Good morning, ladies and gentlemen. Welcome to Ninety One results presentation for the six months to 30 September 2023. Thank you for joining us here in our London offices and virtually wherever you may be. I will highlight the key numbers before moving to the business review. Kim McFarland, our Finance Director, will then present the financial review. I will then conclude with an outlook before we take questions.
Those of you who are participating through the webcast can submit questions during the presentation via the chat function at the bottom of your screen. Assets under management have fallen by 7% to GBP 123.1 billion, on the back of net outflows of GBP 4.3 billion and a fall in the value of total portfolios.
Our basic earnings per share and adjusted earnings per share for the reporting period fell by 5% and 9% respectively, compared to last year. The board has declared a dividend of 5.9p per share, which is 9% lower than last year. We were particularly pleased to have maintained our adjusted operating margin at 32.6%.
It is important to remind you about the business model, which has served us well since inception. We're a client-focused, people-centric, specialist, active investment manager. We are capital light and increasingly technology enabled. We differentiate ourselves from the pack through our organically developed investment capabilities and track records, and our emerging market heritage. Relative to most businesses of our size, we have substantial global reach, allowing us to engage our chosen client segment in different regions.
Over the years, we've developed an owner culture more akin to that of the enduring partnerships, as opposed to that of the average public company. Our employees collectively own more than 29% of Ninety One. All this lets us run a business with a clear purpose, namely investing for a better tomorrow.
We do this by building a better firm, working to become better investors, and contributing to a better world. Sustainability with substance is at the very heart of what we do. This is a familiar slide to you. Since we are a long-term oriented business, I always remind shareholders of the long-term picture. After a record year in 2022, we have faced headwinds, and in times like these, it is important to draw strength from history and experience.
In our 32 years, we have been through many ups and downs, and although every downturn is different, our organizational memory and resilience always helps us navigate through. I'm confident that the people of Ninety One will continue to create value for clients and shareholders over the long term.
Like the 2023 financial year, market and business conditions remain challenging. In a world where risk-free assets have become much more compelling, investor appetite for risk-on strategies has been muted. In response, we have significantly sharpened our focus and doubled down on our efforts to concentrate on areas where we can build market-leading positions.
We retain our growth mindset through this down cycle, but acknowledge the need for cost discipline. Our staff remain highly committed and motivated, and this is evidenced by the increase in shareholding.
We are confident that Ninety One will regain its growth momentum in due course. Allow me to explain the market and business conditions we experienced in the reporting period. Interest rates have gone up dramatically in the last 18 months and higher than the market had initially anticipated. In 2022, inflation reared its head for the first time in many years in the advanced economies.
Geopolitics has been extremely disruptive, not just the war in Ukraine, but also growing tensions between the global superpowers and the current instability in the Middle East. Equity market performance has been extremely narrow, and emerging markets have seen persistent outflows. Because of these factors, we're seeing a pronounced risk-off stance by asset owners, impacting flows into the active management industry.
Because we believe that these conditions are cyclical, and because we have a robust and resilient business with battle-hardened staff, we are confident that we will eventually regain our growth momentum. Drilling down into some of the market factors, here is a 25-year chart showing the Fed policy rate, 10-year Treasury yield, and inflation in the U.S. The speed at which interest rates increased was unprecedented.
Initially, this impacted asset prices, but as inflation was arrested and real yields expanded, demand for safe U.S. dollar-denominated assets surged. The other side of this trade was a sharp decline in the demand for risk assets. We've seen money market funds grow to unprecedented levels while investors assess the situation from the sidelines. Performance of fixed income assets has been dire, with many recording capital losses as interest rates rises work their way through.
In spite of drawdowns in so-called risk-free assets, they are now attracting new money, given the attractive yields on offer. Similarly, we've seen muted returns, including losses in the equity space, which do not encourage substantial inflows. The US equity market has been the only real standout, but if one looks under the surface of the headline numbers, the positive performance has been driven by a narrow set of seven technology companies.
