Earnings Call: H2 2018

May 22, 2018

Thank you for joining us today for full year results presentation. It's been a strong year. We have established several records, notably in fundraising and capital deployment. In fundraising, we have raised 7.8 €1,000,000,000 bringing total AUM to €28,700,000,000 That's up 20% on previous year. Fee earning AUM is also up 12% to €21,000,000,000 We fundraised across a number of strategies during the year. The single largest contributor was of course SDP, our senior debt strategy. But we had other meaningful successes, and notably for our U. S. Platform and for our European Capital Markets strategies. I'll come back to that. On the investment front, we have deployed 4.9 €1,000,000,000 that's up 21% on the previous year. So AUM up 20%, capital deployment up 2021. So I have an impact on obviously on FMC profit for the year because again it's fees uncommitted. So the fee impact is immediate as soon as the funding. Financial highlights, Philippe will go through these in great detail. I would just like to point to key information there. FMC profit up 29% to 95 £300,000 And it's an important juncture for us because this is the first time the fund management company profits overtake investment company profits. I'd also like to point to dividends. You remember last year we changed our dividend policy. Final dividend of 0.21p per share, this brings the total ordinary dividend for the year to 0.30p per share. That's up 11% on previous year. This is above our policy target of 6% to 8% increase. And it's a sign of confidence. We are ahead of our own expected timeline towards the fund management company profits fully covering dividends and growing their and driving their growth. In February, at the Capital Markets Day, we introduced a new set of strategic priorities. They include an increased fundraising target of €6,000,000,000 per year. They also include an increase in operating margin target for the fund management company 43%. By and large, during the course of this financial year, I expect that we will make good progress against all of these strategic priorities. On to Francois Xavier. Good morning, everyone. Good to see you all. I think following the Capital Markets Day and with this set of results, we can comfortably say that we're beyond any form or phase of transition to fund management as an asset manager. I think some of you have noticed in fact that the LSE, the stock exchange has now re categorized ICG as an asset manager. So they've taken us out of the specialty financials category and put us into asset management. And quite clearly, there is now clear water between the fund management company profit and the investment company profit. And it is in the fund management company profit that we are clearly now driving value. FMC profit is up 56% over 2 years. During the year under review FMC profit is up 29% to £95,300,000 3rd party fees were up 21% and costs up 9%, so profits obviously growing more rapidly and we're getting some of that scalability effect. The IT profits are lower this year, but we expected that. As you can remember last year we had £54,400,000 of capital gains were released from reserves following the realizations of some of our legacy assets. So that was a one off for FY 2017. Excluding that release from last year, net investment return, which is now the measure that we're going to use to look at the revenue for the investment company, reduced from £158,000,000 to £240,000,000 I'll come back to net investment return in a moment. Now a number of you, in the discussions so far, quick chat so far a light on the tax number. So let me just recap first from the half year. If you recall, we had a very low tax rate at the half year because the underlying tax rate for ICG is low at the moment. And the reason for that is that as we co invest more and more with our funds, the underlying tax rate is driven by our investment income, which is largely generated overseas remitted as tax exempt dividends. This is very common for investment companies. So it means one of our major revenue lines is exempt from tax. Obviously, our costs get relief against tax, which means that the underlying tax rate is very low. During the year under review, we also felt comfortable enough to release some deferred tax accruals of £43,000,000 These aren't recurring. It's a one off release. There are details on Page 8 of the RNS. And obviously, happy to chat through in greater detail as we get around to talk to you about your models. Moving on to the balance sheet. The asset book now makes up 7.5% of the total AUM. It was 8.4% this time last year. The average investment book is unchanged at £1,900,000,000 Our gearing is at the bottom end of the range at 0.77, so just around the 0.8, which is the bottom end. I expect that to increase during the current year. We are looking at 4 new strategies that we're looking to develop during the year. All of them will require balance sheet support. 