business for growth. Kim, come and tell us about how you disciplined.
Thank you very much, Hendrik. I always think a hard act to follow after that. I am going to very much start with our operating model strategy and the benefits that we get from that. Back in 2002, we made a strategic decision to outsource our operations, our back office and part of our middle office, fund accounting and TA. We looked to outsource those operations to key service providers. One of those key service providers is notably State Street Bank and Trust. We decided back then that this was an investment business, and we wanted to focus all our resources and our time on the investment side, and our client side as well. We have taken steps over the period to really build out our global operating model, which I always call, I say to everybody, it is the backbone of our business.
Through that, we have been able to create a single integrated platform. I think an important point is we are able to utilize our cost base here in South Africa and where much of our IT and op staff are actually based. In fact, roughly half the IT and operational staff that we have here in Cape Town undertake global functions. This infrastructure that we have built has allowed us to scale and grow across our various markets and our products as well. This is really kind of a simplistic snapshot of that single global operating platform I mentioned. We have our investment management, we have our data management, and we have client management. Through that, we have really utilized best-in-class external systems where we have actually needed to support this.
All of this is underpinned, as I mentioned just now, by that long-term, stable outsource partner that we have, State Street Bank and Trust. Underneath all of this is supported by what I've established an internally global integrated operations team. There is no duplication, as you see under those teams there. There's single ownership there. Importantly, there's also single responsibility as well for each of those areas. I think through that level of ownership and responsibility, I've ensured that in fact, that our decision to outsource has had a very real positive financial impact. As I'm going to come on to just now in the financial section, our outsourcing costs comprise about a third of our non-staff costs.
The ability to benefit from outsourced cost efficiencies with growth will have an impact on our overall cost margins. As you can see from here, we do have outsourced operating leverage. We've had 70% AUM growth over the past five years and only a 30% increase on our outsourcing cost base. Crucially, this platform is able to support significantly larger AUM and client numbers. We have the foundations in place to support greater flows and business development and growth. Investing in technology is also important for us. It's our second largest non-staff cost, around 16%. This, we believe, helps to enhance the effectiveness and efficiency of our staff. Recent successful initiatives delivered include centralizing our data architecture, some automation of client reporting and certain of our marketing functions, increasing mobility solutions for our teams, and even introducing robotics into our business.
We continue to make technology investments where appropriate. For example, we are halfway through implementing an upgraded investment risk platform, as well as having ongoing projects to improve access to data and enhance our information security. I guess really from a technology perspective, one of our key priorities right now is to ensure that we have true East-West capabilities, and this is something that Hendrik spoke about earlier. For a long time, we've developed our operating platform and our business on a sort of a north-south axis, and we've realized that we have to expand now east and west and have systems that operate continuously. So we can literally pass the book across from our fund managers from the east, where the sun really rises, right across to that central axis, and to the sunset in the west at the end of the day.
Our relationship with Investec Group. I think an important part here is that a key point to note is that Investec Asset Management, for all the years that I've operated, has been very much a standalone entity with minimal reliance on the rest of the group. All these services, as I've listed here, are fully costed. In other words, we really receive appropriate charges into our P&L. So we're not really expecting a material increase in these costs post the demerger. Obviously, the demerger will require some adjustments to be made during that transitionary period, and some of this we'll get onto later in our second CMD. Also, a big point that we will have to discuss later on is the whole point about branding.
We will be needing to launch a new brand, this is something that we will discuss in detail later on in the new year. My key takeaways from an operational point of view, we've created a single global operating model, and I have global leadership in place. I've established over the years, again, back to 2002, well embedded outsourcing partnerships with a number of industry leaders. I've just mentioned one here today. We've established an operational backbone, and this has very much been built for growth. I have experienced and knowledgeable operational teams and with good, strong leadership, and I do believe we have a disciplined approach to growth underneath that. Let me just touch on the financials now. Just a reminder, today's CMD is very much an information session. This is very much about our business.
All the financial numbers I'm going to show now are reported numbers, which you would have seen already. They're all historical actuals, and I'm giving no forward guidance or any targets today. There'll be a separate CMD, as I said, in the new year, where we'll be discussing our target KPIs. This is a repeat slide that Hendrik showed earlier, I think it's just worth just showing it again because it does indicate the long track record of organic growth that we actually have here. It shows that our management fees represent over 90% of our total net revenues. We continue to focus on operating cost discipline across the business. As I mentioned earlier, we now have the architecture in place to support our future growth. Profits have grown consistently over time with a strong cash conversion.