The so-called Magnificent Seven saw a nearly 90% rise in share price in the first nine months of the year, leaving the return of the S&P, excluding them, at a mere 2%. The majority of Ninety One client mandates are aligned with the red bars, namely MSCI ACWI and the broader market.
Turning to emerging markets, both fixed income and equities have been in a tough period as far as flows are concerned. More than half the capital entrusted to us by our clients must be invested in emerging markets according to the mandates. It's not surprising to see capital being repatriated from emerging markets, given the current low interest rate differential with developed markets. It is difficult to estimate how long this will remain.
What I do know is that the situation can change very fast. Over this period, our usual diversifier, developed market equities, have not been in vogue. Asset owners have used public equity as their banker to upweight fixed income and meet previously contracted private markets commitments.
This should change as rising cost of leverage and falling valuations will mute PE returns, and the value of good publicly listed shares will become apparent again. These conditions provide context for our results. Following from the message I gave you at the full year presentation in May, it has been more of the same. Our AUM declined in the first half due to a combination of a GBP 4.3 billion net outflow and a GBP 1.9 billion negative market impact number.
We closed the period at GBP 123.1 billion under management. Let's assess the flow picture through an asset class lens. There were net inflows in the South African fund platform and in the alternatives platform. Other asset classes saw net outflows, primarily due to reduced risk appetite that we've discussed already.
This is, of course, most pronounced in the demand for equities that have accounted for most of our outflow, despite seeing net new wins in our sustainability equity platform. In terms of our client group split, our South African team has again defied gravity with positive net inflows, reinforcing our market leadership there. Across other markets, the experience of a reduced level of demand for our risk-on offerings has been very consistent, in line with expectations given the global market backdrop.
We experienced outflows in both of our channels, with a bulk of the net outflow from the institutional channel. Let me summarize the flow dynamics of this reporting period. Last year, net outflows were largely driven by redemptions for the purposes of de-risking. This year was all about slower demand or an unwillingness by clients to commit to risk when attractive yields could be harvested elsewhere.
Investment performance has remained competitive in spite of challenging market conditions. Albeit somewhat weaker than in March and lower than where we would like it to be, our long-term performance is competitive against benchmarks and more so against peers. In volatile markets such as these, short-term numbers can change significantly on a monthly or a quarterly basis.
Mutual fund performance, as presented here, is a proxy of peer group competitiveness. We are satisfied with these results. Ongoing competitive performance is key to positive flow momentum when business conditions improve. In tough times like these, it is critical that we have conviction across the firm. In recent months, the leadership team has spent significant time interrogating our strategy and ultimately confirming it.
Our strategy is clear: We should not let the current cyclical headwinds divert us from the task at hand, which, if well executed, will reward clients, shareholders, and the people of Ninety One handsomely. The depressed demand for risk assets is cyclical, and we believe that the cycle will eventually turn. And because we operate a high-margin business with no debt on the balance sheet and a flexible cost base, we can take a long-term view....
Our business model is tried and tested, and this is not the time to change that. We know that success in active management requires full commitment and minimum diversion. That's why we believe in long-term, organic business building. We will stick to that, to what we do, and do it well, and not be diverted into areas in which we have no edge. This is no time to chase current flow momentum.
We are clear about the opportunity available to us and are approaching the current conditions with strategic clarity, strong commitment, and a sharpened focus. The prize is large enough within our core investment competencies. We are currently competing in a market which is roughly GBP 9 trillion of assets. Capturing just 2% or 3% of that market, which we think is a reasonable estimate of what Ninety One can sustainably achieve, will make a material impact on the scale of the assets we manage and the value of our firm.
This is how we are going to power through the middle ground, but execution remains key. We are sharpening our focus on competencies in which we can realistically build positions of market leadership.
