Earnings Call: H1 2021

Aug 10, 2021

Hello and welcome to the Aberdeen First Half Results for 2021. Today marks the next stage in the development of a company with a near 200 year history. I'm going to give an update on our progress against our strategic priorities that we shared with you in March, and Stephanie Bruce, our Chief Financial Officer, will take you through the financial results. I'll wrap up with how we're investing to grow the business. Then we'll be joined by Chris, Rene and Noel for the Q and A and we'll be delighted to take your questions. At our full year results in March, we outlined our strategy to return the business to growth. This strategy is about developing a more balanced business that's less procyclical and is a client led strategy focused on the 3 vectors of our business: investments, advisor and personal. I described the growth journey and how it would look for you and in particular, I said that in the near term, we would arrest the decline in revenue and improve our operating efficiency before creating a medium term pattern of high single digit revenue growth and further positive operating leverage. We have made a strong start in delivering those objectives against the background of supportive markets and a recovery from last year's early COVID challenges. We have delivered the highest rates of revenue and earnings growth since the merger, with fee based revenue 7% higher, adjusted operating profit 52% higher and adjusted diluted EPS more than doubling. We also set the goal of becoming a more efficient company and we targeted a cost income ratio of around 70% as we exit 2023. Likewise, we have made a solid start with a full 6% improvement recording a first half of 79%. We are at the start of our growth journey and we're working hard to create momentum and there is now clear evidence that our 3 vector model has sharpened our focus and approved our execution. And you'll see later, our investment performance remains solid. And I'm pleased to report that we completed our technology conversion onto a single fund management platform. Whilst a huge achievement in itself and a great simplification of our investment processes, it does not signal the end of improvement, but rather the beginning of a relentless drive to continuously improve our investment processes, improve our use of data and improve the consistency of our client outcomes. Whilst not yet recording asset growth at a group level, we have got very close with net flows net outflows of just €1,900,000,000 ex liquidity compared to £6,800,000,000 in the same period last year, and this now has a negligible impact on our revenues. Here you can see the details of each vector. Institutional and wholesale is our largest business and excluding liquidity, we further improved by 89% from outflows of £7,500,000,000 in H1 last year to just €800,000,000 this period. This is the best performance since the merger and is a solid position from which to further improve. The levels of outflows in insurance reflect normal de accumulation activity. Of course, our clients' market strategies, which we are working with them on, will through time begin to offset the normal pattern of de accumulation. In the period, the low level of activity in bulk purchase annuities means we're not yet growing the insurance category. Advisor has recorded the highest net flows in 3 years and the first half of twenty twenty one is equal to all of last year. Personal 2 had a significant milestone with a record first half and net flows greater than the cumulative performance since the merger. In March, I shared our growth strategy and I outlined our priorities, the foundation of which is having the right talent in place across the entire company. The 1st 6 months of the financial year has seen the build out of the new management team tasked with driving growth and executing cleanly against these strategic priorities. Our new operational structure creates clear lines of responsibility and accountability aligned to the priorities of each growth vector. Caroline Connellan is joining us in November as the CEO of Personal Wealth Noel Butwell is the CEO of Advisor. In the investments sector, we've moved to a more regional model with global connectivity. Rene Bullman started in March in leading Asia, and he will talk to you about that. Chris Demetrio has started in his new role as CEO of UK, EMEA and Americas. I'm now going to provide short updates on 4 of these priority areas, starting with our ambitions to grow in Asia. As you know, I have invested a lot of my career in Asia. It's a part of the world I have extensive knowledge about and a passion for. The opportunity in Asia is significant as the economic center of gravity of the world continues to move east. Already more than half of the world's population live in Asia and it will become home to half of the world's middle class. Investment assets are predicted to grow at around 12% per annum over the next 5 years reaching 20% of global assets in 2025. Building on our expertise in the region is a major focus for us, and it starts with having the right leader. Rene Bilman joined us in March to lead the Asia Pacific business. We are well known and have a good footprint in Asia with locally managed assets of £46,000,000,000 and we're managing £18,000,000,000 of assets for our Asian clients. We expect demand for our global capabilities to grow as individual investors and savings institutions in Asia expand their investment horizons beyond their own markets. Through our own regional presence and through distribution partnerships, we're aiming to significantly grow our Asian business. Let me hand to Rene, who will explain how he is leading our very strong team to growth in Asia. Hello from Asia. As many of you know, we have a very strong heritage out here in the region. Our business operates currently across 9 domestic locations with 500 staff and investors on the ground in each of these countries. We are reenergizing for growth, which is why we have exited earlier this year our Indonesian domestic operations. Our revamped Asian strategy is basically based on 3 pillars. 1st, we want to Accelerate the regional distribution of all of our global products, in particular, in the wholesale channel. As a great example, serves our new partnership with Citibank, where Aberdeen products will be available on Citi's digital banking and investment platform, Citi Plus, which opens up the wholesale distribution of our products to see these regional retail clients. 