Earnings Call: H2 2018

Mar 1, 2019

Good morning, everybody. Thank you for joining us. I know you've had a busy morning. Well, some of you have, like, either there were longer and shorter ones out there that you could have already done. As usual, I'll take you through an overview of 2018. Mark will take you through the numbers, and then I'll talk a bit about the progress we're making on the overall business. And then we'll take your questions about first quarter flows. Sorry. Or anything else that you happen to want to ask about? Sure. It says that on there. Pages don't follow-up. If you don't mind about that? Glenn, so 2018 and the 4th quarter in particular, So a lot of downside volatility in pretty much all asset classes. As you all be aware, created a more difficult trading and performance conditions, and investment strategies generally across the industry lost money in 2018. Against that broad backdrop, we did a good job of delivering results in the areas we can control, namely generating outperformance for clients, developing our client relationships and managing our costs while investing to growth. We outperformed our peers by 1% on average, And we think that's a pretty reasonable result given the tougher performance environment. New business remains strong in 2018 with net inflows of 10,800,000,000 Fixed costs were similar to the prior year, despite the cost increases from the lovely MiFID II and GDPR. And us continuing to invest in our new talent and technology. We were though I must admit aided by a favorable FX hedge. Despite the good relative performance, absolute results for 2018 were lower given the market backdrop. Equity market declines and FX moves, which affect us a lot on AUM, and the weaker environment for factor particularly value broadly offset the stronger net inflows resulting in the smaller small reduction in total sum you see to 108.5. Adjusted management fee profit before tax was up 7%, driven by the higher net management fees. Which comes from the fund growth in 2017 and in the first half of twenty eighteen before the sell off. The environment obviously impacted performance regeneration, So total adjusted profits before tax increased to $251,000,000 compared from the $384,000,000 previous year. We continue to manage our capital to benefit you, the shareholders with, during the course of the year, a very possible sale of our stake in Nephila, and the repurchasing of $211,000,000 worth of shares over the year. In addition to this, and in line with the dividend policy, The board recommended a final dividend of $0.054 per share. As a result of the growth in management fee profitability, and also the reduced share count from the buyback programs. Our total proposed dividend per share is up 9% in dollars or 12% in sterling. Sir? Looking at the farm movements in 2018, it's hopefully a pretty clear picture. You could see the things we can influence, which are the flows and the relative performance we talked about before, they're shown in blue, and they're both going in the right direction. Against that, the bits that we can't control, the external factors went against us. 1 pleased with the billion of net inflows during the year, and that included 1,000,000,000 of inflows in Q4. In addition, generating $1,000,000,000 of relative outperformance for our clients, 70% of which was in the fourth quarter when it really mattered to clients, makes a significant difference. But the macro environment and its impact on markets meant that with equity indices down. And remember, we have a decent amount of long only equity business these days reduced our fund by about 1,000,000,000. In addition, almost half of our assets now are non dollar denominated. So the stronger dollar over the course of the year was meant to FX translation was negative. Together, these macro factors more than offset the inflows, as you could see. So moving on to performance. You can see our absolute performance was heavily influenced by the equity moves last year. Overall relative performance across the group were solid, as mentioned earlier, was the asset weighted performance against peers of over 1%. Absolute performance in the absolute return category was down just less than 1%. With our comp strategy is holding up particularly well despite it being a weaker environment for momentum. You can see it was a tough period generally for absolute return in the space, so the down 1% is actually a strong relative performance. And in particularly, we outperformed with AHL Alpha And Dimension, both generating positive returns. Against the period where a number of CTAs had, losses some of them quite significant. In the total return category, The alternative risk premia strategy did have negative returns, but the EM debt strategy actually ended up the year positive despite sell offs in EM debt. Both strategies again materially outperform their peers. Systematic loan only were down on average about 16% across the product category. It's an area where we've had several years of very strong outperformance. So our relative performance this year, I'm afraid, was weak. So we had an underperformance of 2.8% and it's particularly because of the value bias at numeric. A long run performance here remains particularly strong