Earnings Call: H1 2018

Aug 1, 2018

So I'm going to start with a quick run through an overview of the first half. Mark will then take you through the numbers as usual and I'll come back and talk about how we're going on strategic priorities and at least a brief comment on the outlook. And then we'll take questions. So pleased to report the first half of the year was net inflows of 1,000,000,000 which is a record for the firm. I think that's a testament to our client relationship and builds on the firm foundations that we've laid across the organization over the last 18 months. It's also really pleasing to see the breadth of products into which the clients invested So we saw continued interest in our alternative risk premium in the emerging market debt but also the U. K. And European discretionary long only strategies I'm pleasingly, there was a noticeable pickup in demand for the equity long short strategies. Overall, it was a choppy period for markets, which affected the absolute performance across the group, particularly in a couple of the long only, so numeric emerging markets and the Japan core alpha strategies. The more difficult environment for Alpha generation limited, particularly our seeding gains, but also the performance fee generation in the half. Our relative performance across strategies were slightly ahead of peers with asset weighted outperformance of 0.3% for the period, but that's behind our recent run rate of outperformance. Funds under management ended at 1,000,000,000, so that's up 4%. With the net inflows partially offset by negative investment movements, as said before, and FX from headwind as the U. S. Dollar strengthened against most major currencies. That left adjusted PBT increasing by 5% to 1,000,000 compared to the first half of twenty seventeen, primarily driven by the higher management fee revenue and partly offset again by the lower seed gains. Adjusted management fee PBT was up 26% versus the first half of twenty seventeen and from our higher fund and the lower fixed cash costs, partially offset by the lower associated management fee margins compared to the first half of last year. Performance fees were in line with first half of twenty seventeen, but the lower seed book gains led to lower performance fee profits. And then statutory profit before tax was fee earnings per share, so that's 0.064.88p per share, payable in September. And that's up 28% in dollars or 29% in sterling compared to the first half of last year. So with those headlines, I'll pass you over to Mark for the detail. Thank you, Luke and good morning, everyone. I'll start with an overview of our P and L and take you through the normal detail on from revenue costs and capital. Net management fees were up 13% to just over 1,000,000, driven by the strong FUM growth, partially offset by the decline in our revenue margin. As Luke said, the first half was a more difficult environment for Alpha, which impacted our performance fee generation and our seed gains, Performance fees were 1,000,000 and investment gains were 1,000,000. Investment gains were significantly lower than last year, reflecting that market backdrop. Our adjusted management fee PBT was 1,000,000, up 26%. This was driven by the higher management fees and reduced fixed cash costs. Our total adjusted PBT was up 5 percent to 1,000,000 with the strong management fee growth being partially offset by lower performance fee profits. The adjusting items were slightly lower than last year due to a smaller increase in the contingent consideration. Our total adjusted EPS was $0.081 per share, up 8% year on year, which is faster than our PBT growth due to the share buyback Turning now to FUM. As Luke mentioned, FUM was up 4% to 1000000, driven by those net inflows of 1,000,000,000. The flows were broad based and we had 8 strategies with net flows of more than 1,000,000,000 in the half. The negative investment movement of 1,000,000,000 in our Japanese and EM long only strategies. In addition, as we described in February, momentum strategies had a difficult start to the year, didn't recover those losses in the second quarter. The negative performance there was partially offset by positive returns in our UK and European focused discretionary strategies. FX moves reduced from by 1,000,000,000 as the dollar strengthened and other movements reduced from by 1,000,000, which included 1,000,000 CLO maturities, GMEC GPM loan repayments of 1,000,000 and million of guaranteed product maturities. Turning now to the net management fee margins. As we pointed out in our release this morning, we've been notified by one of our large infrastructure clients that they intend to redeem 1,000,000,000 in third quarter as they reallocate part of their holdings with us. Given the low margin nature of that business, the impact on revenues is not material, we've adjusted the run rate margins we show here to account for this pending redemption. As you can see from the slide, the group run rate margin was stable over the half as the mix effects that we've seen previously reduced. You can also see the trend in each category as more stable institutional assets and the outflows from some of our historic retail business, particularly AHL diversified. Turning to multi manager, that's actually increased to 40 basis points, but that's mainly due to the impact of the infrastructure redemption I just mentioned. We still expect multi manager margins to decline as the business shifts to infrastructure and managed account mandates. Margin for total return and systematic long only both increased slightly, but there's no real underlying trend to speak of, and the discretionary long only run rate is slightly down. Due to mixed shifts away from Japan core alpha in the half. Bringing together, thumb and margin, you can see that the increase in the core net management fees compared to 2017 was driven by our total return and discretionary long only strategies. Net management fees in the absolute return category were slightly up, driven by the strong growth in equity long short strategies, where Frum has essentially doubled in the last 12 months, partially offset by the impact of negative performance at AHL. While assets have grown in the multi manager category, this business remains in transition from a traditional fund of funds business to a solutions provider, and as a result, revenues have declined. The headwind from the run off of our legacy guarantee products has reduced, leaving the overall growth in net management fees at the 18% for the half. And let's now look at our performance fees. As I said earlier, we earned 1,000,000 of performance fees in the half. This came from 15 strategies. 