Earnings Call: H1 2019

Jul 31, 2019

Very quiet. Good morning all. Do you want to kick the door to at the back, just in case? Great. Well, thank you for coming. As usual, I'll start with an overview of the first half. Mark will take you through the numbers and then I'll talk about some of the industry themes and what it means for us and then a bit about the outlook and then we'll take questions. After the equity market sell off for the end of last year, As you all know, we had a much more supportive backdrop for most assets in the first half of twenty nineteen. We had a pretty remarkable bond rally towards the end of the This led to positive performance across our long only strategies as well as strong absolute performance from our quant alternative strategies. So that drove a 5% increase in our funds under management to $114,400,000,000. However, it was a more challenging period for Alpha Generation, particularly anything that's about valuations, and I'll come to that in a minute, which led to asset weighted underperformance versus peers of 1.1% in the period. In addition, across the industry, we're seeing clients reducing our equity exposure and increasing our allocation to bonds, bonds is an area where we've been historically underrepresented. So that contributed to the asset allocations, which contributed to the net outflows in the first half. We nevertheless continue to see ongoing engagement with our clients on new mandates and particularly good demands only enough for the quant alternative strategy Adjusted profit before Ex was $157,000,000 compared to the first half of twenty eighteen, which reflecting higher performance fees and seed investment gains in the half, partially offset by a decline in the net management fee margin to 68 basis points and the non operating impacts of $21,000,000 from the FX hedge and the adoption of IFRS 16 as well as no associate income following the successful sale of the stake in Nephila last year. Statutory PBT increased by 22 percent to $110,000,000 compared to the 6 months in 2018. In line with the dividend, obviously, we'll be paying an interim dividend equating to adjusted net management fee earnings per share of $0.047 or 3.87p per share payable in September. And we completed the corporate reorganization in May and Mark will talk about that and the implications a bit later on. So as I just mentioned, funds increased by 5% in the half. It was a choppier period for flows with net outflows of $1,100,000,000 across the half, And I'll give you some more detail on flows in a minute. The strong absolute investment performance drove a 6,800,000,000 increase in funds 4.6 of which was from the long only strategies, so that's particularly obviously equity is going up, but $1,400,000,000 was from strong performance in the quantum alternative issues. So if we look at that in a bit more detail, the 1st 6 months of 2019 was strong period for momentum and for growth strategies, but a much more difficult period for any strategy with a focus on valuation. The market environment in the first half was dominated by lower inflation expectations, leading to lower interest rate expectations leading to the easier central banks, lower rates everywhere again and higher equity markets, and that pushed the central banks to be even easier. So on and so forth in something of a reinforcing cycle over the course of the period. Any strategy that looks at security valuations relative to historic levels While it isn't willing to discount the, honestly, seeming end of inflation and the permanently lower rates had a tough time generating out against this backdrop, absolute performance across our product categories was positive obviously, which resulted in delivering 6.6% of return for clients. Relative performance with more mix with the asset weighted performance, as I said, down 1.1% in the first half. I'll talk about that dear a little bit more detail in the next slide. Returns in the absolute return category were driven by the strong performance from the major quantitative strategies which were up between 5% 11% and a bit%, and this drove our strong performance fees. In the total return category, Alternative risk premium was up again up 4.1% and a half and target risk, which I'll talk about later in the presentation, was up a remarkable 20%. However, the emerging market debt, total return fund was down 1.8 and so obviously well behind the emerging market debt indices. Due to its continued bearish positioning. The systematic long only strategies were up on average of 11.9% driven by the rebound in equities. In the discretionary long only category, Japan core alpha was up 1.3% in the period and the UK and European focused discretionary strategies delivered strong returns again with a Continental European strategy up 23.9 and the UK undervalued asset strategy up 10.2 in the period. I think this gets to a rather more interesting way of looking at it. Because a different view on the relative performance and I wanted to highlight that the softer relative performance really came from is with a focus on valuations in their investment process. Japan Core Alpha is a large cap value strategy, Numeric, while we talk about it as value oriented, it really has a significant weighting to relative value in its investment process. Emerging market debt has a very strong valuation component and he's finding it incredibly hard to own anything in emerging market bonds given their incredible richness compared to historic levels or actually to economic outlooks in emerging markets. Over a long term, Each of these strategies have very good track record and we're very confident in the team. Away from the valuation focused strategy, the technical strategies delivered strong absolute performance and we continue to outperform peers. You'll turn to risk premium continued experience of strong performance and target risk outperformed by 7.6 just in the first half alone. We've talked a lot over recent years about building true diversification into the business. The mix of performance in the first half of the year is not a coincidence, but rather a direct result of one of the axes of diversification. By having both valuation driven strategies and technical driven strategies, you create balance within It's the same as having equities and bonds. It's the same as having different in quantum discretion. In this case, it's about valuation driven and technical driven. 