2nd, for investors, China is still one of the biggest alpha generating markets. We have a very strong Asian and China investment franchise with over EUR 46,000,000,000 in AUM. We will strengthen our team further And combining with our deep global sustainability capabilities to become a leader in Asian sustainability. This will benefit both our regional and our global clients who are still underinvested in China. To support this further, we have also just launched our Aberdeen Sustainability Institute in the region and thereby also support transition to net 0 here in the region. Lastly, We want to leverage our strong digital and platform capabilities in the U. K. To establish strong strategic partnerships with banks and platforms here out in Asia. As a great example serves our partnership with Hub24 in Australia, where we are in the process of developing a new digital investment platform for financial advisers. Thank you very much, Rene, a great leader with a great team and they're getting good results now. Now let me turn to private markets. Private and alternative assets are an important part of our growth strategy. We're investing in areas of high exogenous growth and have organized our business in the way that clients invest: real assets, private credit, private equity and alternatives. In the first half, we saw £3,200,000,000 of deal flow. That's a 10 times increase on the prior year, bringing us to AUMs of £71,000,000,000 We are committed to improving our investment capabilities and the acquisition of Tri Tax is a great example of 21st century ambitions in real assets, bringing with it exposure and expertise in the fast growing, future looking logistics real estate market. They are the UK's largest investor in large scale logistics warehouses, where occupier demand is strong and supply is constrained. They are meeting the needs of their e commerce tenants by investing in modern, national and regional distribution centers ideally located to allow late night orders and next day delivery, and they have 9,100,000 square feet of consented land available to deliver new units for e comm retailers. Tri Tax Big Box, the listed REIT, last week announced their strongest half year performance with EPS up 23.6% and portfolio value up 10.9 percent to £4,800,000,000 Within alternatives, our U. S. Precious metals ETF franchise has seen strong growth since we bought into the market 3 years ago, with AUM now almost tripling to $7,000,000,000 ETS are, of course, a high growth area, and we are now expanding our suite of products in the U. S. And internationalizing into Europe, including a new industrial metals fund aligned to the global electrification theme. I highlighted in March that the adviser platform is a real gem, holding the number one position in the UK adviser market for AUA and for gross lowers. We are focused on both defending and growing our leadership position in this market as the market grows and consolidates. Our advisor and personal vectors are gateways for increasing AUM into our ecosystem and in the first half our Advice business contributed £200,000,000 of flows into our discretionary fund management business. Now let me hand over to Noel, who is going to update you on our activity in the Advisor Vector. Within the Advisor vector, we've recently launched our Advisor Experience program, and this is a multi year investment in improving the experience of using our solutions and revolutionizing how they can be tailored to individual client needs. Now clients will see regular and ongoing improvements based on what they've told us is important to them. And we've already gone live with some of the first enhancements. Firstly, a new client engagement hub, and this is powered by leading technology from Amazon Web Services and Salesforce. This gives new and more effective contact options for clients with more intuitive systems and processes So that the advisers' time can be spent doing what's important, which is spending time with their clients. We've also launched one of the most integrated e signature capabilities in the market, and e signatures are now embedded directly in many of our journeys. At its core, the program is a shift to a client centric model rather than a traditional product led approach. Everything within Aberdeen adviser will be connected to an individual, and this means we'll now at the touch of a button all we can about the client's experience with us. We've also been hard at work on our pursuit of primary position objective. Our ambition with every firm we work with is to become their primary partner, At which point, we expect at least 70% of all new business flow to be directed to us. We've realigned the sales team to deepen client relationships and move more firms to that primary position. In the second half of this year, we'll launch our new adviser portal, which will bring significant functionality for advisers. In addition, we developed a comprehensive newsfeed reporting and secure messaging functionality. Looking into 'twenty two, we'll then see several further content drops with new tax wrappers and importantly, the junior suite, which we know clients are excited about. We'll see the conclusion of the acquisition of our wrap products from Phoenix and also stock broking capability embedded. And growth will be accelerated by us being the easiest business for our clients to partner with, delivered by a constant and relentless focus on competing and differentiating on the quality of our content and experience. For every firm, for every type of client, we want to be here for everyone as we move forward into this new era as Aberdeen. Thank you very much, Noel, and you've really got that team buzzing. We are futurists, and at the center of being futurist is investing and behaving responsibly. Our actions enable our clients to be better investors, and by focusing on responsible investing, we believe we can deliver better risk adjusted returns. We're also running our business to have a positive impact on our environment and on society. The impact of climate change is one of the world's biggest challenges, and we are holding ourselves to account to have a positive impact. We've committed to net 0 with 50% reduction by 2025. 98% of our sourced electricity is already renewable and we're a signatory of the Net 0 Asset Managers Initiative. As an investor, we are partnering with clients on solutions that allow them to achieve their future goals while dialing up the impact of their investments. At Aberdeen, we have taken a fully integrated approach to how we invest, considering all ESG risks and opportunities, and importantly how we manage the transition. Getting our assessment of this transition right is how we generate Alpha. We do it in 3 ways. Firstly, ESG integration means throughout the entire investment lifecycle. That means from idea generation to research to peer review to portfolio construction and ongoing investment engagement with investee companies. Accelerating availability of ESG Investment Funds, we'll have quadrupled our SFDR 8 and 9 CCAP fund range in the next 12 months. Thirdly, investing intelligently in brown opportunities today that have credible plans on how to get to green. That's how we'll generate long term returns for our clients and at the same time accelerate progress to a carbon free future. Let me hand to Stephanie now, who will provide details of our financial results. Good morning, everyone. Our financial performance in the half year demonstrates momentum towards our growth ambitions, as you can see through our key indicators. Our fee based revenue is £755,000,000 7% higher than the prior year, reflecting 4% higher average AUM, an increase in revenue yields and favorable markets. Adjusted operating expenses are GBP595,000,000 which is 1% lower than prior year. Adjusted operating profit is our key performance indicator and at £160,000,000 demonstrates strong growth momentum with a 52% increase against what was a depressed prior period. The resulting cost income ratio of 79% is 6 percentage points lower than prior year and aligned with our progress towards our target of 70%. Adjusted capital generation is 176,000,000 71% higher than prior year, reflecting the increased