Good morning, good morning. Thank you for coming. interim results for the six months December to December 2022 for Ashmore Group. You're in the right meeting, if that's what you're expecting. If you're not, please leave, find a better one. There are plenty. overview, where are we at? the bits at the beginning, you know about all this. It's complicated, it's ugly globally. We've got inflation. People are fighting. We've got China reopening, which is positive at the margin. We've got the Russians being revolting. All those sort of backdrops make things quite volatile, and they'll continue to be volatile. We've seen a little bit of recovery in both equity and fixed income in EM.
As we would expect, given how we act in down markets, we're performing quite strongly at the minute, as we would expect to do so. That's good. That's all normal. In terms of our financial performance, Tom will get into the detail on that, but that's much as we would expect. Lower AUM levels, and in terms of where we are in the cycle and of course our business model is relatively robust. We try never to do anything that's a panic. We try pretty conservative in the way we run it, manage the business, and we're pretty comfortable in what where we're going. In terms of headlines, average AUM is down 35% year-on-year. Net revenue down 22%.
Our expenses are down 3, despite a higher inflationary environment, which is a difficult thing to continue. We're happy at the moment. Adjusted EBITDA down into the 50s. I think we've always said for a very long time that EBITDA above 60, margin above 60 was gonna be difficult to maintain. We still maintain that. We're still industry leading, we think, in terms of margins. Statutory PBT includes a GBP sixteen and a half million unrealized mark-to-market loss from our seed program. I emphasize unrealized. It happens, it goes up and down with markets. The seed is there to grow the assets under management. Local business is pretty resilient in terms of asset under management move, only down 5% in the period, which is part of the point of the local businesses. They give us diversification.
As they get bigger, they give us more powerful diversification. Where we see it from here, macro, it's out there, but it's less painful, depending upon where we go with what happens in terms of supply chains, et cetera, but it's less painful. It's all gonna be about the data, really. U.S. data is driving everything. Valuations are relatively attractive. Big discounts again to DM, which is nice. Investor positioning is pretty light. It started to turn a bit this month, or last month, a little bit. We started to see a little bit of inflow over the last sort of two to four weeks in terms of the markets generally. We feel very strongly that at this time, this is normal. We would expect outperformance through the market recovery in EM.
We see strongest chances of outperformance in equity and high yield. Volatile. Yeah, look at this. If you look at the table on the right, we've looked at the four largest fixed income asset classes and equities. Equities are most volatile, as you might expect. Emerging market equities in Q1, the quarter of our fiscal half, in other words, the quarter to the end of September, down 12%, up 10% in the quarter to end of December. Pretty volatile. In terms of fixed income, much less volatile. I guess the most volatile piece is local currencies, you might expect, 'cause there's FX risk in it as well. Down 5%, up 8%. Net, the fixed income asset classes were up over the half, then the equities were down 3%.
Developed market equivalent, global equities up 2, global bonds down 3. Clearly a difference and a distinction in terms of what's going on, and that's really part of the opportunity. In terms of where the macro's at, still relatively high inflation, although some of the headline numbers are trending lower. I don't think that's a one directional thing, though. I think we're gonna see little bumps in the road there. Policy tightening's been very aggressive and continues. Ukraine War's very expensive and continues. I suspect we're about to hit another phase of that being quite ugly over the next couple of months. China unwinding at massive speed its zero COVID policy, which is interesting. Investors still do nothing when they're frightened, so risk aversion tends to create not much activity.
As I say, we are seeing a bit of activity now in terms of, people sort of reinvesting in the asset class a little bit. If 10 was everybody loving to invest, they've gone from zero to one. It's a start. Again, very typical after ugly periods of performance in the market. In terms of the index, modest overall index returns. As you can see, the vol's on the right-hand table. EM fixed income has outperformed DM. EM equities has underperformed DM. Mixed returns. We would see more upside in many ways in terms of the equity space. End of the period, very strong rebound. There's more room to go.