2017 in the first half of twenty eighteen was a period where the valuation driven strategies did very well. There was a lot of alpha but it was a period where we traded water in the momentum strategies. It led to strong inflows and strong management fee growth. First half of twenty nineteen was the opposite. Customer valuation driven strategy is great for the technical ones. This led to weaker flows and management fee growth as you've seen because evaluation strategies are a bigger percentage of our AUM, but great performance fees performance regeneration because the momentum strategies have both a higher risk, but also importantly contain a much higher percentage of performance fee eligible funds. Long term shareholders benefit in both environments. It's just the form of the benefit that looks different and it will even out over the course of the cycle. The excellent flows in 2017 2018, the short term underperformance of some of our strategies coupled with this de risking that we talked about after the move at the end of last year has impacted our flows as you can see from the slide. Despite this, we continue to widen and deepen the long term relationships with clients and add new relationships with strategically important allocators and distributors. As a result of the focus, we continue to see the trend of clients investing across the firm with 71% of the farmer June 29th relating to clients invested in 2 or more products and 45% related to clients invested in 4 or more us. This illustrates the strength and breadth of the offering and the value in building deep relationships through a single point of contact with our clients. So with that as a bit of background, I'll hand over to Mark from the numbers. You, Luke, and good morning, everyone. As always, I'll start with an overview of our P and L and then take you through from revenue costs and capital. As I highlighted at the full year, we entered 2019 with lower run rate management fees, driven by the equity market sell off at the end of last year. As a result, we have lower management fees this half despite the strong growth in compared to the prior year, including filler. The combination of these factors led to adjusted management fee PBT being down 31% year on year. The strong absolute performance that Luke just highlighted drove a 51% increase in performance fees to 1,000,000, And that combined with the higher ceiling gains led to performance fee profits rising by 124%. Overall, adjusted PBT was up by 3%. Adjusted EPS was $0.086 per share, up 6% so slightly faster than PBT due to the lower share count following share buybacks. And the adjusted core PBT was 155,000,000 compared to 100 and 45 in the prior year, growing by 7. Statutory profit was 1,000,000, up from 1,000,000 due to both the increase in adjusted profits and the change in adjusting items. As Luke mentioned, on the fund side, fund was up by 5%. Net outflows in Q2 were $400,000,000. And with the outflows in discretionary, long only moderating compared to Q1, but then with higher redemptions from multi manager solutions. We continued to see inflows into alternative risk premia, and there was also a small inflow into absolute return, driven by flows into our Institutional Solutions area, partially offset by outflows from ELS. As described earlier, the investment movement of 1,000,000,000 was mainly driven by equity markets, combined with the strong performance of our quant strategies. FX and other movements were minimal in the period. Turning now to the detail on our revenue margins. Here, you can see the same trends that we've discussed previously. Long only in total return margins continue to trend sideways and moving up or down slightly over time with mix shifts. The absolute return net management fee margin decreased as a result, both of the continued growth in institutional assets and also some outflows from both ELS within man GLG and some of the historical AHL retail business, so AHL diversified. Those moves more than offset the positive impact from the strong performance in higher fee strategies such as AHL Evolution. And as we've said previously, we would expect that gradual decline to continue. The multi manager solutions run rate was down to 31 basis points. That's due to the continued mix shift towards lower margin managed account and infrastructure mandates and in particular, due to some redemptions from the higher fee funded fund strategies right at the end of the period. We continue to expect that margin to decline as the business shifts towards infrastructure and managed account mandates as we've seen in the bringing together the FUM and margin, you can see that while average FUM was only slightly lower compared to the same period last year, the change in the mix of assets and that lower margin has led to the lower net management fees. At the end of the period, core net management fees fees was $767,000,000, driven in particular by that