3 of them are in real estate, 1 in Europe, 2 in the U. K. And 1 strategy in infrastructure. You'll remember from Capital Markets Day, the critical function of the balance sheet is one of the critical functions is to incubate and nurture new ideas so that we can develop fund products that can then stretch out for many, many years beyond. Expect to see some of that activity during the new year. We also renegotiated our main bank facilities during the year, which is the first major change actually in how we structure our banking relationships for about 7 or 8 years. It's a £500,000,000 facility and it has split maturities, which means we have much more comfort over when those when the facility matures, and therefore, that creates greater stability. The terms are also improved on that bank loan. Cash I had net cash outflows during the year. That's actually mainly that's entirely due to the investment company participation in the very strong levels of deployment that our fund saw during the year, which Benoit will come back to. So looking more specifically at the fund management company. Driven obviously, the leading indicator is still is very much gross funds raised and fundraising during the year driven by the corporate asset class on the left side. So during FY 2019, it was SDP. In the current financial year, I'd expect we'd expect Fund 7 to drive the fundraising for the corporate in the corporate asset class. Capital Markets saw a good level of activity for CLOs. We issued CLOs both in Europe and the U. S. And some good traction on the liquid credit funds. I expect more of the same in FY 2019 perhaps a little bit more of an acceleration on liquid credit. Real estate saw its main mezzanine fund, Fund V is bridging the financial years. So some of it was raised last financial year, but most will be raised in the new financial year. And we also have those new strategies in real estate that would be nice to see some fundraising for during the year, but that will clearly be at the tail end as they're all in development. In the secondary asset class, strategic Equity Fund 3 will be we'll hopefully be raising that during the new financial year. Saw no fundraising during FY 2018. So overall fee earning AUM was up 12% during the year. And the new financial year will be off to a great start because Fund 7 is charged on committed. That's going to those closes the close on Fund 7 will be is around is going to be very much imminent. There's already been a first close and there'll be further closes. But it means we'll be charging fees immediately. So fee earning AUM will go up. We saw realizations in the year, which is the red bars of €2,300,000,000 It actually averaged over the last few years at around 10% of third party AUM. So it's very consistent and sort of a useful benchmark for your modeling. We also saw some further leakage as a result of FX because of the strength of the euro against the dollar. So all of our denominated dollar denominated funds went down in value against the euro, which is what we measure our AUM in. That saw an effectively a reduction in AUM of €800,000,000 Very important area for us is to retain our level of fees and this is a strategy by strategy dynamic. So what we're interested in is retaining the fees for one particular product in over a number of iterations retaining or even increasing. So although we use the weighted average fee rate for the company as a whole, which dropped from 91 to 86 basis points, As long as that is a function of mix and not a function of losing price control, that's not as interesting as looking at it on this basis, where we've now given 3 years of track record on the fees for each asset class. The reason why there was the drop during the current year from €91,000,000 to €86,000,000 is just because we are raising more for senior for more senior debt like products. So SDP, senior real estate, credit funds all those have lower fee rates and therefore they affect the weighted average for the company. This only includes management fees. We don't include performance fees in this. But just one thing to note on performance fees, Because of the number of closed end funds that we're now raising, we're increasing our guidance for performance fees. For the last 4 years, we've used £15,000,000 to £20,000,000 as guidance. And actually we've averaged £18,400,000. We're uplifting that by £5,000,000 so the new guidance is £20,000,000 to £25,000,000 Just coming back to this point about where is AUM where is fee earning AUM shifting during the year and how it affects our weighted average fee rate. This slide shows for each of our individual strategies how it how fee earning AUM changed during the year and how those strategies charge against the red line which is the weighted average for the group. So on the left hand side, you have some of the strategies that are more successful in fundraising during the year: STP, Liquids. All of those actually are lower than the weighted average. Therefore, as they saw increases in fee earning AUM, they dragged the red bar a little to the left. In the new financial year, we'll see European Mezzanine Fundraise alongside Strategic Equity and also Longbow, which are all on the right hand side. So I expect to see maybe not quite a seesaw effect, but more density on the right hand side, which will hopefully my expectation is move the red bar a little to the right during the current financial year. But the most important thing is our individual strategy is retaining or increasing wage average for the company as a whole. All of which gets us to our operating margin at 45.4%. We're ahead of our new target of 43%. I expect we'll see some increase in costs as we incubate some of these new strategies and that will come through in FY 2019 and FY 2020. But we are seeing the benefits of scale coming through. So I've added to this this time around the percent of revenue for each of the cost lines, which as you can see the cost to income ratio dropping from 59% to 55% over the course of the