in this category, and it was somewhat inevitable after 7 years of outperforming not just the market, but also our target offer in that strategy that we would have a weaker year at some point. Returns in the discretionary long only category dominated obviously by Japan Corralso given it's the largest strategy in the group. Relative performance was slightly positive. And Japan Coral forwards ahead of its peers and other strategies will, I mean, broadly in line in simple terms. So if I then look at flows, in 2018, we continue to see broad demand for our products And one of the things we're pleased with with 10 of our strategies generating net inflows of over 500,000,000. We saw continued interest in the alternative risk premia in the emerging market gap and actually in both our UK and European long only strategies. Alternative risk premia was the biggest contributor to their flows and remains a great demonstration of how the firm works when we all come together. During the year, we made further progress in strengthening relationships with existing clients and adding new relationships with strategically important asset allocators and distributors globally. We continue to see the trend of clients investing across the firm, Now 71% of our funds relating to clients invested in 2 or more products and 48% relating to clients invested in 4 or more products. Both stats are marginally lower than last year, but that took over 1 several large mandates from new clients. But interestingly, our top 10 clients now have an average of 6.5 mandatory You can work that up at 65 mandates across 10 clients, which demonstrates the breadth of their engagement with the firm. And one of our big opportunities is progressing other clients up into doing that number of things with us. So with that, I will pass on to Mark to give you specific numbers. Thank you, Luke, and good morning, everyone. I'll start An overview of our P and L and then take you through all the normal detail on some revenue costs and capital. Net management fees were up 7 percent to $791,000,000, driven by higher average funds, which was partially offset by a lower revenue margin. As Luke explained, 2018 was a more difficult performance environment, which reduced our performance fees and led to a small loss on our feeding book. Performance fees were 1,000,000, and we lost 1,000,000 on Seating. Our adjusted management fee PBT was 1,000,000, up seven dollars. This was driven by the higher management fees and the limited increase in fixed cash costs, partially offset by an increase in asset servicing costs due to MiFID II. Core management fee pdt, which excludes legacy income, was $203,000,000, up 14%. Total adjusted PBT was 251,000,000 dollars, 35% lower than last year due to the lower performance fee profits. The gain on the sale of Nystila, which we've mentioned earlier, and a reduction in the numeric contingent consideration liability following the market sell off in Q4. The statutory profit was 1,000,000, which was up by 1,000,000 from the prior year. Adjusted management fee EPS was $11..8 per share, up 9% year on year, which is faster than the PBT growth due to the lower share count following the buyback and the tax rates on the adjusted profit was in line with last year at 14%. And as Luke mentioned, turning to FUM, and fund was down slightly at year end. Net inflows in Q4 were 1,000,000,000. With strong inflows into alternative risk premier and systematic long only, partially offset by outflows from absolute return and discretionary long only. The outflows were driven by redemptions from discretionary use of strategies, which are typically more sensitive to short term performance. Plus a couple of redemptions from a few larger institutional mandates. The negative investment movement of 1,000,000,000 was heavily concentrated in Q4, as you can see, with the majority of it coming from our long only strategies as equity markets fell. FX moves reduced from by a further $2,700,000,000, which dollar strengthened and other movements reduced from by $1,000,000,000, which include CLO maturities and negative leverage movements, which was partially offset by 1,000,000, increases the strategic bond assets came in as the San team joined in Q4. And turning now to the revenue margins, you can see our standard chart here, So you can see the same trends that we've discussed previously. Long only and total return margins are basically flat. Bouncing up and down one way or another period by period. The absolute return net margin decreased as a result of the continued growth in our institutional assets and the outflows from some of our historical retail business, particularly AHL diversified, As we've said previously, we expect that gradual decline to continue. The multi manager solutions margin decreased to 36 basis points And as we've described many times before, we continue to expect this margin to decline as the business shifts towards large infrastructure mandates and managed account mandates. And then the rest is clearly just mix across the group, which gets you to the blended margin of the group level. And bringing together some and margin, You can see that the bulk of the growth in core net management fees this year was driven by the growth in total