1,000,000 was from AHL with 1,000,000 from Evolution, 8 from Alpha and diversified, and 6 from the AHL Institutional Solutions. GLG earned 1,000,000 of performance fees, the majority of which were from the European long short European distressed and other long short equity strategies. 1,000,000 came from each of Efraim and Numeric, as I said, there was 1,000,000 of seed gains. We had $11,000,000,000 of performance fee earning from at peak at the end of June, which has crystallization dates in the second half of this year. Of that million is in AHL Strategies But then there's about another 1,000,000,000 of AHL funds, which are within 5% to peak. The majority of which is in Dimension and Alpha. It's worth keeping an eye on those when you're modeling 2018 fees. 1,000,000,000 of GLG farmers at peak and the performance fees of all of those strategies crystallize in December. There's also 1,000,000,000 of numeric from and the majority of those crystallize in Q4. While we always give you this sort of detail to help you with your short term modeling, the point I really want to emphasize in our performance fee earning capability over the cycle. Performance fees are a significant earning stream for our shareholders over time, And there are an earnings stream that we've either used to make value adding acquisitions or that we've returned to shareholders via buybacks, as you can see at the chart on the bottom of this page. Over that time period, we've announced 1,000,000 of buybacks in addition to the nearly 1,000,000 of dividends. While we cannot control the performance outcome in any given year, that depends on the market environment. We're focused on improving the quality of the strategies over time, and growing our performance fee earning capacity. And turning now to costs, fixed cash costs for the period were 1,000,000 4% lower than last year. There were cost increases from MiFID II and the additional investment in our client service and investment management capabilities. These were more than offset by the impact of real estate efficiencies and most significantly via favorable sterling hedge rate with a $12,000,000 FX benefit in the first half. As we explained at the full year, we're investing $15,000,000 this year in growing our investment in client service capabilities. Hiring has been a little slower than we'd planned as we source the right people. Fixed cash costs will therefore increase in the second half due both to the higher sterling hedge rate of 1.33 versus 1.26 and due to the impact of higher headcount. Turning to our comp ratio, that was 47% for the half, up 1% compared to the same time last year. That increase is really due to the lower level of investment gains. Netting at the half year was close to $9,000,000, up marginally on the equivalent time last year. To reiterate what we've said previously, we expect to be at the higher end of the range in years when absolute performance fees are low. And the proportion from GLG and numeric is high. And conversely, we expect to be at the low end of the range when absolute fees are high and the proportion from AHL and FRM is high. As we just ran through, the majority of funds currently at high watermarker from the American GLG. If that's reflected in second half performance fees, then 2018 would be a year with a high percentage of fees from GLG and numeric, and we'd expect to be at the higher end of our range. Asset servicing costs were $25,000,000. The increase is due to the higher FUM and the additional MiFID costs in the asset servicing line. D and A was in line with expectations at $11,000,000. Turning now to our core business, As you all know, man's moved from a legacy business model focused on guaranteed products to our diversified and institutional business of today. Management fees in the core business grew 16%, driven by our strong organic growth. Adjusted management fee PBT grew by 6%, but core management PBT increased by 42%. We're at the end of the run off process for our legacy business now, and we're focused on organic growth in our core business. Lastly, before handing back to Luke, let me run through you through the key points on our balance sheet. We continue to actively manage shareholders' capital. In March, we completed the buyback we'd announced in 2017. And in April, we announced a further $100,000,000 buyback. As of now, we're basically halfway through that with an average price of 1.80 As we previously outlined, we have a seeding program to support the growth of new products, which is managed within a $75,000,000 VAR limit. The C book increased to 1,000,000, up from 1,000,000 at year end as we look to support a range of new strategies. Circless capital after the normal adjustments is around 1,000,000. And as we've explained previously, we expect the new lease accounting standard to reduce our capital surplus by about 1,000,000 or 1 surplus capital is $230,000,000. With that, let me hand back to Luke. Thanks, Mark. Right. So now I'll give you a bit of update on the progress we're making more generally. As always, our first priority is generating outperformance for clients through high quality research, the quality of our people and the strength of our technology, In terms of generating alpha, as I touched on earlier, was a tougher environment, resulting in a choppy picture across the group, with asset weighted outperformance versus peers across our strategies of 