Earnings Call: H1 2019

Aug 7, 2019

Good morning, and thank you for joining Standard Life Aberdeen Plc's Half Year Results Analyst and Investor Call. Today's call is being recorded. I will now hand over to Keith Skjok, Chief Executive Officer. Please go ahead, Keith. Good morning, and thank you for joining us, and welcome to Standard Life Aberdeen's interim results. It gives me great pleasure to be joined by Stephanie Bruce, our new CFO, for her first Results Presentation as well as Campbell Fleming, our Head of Global Distribution. In a few minutes, Stephanie will take us through the financial highlights. But before she does, I want to take a moment to update you on what has been a busy first half of the year. Busy, but in a good way as we continue to drive the strategic transformation that will deliver the world class investment company we In the face of tough industry conditions with flows difficult to come by and fees under pressure, We maintained our focus on delivering what we can control and building on the resilience we delivered in 2018. This focus continues to concentrate on the 3 drivers that are most fundamental to our business And to delivering shareholder return, attracting assets, intensifying our financial discipline And unlocking the value from our balance sheet. The first half did see a visible improvement in investment performance And continued resilience in gross flows, which are increasingly well diversified. We improved our access to savers and customers Renew relationships with Virgin Money and Skipton, and we accelerated the build out of our adviser business. We also retained €35,000,000,000 of AUM in our settlement with the Lloyd Bank Lloyds Bank Group. There was a modest improvement in net outflows. And with help from markets, AU and A increased by 5%. All of that, of course, was made possible by the most important of our assets, our people. I'd also like to note that the leadership changes we have made are working well. Multi Asset Investments and Wholesale Distribution are Both seeing a positive impact. Rose Thompson, our new Head of HR, is spearheading a program to improve engagement and embed a values based And of course, we are benefiting from Stephanie's fresh insights. In these challenging Conditions, Stephanie, has helped us intensify our focus on financial discipline. We are making progress in improving our operational efficiency Through continuing to execute well on our transformation program, we have actions in place that will deliver 2 thirds of our efficiency targets, The heavy lifting and investment to upgrade our infrastructure is now well underway. And despite the associated costs, Continued careful management of our balance sheet has allowed us to maintain a strong regulatory capital surplus. We are therefore pleased to announce a maintained dividend of £7.3 per share. While there are Increasing signs of progress. There is, of course, still a lot to do to deliver the strategic transformation and take advantage I'll return shortly to talk about those opportunities after Stephanie takes us through the financial highlights. Stephanie. Thank you, Keith, and good morning. In summary, the key financial headlines are as follows. Assets under management and administration have increased since year end by 5% to 577,000,000,000 Growth flows have been sustained, and we are seeing an improved position on redemption, which have reduced to a level below that which was experienced throughout 2018. Net flows remain in outflow at $15,900,000,000 Adjusted profit of $280,000,000 10% below June 2018, impacted adversely by decreased revenues and benefiting from further improvement on costs. Statutory profit after tax has increased from $111,000,000 to $636,000,000 Primarily as a result from the sale of 6% of the stake in HDFC Life. Diluted EPS has therefore increased by 20.8p Since H1 2018 to 0.27p Adjusted diluted EPS has increased to 8.9p. The interim dividend is unchanged at 7.3p. Let me now highlight a few Number of areas in more detail. So assets under management and administration has increased to 577,000,000,000 Benefiting by 7.5% from a recovery in markets, offset by net outflows of 2.9%. On the right hand side of the page, You can see the assets under management and administration relating to our platforms of RAP, Elevate and Parmenion, which have increased by 11%, benefiting from uplift in markets and further net inflows of new business. Turning to gross flows. Overall, we have delivered $36,500,000,000 of new business, which is in line with the absolute levels of the prior half year, It also represents a continuation of the improving trend of growth flows as a percentage of opening assets under management administration. Now leaving aside Strategic Insurance Partners for a moment, the rest of the business has generated and won $27,000,000,000 of new business in this 6 month period. This is a higher level than for the last two half year periods, 2% better than H1 2018 and 33% better than H2 2018. It was particularly pleasing to see improved momentum across a broad range of propositions. And turning just to the specific asset We are still seeing pressure on equities at almost 9% below inflow levels of the second half of last year. The market remains tough with the continued