Internationally, we are building deeper relationships with fewer asset owners to provide them with differentiated and expert solutions from our specialist equity and specialist fixed income and credit platforms. In South Africa, we intend to strengthen our market leadership. Furthermore, our commitment to sustainability has also opened new organic growth opportunities ahead. In the first half of the year, our sustainability and impact platform defied market conditions and recorded positive net inflows.
In summary, we will focus where we can win and relentlessly drive to be better and more competitive. We stay close to our clients through the cycle and are ready to capture flows when risk appetite returns. I now hand over to Kim McFarland, our Finance Director, who will take you through the financial review. Kim?
Thank you, Hendrik. Good morning, all. So once again, and in the same format as previously used, I'm presenting our interim results to 30 September 2023. The results are reflective of the current environment that Hendrik has already summarized. The highlights are as follows: Adjusted operating revenue decreased by 9% to GBP 299.6 million. Adjusted operating expenses decreased by 10% to GBP 201.7 million.
This resulted in an adjusted operating profit of GBP 97.9 million, a decline of 9%. After taking in, after taking account of the increase in adjusted net interest income and the share scheme net expense, profit before tax decreased by 6% to GBP 104 million.
There's no surprise to see the uptick in net interest income in the current market, and the share scheme net expense is an IFRS 2 accounting adjustment, which we will continue to show separately. The effective tax rate for the period was 23.8%, and the key reason for this increase is a change in the U.K. corporate tax rate.
The above factors resulted in profit after tax decreasing by 6% to GBP 79.3 million. The adjusted EPS declined by 9% to 8.2p, in line with a fall in adjusted operating profit, as I explained above. Consistently, I have reported adjusted operating profit by adjusting for such items as lease interest, subletting income, as well as removing the contra impact of the revaluation of the deferred employee benefit schemes.
The adjusted operating profit margin held constant at 32.6% due to adjusted operating revenue and expenses declining at a similar rate. We are confident that the adjusted results, as referred to here, reflect the true operating position of the business for the past six months.
This slide provides further details on the adjusted operating revenue, which decreased to GBP 299.6 million. Management fees decreased by 10% to GBP 282.2 million, in line with the first half, in the first half. The adjusted AUM decreased by 9% from the comparable six-month period to GBP 125.3 billion.
The average fee rate held at 45 basis points, just slightly down from 45.2 basis points at 30 September 2022, but the same level as the average fee rate for the full year to 31 March 2023. Performance fees increased by 10% to GBP 12.1 million and were in line with guidance and expectations.
Always difficult to guide on, but we are comfortable these levels are indicative of future earnings. Other income of GBP 5.3 million consists of operating interest and the net gains on FX and investments. The next slide shows an analysis of the adjusted operating expenses over the comparable six-month periods. Adjusted operating expenses decreased by 10% to GBP 201.7 million. A key expense is, once again, employee remuneration.
Employee remuneration, as a percentage of total adjusted operating expense, is reduced to 65%, against 66% in the comparative period. The total remuneration expense decreased by GBP 70 million, or 12%, to GBP 130.3 million.
The key driver here was variable remuneration, which fell in line with the decline in adjusted operating profit. This alignment we have clearly articulated in the past, and we are committed to as a business. Variable remuneration remains over 50% of employee remuneration, and this resulted in a compensation ratio decline to 43.5%. Turning to business expenses, these decreased by 6% to GBP 71.4 million. All areas showed a decrease since the prior period, except for travel, which just marginally increased. We've increased the decline, and this time, the exchange rates were in our favor when it came to expenses.
To summarize, inflation-linked impact of a positive GBP 2.1 million for those costs impacted by inflation. FX-linked impact of a negative GBP 6.1 million, with a weakening of certain currencies, namely USD and ZAR. Then what we regard as actual reductions of GBP 0.3 million. This means business costs were largely held flat after taking into consideration the impact of inflation and FX.