This slide breaks down our AUM growth over the past four and a half years. I think the key message really to take away here is the consistency and strength of the organic growth. You can see at the top there our TOC ratios for that period. The last 4% is just for the half year. I guess one could annualize and say 8%, I think it's better to just show what the TOC ratio has been for that six-month period. Our 10-year average is strong, and we were showing a 10-year average TOC ratio of 7%. I think what's another key takeaway here is that in the last 10 years, only FY 2017, which I'm showing there, has been our single negative outflow year over that period.
As mentioned and depicted here, over the past five years, Investec Asset Management's distribution team has generated net flows every year, as said, except for in 2017. We generated GBP 5 billion of net flows last year, and we've had a strong start to this year with over GBP 4 billion, which Hendrik mentioned earlier. Our net flows are broadly spread with no dependence on any one particular asset class. What's interesting to note there in the half year to 2019, all of our asset class have actually generated positive net flows. We've seen particularly strong net flow in the advisor channels over the past year and into the half year for HY 2019 as well. Here are the reported financials, as mentioned before, this slide reflects how we have historically reported on our numbers, they're all numbers that you would have seen before.
Our client revenues are mainly driven by our high-quality management fees. The increase in management fees are reflected in the growth in our AUM. Diversification and product evolution helps to defend our fee levels, which are broadly stable at 50 basis points, is reflected there. What I am stripping out here for the first time, however, is our performance fees and our Silica recurring revenues, which I show separately there. These revenues historically comprise a small component of our net revenues. Performance fee mandates are predominantly based here in South Africa and only comprise around 11% of our AUM. Just pause for a minute, in case you're wondering, I mentioned Silica there. Silica is our TA agency business in South Africa. It's 100% owned subsidiary, which we established back in 1999, when there was really no other outsourcing platforms available. It's very much an industry utility.
It's got more than GBP 100 billion of assets under administration, and it's predominantly third-party business there as well. It doesn't generate any material profits, although it did generate a small profit this year. It is very much an unleveraged business as well. Also worth noting there is our cost to income ratios are at 67%, and this was also for the last year, and that was the same in the prior year there as well. We reflected a positive income cost draws ratio in FY 2017-2018. This figure has turned slightly negative in the half year as a result of some directed non-staff costs, which I'm going to touch on just now. Okay. Right. A bit of an analysis on our costs now. We've experienced a number of cost pressures, but I do believe we've remained focused on cost discipline.
Our platforms are in place, but at the same time, we do continue to invest and support our long-term growth ambitions, which Hendrik reflected on earlier. You can see that roughly two-thirds of our cost base is staff-related. As I said earlier, this is very much a people business, and we invest in it, and we will continue to do so. In 2017 and 2018, our focus was largely on building out some of our client group teams. For example, there was a growth within, which again, Hendrik touched on earlier in North America. For the operational teams, it was largely around upgrading and adding additional support capacity there.
In 2018-2019, in the last six months, there's been pretty much an even split of people growth across our investment, client group, and ops, and all of these have been managed and in line with our budgets as well. In 2019, there was a notable step-up actually in non-staff costs, which you can see by the percentage I've reflected in the bottom chart there. This has been driven by MiFID II, which has had a big impact within the industry. At the same time, we've got elevated accommodation costs as we start the process to move into new premises in London and have recently done that in Hong Kong as well.
Other directed spend has been an increase in regulatory costs and levies, consulting fees as we go into this demerger process. Then really third-party travel, marketing costs, that's pretty much all in line with increases in our activity levels. On the right there, you can see our remaining non-staff costs and how they're broken down. As I mentioned earlier, the key parts of that are fund administration systems and then moving in to the other parts as well. I will add, as I mentioned earlier, that we do benefit, at the same time, from a South African cost advantage of operating out of here.
This is a slide Hendrik also mentioned earlier, and you've seen it before. I think it's an important one because I think it really emphasizes how cash generative our business is and which will support our dividend paying capacity and ability into the future. Really my key takeaways from here, I think we've seen consistently strong net flows supported by client and geographical diversity, substantial management fee growth, limited dependence on performance fees and any other income, which were quite small there. I believe we have a focused cost discipline, yet at the same time, we will continue to invest and support our long-term ambitions. As Hendrik said earlier, we are not a cost cutter. We have no financial leverage. This is a highly cash generative business supporting our dividend paying capacity. Thank you.