I think it's going to start trading around here, having been so heavily trashed through to about October time last year. You've seen a bit of a bounce, which is good, but now you'd expect it to sort of move around with fundamentals. Yields and spreads are still high. Equities are trading at peak price-earning ratio discounts. It's an environment where you can make money, but it's not, you know, shut your eyes, lever up and see you later, Charlie. You need to pick the right things, and you need to be actively trading, in our opinion. That's sort of where we stand. In terms of investment performance, again, typical really for us in the cycle.
Things really sort of started to kick in for us in November, so midway through the second quarter of the half. In terms of alpha, as we would hope, having acquired risk on the way down. We've now moved to one year, about 45% outperforming, the same as kind of the previous half. Three years, we're now up to 40 from 28 the previous half, and five years, we're at 43 from 48 the previous half. About the same. The big injection of performance has come sort of since, as I say, midway through the quarter. Over the last six months, we're up to 75% of assets outperforming. We're above 50 in all themes. It's typical in terms of outperformance. This is what usually happens. We started well in 2023. That's great.
We'll see how that continues. We think there's more to do. We think there's plenty to go here. Do you wanna chat about the numbers, Tom?
As you've just heard, Ashmore's near-term investments, investment performance is strong, and the outlook from here is more constructive. That said, the firm's financial performance that's being reported this morning was influenced by average AUM levels, which at this point in the cycle were 35% lower than for the same period a year ago. As a result, adjusted net revenue declined 22% to GBP 107.7 million, reflecting lower net management income, offset to a degree by positive FX revenues generated in the period of weaker and more volatile sterling. I'll cover the operating costs in more detail later, but the headline continues to be an ongoing focus on managing costs through the cycle. Consequently this period, the business model has delivered a 3% year-on-year reduction in expenses.
Notwithstanding an increase in the variable compensation accrual at this half-year stage to 22.5%. As a consequence, adjusted EBITDA of GBP 63.2 million is 31% lower than in the prior year period, delivering an operating margin of 59%. Below the operating line, the mark to market of the group's seed capital resulted in an unrealized non-cash loss of GBP 16.5 million, primarily driven by lower valuations in the alternative fund. In aggregate, therefore, profit before tax declined by 54% to GBP 53.8 million, and on an adjusted basis, diluted EPS of 7.8 pence per share is 25% lower year on year, out of which the board has declared an unchanged interim dividend of 4.8 pence per share.
Before looking at the details of the P&L, I'll walk you through the development of assets under management over the period. Assets fell by 11% over the six months to $57.2 billion, comprising positive investment performance of $0.8 billion, and net outflows of $7.6 billion. As Mark described, there was a significant difference in market performance between Q1 and Q2, with a more positive market sentiment towards the end of the period, more than recouping the Q1 drawdown. Net flows followed a similar pattern, with the outflow in Q2 being approximately half of the level that we saw in the first three months. On the subscription side, while there continued to be relatively subdued investor risk appetite for much of the period, we saw a number of top-ups from institutional clients taking advantage of the highly attractive valuations available.
This early adopter behavior is typical at this point in the cycle and is often the result of clients recognizing the strong early-stage recovery returns that can be generated after a period of market weakness. In terms of redemptions, the de-risking behavior that was evident towards the end of the prior financial year continued into this half. Approximately a fifth of the outflows over the six months, or $1.8 billion, was due to reductions in the size of the overlay and liquidity mandates, consistent with the lower market levels seen for much of 2022. While the remaining fixed income outflows were mainly the result of institutions making asset allocation or portfolio risk decisions, given the prevailing global macro uncertainty. The equities team experienced a small net outflow of $0.2 billion.
While there were some redemptions from the top-down active strategy in the All Cap funds, the ongoing momentum in locations such as Saudi Arabia delivered net inflows from local clients. The group's strategic objectives remain to diversify assets under management over time through growing the equities franchise, increasing distribution reach through intermediary retail channels, growing fixed income strategies such as investment grade, and further development of the office network. Turning now to the P&L. Adjusted net revenue was 22% lower year-on-year at GBP 107.7 million. Net management fees of GBP 98 million reduced by 25%, driven by lower average AUM, but benefiting from sterling being on average 13% weaker over the period.
