Good morning, everybody. Thank you for coming. Ashmore Group first half 2026 financial results. Here is the overview. The market has done pretty well and we have done okay as well. Generally, EM is doing really what we would expect it to do, which is outperforming developed markets. We are at 82% of our assets outperforming in the one year, which is good. We are comfortable with that. Our flows have gone up, which is great. So 10% increase in AUM over the half, which gets us to about GBP 52 billion. Net inflows of GBP 2 billion. Subscriptions up 35%, reds down 39%. So things are moving in the right direction, or the other way around, 39 subs, 35 reds. Our statutory profits, revenues are down year-on-year due to lower average AUM and reduced performance fees, which you would expect.
We try and keep our costs as tight as we can, despite inflationary environment. Our investment performance on our seed has been strong. That has delivered GBP 55 million of gains. PBT up 64%, GBP 22 million. Diluted EPS up 90%, basically to 10p. Dividend per share maintained at 4.8. Strategic stuff that we are doing is working, which is nice. Equities AUM continues to grow steadily as it has throughout the last five years, up 17% to GBP 8.8 billion, which is 17% of group assets now. Local offices are also growing up another 8% to GBP 8.4 billion, which is 16% of group assets. Those two trends we expect to continue, steady growth in those places. Macro for us is pretty good, and we think that will continue. Economic growth is pretty solid in the larger EM economies in particular, which is where we see most interesting things going on.
Pretty high rates and steady deflationary pressure being exported from China, we think allows for further easing. Dollars we do not think get any stronger from here. Geopolitics are a drama, but they have often been a drama and in some ways quite good for EM. A lot of opportunities across the piece, so we keep thinking active is the way to go. Sitting on an index, you guarantee yourself a problem at some point. Update on the performance in particular, obviously dollar collapse is not great, but dollar weakness is good for us as a tailwind. So good absolute returns in 2025. Better than DM, as I said. The indices are on the right, so this is ignoring us. This is just the indices. The dollar was down 10%. The MSCI World Equity Index was up about 20%, and EM equity was 30%, and frontier 40%. So strong equity outperformance.
On global bonds, global bonds were about five or six. External debt was about 12, 13, and EM local currency was about 20, and corporate was just a little bit better than DM. Across the piece, index, no judgment required. Better year for the 12 months to December 2025 in EM over DM. What else is going on? U.S. tariffs are what they are. Generally inflationary and not positive for global trade. But what it has done is push intra-EM trade up quite a lot, and we see more of that coming. If anything, more intra-EM reforms and progress in terms of making stuff easier to do, which I think is great. Geopolitical risk has calmed down a wee bit until it has not. But most of the drama is out there, and people are aware of it.
Currency generally has underpinned equity and local currency in particular, and we are seeing that in terms of client appetite too. Continuing appetite for local currency bonds and for equities. Spread compressions helps. Developed markets, I think we all know the problems, right? Lots of debt, fiscal deficits. Politicians trying to issue paper to kick the can down the road. Valuation is expensive, and policy uncertainty. Just summarizing performance for you. We like to do this just to give you a sense. As you know, we split between global and local businesses here. These are the main themes. The one year, we are up 82% is outperforming, which is good. We are happy with that. The good news is we are also outperforming where we see most interest in raising capital, which is in local bonds and in equities, both global equities and actually local equities. That is good to have.
Overall, as a group, we are now up above 80%. Three years at 70 and five years at 58 as the very strong recovery from 2021 drops out. This is not an issue. This is all saleable. I think this is Tom.
Sorry.
Thank you.
Okay, starting as usual with a high-level financial summary for the period characterized by strong investment performance, continued operating efficiency, and consequently strong growth in statutory earnings. Adjusted net revenue was 16% lower year-on-year, reflecting the impact of reduced average AUM levels and lower performance fees compared with a year ago, given fewer asset realizations from the alternatives vehicles in this half. Total operating costs marginally increased by 1% as we continue to focus on operating efficiently across the group's global network of offices. Variable remuneration was accrued at 32.5% of pre-bonus profit. Consequently, adjusted EBITDA of GBP 20.9 million delivered an operating margin of 31%. The combination of strong markets and Ashmore's investment outperformance mean that the seed capital portfolio generated pre-tax profits of GBP 55.4 million, leading to a 64% increase in profit before tax to GBP 81.9 million.