Any questions from the audience in Cape Town or observations?
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Yeah, just maybe a question on the profitability. Your operating margin has been quite consistent over the years, around 33%. You've got quite a high fee margin, but it looks like you have to keep investing to grow the business. Is that sort of where you see it settling in the long run, or how do you look at that?
Again, qualifying this, that we are not making forward-looking statements. I think you'll notice that the half year operating margin was lower, but typically it's seasonally lower in the first half year than the second. I'm still quite comfortable with low 30%s. Low 30%s and in a bull market year, maybe a bit higher is what we work towards. There obviously are some substantial asset managers operating under the 30% level. Actually, having done so for some time, there are people who have real leverage in their business, particularly those with successful passive books, where they don't add cost or quant books or can go much higher, large internationalized managers. Most of our peer group, the people we look at, seem to be operating around there.
What's interesting about the margin, there doesn't seem to be much margin expansion as you grow in scale because of the reinvestment rate required. I would be very comfortable, I think the management team would be very comfortable if we could sustain an operating margin in the region where we have been, given the fact that we're in an industry cost where, without market help, revenue expansion or fee margin expansion isn't really an option. We work very hard to retain the fee margin as opposed to the operating margin. That gives you color. Therefore, the output we want to show is growing profitability and growing cash distributed to shareholders.
Hi there, Hendrik. Just picking up on that, maybe two-thirds of your costs are staff costs. Could you just expand on your philosophy about remuneration? To what extent is it formula-based or profit pools for bonuses and so on?
Where do I see these slides go? I'll go back. I'll show you a picture. I'm just going back to the people slide. I think what's really important, this business is driven by people who should not only as shareholders but as working staff, should feel that they have a stake in the outcome. I'm going to slide six here. Variable in their participation. We are really quite committed to that our people need to feel what our firm and our clients are experiencing. Ultimately, our profitability, our revenue is what our clients are willing to back us with, which means we would have had to do a good job.
In our more than half of our people, of our compensation cost is variable and fully variable, which protects you in times like 2008, but does cost you a bit of money when you grow the business. We roughly want to keep that model. I think I mentioned to someone over tea, one thing that does creep here, and I think we should just accept it, and at least we as management would just accept it. If you run a business of longevity and loyalty, which really cements your client relationships more than anything else, you do run your fixed slightly higher than a shop that turns over its people faster. Because those people between 5 and 15 years with a firm don't go backwards in terms of inflation.
Actually, we think it's a cost worth taking as long as we can retain the kind of margin and the kind of profit growth we've had in the past. The long answer to tell you, variable staff cost, they feel it both on the ups and down, and you've got to be straight and honest with them. You can't just chisel away in the up and let them take the down, because then you won't keep good staff. Harry. Sorry.
Yeah. Thanks very much for the presentation. Two questions, please. Can you give us a sense of why we're seeing such a strong improvement in the advisor net flows over the last 18 months? I think, could you also give us a bit of insight into the impact of MiFID II on your costs? Has it been fully implemented across the business in terms of costs, or is it only in the U.K. operation and Europe operation? Thank you.
I think two things. There's a man called Richard Garland I'll introduce you to, and you'll understand. He's been tasked over the last few years to drive the advisor business. He's not here today. I think his energy and application, and the support from John Green and the leadership to really make that effort because it's a slightly different business. Outside South Africa, we wanted to change the mix between institutional and advisor. I think we've got the traction with the right, and it's really about the right financial platforms. The large banking groups, et cetera, who can provide you with volume, who are very sophisticated in the way they buy and are very selective who they allow on. I think that's really driven. Also, South Africa has been a good advisor market and so has the U.K.
Essentially, it's a business mix logic that we've been pushing, and we've been talking about it for about five years, and you've only seen the results more recently. Sorry, that's the first question. The second one, Harry?
MiFID.
MiFID. MiFID costs. The costs are in. They're there and they're real.
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Yes. We just have to run a single operating model. I think there's some MiFID-related costs which are also important. Just the systems environment, the reporting requirements, et cetera, which may not be directly MiFID. You saw it yesterday when you look at the group results in the wealth management. They had the tougher job even yesterday because they lost some because commission rates have fallen so much. They lost some revenue as well. We only had a cost to implement that. It's in. I don't think, Kim, there's anything more to come on MiFID.