The comparable period split of these expenses remain largely unchanged. Looking ahead, we anticipate the business expense will change with a mixture of inflation and FX pressure. At the same time, there remains a strong cost discipline in the business, even while we do continue to invest in our growth initiatives, as mentioned by Hendrik.
We expect and guide for variable remuneration expense to be aligned with adjusted operating profit and for us to continue to manage our fixed remuneration and business expenses. This slide shows the total business expenses as a percentage of average AUM in bps over a 7.5-year period, covering the period both pre and post the listing period in March 2020.
The key message here is the consistency of business expenses as the business has developed. The slight uptick can be attributed to the decline in average AUM levels. But as we noted before, remuneration expenses have declined, business expenses to a lesser degree, and we are managing closely to keep expenses below the highs seen pre-2021. To summarize here, this is a graphical representation of the absolute movement in our adjusted operating profit from H1 2023 to H1 2024.
Our adjusted operating profit for H1 2023 was GBP 107.9 million. Management fees have decreased by GBP 30.6 million. Performance fees have increased by GBP 1.1 million. Other income items have decreased by GBP 1.8 million. Employee remuneration decreased by GBP 17 million. Business expenses also decreased by a further GBP 4.3 million, and this resulted in adjusted operating profit for H1 2024, being GBP 97.9 million, as I reflected earlier.
My final slide summarizes the Ninety One balance sheet and capital position at the end of September 2023. Ninety One's Qualifying Capital decreased to GBP 300.7 million. Estimated regulatory requirements also decreased to GBP 114.8 million. In line with our dividend policy, the board has declared an interim dividend of 5.9p.
The decline of 9% from the 2022 interim dividend is in line with the fall in adjusted EPS to 8.2p and translates into a payout ratio of slightly over 70% of post-tax adjusted operating profit.
After the dividend payment, there will be an estimated capital surplus of GBP 132.2 million, and this will result in a capital coverage of just over 200%. During the period, Ninety One undertook two buyback programs. Noting the share price and the capital coverage, the board considered it prudent to deploy the surplus capital on the balance sheet in this manner.
Under the first program, to the end of July 2023, we bought back just over 4 million shares, and under the second program, the number of shares in issue had declined by a further 7 million, 1.2% in total to the end of September 2022, 2023. This resulted in a return of capital of GBP 18.8 million to shareholders.
After completion of the second program last week, a total of 15.3 million shares have been bought back for a total consideration of GBP 25.6 million, which will reduce the number of shares in issue to 907, 907.4 million. So there's no plans to increase the number of shares in issue, nor to encumber the group's balance sheet with debt. Thank you, and I'll pass you back to Hendrik.
Thank you, Kim. In the near term, we are planning more of the same, knowing that conditions could improve rapidly once the market regains confidence. These lines were written before last night. These are testing times for active managers, and this will require a combination of commitment, cost discipline on our part.
It should not be left unsaid that we remain highly profitable and debt-free, even in these challenging times. This provides us with the opportunity to think and act long term. Ultimately, we expect this environment to improve, but we are not dependent on that in the short term. Interest rates will eventually peak, markets will broaden, and appetite for risk will return… we will regain our growth, as has happened in the past, every time we've faced a downturn in demand for risk assets. Ours is a proven model for long-term value creation.
Our people have adequate skin in the game and are highly motivated and engaged. They are truly invested for long-term success. We have a clearly defined strategy and the performance to win business in areas where we can compete. And finally, we have deep client relationships globally, and those are becoming even deeper and more enduring.
Our track record of business building over several decades gives us the confidence to face the future. Thank you very much. We can now move to questions and answers. We will take questions in the room first, and then from the webcast. To remind those of you participating through the webcast, you can submit questions via the chat function at the bottom of your screen. If asking a question online, please state your name and company as well. And of course, that goes for people in the room. So any questions? Right here.
Good morning, it's Raheem Karim from Investec. Two or three questions, depending on how you want to count them.