year. Going from the top across all of the teams we've seen salaries decrease as a percent of FMC revenue And total staff costs including variable incentives are down 1% year on year as a percent of revenue. So we are achieving scalability even as we absorb the operational and regulatory complexity that arise out of the increasing breadth and number of our products. You'll see in the incentives, the middle bar there, there has been more of a shift to variable comp from to cash from variable comp. This was in keeping with the policy that the shareholders approved at the last AGM where we focused a bit less deferral and more cash on junior and infrastructure staff. We're still 56% deferred as a company and executive directors are 89% deferred. The other costs at the bottom actually stay constant in sterling terms, but reduced as a percent of revenue. So as I say, beginning to see real scalability. Let me finish off with the investment company. So moving to net investment return as our main measure of investment company income. This looks at all of the returns of the investment company as an investor would look at the pool of co investments that we've made in our funds. So effectively, it looks at the balance sheet as a large client investing across ICG funds. What you'll see is the 12.6% net investment return is very consistent with the last 3 years. We're guiding to 11.5% for the new year as a good assumption for FY 2019. And this reflects the increasing investments in our mid return strategies. So in a sense the fundraising from the last year will come through in some of the returns that we'll see as that capital is invested and co invested with the balance sheet. So it's we're guiding a little lower in this year than last year just because we can see the mix changing a little bit. And just to dig a little bit deeper into that mix, this looks at the real drivers of net investment return. And in fact, 5 fund co investments delivers 82% of the investment company returns. So take the top line European Mezzanine Fund 6 as an example. That produced £104,000,000 of returns for the balance sheet, which was 43% of its returns, which represents an NIR of 28%. Now the investors in European Fund VI are expecting a return or targeted return of high teens. So they are going to be delighted with 28%, which is where the fund is at the moment. And of course, we as a client, the investment company as a client is also delighted. So I think this level of analysis gives you much more insight into how the investment company revenues and the investment company returns are going to pan out. The IC cost profile, as you'll know, is driven by the big change is often driven by the balance sheet carry, which are deferred awards that are given out for successful and paid out on successful realizations of balance sheet investments, which occur investments with the funds. Last year so this year's figure is very much driven by the realizations we saw in FY 2017 sorry FY the FY 2017 and FY 2018. So we've seen an increase in deferred awards there. The other non staff costs at the bottom have also increased. These include abort costs or the costs where we've looked into new strategies and they haven't been necessarily successful. So this includes if you remember the last years we've been investigating an oil and gas strategy to see if we can create a fund strategy out of oil and gas assets. Having worked with the team for 18 months, 18 to 24 months, we concluded actually the pipeline wasn't sufficient for us to foresee a very long term fund strategy and long term income that we could generate for the FMC. It's very important to us that we do explore these new areas. They clearly if we're exploring enough not all of them are going to be successes. So let me just finish off with guidance. Fundraising and FMC operating margin guidance remains the same. We discussed that at Capital Markets Day. Performance fees uplifted by £5,000,000 to £20,000,000 to £25,000,000 per annum and net investment return as I mentioned 11.5%. We expect the balance sheet portfolio to say roughly the same size £2,000,000,000 and that co investment ratios continue trending downwards. With new strategies to invest in through the balance sheet during the year and through OpEx through the balance sheet during the year, I'd expect the gearing to actually move more centrally to within the range of 0.8 to 1.2 times because we have quite a nice roster of new ideas to look at. And the underlying tax rate still guided to low single digit. And with the, probably slightly faster delivery against the business plan, that was or the plan that was delivered a year ago when we articulated our new dividend policy within in the new financial year, we move into that 80% to 100% of fund management company profit as the driver of the dividend. And so we're now discarding the guidance that we gave you of 6% to 8% growth. So I think overall actually one other thing to mention. Fund 7, Benoit talked a bit about the drop down of profits as we flip as we move from Fund 6 to Fund 7, there is an immediate increase in profitability for the European mezzanine strategy as a result. This will provide a very nice underpinning for the current year's results. And as we talk to you individually, we'll make sure sensibly reflected in all of your forecasts. All in all, I think we believe this is a very pleasing set of results with great momentum moving into the new financial year. With that, we will go back to Benoit on