Good morning. Thanks, everyone, for joining us today for our first half results. I'm Matthew Beesley, I'm the Chief Executive here at Jupiter. As always, I'm joined by Wayne Mepham, our Chief Financial and Operating Officer. Wayne, I will walk you through our results for the first half of the year, and then we'll open up to questions, which you can ask via the webcast. So overall, we have a solid set of results to present to you today. We manage this business very carefully and are strategic in our planning, so I hope that nothing in these results comes as a surprise to you.
I'll discuss flows in more detail shortly, but while we saw net outflows in the first half of the year, these were in line with our expectations and were driven by the changes to the Value team and our decision to extricate ourselves from the management of the Chrysalis Investment Trust. There are encouraging trends in the underlying business, and we saw only very marginal underlying net outflows in the period. Thoughtful and disciplined allocation of capital is a key focus for both Wayne and I. Operating costs are a little lower than expected, and this discipline has continued to give us space to invest for growth. We've made progress against each of our objectives, including removing complexities and seeing underlying growth in our home market of the U.K.
While I would not like to call the bottom in terms of retail investor sentiment, there does seem to be early signs of improvement, so there are reasons for cautious optimism.
Thank you, Matt . Good morning, everyone. For H1 2024, we have delivered underlying profit before tax of GBP 47.9 million, which is a 3% increase on the same period last year. Our AUM is largely unchanged compared with June 2023 at GBP 51.3 billion, despite the outflows we've experienced, which were GBP 3.4 billion for this first half. Combined with lower average fee margins from the changing business mix and the tiered pricing structure we announced previously, our net revenue reduced to GBP 174 million. Strong cost management continues to be a focus, and our total operating cost was slightly lower than the same period last year.
Along with good returns from seed capital investments and liquidity management, this results in an underlying EPS of GBP 0.066. Our dividend policy, which we implemented in 2022, should be very familiar to you now, which means our interim dividend of GBP 0.032 is half the underlying EPS earned in the period, excluding performance fees, which was GBP 0.064. I'll report on our strong capital position and how you should think about that at the year-end a little later. Our investment performance over three years was a little higher than at this point last year at 55%, and Matt will give some color to this in a moment. But first, let's briefly look at the financial performance compared with the second half of last year. This is the bridge of underlying profit before tax, excluding performance fees, compared with the second half of 2023, which is down GBP 2 million.
Net revenue is the main driver of this. We saw net revenue margins down by just under five basis points, in line with my expectations. This is partly offset by lower costs, mainly driven by timing of non-compensation costs. While we have continued to focus on cost control, there is some seasonality here, and we expect higher costs in the second half, which I'll come on to talk about shortly. But these costs and the timings are as planned, and my expectation now is that we will deliver modestly better than my February guidance, which I will explain later. We have again seen strong alpha gains on our seed portfolio, combined with the ongoing benefit of higher interest income on our liquidity positions. This is GBP 6 million higher than for the first half of last year and broadly the same as the second.
So that results in GBP 47 million of underlying PBT, with a further GBP 1 million of performance fee profits, taking us to a total of a little under GBP 48 million of combined underlying PBT. Exceptional items are exactly in line with guidance and, of course, are all in the first half. That's the end of this type of amortization of intangible assets, as we have passed the four-year anniversary of the acquisition, so no exceptional items are expected in the second half. That's a statutory profit of GBP 38.7 million. I'll go through some of this in a bit more detail, but first, over to Matt to talk about investment performance and a little bit more detail on that flow picture.
The first thing to acknowledge on this slide is that these numbers are not where we want them to be. Delivering active investment performance to our clients is paramount.
We know there are areas where we can improve, and we're taking active steps to do so. For example, we've been using data-driven insights to help our investment managers recognize behavioral biases in their portfolio management, some of which may impact performance. We've also been developing new and improved analytics for use internally to further support our managers in their day-to-day activities.
As a truly active manager, we know we will at times have periods of underperformance. However, our focus is to add value to our clients over the long term, and we are always looking for ways to do better. As relates to the first half of this year, the decline in the key three-year number has been driven by a few of our larger funds moving below their median over the period, including European Growth, Japanese equity, and around GBP 1 billion of the Merlin Portfolios.