0.3% in the first half and about the same on a against benchmarks. Given the mixed results across the strategies, we'll have a look at that in a little bit of detail. As we described previously, Momentum strategies had a difficult start to the year and while the second quarter was more positive, they've yet to have fully recovered losses from February. As a result, AHL's flagship strategies ended the quarter with negative investment performance of between 2% 3%. Which compares to the BTOP index, which was down about 3.6%. While that means the 3 year rolling returns, obviously excluding EVO where the returns are stand out. Our VHL funds are positive, but they're not that exciting. Clients are very clear that they own the momentum strategies for their ability to generate strong performance during a sustained market sell off. Hence clients are very sanguine about the performance in the first half of the year in AHL. We saw good performance from GLG's discretionary alternatives strategies. Strongly performing strategies included the European Long Short strategy, which was up 2.3% for the period, which is running with a 1 year sharp 2.1 as well as Alpha Select European Midcap and our credit strategies, particularly the Global Credit Multi Strategy And European Distressed Funds. Within the total return category, we're really pleased with how the M debt total return strategy navigated what we all know was a difficult market environment returning positive 2.2%. As we mentioned at the year end results, Guillermo has been bearishly positioned and as a result, outperformed its peers by about 8% in the first half, making money despite the big sell off. FORM strategy is at a more difficult period, mainly due to their heavy momentum exposure. So FORM diversified 2 was basically just under flat. But underperformed the benchmark by about 1.7. Looking now at the long onlys, as you can see from this slide, Numerics' range of strategies had a mixed relative performance in the half. Global Core, which is Numerics' largest strategy, underperformed the reference index by 2.6% and it's due to its value bias with essentially all of the underperformance coming in the U. S. And similarly, the U. S. Small cap core performance there underperformed its reference benchmark by 4.5%. Positive alpha was generated in European core and again in Emerging Markets Core despite the sell off performing outperforming their indices by 2.3percentand0.4percent respectively. The group's largest strategy still is Japan core alpha, and it also underperformed its benchmark due to the value bias. But by contrast, our UK long only funds and our Continental European Equity strategy, both of which now have over 1,000,000,000 of assets, continued their run of outperformance. So if we go into a little more detail on the work we've been doing on research and enhancing our technology platform, to improve the alpha generation across the firm and therefore further develop the breadth of offerings we have for clients. During the first half of the year, across our quantitative business, our ongoing focus on research continue to drive the development of strategies. An example of that, Manny developed a systematic approach to mapping and quantifying the fundamental network effects between suppliers, customers and across markets. We believe this can help both the strategies at numeric and also the discretionary portfolio managers as you understand the equity market universe using a much more consistent framework. AHL continues to add new markets, has been one of our key differentiators and continuing to diversify the drivers across this portfolio They currently trade over 600 markets. And in the last year, they spent a lot of time working on mid frequency equities, trading a little bit faster and actually AHL now trades more volume in equities than any of the other divisions of man. And also in single stock options to increase the breadth of assets and models that they trade. Within our discretionary business, we're embedding quantitative techniques to support and enhance the alpha from each team. Developments include the deployment of quantitative techniques to reduce systemic risk as well as the center book within our longshore program, which complements the discretionary decision making with a systematic overlay. Man GLG also continues to make progress in other areas. And we appointed a credit CIO earlier this year to help develop our credit offering, This is an area where we have significant untapped potential, and it's a key focus of mine to develop a broader credit offering. At the group level, we made further progress in centralizing our trading and execution as we build out our central trading central trading technology and trading research function. A globally coordinated execution team allows us to adapt to today's more complex market structures and deliver better outcomes for all of our investment engines. We expect this to further reduce our trading costs which translates either into improved performance for our clients We remain committed to keeping technology at the heart of the firm in a very rapidly evolving world We've appointed an Alpha, Chief Technology Officer to manage the development of the technology used across the firm to generate and deliver the Alpha, our clients are looking for. He'll be supported by a team drawn from across the different investment engines. This new structure supports our vision for creating a technology team an environment in a platform, which promotes the highest level of innovation and agility, while also minimizing any unnecessary duplication of technology, tools and processes across man. As ever, we continue to look at possible acquisitions to expand our offering for clients, but honestly, we haven't identified anything that meets our criteria of a sensible price and structure that delivers appropriate risk reward for shareholders. Turning to clients, during the first half of the year, We built upon the new style of engagement that we developed in the last couple of years with