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in the U.K. and in South Africa. Across the board. There was obviously a substantial financial hit. Hendrik's quite right. I think what people underestimate is not just the actual cost, the brokerage cost from a MiFID perspective on the CSAs, but also the number of systems we had to implement across the board to be able to support MiFID as well. I think it was over 10 new systems that we had to put into our infrastructure to be able to do that. Obviously there's additional cost drag on that, but it's globally.
Yeah. It's probably one place where the EU, like in GDPR, are starting to affect the world. Leonard.
Thank you. You put up a slide where you spoke about the long-term trends in terms of assets and revenue pool, et cetera. The one that on those projections seem to be growing quite well into the future is the alternatives space.
Yeah.
It's one of the platforms that Investec has developed but hasn't really attracted much assets. Can you maybe just chat a bit about that and where you are versus investing in that capability or still investment to come or where are we with that?
I think what we do, Leonard, when we try to learn. I'm going to that slide now. What we do when we try to learn about something or add a dimension to our business, we tend to play small. We tend to get into the area, understand the area, for example, illiquid credit and private equity. We're not talking alternatives as in rapidly trading hedge funds or highly leveraged, long, short product where you squeeze and where you magnify an alpha. We're not talking about that. We're talking about challenging, less liquid, different things. Also to build an alternative, I wouldn't call it a beta, but an alternative exposure in our business, which is different from the normal liquid market securities we do in the long business. We've built private equity, private credit, largely on the African continent.
We took our resources and commodities area in there and said, look, we should do things differently here. You can't just play the beta every 10 years for five years and then have a problem. We've got some significant sustainability and impact ideas in there. Right now, I wouldn't project the alternative stream forward except for very successful infrastructure credit business, which I think has legs. I wouldn't see it now as a differentiator in earnings stream in the next two years or three years. Once we pick the spot in there, which we want to leverage and scale, we will communicate that to you, and we will go for it. At the moment, we're learning, and we've learned around what it takes to build a private equity business. We've been there for 10 years. It's hard.
We've learned what it takes to build illiquid credit business next to your bond or your corporate credit business. We've learned about how to rethink the commodities and resources offering. That's really where we are. I don't want to get hopes up, we know that the active world is migrating to more challenging expressions of investment opinions, we need to learn and understand, we've got some excellent people working in that area. At this point in time, not yet making a meaningful difference to the profit stream to the extent that they should or could over the next few years. It's not dissimilar what I explained to you about China. We always have an R&D part of our business.
Our challenge that you would have and the challenge we have ourselves is what is our conversion rate of the R&D efforts into meaningful profit contribution?
Hi, can you just touch on the ownership structure and how you see that evolving post the demerger?
Yes. Right now, as we speak, staff own, and it's really senior leadership with very strict criteria, who have access to equity purchase, who can purchase equity, own about 18% collectively through a single vehicle in which they participate. That's been built up from the original 15% in 2013 by exercising an option of 1% a year. There is some more to come in that structure, which will ultimately take it up to 20%. We also will have to provide for or establish a fair scheme for staff which are not in, but is going to participate through a restricted vehicle. We will share that detail with you before the second Capital Markets Day. Essentially, the big change is, obviously that was restricted up to a certain level.
The big change is now if and when the company floats, you are not restricted to the amount of staff participation or the percentage of staff participation. Given that it's a cash flow business, given that people earn money, I think the opportunity to put the money in the company may be an attractive opportunity for the long run. We want to position the firm as such, as a significantly employee-owned firm that is public and operates with a long-term mindset. That's really where we're driving. Right now, 18%, with an option to add an additional 2%, and a discussion around a broader participation pool for staff who up to now were excluded simply because of the criteria for that previous scheme.
Hey, Hendrik. Just wanted to ask you around on slide 37, you've got your advisor distribution channel.
It looks like of the GBP 35 billion, about a third comes or is wealth managers and private banks. Could we assume that that all relates to Investec? The question is, what will this relationship in terms of distribution look like post the unbundling? Okay.
Start off by saying Fani and I have a very good relationship, and it'll improve because Fani will become a bigger client, I hope. At the moment, Investec is actually relatively small. We use the number under 2%. It's probably about 1.5% of our book come from various Investec sources. Because Investec is an organization which doesn't operate, at least the wealth management guys don't like, and correctly so, don't like conflict of interest. You have to be better than the best to actually reach an Investec client. Hopefully, now we just have to be as good as the rest to achieve, to be exposed to Investec clients from an asset management point of view. My expectation on that is that this is a valuable relationship. We would like to grow over time, but this is not a business.