strong absolute return performance towards the end of the period. The sale of Nephila last year means we no longer receive associate income and the new lease accounting rules, we mean we do now include sublease rental income in news. Looking now at performance fees, as I said, we earned $125,000,000 in the half $116,000,000 of that was from AHL Strategies, mainly from Evolution, which crystallizes Annulier in June. GLG earned $9,000,000 predominantly from the UK hedge fund strategy out for Select. And then seed and gains were $17,000,000. Compared to a gain of GBP 2,000,000 in the same period last year. Those gains were primarily driven by some of the credit strategies that we've seeded and the risk retention positions that we hold in relation to our CLO business. As you can see from the chart, it's been one of the strongest starts in recent years. And if we turn to the next slide, you can also see that we're well positioned for further performance fee earnings coming into the second half. Got 18,500,000,000 of man AHL bum at or above high watermark at the end of June. And within that, you've got 13,300,000,000 that crystallizes the second half of this year with dementia and alpha, as we've said previously, being key strategies to watch for the second half. They're currently more than 5% above their respective high watermarks, which puts us in a good position for the second half of the year. $2,900,000,000 of GLG from was actually above high watermark and $3,100,000,000 was within 5% of high watermark, The netting risk from ELS that we discussed regularly remains elevated given it's still below its high watermark. And on numeric, you can see that it needs to get back to its historical levels of performance before we expect to generate meaningful performance fees again. Overall, I think you can see we have good performance fee optionality for the remainder of the year, driven in particular by AHL performance year to date. The bigger point we always want to emphasize here is about our performance fee earning capacity over the cycle. We're not going to be able control the outcome in any given year, but we focus, on growing that capacity over time. And we've made good progress on that over the past 5 or 6 years with the and fee eligible sum, up by nearly 1,000,000,000 since 2013. Turning now to costs. So total compensation costs were $243,000,000, up from $227,000,000. That comprised $99,000,000 of fixed comp, $144,000,000 of variable. The increase in fixed comp was due both to the higher FX rate which we mentioned before and the full year impact of investments in the business in 2018. Variable comp increased, both due to the stronger performance fees and also some prior year deferral charges. If we look at the comp ratio, it was 46% in the half lower than 2018, primarily due to the higher absolute levels of performance fees. And just to reiterate, we expect to be at the higher end of the range when performance fees are low, and the proportion from the American GLG is high. And conversely, we expect to be at the lower end of the range when performance fees are high and the proportion from AHL is higher. If we have strong performance fees in the second half, we therefore expect the ratio to be lower for the full year as absolute performance fees increase Non comp costs increased primarily due to the non operating headwinds that we flagged, so $5,000,000 from FX $3,000,000 from the new lease accounting standards and the remainder due to higher depreciation, reflecting previous investments. Full year guidance for the fixed cost remains 330,000,000 as some costs are 2nd half weighted. It's also worth noting that with the current GBP spot rate being significantly below the 2019 hedge rate, that would be a benefit going into 2020. And just as a reminder, we no longer hedge our fixed costs from the end of this year. And just given those various moving parts, particularly on the management fee profit, thought it was helpful to show the profits bridge here year on year. So as we highlighted at the full year, we've got around $21,000,000 of non operating headwinds. From FX and accounting impacts, as well as that lack of associate income following the sale of Nephila, and then a further 2,000,000 from that. Final stages of the run off of guaranteed products. There was a $21,000,000 impact from lower core management fees as we started the year at a lower run rate. And then those headwinds were more than offset by the strong performance fees and investment gains in the half, meaning adjusted profits were higher overall. We think that's a solid outcome given the level of those non operating headwinds in the half. Turning to capital, As you will have seen, in May, we completed the corporate reorganization announced last year. The structure is now consistent with other global asset management businesses. And going forward, we'll be summarizing our capital position based on our net financial assets, consistent with other global firms. As you can see from the slide, net financial assets unsurprisingly comprises our financial assets of cash and seed investments less our financial liabilities of debt and contingent consideration. At the half, the group's net financial assets for $474,000,000. And the short term impact of the reorganization means we're calling our Tier 2 debt of $150,000,000, as you may have seen, through the RNS announcement recently, as we no longer require capital qualifying instruments to finance our business today. That debt has been costing us about $9,000,000 a year in interest expense. And as you can see from the little dotted box at the top of that chart, we started to use total return swaps to