focus on lowering risk profiles in the current global environment impacting demand. A high spot for equities is the interest in the China A Shares Fund, which has delivered strong performance and is generating strong interest as the best selling fund In multi asset, net inflows were recorded in areas such as MyFolio, With the pressure in this asset class still being evidenced in absolute return. In fixed income, we saw an increase of flows on the last two prior periods, Supported by strong interest in our offerings in developed markets credit and emerging markets. We continue to see strong interest in private equity and European real estate, and our new index of hedge funds is unique in the market It has been the most successful UCITS fund launch in the alternative space in the last 12 months, attracting $500,000,000 since its launch in February this year. In quantitative, dollars 3,500,000,000 of close were received from Virgin Money, which represented the first stage of developing our partnership. I'm pleased to confirm the completion of the joint venture on the 31st July, which enables the collaboration of our investment content Virgin Money's customer base, now of course extended through the Clydesdale Bank acquisition. On platform, growth flows have reduced in the prior H1 twenty eighteen period, but have remained robust compared The second half of twenty eighteen as we see the impact of ongoing consumer uncertainty in the U. K. Turn to growth flows by our strategic insurance partners. Now these by nature of the underlying business are much more lumpy reflect the on boarding of business in those insurance partners. In this period, we have received $9,700,000,000 of such inflows. This includes incremental flows from Phoenix Group of $1,300,000,000 And in addition, Phoenix Group undertook a further bulk annuity transaction, which gave rise to $500,000,000 of assets for management. To touch on global activities, we are pleased that in EMEA, we are reporting net inflows in this period, which is the first time since 2017. An area of disappointment is the fact that of our growth flows, Only 3% were in Asia in this period following further difficult trading for equities. Now moving to redemptions. The 2 key classes with adverse impacts were equities and secondly multi asset as shown by the purple blocks. The outflows for emerging markets, Asia Pacific and global equities do remain elevated. While for multi asset, the outflows are concentrated in But these are 44% less in the second half of twenty eighteen. Overall, GAR's assets under management in our institutional Sales are now $15,000,000,000 which is 3% of assets under management and administration. For our strategic insurance partners shown in pale blue on the graph, the redemption flows in this period reflect the usual outflows for that book of business, Namely, the ongoing decumulation pattern for those clients taking income as they age and retire. We receive new funds In on a lumpy basis, but once that business is received, it tends to be persistent and moves to a natural pattern of drawdown. In other words, these flows are much less volatile on the way out than they are on the way in. We are pleased that Scottish Widows have chosen to $35,000,000,000 of assets with us in real estate and quantitative. Both of these areas are key capabilities for our growth agenda. Also through the agreed terms, we now have the pattern for the movement of those Scottish Widows assets that will be transferred out. This will be a key movement in the second half and into Q1 twenty twenty. Therefore, overall, it remains disappointing to be in net outflows. However, looking forward, our current pipeline is stronger than in prior periods and encouragingly indicates many more new opportunities with new and existing clients. This reflects 2 key factors within the good work being undertaken by our distribution team. Firstly, on retention of existing clients And secondly, the active development of our clients and market coverage creating new opportunities. As Keith highlighted, Investment performance has improved. For our pipeline, this will not yet be reflected given the inevitable time lag of investing decisions. So we are also encouraged on the positive implications that should follow this improvement in performance. However, we do continue to be cautious Due to the tough markets and subdued consumer sentiment, particularly in the U. K, which continues to be impacted by political uncertainty. Moving now to the key components of the adjusted profit of $280,000,000 Firstly, on revenue. The reduction reflects the impact of those outflows we experienced in second half of twenty eighteen and further outflows in 2019, particularly in multi asset Turning from volume to margin. The average margin has reduced by 3.5 basis points on comparison with June 2018. Underlying this are several specific factors, both positive and adverse. Firstly, Margin on equities has improved by 2.1 basis points since the H2 2018 period And broadly has held constant on the June 18 comparator at just under 67 basis points. On fixed income, margins have also increased since year end And are back to broad alignment with those levels at June 2018. And on platforms, the margins we are earning continue to be solid