This is not a typical European demerger when there's a hell of a long I mean, when all the advisors came to talk to us, they were selling us the expertise of negotiating over the book you have from your parent. We said, come on, guys. This is not what we do. We're a third-party business. We deal in a competitive market. Investec has never allocated money to internal divisions because they actually look after the welfare of their clients in the end. For us, this is not a big issue. It may even be marginally positive rather than negative. Would that be correct, Fani?
Yeah.
Good.
Also correct about the larger client bit. Thank you.
Hendrik, just on your operating model you've got the kind of specialist strategies. The first question there would be, are you looking to add more strategies to the four-factor value and quality?
No.
The second question would be, the other leg would be outcomes.
Yes
This seems kind of at odds with each other because the one mindset is beat the benchmark.
Yeah.
The other mindset is aim for a target. How does one have harmony between those two strategies?
Can you ask your partners, Steve and Chris and others, to come and teach us? It is the question. It's a very difficult question. Point is the solutions business, the multi-asset business has to evolve, and it's slightly different. Traditional multi-asset business has been pure benchmark driven, in a sort of 60/40 world. That world is evolving and the mindsets that people have. We are actively trying to develop not an absolute return because we don't really believe you can ever promise absolute return in this business. I know a lot of people in the room might believe they can offer absolute return, but we think total return or a benchmark, a less cognizant but more objective-driven investment process, particularly in the DC world, is relevant because clients give you money for 30 years.
They have no trustees to police you, they need to ultimately hope for an outcome. I think in our multi-asset business, we it'll probably be moving towards the advisor space rather than the institutional space, or pointed towards the advisor rather than institutional, where the solutions type of businesses become relevant or solutions type products. We're not trying to offer LDI or any of those implemented solutions. That's a different gig, we think it takes a different culture. It also is a very healthy reminder to the alpha people that they live in the real world. The alpha people sometimes are so obsessed by their alpha that they miss the fact that this is a really dangerous asset class where they are now extracting 1% for their client.
When their client asks their opinion, they don't have an adult conversation and saying like, I'm really dangerous. Yes, you pay me a lot of fees, it's a really dangerous asset class right now, I don't feel that comfortable. I think if you have what we try to build, long-term relationships with a number of clients that, as I always say, all the serious relationships, I can have all the numbers of the key people in my phone, and so can John Green or Mimi or anyone else. We don't work with thousands and hundreds of thousands of retail clients, which means we are going to work intergenerationally with those accounts and those relationships, which means we need to be also navigate, migrate our exposure to them.
If we do the wrong exposure, don't just keep it because you're going to make fees for the next two years. Actually have an adult conversation. I think the solutions thinking and a mature multi-asset business are really, really important to give context to your high alpha, which is the majority of where our revenues will come from for many, many years to come. I think the final point that we should stress here is that we have spoken as, I think Harry reminded us, we spoke about our advisor for the last five years in our results presentations and actually showed the real results only recently. We have spoken for a long time about growing our multi-asset business. We haven't grown it enough. We haven't captured. We've done okay.
We have to do better because that enriches the rest of your business, and I think that's an area where we have to keep focusing on, even if over the next six months, I wouldn't see very different results from what we have now, because a big part of client need is migrating into that business. I see [Peter Brook] here sitting smiling. Yeah, you're in the right business. I think we can really build that part of the business, and it'll enrich our alpha. Bottom line is we try to do things where there's mutual enrichment or mutual reinforcement, we acknowledge the difficulty of sometimes doing more than one thing. Yes. Any other questions from Shall we give London or shall we say the internet a chance? [Varney], will you read the questions that have been emailed? Have they come from London or where?
It's not entirely clear, but I'll read out the names. Some of these have been covered, so I'm only going to cover the gaps now.
Yes.
First question, has there been any historical collaboration between the bank and the asset manager in either geographies, will the spinoff limit or enhance this optionality?
I think what we've seen, very little deliberate business collaboration. The reason is when we started out in the early '90s, there was this huge fear in the market that there would be a conflict of interest. I still remember suggesting and convincing Bernard Kantor and Stephen Koseff that the Karoo is a great Chinese wall, which is the 1,600-km gap, or not, big part of the gap between Cape Town and Johannesburg. The real reason is we all wanted to be in Cape Town. I think we've always operated as if we had the toughest and the most extreme Chinese walls, and therefore not approach clients in groups as some financial groups do. However, of course, a good relationship between individuals and people is very helpful.