You guys always go three at a time, but they're fine.
The first was just on, on the management fee margin. That held up better than I'd expected, especially given the mix of assets. So don't know if you could provide some comment around any of the specific moving parts there, and, and how you see pressures across the industry in the current environment, possibly impacting that in, in the medium term.
The second question relates to the, the buyback and the capital return that was done in the period, obviously very welcome. Give us a sense of how we should think of ad hoc buybacks going forward. What are the triggers for that, and, and what specifically the board saw as, as, particularly attractive at that point?
Then, I guess, associated to that, you know, the accretion to the employee holding that comes as a result of that buyback takes you to close to 30% now. You know, what... Is that effectively the limit? What do you do beyond that to help further align the employee base with the shareholder base? Thank you.
So maybe I'll ask Kim to deal with the buyback question, and I'll just talk about the fee dynamics.
Mm-hmm.
Remember, a big part of the book shifts, and in this case, however, this last six months, it wasn't because we were selling necessarily higher margin offerings and losing low margin. That had some impact, but we haven't felt the kind of... and I've been signaling that to you for about two years, the kind of fee pressure, which is just, okay, get the cost down, you know, before we start talking.
We've found a rational client understanding percentage of alpha and being comfortable that fee levels in the active management industry are approaching value, value, value for money levels. Noting that we're a primarily institutional business, these are negotiated, you know, very specifically. Ninety One is very disciplined in terms of agreeing to fees. We don't just cut for volume. And I think that reflects in the book.
It's more important for us to keep the integrity of the book than do volume and show flows at all costs, and I think that's been reflected. But my sense is, which I've again been saying that for about five years, is interest rates have a big, big influence over nominal fee levels. And as interest rates normalize, that extra basis point becomes less of an issue.
And I think focus is gonna shift to, with the big alternative holdings now on the institutional end, focus will shift to the cost of those holdings and those investments rather than the last basis point in active. Having said that, I do believe that we haven't seen the end of the slow downturn in fees. We haven't quite bottomed. It's just a probably a slower decline, maybe than before. And ours has been very consistent because we've negotiated in a very disciplined way to make sure that we can afford the job our clients want us to do. Kim, on the buyback.
Sure. I think coming to the buyback, as you know, over a period of time, we had very little capital on the balance sheet. Since the listing, we've been building the capital base up. I think a few times I said we've been trying to get it up to that 200% coverage position. Back when we did the final results, we were pushing over those numbers. We said we were looking to... We were questioning what we're gonna do with the capital. The trigger was very much, we were over that 200% coverage position we were trying to look at.
Talking to the board, we saw what we considered weakness or softening in the share price, and those were probably the two triggers that led the board to say, "Let's take some of that capital excess, surplus capital, as we see it, off the balance sheet, and deploy it into the market, where, where the share prices are sitting at that particular point." It was very much two programs, you know, that were actually undertaken.
As I mentioned, the last one actually finished last week, funny enough. And purely coincidental, nothing to do with doing results, today. Looking ahead, you know, would we do additional? Those would be the same trigger points again. Looking at surplus capital on the balance sheet, and then considering what we consider to be what the correct value points of the actual share price are as well.
So those are probably the, those are largely the two triggers. And the point about, you're right, it does improve the position, from the employee point of view. I think you've got to be careful, we've got to be careful when we quote the 29%, because that includes the staff share schemes as well. So when we look to the 42.2 or the staff share structure that we actually have, that's closer to being less than 27, so it's closer to the 26% position. So there is headroom as far as that's concerned.
Yeah. As you know, we are people who take things, you know, we take a long-term view, and we move slowly and deliberately. So, we don't believe in you know, excessively aggressive moves where you guess where a share price would be. So there's time to resolve that question. If we think employees would be better aligned with more, we'll have to, we make a plan.
Mm-hmm.