The net management fee margin increased by 1 basis point year-on-year, largely reflecting the positive margin impact of flows out of lower margin large institutional accounts, including overlay, offset by modestly negative effects relating to investment theme mix. For example, less AUM and blended debt and other factors such as product mix and competition. Over time, our strategic objectives to diversify AUM should provide support to the revenue margin. For example, by delivering growth in higher margin products and channels such as equity and retail, coupled with the growth in the local market businesses.
The asset management industry continues to be competitive and therefore I would maintain my assumption that the margin drifts lower by approximately 1 basis point every 12 to 18 months. Despite the difficult market environment, Ashmore generated GBP 3.7 million of performance fees due to outperformance in certain blended debt and local currency mandates, as well as successful asset realizations from the alternatives theme. I expect this to be the bulk of the performance fees to be delivered in this financial year. Finally, on revenues, the meaningful movements in the sterling dollar rate during the 6 months provided opportunities to sell dollars at attractive levels. This, combined with the marking to market of the firm's hedges, delivered total FX income of GBP 4.7 million.
As a consequence of these actions, the group's cash balances are now split approximately 75% sterling and 25% US dollar and other currencies. In a weaker revenue environment, we've continued our focus on controlling operating costs. On an adjusted basis, operating costs were reduced by 3% year-on-year to GBP 46.2 million. The main driver was a lower charge for variable remuneration, which was reduced by 19% year-on-year to eighteen and a half million pounds, broadly consistent with a reduction in adjusted revenues over the period. Expressed as a percentage of pre-bonus profits, the 22.5% accrual is a touch higher than the historical interim charge, reflecting a point in the cycle where strong investment performance is being delivered, but the firm's financial performance is naturally lagging as a consequence of lower average AUM levels.
The half-year accrual percentage also recognizes that in recent years, the full-year VC charge has been above 20%, and at this stage, it seems likely that the year will follow a similar pattern. As usual, the actual full-year charge will be determined by the remuneration committee, taking into account the full year's performance and could therefore be higher or lower than the half-year assumption at 22.5%. For modeling purposes at this point, I would use the interim percentage as a guide for the full year's charge for the current period. The weaker sterling impacted staff and other operating cost lines, accounting for approximately half of the year-on-year increase in each case.
The remaining growth is due to factors that I described with the full year results in September, namely a return to more normal business activity levels post-pandemic, including travel and the impact of higher headcount and some salary increases. Some of the cost drivers, in particular the salary increases, occurred midway through the period. Given the current expense run rate, the second half will see a slightly higher level of operating costs, meaning that full-year operating costs will come somewhere in the mid-fifties. Ashmore continues to invest in growth by deploying capital resources to its seed capital program, and in this period, investments were made in fixed income strategies while capital was successfully recycled from the alternatives and equity themes. Liquid fixed income and equity market movements in the period resulted in a small mark to market gain and loss, respectively, in those asset classes.
Overall, there was an unrealized GBP 16.5 million P&L loss for the period, driven by lower mark-to-market valuations in the alternatives theme, in line with weaker equity market levels. This therefore did not have any impact on cash flows. The split of seed capital exposures across the underlying asset classes has remained broadly consistent, with the majority of the group's investments being made in strategic growth areas such as equities and alternatives. As you can see, the group's seed capital investments have made a material contribution to AUM development over time, with approximately 10% of assets in funds that have been seeded through the program. On a statutory basis, profit before tax declined by 54% to GBP 53.8 million.
The effective tax rate of 17.7% is lower than the effective prevailing UK rate of 20.5% for the period due to the geographic mix of the firm's profits and the allowable value of employee share awards for tax purposes. On an underlying basis, given this mix of profits and the known changes to corporate tax rates, such as the increase in the UK rate to 25% effective from April 2023, the group's effective tax rate going forward will be between 17% and 18%. Adjusted diluted earnings per share of GBP 0.078 are 25% lower year-on-year, out of which the board has declared an unchanged interim dividend per share of GBP 0.048.