and broadly consistent at 25 point On the other hand, the margin on multi asset has decreased by circa 10 basis points. This reflects growth in the volume of lower margin Permian and Myfolio Solutions, but also in part reflects the impact of price agreements from the second half of twenty eighteen link to our retention activities. Encouragingly, if the current improved performance in GARs continues, those fees will increase. Looking forward, another factor to consider is that the transfer of the now agreed tranches of Scottish Widows assets will, once completed, have a positive So in summary, while we continue to see an overall pressure on average margin, We are not seeing a significant long term shift for our business at this time. Moving to our share of associates and joint venture profits. This has increased in the period due to the impact of Pfenex profits now being recorded in this period. And on operating expenses, We have recorded an improvement with costs reducing to £673,000,000 Let me move on to financial discipline. Financial discipline is something you will not be surprised to hear that I see as a major objective. Coming into this role, I am looking closely How we ensure financial discipline is applied through a period of ongoing change internally and as a result of the impact of ongoing external pressures. It is clear for any business and sector going through transformation that there is a balance to be struck. Taking out at the right pace to achieve the economic outcome required and taking out the right cost so the space is created for the investment in those areas of growth for the future. We remain on track to deliver the $350,000,000 of savings that have been highlighted previously. As a reminder, This represents 23% of the baseline cost in 2017. We are making good progress. At the end of June, we have undertaken actions that will deliver £234,000,000 of efficiency. So we are now already 2 thirds complete As we have seen in previous periods, the profit and loss benefit, As shown on the lower slide or on the left hand side of the slide, lags the actual actions taken. And as has been highlighted before, a number of the Key planned benefits in our operational and technology arenas will not be realized until the end of 2019 and into 2020. In the first half of the year, the benefit of efficiencies amounted to $103,000,000 for the period, dollars 206,000,000 annualized, Compared to $40,000,000 as at June 2018. Given we are ahead on the completion rate on actions, We are expecting an increased proportion of benefits to be realized in the results in the second half of the year. During this period, we have also seen investments in acquisitions and preparations for the Virgin Money activity, together with investments in staff through new hires and staff inflation and through acquisitions such as Orion, providing real estate capability in the Far East. Now given the ongoing pressure on the top line of the business, we continue to look at all opportunities in terms of both our cost savings And how we are adding costs in our business in order that we increase the pace for realizing these benefits and to ensure a relentless focus on the business as usual disciplines. This includes accelerating the actions planned for subsequent periods, such as accelerating the review of those funds which are subscale and not economic, Quicker streamlining of administrative processes and robust supplier cost management and accelerating our work to aid those areas of the business where the cost income ratios are too high for this environment. In particular, there are opportunities for us to be more agile and coordinated in how we operate across our ecosystem, And we are seeking to accelerate these opportunities. Our cost profile does not lend itself to being flexed in any one half year period respond to the revenue challenges we have experienced. The cost income ratio, therefore, has increased in the period to 72%, reflecting the changes in revenue. However, I have now intensified our financial discipline on revenues and cost to make sure the business is the right size for these conditions The cost to achieve transformation are being funded from our balance The transformation we are undertaking is significant in its scale, And that scale brings upside by incorporating investments in the business for the future. For example, within the restructuring of $198,000,000 in the first half of this year. There are costs which represent key investments in our business, and I will take just a moment to give you 2 such examples. Firstly, Charles River and the Front Office platform. This accounts for circa 10% of our spend in this period provide the core data platform on a consolidated basis for all fund managers. The upgraded versions are far to the original and will place us in the top quarter of our investment platform technology, thereby providing future proofing for some years to come. And secondly, as Keith has highlighted, our people are essential to our business. So a key area of investment for us The transformation of our HR systems and processes. This had been slow to get moving. But with new focus in H1 2019, the pace has picked And the outcome will be a consolidated system and process by Q1 2020 that will be a key enabler