the operating review. Thank you. The strength of these results as described by Philip is entirely born out of our now well established strategy and its successful implementation. Our 3 pillars, you remember the investment, it's our investment philosophy. It's investing selectively. It's also origination capability. Portfolio management, it's maximizing value. That's ensuring we maintain the quality of our track record, possibly improve it, which in turn drives fundraising and growth of assets under management. And for full year 2018, all of these aspects came together. Starting with investing. First thing to say is, we remain in a generally favorable environment. Incidentally, we are you'll see the little picture here on the right. We're using our own data. You may remember at the Capital Markets Day, I mentioned that we have a wealth of data, which is a competitive advantage. We particularly have a lot of data on European private companies. We have more than 400 companies in our data set. And unlike what's generally available in the market, which is deal data, we have performance data over long periods for all of these companies, which is extremely valuable. Historically, we've used this to inform our own investment decision and strategy. Recently, we were starting to use it as added value and a differentiator with our LPs, with our fund investors. In last month, we published our first quarterly European Private Company Trends Report and it was extremely well received by our investors, again, because that's not information that is readily available elsewhere. So I've pulled out a couple of slides from that report, which brings me to my initial comment, which is that the general environment is positive. You can see here, European companies are experiencing solid growth. It's true for revenues. It's particularly true for EBITDA, which is pointing to an increase in profitability and generally an increase in cash flow generation. And if we look creditworthiness, for all the talks about the end of a credit cycle or significant increase in leverage, that's not what we're observing. And again, this is a large data set. This is from all of our strategies, CLOs, senior debt, equity, mezzanine. This is significant data set. And yes, we could see a slight increase or gradual increase in leverage levels, but you'll notice it's mostly the blue bar, so it's senior secured financing. And also the total leverage is nowhere near the levels of 2,008. The other important thing to note is that red line that's cutting across, that's interest coverage. It's EBITDA over net cash interest. It's a measure of company's ability to service their debt. You could see it's at its highest level since the financial crisis. So that is pointing to companies that are financially strong. They're not overburdened by debt. I focus here on our own data, which is Europe. There is more readily available data in the U. S. And it would point to very similar conclusions. In this favorable environment, we've been extremely active. Mentioned before, we've deployed a record €4,900,000,000 during the year. That's across all of our geographies and all of our strategies. If you look at our favorite fund deployment chart on the right hand side, you could see that all of our strategies are on track and some of them significantly ahead. If I just pick a few, Asia Pacific, which was lagging behind last year, has now caught up on the back of a number of transactions Australia and Singapore, in Korea. And that strategy should be back in the market with a new fundraising towards the latter part of the year. SDP III, which we've just fundraised last year, is already 22% invested. Our U. S. Mass fund is 80% invested. So we're going to be looking into flipping to the next vintage pretty soon. And this is ongoing. So this is data from end of March. But if you take strategic secondaries, which incidentally we've rebranded strategic equity, so you may see both headings. Strategic secondary as a strategic equity is now up to 80% invested. And as I mentioned earlier, our European fund, pace of deployment and that is all down to origination, because we're not about to compromise on investment quality for this reason, which is track record. We've said it and we'll say it again. This is our most valuable asset. We have a very long track record. We've never had a failed vintage. We've never had a failed fund. All of our funds have exceeded their target hurdle. That's unusual in our industry. It's extremely valuable. The good news is our current portfolios are very healthy. And it's likely that current vintages will not only consolidate the strike record, but they are likely to actually improve it. And that's important because not just because of the success of these individual vintages, which is of course meaningful for investors in those funds, but because this is a window into the future. The track record that we're establishing today is going to enable us to fundraise for years to come. So it's an important factor for us. I mentioned that all of our strategies are performing well. You've seen some of the number that Philip has shown. Some of our strategies have exception are showing exceptional returns. Our strategic equity or strategic secondary strategy is showing returns north of 50%, that's 5 0 IRR. And you've seen that the Europe Fund VI is at around 30% IRR. So extremely historically high returns, quite promising. Obviously, we are taking advantage of the market environment to crystallize some of this performance and anchor it for each vintage and for the track record. One of the metrics we're tracking is the percentage of transactions realized during the year that have exceeded their respective hurdle rate and were at historically very high levels at 95%. This is again pointing to very strong vintages, possibly some of our best vintages. Fundraising, record year €7,800,000,000 raised. The biggest driver, of course, was SDP with €4,200,000,000 But this should not overshadow some real accomplishments during the year, and I'll mention 2. 