our existing and potential clients. Making good progress in building long term relationships with clients and adding new relationships with strategically important asset allocators and distributors globally. In line with this focus, we continue to see the trend of clients investing across the firm was 72% of the FUM related to clients invested in 2 or more products and 57% related to clients invested in 4 or more products. We repeatedly see that our clients value both the strength and the breadth of our offering. And our ability to provide them with a single point of contact who understands the clients and their individual requirements. Sales in the first half were 1000000000, up 14% compared to the first half of twenty seventeen. We've continued to see interest and inflows, as I mentioned, into our risk premium strategy, with 1,000,000,000 of sales, Our EM debt strategies were 1,000,000,000 of sales. Man GLG's European long short strategies collectively had strong investment performance in 2017 and that translated to $1,000,000,000 of net inflows in the period and there were also strong inflows, as mentioned, into UK long only and Continental European Strategies. Redemptions were 1,000,000,000 in the 6 months to June. That's up from 9.3 in the first half of last year, but actually the redemption rate is reasonably a similar percentage to the previous year. As Mark mentioned earlier, one of our large infrastructure clients has notified us that this potential of this pending 2.2 redemption from a low margin mandate they have with us. Our central infrastructure is the foundations on which the firm operates. This includes our proprietary central technology platform, which enables us to evolve and adapt as markets and clients need shift. As well as our infrastructure teams more broadly As I set out earlier, we moved to centralize both our execution and alpha technology teams, which will help drive excellence in these areas, a minimized duplication for the benefit of both clients and shareholders as well as its ongoing benefits. Our infrastructure positions us to integrate new acquisitions or new teams rapidly with the potential for significant operational cost synergies while preserving the added investment process. While we don't see many acquisition opportunities that are attractive today, We do think this capability is and the breadth of our investment strategies means we're well positioned to develop bespoke solutions to suit specific client requirements. Drawing upon the expertise available across the business. We find increasingly that institutional clients want strategies tailored to their needs, In response to this, we work with our clients to understand their circumstances and to create individualized solutions for them. To give you an example of this, during the first half, we launched a bespoke solution for a European client, combining strategies from AHL numerical and GLG. And delivering what we think is a unique blend of discretionary, fundamental quantitative and technical quantitative approaches. To generating stock alpha. The mandate relied on the unique combination of the quality and breadth of our strategies and our ability to customize it to the specific structuring requirements of the client. We think that these were only one of the very few firms that can address these times of client needs, and they are increasingly important around the world. As Mark explained earlier, we continue to invest in new talent technology and have committed an additional million of spend into our investment and client service capabilities this year. It's proved somewhat slower than intended to get the right people in, but we're confident that we will source them, unless we'll further support our ability to deliver value added to our clients. During the first half of the year, remember, we also successfully managed of regulation, MiFID II and GDPR. And we're supported in meeting these requirements efficiently and honestly with a minimum of FAST by the strength of our technology infrastructure and the efforts of our people. Before I give you some comments on the outlook, I want to talk about our approach to people. And in particular, I'll focus on talent and our commitment to diversity. While technology is central to our delivery, we are at heart fundamentally a people business to best serve our clients and shareholders hiring and retaining the best people and creating an environment which they can achieve their potential is our top priority. We placed great importance on being an employer of choice and a good place to work for all employees. We aim for a true meritocracy where you succeed through talent, commitment, diligence and teamwork. We're committed to supporting our employees so that everybody at Mann Group has the opportunity to be the best they can. We've developed a dedicated talent function which focuses on helping our people achieve their potentially individually and as teams. We also conduct regular employee surveys to get actionable feedback on well, what we're doing well, but most importantly, what we can improve. We also believe that by celebrating diversity and building an inclusive working environment, We encourage original and collaborative thinking with multiple and differing perspectives, which positions us to deliver better results for our clients. Encouraging diversity and inclusion is fundamental to achieving our business strategy. We operate Drive and employee led diversity and inclusion network which seeks to inform support and inspire our people. So far this year, within Drive, we've launched a dedicated pride and family's network and we'll be launching our network for Black employees and allies in the third quarter. Earlier this year, alongside our annual report, we issued our first annual diversity and inclusion report, which included our gender pay stats and an overview of our diversity and inclusion initiatives. Through reporting annually on our commitment to diversity and inclusion, we will assess and monitor the progress in this area