If we look more broadly across our larger funds, nine of the 13 funds that are above GBP 1 billion in AUM are outperforming over three years. If we look at where we're performing well, in many cases, we are performing exceptionally well and in areas of strong client demand. All of our funds are top quarter. Sorry, of all of our funds are top quarter, over half are also in the top decile, including the Strategic Absolute Return Bond Fund, the Indian Equity Strategies, Global High Yield, and Asian Income, all of which are in that sweet spot of client demand and exceptional performance. These might not be our largest funds, but they are key to growth, and it's reassuring to see that these faster-growing funds are performing so well.
Moving on to flows, we can see here that gross flows have improved in the first half.
There was a real weakness in the market last year, with retail sentiment declining throughout the year, which was evident in our gross numbers in 2023. I'm glad to report that we've seen GBP 7.5 billion of gross flows in the first half of 2024, returning to what we would consider to be a more normalized level, and that's really been driven by improvements in retail. Looking at the headline figures for net flows, it's clearly been a changing half, as we expected it to be. Of these net outflows, over GBP 800 million was due to the change in management structure for Chrysalis, which, of course, we instigated. There's a further GBP 2.4 billion from strategies associated with the Value desk. We made it very clear at the four-year results that we would expect to see outflows from Value strategies.
While we could not know the quantum or exact timing, what we've seen so far is within our reasonable expectations. We also said in February that we would be absolutely transparent with you, and we remain committed to that. The desk currently has GBP 6.3 billion of assets under management. GBP 3.4 billion of this is in segregated mandates. It is within our reasonable expectations that all, or nearly all, of these mandates could leave by the end of the year. And we'll, of course, keep you updated, but that is what we expect today. Back in February, we also said that we thought underlying flows would be around flat for the year. The GBP 0.2 billion of underlying outflows in the first half is entirely consistent with that, albeit, of course, we prefer to be reporting marginally positive flows rather than marginally negative flows.
However, we did generate net positive underlying retail flows, which is really encouraging. Our Indian Equity Strategies and wider Asian Income Products have seen strong flows, as long as there's demand evident for GEAR, or the Global Equity Absolute Return Fund, and SARB. Institutional flows were a little more muted in the first half in both gross and net terms, with GBP 0.3 billion of net outflows. This was largely due to the expected redemption of one lower-margin mandate. Despite these net negative flows, we actually saw a positive, a net positive revenue contribution on an underlying basis during the period. From a regional perspective, the UK was actually slightly net positive in the first half on an underlying basis, which I'll go on to talk about in detail shortly.
And finally, there was ongoing demand for well-performing Asian equity products, both in local markets and in Europe, although these were not enough to offset unconstrained fixed income outflows in the latter region. I won't spend too long on this slide, but while we're looking at our flows and the shape of our business, I wanted to introduce to you a new and slightly different view of the group. I've talked to you previously about the way in which we interact with clients and how that is fundamentally changing. The relationship is no longer one of product push or just selling funds, but of a deeper understanding and offering solutions or components of solutions to meet their needs. As a result, we think of our business not as a collection of individual funds, but rather in terms of our capabilities, as we set out on this slide.
As you can see, Jupiter today is a well-diversified business, but still appropriately focused across seven key capabilities where we can deliver both an active and a differentiated approach. Importantly, each have a significant amount of AUM. I've already covered the flow picture, but you can see that there was growing demand for systematic equities, as well as what we define here as Asian and emerging market equities.
Okay, if I combine the flows Matt has just spoken about with the picture across the last two half-year periods, including markets, you can see that the impact of outflows has been partly offset by investment returns. We end the period only slightly down on June last year, but after strong market returns in both H2 2023 and this last six months. So average AUM is up over 2% on the previous six-month period at GBP 52.1 billion.
Let's look at how that has impacted revenue. In H2 2023, we delivered GBP 175 million of net revenue, and that has fallen to GBP 170 million for the first half of this year. We've experienced net outflows over the past two and 12 months. This fall in revenue has been partly offset by the impact of strong markets across the two six-month periods. There was also that tiered pricing adjustment, which we implemented this year for the benefit of clients in more highly scaled products, along with other seasonal variations that resulted in the reduction in revenue. For the half year, this is equivalent to an average fee margin of a little over 65 basis points. That's lower than the four-year guidance, but simply reflects the timing of some expected flows, which I anticipate will drive up margins in the second half.