implement part of our Seating program. There's a financing expense of about 3% associated with these, and we've added some more TRS since June. Like for like, we would expect to save about $404,500,000 annually for that change in finance structure post calling the debt in September. Before I hand back to Luke, I just wanted to remind you of this slide, on our capital returns over time, given that I think it's a great reminder of one of the core strengths of the business. You can see we've returned an average $300,000,000 a year to shareholders over the last 5 years. Those returns are driven by the profitability and in particular, the cash generation of our business, And we've also made those returns while growing the business with farmed up by $60,000,000,000. And as I said previously, performance fee earning from up by nearly 15,000,000,000 since 2013. We've got about $15,000,000 of the current buyback to go, our capital return policy is unchanged. Just as a reminder, we pay out management fee profits as dividends, and then we can and have further capital over time, historically via buybacks. We've always completed existing buybacks before making any decisions on further capital returns, that remains the approach today. But to be clear, the philosophy is unchanged. If we can't reinvest capital more profitably for shareholders, then we've returned it to them. With that, I'll hand back to Luke. Thanks, Mark. So before giving a few comments on our outlook. I thought I would talk a bit about the current industry teams and their implications for our business. Mark and I already touched on the shorter term impact from the changes in asset allocations on our business, but it's worth spending a bit more time on more broadly about this theme for the industry. As all of you will know, clients have been reducing their of equity and our hedge fund exposure, which has resulted in outflows across the industry. Given our skew to active equities and liquid alternatives, This does have an impact on short term flows, but our client and quant focus continues to drive sector weighted flow outperformance over the cycle. What we mean by that is if clients are redeeming from a particular sector, we still think we can have better net flows in this sector, but everybody's redeeming from a particular thing, it's very hard to fight the tide, if that makes sense. On the flip side of this, clients have been increasing their exposure to credit and fixed income, leading to inflows in those asset classes. We've been building out our credit capabilities over the 12 to 18 months. We added a number of teams covering strategic bonds, high yield opportunities and real estate debt. It may seem that we were a little late to some of these areas, but we only want to have teams that we really believe add value for our clients. And great people just take a long time to source and to recruit one of the teams going two and a half years after we first made him an offer. Is doing incredibly well, but it takes that long to get good people to move. We've also seeded quant strategies in the fixed income area, which have performed very well. And we think the next few years will see a significant increase in the penetration of quant in credit and fixed income. We're aiming to build a more complete offering for clients in this area and thereby continue to further diversify the group over time. Private markets. Alto gives us some private market capability, but it remains small in the group context, and it's an area which it takes time to build traction We're committed, but while headlines are about huge funds that a few select managers have been able to raise, the reality is business momentum takes longer to build in private market offerings than it does in public market ones. It's a much public discussion on liquidity is used on daily traded funds, both equity and credit, with several high profile covid cases in the news recently. As a result, there's been much political and regulatory comment, particularly here in the UK. The hedge fund industry went through this in 2008. Within appropriately illiquid holdings for the liquidity terms of funds. As a management team, we have very direct, somewhat painful experience are running hedge fund businesses during the period, 2009. We learned serious lessons and it means we focused on managing liquidity and all fund offerings conservatively. The tangible demonstration of that is that we frequently close funds to at lower AUM than competitors would to ensure that A, they can continue to deliver returns, but B, importantly, they don't get drawn into holding in appropriately illiquid holdings. We closed funds at the lower of where the portfolio manager or the risk team think size is affecting management style or our ability to deliver the prospectus liquidity terms. Individual portfolio managers should not be and are not at man allowed to decide the liquidity or the risk rules around an individual position or around a portfolio. This should solely be the responsibility of fully independent, fully impaired risk managers. You can read many an article about the impending industry consolidation, most weeks, but obviously there's not much actually happening. We continue to see M and A valuations and in particular private market valuations at high levels. We have strong organic growth capability given our alpha and alternative focus and our quantitative expertise we do not need M and A to grow the business. We're confident that our business model can continue to generate good compound growth and shareholder returns organically. While we continue to look at M And A opportunities, we would need to see something at various active