over time. In our reporting, we introduced the paving the way our campaign for enhancing diversity at the firm and across the industry more broadly. When it comes to achieving real change in diversity in the industry, there's no doubt that a less diverse pool of potential candidates is an inhibitor. We believe that we can and must take steps to address this pipeline issue proactively We've introduced a number of initiatives to support this in recent years and our paving the way campaign seeks to build on our efforts in this area. Regarding gender diversity specifically, man group this year became a signatory to the women in finance charter, a pledge for gender balance across financial services. As part of this, we've introduced a target of at least 25 percent FEMA representatives in senior management roles by 2020. We're pleased to report a positive trajectory in relation to that. Try that again. Report a positive trajectory in relation to gender diversity at the firm, having seen an increase in the proportion and we're committed to further improvement in this area and all of the other areas in the years ahead. We also enhanced our parental leave policies so that all new parents at the firm globally are entitled to 18 full weeks of pay. It's not dependent on location or gender on applies to both biological and non biological new parents. We believe these initiatives help our people to take leave at one of the most significant times in their lives, underscoring our commitment to enabling employees to have a real work life I believe we do our best work for our clients when we support our employees, and we value their different perspectives and experiences. So with that bit of passionate thing, I'll come to the conclusion and then take some questions. Against the tougher market backdrop for Al from Vita, the first half of twenty eighteen is one of solid progress at Mann. We had record net inflows, which illustrates our client's confidence in our strategies and it was particularly pleasing to see the breadth of inflows demonstrating the diversification of the business that we've talked about so much over recent years. We saw strong growth in management fee revenue and profits, driven by organic growth and by our cost efficiencies. Performance, as I mentioned, was okay, but not that great. Business momentum remains good. However, as we said many times, the institutional nature of our business means flows are likely to be uneven on a quarter to quarter basis. And the one off redemption that Mark talked about earlier is an example of that, but it doesn't change our broader trajectory. So I'm always a bit nervous about talking about markets in these sessions as nothing we do is about having a discretionary prediction of the direction of equity markets. But others in the industry have sounded somewhat downbeat on the opportunities in the last few days, And honestly, we don't really see that as true active managers, we live in Alpha Space, where it's our ability to generate extra returns from our skills dominates the outcomes for our clients. Even if the first half was a relatively tough environment, it isn't predictive of what the forward looking alpha opportunity is. I spent years running a business where we tried to predict where Alpha would be. What you learn is it just takes skill and you have to wait for it. But we've demonstrated over time a clear ability to generate significant alpha and value added for our clients. To me, it's very clear that there's a lot of money in institutional portfolios globally looking for good value added investment ideas as beta alone is not going to generate the long term returns they need. So we put all of our efforts into generating high quality value added for our clients. And whenever we do that, we see demand. We remain committed to investing in talent, research and technology. And as ever, and I just can't repeat it enough, it's about a focus on delivering superior risk adjusted performance for our clients because if we do that, that will translate into the delivery of value for our shareholders. Good morning. Arna Gibla from Exane. Three questions, please. Firstly, on surplus capital, could you perhaps comment what sort of level of surplus capital you feel comfortable operating with? My second question is on the increase in in seed capital, is that going into new products? Or do you have a new product pipeline you could update us on? And finally, the trends in management fee margins you've helpfully given us your usual slide on how the run rates are looking per category. Could you give us a bit more granularity as to how in the absolute return products, how management fee margins are trading for HL and for GLG? Sure. The first one. Yeah. So on surplus capital, we obviously want to run the firm in a prudent way, but we don't comment on a sort of minimum amount above the requirements. So you can see the surplus that we have. We have the capital return policy that you've seen. There's no change to that, but we wouldn't comment beyond that. On the seed book, yes, I mean, the reason that money's gone into the seed book is because of things that we're seeding, which are therefore new products. The the clues in the name, one of the things that I've tried to get away from is the bit of talking about every new product Obviously, everyone we're launching, we're excited about everything in the seed book we're excited about its future, but I know they won't all work. I mean, we have a history of about fifty-fifty on products that we launch either growing to scale or ending up getting shut down. I don't worry that that's too lower hit rate. I wonder often if it's too high a hit rate, maybe we should take more risk with it. One of the things that I sort of promised myself when I took over is we would talk about things that are working rather than things which may work in the future. So you've seen 3 or 4 examples that we mentioned a lot about today, which are things that will launch seeded 2 years ago or 3 years ago and are now significant