operating profit. Overall, reflecting the reversal of strong flows into liquidity funds in the prior period. Net outflows in the 6 months were CHF5.6 billion. Liquidity and insurance are the main drivers of our outflows in this half, but this is low margin activity. Now we are focused on the value of our flows as this dictates revenue. And therefore, excluding liquidity flows, which are low margin, There are net outflows of £1,900,000,000 an improvement of almost £5,000,000,000 compared to the prior year. While still a net outflow, this does represent a significant improvement over prior periods with net outflows now less than 10% of the net outflows at the low point in the second half of twenty eighteen following the merger. The benefit of this for revenue is clear and I will cover this shortly. AUMA was broadly flat compared with the opening position in January as higher markets have offset net outflows and the corporate actions we completed in the period. As a team, we are focused on arresting the decline in revenue and we have made progress. In the first half, three key aspects have all contributed to the positive momentum compared with the first half of twenty twenty: yields, markets and flows. Firstly, yields. As yields have stabilized, we have seen a positive impact on revenue. In the first half, our asset mix, together with the structural benefit from our new arrangements with Pfenex, have created a positive increase in revenue of 1% compared to the 1.2% negative impact seen in prior year. Secondly, on markets, These have been favorable in this period, benefiting revenue compared to the prior period. In addition, we earned £10,000,000 higher performance fees in this half. And thirdly, on flows. We have been working hard to improve flows by focusing on the investment needs of our clients and have delivered encouraging momentum in a number of asset classes, including real assets and private equity. The improvement in net outflows from our core portfolios, excluding Lloyds, has made a positive impact on revenue. This can be seen in the dramatic fall in the revenue impact from net outflows excluding Lloyd's moving from £27,000,000 in the first half of twenty twenty to only £2,000,000 in the current period. This represents less than 0.5% of our revenue, so significantly better, such that net outflows are now only having a modest impact on revenue compared to the impact back in 2019 of 9%. This improvement over time is captured here. The solid black line demonstrates clearly the significant change in the revenue impact from net outflows in our core activities of institutional and wholesale excluding liquidity, advisor and personal. You can also see on this chart the minimal You can also see on this chart the minimal impact from the flows in liquidity. Now this is the dotted line. And whilst we have seen large swing we've seen a really large swing from the positive flows of last year to the negative flows this year, This has only resulted in revenue impacts of negative £1,000,000 so overall insignificant. Our continued focus on cost management delivered a reduction in underlying operating expenses of €20,000,000 in the period, circa 7% on an annualized basis. This is net of increased compensation accruals to reflect the improved performance of the business, while inflation, corporate actions and foreign exchange all added to the cost base, resulting in overall operating costs 1% lower than the prior year. After allowing for reductions in staff numbers as the phases of transformation program complete, offset by inflation and other accruals and staff compensation, Net staff costs increased margin 8 to €324,000,000 Non staff costs were reduced by 4% to £271,000,000 after allowing for inflation and some brand expenditure in the half year offset by savings in outsourcing costs, reflecting our actions to build further leverage from core services of our 3rd party relationships. We continue to simplify the business, addressing areas that are contributing lower returns. During this half year, we completed the simplification of the Nordics Real Estate Business and the disposal of Parmenion. We also acquired the Tri Tax business. As a proportion of our AUMA, Non staff costs are 8% lower since the prior year and we will continue to focus on this reduction as we move towards our target for cost income ratio of 70% as we exit 2023. The cost income ratio has improved by 6 percentage points to 79% for the half year period. Overall, we remain on track to deliver against our annualized synergy target of €400,000,000 later this year. And in the second half, we do anticipate additional spend on brand rollout, the impact of inflation and the move to hybrid working as COVID restrictions are lifted for our employees. So breaking our results down by vector. It is pleasing that we delivered improved performance in all of our vectors. So turning first to investments, which is our core activity representing 84% of our assets under management administration and 78% of adjusted operating profits. This vector has made good progress in the first half across the indicators. Fee revenue is higher by 6%, reflecting growth in all our asset classes except fixed income and multi asset in institutional and wholesale. Yields have improved as an increased proportion of AUM are held in equities and private markets. Costs have been controlled and reflect reductions in non staff costs, particularly in 3rd party outsourcing costs, offset by higher accruals for staff compensation to reflect performance in the period. The cost income ratio is 79%, which is 5 percentage points better than last year. Adjusted operating profit of £126,000,000 is higher by 33% than the prior period. Within the profile of flows in this sector, there are lumpy movements in flows in both insurance and liquidity, which impact the overall flow numbers in any period. Although as I have just demonstrated, the impact on revenue of each of these classes at 10 basis points and 8 basis points respectively broadly is not significant. Overall inflows in this We have created good momentum. And as Stephen has highlighted earlier, we have created further leverage with gross flows, excluding liquidity, increasing by 13%, while redemptions have reduced by 2%, creating a positive movement on net flows of CHF4.2 billion, a 48% improvement on the prior period. Encouragingly, the pipeline of 1 not funded flows is circa €8,000,000,000 AUM for the investments vector is consistent with the levels at year end and reflects the net outflows, particularly from higher liquidity and insurance flows, offset by the positive impacts from higher markets and the corporate actions, which increased AUM by 2%. Our largest client in this sector is Phoenix at £170,000,000,000 of AUM. We will see the remaining Lloyds Banking Group assets amounting to approximately £34,000,000,000 transfer out in the first half of twenty twenty two. But remember, these are low yielding assets. Our refreshed partnership with Pfenex is showing progress and is focused on working together to grow assets by providing solutions which serve the complex needs of the insurance customer base in the open and the closed books. So within the investment sector, our key growth opportunities are in the institutional and wholesale client base. Now specifically in institutional wholesale, revenue is 8% higher than the