Therefore, diluted EPS rose 89% to GBP 10.1 per share, and excluding the seed capital returns, diluted EPS was GBP 3.1 . The balance sheet remains well-capitalized and highly liquid, with excess financial resources of GBP 480 million, or GBP 67 per share. Finally, as Mark mentioned, the board has declared an unchanged interim dividend of GBP 4.8 per share. Looking at the local offices, during the half we have continued to develop the network in key emerging economies. These businesses are exposed to high growth markets and also provide real diversification, as has been demonstrated again in this period. Looking at each office in turn, Ashmore Colombia delivered 16% growth in AUM, reflecting strong absolute and relative performance in its listed equity strategies.
During the period, the business broadened its product offering with the launch of a regional LATAM equity strategy and has been investing the most recently raised private capital in infrastructure debt and private equity. Ashmore Indonesia had a notable increase in new client flows as the broader market environment improved and retail distribution initiatives were implemented. In Ashmore India, the team's high-quality, long-term performance track record continues, and the near-term focus is on deepening onshore distribution access for retail investors. Finally, while Saudi Arabia had some institutional redemptions early in the half, the business continues to diversify with the launch of a second private equity fund focused on education, and is also broadening its client reach through the use of digital distribution. In terms of the two newer offices, Ashmore Qatar is now fully operational, supporting the group's investment management capabilities in the region and deepening local institutional relationships.
Regulatory approval for Ashmore Mexico is anticipated shortly, allowing the team on the ground to exploit the growth opportunity arising from recent pension reforms. Alongside continuing to build scale in the existing local operations, we will continue to look for opportunities to expand this network over time. In terms of the aggregated financial performance, management fees are broadly in line year-on-year, while performance fees were lower, reflecting the successful realization of alternatives investments in Colombia and Saudi Arabia that generated performance fees of approximately GBP 7 million in the prior year. While asset realizations from the older private equity vintages are ongoing, meaning that performance fees are possible, the timing of these is inherently uncertain. The implementation of a consistent global operating model means that the local businesses achieved a 45% EBITDA margin and are delivering increasing profitability as assets under management locally grow.
Looking at the group's assets, the total of GBP 52.5 billion increased by 10% over the period, driven by Ashmore's investment outperformance, which added GBP 2.6 billion and net inflows of GBP 2.3 billion delivered across both the global and local businesses. Subscriptions increased by 39% year-on-year to $5.7 billion, reflecting higher client engagement levels over the course of 2025 and increasing recognition that EM is outperforming the attractive absolute and relative valuations on offer, and therefore a realization that global portfolio allocations need to change. The subscriptions activity was broad-based and includes both the funding of new client mandates, notably in equities, external debt, and blended, and existing clients increasing allocations across the group's range of fixed income and equity strategies. Client demand was also geographically diverse, with equity flows from European clients and Asian clients allocating to sovereign fixed income strategies.
There are also encouraging signs that U.S. investors are now considering reallocating away from their home market. Reduced redemptions also contributed to the net inflow, with a 35% decrease year-on-year to GBP 3.4 billion in the half. Indeed, this is the lowest half year redemption level since 2010 and reflects the latter stage of what has been a reasonably lengthy inflow cycle. Looking forward, Ashmore has started 2026 with a healthy client pipeline reflecting the positive market environment of recent years, the outperformance being delivered by Ashmore's active investment management, and a growing realization by investors that emerging markets warrant a higher allocation. The caveat, as ever, is that the timing of funding can be uncertain. Turning now to revenues. The year-on-year decline of 16% is attributable to a 3% lower average AUM level and reduced performance fees compared with the level delivered from asset realizations a year ago.
Net management fees were 9% lower year-on-year at GBP 62.1 million, with the movement attributable in roughly equal measure to the average asset level and FX headwind from a stronger sterling and an average fee margin that is two basis points lower than a year ago. The year-on-year movement in the management fee margin is entirely due to the full run rate impact of flows in the prior year period, the six months to December 2024. The reported margin in this half of 34 basis points is unchanged compared with the six-month period to June 2025 and was broadly stable over the period.