contributors to the firm, I am confident that some of the things in the seed book today will be significant contributors to the firm in a couple of years' time, but I wouldn't want to guess which one. And just on margins, I mean, let me talk through a couple of the trends which we've talked about previously. Most of them are essentially still the patterns we see. So in absolute return, the most obvious pattern is you still got the old AHL retail book, which is gradually reducing which is the main mix effect going on there. There is some actual underlying pricing pressure within absolute return. That's the one bed of business where we see it, as we've said previously. And you gradually see that margin drifting down through those effects. And total return, the only particularly noticeable effect is CLOs are typically lower fee than other things in that category. So there's some minor mix effects there. There's no other trend that we would really draw anyone's attention to. Multi manager, again, story is very much as we've spoken about before. We expect it to be sub-forty bps long term, not commenting beyond that. It just happens to have ticked up now because we've got the large redemption of an infrastructure account, but the underlying trend is still in place and systematic long only is really just mix of client by client. Sometimes it ticks up, sometimes it ticks down, Again, it's just a noisy pattern around that sort of range. And then discretionary, the main thing that at any given period is whether Japan Core Alpha is a bigger or smaller proportion. So it's dropped slightly now because Japan's a slightly smaller proportion. In the same way that it rose in the second half of last year because it was a slightly higher proportion. The underlying backdrop of all of that, if you think about it at group level, We still run the business on the assumption that the industry has gentle margin pressure over time, which is why we're very focused on efficiency. But you can see the stability coming in particularly category by category with the new categorizations. I also think. So maybe underlying the question or it's the next question coming. There have been a couple of people in the CTA space who've effectively looked rather surprised by the fact that the price for plain vanilla momentum in developed markets, the sort of easy to trade futures markets has been coming down for some time, I mean, years. Some people seem to have been a bit surprised by that. And are now trying to reengineer their business. We recognized 10 years ago that like everything we do, the world becomes a bit more efficient And so you need to keep innovating and creating new ideas. So we said about 10 years ago, expanding our momentum into a variety of different markets. So we trade a lot of markets where the value add is good and the fees are still very good. We also trade a lot of different types of quant strategies. And so yes, if you want plain vanilla momentum in 50 large futures markets, the price has been coming down continuously for a while. You can either sit there and go, oh god, or you can create new innovative strategies that come in as bits roll down here, you put new things in up here and combined, you keep the average fees at reasonably the same level. Good morning. It's Hubert Lam from Bank of America Merrill Lynch. A couple of questions. Firstly, what were sales like for trend following HL in the first half? And do you expect that to change in the second half? Or is it just due to performance and because of the weakness, you don't expect much that to pick up unless performance turns around. That's the first question. Second question is the flows in Q2 in terms of has a class, we're pretty consistent across Q2, Q1 alternative risk premium and emerging market debt. Do you see that changing at all in the second half of the year or you still continue to see momentum in these strategies that helped you in the first half? So the technical number on AHL is about flat, right? I mean, it roughly flows in the momentum strategy that AHL is about flat in the first half of the year. That's made up of a mixture of by definition after what happened in February, it's no surprise that there was a slowdown in conversations for a couple of months while people figured it out. But as they say, clients are very sanguine about what's going on. Combined with a couple of the products which have been shut. And so that that's quite hard to get flows in something that's shut. The, what's the second bit? And the Q2 fledged. So Yeah, I mean, which areas The the it's always hard to predict in a way, but, the trick is to have a breadth of things available. I think what you didn't mention was the very nice flows in the different equity long short strategies in the first half and given performance there and given nerves about markets, I wouldn't be surprised to see that carry on, but what's this diversity point that we've talked about trying to get there a lot. When we look at the flows, we have a big pipe and different things that might happen. And what you see is that it's spread across everything we do. Now where it hits in a particular period, is normally it's a mixture of performance, which clearly drives client behavior, So relatively call it 12 month performance and just market environment and what's hot or not hot at particular time. So there's flows everywhere in the business, but they won't hit at the same time. Does that make sense? Hi, it's Haley Tan from Citi. You've mentioned 72% of your film now relates to clients investing in 2 products or more. And also that you're now going to put a centralized which means you can offer more customization for clients. To think about flows maybe in a slightly different way, you'll be hearing a lot from traditional asset manager a little bit about investment solutions. When clients are coming to you, how many of them are now coming to you for a product versus how many coming to you looking for a solution? So you can get a handle on that sort of change, please. Thank you. I