for connecting our people and providing an enhanced Turning now to our capital position. As Keith has said before, we have a strong capital and balance sheet, which is an important source of benefit to the business and to shareholders. Key movements in this period comprised the buyback, the debt retender And the sale of 6.21 percent stake in HDFC Life. Overall, since the start of the year, our regulatory capital surplus has increased by 300,000,000 The $900,000,000 The regulatory position only includes $200,000,000 of the $5,200,000,000 market value of our We have also continued to optimize the debt arrangements, re tendering debt that was Solvency II compliant, but not appropriate for the CRD IV regime. We will continue to optimize our debt arrangements given ongoing consultation and change within the regime. And finally, turning to the dividend. It was highlighted clearly at the year end that the Board intended to hold the dividend throughout the period of transformation. I can confirm that the interim dividend position is unchanged. However, the estimated cash cost of this dividend has changed with a reduction of 19% to 173,000,000 For June 2019, diluted EPS is 0.27p a considerable uplift on the prior period due primarily to the crystallized gain on sale of 6% of HDFC Life. Diluted adjusted EPS has increased to This has been helped by our focus on financial discipline, combined with a 19% reduction in our share count over the last 12 months, a Product of returning over $1,500,000,000 to shareholders via the B Share scheme and buybacks. Looking forward, The distributable reserves will be further supported by these profits, the receipt in the second half of twenty nineteen of the compensation payments And the continued realization through 2019 2020 of synergies and transformation benefits. With that, Keith will now comment on the positioning of our business for the longer term. Thanks, Stephanie. While we continue to make good progress with our strategic transformation and what can only be described as a challenging environment, It's worth reminding ourselves that, that transformation is proactively positioning the business for long term growth. Over the next 10 minutes or so, I'll focus on the opportunities opening up for us as well as the investments we're making to take advantage of them. Our vision is to create a world class investment company that has global scale, well diversified by product and channel. We aspire to Be a leader in new active investing with reach to clients and customers throughout the savings and investment ecosystem Via our platforms, advice and investment content. It's these characteristics that will bring us even closer to clients Customers and help meet the rapidly changing demands across the investment landscape. As we continue to position the business for long term growth, we are also helped, as Stephanie pointed out, by our strong balance sheet. This is not only a source of resilience, but also a means of funding the investments in innovation, technology So what are we going to do to take advantage of Generated by that rapidly changing investment landscape. As I did at the finals in March, I'll concentrate on 3 areas I will now hand the call over to the operator for the next question. And finally, utilizing our balance sheet to fund investment and drive So first, investment performance. Performance across the house continued to improve In 2019, 53% of funds were ahead of benchmark in the year to June. And for the all important 3 year track record, 65% of funds were ahead of benchmark compared with only 50% at the turn of the year. The performance enhancement plans we put in place over 18 months ago to address underperforming funds Are clearly bearing fruit as has the investment teams coming together. By the end of June, Asia Pacific Equities and GARs were ahead of benchmark at 1, 3 and 5 years. JEM Equities, Global Emerging Markets are nearly 900 basis points ahead over 1 year and ahead at 5 years, but still have a little bit of work to do to repair the 3 year track record. However, the improvement in global equities is nowhere near as strong. It will, of course, take time The improvement in investment performance is widespread and much broader than these four areas. Equities have strong 1, 3 5 year track records in the increasing number of European smaller companies are 500 basis points ahead at 1, 3 and 5 years. European long term quality is over 100 basis points ahead at 1 in 3 years and over 300 at 5 years. The U. K. Opportunities and long term quality funds have equally Strong records. We also have broad outperformance across fixed income. All regions are ahead of benchmark and investment rate credit, And there are strong track records in emerging market debt, total return credit and diversified growth funds. To be sure, the strength of the turn in performance has been helped by the grain of the market. However, it's also clear that the improvements in investment process And people leadership have had an equally powerful impact. It's also encouraging that this has taken place Again, across a broad range of funds at a time when value as a style remains deeply appreciated. Furthermore, the investment to improve our underlying infrastructure, such as moving to an upgraded