Management fee margins at the investment theme level were also relatively stable, with the exception of alternatives, where the first half margin was impacted by the return of higher margin capital to investors, coupled with the investment cycle of recently raised private debt capital that is not yet earning full run rate management fees. On a pro forma fully invested basis, the alternatives margin is approximately 110 basis points. As mentioned, the first half performance fees of GBP 0.8 million are lower than the prior year period. I continue to forecast up to GBP 5 million of performance fees in the current financial year, excluding any contribution from alternatives realizations in the second half. Finally, other income of GBP 4.6 million increased due to the generation of transaction fees in the period.
I would expect this source of revenue to revert to more normal levels in the second half of the year. In terms of operating costs, we continue to operate an efficient business model globally, and total operating costs of GBP 48.3 million were broadly consistent with the prior year period. There was a modest increase in salary costs to GBP 16.1 million, primarily reflecting recruitment in the group's local businesses, including the establishment of the new office in Ashmore Mexico. Other operating costs were reduced by 2% to GBP 10.9 million, notwithstanding the preparations for moving to a new London head office at the end of fiscal Q3. The VC accrual of 32.5% is consistent with the prior year range of 30%-35%. In absolute terms, it means a charge of GBP 19.8 million, 1% higher year-on-year.
As in previous years, realized life-to-date seed gains of GBP 14.8 million and interest income of GBP 6.8 million were included in the calculation of the VC accrual. Given neither life to date gains nor interest income are included in EBITDA, in this period, this has had the effect of reducing the operating margin by approximately 10%. Looking to the second half, there will be a slightly higher non-cash depreciation charge reflecting the cost of the new London office lease. But overall, I expect full year non-VC operating costs to be approximately twice the first half level of GBP 29 million. The group seed capital program is now well established and has meaningful scale to support the diversified AUM growth and deliver attractive through the cycle returns to shareholders.
Seed investments now have a market value of GBP 391 million, with market-to-market valuations in the period benefiting from both positive markets and Ashmore's outperformance. In addition to the GBP 391 million, the group has made commitments of GBP 81 million to funds in the alternatives theme, which are likely to be drawn down over the next few years to facilitate growth in Ashmore's thematic private equity and private debt strategies. Given that many of the current seed investments have delivered positive returns and provided appropriate scale to funds, I would expect the successful realization and recycling of existing seed investments over the coming periods to largely fund these additional commitments. While the primary goal of seed investments is to support growth in third-party client AUM, over time, the program has also delivered meaningful profits to shareholders.
In this period, the impact was a GBP 55.4 million gain, of which GBP 9.6 million was realized in the six months. In terms of new investment activity, a total of GBP 38 million was invested in the period to support growth in private equity strategies, notably in the Middle East, and to establish new funds, including the regional LATAM equities product I mentioned at the beginning. Realizations of GBP 47 million were achieved, principally through matching client flows into seeded equity strategies and following the return of capital by alternatives vehicles. On a life-to-date basis, these realized investments have delivered GBP 14.8 million of gains. Finally, on the P&L, interest income of GBP 6.8 million reflects lower average cash balances, in part reflecting the incremental seed investment activity in recent periods and prevailing short-term interest rates, compared with the prior year period.
The effective statutory tax rate of 13.6% is relatively low compared with the guidance of approximately 22%, largely due to market-to-market equity gains on the seed book not being subject to U.K. corporation tax. On an operating basis, and taking into account the geographic mix of the group's profits, the effective tax rate remains around 22%. Turning to the balance sheet, Ashmore has total financial resources of GBP 573.6 million, which compares with its total capital requirements of GBP 93.3 million, and means that the group continues to operate with a meaningful level of excess capital, equivalent to GBP 67 per share. The balance sheet remains highly liquid, with GBP 261 million of cash at the period end and approximately two-thirds of the seed capital investments are in funds with frequent dealing opportunities.
