Good morning, everybody. Welcome to our interim results presentation. When we presented the full-year results for 2024 back in February, I talked about what a busy year it had been for Jupiter. In that presentation, I listed some of the many achievements we've made in improving our investment lineup, sharpening our product offering, and delivering on our commitment to defined cost efficiencies. I told you that these were not yet all visible in our P&L, but all would put us in a better position to drive growth. Since then, we've made a number of announcements, including committing to further cost savings and announcing the agreed acquisition of CCLA. Both of these put us in a yet stronger position. I am delighted to be able to say that we are now seeing the positive impact of some of these improvements, with positive momentum across the business.
For me, there were three key drivers of this positive momentum. Firstly, we're seeing a shift in client sentiment, with improvements in flows across both client channels. Secondly, we continue with our strong track record of delivering on cost savings, having announced a further program recently. Thirdly, we've made meaningful progress towards all of our key strategic objectives. We'll go through more details on each of these, but it is these achievements, along with the improving picture for active asset managers, that leaves Jupiter in a stronger position to drive future growth and to achieve our target cost-income ratio. I won't spend too long on this slide, as Wayne will cover this in more detail, but there are a few key points I would pull out.
Almost all of these metrics are somewhat ahead of market expectations, driven by cost efficiencies achieved, strong performance fees, and a second quarter that delivered positive net flows. In total, we saw net outflows of only GBP 0.2 billion in the first half, and I'll talk through the drivers of that shortly. We generated over GBP 30 million of underlying profit before tax and earnings of GBP 0.042 pence per share. AUM finished the period at a total of over GBP 47 billion. This is a strong recovery after falling to GBP 43 billion during the market turmoil around the implications of global tariffs. As well as the market recovering, that AUM is, of course, also driven by the added value, or the alpha, our investment managers generate. I'm pleased to say that we've seen improvements in aggregate investment performance across all of the one, three, and five-year periods.
Over three years, which is our key performance indicator, 64% of our mutual fund AUM outperformed their peer group up to the end of June. Almost half of the AUM was in the first quartile. This outperformance figure is up from 61% at the end of 2024 and up from 55% from 12 months ago. Over one year, 62% of mutual funds are outperforming, up from 42% at year-end. Over five years, the figure is 68%. There are differing drivers for each of these periods, but there's a general trend of improving performance in our U.K. and European equity capabilities. Delivering positive investment outcomes for our clients, of course, remains crucial as a truly active, high-conviction asset manager. I've talked in the past about how the active management industry has collectively done a poor job of evidencing its value proposition, not helped by narrow, concentrated, and broadly consistently rising markets.
We don't know yet whether the volatility we saw in April, particularly in U.S. equities, will definitively change that trend, but there are positive signs pointing towards that. If so, we as Jupiter are well-positioned with a strong lineup of truly active investment capabilities. Moving on to the flow picture, we saw just under GBP 7.5 billion of gross inflows in the first half, which is what we consider a more normalized level. That improvement was really driven by an increase in institutional fundings, where we saw over GBP 2 billion of gross inflows. Overall, that led to the first half outflows of GBP 0.2 billion, with GBP 1.6 billion net positive flows from institutional and GBP 1.8 billion out from retail clients. The flow story in this half of the year is very much in two parts.
The first quarter saw GBP 0.5 billion of overall outflows, with momentum in institutional channels going some way to offsetting muted retail demand. The worst month for retail flows was, in fact, February, but since then, we've seen a persistent, continual improvement each month. June was net positive in the retail channel. Within retail, GEAR, or global equity absolute return, continued to generate strong performance and attracted net inflows of around GBP 1 billion. It's worth noting that of our top 10 net selling funds in the retail channel, all but one focused on a global universe. That institutional momentum that we discussed before continued in the first half too, with GBP 1.6 billion of net inflows. Globally focused mandates were again the drivers here, led by systematic capabilities and our Global Leaders strategy.
Predicting client demand is, of course, difficult to do, but I can say that to date, we've seen a positive July in terms of net flows. Clearly, this is very short term, but there are positive signs. We have good visibility on the institutional pipeline, and while I would not want to quantify it, I would absolutely hope and expect that momentum to continue through the rest of this year. To briefly look at the same data from a capabilities point of view, as I've mentioned, the strongest drivers of our net flows in the first half were in global equities, led by Origin and Global Leaders, and the systematic capability, which saw strong flows in both the institutional and retail channels. I said in February that I saw growth potential across the majority of these capabilities, and I continue to hold that view.