the the I try to use an analogy, and then people look at me like I'm we'll see if this works on you. The way I think about it, the reality is the first thing we do with a client is almost always a product. And that is a door that they come into the house. But as a firm, we have a lot of different doors that you can get into the house. When somebody's done something with us, they come into the house, they will almost always start wandering around the house, looking at other things we have within the building. And things move from single products to multiple products to solutions. Sometimes people come and say, Hey, I've never done business with you, but can you do me a three legged pig with a I don't know, whatever. Okay. Anyway, you know what I mean? There's some complicated solution, but not much, but how many of our conversations move beyond single products, almost all of them. That makes sense. In another way, it's a sort of slightly fluffier statistic in the way you count it, but more than 60% of the assets, I think, I'm going to put that caveat in because it's a bit difficult to calculate. Are in things which have been in some form tweaked for the client as opposed to in standard commingled structures at standard commingled fees. It just gives you a sense about most of what we do is in some way reacting to the client's needs. Morning. It's Anel Sharma from Morgan Stanley. A couple of questions, please. In the AHL bucket, I think just under 1,000,000,000 of assets, can you give us a sense as to how much of that is legacy retail, as you call it, and you would expect to kind of trend out. And secondly, I'm just curious about the mandate that's lost in Q3. The business that you set up there in infrastructure is relatively new compared to some of the other parts of the group. So just what's kind of changed there, what's happening to kind of caused a bit of a disruption, if you'd like. And then the third one is on the cost base, given some pretty clear guidance. Just curious as to if there's any one offs in there, which might be coming off. So for example, Mifid II, are you done with the MiFID II costs or is some of that going to come away? Thank you. We don't pay for research. That will be bad for this room. So maybe on AHL, we've got billion in the legacy retail. And we tweak the categories slightly in the press release so that the AHL diversified is purely the legacy retail now, so you can track that more easily. So hopefully that's nice and clear. Let me just do the cost 1 as well. No, there's not really any one offs. Unfortunately, MiFID is with us forever. Till they do MiFID III. So I don't expect any change there. On the, on the client question, trying to respect the client's confidentiality to some degree, I mean, to a degree they deserve, but it's not that. The, so that they continue to be a client of the firm. They continue to be an infrastructure client. They had a chunk of money in what was basically a holding patent account waiting to find funds to invest it in, they had a change in management, as can happen It's one of the things when you have big accounts from institutional clients, you can suddenly get a different CIO or a different person in charge and they can And they basically decided not to invest that money into separate funds and therefore took the cash back it was essentially you can it's almost like a cash account waiting for the things they've been invested in. So does it change Our relationship with them know does it change what's going on in the infrastructure mandates where there's positive momentum know The bit we've tried to talk about with the lumpy things in flows is just we have a lot of big accounts. We think that's one of our skills. There are very few people in the alternative space who clients can give $1,000,000,000 or $2,000,000,000 account. And so we have a good market share of those, but you're always subject to the CIO getting fired and the new one getting appointed who as a different view or a new organization structure or whatever it might be. That help Hi, good morning. Gedric Campbell, JP Morgan. So three questions. Firstly, on the sort of U. S, obviously, you've made a good effort there in your 27% of AUM now from the U. S. What's going on there? What sort of particular products potentially are? Are selling, secondly, just on Global Private Markets, just a comment on that, how that, how is that going with Alto, etcetera. And then finally, just on technology, how you're leveraging technology on the discretionary, portfolios, is there potentially risk that you start the higher correlations between the pure constructors and the discretionary scratch trees? Sure. So take those in pieces. So on the last one, one of the things we are careful not to do is we're not trying to blend alphas for so we are we're giving tools to discretionary people to help them. But we're not trying to make them in some form quant. And we believe that you can generate alpha from a set of ideas in scratchinery process in a quantitative process in a fundamental quant process in a technical quant process you can have a growth mindset, a value mindset, I don't believe there's any single way of generating alpha. So we want as many different teams generating alpha as possible. What we want is as many of the tools as you can give them that we don't have to build 3 times. One of the fascinating things is if you give literally the same data set, So we've done it with the data set of all of your ideas. We give that to the folks in GLG, we give it to the folks in numeric, we give it to the folks in AHL, They can all generate an alpha out of that data set, but those alphas end up being about 0.2 correlated. Because they just come at the problem differently. That is exactly what we want to maintain in the firm. We just want to have as many of the things which can be done in a centralized way once efficiently put there and then the alpha generation is sort of broad and wide as possible. Does that make sense? Was that 1? GPM? GPM, GPM is going very well. Small