risk reward levels for our shareholders before thinking about acting. The place we do see attractive risk reward is adding experienced teams. These teams typically want to work in an alpha focused firm with strong client relationships and we're seeing more people who are skeptical that their current employer meets those needs. We have a great track record of integrating these teams into our firm and growing them as our clients allocate over time. We have some great examples in recent years, including obviously the M debt team. We now run over 6,000,000,000 the undervalued asset team and the Continental European growth team, both you have over 3,000,000,000 of assets. As I mentioned, We've recently added a number of credit teams or actively pursuing other opportunities. It's worth highlighting that when we invest in new teams, the cost is all events through the P and L. So there are some some short term cost implications that you've seen in the first half of the year, but there's no capital usage We look at the IRR, we think opportunities can generate for shareholders and for clients over time. We don't let the nuance of accounting of whether it's P and L or capital drive our decisions. Teams where we find one we believe in. Finally, the industry as a whole is trying to figure out how best to use technology to help clients whether that be to reduce costs, manage risk or improve performance. We've had that in our DNA for a long time now, over 30 years at AHL and numeric, And we have a huge advantage compared to competitors as this becomes more and more a central part of what clients expect. We have 100100 of researchers and technologists and tons of experience. I tried to work out some man year experience calculation, which ended up being a a big number. Others will struggle to replicate what we spent decades building. We have multiple examples of using that technology to real benefit. It isn't an abstract conceptual advantage. To give one very tangible example from this year, we estimate recent execution technology improvements have added 2 percent of expected return in one strategy alone. This not only benefits clients, but has improved shareholder returns by about 10% of implied performance fee increase. Similarly, we recently rolled out a proprietary tech solution on ESG, something that everybody cares about. This is a real tool that enam powers a portfolio manager to deliver truly ESG superior portfolios to understand why it's an ESG superior portfolio and it then enables the client to visualize where that improvement is actually coming from. We continue to invest in our quant teams Now, it's clear we can generate great value for clients by applying our quant skills into areas of the market and the industry where others behave like they're still using an HP12 seat. I presume most people in the room, one of those is. Here's an example of this, which is our target risk strategy I mentioned earlier. Target risk applies AHL's 30 years of expertise in allocating and managing risks in CTAs to a balanced long only portfolio. The strategy has strong absolute and relative performance since its launch with an annualized return of 10.6%, importantly outperforming the sixty-forty benchmark by 3.5 percent net per annum. 3.5 percent net per annum is not a back test. It's live performance of nearly 5 years now. Those returns are driven by applying our core quant and technology skills to a broad range of markets in a long only fashion Not about Alpha, but it obviously does add huge value for clients. In particular, we think as some of the expertise in risk management, that's adding value in this strategy. Evolve scaling delivers a more consistent risk profile than traditional approaches, We have a momentum overlay that helps reduce exposure during market sell offs and there's a sophisticated correlation overlay is designed to mitigate the risk of a bond driven sell off, which may one day happen. Our huge trading experience on our edge we have in trading that we continue to invest in is really important because it means we can be more proactive in the way we run this strategy than others can without creating a cost or a slippage problem. These are techniques we've been using for many years in our alternative strategies, But we're deploying them now into areas of the market where other people don't think you can use those sorts of techniques. Clients have started allocating to this strategy, which is why we bring it up this time. We've raised about 2,500,000,000 today, but it is a very large capacity strategy. Before I open up for questions, let me give you a couple of comments on our outlook without seeing what Q3 flows are. As I mentioned earlier, we continue to see clients reducing their equity exposure, which is likely to weigh on flows in the near term. However, as we enter the second half of twenty nineteen with good performance fee earning potential. As Mark mentioned earlier, We have $18,500,000,000 of AHLs from above high watermark today with $13,300,000,000 of that crystallizing in the second half of twenty nineteen. Alpha and dimension are both currently more than 5% above their high water mark. We think we remain structurally well positioned with compelling investment of propositions, deep client relationships, and a competitive competitor I can't speak today, competitive advantage in using financial technology to drive investment returns. Period risk adjusted performance for our clients, the highest quality to our clients, and that transfers translates through to delivery of value for the shell. So with that, we'll open it up to questions. Good morning. It's Ana Giblat from MacDon. Two questions, please. First