This recognizes the importance of the dividend to shareholders and considers the financial performance in this period, the financial resources available to the firm, coupled with the near-term outlook. Turning now to cash flows, the group generated GBP 46.4 million of operating cash over the six months. There is some seasonality to cash generation during the year, with the first half including significant payments relating to the prior financial year, including cash bonuses and the distribution of the ordinary dividend. After GBP 15.6 million of share purchases to satisfy employee share awards, a small net incremental investment into the seed portfolio and a modest translation benefit from the closing sterling dollar rate, the group ended the period with GBP 480.8 million of cash.
The prevailing interest rates available mean that the group is now earning more income on its cash deposits, with GBP 6.5 million of net in-interest income reported for the 6 months. In the absence of any further moves in market rates, I would expect a similar level of income to be earned in the second half. Finally, on the financials and update on the balance sheet. Ashmore maintains a strongly capitalized and liquid balance sheet that serves the firm well through different market cycles. There continues to be no debt. In addition to the approximately GBP 480 million of cash, there are GBP 260 million of seed investments based on current market values, the majority of which is held or invested in funds with frequent dealing periods.
As at 31st of December, having completed the transition to the new ICARA regime, the board has assessed that the group requires GBP 84.5 million of capital to support its activities, including its regulatory requirements. Therefore, with total financial resources of GBP 704 million, there's a significant excess of GBP 620 million, equivalent to 87 pence per share. Finally, before I finish, I'll give you a brief update on the local emerging markets businesses. As a reminder, these operations provide the group with significant diversification benefits and provide exposure to strong long-term growth. In this period, the four local offices delivered a resilient performance, ending the period with combined AUM of $6.6 billion, representing a modest reduction of $0.3 billion over the six months.
As you can see from the top right-hand chart, the businesses are both growing in absolute terms and contributing an increasing proportion of the group's AUM and profitability. The aggregate EBITDAR margin is approaching 50%, and there's a meaningful degree of scalability across these businesses that underpins higher profitability levels as AUM grows. To highlight a few of the recent developments, Ashmore Colombia achieved a number of successful private equity realizations and is targeting meaningful near-term capital raising in both real estate and infrastructure, while the listed equity franchise continues to outperform. The investment teams in India and Saudi Arabia are delivering strong investment performance. In Saudi, the local product range is being expanded across liquid equity and fixed income, as well as alternatives.
Finally, Ashmore Indonesia continues to develop its institutional offering and to enhance its distribution access through the use of digital channels. I'll continue to provide you with updates on these businesses as they continue to develop and deliver increasingly meaningful diversification and growth to the group as a whole. I'll now hand you back to Mark, who will cover the outlook.
Thank you, Tom. Yes, where are we at? We touched on this a little bit. Macro headwinds, they may be receding. They're less bad than they were February last year, the end of it. There's still things, you know, chopping and changing. I think we all know that. I mean, the biggest positive thing is the policy change in China. A little bit of an extension of that, some of the early policy moves in the central banks in emerging markets in terms of managing inflation has been good. I think a lot in terms of market feeling, though, is gonna all be about U.S. inflation and how people feel about that and how the rest of the world follows that.
I think we're just going to be following the data pretty aggressively for the next 3 months. It's back to data in the U.S., I think is really the trade from the market backdrop. Meanwhile, we'd expect to see China's doing considerably better in terms of numbers all around. The growth premium for EM, in terms of the GDP, will get bigger, I think, over DM over the next 2 years. If you look at pricing on the right, I mentioned before, there's pretty light investor positioning in EM. You now got some pretty strong support, both in terms of price earnings ratios in equities. MSCI EM is at 11 and the world is at 15, so there's some room there.
In terms of yields, I mean, Treasuries are now up to, let's say, 3.64% in terms of the 10-year. There's a significant pickup over that for whatever you wanna do in terms of fixed income. Significant benefit for being in EM. After a period of risk aversion, it always takes time for people to come back. It's always. It happens initially a bit slowly. As I say, as Tom said, some of our clients have started. Some new money is coming into the market, it just takes a period of time. This is a normal space.