return and discretionary long earning strategies. Absolute return fees were flat year on year, reflecting the fact that assets were also broadly flat. Multi manager revenues fell as assets in margin dropped. The Farm drop in particular reflects the infrastructure redemption we mentioned at our interim results. And the headwind from the run off of our legacy products, which you'll have heard us talk about over the years is nearly over. And if anyone hasn't already done, so please remove any associate income we've sold the filler. And this slide is again, just summarizing the moves through the year to give it the run rate net management fee. So it reflects the fact that we had strong growth generated from flows. But those have been more than offset by the market headwinds. In particular, the sell off in Q4 more than offset our progress earlier in the year. And this leaves us with lower run rate revenues as we enter 2019, despite the inflows we saw from clients during the year. Turning now to performance fees. As I said, we earned $127,000,000 of performance fees in the year, $92,000,000 from AHL, of which 43 was from Evolution and 35 from Dimension. GLG earned 31,000,000, the majority of which were from the European long short you have discussed, and then a range of the smaller equity long short strategies. And then F and M and A, Meraki contributed 1,000,000. The Seabook lost $5,000,000, as I said earlier compared to a gain of $44,000,000 last year. The risk management and hedging of our seeding positions kept losses to about 1%, which we think is a creditable outcome given the backdrop. At year end, we had 1,000,000,000 performance fee earning from. Of that, 1,000,000,000 was June crystallization, which was at peak. Please bear that in mind when thinking about the H1 performance fees. Evolution is the main strategy that crystallizes in the first half and it's currently slightly above high watermark. I'd also highlight that the netting risk from the elapse we've discussed previously is elevated given the fund starts of the year about 5% below high watermark. The bigger point I want to reinforce as I always do on this page is about the performance fee earning capability over the cycle. We've set this every year, but we cannot control performance outcomes at any 1 year. What we're focused on is improving the quality of the strategies year by year, and growing the performance fee capability over time. Turning now to costs. The compensation ratio was 48%, up from 44% last year. That's in line with what we've said previously. And just to reiterate, we expect to be at the higher end of the range in years when performance fees are low and the proportion from the American GLG is higher. And conversely, we expect to be at the lower end of the range when performance fees are high and the proportion from AHL and upper end is higher. Fixed cash costs for the year were 1,000,000, below our guidance of 1,000,000. There were cost increases from the investments we told you about. Into our investment management and technology capabilities. These were partially offset by real estate cost savings and by a favorable FX hedge rate which was a $10,000,000 benefit year on year compared to 2017. The accounting standard that everyone is becoming familiar with is now in effect. That brings our leases onto the group's balance sheet, but it also changes the P and L treatment from now on. Although this change does not impact our actual costs or cash flows, the P and L premium will be different, and it's going to increase net expenses by about $1,000,000 in 2019. That will normalize and then eventually decrease over time, but please be aware for the 2019 modeling. And as usual, we've got all the details in the appendix. Our 2019 guidance for fixed costs, including leases on the new basis, is $350,000,000. In simple terms, that's the 2018 costs plus the $5,000,000 change from leases. Plus 11 from the FX translation to the 2019 hedge rate and then adding on the impact of annualizing in the investments we noted in 'eighteen. Please also be aware that we're no longer planning to hedge the fixed cash costs from 2020 onwards. Asset servicing costs were 1,000,000 dollars, $14,000,000 higher due to the MiFID II costs and a higher average assets. Going forward, guidance remains about 7 bps of including the American GPM. And before turning to capital, I wanted to explain the rationale and mechanics of the proposed corporate structure change we announced in Q3. We've seen significant growth in our business over the past 5 years, and we're now a much more global business. As a result, we're proposing to adjust our structure and our governance. We're proposing a Jersey Incorporated holding company, and we'll be increasing our senior management presence in the U. S. The structure should provide greater flexibility in future and support the effective and efficient management of our business. It would give us more flexibility in financing, including, for example, the seed capital program that supports innovation in our international businesses. We also believe it's a structure that is consistent with other global management firms and helps us compete over the long term. At the moment, our US Nation businesses are regulated by both