1 is our U. S. Platform. We're finally becoming relevant in the U. S. You may remember we've increased the size of SDP because we carved out a sleeve for the U. S. Of about €1,200,000,000 During the year, we also fundraised our 2nd U. S. Mezzanine fund, which will close in the coming weeks, if not days. And we will have more than doubled 3rd party fees. I'm sorry, 3rd party commitments in that strategy. The fields will follow at around 1.3 $1,000,000,000 which is a strong success for that strategy. Last year also saw the tail end of the fundraising of our strategic equity strategy at $1,000,000,000 and that's in addition to the ongoing issuance of CLO. So the U. S. Platform is truly becoming meaningful and has been particularly true in this full year 2018 financial year. The other key accomplishment is in capital markets and particularly in the European Capital Markets. We've invested in that team over the past few years and we're reaping the benefits. We're finally having a breakthrough. We've raised more than €1,000,000,000 about €1,100,000,000 last year across these liquid strategies. That's in addition to our traditional historical CLO business. And that's quite important because this strategy is all about scale. So it's very promising. You could see there's a marked difference with previous years. It's very promising looking into the future for our capital markets business. Fundraising outlook. Well, as I've mentioned, we've got a bit of a head start with our Europe Fund 7. We've already raised €2,600,000,000 We're on track for the €4,000,000,000 So obviously that's giving us quite a bit of visibility on the overall fundraising this year. Worth mentioning that our North American private debt, which is our mezzanine fund in the U. S. Is essentially done. We're closing it imminently. And in addition to all the strategies that are constantly in the market, that's true for the capital market strategy. It's largely true for real estate strategies as well because the investment period is shorter. I mentioned strategic equity. The acceleration of their deployment, they are now 80% invested means that again this is another strategy where we've had to significantly bring forward the fundraising. We've actually officially launched the fundraising for this fund. Previous vintage was $1,000,000,000 Obviously, we'll be looking to upsize it somewhat. And it's likely that the fundraising will entirely take place during the course of this year. This is essentially a year ahead of what we initially expected for this strategy. So all in all, the pipeline for the year and the prospects for the year fundraising wise are looking promising. Quick spotlight on Europe Fund 7. This strategy has been extremely successful vintage after vintage. So it's no surprise that there is significant investor demand for the strategy. Hence the new target at €4,000,000,000 of third party commitments. This is up 60% from Fund 6 and it's double Fund 5. Obviously, a consequence of that is the co investment ratio is converging towards 10%. It's greater capital efficiency as we're growing, 3rd party commitments. Another element worth noting in addition to what's on the left hand side, which shows the acceleration of the pace of deployment. But what's worth noting is that the fee trend. Because the strategy is successful and in high demand, we have had to give up less discounts. We therefore expect the average fee rate for Fund 7 to be above that of Fund 6, which was itself ahead of Fund 5. So that's an interesting fee trend. It shows how powerful successful strategies can be in our industry. And obviously because this is fees uncommitted and it's a €4,000,000,000 fund, even a relatively small increase in the average fee rate has a not immaterial impact to use a double negative. Sorry, before moving on to this, there is another key point I'd like to make here, which is taking a step back. Obviously, this is good news. Fund 7 is actually Fund 7 is very good news because it's a 10 year fund. We're anchoring fees on one of our key strategies for another 10 years. That's always going to be good news. But taking a step back, I think it's worth mentioning, in the past we focused and we insisted on the locked in value of our fee streams and the predictability of our profit growth over the medium to long term. What we perhaps did not make clear enough is that there is no opposition between new strategies seeded by the balance sheet that provide the growth and old strategies that provide a stable fee base, but that are not growing. That's just not the case. We're seeing this is our oldest strategy. It's a 29 year old strategy. This is still growing significantly. It's doubled in size in the last two vintages and it is growing it's increasing fees. So even our more mature strategies can still grow significantly. The new strategies are just adding more growth. They're steepening the growth curve and obviously