We think we can maintain those relationships, those personal relationships, where people who know something or can point you in a direction of opportunity will still do that. Because we never had a system where we paid people across boundaries to incentivize collaboration, et cetera. That's not how Investec works. My sense is that from an organizational point of view, not much, because we try to keep the independence of the business. We genuinely believe that that added more value ultimately for clients and shareholders. On a personal level, I see no reason why there won't be good collaboration between people who were at least family members and are probably now just becoming cousins. I don't think there would be an issue.
By the way, that's why we want a shareholding from Investec or the remaining group with Investec in the newly listed asset management business because that will signal good relationship. That's the first question.
Next question. Your operating margin has remained relatively stable at 33%.
That one we answered.
Why hasn't this grown given improving AUM and scale? Where do you see this heading to?
One of the most elusive objectives in our industry is true scale. We saw it relatively recently when the market beta was quite good and BlackRock lifted its operating margin essentially on the back of iShares, substantially. On iShares, you have no extra people or very few extra people. You don't have expensive portfolio managers. You basically have systems, and you lift it. That's a true scale business. Most of the GBP 100 billion to, or call it the GBP 50 billion to GBP 700 billion, GBP 800 billion managers I know run at roughly the same operating margin, unless they're single country or single asset class boutiques. Something like an Ashmore, which is public, you can see the high margin.
If we were to put one of our teams out there without the broad support, yes, they can have that margin, but their growth prospects would be limited. Somewhere in there lies the answer. You have seen higher operating margins where firms have merged, but the cost to the shareholder of the merger has been very significant. Go and put the two things together, you get a high operating margin, but the share price is through the floor, or you had so many shares in issue that in the end it catches up at the earnings per share or dividend per share level. We are very tight on that. We want shares to be expensive. We want a few shares, and we don't want more. Therefore, that is the focus rather than operating margin per se.
We would obviously do what we can to drive it. I really haven't seen anything between from GBP 100 billion to about GBP 500 billion, where it just expands on size. Where we can, the smaller firms at the bottom end, and it's sort of perverse. My sense is at the bottom end of the GBP 100 billion to GBP 500 billion range, you have a better chance to expanding if you get single product or funds that scale substantially. Okay? You have one or two funds scale, and you'll notice that even our top clients are very distributed. If we get in a relationship or a particular product that scales significantly, that falls through. What you then must watch out for is, of course, vulnerability to the success of that.
We've seen that in some of our public competitors as well, where a big fund goes wrong, and then they get pressure. We could probably push if we have one or two or three of our offerings scale significantly. That operating margin will peak again as we reinvest to put alternatives or additional product down next to it of the same scale. I cannot see us striving for a 40% margin in this world. Enough. Right. Just go to the end. I must get through this. I just want to summarize. Now that we've given you this, invite all of you, those of you who are going to think about this and write.
Please. Any questions you have on the model, on the operating logic of the business, let's clear all of those things out, so when we come to CMD 2, we can talk numbers, and you can build your models, and you can understand what we try to do and give us feedback. I think use this time. We deliberately not try to complicate the presentation because we want you to understand exactly why we think this is an asset manager with a different proposition, a clear growth path, a clear operating model, but not denying that there are challenges in the industry. We just think that the opportunities are bigger than the challenges. Really for us, it's about increasing client relevance. That's what we strive to do, which ultimately will translate into shareholder value. I've taken you through the steps how to achieve that.
Not going to do that now. I'm going to summarize by saying we are differentiated. We have four reasons why we think we're different from our other competitors in the world. Finally, we have enough attributes of industry leaders. What is important, we are not trying to emulate the guide. The FTfm had this article on Monday where they said, only the big guys win. If you go read that article, it's not true. The trillion-dollar guys win, of course. That's why they're trillion-dollar managers. But actually, if you look at the split between, say, in the GBP 100 billion or the GBP 50 billion-GBP 200 billion size, more than 60% of managers had net flows. It's only 40% that didn't. They get driven out of business because they're bad.
If we do our job properly, we believe we can generate enough net flow that we can service that chosen market. The differentiator we have, most managers of our size, we have reached, and we know how to reach that chosen market, and there's no need to do cross-border complexity and things that we have done in the past. We have navigated those. That's really the message today. Thank you very much for coming. Thank you for being with us, and we welcome your questions .