the UK and their local regulators The proposed structure would result in a group no longer being subject to those global consolidated capital requirements and was therefore provided with greater flexibility. Comparable, as I say, with other global firms. As we said before, there's no expected change to our tax within the remaining UK tax domiciled And as Amit said, going to the next slide, there's also no proposed change to our capital policy today. One of the strengths of our business is capital generation. And as Luke said, we continue to actively manage shareholders' capital. The sale of our stake in the filler generated net proceeds of $140,000,000. We're midway through the buybacks that we announced in October So you've seen us both pay a healthy dividend and return capital separately to shareholders. Pro form a surplus capital is $340,000,000, which includes all the normal pro form a adjustments at year end as well as the new lease accounting impact. That's slightly better than some forecast due to lower lease impact in the drop in contingent consideration in the second half. As we previously outlined, we have a CCAP program to support new products, which is managed within the $75,000,000 value at risk limit. Receiving book increased during the year to 662,000,000 up from 1,000,000 at last year end as we supported a range of new strategies. Before handing back to Luke, I wanted to pull together a few of the cyclical trends and longer term strengths we've touched on already today. Run rate net management fees are lower as we enter 2019, as I said, despite the growth from net flows and relative performance during the year. Those two are the long term engines of growth for asset management firms, and we're pleased we continue to deliver on them last year. Over time, performance fees are a very valuable earnings stream for our shareholders. However, we are currently below high watermark for some of our funds. Across our performance of the earning strategies at AHL, dimension and evolution entered 2019 largely at home waterlog, but Alpha was about 5% below. At GLG, ELS is also about 5% below Hawaii Watermark and the majority of you have some way to go before they're in performance fee earning territory. This may or may not impact 2019 profits depending on markets. What it doesn't materially impact is the long term value of that fee stream to shareholders. I'd remind people that we entered 20 17 with various high watermarks to make up, and that was a very positive year for performance fee profits. Finally, as I said before, the FX hedge rates and accounting items are a headwind in 'nineteen, although both of those will normalize in the long run. And then lastly, before handing back to Luca, I wanted to leave you with a chart illustrating one of the great strengths of our business. Whenever we stand up, we naturally focus on recent performance, but I think the longer term strength sharing on this chart is quite striking. Over the last 5 years, we've returned over $1,500,000,000 to shareholders through dividends and buybacks. That is over 30% of our total revenues over that period, and it's also over 50% of our market cap as we stand here today. I think 55% as of this morning. Even more importantly, it's driven by the profitability and cash flow generation of the business. So we have made these capital returns that you see, while growing our management fees and performance fee capability and maintaining a strong balance sheet. We are realistic that there are some cyclical headwinds for this year, but we're also realistic about some of the structural strengths of the business. And the cash flow generation and the capital return is a great, great strength with which I'll hand Vasiliuk. Thanks, Mark. As Mark just highlighted, In the current environment, it's natural to focus on short run performance and particularly on flows. And as we all know, there'll be lots of questions on that in a minute. But before we get there, I wanted to spend some time talking through why we think we are structurally well positioned for growth. Organic growth, and even if there are some short term headwinds at the moment. 10 years ago, Man's business and profitability was centered around retail focus guarantee products. Post 2008, currencies are redeemed from these products or didn't reinvest in the products matured. So when people worry about the asset management business generally offering products that don't work with today's clients, and the redemption pressures that average asset managers might face with, we won't shrug that challenge off. It's actually one man who had to confront and to manage our way through over the past decade. The benefit we have here is that we've already repositioned our business. Such that we now offer clients a much more modern diversified product range with a much greater focus on research, innovation, technology, and delivering for clients what they need. Please don't get me wrong. This transition was far from easy. It took some successful acquisitions, numeric, FRM, and so on, in particular, have been hugely positive contributors in a different way, but it's taken a huge focus on innovation, and on building real client relationships. And it took some material cost cutting as