There's been much market discussion around money flowing out of the U.S. and towards other regional equity mandates, particularly as it relates to European and UK-focused strategies. Although we've not yet seen this in the flow data, we are seeing high and increasing levels of client interest. In the U.K., Adrian Gosden and Alex Savvides' teams have now been in place for some time, and their performance is strong. Niall Gallagher and his team joined a few months ago to run our European equities capability, immediately embarking on a client tour that took them from Iceland to Argentina via a great many countries in between. Client interest in these areas is high, and investment managers are keen to engage with these clients, and as such, we have strong expectations for all of these newly joined teams.
Good morning, everyone.
Since our last presentation in February, you received a number of updates from us, and I'm sure you're keen to see how those have impacted our half-year results as well as the outlook. Of course, we announced the acquisition of CCLA just a couple of weeks ago, and I won't be giving much more information on that at this stage, bearing in mind it is expected to complete towards the end of the year. As usual, let's step through the half-year numbers and add some additional perspectives on the outlook. Underlying profit before tax and performance fees were down a little compared with the second half of 2024. There are a number of offsetting items here, so let's walk through this. Revenues are down as expected, driven by lower starting AUM. That has been partly offset by lower costs.
We saw strong performance in our C portfolio last year and good performance again this year, but lower gains. Interest income contributed a little more, which is, of course, because we redeemed the subordinated debt in April. Together, that's underlying pre-performance fee profits of over GBP 29 million. We earned over GBP 5 million of performance fee revenues, most of which were offset by deferred compensation costs. In total, our underlying profit before tax is a little over GBP 30 million. Exceptional items for H1 2025 are just under GBP 3 million. That's nearly all of the GBP 4 million I've previously guided to for the full year. Of course, with the CCLA acquisition, it will probably now go above that previous guidance. That incorporates some of the GBP 17 million of post-tax one-off costs we announced with the acquisition.
Most of that cost relates to the integration, which we expect to take no more than two years from completion. As I don't have the exact timing yet, my current estimate for the full year of GBP 6 million is provisional, and there are a wide range of possible outcomes. Let's break those results down in a little more detail, starting with AUM. The biggest driver of our revenue movements has seen quite a lot of volatility over the past year. You all know about the flows in the second half of last year, and for the last six months, we had modest outflows in the first quarter, but this last quarter has been modestly positive at GBP 300 million in. That's a trend that started in May and has continued through to now.
It's very early days in the second half, but as well as institutional flows, we are also seeing modest money in from retail, which is not something we have seen across multiple months for quite some time. If we think about AUM movements overall, the 2025 low point for AUM was GBP 43 billion in April, falling from GBP 45 billion at the start of the year. It then came back to that same GBP 45 billion in May, and we ended the period with over GBP 47 billion under management. Compared with the average for the first half of a little over GBP 45.5 billion, that means we start the second half in a stronger position, and it's got better still since the period end.
Turning to revenues, the fee rate is broadly, as I expected, having come down from the year-end run rate due to anticipated institutional funding and flows more generally reducing the average, which has been partly offset by the impacts of markets on mix. This has driven a reduction in the margin to 66 basis points on average for the first half. Total net revenue, excluding performance fees, is nearly GBP 149 million, and adding the crystallized performance fees in the first half of just over GBP 5 million, that takes us to a total of GBP 154 million for the first six months. I'm now forecasting for the average fee margin for the full year to remain unchanged from today at 66 basis points. The possible full-year outcome for performance fees this year is probably of greater interest given our intention regarding distributions we announced a few weeks ago.
That is, we intend to distribute 50% of performance fee revenues earned in the period. We've already crystallized over GBP 5 million of revenue so far, but most of our arrangements have a reference point of December. If all fees had crystallized in June, the revenue for the year would have been nearly GBP 58 million. Of course, that total is largely uncrystallized and is likely to move from here, but we cannot be sure to what extent or in what direction it will go. Let's move on to costs. You all know that Matt and I have a clear focus on costs, driving efficiencies across the group whilst investing judiciously in profitable growth. In 2022, we extracted GBP 20 million of costs, and in May, we announced a further initial target of GBP 15 million of savings.