challenge we've got in GPM is that, assets in that space are expensive generally. And so putting money from mandates to work is slower than it might be if you weren't being disciplined about what you're doing with it and as you saw, we gave 1,000,000 back from somebody that got to the end because they had a very good investment, but it was no longer cheap enough for what they were looking for. And so we have a as we do in everything in public markets, we have a belief that you shouldn't chase prices when they get too expensive and that's been a challenge for the speed. We've had quicker asset of quicker client demand growth than we've been able to put the money to work. At this point, but it's better to be disciplined than it is to chase prices. Oh, the U S is, I mean, the U S is broad based for us now. We have a much broader client base, which means we're doing more different things with them. So it's not very specific, I would say our US assets have a higher weighting to comp than our average assets. That's partly because the point when we were growing our US relationships was a point when when quant was hot and a point when GLG strategies weren't as you know, when we took over, we first thing we said was we had a bunch of restructuring to do in GLG that period coincided with the period that 1st growth in U. S. Assets. So I think there's lots of potential for GLG in the U. S. Over time. But it sort of so if you took current weighting, it's slightly different, but that's just a timing thing. Thank you. Mike Werner from UBS. Two questions, mostly on flows. Just wondering if you could provide a little bit of color, I guess, in terms of flows geographically by clients in the first half, maybe how that compared to 2017, particularly U. S. Versus Europe. And then, on the secondly, I guess, you may have alluded to this. But, you know, again, on on flows, just trying to take a look at the mix of new clients versus old clients and particularly how that has maybe changed or stayed the same in the first half versus last year. Thank you. Let me just get you the detail on the flows by geography. So first half of this year was slightly more skewed to Europe than we've seen in the second half of last year. Slightly lower in the US, but I wouldn't take anything from that. It's just a sort of the noisiness of the flow rates So minor skews away from what you've seen last year, but nothing that I would focus on. Sorry, the second question. Just to take it. That we continue to we continue to add some interesting new strategic clients. So when we set out with a target of 50 in 3 years of new strategic clients. I'm looking at John because he remembers all these sales numbers. In greater detail, we're 30 something now, right? 37. So we added a number of those in the first half of the year, which is part of the ongoing work. I think in some ways, if you wanted to look at the untapped potential, it's much more about doing more with existing clients than it is chasing you times. There's lots more people we could do business with, but we can essentially fill up any good capacity we've got with existing clients. Tom Mills from Credit Suisse. I just had a question around, I think you mentioned earlier that you'd sort of set up a bespoke mandate for a client across AHL, GLG, numeric, which seems to be the sort of highest value thing to the client, most differentiated thing that you could possibly do. Is that something that is sort of born out of the client's own initiative, or are you sort of actively getting out there and pushing that to your clients and can you do that? The discussion with the client, where they talked about a need. In that case, their need was for something which was basically, I mean, they were like, I need some stock alpha to go into my portfolio. What have you got? And I even think I was in the first meeting on the conversation. It's a it's an existing client. We have a very good relationship with them, but I can't remember when we were first or the second part. You're talking about it and what is, look, we can do this, so we can do that, or we can do that. What is it you're looking for? What's the constraints As you start talking through it, they didn't care whether it was quantum discretionary. They didn't care. They had structuring constraints. Because it needed to fit into a European context in that case. So we had to work through a set of structuring things, but they were like, look, give me whatever you think is the best. So they they had a problem that they wanted to get something, and they were basically saying, you tell me what you think is the best answer. So we went away and came up with something which blends all of the different sources. You're obviously able to use some leverage in that. Once you get the diversification, you get some mixed. You know what I mean? It's not equally weighted between the different things that technical reasons behind the different weightings. And you end up with something which gives them what they want. The conversation The conversation to say this is an interesting idea was pretty quick. Between the point where it's an interesting idea to be able to execute it was 6 months of slog because that's how these things work. Right? I mean, the interesting solutions don't happen in 1 week, even if the idea of, hey, why don't we blend all the different things we've got in market neutral stop picking into a single vehicle as well. Oh, yeah, that sounds a good idea. That bit can be quick. But it's your ability to go through all the stages of it and not have to worry about internal machinations or different obviously by definition, every team would like a bigger proportion of the assets and a bigger proportion of the fees and a bigger of it. And he was like, okay, but we have to do what's right for the client and we'll work out. And we were able to do that really effectively here. So there's no point where the internal bits put in the way of giving the client the best answer. We saw the internal bits out afterwards. That makes sense.