you'll see on the next page. We ended up roughly the number of people that worked at Mann, FRM, GLG, numerical, so on, about a decade ago. And you could see that we're around 2,500 people. Today, there are roughly 1100 less people working in the firm. That improvement has primarily come from figuring out how to support the business more efficiently is we brought everybody onto one core operational platform. We did that. It's not about making an about, maybe one day we'll start trying to consolidate things. We've done this over the last 10 years. Importantly, the number of frontline investors and salespeople looking after real clients and their investments hasn't moved by nearly as much. That level of change is hard to deliver but it's a necessary part of repositioning, and we went through it and the rest of the asset management industry will need to go through that. What we've seen What we've seen in recent years is the result of a lot of hard work. We're pleased with the diversified range of products we can offer clients today So at the same time, it's absolutely essential. We have to keep innovating. Otherwise, you'll start to drift backwards. What you see from this comp chart His clients have now recognized our efforts to build the products and solutions they want and need today, and they've rewarded that work with inflows into our core products. We've now seen cumulative net inflows of over $25,000,000,000 over the last 3 years or roughly a third of the starting AUM in that period. It's not all about beta. It's about offering products to clients that they actually need. That's about the strength of those products today. But yes, it is about getting rid of the headwind from the legacy products redeeming maturing as we've repositioned ourselves. Before I finish with some comments on our outlook, let me run you through why we remain structurally well positioned for long term organic growth. The whole industry is trying to figure out how best E technology to help clients, whether that be to improve performance, manage risk or reduce costs. We've had that in our DNA for a long time now. Over 30 years of quant development for AHL and numeric And we have a huge advantage compared to competitors as this becomes a more and more central part of what clients expect. One of the interesting things of Quang development is you get a real compounding effect because once you've done something in Quang, you don't have to redo it. You can treat me using it. In the discretionary world, you have to start every day a fresh. In the comp world, you get a real compounding benefit. We have 100100 of researchers and technologies and decades of experience. Others will struggle to replicate what we spent decades building. It isn't an abstract conceptual advantage. It turns into real hard dollars. To give one very tangible example from this year, We estimate in 2018, we saved our clients about $140,000,000 as we've deployed various technology tools, including machine learning, and other quant research to improve the execution across the firm. Clean that in perspective, it's almost 20% of our net management fees were up to you. So the amount that we can save by making the execution better has the real value generation for our clients. We're a performance focused asset manager. And to deliver performance at our scale, you need a broad range of strategies for clients. The breadth of what we do and the range of different and distinctive approaches to investing at man is compelling for clients. There are very few friends with a breadth of solutions we can offer. It allows us to be relevant to a wide range of clients across the world and also importantly to remain always relevant throughout the market cycle. It allows us to find collaborative solutions to clients' problems, because we have a diverse set of skills within the firm. We remain very proud of our diversified set of risk premium strategies, and maybe I'll go on about it a bit much, but they share the value of collaboration across the firm. And it's been recognized by clients with over 10,000,000,000 raised, and they've generated 3 year returns more than 13% ahead of the benchmark cumulative over that period. Finally, we're a client focused firm. And by that, I don't mean a distribution focused firm. Our industry tends to be very inward looking, focusing on the products, people think they can easily build and then flock rather than focusing on solutions to the problems clients actually need solved. We've made it a big priority to the firm to shift that mindset to the outward looking and listen to our clients. We think you could see that difference in how clients interact with us. Our 50 largest clients are in their in more than 3 products with all three solutions with us on average. And again, it's demonstrating the depth of the relationships as well as the breadth of people that we deal with. And lastly, I just want to before I turn to the other, I want to remind people why all this matters We're an institutionally firm, but ultimately we serve tens of millions of people around the world, all saving to meet their financial goals. Our purpose is to help those people actually meet and exceed their goals. And if we do that well, our business thrives. Before