single instance of Charles River The unified people system on Workday will bring our teams even closer together and reinforce With investment performance improving, The competitiveness of our product suite, Campbell and his team are able to increasingly concentrate on attracting clients and customers. At a time when fees are under constant pressure, it's even more important to pay attention to the sources of long term revenue as well as asset Great. According to the Boston Consulting Group, 90% of the industry's revenue growth will come from new active Over the course of the next 5 years, around 49% will come from alternatives, 23% from solutions and the remaining 21 We have the scale and breadth of capability to take advantage of these opportunities. We are a top 10 player in alternatives, a leading provider of risk based solutions for retail clients and one of Europe's Leading managers of insurance assets. We also continue to invest by deepening and broadening our product range to ensure that we continue to meet client needs. Some recent examples of the expansion of our real estate capabilities Into Asia through the Orion platform and the launch of our index of hedge funds, which now has over €500,000,000 of assets under management. On Active Specialties, we continue to enhance our ESG offering. And our China Asia fund now has €2,600,000,000 of assets under management from us taking domestic China to clients around the world. These examples underline our strengths in global distribution across the wholesale and institutional channels. We also continue To invest in our reach throughout the savings and investments ecosystem, we've announced new relations with Skipton and Virgin Money that utilize both We will now take a look at our strategy and our strategy to bring access to over 6,000,000 customers. Our unique investment hub technology continues to grow at pace And now have assets exceeding $10,000,000,000 We accelerated the build out of $18.25 with the acquisition of the adviser teams from The strategic relationship with Pfenex brings us access to 10,000,000 customers, There has been a slower start than I think either of us would have liked. Rest assured, we are taking action to ensure This partnership will deliver on its promise. The net results of all of that is that we have access to 16,000,000 And these customers have access to a broad range of offerings throughout the ecosystem from digital self-service traditional face to face through either 1825, Parmenian or the 5,000 IFAs powered by our As I said earlier, we continue to be very busy, but in a good way as we remain focused on driving the transformation that's opening up As well as the regulatory surplus that Stephanie has pointed out, we have valuable listed investments worth over 5,000,000,000 We have a long and proud track record of reshaping our balance sheet as we transform our business, And we have been returning capital to shareholders, and we intend to continue that Tradition. To that end, we will commence a 200,000,000 share buyback within this quarter to complete The €1,750,000,000 capital return we announced last year. We are also deeply aware These investments are held ultimately to create value for shareholders. And as we continue to reshape our business, We will also remain focused on ensuring that we unlock the value of the assets on the balance sheet. I am confident We will make further progress in the second half of twenty nineteen. In summary, the first half of twenty nineteen So as continue to make progress in delivering our transformation in challenging market conditions and in positioning the business for long turn right. We have the financial strength to invest in innovation, technology and our people, while at the same time rewarding shareholders. As we do this, I can assure you that in these tough market conditions we face, we will be relentless And our focus on the 3 drivers that are most fundamental to our business and to delivering shareholder return: attracting assets, intensify our financial discipline and unlocking the value from our balance sheet. Thank you for listening. Stephanie Campbell and I will now be delighted to answer your questions. Operator? Thank you. Ladies and gentlemen, we'll now begin the question and answer the first question comes from the line of Hubert Lam from Bank of America. Hi, good morning. I just got a couple of questions. Firstly, on costs. You're currently about 2 thirds of your way in terms of your cost synergies. Just wondering what do you think is a possibility of maybe increasing the cost savings that just given how fast you've achieved your savings to date? Second question is on fee margin. As you mentioned, the multi asset margin fell by 10 basis points over the half. But you also mentioned the possibility of it increasing if the performance improves or is maintained. Can you maybe discuss a bit in terms of what performance needs to go to for that fee margin to ratchet up again and what the fee margin how much higher the fee margin could be If that if it's triggered. Thank you. Okay, Hubert. I'll go we go to Stephanie first for costs and then go to Campbell on the question on the fee margin. So thank you. Our priority is to deliver the €350,000,000 of savings and to make sure that