So I think my guidance of 66 basis points for the year as a whole continues to be a good estimate. We also generated performance fees of nearly GBP 4 million. As usual, details on the performance of those funds, which have the potential to deliver performance fees, can be found at the back of the presentation. Given the levels we already generated, I think there is some real possibility that the four-year figure could be at the top end of the GBP 5 million-GBP 10 million range I spoke about in February. So let's move on to costs. Before we review the cost base for the first half, I'd like to make some comments on how we think about disciplined cost management. This is not new, but all our actual and potential costs are always looked at from these three perspectives.
Does it deliver growth opportunities which support and grow our revenues and ultimately our bottom line? Will it help us build, maintain, and improve our scalable platform, which we have demonstrated before delivering both efficiency and operational leverage? Or does it deliver value for money from mandatory spend, where we focus on working with our strategic partners to establish and maintain the most effective cost model? That focus will be evident as you look at how the shape of our cost base will continue to evolve. That's our cost ethos. Our cost discipline is strongly embedded in our ways of working. We spend money where we believe we should. We control the total spend where we think we can, and we constantly think about how we can improve our cost ratios.
Turning to our costs for the half year and following my comments on our cost ethos, it should come as no surprise that these are exactly where we expect them to be, and in some cases, a little better. Overall, there is some seasonality here, with a greater weighting towards the second half. The big staff costs I guided to GBP 79 million for the full year, and that guidance still holds. I also guided to a total compensation ratio, excluding performance fees, of 47%. Accounting requirements have had an impact on timing, and you can see a lower ratio at just under 45.5% for the first half. It's a little too early to be concluding on variable pay, but it's quite possible we could do better than my February guidance of 47%, maybe by around one percentage point.
Non-compensation costs also include a degree of seasonality, and I would expect them to be higher in the second half than the first. We still maintained our rigorous focus on cost discipline and, so far this year, have identified around GBP 2 million of specific savings. This means that, before any other changes, I now expect our full-year non-compensation costs to be GBP 109 million. Focusing in on some specific investment, we are making on discrete operational areas. Those are largely the technology-led initiatives Matt spoke about in February. This has and will increase our headcount in the short term, but resources deployed here are temporary. When the work is done, which will be next year, our headcount will be back to levels we have not seen since 2016, despite AUM now being over 30% higher and regulatory demands being significantly greater today, requiring at least 20 additional mandatory heads.
Referencing back to that same year for our non-compensation costs, the biggest driver in the increase has clearly been inflation, with the relevant index up 33% over the period, in line with the increase in our AUM. Aside from regulatory demands, the remaining increase is entirely related to areas where we were underinvested historically, such as core technology systems, which we have already addressed. That means all the operational efficiency investments we are making right now are being funded by cost-saving initiatives we have implemented previously, particularly through those achieved when we tightened costs in 2022. All of this is a good demonstration of not only rigorous resource management, but also the scalable platform that we have invested in and which we can leverage further. That does not mean we are satisfied, although we have done all we can.
I've already covered our approach here, and I'll come back to our focus on removing undue complexity in a little while. But now, let's move on to the balance sheet, where there are a few things on capital I'd like to draw out. Firstly, that strong capital position I've spoken about before continues to be in place. Our surplus capital has now grown to GBP 199 million after the dividend we declared today. That's around 3.75 times covered with the subordinated debt and 3.5 times if the debt were repaid today. As you know, the subordinated debt is able to be redeemed from April next year, although we should make clear that the board has not taken any decisions on this to date, and should they do so, there are still certain regulatory hurdles to address.
Secondly, we've declared a GBP 0.032 interim dividend, which is in line with our ordinary dividend policy of 50% of pre-performance fee earnings. Finally, our capital allocation policy continues to ensure that we prioritize the capital needs of the business, including the capital required for seed and catalyst funding. Our approach here is proving successful. We have started to build some real momentum. Matt referenced our Global High Yield Bond Fund earlier, which is one of the places we put catalyst funding earlier this year. As a result, larger clients can more comfortably invest with fewer concerns over concentration limits. That fund is now close to GBP 300 million of AUM, from just GBP 50 million a year ago. So, of course, relatively small numbers, but a fantastic growth trajectory.