I really do believe that, I mean, if you look at the prices, the spreads below, and just in terms of there's plenty of room for fixed income spreads and also plenty of room for price-earning ratio expansion in terms of MSCI EM. We think both equities and high yield will outperform. Where does that leave us? 2022 was pretty ugly. Nobody liked anything much. You'll probably know that quite well. Investor risk appetite was very low, which means people did very little. They're beginning to change a little bit now. Basically, if they get decent beta, people will start to come back to the market. Once they get decent beta, then they start to look for places they can get alpha.
Very important we continue to do what we're doing, which is generating significant alpha now. The financial performance of the business, again, very typical. Lower AUM, lower P&L. Makes sense. It's where we are in the cycle. We continue to maintain our business model, which is we're trying to be sensible and conservative in what we do. We wanna be, in an unstable world, we wanna be a stable platform for people to invest in and people to work in. We feel pretty good about EM from here. This is the time in the cycle, the next year to 2, we should do pretty well against EM. I'm open to questions, please. You've got your own mic, which is scary. You have to press the button.
Testing. Yeah. It's Hubert Lam from Bank of America.
Hi, Hubert.
A couple of questions. Firstly, on flows. Just don't wanna talk about it more today, we'll talk about it more. You're talking about early stages of risk appetite coming back. What's typically the lag between performance and flows coming back? Just so we can get a sense as to possibly when you can possibly see the flows coming back in.
I mean, historically, you tend to get a little bit of early action out of retail, which is small in the scheme of things for us, and you get some institutional top up from clients that know you well. That's sort of in the sort of first six months after you've started to demonstrate some nice alpha. Typically, the largest flows can be 1-2 years out, and normally the highest flows are right before there's the next downturn. Just the law of what people do.
Thanks. Also can you talk about redemptions? I think a lot of the outflows you've seen over the last year are driven by de-risking, rebalancing. Are you seeing less of that now? It feels like it wouldn't make sense to de-risk at this point in the cycle, but just seeing if how client sentiment's changed.
I think the first quarter of a calendar year is always important 'cause people sort of look back on where they were come the end of December. There's still a fair amount of that goes on in Q1. We'll have a pretty good feel for that come April, Q2 calendar. April to June, we'll have a good feel for where that's got to. You can see in terms of the data that the net flows and numbers are dropping from, changing from significant outflow, they're moving back towards neutral and inflow. I think, yes, a lot of the de-riskers may well have de-risked, but there's probably a group of them that will still look at things on a yearly basis, will kind of take decisions.
Yeah, I would expect it to be not be over just yet, but significantly less every day. Please. You have to press the button and hold it in.
Hi, I'm Shrey Srivastava from Citi.
Hi.
Congratulations on your 6-month performance. While that's quite strong, the trends seem rather more mixed over a 1-year and 5-year period. Just wanted to ask, does this mainly relate to timing, or is there a mix effect as well within that?
This is normal. For us, this is the way we invest. I think it is timing. If we weren't outperforming at this point, there'd be something seriously wrong. It's always reassuring. You never know till you know, but it's always reassuring that our performance trends are as before. This is the time we should feel we should outperform. I think it's really a question of time. Yeah. Hi. Sorry. Yeah.
Thank you. Mike Warner from UBS. A question for Tom, I think more. In terms of the accrual of the variable comp at 22.5%, can you just remind us what that full year accrual has been in the past couple of years, the range maybe? You know, is that 22.5% something that we'll see in the first half of every year, kind of like we saw 20% in the first half of every year the past couple of years? Or will it be more dynamic depending upon where you are in the cycle? Thanks.
Yeah. Over the last few years, the full year number has been above 20%. We were 21.5% last year. We were 22.5% at peak a couple of years ago. What we've noticed is there's been a first half, second half skew in terms of profitability as you sort of caught up from the interim 20%. It felt like it was timely to adjust the mid-year estimate of where the full year is likely to come out. It's important, it is just an estimate. As I said in my pre-prepared notes, it could go up, it could go down. It'll all depend on what the rest of the financial year looks like.
At the half year stage, 22.5% felt appropriate given where we were in the recovery cycle and our previous few years of experience. The range has actually been much more than that. I think we've been as low as 14% in some years. It feels like...
11.7 was the lowest.
11.7 was that?
Yeah.
That's been before my time.
Before your time.