they're giving us diversification as well, which brings me to the new strategies. Filip has touched on some of these. We have a number of new strategies or new products in the wings. You may have seen that we have brought in an infrastructure team. They joined us 2 weeks ago, so it's early days. But this was one of the asset classes that we had openly said we were interested in because we think it fits well in our portfolio of strategies. And we have also a number of new products being launched in our real estate business including a pan European sale and leaseback strategy, which we think could have significant potential. But it's early days. So we are both very ambitious about these new strategies and also very cautious because we know not all of them will work. We want to focus on those strategies that are very scalable and that are resilient that can bring us growth for 5, 10, 15 years. And not all of them will meet these criteria. Having said that, having just one new strategy taking off is such a creates so much value that it's certainly worth the focus we dedicate to it and the investment and support from our balance sheet. In conclusion, after a strong full year 2018, The current financial year is off to a very good start. We've admittedly made our life easier by getting an early and comfortable head start, in particular thanks to Europe Fund 7. I've mentioned at the Capital Markets Day that our strategy works. It's a matter of accelerating this strategy. I think we're already experiencing some of that acceleration. It's a matter for us now to build on that momentum, add more strategies and consolidate our position and our ranking in our industry. And on that note, Philippe and I will be happy to take any of your questions. Good morning. It's Gajuk Kambo, JPMorgan. Just a couple of questions. Firstly, in terms of the mezzanine fund 7, so this is a large fund versus what you've done historically. How should we think about the cost of that? Do you need to hire more people in to run it? That's the first question. And the second one is in terms of U. S. Sleeves, are there any other strategies that you may use as U. S. Sleeve? Okay. So 2 very different questions. On the on Fund 7, we don't specifically need to hire executives to deploy Fund 7. Actually our current pipeline for Fund 7 is extremely good. It's quite possible that Fund 7 in terms of deployment will have one of the fastest early deployments that we've ever had for a fund. So it's not that we need new executive for the strategy, but we always have to be thinking at least 1 vintage ahead. And if we believe, which is our belief that there is more potential for growth in this strategy, than we need to be thinking about reinforcing the team. Because what we do for this strategy is, it's a bit unique. It's a blend of quasi equity and debt instruments. It's very technical. And therefore, you need to bring on people early on so that they can get accustomed to our way of doing things, our way of originating transactions. So yes, we keep constantly looking at beefing up the team, but it's more thinking ahead to Vintage 8 and 9. As for the U. S. Sleeve, I'm afraid that in our discussions with LPs for senior debt, when we negotiated a sleeve for the U. S, we didn't go as far as asking them for a sleeve that we could use for anything. So I'm afraid it has it will be dedicated to developing our senior debt business in the U. S. Any other question? Yes. Thank you. I wonder if you could talk a little bit about deployment rate because it looks like you deployed assets about in line with your net raising this year. Presumably given you're having more AUM next year as a percentage term you'll need a higher rate of deployment. Is that something you think you will be seeing if you got the infrastructure in place to be doing that? So several aspects to your question. 1, we are adding new strategies. And so adding new strategies means new teams. So you take senior debt, the SDP team didn't exist a few years ago. Obviously, that's a new strand and that's new deployment, which is matching their own fundraising. When we're increasing the size of a fund, then it's a combination of perhaps deploying faster, but generally it's more of a question of deploying into larger transactions. What's happening is we're typically adapting to evolutions of the market and opportunities in the market. And what we are seeing, it's true certainly for a European Fund 6 and 7, is we are getting access to larger transactions. And so it's less a question of doing more transactions. Actually for instance, Fund 6 doesn't have more transaction in the portfolio, more deals than Fund 5, it's just that they are larger. And that's what's happening as we essentially follow the growth of the market. Thank you. Sorry, just to finish off on that, Phil. Obviously, more deployment and larger fundraising, we need to make sure we got all of the mechanics in place so that we can keep growing the business. And so an awful lot of attention over the last few years is to just make sure that beyond the investment teams where you obviously need to make sure we're originating the best transactions for the best terms, We've also got the marketing behind that, the infrastructure, the operations, the compliance. So that and that's a never ending task. It doesn't we always need to make sure we're ahead of where we need to be. Morning. It's David McCann from Numis. Just on the guidance and the new guidance rather than the net