That covers the results and the guidance updates for the full year 2024. We're now going to focus in on our strategic objectives. Matt.
As usual, before we open to questions, we want to provide a quick update on the progress we've made against our strategic objectives. You'll know this slide very well by now, but given that we have this in mind when we make all of our management decisions, it's absolutely right that we keep coming back to it. We won't go into a lot of detail on all four of these objectives today, but I wanted to focus mostly on the objective about increasing scale, waiting to run through some progress as related to decreasing complexity. I've said to many of you before, many times, that of our four key strategic objectives, increasing scale is the most important. We will always have a focus on driving efficiency, but top-line growth is always the ultimate aim.
We talked recently about how two aspects of this are increasing our scale with institutional clients and also through our international business. Notwithstanding the short-term specific challenges we've already covered, momentum continues to grow in each of these. Our institutional pipeline remains robust, and although we saw net outflows in the half, revenue impact was positive on an underlying basis. Regionally, we saw positive flows from clients based in Asia and over GBP 200 million of net inflows from Latin America, reaching over $2 billion in AUM in the region for the first time. We have built a globally diversified business. The reason we built a globally diversified business is because clients in different parts of the world have different demands and different appetites for risk throughout the cycle. This therefore helps smooth the results profile of our business.
The graph here shows industry data for sales of active equity products from clients based in different regions over the last 10 years. It tells an interesting story. Over the last decade, U.K.-based investors have shown very little demand for equity products at all. At the same time, clients in Europe and in Asia have been much less risk-averse and have been buying into equities. And now, maybe that the U.K. might be beginning to move up the risk curve, demand seems to be tapering off elsewhere. We think the diversification and the benefits of diversification are clear. But while that diversification is important and part of a key part of our business model, our home market has always been and will continue to be the U.K. It represents over 60% of our AUM and even more from a revenue perspective.
It's a mature and highly profitable business for us. We spent a lot of time in these presentations over the last few years talking about our institutional and international growth opportunities. Perhaps we haven't spent enough time talking about the heritage that we have in the UK wholesale market and the actions we're taking here. Because leveraging the strengths of our core heritage is a key focus for us. The UK is a mature market, but we are one of the market leaders with an exceptionally strong brand. In the latest Pridham Report, we were the seventh for gross sales and second of the focused pure active asset managers without captive assets.
Given the scaled starting point, while we may not see the same level of relative growth as some of our more native regions and channels, we will continue to evolve the business from this position as a market leader. We are refocusing our cooperative model to best leverage key partnerships consistent with the shift within the client group away from a product push approach and towards deeper, more holistic relationships with our clients. We're investing in our core capabilities of UK equities, and new hires alongside our existing investment talent will leave us with one of the broadest and, I believe, the strongest lineup of UK equity capabilities that we have ever had and possibly of all of our peers. Now, this might seem like a countercyclical investment after a long period where UK equities have been out of favor, but we think there is a real opportunity here.
We've talked publicly about the malaise in UK capital markets and said that we need a government to be bold and imaginative in turning this around. And at the very least, with what we hope and expect to be a period of political stability and falling interest rates, there are real reasons to be cautiously optimistic around a potential turnaround in sentiment of both the UK investor and towards UK stocks. But the flows we have seen are not just based around UK equities. We've seen strong flows this year from Asian and EM equities, systematic equities, and parts of fixed income. And the flow picture is improving. We saw over GBP 4 billion of net outflows from UK wholesale clients in 2020, but the picture has steadily improved since then.
Although our headline figures for the first half show GBP 1.7 billion out, more than all of that was down to Christmas and outflows to the value team. Consistent with what you've heard from some of our peers, underlying flows in UK retail were actually slightly positive in the first half. There are clear reasons to be optimistic about our future progress in leveraging our heritage in the UK. While we'll continue to focus on our core objective of increasing scale, and with that, in our institutional and international channels, we will not do this at the expense of our heritage in the UK retail marketplace.