prior year, and that is before taking account of performance fees. Yields have been stable overall. Encouragingly for our growth strategy is the improvement of flows within institutional wholesale. Here we have seen 21 percent higher gross flows, €3,500,000,000 compared to prior period and at the same time the redemptions have reduced by CHF3.2 billion, an improvement of 13% on the prior period. This has created the positive movement for this activity as shown here. This progress is evident across most asset classes, particularly in equities and real assets, while headwinds were seen in fixed income as assets moved away from this strategy. Overall, we have seen the best net flows position in institutional and wholesale excluding liquidity since the merger, and the pipeline is also encouraging. In particular, the pipeline in APAC is strong and our focus on building our presence with wholesale clients is a key focus for Rene and the team and this will be aided by the Citi and Hub24 partnerships, which have been a key development in 2021. And of course, investment performance is key for our service to clients. In this period, the 3 year investment performance is 66% against benchmark comparable with the position at the year end. That overall consistency reflects differential performance across the core product areas and strategies as seen here, in large part reflecting style positioning within our offerings. We have seen a dip in equity performance in the 6 months to June with the market's rotation of value acting as a headwind given our overall quality and growth bias. With the recent market adjustments, our preliminary result for equity performance in July demonstrates signs of improvement on a 1, 3 5 year basis. Encouragingly, we now have 54 consultant ratings compared to 43 at the time of the merger. And for our wholesale client base, we have increased the number of Morningstar 4 and 5 star ratings to 125. That's an increase of 6%. So turning to the advisor vector. Here, we administer £72,000,000,000 worth of assets for our clients in the U. K, which to comprise both national and regional advisers and discretionary fund managers. We typically retain assets on our platforms for an average of 6 years and this is increasing. We have seen strong growth in revenue on both platforms. Overall, revenue has increased by 26% as a result of new flows, market levels and the €12,000,000 structural benefit arising from the revised Fenix arrangements, which more than offset the reduction from the impact of the pricing changes that we applied in 2020, which were implemented pre COVID. Through these changes, our yield has increased by 2.2 basis points to 25.3 basis points. This higher revenue has resulted in a much improved 10 percentage point change cost income ratio to 57% and an improved operating profit of £37,000,000 an increase of 61%. Now we have a good track record of generating positive flows on the platforms. And in this half year, we have recorded the best flows in 3 years. As a consequence, the AUMA on our platforms has reached a record level as at June with an increase of 8% since the year end. Turning to our personal vector. Our clients are in the U. K. And comprise private clients, financial advisers, charities and trustees. This is currently the smallest part of our business, but is building momentum. The cost income ratio, whilst improving to 90% in this period with a small profit, will require greater scale and further action to achieve our ambitions for this vector. Overall, gross flows increased to 1,000,000,000, a 67% increase and net flows recorded a fivefold increase. We see a significant opportunity for growth in the numbers of clients that we serve, addressing an advice gap in the U. K. The number of clients in Aberdeen Standard Capital has continued to increase in the 6 month period by 6% and assets under management in Aberdeen Standard Capital are now at record level with specific benefit from deepening our charities activity, launch of sustainable portfolios and providing improved functionality on the portal. Adjusted diluted earnings per share is 0.07p with a significant increase to prior period reflecting principally the improvement in adjusted profit with additional benefit arising from the buyback which was completed in February 2021. Adjusted diluted capital generation per share is 8.2p, an increase of 3.6p. This increase reflects the improved adjusted operating profit generated by the business. And importantly, this level of capital generation more than covers the dividend per share of 7.3p, which was as we forecast in the policy set out in March. This represents dividend cover of 1.14 times adjusted capital generation. And that improved capital generation has contributed to our surplus capital position, which was further strengthened in this half year period from CHF2.3 billion to 2,800,000,000. This includes the sale of 4.99 percent in HDFC Life, which added 700,000,000 and is the continuation of our stated strategy for this investment. We intend to continue our strategy of monetizing the HDFC Life stake. The simplification of the business by disposing of Permian and the Nordic real estate activities realized over 100,000,000 offsetting in part these disposals, we invested in Tri Tax in this period with a total potential consideration of €200,000,000 Our regulatory capital surplus at €2,800,000,000 is an increase of 22%. A reminder, this does not reflect the majority of the value of our listed stakes. I highlighted in March that the new IFPR regime is anticipated for the start 2022. On that basis, our indicative pro form a surplus would be of the order of 1,700,000,000 as we are no longer able to include certain elements of year 2 debt and insurance holdings. We are comfortable that this capital position is at an appropriate level, taking account of our growth and investment opportunities and plans. I'll now hand back to Stephen. And we're very pleased with the progress we made. I'll now turn to our capital position. As of the 30th June, 2021, our capital resources remain strong at £3,900,000,000 This gives us the capacity to invest more in our business to accelerate growth. Each of the 3 growth vectors has a distinct investment plan. For investments. We will invest in further embedding advanced data analytics in the investment process and in closing the performance gap to best in class. Building out our business in Asia is also a focus and increasing our private markets capabilities, as we just described. We will also grow our investment in seed capital, which will fuel the growth of the wholesale channel. In our advisor vector, we will continue to invest in the technology that Noel talked about that is needed to support our advisor experience program. Key to this is making our platforms even easier for advisors and their customers to use. For our smallest vector personal, we've been clear that growth will be through further acquisitions to get to scale. We also need to invest in technology to grow our digital direct to consumer savings and wealth offering. And this morning, I'm delighted to confirm that we have acquired Ekso Investing, who have world class artificial intelligence digital investing capabilities that will allow us to bring always on 20 fourseven digital discretionary fund management to your smartphone. We are disciplined in the