we open up for questions, just a couple of comments on the outlook. We've had a healthy number of mandate wins over the past few months, But as clients responded to the change in markets at the end of last year and adjust their portfolio, we have seen a pickup in redemptions in the first quarter. We've always talked about the lumpy nature of flows in the firm. And what we're seeing in the first quarter is just the normal course of business that we expect to see. It's not something we're worried about in terms of the status of flows. We remain really confident that we're structurally well positioned for the future. We have compelling investment propositions. We have deep client relationships. We have a competitive advantage in our experience of using financial technology to drive investment returns. As ever, we remain focused on delivering superior risk adjusted performance and the highest quality service to our clients. If we get those 2 things right, it translates into the delivery of value for our shareholders. So with that, we'll open it up to questions. Yes, good morning. It's Ana Gibert from Exane. I've got 3 questions, please. Firstly, on, you talked a lot about being asked for services and looking to add value to clients. I'm wondering in terms of when you look at your product set or your solution set, where do you see opportunities to build out and how you're addressing these opportunities? And secondly, could you talk a bit about fees on the front book and on the back book, and you have to retain product sets in terms of the feeder at Vistra, the growth in terms of coming in and the growth afterwards are coming out. And thirdly, well, since you mentioned you're seeing a pickup in redemptions, Could you perhaps talk about which asset classes you've seen in the redemptions pick up in? Thank you. Sure. So, and I mean, I'll leave you to give a piece. 1, I'll give it value for clients and the growth opportunity. There are lots of things we don't do. One of the things I've always talked about is we only want to do things where we believe we can generate alpha for our clients or value add. Alpha Works is a very easy definition in something like Equities, but in some of the other areas, it's a bit more complicated. But you think of it in those terms. There are lots of asset management products, which don't have value to clients, and I think they don't have a future over time. So we are very much focused on looking wherever we can find things that we can add value. We are, have been and will continue to invest in the quant businesses we've got to find new things that we can do with quant techniques. That's about both getting better at the things we do. You could see that in the outperformance of AHL Alpha, which is a very long standing product, but it's outperforming the industry. Because of the fact that it's we've continued to innovate within that as well as the new areas. And then obviously, we'll keep adding teams. I think last year, we looked at about 200 teams, and we added 2, I think. The bar is very high. But we added there, actually, now while 2 at the end of last year in the credit side in GLG, we added a team that got quite a lot of coverage this year. Beginning of this year in the GPM side. We look at a lot of people before adding those teams because we only want to add the ones where we're convinced they can generate output, but there's lots of room for growth from the point of view adding new capabilities. And on the seed side, the most important component of the back book is AHL diversified because it's about 3% management fee. So it's the runoff of that that causes the biggest part of that mix effect within absolute return. If you look at the front book, it's pretty close actually to the blended mix. So it's this slightly counterintuitive thing where The back book Wells offered a higher rate, the front book is coming in not far off the existing and that actually causes a drop. But the main thing to focus on is AHL diversified running off There's no increase or decrease in the speed of that. It's just steadily been decreasing over time. And I think the other question was other redemptions focused anywhere particularly. And so for the short answer is no. I mean, the in the same way as the inflows, on the balance of the book isn't changing at all. It's just you get some people reposition after a year like 2018. Hi, good morning. Gedric Campbell, JP Morgan. Two questions. Firstly, you mentioned that you're basically positioning your business to meet the needs of clients or solutions that clients find. What are the sort of key solutions that clients are asking you for in terms of discussions you're having? Second one is really around sort of the private market area. You haven't really talked much about that. Is that going and any opportunities there? Sure. So on the solution thing, I think part of parts of the billings, in Asset Management, we'll have a great tendency to talk very specifically about what being they do. So they get very soft about whether you are a European Income Fund or whether you're a European excluding UK Income Fund and think that that's really significant. The reality is when you sit with the CIO of a $100,000,000,000 pension plan, They're not