Our second objective is decreasing undue complexity. This is an area that links well to our disciplined approach to cost management. I covered our cost ethos earlier, referencing those three categories of spend.
There was investing in areas where we see strong revenue and profit growth potential. And there was maximizing value for money from mandatory spend. But more relevant to this objective is the portion of our cost base focused on improving operational efficiency. That's driving scalability and taking friction out of our business. And removing undue complexity is at the heart of this. We've done a lot here already, but we know there is more we can do. We've previously talked about the fund rationalization process, which has reduced the overall fund range by around 25%. While that discrete program is largely complete, the curation of the product range is an ongoing endeavor. And we expect to finish this year with around 10 fewer funds than when we started. That's through mergers and closures and after some targeted launches too.
Last year, Matt highlighted the investments we have been making into technology and data, particularly through client engagement. That's for building around the core scalable model, but removing further unnecessary complexity from our operations. With my particular focus on both finance and operations, I'm glad to report that these programs are all progressing well and, crucially, to budget. These changes will enable us to do even more than is possible today, whether that is through automating manual processes or using data to understand our clients better. Of course, we cannot complete a presentation these days without mentioning AI. Our approach here is aligned to the disciplined approach we take to all investment. AI presents potential opportunities across the whole of the value chain, and we are exploring all potential uses wherever we see value being added to our clients.
So we see the opportunity, but we are measured in how we approach it. A large part of that opportunity may well be in finding ways that help us understand and meet our clients' needs even better, improving their experience with Jupiter and broadening our appeal to clients. There are opportunities to support the delivery of a more bespoke or personalized client experience, to support areas of client reporting or client service, or potentially to deliver more customized solutions for clients, such as the long-short systematic equity capability we designed with and for one specific key client in the first half. Our technology focus and specifically the potential from automation can help us deliver more of this type of bespoke solution and all the connected aspects of client engagement, just like this, without adding undue complexity.
While we continue to focus on deepening our relationships with all stakeholders, I've already talked at length about our clients and about our shareholders. I do have a lot I want to very briefly talk about our people, who are, of course, another key stakeholder group. I was pleased to see that in our most recent pulse survey of our employees, we received an engagement score of 76%, once again above the industry benchmark. Our people at Jupiter remain enthused about the changes we are making to better position ourselves for future opportunities that we know are ahead. I want to thank them all for their continued hard work and endeavors. To wrap up before we take questions, I believe we have produced a solid set of financial results today, the ones which are entirely within our plans and our expectations.
We know that there are challenges both to the industry and to Jupiter specifically, but I'm encouraged by how well our underlying business is performing. Our focus on cost discipline remains resolute, and we've again delivered cost savings, but maintaining the ability to thoughtfully invest in areas that will drive both growth and further efficiencies. It's early days, but there does seem to be signs of potential improvement in client sentiment. If that is maintained, then Jupiter is very well placed to capitalize. And with that, I'll hand it over to Alex James, who will lead us through questions.
Thank you, Matt. We've got a few questions come in for both of you. We'll start with a couple of questions for Wayne on margins and costs.
Firstly, he wanted to understand the run-rate fee margins at June end, especially as systematic equities are driving the bulk of those flows, which is presumably lower margins. Any comments on that?
Yeah, look, I reported that our fee margin for the first half was just over 65 basis points. And again, just to remind you, that is a little lower than I guided in February, but it will come back through my projections to be 66 basis points for the full year. Look, there's a number of factors that have been affecting our margins. One of them is clearly the tiered pricing that we put in place earlier this year. There's also a changing mix, which I think is for us into the second half of the year will be the biggest element.
So that is reductions in lower margin business and gains where we expect to see some higher margin business coming in. Some of that's already here. Some of it I expect to see. So you should see a higher margin in the second half versus the half, but overall, 66 basis points.
Thank you. On the cost side, how much flex cost has been clearly strong in the first half? How much flex do you think there remains in both fixed and variable staff costs?
Fixed and variable staff costs. Well, I think there is clearly a little over 50% of our costs in fixed staff at the moment. And clearly, I've talked about the fact that we have got some temporary resources on our books.