we're doing everything that we can do in terms of the efficiencies. As you say, we are already on track sorry, we're already 2 thirds way through in terms of creating those actions, which again is pleasing. As you would expect in terms of the financial discipline that I want to see coming through, we are going to do everything in terms of the particularly in the business as usual space to make sure that are doing everything that we can do to adjust in terms of the environment that we're in. It's not about setting new targets. It's not about trying to race to another target in an external environment, particularly at this point. The real focus for me is making sure that we're delivering on the savings we have and make sure that we can get that financial discipline To make apply in all areas of our business as usual activity. And that's really where I mentioned that we want to accelerate As much as possible, things that were already going to be planned, either towards the end of a transformation period or beyond. And it's those sorts of areas that we will be bringing in. Those are the sorts of things you would expect us to be doing as part of the business as usual discipline in terms of the current environment. In relation to the fee margins, I think if you look at Slide 13 that Keith alluded to, You'll see a significant improvement at that vital 3 year number and also the 1 year number. If that continues, then we hope that a) the outflows will continue to reduce And that also the inflows in those products, which are currently we still receive flows into them We'll also pick up. As to when and how that might happen, it's very difficult to forecast And we prefer not to, but you're seeing the margin impact come through, I believe, in slide 24, Which is the mixture of the exacerbated outflows we saw in that asset class in the last half And also some of the fee variations agreement that we've had put in place, which by the way, if performance continues To improve, there will be the ability to claw back some of those fees that have been reduced. So, the trend I believe is significantly improving in terms of performance And as and when that comes through to the margin pickup and the flow improvement, that's very difficult to predict. But I think if you look at the overall trend that Stephanie picked up in terms of the raw increase in gross flows and the Improvement in the net flow position with the overall increase in our assets under administration and management. I'll take that in these very difficult trading conditions that Keith has also referred to. The next question comes from the line of Gurjit Kambo from JPMorgan. Please ask your question. Hi, good morning. Just a couple of questions. Firstly, just in terms of the revenue margin. So in Equities, the margin Increase a couple of basis points, I think, in the first half. So just trying to think about the dynamics there. Are we sort of saying that the What you're losing or what you're bringing in is actually not at that different levels. And maybe the inflows are at slightly higher To drive that revenue margin up in the first half. So that's the first question around equity margins. And then second, just more broadly around sort of the flows In areas like Private Markets, I guess, the broader industry has been washed with a lot of cash coming in. And For SLA, we've seen a sort of couple of halves now where you've continued to see outflows. So just sort of what's going on there? And then just on Myfolio, in terms of The sort of dynamics there. It feels like the inflows have sort of held up versus the last kind of couple of half Yes, but half periods, but the redemptions have picked up there. So what's sort of going on in the Myfolio and Palm Union? Okay. On revenue margin, we'll go back to Stephanie, but I think we're largely talking about a mix Impact, Stephanie? Yes. I mean, in terms of specifically on the margin and equities, as you say, We are seeing an improvement on that second half of twenty eighteen and a consistency with the first half year period of June twenty eighteen. But as you say, what really is driving it through, therefore, is the overall mix and volume that is moving across the overall book. I think what is pleasing is that certain areas and asset classes actually are holding or in some cases improving in their margin overall. And therefore, in terms of Our diversification across the activity in the period is therefore helpful in terms of our overall average margin. Conclude. Yes. I'll just add to that. When you do have improving performance, improving market levels and things you can maintain Pricing, you'll see that there's been a range of good wins across the piece from many regions, Both in new active equities, both in alternatives and things. In relation to the alternatives and private markets picture, There's a thing going on there that as strategies come to their end, they are Either recycled or replaced with new strategies. And that means that until we actually draw down on those commitments, The commitments that we've won do not appear in the flows. So if you have a look at the outlook there both in terms of real estate, Private markets, private equity and the like, we do have a decent pipeline of 1 and not funded and committed and