bothered by that question. They're sitting there going deep. I'm supposed to make 5% we'll return to an American plan. I'm supposed to make 7 a half, 8%. And they sit there. They're looking at that bond portfolio, and they sit there looking directly portfolio, and they go, Okay. That's not gonna get me there. What do I do? And they're not looking to, you know, yes, when you get down to the individual picking individual funds, there's always a certain amount of discussion. But the reality is that trying to deal with a big picture problem And only the maze, how much asset managers only want to talk about the tiny detail. And so a lot of the conversations are about how can we use skills we built up. One of the things of the firm is when you look at core skills, we're so used to managing large risk positions we're just sort of taking a second nature. We're thinking we're used to trading larger volumes over the course of the year. So that's why many of you are here. Yeah. And that means that we can look at the big picture problem the clients have rather than just the micro one. And we can apply some of those skills we've got. Because, you know, when you certainly talk to a $50,000,000,000 pension plan and you talk about how they manage their risk between Equities and bonds. They're sort of sitting there, okay, but we can't do anything about it because we can't to change our asset allocation because markets are too illiquid. We think nothing about moving $10,000,000,000 $20,000,000,000 from one part of the market to another because we do it every day with our normal risk management. And as you start to bring those ideas to bear for clients, they really understand you're trying to help them. They may use those techniques directly. They may Thank you for the advice and use it themselves. They may then just decide to buy something else from us, but you are helping them solve their problem And through that, you build a differentiated relationship. Yes, and look, I mean, some of it, so we don't do, we don't offer execution services for our clients. We'll leave that to the banks to do. We run money for our clients. But as many of you work in organizations where The reality is if you help your clients, they will find a way of paying you. They may pay you directly for the way you help, and they may buyer service, which looks exactly like the thing you took from level, they may buy something over here to pay for something over here. We all know how that works across different parts of finance. And it really works with clients. And when you look at the flows, what's very clear is the vast majority of the flows come from places where we have a dialogue with the senior people, the CIO equivalent of that organization and we're helping them think about how they get to 7.5% in dollars, how they get to 5% over CPI as one of our clients It was the second one, because it's part of the GPM. We haven't talked too much about GPM here because from a pure results point of view, it still a small portion of the firm, a couple of percent of the assets. We are making good progress there. We are going in a considered fashion. So we've grown assets within the thing. We've had good client reception. I think there are lots of parts of the private markets world where assets are expensive and Boy some of the businesses that are investing in those expensive assets have very high expectations of the value of those businesses. And we don't want to try and chase that at all. So we continue to look for niches where we don't think either there's value or we could create value. So the bits around affordable housing is a good example of that where, you know, we can all imagine how many pension funds in the world are looking for things which meet the responsible investing type of banner, but also generate some sort of reasonable return. And we think that's an interesting opportunity there. So we're finding things to do, but we're going steady rather than rushing. Thanks. It's Haley Tam from Citi. I've got 3 pretty technical questions actually, so I promise not about flows. The first one was just actually on the the reason for moving away from hedging FX in the fixed costs. I wonder what the thinking was behind that, whether there's some significant savings and surge costs. I think 60% of those costs are still sterling, so that'd be great to understand. And secondly, in terms of the move to Jersey, Could you help us maybe sort of frame the potential benefit from not having to do a global consolidated capital requirements in the future? Or if you can't, then maybe tell us when you can, that'd be great. And then the last thing, just on the ELS netting risk, if you could help me again think about quantification? Is that maybe some reminder of the $4,000,000? That'd be great. Thank you. Sure. And so on the FX hedging first, So there's effectively some execution costs associated with that. And the only real benefit that we see given it's an only it's a 1 year hedge is helping the outside world understand 1 year costs and makes no real difference to the long term possibility of the business So that just feels like a bad trade off for us paying the execution costs each year for something that just has a 1 year benefit and we'll obviously