investment return for the Eurom book going down to 11.5% from the circa 12% plus you've seen in recent years. Let me just talk a bit more through why that might be declining a bit given what it looks like you have to put a bit more into obviously EUROIMS7 given you'll be sitting circa 10% of that possibly. And obviously some of the newer strategies coming on as well. And I'd thought all of those would be in the kind of 15% to 20% type bucket. So why does the overall growth The total exposure to the European mezzanine asset class will probably not we'll say roughly the same, at least for the new financial year because we'll get assets back from the older from Fund 5, Fund 6 as we put money out for Fund 7. And although the amount we're putting into each of those funds has actually been the same for each fund, it's been 500,000,000 although the percentage has come down. At the same time, during the financial year just ended, we've got investments in SCP. We've got investments that we'll put be putting some capital into the new strategies, all of which are a little bit lower than the European mezzanine strategy. So they'll dilute the returns a little bit. We're also seeing we're also putting capital into the liquid credit funds, which has tends to be a relatively short term investment, by our standards, say, about 2 to 3 2 years or so. But it's the returns are quite a bit lower, but they're liquid. So it means as soon as we can attract more funds, we can take that capital out quicker. So while we're looking at growth in the liquid credit, while we're also expanding some of the newer strategies, which will be nearer 10% to 12%, I'd expect to see that I'd see that come down a little bit. So it's just thinking about what the actual asset mix is going to be or the actual fund mix is going to be during the New Year. Thank you. And just one final question on the guidance. Would you say that keeping the tax rate guidance where it is quite conservative assumption given the likely mix of income looking forward to the year or 2? Well, the dynamic if you take away the deferred tax yes, the deferred tax releases, the dynamic is we've got the revenue of the IC, the returns of the IC which aren't taxed because they're taxed ultimately in the hands of the final investor. We've got the costs of the IC, which are fully relieved. And we've got the fund management profit, which is taxed. So it's a dynamic between the fund management profit growing and eventually overwhelming the tax relief we're getting from the cost of the investment company. So low single digits is certainly where we expect to be in a year or and if you look out 2 or 3 years, I think we'll go from where we are now. If you take out the one offs, it will ease upwards slowly. It seems a bit churlish this question, but looking at your fee mix and you were keen to point out the fact that it's only down a bit because of the mix change. What's going on in real estate? Is that a mix change within real estate? You know that's what I'm going to say. Yes, it is because we've had what we've done is we've the mezzanine fund which charges the higher fees has stayed roughly the same size. It's grown a little bit. But the fee earning AUM hasn't grown substantially. But they've been growing the senior real estate funds. So they tend to issue those in about £300,000,000 or £400,000,000 they raise once or twice a year. And that has a much lower fee. So it's entirely mixed. I didn't break that out. I broke out these the STP from mezz in the corporate just because they're larger amounts. I could have done the same in real estate. It would have got busy. But it's the same dynamic. Any other questions? Just in terms of the new four strategies that you're investing, I think the 3 real estate infrastructure, how do the real estate funds differ to what you currently have? It's a mix actually. So there are there is a higher yielding strategy. There is what you may call a mid range strategy. So 10% plus type return and there is a lower return strategy unless investors put some leverage on it which some may do. So it's a mix. For us, the key is that, is to have the diversification. It's quite useful to have higher yielding strategies because some investors like that and they tend to be flagship strategies because they are higher return, they tend to be more or perceived as more added value. So they're quite useful to have. They may or may not be that scalable. Then you're going to be looking for skill in strategies that are lower yielding that probably have a lower fee rate as a consequence of that, but when you think you have significant growth potential for the strategy. That's the sort of balance that you're trying to achieve with these strategies. And that's the that's exactly what they are trying to do with these strategies in real estate. Believe it or not, because they're quite imaginative, that team had come up with many other potential strategies. We had to tell them we need to choose our fights. So we picked these 3. There is no certainty of success on any of these, but at least there is a right combination and right balance when we're talking to investors, because you also don't want to have strategies that are too overlapping. Great. If there are no other questions, we are We will be around for a while. Iain and I will make sure we contact you all and have a good chat through the numbers and what they mean for your forecast and models. Thank you all for coming along this morning. Thank you.