not yet drawn down. So it's a normal cycle of what happens in that asset class. In relation to the Myfolio flows, There was one significant client loss in the period which impacted it as you picked up. And we've also launched new versions of Myfolio, Newfolio Life and the like to take advantage of people wanting lower priced products. So we now have Basically a bronze, silver and gold version across the piece from myfolio. These were launched specifically with Virgin Money in mind but also to the Skipton partnership, Which we hope will continue to grow over the next 2 to 3 years. So going back to Keith's point that you saw with those access to those many millions of customers, we're now able to offer a range of outcomes and services At all points of the price spectrum to take advantage of those people that are prepared to pay Good active and constrained strategies write down to those people who just want a passive or better beta approach. Okay. We can finish the next question. Thank you. The next question comes from the line of Bruce Hamilton. Please ask your question. Hi, yes. Thanks for taking my questions, guys. I've probably got 3. Firstly, on the sort of performance numbers, I mean, I take the point on the some of the bright spots you flagged. But when I look at the table, I mean, your 3 year in equities, which is high margin, Still very weak at 27% above benchmark. So can you walk through which areas are still really weak and where we need to see an improvement? And also on the multi asset, which I guess is another high margin area, the 3 year has clearly improved a lot. But the 1 year at 21 Above benchmark suggests that that's probably going backwards in the short term. So I just want to understand a little more. It looks like the 65% is kind of Helped by lower margin areas and higher margins still have quite a lot of issues. So maybe just help me understand that. Secondly, on sort of liquidity risk, To also be a market topic, how do you assess the risks that the FCA could look at Changing rules around particularly, say, open ended real estate funds where liquidity mismatches perhaps look more extreme than other areas. And then finally, on the sort of strategic investments and balance sheet. You mentioned the ability to invest in tech and so forth. Can you give us a little bit more color on which areas you think look most interesting for investments. Is it really technology? Or are there sort of asset classes or other things you'd like to get your hands on? And for some of the €5,000,000,000 of strategic investment value on the balance sheet, any of that, that we should think about in terms of divesting or not being core to strategy going forward. Okay. On the performance numbers, The one area which I think I called out that we are It's not doing as well. It's ahead it's getting ahead of benchmark, but the progress is nowhere near as strong as global equities. And in particular, 1 of our large global equities has an emerging market, TILT, and that's what is being sold to investors. So at a time when the U. S. Economy and U. Market has been relatively robust. It will take time for that to swing around. So what you're seeing is a lot of components kind of coming through. On the multi asset, You're looking at averages there rather than point forecast because it's and we are seeing Across the piece, I would reiterate that the bulk of our multi asset funds and GARs, in particular, is now ahead of benchmark 1, 3, 5 years, and it is doing its job. On liquidity risk, I think a couple of things on that. This is A market perennial that's been around for a long time. I've been through several cycles. Certainly, my interaction with the FCA suggests They're in an appropriate strategic place. If you think back to what happened with the lockup in Property funds and the way in which that was dealt with post Brexit. I think it was dealt with relatively well. And conversations are ongoing about how you deal with that. So I don't see any signs yet of a knee jerk reaction. I see rather sensible conversations about the wiring and plumbing and the liquidity ladder. And the other thing I point I'd make on that liquidity ladder, when you look at firms like us and somebody else, although it pains me to say it, we've had those outflows from GARs and we've navigated So that there are people out there Doing things in the right place. On strategic investments, I've got a couple of comments. When we were talking about investments in technology, we were really talking about The Charles River and the technology that connects our middle office with suppliers where we are making investments Funding them off the balance sheet and significantly upgrading our own technology, which helps bring the teams together, and we're to make significant progress on that in the end of 2019. In terms of the strategic assets or the assets on the balance sheet, we've made it Clear the investment in Phoenix is strategic. I would view the AMC in India as But I would note, and I think it's important to understand that we had an IPO a year ago And we need, together with HDFC, to facilitate A minimum public shareholding of 25%. There needs to be a 25% free float in India, and we have until August 2021 to do that. So there will be We'll play our part in