Yeah, it is a range, and it does depend on a range of qualitative factors as well as quantitative factors. For now, 22.5%, and my guess is it'll be 22.5% at the interim point next year. We'll have another look in the summer and see where we come out.
It ties in your performance too. If you're performing well, but you've got a lower AUM base, you start thinking, "Well, I need to reward the people performing well," so you have to manage that a bit. That's why we move around a bit. Please, gentleman in the front.
Hi, can you hear me? Yep. Good.
Very well. Thank you.
Just to follow up on that question on cost first and then one more strategic. If I've understood what you're saying is this is not a kind of step-up necessarily, this is more a balancing between first and second half, and then obviously it'll move depending on performance, et cetera. Okay, cool. On the more strategic stuff. In terms of your wholesale distribution, what are you kind of working on? How many sort of wholesalers do you have on? What's sort of key to, you know, re-accelerating maybe retail aside from risk appetite? In terms of sort of product development, where are you most kind of optimistic in terms of some of the, you know, additional maybe higher margin growth?
I know you've got some private market stuff that, you know, should be raising in the next 12 months. What else kind of out there in terms of thematic, sustainable equity results, you know, should we be thinking about that could, you know, drive growth in the next few years?
I think it's gonna be driven by where we perform. If you talk to the sales force, which we try and do fairly regularly, they would say that they see most risk appetite from where the most recent strongest relative performance has been. It's sales. I get it. You know, it's much easier to sell something that's doing better than something that isn't. If I look at the conversations we're having now, they tend to be around the equity space. That's true in the global and the local businesses, I would say. We're seeing a little bit of interest across some of the broader debt themes in terms of external debt and some blended interests just because people sort of see that as a place to go.
I think there is an understanding that they can choose particular debt themes. They don't just have to have everything blended. We're sort of seeing quite a lot of pitches at the minute for investment grade. That's where I think we'll see flow activity first. Like everything in life, as your numbers, the stronger they are in various places, you'll attract hotter money in some places, and cooler money takes a little bit longer. In terms of the retail space, yeah, that is very much a on and off market. I would expect retail, you know, so some retail money will probably trample quite quickly into equity, which is a good thing. There's still a general feel in most retail markets. There's quite a strong home country bias.
Some of the obvious places to buy to diversify from the dollar, for example, in terms of either buying EM equity and having some currency exposure along with the equity risk or buying local currency. The local currency place is a harder place for retail to get its head around. Even though local currency is performing pretty well, I wouldn't expect a lot of retail capital from there. I think the retail capital is gonna buy a broad debt product and a broad global EM equity product first. Yeah, please, gentleman in the...
Thanks. Sorry. A slightly boring question, but on the net interest income guide for the second half, I guess flat half and half seems quite a conservative guide given where rates have gone. Could you maybe elaborate on that and why that might be the case?
There's still got some longer-dated deposits that will run on into this half. You've gotta have the full period effect of all of that rolling off before you end up at what you would think of being a run rate if you took 3.5% and applied it to the GBP 480 million.
Okay. It should probably pick up from next year on.
Beginning of next year, you might see a high subject to where rates go beyond that.
Yeah.
yeah, all else being equal. Yeah.
Thank you.
Press the button.
Yeah. It's Arnaud Giblat from Exane BNP. A couple of questions. Again, back to flows. You mentioned the big tickets are probably one or two year out if performance stays intact. Is it still the case that investors are focused on the three numbers or perhaps if they're playing for the sharp recovery, maybe they're looking more at shorter-term performance?
I think existing clients tend to be quicker on the trigger because they know us. The longer they've been with us, the quicker they tend to be. Existing clients are faster to make a decision, so they'll tend to make a decision within a 12-month period. New clients just take longer because they kinda have to figure out where they wanna be. I would say they would look more at 3 year, but I'm generalizing.
Okay.
Certainly institutional. Retail is a bit more short term than that. It can be three months.
A quick follow-up for Tom. You mentioned during your presentation guiding at constant mix to, I think it was 1 basis point erosion per year. You used to say 1 to 2, is there less fee pressure, or am I interpreting?