The group's cash position is, however, relatively low with recent levels, given the seed activity. From a cash flow perspective, the first half typically sees significant payments related to the prior financial year, namely the final ordinary dividend paid in December and employee variable compensation paid in October. Additionally, in the last six months, the EBT has purchased shares worth approximately GBP 14 million. Operating cash generation tends to be stronger in the second half of the financial year, and total cash will continue to depend on the balance of seed capital investments and recycling achieved. With that, I'll pass you back to Mark.
Thanks, Tom. Thank you very much. Outlook from here. I think things are pretty supportive actually from what we're up to. Absent some global war, I think things look pretty good. On the right, we just talk a bit about bond yields and also how the equities are doing. If you look at the bond space, those three lines are CPI, so inflation, real yield, and actual yield. As you can see, real yields are really pretty good in terms of EM. You've got positive real yields, inflation low, if anything, declining. Let's say worst case, flat. There's plenty of room for EM to cut rates. Even if they don't, you've got nice positive real yields. We're seeing that in terms of client demand to buy local currency and local currency bonds in particular.
On the equity side of things, after about May, June, in the year we've just had, significant index outperformance over the S&P, if anything started at the end of Q1, and we would expect that should be able to continue, although there has been, as I say, significant performance to this point, but the EPS story is still good and recovering in EM. As EPS improves, share price performance tends to continue to follow it. In terms of policy and things for the year ahead, China is obviously China and definitely going to continue to export deflation, which may give others challenges, et cetera, but that is definitely the game. Inflation should remain low in China and they should export deflation. Relatively stable growth.
They have one thing probably now that they still have to fix and they're struggling to fix, which is the property market, and generating sufficient youth employment for these large numbers of people coming out of university every year. It's feeling relatively stable in terms of their outlook from here. This is one of those years that's a big election year for EM, which tends to provide reasonable opportunities for us. Everybody lies to get elected, and EM's no different from anywhere else. I'm looking through the noise, tends to be quite a good time to take some risk.
Through the first half of this year, the trick is don't get carried out in a lot of bad headlines and start acquiring risk, subject to price, of course, but start acquiring risk at pretty good prices mid-year with a view to elections tending to usually be mid to back end of the year or late half one through to late December time. A lot of LatAm elections and that tends to be, as I say, we quite like years like this. You tend to get a little bit of negativity around headlines and then you tend to get a chance to buy risk. We quite like years like this. This tends to be a good time for us to add risk to make quite a lot of money in the year after. The only thing against that is if nobody lies or nobody says anything controversial.
But I think we are going to get some noise around LatAm elections in particular. Monetary policy, I think it's going to get looser. As I said, high real rates and inflation under control, so I would expect to see rates continue to get cut in most places. I don't really see a dollar strength being a drama. You're going to get moments of strength, but you're going to get generally a selling trend. Just huge net liabilities in the U.S. and everybody's so long the dollar. The way people are talking to us about what they want to buy, it's mostly non-dollar assets. It's noise around the edges, but it's the right sort of noise in terms of dollar softness. The policy mix plus what the Fed's up to, I think is going to continue to do that.
AI is going to be deflationary probably. I suspect you're going to get bottlenecks around the ability to turn massive spending into actual productivity gains. You're going to get bottlenecks in terms of the kit being available when you want it, where you want it. But at the margin, you would expect it to be deflationary. That's kind of the macro outlook. Summary from where we're at, reasonable half for us. It's a good market. We outperformed. Flows are better, so increase AUM, that's nice. Flows will be two ways for a while. It always happens like that. It comes down, then it kind of bobbles along, then it goes up. We're at a point where we should see gradually drop. This was a huge drop in redemptions. Redemptions never go to zero. So you'd expect to see redemptions fly around a bit, but generally lower.
The trend is lower and subs definitely you'd expect, given what we're seeing in the pipeline, you'd expect to see that to continue to improve. Staff profits have been up. That's good. What we're doing strategically in terms of growing the local businesses and equity businesses, that's continued since 2022 all the way through. We expect them to continue to grow and to change, and particularly those things. Macro, I think, is pretty good for us. There's a relative value story, but there's also an absolute value story. That's the broad picture. Very happy to take questions. I'll actually do the thing. Sorry. I've realized I'm already standing up. Oh, that was easy. There you go. I'm here to help.