making sure that happens. Thank you. The next questions come from the line of Arnaud Gibla from Exane. Please ask your question. Yes. Good morning. I've got 3 questions, please. Firstly, if I can come back to the open ended real estate funds. You mentioned that conversations were ongoing with the FDA. But how do you approach any liquidity risks from your Because when you go back to your gating experience from 2016, clearly that was triggered by Brexit in the With the risk of a hard Brexit coming up and while the U. K. Property market is not exactly performing really well, do you see Have you repositioned those portfolios for eventual redemptions? And my second question is on the management fee margin in the multi asset product. Part of the drop you mentioned is part of the reprice. Is the revenue margin you're reporting on a run rate basis, did the repricing happen During the half and should we be looking another way of asking that question is should we be looking at that run rate being a bit lower? And finally, if I can come back to Slide 9. You mentioned a €25,000,000 difference between the cost synergies that have been achieved and those on a run rate basis. So is that what we're looking at for H2? You're starting off with a €25,000,000 lower run rate Cost based to which we take off some cost synergies to come and add back some investments. Thank you. Okay. Well, if I can do the Oeyk Campbell, we'll do Fee margin and then we'll come back to Stephanie on the $25,000,000 We have been working hard to make sure that And more accurately, our tapes are in absolutely the right space. And at the moment, They are open. But one thing I can say is we have a principle that says we will do whatever is the right thing For our clients and our customers, and we'll work with The authorities to make sure that that's in a good position. So I don't really have much to add. I think it's pointless Speculating about those issues. We're aware of the issues, and we've managed through them in a previous period. And I think our track record actually Campbell, on the fee margin? Yes. On the fee margin in respect to multi asset, there's a very Idiosyncratic thing happening here with a vintage of clients that got into the funds and then experienced a difficult Period. So they are the clients in which we varied the fee arrangement and reduced and introduced a performance fee And who stayed with us. And then secondly, the assets that are coming in, we are Winning those assets at sort of traditional rates, which remain Anything north of 65 basis points and up to 80, 85 basis So there's an idiosyncratic thing going on here in relation to a vintage appliance that we have come to sensible arrangements with and The new business that's coming in is at sort of traditional rates. So that Coupled with the mixture that we've got there has resulted in that margin drop in that particular In the first half of this year. In the first half of this year. I think in terms of how we're looking at the guidance We would not see that having an additional impact as we look forward to the second half of the period because of the reasons that Campbell has said. If I just turn to then your point about the run rate. I think your question refers to the €103,000,000 of annualized Run rate costs that I mentioned that applies for the first half of 'nineteen versus the £40,000,000 in the equivalent period in June 2018. I also mentioned when I was just running through the presentation there that our expectation is Very much that we will see an increase in the run rate that we've seen in H1 twenty nineteen for the simple reason that a number of the areas We're always planned to come through in terms of the benefits in the second part of the year and particularly quite a lot of heavy lifting that's Being done in the back end of 'eighteen and into the first half of 'nineteen, those benefits are never planned to materialize until Into the profit and loss account until the 2nd part of this year and into 2020. So as we're looking at the cost profile, we are Working with the discipline to make sure that we come in at an increased run rate in the second half of this year. And I'd also just go back to an earlier point, which is that whilst we are, as I said, are very much focused on delivering the target, A key part of the discipline that I'm driving forward in terms of the financial costs is to make sure that we continue to focus in on those BAU I'm bringing them down at the same time as well. And that includes actually where we will add on costs and how we will add on costs. And again, as I referenced before, about getting very good discipline around the ongoing business as usual expenditure, reflecting the tougher conditions that we're in. Okay. Thank you, Stephanie, and thank you for your questions. And thank you for coming on the call On a what I know is a very busy day. And I know that Stephanie and I will be available and meet Those who would like to for lunch at Bow Bell's house today to answer more questions. So thank you very much for your questions. Thank you very much for listening, and please enjoy the rest of your day. Thank you. That concludes our conference for today. You for participating. You may all disconnect. Have a nice day. Dear speakers, please stand by.