To be clear, I am confident it will not be less than that, and we will, of course, see if there are opportunities to do more on costs without disrupting the growth of the business. Importantly, this target is both entirely distinct from and unimpacted by the announced acquisition of CCLA. For that deal, we announced a completely separate GBP 16 million efficiency target to be achieved through the integration of that business. For the GBP 15 million target on Jupiter's own business, that will come through over 2025 and 2026, and we will see the whole reduction in place for 2027. For the CCLA target, that will be fully in place just one year later in 2028. These are significant savings and individually represent the largest cost savings we have announced since 2022 and come on top of the normal cost savings that we find each year.
Turning to the actual costs for the first half, our total operating costs, excluding those related to performance fees, are down nearly GBP 13 million since H2 2024. That's over a 9% reduction. Even with typically lower costs in the first half, we are down 4% compared with the same period last year, all with the impacts of inflation on both fixed off-costs and non-compensation costs. Turning to each part in turn, the total compensation ratio is accrued at 49%. That's in line with my guidance in February and is despite the increase in the share price, which pushes up costs relating to unvested awards. The share price has continued to rise since the period end, which has an impact, but my guidance of 49% remains unchanged as of today.
In May, I adjusted my guidance on 2025 non-compensation costs to GBP 105 million as part of that announcement of the additional target of GBP 15 million of savings. That GBP 5 million reduction is reflected in lower costs for the first half. There is some seasonality here with higher costs in the second half. I can reiterate that we expect non-compensation costs of no more than GBP 105 million for the year as a whole. Turning to the remainder of that GBP 15 million target we announced in May, we did this because we have made good progress on work we have been undertaking for some time, earlier than I had anticipated. A greater proportion of the savings will come through non-compensation costs, not the least because much of the work on the compensation side was already advanced and featured as part of my previous guidance.
There will still be efficiencies on comp costs, which will mainly be through fixed off-costs and will likely be around GBP 4 million, which you will also see come through in the headcount figures. While revenues, of course, affect the ratio, I expect the impact to be broadly one percentage point on the compensation ratio after this year. For 2025, I expect a 49% ratio followed by 48% in 2026. By 2027, I think we might see our ratio being 47% or below. This is, of course, before the impact of CCLA. That leaves us with around GBP 11 million of non-compensation cost savings. We've already identified nearly half of that, which is coming through the 2025 results. I feel confident with the work we are doing that we'll see most of the remaining, maybe GBP 5 million of reduction, come through in 2026.
In terms of where these savings are coming from, it's a range of areas, and I'll give you just a few examples here. I announced our new relationship with The Bank of New York in February. We have completed the first wave of activity here, and net savings through outsourcing are partly in our current year numbers, with more savings to come in 2026 and 2027. Next, we've been investing in technology, and that is bringing efficiencies, not just in terms of people's time, but also the cost of the main systems we need in our business. Finally, having completed many of the big ticket savings through our program since 2022, we're now focused on the next level of cost, the smaller systems, the smaller data feeds, and more broadly, the smaller relationships. Individually, these are only small savings, but together they become meaningful.
We will keep going, not least because we don't want any undue complexity in our business, and it's just one of the ways we can get closer to our target of a 70% cost-income ratio. As usual, my final section is on capital. Firstly, and as you would expect, our capital position remains extremely strong in June. The ordinary dividend policy has not changed, it's simply 50% of pre-performance earnings. That's GBP 0.021 of interim dividend. As I've already mentioned, the board intends to make an additional distribution this year based on 50% of performance fee revenues earned in 2025. To be clear, that is half of any performance fee revenue, and that theoretical GBP 58 million performance fees I mentioned earlier, it represents the potential for a further GBP 0.05 of distribution per share on top of ordinary dividends.
We currently have GBP 143 million of seed capital and catalyst funding, and around GBP 75 million will be redeemed in July and the second half. The largest of these is the catalyst funding for the Global High Yield Fund, which has delivered the AUM growth from client funding that we targeted, so it's time for that capital to be returned. During the period, we added seed capital for the launch of our new Cayman-domiciled GEARx fund, which has already attracted client interest since launch in June. Turning to the impact of the acquisition on capital, there are a few things to consider here. Firstly, although the acquisition is for GBP 100 million, we will receive GBP 26 million of tangible assets in return, so an actual reduction in regulatory assets of around GBP 74 million.