on your new capital, the new way you look at capital. On net financial assets. How should we think about the potential for buybacks? I mean, looking into H2, you've got 1,000,000 of cash out to pay down the Tier 2. You probably have about 170,000,000, I think, for numeric. On the other side, you've got cash in from the swaps you're putting in place. So what sort of cash balances are you targeting and what sort of cash is available for potential buybacks how should we think about buybacks versus your new metric, not net financial assets? You get the second question, but that was a long question. So I wouldn't think about it just in terms of the cash. So obviously we're generating liquidity because we've got the Tier 2 and we've also got the numeric, an out payment, as you say. But the reality of the capital position is we do have the 470 of net financial assets, you're seeing us generate cash from the seed book through different ways of financing it. Think about it as capital, not cash. And the philosophy is just the same as before, if we don't have a better use for the capital, which has really meant M and A in terms of what we're investing. Will continue returning it as we have done over the past 5 and a half years. So, no change in philosophy, no change in approach and we continue to have a strong balance sheet so we can continue to return capital if we choose. I think if I add one bit at fundamentally when you think about asset management, it's not a capital business. Right. There is a regulatory situation in the UK and Europe, which talks about capital requirements, but in the end, we're a service provider to our funds, right, we're a service provider to the clients. That's not something you need to sit on capital. Now you can decide whether to run the firm with net cash sitting in the bank or you can decide whether to run the firm with net debt, but it's not capital. And I think of what we're trying to do is to, with the regulatory structure we've now got, we can move away from talking about that. We think of, do we think this is an environment we want to have net ash in the bank or do we, are we happy to run with net debt? And that's what we'll decide each time over time. My second question ties into that because if you're looking to do private markets organically and it makes sense, we're seeing a lot of inflows at industry level. That's probably going to consume a lot of seed money. It's you need to see it a lot to build a track record to get the assets. So I'm wondering how are you thinking about that, instead of in terms of ramping up the seed for profit markets? Sure. I mean, I think it's an interesting question of whether you there are opportunities in private markets to put your own capital to work. I'm not sure that we think that it is all about seeding. And I think one of the bits you have to be careful is to be clear as whether something is a seat position in which case you're putting it there just to get something going with the view to taking it out as soon as the business is self sustaining. Or you are investing for the long term because you think there's an investment opportunity. Today, everything we do is about ceding funds with a view to being in and then getting out as soon as is reasonably there. We have But we have a value of risk way of thinking about our ceiling because it's really about how much risk are we taking. We've got today, 20 something 1,000,000 of our we have a 75,000,000 limit. We don't think we are pushing what we're doing on seeding today. That will go up and down over time. It's been certainly in the high 60s at various points in the past. It's at a relatively low level today. The dollar amount of seeding, we don't think is a particularly good way of looking at it in that. You could see part of that in the way we're financing it. Becomes less important. It's the risk you're taking in it. So you might have seeding in something where there's very little tracking error. So then a little risk in the seeding or you have something which takes a lot of risk and then you need it could be small and still risk. Paul McGinnis from Shore Capital. Two questions, please. First one is on the dividend. Policy is for it to be at least as much as management fee profits I just wondered, does the fact that that in this case generated sort of 26% year on year drop? Does that send an necessarily negative message about your outlook for management fee profitability, given that you have the flexibility to pay more than that under your existing policy? And then second question, ELS, the performance there has been now sort of week for an extended period of time there. Just want to just talk about any actions you're putting in place to try and turn that around. Yes. So I mean, the dividend, you're right that the technical policy is up to, you've obviously seen us pay exactly the amount of the management fee profits. I don't think it's sending a message beyond consistency of what we've done in the past. And clearly, we want grow that over time and that's the expectation over the cycle. You've seen it have some particularly strong periods and then dip down a bit. We're sticking with the policy as it is today but it doesn't send any message in our mind around the strength of the business over time. It's just a consistency of approach. Yes. And I think the again, the other bit of it, so if we're paying out the management fee profits, the other bit we talked about is we will return capital to shareholders And there's lots of different ways you might do that at different times. One of the challenge on the current buyback is the stock volumes are so low. If you could all go and get some