deployment of capital, applying 3 simple tests to every investment decision we make: does it drive growth, does it drive returns and does it get to scale? In that way, we will ensure that we are building returns for you, our shareholders. We are futurists. In summary, we made a strong start to our 3 year strategy, with a 52% growth in adjusted operating profits. We've arrested the revenue decline. We've delivered record profit performance in our Advisor business, and we've seen record flows into the personal business. The next 6 months will focus on investing for growth in all three of our vectors. We will continue to sharpen our investment capabilities and address improvements in investing performance. We'll concentrate on building our digital distribution and improve our wholesale capabilities, continue to upgrade our advisor experience, and importantly, we'll concentrate on investing in our talent. Thank you for listening. We'll give you a quick 2 minute break and we'll be back to take your questions. Thank you. Welcome back everyone. Stephanie and I are here and we have Chris, Noel and Rennie as well, and we are ready for your questions. Sarah is going to take us through the session. Over to you, Sarah. Thank you, Stephen. So your first question comes from Haley Tam from Credit Suisse. Please go ahead. You're live in the call. Good morning, everyone. Thank you for taking my questions. I have a couple, please, if I may. The first in terms Of your growth plans in Asia. Thank you for the additional color here. To help us think about it, do you have a target to which the £46,000,000,000 of AUM can grow to. And is this 12% per annum regional growth actually your best guide here? And maybe if there's any color you can give us on which global products you have earmarked for regional distribution, that would be very helpful. Second question, if I may, just on the adviser business. You've mentioned the benefit of the new range of the Phoenix to revenue yield here at £12,000,000 Sorry for asking. I'm not actually showing entirely what that is. Could you perhaps help me here understand how sustainable that is, if that was a one off, if that's something I should expect to continue? And I'm sorry, just a cheeky third one. On your regulatory capital surplus, the €1,700,000,000 post IFPR, that has increased by €500,000,000 helped by the €700,000,000 from HDFC Life stake sale. Just to confirm, my takeaway is that you are comfortable with this level of surplus, planning to invest it. And so just to confirm, we should not expect to see any of this surplus return to shareholders in the near term. Thank you. So thank you, Haley, there's a lot there. Let me start to unpack it. So I'm going to take the Phoenix piece first. We have structurally improved the competitive position of the adviser business. The GBP 12,000,000 benefit was is the absence of payments that we used to make business to business payments, which you can think of as contra revenue that went to Phoenix. So that is a structural and permanent benefit that you can expect to see flow through our business in future periods as well. Turning to Asia and I'm going to throw it to I'll throw it to Rene in a moment. I mean we haven't We were much bigger in the past in Asia than we are today. So when I examined the business and I looked at the history of the business and I saw the scale of the Aberdeen platform. If you go back to periods just not that long ago 2015 or so, we were a much bigger business. So our aspiration is to get back to being a significant force in the Asian market. We've got a great team on the ground there. We've done a number of things and we've tightened our footprint. So I talked to you in March about the fact that we were we looked at Indonesia, for example, and although it's a great growth opportunity, the path to scale was simply too long. So we chose to exit Indonesia. And likewise, we've got other tightening up that we've been doing, Rene has been working on. That allows us to focus on a more hub and spoke model, and it allows us to distribute through partners. And the Citibank deal that we announced where we're already live in Hong Kong in the Digital Wealth Planner. We're going to be live in Singapore shortly. We're also going to be live in the U. S. And then we've added a series of funds to the Citi platform. But let me ask Rene to talk a little bit more about what he's been doing, a little bit more about the product story and a little bit about his sustainability edge. Thank you, Stephen. I think that it's, as you said, unpacking the question a little bit, there are 2 elements to it. Historically, Aberdeen had a very strong here in the region, particularly around emerging market and Asian equity. I think the merger has brought us a much, much broader capability set, And that includes in particularly bringing way more real assets or real estate, fixed income, multi asset capabilities to the region. So the focus is twofold. 1 is really helping to distribute these global products more to the region and just raise the profile of our firm as a whole here in the region. And then as you highlighted, the EUR46 1,000,000,000 in Asian assets is actually Asian capabilities that we distribute both in Asia, but also globally. So our goal is clearly that rest of the world, we are well known for our very strong Asian investment capabilities, and we think there is still a lot we can do more there. And likewise, in Asia, it's really the full that we can bring forward. Now Stephen touched quick on sustainability. We have done a lot in the ESG space for a very long time and have a very good reputation in incorporating this in our investment processes. And so our goal is to accelerate that process, particularly around the Asian investment capabilities. So if global investors want to invest in Asia, sustainable, they know where to call going forward. And let me come back thank you very much, Randy. That was very useful. Let me come back to the last part of Haley's question, which was about our capital strength in a regulatory surplus. And I think you should judge us in the way that we create capital and invest capital. And over the short period of time that I've been in charge here, we divested businesses in the Nordics, We divested a Permian. We did that at a significant gain. We invested in Tri Tax, and last week they just reported record earnings and growth. We are investing because we see a world of opportunity. Our clients are asking us to invest in order to improve the investments that they can make and we're going to continue to do that. I laid it out, our core asset management business, of Advisor Business and our Personal Vector. For the first time, you can see clarity in the nature of those investments. So we are actively evaluating where we can continue to invest as we announced this morning with the acquisition of Ekso and you can expect us to continue to do that in a very disciplined fashion and so we're not signaling that we're giving capital back. Next question please, Sarah. Thank you. And your next question comes from Hubert Lam, Bank of America. Please go ahead. You're live in the call. Hi, everybody. Good morning. I've got three questions. Firstly, in your flows in private equity, private credit and real assets, as you mentioned, were good. Is H1 Flows a good run rate going forward or what annual flows should