explain to you how the costs will move relative to FX in each year so you can understand it. So I think that's relatively simple. And Jersey said, as we said, the change post that is moving out of the setup where Our international businesses are regulated both by the U. K. And the rest of the world. So global consolidated supervision not complying. Putting a number on that with the furniture at this stage. We want to go through the process and we need to then into the FCA for the European business, we'd expect to talk to you about it in more detail at the half year. And then lastly, on the LS netting, I mean, there's quite a big distribution effect within that to put an exact number on it is difficult And for context, you've seen it in double digit $1,000,000 in the past. It's certainly capable of being that size of effect this year. Good morning. It's Jupyler Lamb from Bank of America. A couple of questions. Firstly, on wondering if you can get a sense in terms of client risk appetite for your traditional trend following products? Secondly, on the capital, $40,000,000 versus capital is probably better than what I anticipated. If you can just feel for what do you think about the M and A environment right now. And also whether or not that's an M and A, if you can use that for, buybacks if your when your current buyback completes. Cool. So I think on AHL trend, this is a basic trend products, if you like. Again, You should just recognize basic trend is not that higher proportional to what AHL does today. So traditional trend is it's probably 25% of what goes on within AHL today. The demand for that is is I mean, if it's a consistent AUM, is that a reasonable expression for it? The the reality is people buy that content for the rainy day. And if it comes around as a rainy day, it'll be very important that it makes good returns out of that. You know, as you can imagine that, whether it was, you know, early in December, it was positioned for to make a very large amount of money if the sale of a continued, but when Powell woke up and decided to blink to get repositioned the other way around. The reality is our AHL Alpha was marginally positive last year, a couple of the 50 basis points or something. And on a 3, 4 year basis, again, it's been about that. And the reality is only that as a hedge within a portfolio is something that a bunch of clients think is a sensible thing to own. You get a certain you get the old one gives up on it and you get new ones come in every now and again. But if it flows there, on fatiguing material will become so again, if it makes good money, you'll, I guess, if there's a big sell off and it doesn't make good money, I guess. Does that make sense? But the flows across AHL, There's many other things we do there. And one of the really exciting bits over the last few years has been the innovation going on in AHL has been the increase in content. We're pleased to see the dimension last year was up 2a half I think something like that. 3. Let me get somewhere there. You know, that's that in the context of what was going on is a is a nice outcome until he's not driven by depending on the momentum at all. So I think it's recognizing there's a lot of innovation in AHL while keeping the optionality in the momentum. If that makes sense. The question on the M and A front and capital, we have seen the value of public market businesses come down. In Asset Management, clearly, as you know, there's a lot of execution risk in a public market business, public market acquisition or merger or whatever you want to call it. And so the bar is very high for doing something like that. Private market valuations haven't really changed very much as of now. We continue to look on a very consistent basis at businesses. We looked at our over 100 businesses last year. There was a couple of times we got interested and then nothing came with it. Will continue to be disciplined, we're in the middle of a buyback now and as Mark showed you on the slide, we have been very consistent about returning capital in what I think are quite material amounts over the years. And there's no reason to think we'll change that. We'll have to decide as we get into the year and the buyback side of the way, and we've done the restructuring and so on, how we want to conviction ourselves there. Thank you. Mike Werner from UBS. Just a quick question. I think you said at the end of 2018, the performance fee eligible AUMs were about 4 point 5% away from their high watermark on a weighted average basis. We've seen a lot of movements in the markets year to date. I was just wondering if you have a little bit of an update as to where there might be today? So the general pattern is numerics performance picked up a bit, so the gaps dropped there hasn't been a huge difference on the AHL and GLG side. So they haven't done a massive amount so far. So there's no dramatic change from the year end. Yes. I'll look it up a bit down a bit. I'll end up by where you felt And remember when we talk about numeric, it's all in relative performance. So there's no we don't have a performance fee anywhere based on getting paid for B2 in the equity market. Anymore for any more. We'll need it past the 25 minutes call. Thank you very much, everybody.