But our current alignment's a lot better than 10 years ago when we had no shares, or 11 years ago. And trust me, in tough times, this really works because people have something to defend, something to look through, something to treasure, and not just a monthly paycheck to look forward to, particularly when bonuses are lean.
I think it's the alignment point.
Mm.
That's what you've really got-
Yeah
...with the staff internally.
Yeah.
The alignment of the success of the business.
We're all pointing in the same direction. And our clients, our clients appreciate that. Any other questions?
Yeah. Morning, Hendrik. It's Piers Brown from HSBC. I mean, you referenced last night. I'm just wondering whether we sort of reached peak negativity, or what would it take in your conversations with clients for them to become more risk-on in their stance? Is it peaking interest rates, peaking inflation, or is it geopolitics?
Just any sort of color you can shed on that would be interested to hear. And then maybe a more micro sort of point just on the cost performance, which remains very impressive, the ability to adjust to the pressures we're seeing on the revenue side. I mean, the biggest element of that is the compensation reduction. I think that was down 12% year-on-year. So, you know, the obvious question is: Is that putting any pressure on retention?
We've seen some quite frequent press coverage about some of the, you know, big packages being offered by some of the multi-manager platforms, whether there's any pressure starting to creep in from that side. Thanks.
I think last I heard, you know, those guys are, you know. The multi-management platforms have very different career horizons from us, and yeah, maybe people will go there or not, but I think culture also matters, and long-term value creation matters. But you are right. If you're gonna keep cutting, keep cutting, keep cutting, at some point, it'll have an impact on talent.
We haven't seen that. In fact, we've seen the opposite. Because of the equity position and the stability, organizational strategy, and structure, we've had more approaches than we could cope with, because quite clearly, it's not a time to upload people. But we have very, very fruitful conversations with very interesting people coming forward, saying they would like to join us. And we say, "Well, actually, you know what?
Business is tough." So at the moment, it's the opposite, but who knows? And I think everyone else out there is feeling the same pressure, so it's not as if... And if you look at our profit performance, it's probably ahead of peer groups, so, you know, I don't think we are that pressured. We're just very honest about it.
No one here gets paid what they didn't earn or achieve for the shareholder, and that is not directly aligned with some, you know, it's not aligned to a make-believe world, which I think our industry, from time to time, gets the habit of getting into, and it doesn't happen here. But yes, if you're really good in this business, and if you can generate alpha in these markets, you're gonna be valuable. Kim, I don't know what the-
Yeah.
Is there anything else on costs?
Well, I think it's a point about alignment-
Yeah
...which we were raising earlier about, you know, the staff are actually aligned, and they understand it. And we are very transparent with the reductions and how, you know, the variable remuneration is linked to the profitability of the organization. So it, it's there are no secrets.
People are aware. We're really communicating it into the business. And I think when you're holding, when you've got, as I say, close to 30% held by the company, everyone's, you know, people are actually helpers of the company by the staff. People are very much on the same path there.
Officers eat last at Ninety One. So-
Yeah
... it's not as if the fat cats on the ninth floor sit there earning lots of money when the troops-- Exactly. Your problem is in the young space where people have to pay mortgages, people have to make it, you know, they have to make, pay their living costs.
There, we try to be far less hard than further up, when there's alignment through possibly dividend flow and other things. But I think on the risk point, I was actually thinking about you, Piers. I was in Hong Kong last week, when the Hong Kong government invited lots of people from the financial industry to be together. And, you know, sometimes perceptions and reality are slightly different when a, you know, Chinese vice premier really welcomes the market people of the West and is really keen to build business.
We don't often, sometimes don't get the same feeling right here, and the perception that Hong Kong's fallen off the Earth is entirely wrong. It's the Greater Bay Area is as large as India. There's you know that better than I do. Now, Quinn talks, tells the world the whole time. But there's a huge amount of action happening in the world, and right now, emerging markets are starved of external capital.