you expect from these segments that we should be targeting? Secondly, on costs, How should we think about costs in the second half versus the first half? So if you look at Slide 2, it seems to show that this is the bottom of costs. Should we expect costs to rise from here? And the third question again goes through your capital position. Of the 1,700,000,000 of pro form a surplus capital, how much of this can it actually be used for M and A and how much of this would you consider to be true surplus if you take into account the buffer? Thank you. Thank you Hubert. I'll just talk a little bit about this and then I'm going to hand to Stephanie, who's going to talk a little bit about costs and really thinking about costs in terms of operating leverage because where you want as jaws that are open. If you've got revenues going up and your costs don't go at the same rate, you get operating leverage, margin enhancement and earnings growth. And a growth business should look at operating leverage rather than just a shrinking business just looks at cost, you can't just look at You can't shrink your way to growth. In terms of private markets and the half year, we're very proud of the half year result. I think it's very good. But I think in much longer terms. We're not changing our guidance that we gave in March. In March, we said this year, the full year, and this is the half, this full year would be about arresting the decline in revenue. And From that, we would then be able to inflect to our pattern of high single digit revenue growth as a total group. You can see very clearly in the pattern of results that we've just given you today that we've got the adviser business lights on, assets growing and revenue growing, likewise in the smaller personal business. And in the biggest, largest business, our core investments business, we've shown the best flow performance since the merger. So I would I can't give you specific guidance on with the private markets area. I can tell you it remains a focus and we're proud of the half year, but within the context of the overall business, I'm not going to change our guidance. Stephanie? Yes, I would just add also on flows. There's a number of areas Hubert, as you say, Which have actually performed well and have created positive really good positive momentum from the prior period. And that's very much part of the parameters and our thinking that Stephen and I shared with you back in March. So we're pleased with that momentum. Those are the parameters we're on and we will continue to focus on that. I'd also say regionally, we've seen some very good momentum coming through in a number of the areas regionally and particularly in the U. S. And APAC, and that's obviously hugely pleasing as well. That's very much again part of the parameters that we had that we set out to give our initial guidance. If I maybe just pick up on the cost point and you said basically how should you think about costs in the second half versus the first half, Hubert? I think what's important about is to understand about the first half is that we continue to exercise really, really robust cost management discipline across the organization to make sure that we really are focusing and targeting our expenditure on the right costs. You'll see from the slide that we've talked about, we have created underlying savings to the extent almost of 7% on an annualized basis. We will continue to take savings out of the business, but we will also at the same time invest in those areas which are going to help us on those growth priorities that Stephen, Rene, Chris and Lou are very much actively focused on every single day. And that's areas where it can help us create capability, access markets, really think about how we can open up that growth with our clients. So I really think about the cost as we will continue to be very disciplined on the savings that we want to affect as we complete the whole transformation program and as we look at areas where we and aren't quite got the spend in the right place, but we will also be investing. I also think I would draw your attention to we are seeing some increased inflation and regulatory costs as you would expect, but the bigger sort of offset to the savings that we are making It's very much decisions that we are taking as to where we want to invest for growth. I think of it overall as H2 as being A modest increase on where we are at the moment because, as I say, the underlying savings will continue, but we will see some additional investment going into the business. And Stephanie, would you like to comment on the surplus capital question? Yes. Yes. So and again Hubert, as we've explained, I think, before and Stephen has actually just touched on in terms of Haley's responding to Haley's question, we are very focused on how we utilize that surplus. You're absolutely right. We obviously do have working capital, seed capital and a buffer in there that we will continue to manage. I would draw you back to what I said in the presentation as well. We have available capital that is not even in those numbers as well. And that also has to be thought about in terms of how we think about our available funds for M and A. Thank you. Thank you. Sarah, do we have other question on the line? You do, yes. And your next question comes from Andrew Crean from Autonomous. Please go ahead. You're live in the call. Good morning. Thanks for taking the question. A couple of things and coming back really to regulatory capital. Are you prepared to actually give a number as to where you want to operate relative to your capital buffers? Or are you To date, you're just sort of saying you've got excess capital, but not in the numeration. I think the market would like to be able to understand the tolerance levels there. And then secondly, plans for HDFC Asset Management. I think you said on the Life side that you're prepared to sell down further. What are your plans on HDFC Asset Management? Safety? Thank you, Andrew. Thank you for your questions. I'll cover the HDFC Asset Management, the way I think about that, and then I'm going to ask Stephanie to talk a little bit more on the capital side. So HDFC Asset Management, if you think conceptually, We have an ownership position in an excellent asset manager in India, a fast growing country, one of the great opportunities of the world. So The challenge is I haven't yet been able to go to India. Obviously, spent a lot of time there in the past. But since I came into this role, I haven't been able to go there. I haven't been able to kind of analyze the potential benefits and synergies of the stake that we have. But it's an open question for me. And I think that it's I should I owe it to you and I owe it to our investors to make that evaluation. What is the pattern that we expect in domestic investing in India? When do we expect domestic investing to become global investing because obviously if we see India start to invest beyond its own borders, We are a large global investor and you would see significant opportunity for us there. So at the moment, our disposition has been we would divest of life as non strategic as we just did with the £700,000,000 proceeds, but for HDFC Asset Management, and I want to explore that opportunity a little bit further. Stephanie? Yes. Andrew, I think as you say, we've talked There's obviously a range of buffers