So helping us to do some very specific projects which will bring value to us in the future, that resource will go when that work is complete. So that will address the fixed staff cost. Clearly, there's inflation to address as well. So that is a headwind that we will face. I think from a variable perspective, it is variable over the long term, but clearly, there's some accounting requirements that make it less flexible in the short term. But look, I've given the guidance of probably around 46% for this full year. We'll continue to look at it through the year end.
Moving on to non-compensation costs. Our slide in the appendix shows that a lot of this low non-compensation cost is due to the other costs. Do we have any detail on what comprises those other costs?
Yeah, look, as you know, you can see from that slide, about 50% of our non-compensation costs are actually AUM related. So they're quite nicely linked to movements in our AUM. They're not wholly correlated, but they are correlating in some way. That change, that particular line item that you're referring to there is where we have got both seasonality, but also where we've been able to find some cost savings. So that is not a run rate number in there. That will move back up in the second half as we see those costs come back in.
Okay. Matt, some questions come in on flows and some outlook around the value team as well. A couple of questions here. Firstly, can you provide some more color on your outlook for the remaining value team, AUM? Perhaps a sense of whether we are halfway through these outflows or closer to the end by now? And relatedly, how retail clients specifically are reacting, less in terms of numbers, but given there may be a potential lag to redeem that to see redemptions versus that of institutions.
Yes, I think we'll be very clear here, but just to reiterate, of the value desks, separate account mandates, so the GBP 3.4 billion that we referred to, it's our expectation that all or nearly all of that will leave by the end of the year. That remains consistent with our expectations at the start of the year. What we said all along and remains the case today is we don't quite know the timing of that.
In terms of the retail clients, obviously, we have Adrian Gosden and Chris Morrison running the income fund already in situ, and there's been lots of time engaging with clients. We're very optimistic about our ability to grow that investment capability over the medium term. The replacement team for the UK Special Situations Fund led by Alex Savvides will be fully in situ in just a couple of months' time. Some of Alex's team have already joined us at Jupiter. Our expectations, again, as we go into next year, we will again be growing that investment capability as we move through 2025. In the short term, though, of course, there is risk of further assets to leave, but I think sentiment towards UK equities will be crucial in determining exactly how that plays out through the balance of the year.
Maybe a comment also on the institutional pipeline in general.
The institutional pipeline remains very robust, very much consistent with our expectations. We've always said that institutional business is lumpy. It's non-linear. We've given some guidance previously about how typically our historical experience has been in terms of pipeline conversion, how long that pipeline does tend to convert. This is based off typical experience. Again, there's nothing that we see today that would suggest a deviation from that typical outcome, albeit with some variability and unpredictability. What's most encouraging about our institutional business, forgive me for reiterating this point once again, is the breadth of investment capabilities that it covers, the diversity of geographies that it covers, and also the different types of channels that it covers as well. Indeed, some of this is direct, some of this is consultant-advised.
We have a broad and deep institutional pipeline, and we have a client base that gives us great comfort that we're building a sustainable business with an institutional channel.
Thank you, Matt. A couple more questions. One question on costs before we move on to some questions on Capital as well. Wayne, notwithstanding that we haven't given any specific guidance, a question on how we might look at 2025 costs. How much the targeted increase in headcount could be offset through additional cost-saving measures? And then any guidance or directional views around the trajectory for the cost-income ratio and income ratio for 2025?
Okay. So look, I mean, I think the headcount savings, just to be absolutely clear, those reductions are temporary resource. So they are working on specific activities that we are undertaking, which is driving the growth in our revenues in the long term or delivering operational efficiency.
So there is no sort of production process that we're going through here. I mean, clearly, it's difficult to estimate this cost at this particular moment in the year. Clearly, we've got inflation increased on staff costs, and we obviously go through a planning process through the second half of the year in terms of any other initiatives we'd like to make. So I'm not going to comment on what the ratios will look like, but clearly, it's a focus on, I suppose, the main comment I will make always around this is we maintain a balance, an appropriate balance of investing in our business, but also looking to shareholder returns as a careful consideration for us. In terms of the second question as well.
You've answered both of your bases, haven't you? Moving on to questions on capital.
Do you have any updates on a two-part question on return of capital? Do you have any update on the share buyback program that was approved at the year's AGM, whether that will be enacted? And then relatedly on return, will the board decide whether to refinance the subordinated debt or not before any decision is taken on additional returns to shareholders?