Thanks, Mark. Just two questions, please. First, really good progression in fee margins over the past 6-12 months. Are you guys still guiding to on a like-for-like 1-2 basis point decline? I think it's every 12-18 months. On the second question, really, as you mentioned, great redemptions coming down, subscriptions up. How does that pipeline feel in terms of your ability to kind of repeat what we saw in Q4 in terms of flows of around GBP 2 billion or so, ex the liquidity? Thank you.
Do you want to deal with the first one?
Yeah, as you know, the basis point every 12-24 months is the best guess, having taken out the things that we can calculate that have driven any other move in terms of mix or size of product, et cetera. That feels like it's about right, but it's still a best guess. The market's still competitive. There is industry-wide pressure on margins. We think we're in a relatively protected part, but we're not immune to the competition or the margin erosion by osmosis, where people get a good deal somewhere else, they tend to come to us and say, "Can we get a better deal?" So that basis point also feels about right. But as we've seen in this period, things can stabilize depending on mix and the retail flow and what we're getting in the locals, et cetera.
Yeah, exactly. It's a best guess. As the local business gets larger, and as the equity business gets larger as a percentage, that helps. Because fixed income tends to be priced generally cheaper. Huge sweeping statement around the world, and alternatives tend to be priced higher, too. As all those things are growing, that all helps. The other question was?
On the pipeline.
Oh, pipeline. Yeah, the pipeline is, I think the last time we spoke, is probably better than the last time we spoke. There are more people. It also tends to feed itself a bit. As people see this happen, they tend to say, "Oh, maybe we should do a bit of that." Unfortunately, everybody follows somewhere. Pipeline, I would say, is better than the last time we spoke. If the pipeline was 10 in a screaming, raging bull market, everything is fantastic. If it was one when the Russians invaded, it's probably five. Last time we spoke, it was probably three. Again, I'm hoping I said. If I meant to say that, if I didn't. Reds will be fundamentally they're trending lower, there's no question.
Individual clients will have things they want to be doing, so you can't really That's a huge drop in reds. We thought, "Oh, well, isn't that nice?" I wouldn't guarantee that drop every time. Oh, yes. Give me the mic. Oh, he's a great Self-help, I love that.
Hi. This is Ara Castillo from Jefferies. I guess, on the back of Mike's question, I am just wondering in terms of the differences you are seeing in the pipeline for institutional versus intermediary channels, and also in terms of new client mandates in EM debt versus top-ups. As I understand, top-ups are normally easier to come around because clients do not need to do due diligence. My second question is on the local platforms. I have seen you have had a drop in revenues year-on-year and also a decrease in EBITDA margin. Any context on that would be very helpful. Thank you.
Do you want to do the second one?
I will do the second one. Yeah, that is entirely.
I will forget the first one.
Yeah. I will remind you. I wrote it down.
Okay.
On the locals, the drop in revenue and the margin entirely due to fewer performance fees. We realized some assets in LatAm and in the Middle East at the beginning of the 2025 financial year. It is about GBP 7 million in total. That is in the first half. Underlying management fees broadly in line. The margin here, that mid 40s to 50% is where we would expect the aggregate to be, and growing hopefully from there as the scale comes through.
On flow, I think you are talking about institutional over retail and existing client over new, and I guess by products there. In terms of institutional over retail, it is mostly, I would say, yeah. We are seeing flow in retail begin to move a bit, but it is not. The retail is often ahead of institutional, but it is not dramatic. I would say steady retail interest in equity, and that is a mixture of U.S. and other. Sporadic retail interest in local currency and some in investment grade dollars. If retail, again, if 10 was everybody was crazy and happy and delighted, and one was they never did anything, I think retail we are still two, three. There is a lot of retail still sucked into the U.S. market. Institutionally, it is definitely, I would say, a stronger pipeline.
I think the second part of the question around that was around the split between new clients, new target type things and existing top-ups. Using the last quarter as an example, it was about 50/50, I think. Is that about fair? I would say the top-up clients are the ones you feel you are. Again, fortunately, we have a bunch of clients we have had for a while, and a lot of them are still at one out of three, having gone in 2022 or 2023 from three down to one, let us say. A lot of them are still at one, but we have just seen some of those start to go back to two, just beginning and talking about it. So it was 50% roughly of what happened in Q4.