that you have in, a, taking account of a number of circumstances, the environment that you're operating in at any particular point in time, How you have deployed the other available sources of capital that you have. And clearly with the sorts of strategy that we have set out, Clearly, any one buffer figure, if I gave you a figure today, it would clearly and obviously evolve. I think the key point here is to look at the combination of our regulatory surplus capital plus our available capital because obviously that is the sort of financial strength that Stephen has spoken about in a number of different areas. And we will very carefully manage that buffer to allow us to look to operate in those different environments as they unfold over the period of delivering that plan. Thank you, Stephanie. Sarah, shall we pick up the next question? Yes. Your Next question comes from Greg Simpson from Exane. Please go ahead. You're live in the call. Good morning. Thank you for taking the questions. The first one, I think you mentioned you had an institutional pipeline of 1 but not funded flows around €8,000,000,000 Do you have any color on the type of product where SLA or Huerta or Aberdeen is seeing momentum for these mandate wins? And that's on the inflow side. Is there anything to flag on the other side of mandates loss but not yet redeemed? I'm basically trying to get just trying to think about the confidence and timeline of asset management flows turning positive. And then just a second question. In terms of the build out of Asia, how is Aberdeen thinking if it's all about the onshore China market? We've seen a few asset managers Applying for or receiving licenses to run wholly owned asset management businesses there. Thank you. Okay. I'm going to throw the pipeline question to Stephanie. She may want to involve Chris. But I'll first of all just talk a little bit about China onshore. There are a number of things that when we think about China, it's a huge opportunity. We have a joint venture in China already, fifty-fifty. Heng An is our partner there. And we actually have the only domestic foreign pensions license. And if you think about China today at $10,000 per capita. You know what happens when you hit $10,000 and you grow to $15,000 You see a hockey stick growth in pension contributions and people start to really invest for their future. So we think further down the line, we think that that Joint venture is an important thing. It grows very well today. We've got a good management team. It's something we're committed to. We also want to have broader distribution in China Mainland and that is today often done through the Chinese megabanks. So we are working on making sure that we too have better distribution in Mainland China. Obviously, I've spent a lot of time there and worked with these banks extensively, as has our Chairman. So we're working on that. From an investment standpoint, We've got some fabulous funds. We've got the our China Asia performance, for example, has been superb. The wobbles that we've seen in the concerns over Chinese regulation, I'll just share with you the way I think about it. We're dealing with the Middle Kingdom. We're dealing with a country that has explained in great detail that there would be they value capitalism with Chinese characteristics. And as a consequence of the fact that politics drives policy and policy of Dai's progress in China. We think you should look through that at the opportunity of what is becoming the largest economy in the world. And that's what we're doing. And as investors, we really need to take that long view, take that long view of the world moving east, understand the risks and opportunities within it, be highly selective in where we choose to invest, but not be blown off course by the headlines. Let me throw it to Stephanie. Yes. So if I just pick up your point, your first question, Greg. You actually said in terms of the pipeline that I quoted of €8,000,000,000 was for institutional. Just to be absolutely clear, it's within The institutional wholesale broader vector as well. So I'm going to come to Chris in just a second just for him to give you his color on that. I think the point that I would highlight is actually how we feel about the momentum that we have been creating here. And I take you back to the slide That I showed in terms of the very much the narrowing in terms of the improvement of our gross flows and very much the reduction of our redemptions. And why do we feel confident about that position? Because actually, again, as I say, across the actual categories where we're really seeing that benefit, It's a really rich series of our franchises that are all starting to benefit from that. So it includes the private equities, real assets, also that we've talked about, Private credit is positive, emerging markets, fixed income, all we're seeing them making significant improvements, but also moving to that positive territory. Advisor and personal, as you know, are already in a good track record of creating the personal flows. The one area that we are obviously areas that we are still working on is very much around developed market credit and also emerging market equities. So those are the sort of the key areas that we just have to balance up in terms of making sure that we understand the confidence of the outflows and how they will materialize. But Chris, I might come to you as well because obviously within the U. S. We've seen really positive flows trajectory and obviously you'll have a broader view having had very much taking the seat and leading U. K. And EMEA as well. Yes. Thank you, Stephanie. I think when we look at the pipeline going forward, What's pleasing about it is the breadth of capabilities that are contained within that pipeline. There isn't an overly dominant asset class that's driving our pipeline either in or out on a go forward basis. And that and so we are as Stephanie pointed out, we're seeing that momentum building across franchise. We're also seeing activity rates pick up meaningfully in terms of search activity around some of the asset classes that have been challenged in our business from a flow standpoint like ours and emerging market equities. So it's really encouraging to see that early search activity picking up in those areas and are screening well with our clients in those areas. Stephanie touched on the U. S. Business. It's been a really pleasing story there over the last 3 years. It was a it's a very important distribution outlet for our organization. It was highly concentrated in strategies like global equities, emerging market season cars around 3 years ago, which suffered from significant outflows. Over that time, we've diversified the business. We've acquired our ETF capability and our precious metals capabilities, and that business is back to growing again. So real focus and simplification of the business, together with diversifying the capability set for our clients is now leading both in the U. S. And globally to a pipeline of a diverse set of assets with a real mix of blended revenue yield, a real mix of short term flows like the liquidity profile together with long term revenue streams in the Private Markets business. So I think we're very encouraged, Renee and I, by both the diversification of the asset classes that exist within our pipeline, But also the diversification