Next, the one-off costs create a capital strain of GBP 17 million, but they will not emerge immediately, so I think the capital strain should be very small this year. Finally, there will be the normal and temporary increase in the regulatory capital requirement relating to acquisitions. Those numbers need to be finalized, but I always think about it in broad terms as an increase in line with AUM growth and then a reduction as we deliver the integration. Maybe GBP 20 million additional requirement on day one, but it may come down over two years as we integrate the two businesses. Importantly, as the CCLA announcement stated, we expect the regulatory coverage to be over 2.5x at the year-end, and that leaves us in a strong place after the acquisition completes.
Thank you, Wayne.
You'll all be very familiar with this slide now, which shows each of our four strategic objectives. I won't spend too long on this today, but I wanted to give you all a quick update on our most recent progress against each of the objectives. I've always said that of the four, increasing scale is the most important. I've already talked about how we've seen improvements in the flow picture, and while clearly we want to get to a position of consistent ongoing net inflows, and we're not there yet, we do have strong momentum here. We've also, of course, announced the acquisition of CCLA, which will add over GBP 15 billion to the combined group and reinforce our scale position in the UK with over 75% of our client assets sourced from here.
Wayne has already covered this, but we continue to be relentlessly focused on cost discipline, investing where we should, but always looking for ways to deliver efficiencies. We believe we have a strong track record here, and it's an area we will continue to focus on. Between launching a number of carefully targeted innovative new products and expanding our reach into a brand new nonprofit client sector, I do not believe that we have ever appealed to this broad client range. This year, we have launched both GEARx, a more highly leveraged Cayman-domiciled hedge fund vehicle of GEAR, and our first Active ETF. It's early days for each of these launches, but the signs of client interest are encouraging. Finally, we continue to manage strong relationships with all of our stakeholders.
Our engagement score in our most recent employee opinion survey increased to 83%, up four points on our previous survey. We were also delighted to be recognized here in the U.K. as one of The Sunday Times' best places to work for 2025. Most importantly, this is based on our own employees' views. For our shareholders, as Wayne has already covered, as well as our most recent share buyback program, we have announced a further capital distribution of 50% of performance fee revenues for 2025 as part of a careful assessment of and desire to balance returns to shareholders and reinvestment into the business. Before we hand over to any questions, I'd briefly like to summarize and say that we have seen a strong start to 2025 with positive momentum across the business.
Thanks to our people's ongoing hard work and dedication, we've achieved a great number of things over recent years, and I'm delighted to say that many of these are now starting to become visible. Flows are still not yet where we want them to be, but they've been improving month by month, and most importantly, we've seen really encouraging momentum across both client channels. Our focus on cost discipline remains resolute, and Wayne has given details on how we will achieve our targets. We've made meaningful progress towards our strategic objectives, adding scale, reducing complexity, broadening appeal, and building strong relationships. In short, our focus has been on the execution of our strategy, and this will continue through the rest of the year and beyond. With that, Wayne, Sam, and I will take any questions that anybody has. Sam.
Thank you, Matt. We have a question on Active ETFs. We, of course, launched a product earlier in the year. Could you provide an update on client interest in the products and your expectation for flows and more broadly our future plans in this product segment?
Yes, it's very early days with the launch of our first Active ETF, and we've seen lots of client interest in the fund. I expect that, consistent with the other launched vehicle that we've referenced, GEARx, we will see meaningful client interest and then investment in those funds in the coming months and through the back end of this year. In terms of our wider approach towards the Active ETF structure, we definitely see this as relevant. We continue to think about how we can best utilize it to innovate, and you should expect further news from us in terms of future launches towards the back end of the year.
Thank you, Matt. A further question on flows in relation to our institutional flows. With some of our institutional pipeline now converting, are you able to elaborate on the pipeline anticipated for the second half of 2025, and should we expect similar net flows as the first half?
Yeah, as you said in our prepared remarks, we're not going to give precise guidance on the institutional pipeline through the back end of the year. I think, as everyone's heard, where both Wayne and I have said in the past, institutional pipelines are unpredictable. They can be lumpy, and often they are long duration in nature. What I can say is that we do have the visibility we do have on our pipelines we look into the back end of the year is very encouraging. It's diversified across a range of different clients from a range of different geographies, some consultant advised, some not consultant advised, and also across a number of different strategies.
We feel very confident that we have ongoing and building momentum institutionally, and we're certainly very hopeful that we'll see that both institutional channel, but also separately, as you mentioned, in the retail channel through the back end of this year.
That's all the questions from the webcast.
Thank you all very much for joining us today. We will look forward to updating you all after the summer on our ongoing progress to deliver against our strategic objectives. Thank you all and have a good day.