No. I think you might be overanalyzing, Arnaud. I think I said approximately a basis point or so every 12 to 18 months. It's consistent guidance. It's very difficult to be precise on that because you can analyze all of the other moving parts in terms of product mix, fee mix, size of asset, investment. The bit that's left by default should be competition, but it's quite hard to pin that down. It's a basis point or so, basis point or two every 12 to 18 months. There's no change in the direction of travel.
Is that management fees only?
Yes.
Yeah. Because the mix, the fee mix changes, right? As you get down to lower levels, clients start to say, "Oh, maybe I'll try and screw an even lower level, but I'll give you a performance fee." As you get The fee mix is kind of subtly, not very subtly, but is evolving. It's not all management fee business only.
Lastly, just to come back to deposits. I mean, given where rates are, I think it's quite an important question. What's your investment policy with the balance sheet in terms of investing the cash?
We use an in-house managed money market fund for our USD deposits, which I mentioned is now the USD exposure is about 20% of the cash. The GBP deposits are put on a range of term deposits ranging from 2 months, at the shorter end to we've got some 12-month deposits that I mentioned are still rolling off. We run it relatively dynamically on a month-to-month basis.
Yeah, 'cause we like to have cash available if we wanna do something in terms of seed. We don't take any really long-term locked away cash except through seed product. Yes.
Morning. It's David McCann from Numis. Just to follow up on that question about the cash, because I think in the past you've had a much bigger bias towards dollar weighting in the cash. Why has the group, you know, decided to change? That does seem quite a big shift. That'd be the first question. Just on the tax, I know, you know, we've talked about this before in prior presentations, but, so your guidance, you know, when the UK corporation tax rate goes up to 25% to still have the effective tax rate at kinda, I think 17% or 18% you said. I guess why does the effective tax rate go from being, like, 1 or 2 percentage points below the statutory to being, like, 6 or 7 percentage points below?
I know we've dealt with this before, given we're now very close to that date, it would just be good to, Yeah, remind us of why that was. Finally, it looked like the management fee margin on the alternatives category went up a lot in the period to kind of 150 basis points or thereabouts. Just any moving parts then you didn't mention it in terms of the overall group context. Thanks.
Okay. On the FX exposure, we started 2022 at around 80% USD, 20% GBP. We've pretty much switched that around. It's now 75-25, the other way around. A lot of the spot sales that we executed were during the sort of late August through mid-September period. You remember in the middle of September, we almost got to parity, so we were selling our USD at what were relatively attractive rates for GBP. There's an obvious mismatch tension in our business between the revenue generation, which is 90% in USD, and the cash expense and other needs in terms of tax and dividend, which are all GBP. We took the opportunity through that period to sell our USD and switch around to be buy.
If we don't do anything else from here, obviously that will gradually shift back the other way as we continue to generate dollars and spend and distribute cash to shareholders and the tax authorities. It was a decision taken based on the rates that were available at the time. In terms of the tax rate, is the geographical mix. A meaningful proportion of our taxable profits these days are generated in jurisdictions that are not impacted by the U.K. rate. The U.K. rate is moving. That adds some upward pressure. We have a Dublin domiciled ManCo for our ICAV range. We have products that are managed and taxed. The management fees, therefore, are taxed in Singapore, which have tax rates of 10%-12%.
It's the geographic mix which makes a difference. The final-
Comment. Now I guess if that being the case, why are we not seeing lower effective tax rates now, if, you know, a bulk of them are at 10%-12%, why are we already seeing kind of 17%?
Because there are other impacts on the tax rate, such as, you know, how much you can allow for, share awards and other things going on. There are some specific six-month impacts that are then, if you like, replaced. Absent the geographic mix, the effective tax rate actually this period is much lower, and the geographic mix moves it back. It's complicated 'cause there are offsetting factors in this half. Going forward, it will be somewhere in the 17%-18%. Then the final question was on alts, which is realizations. Realizations in some of the lower margin themes. That's why the residual margin is moving up.
Does anybody have anything else? Okay. Well, thank you very much for coming. Thank you for your interest. Nice to see you again. Hopefully, we'll see all of you before the new year. Thanks very much, everybody.