of the revenue profile of that pipeline as well, which gives us a lot of confidence to be able to invest in the business going forward. Thank you, Chris. So I'm hoping that we're going to have a question about the U. K. Number one adviser business so that I can bring Noel into this. But Sarah, what do we have on the line? Yes. And your next question comes from Stephen Haywood from HSBC. Please go ahead. Hi, Stephen. Good morning. Thank you very much. Hi. You've obviously shown some Progress towards your high single digit revenue CAGR target. Do you think this is going better than you forecast at the Better than you sort of illustrated at the full year results in March. You showed a graph predicting around 0% revenue growth in in 2021. And now you're showing mid single digit growth in revenue. Is this showing that you're ahead of your progress targets or do you think the majority of this is coming from higher than expected and performance seas. And I have 2 other small questions, if you don't mind. One is on the remaining assets of Lloyds Banking Group. Can you tell us how much is left to go? And finally, on The tax rate in the first half, I haven't been able to see why this was so low. If you can provide an update here, that would be helpful. Thank you. Terrific. Thank you, Stephen. I'm going to I'll take the easy part first. So Lloyd's, we've actually been really clear on Lloyd's. So we shared the whole pattern of outflows in Lloyd's. So €34,000,000,000 still yet to go. It's actually very low margin, this tail that goes, but it goes in H1 next year. So that was factored into all of our numbers and I think It was well known. The other part of your question, we think we made a strong start. You're absolutely right. When you have 7% revenue growth, 1% expense decline and 52% growth in earnings and you go from 85% cost income ratio to 79%. It feels like a strong start. And but we are going to stick with the chart that I shared in March and I showed again this morning because this is the half year and we've got a full year to deliver. The team are very focused on the full year and we've made a lot of appointments, talent appointments, and we've reconfigured to have clarity of accountability. But I would stick with the original guidance. This is the year about arresting the decline. And if we can do better, we will. Stephanie? Yes. And in terms of the tax rate, Stephen, it's as you say, we have a lower tax effective rate in this half year period. And the principal reason is really to do with the change in the UK corporation tax rate, which was implemented and enacted in May this year, which therefore has changed the way that our deferred tax assets can be calculated and therefore we have been able to throw a benefit now flows through to our P and L, which we would expect to obviously to come through in the second half of the year as well. Thank you. Thank you, Stephanie. And we have time for one last question. So, Sarah, do we have a question? You do, yes. And it comes from Gurjit Kambo from JPMorgan. Please go ahead. You're live in the call. Just a couple of questions. So just on in with Citibank, what sort of products Are you selling out there? Is it like a broad suite of products? Or are you going in with a, I guess, a narrow range of your best performing products? That's the first one. And then just in terms of the operating margin in Personal, if you get to do you also believe that can get to 30 in line with the group target and can you do that organically? And then I'll ask the question on the adviser business. In terms of the number one positioning, what do you offer different to what the other peers out there? What differentiates your Advice business? Well, thank you, Gurjit. That was great questions. I'm going to throw it to Rene to first talk about the funds that we're offering to Citibank and then we are going to and before I throw it to Noel, let me cover the question personal margin. I would say that the personal business small business today and it's just shown excellent growth because it's better than the cumulative period of the record, so we're happy with that. I wouldn't imply too much from that business at this point because Its scale today doesn't match our ambitions. We are going to make that a larger business. We're going to invest in it and it will be through acquisition that we would We'll do it organically, but the path through organic growth is going to be too long. So we will also augment it through acquisitions. Stephanie, do you want to comment on that? Well, the only other thing I would add, Gurjit, is actually it's worth remembering that the existing Personal Vector businesses, as Stephen says, are relatively small in terms of our overall business. But actually, it does split into 2 and there's Aberdeen Standard Capital and there's 1825. Aberdeen Standard Capital is already operating at a good margin and therefore we would expect it absolutely to be very much part of that overall target for the group. The 1825 planning activity is a very different model. Therefore, we have more work to do to get that to move directionally towards that target. But as Stephen says, Actually, I think that will be it will be 2 different methods of actually expanding the scale of that vector where we will see that change. Thank you, Stephanie. Now I'm going to hand it to Noel. Gurjit is asking the question. Noel, what makes your business special? Thanks very much, Stephen. Thanks for the question, Gurjeet. Yes, so what makes well, 1st and foremost, the people within the business is my very, very short answer to that because everything they do every day focused on delivering for our clients and customers is what delivers the great results that we have so far this year, but I suspect the question is in relation to our competitors and what makes us different. What makes us different really, I suppose, is what we focus on. And we focus on and we'll continue to focus on differentiating, competing on content and experience, The quality of our content, our investment solutions, our reporting, our tools, etcetera, etcetera, and then the experience that the client firm, the adviser firm, in using those when they deliver their client value proposition to their client. So I've talked about, as Stephen mentioned earlier as well, being the easiest business for advisers to partner within the U. K. Why is that important? That's important because we have a capacity constrained market. Advisors want to take on more new clients, but they can't. So everything we're all about is how do we create capacity in a capacity constrained market By making our solutions more intuitive, the experience much more simple and seamless and effortless will allow advice to take on more new clients, so people get The benefit of that advice, but we also, therefore, then get the flows that come into the business and the assets onto the platform. So That's what we're going to do. That's what we'll focus on. That's how we'll compete, and that's what will differentiate us going forward. Thank you very much, Noel. We actually have a hard stop because we have a client pitch to go to and that is a very important thing to do. But thank you very much for your attention and your interest in us this morning. We're on track for delivering what we promised in March, and we will see you again at the full year. Thank you.