friends to trade the stock, that would make it easier to do the buyback. And so, we'll have to keep looking at what the right way to do, return capital when it to return capital is. The question on ELS, sorry, just to say from there. So I think there are So you have to separate out. One of the things within the market neutral equity programs within GLG, there's a number which are performed well over this period. Obviously, we mentioned the UK team, but there's 3 or 4 other teams that run separate funds and have performed very well. The multi pm product in the LS itself is the one that's had a tough time. It's very consistent with a tough time that's been had in the American same way. We are we are constantly doing a lot of work. We have The polite word, we have looked to upgrade a number of teams over the course of the first half of the year. Within it and exit teams that we didn't think we're going to generate a return for clients. We've done a lot more to bring quant techniques in there because we think that makes a difference both helping the existing PMs and getting more out of what they're doing by using central book type of technology to extract more. I'm actually pleased to say that so there was a very Good guy is one of the partners in AHL, who ran the equity team at AHL, who left a couple of years ago, I guess, now. Who I'm pleased to say coming back at the end of the year in order to run the quant team within GLG, which really ensures we're getting the most out of that to extract the best from the PMs ideas. Hi, good morning. Gunjit Campbell, JP Morgan. A couple of questions. So, just on the sort of liquidity issues in the industry, Do you see a risk for the industry perhaps more broadly that if there's more constraints on liquidity, perhaps returns could start to potentially be impacted and maybe more of a focus on risk adjusted returns and maybe man group benefit from that because you have a more, I guess, sophisticated risk model. That's the So the first question. Second one was on just ESG. How are you sort of thinking about it as an asset class? Is it really something which you embed across the whole man group model? Are you actually thinking about particular history funds, which you could launch, future? Then just finally, just on the TRS, is the VAR limits exactly the same as what you had before with the, with, I guess, the seed capital on your last one, just because it's easy, yes, but our limits. Yes, it's a more efficient way of financing it. That's the way to think of a TRS. The, on the ESG, I should have written down the first one, because I knew I'd still get I would have, liquidity in markets. Look, I think that the that there are some instruments which are suited to trading in and out of that are suited to iliquidity funds. And, you can generate a perfectly reasonable term, that is expected in, let's call it, the usage market by doing those things. You can't generate double digit alpha in the usage market. You can if there's BT, you can generate that, but I mean, just the constraints there, both of liquidity and leverage and so on, constrained what you can actually achieve. And we find that our client base in those areas is very understanding of that and isn't looking for something that's impossible. We don't offer it But I think you see people get pulled towards that. I think that you then get other things which are suited to buy and hold type of strategies, but they're also therefore suited to buy and hold type of liquidity and that's the private market type of question. I think our we're very, very focused on not not making mistakes around liquidity and funds and not having bad surprises for clients. I think as I say that the hedge fund business learned these lessons. It was hard work. We still have a guy and a half, I guess. Work for us in Switzerland who spent the last 10 years helping clients out of side pockets from the financial crisis in hedge fund holdings across the industry. You know, 10 years of working out of issues. These things don't disappear in a couple of days, mostly when I look at the broad industry, look, we find that market liquidity is really rather good. Okay, we trade. So we trade a lot. We're proud of that, but we find that we're able to trade in and out the positions very efficient You have to understand the way market liquidity works. And so that's why we spend so much time and effort on our execution platform because we think that's how you recognize who the liquidity providers are where they are. Yeah. At a point where this market environment changes, then there are going to be some significant price changes, right? People have a tendency to say all of this. The answer is if you put a private equity holding in a daily liquidity fund, you can't deliver daily liquidity. If you put a bond into a bond fund, in order to deliver liquidity, you're going to have to find the clearing price. In equities, people are used to the idea that equity prices can go down by 25% or more in searching for the next clearing price. I think at some point, if there is ever a place where credit markets try to reprice back to the way they were. You are going to see things that are shifts of 25% in a day, but that's about managing liquidity different than the liquidity risk that people have been taking where you've got things where there is no in a government bond, even in a high yield bond with multiple owners, there is a clearing price. It just may not be a comfortable clearing price. In a private loan, there is not necessarily any clearing price. Maybe nobody wants it and then you're stuck with it until it matures. On EST, I guess our experience with clients is that The