It was a few people going back to two, but they are not in any way, not that many people either. New client activity is the rest of it, and I would say the pipeline is more new client than top-up at the minute, and it is more geared to equity over fixed income at the minute. That is the kind of general statement that will be proved wrong in six months time. That is just my sense of the last couple few weeks of conversation and RFPs. Did that cover all the question?
Yeah.
Great. Thank you.
David McCann from Deutsche Numis. A couple for me, please. First of all, on the variable comp ratio, 32.5% for the first half, would you say that is a good guide to be using for the full year and thereafter? Or if not, is there a better guide you would have there? Secondly, do you have any update on the performance fee guidance for this current year? Sorry, you may have mentioned it, I might have missed that. Then lastly, one for Mark. Obviously, there is quite a lot of asset flow coming to the industry, as I am sure you have observed. Do you think this is realistically addressable for you as an active manager? Do you think there is a case that this money stays, and can you address that? Or is this realistically money you cannot really touch because they have gone passive, that is all they are ever going to be?
Just curious on your thoughts on that.
Do you want me to address it?
Yeah.
Yeah. VC at the half year, always in accrual percentage. As we talk about every year, we top it up or we reduce it once we know what the full year result has been. If we continue to deliver the strong levels of outperformance, we'll need to pay the investment team. There could be upward pressure on the 32. If it falls off in the second half and the 12 months has not been as good and the distribution team doesn't continue to deliver the flows that we've seen in the first half, maybe there can be some downward pressure. It's an accrual at the half year. It gets determined by the RemCo in July once the full year's numbers are known and understood.
If you want an estimate for the full year at this point, 32 and a half is as good as anything, but it will change come July. On the performance fee, I thought I made it clear. The guidance I gave in September was for up to GBP 5 million. The guidance I'm giving now is up to GBP 5 million, absent something being realized somewhere in the portfolio of our private equity assets that delivers a fee.
The passive question. Some of it's permanent. Some of it people will say, "Well, I'll just do passive." You definitely get a bit of that. Fortunately, for what we do, some of it isn't very well replicated by passive indices. But there are some people who are just obsessed with cost and will take index drift from passive, even if they haven't really thought it through. Money through consultants tends to be to not do that, because the consultants have done an enormous amount of work in this, because their initial thing is we should sell passive to some extent, although, of course, they want a business, so they don't want to completely kill active, so they can choose between managers. Some of it is permanent, I would say, particularly in the fixed income space, in the larger tighter spread stuff.
Some of it is definitely a first thing to just throw the cash in before they find a manager. I think that's always been true. For us, that's more of an issue for us, again, this is a big generalization, but more of an issue for us in fixed income, I think, than in equities. Not that there aren't indices in equities and passive things to do, but just what we're doing tends to lend itself better to active and we're taking market share from other active. So we are in a different place than we are, perhaps, in some of the fixed income strategies. I do not know if that covers it.
Thanks.
Ray Mail, Pamela Libram. I suppose the only question that has not been asked about pipelines and flows is geography. Is there any sign that the Americans themselves are realizing they're a bit too long the dollar?
No, not really. That's not quite true. A little bit of retail. Americans love equities. So we've seen a dribble now, I think I hopefully said this earlier. There is a bit of a dribble of American retail capital into the equity products. Nothing in bonds. Then institutionally in the States, not really. Again, a bit of equity. There is a bit of an equity pipeline, but the pipeline we have, there's some U.S., but it's mostly non-U.S. There's some, but it's mostly normal. So they have not gone, it's time to have less America. That whole story of getting them from 100% America to 90% America in the '90s, we're back in that game again. Nobody gets fired for losing a lot of money and buying the wrong American stock. But they all get fired if they buy Ukraine and Russia invades.
But I think the conversations are still there, but the retail story is picking up and the retail tends to be a leader. Institutionally, some. But not the big war yet. Anybody else? Okay, well, thank you very much for coming. Happy to chat if that makes sense. And we'll hopefully see you again in six months. Hopefully, we'll have even better numbers. You never know. Thanks very much, everybody. Thank you.