Yeah, look, I mean, on both points, clearly, I'm not going to announce an announcement. So we'll come back to deal with that later in the year. I mean, we have now got a modest ability to buy back shares, 3%. So that gives us the ability to think about when the time is right, how we might return capital to shareholders, either through a share buyback or a special dividend, which we've obviously done both in the past. Typically, we look at those at the year end.
It's not every year end that we consider making those additional returns to capital. So we'll obviously be looking at it later on in the year with the board. On the same point on the subordinated debt, yeah, again, this is a consideration for the board. We'll be thinking about that quite carefully, obviously thinking about our capital needs as a business overall. That's something we'll look at towards the end of this year, thinking about that early redemption date in April next year.
Relatedly, perhaps you can find some details on the seed capital, the levels of that, what we might expect that to go to. And then a question I think you've answered to an extent, but is there an excess capital level out which would allow for additional shareholder returns?
Yeah, I mean, on the seed capital, just to remind you, we have a board set limit of GBP 200 million, and that's based on the cost of the investment we've made. So our cost of seed capital today is a little over GBP 130 million. So we have probably GBP 70 million of capacity left. I mean, we've proven, I spoke about earlier, the benefits of particularly catalyst funding for us at the moment. There's really seen that very strong growth in one particular fund. I think we need to think about whether there's more of that that we can do to support some of our smaller funds and get to the scale that we know we can achieve. So I think that's the first thing. So we'll obviously be thinking about that quite carefully as we go through this second half of the year.
I mean, from an overall capital position, I don't think I've ever said what I think our right level is, but what I've always said is what I typically see in the marketplace for an asset management business. And typically, I'm seeing that around two times covered. Now, that is two times covered of the capital requirement, but also we've got to clearly think about seed capital requirements. We've also got to think about liquidity requirements. Where we've got a GBP 200 million seed capital opportunity, then that could mean we go a little higher than that for us, which would be obviously GBP 140 million of capital on a two-times basis. So all those things, again, we're taking into consideration as we look through the rest of the year before we make any decisions come February.
Thank you. Matt, two further questions at the moment.
The first is you've talked publicly about the opportunity for government to be involved and imaginative in terms of UK markets. On the flip side of that, if there is a potential rise in capital gains tax, do you have a view on that would mean in terms of flow and how client sentiment would be impacted?
I don't have a view on how that would be impacted. No. I mean, look, investment typically is for the long term. We typically run the business of helping individual savers and institutions invest for the longer term. It would be reasonable to expect there might be some negative impact of that, but it's not something that we have done any detailed analysis on at this stage.
One final question to finish, and that's another one comes in during on flows.
What are some more details that perhaps what's driving the positive momentum in underlying retail flows? Is that mainly due to better distribution or relative performance? Are you seeing a sustained pickup in investor sentiment?
Yeah. So look, I think it's all of the above. So if you look at where we have seen benefits so far, I think it definitely reflects a subtle shift towards contemplation of risk assets, or should I say riskier assets, that gradual move away from either cash deposits or government bonds, recognizing that we're likely to either soon in or soon to be in an environment where rates are coming down. So that's the tenor of the conversations that we have with most of our clients, regardless of geography or channel, as one of largely looking to seek more risk.
Understandably, of course, clients are looking at places where they see therefore a balance of risk and opportunity, but also some downside protection. And good, strong investment performance needs to go with that. And so it's no surprise that areas like Indian equities, Asia-Pacific income, we referenced both our Global Equity Absolute Return Fund and our Strategic Absolute Return Bond Fund are all benefiting from that gentle shift in sentiment, but also that sweet spot of having strong investment performance. And that's a key part of where we find ourselves today. While our headline performance number, the aggregate three-year KPI number, is not where we want it to be, we have many large funds that are in that sweet spot of client demand, the right amount of size, and strong investment performance. And I think that's going to be crucial as we look into the second half of 2024.
You say no further questions.
So that's me just saying thank you all for your time today. I know it's been a busy day today. Thank you for your ongoing interest, and we'll look forward to updating you in due course.
This presentation has now ended.