proportion of clients that care about ESG is growing incredibly rapidly. That if they don't care about it, they don't care about it and there's no point spending any time. If they do care about it, then they want it embedded into the way you run money normally. So people we find clients are much more interested in are you able to embed ESG requirements into the products that they would otherwise invest in rather than saying, oh, okay, you can give me some totally brand new version of a product. So what we've done, as I say, is to use a combination of technology and quant skills that takes both the public providers of ESG information like sustained analytics and MSCI and so on, and also our own numeric built a rather sophisticated way of trying to separate out all of the other factors and leave you just what is the ESG factor involved in individual stocks in the way that we're used to thinking about what's the quality factor was you can think of the SG in the same way. And then that provides a tool which portfolio managers can sit and understand what the ESG situation in that portfolio is. And then if it's a commingled account, then it's about delivering what you said in terms of the SG thing. And if it's a bespoke account for a client, often you will find This client over here is extremely focused on carbon and this one over there couldn't give a lot to it about carbon. And the bit of dealing with large sophisticated institutions is not to tell them they're wrong, but to understand what their requirements are and be able to build that into the investment So it doesn't constrain the portfolio manager from you don't have to spend all day trying to work out what the hell does that mean type of thing. To give them an easy tool, they could spend their time picking stocks or if it's a quant process, a process can build it into the process and you can achieve whatever balance of ESG that a client particularly Hi, good morning. It's Hubert Lam from Bank of America Merrill Lynch. Just one question. Initial performance has been good year to date. I'm just wondering if you've seen a pickup in terms of client interest in HLL, one patent, your momentum driven strategies? Yes. Sure, Tanta. I mean, look, one of the things is some people over the last couple of years in the industry have been somewhat gloomy about the situation for trend following generally. I have to say, we've never been like that and our client base has never been like that. So actually AHL AUM is at the all time high today, all the way going back through the sort of crisis, perhaps the breadth of things we do in AHL is much wider today. So, there's probably a dozen different strategies and there's an eye on 200 different models now applied across come with the latest count 7800 markets. Spreading, diversifying, finding new things to do has been key to what we're doing. I think we've seen the clients have continued to believe momentum has a place within that portfolio. We think it has a place within that portfolio. And so the conversation has always been there's a little bit where you people if you don't get a significant market move, you won't get a for momentum and some people get bored waiting. You get others who get more worried about what's going on and more, you know, want to add momentum. Clearly sitting there today, people, it's very easy to put somebody to see the benefit of momentum in their portfolio. It's quite hard to work out. As a human, to say that you want to buy bonds at 0 yield for 10 years because they carry well. That's quite hard as a human to get your head around that. It's quite hard for anybody who's been trained in markets over the last 20 or 30 years to to go all in on that. The answer is a model doesn't. The good news is they don't go to cocktail parties and so they then have to be embarrassed by buying shedloads of things on a carry when it's a negative number. It's a weird world when the best carry in the first half of the year was not from buying an 8% coupon bond, but from buying a 0 yield bond. That's a weird well, but it's a wealthy limit. You. Mike Werner from UBS, but a bit of a follow-up on that. In terms of your AHL strategies, can you just remind me which ones are close to being capacity constrained and where you see the greatest amount of capacity? Thanks. I mean, I would think in terms of evolution and dimension are essentially at capacity, the sort of marginal amounts, but from the shareholder point of view, there might still be a capacity. Alpha's got a decent amount left. And then clearly some of the total returns that we talked about. So whether it's target risk or ALP, there's good amounts of capacity left in there. Yeah, and then look, I think there is a There is a huge amount of effort goes into creating new capacity and things. And wouldn't need very many people in AHL if we weren't trying to find new things to do or new capacity to do things. One of the challenges when you have these periods of very strong performance So we set an objective for the year of trying to generate a $1,000,000,000 of new evolution capacity. That's a very high bar. What happens when you make double digit returns in the first half of the year is you just used up a $1,000,000,000 in capacity. So one of the things that sometimes we get caught up in these because in certain parts of the market flows, drive everything. The reality is there's nothing better than generating $1,000,000,000 of performance in a hedge from that doesn't give any capital back. And so now it uses up a $1,000,000,000 more capacity, but you sold that in a way where you can't have a better way of sending it if that makes sense. Cool. Thank you all very much.