You've seen even China, FDI being negative for the first time in, since I can remember. And so when these perceptions change, there are massive opportunities. There are big capital flow is about to happen, and people will forget that they never wanted to spread capital around the world and keep it all in U.S. Treasury. So, it's going to happen.
My gut feel, and someone asked me this morning, and it's not a forecast, and there are far more learned people in Ninety One who work with very complicated models, who initially said interest rates will peak at 4% and not at 5.25. I just know, Jerome Powell doesn't want to be Arthur Burns.
They don't want inflation to come back. Central bankers are extra conservative, therefore, we've got to prepare for a little longer of the same. Maybe last night was right, maybe it's an early indication of what can happen. We're not planning our company on a point in time when the world will be hunky dory again. But, I think it's closer rather than further away. And that's why we've taken the strategic posture we have.
Because if you chase yesterday's asset, yesterday's flow stories today, you'd typically do it at a very high cost. You know, we all could have bought credit boutiques and things at inflated prices, and then not necessarily be sure we can, you know, harvest it. So what we're trying to do is be clean, stay in our space, wait for it.
But under the surface, be as entrepreneurial and as creative as possible to be relevant to our clients. And I think that bit we probably could have done better. I think there's always stuff you learn. And the good thing about a downturn or a downdraft like this is you stop believing all your own propaganda. You actually start rebuilding the business bottom up, saying: How can we make it better? How can we be more competitive?
And that's how Ninety One would like to use this period, rather than promising good outcomes, to say, "We are gonna be so much fitter and better by the time we're out of this, that actually we can let the growth fall to the bottom line." Anything else? Any questions there, Ola?
Yes, we have one question from a private investor called Herman van Velze.
Van Velze. Herman van Velze, I know him. He's a very good analyst, by the way, so watch out, he's gonna ask a good question.
It's a good one.
Yeah.
Who says, "Hi, Hendrik. Can you expand on your growth initiatives, especially in the U.S., that was a key focus some time ago?
Herman, it is still a key focus. We have 50 people in the US waiting, preparing for the capturing some of the international flow, which has started, but in a very small way, both into emerging markets and into international equities. Those are the two areas we play. And it's obviously emerging market, equity, and debt.
And we think, and a number of searches have already been launched or are underway, but asset owners, and in our case, we play at the upper end of the institutional and financial institution market, where it is slower institutionally intermediated decisions rather than individual decisions by individual shareholders or mutual fund holders. And we sense that is something to do with when the dollar peaks and when risk perceptions improve.
But what we do have, we've been building up a very competitive track record on the equity front, which is just going through 5 years, our international franchise track record, which is aligned with our quality equity. Our capability is ready, locked and loaded. Our emerging market offering is ready.
And I think we will be competing for substantial assets. So that is a very, very clear potential growth rocket for this business. I think where we've had, you know, all everyone's had a very tough time is in the U.K. Because we had quite a big U.K. equity book a few years ago. U.K. equities have just gone unfashionable. We just haven't distributed, maybe as well as others, because we're dependent on third party.
The pension market has essentially closed twice in the last 18 months, with the initial LDI liquidity problem that caused fire sales in the previous financial year of perfectly well-managed risk assets, some over U.K., some international, but in our case, some U.K. We've now seen in this period, with interest rates shooting up, the final de-risking of many of these schemes.
We've actually said, "Fine, thank you very much. We can buy gilts and, you know, we don't need people like you, and we're ready to sell to Pension Corporation or other buyout firms." So that is over. So in a sense, the drawdown we had from the U.K. is kind of over. The U.S., or North American, I would say U.S., North American, it includes Mexico and Canada.
The North American action has started, trickled, but not enough, because we also had risk-based redemptions. You know, people took actively. When I showed you the fixed income picture, emerging market local debt was the only part of fixed income that actually made a positive return, ironically.
You would have thought that the... You know, Trump has another name for some of those countries and currencies. They actually did better with a yield, but the perception was very negative, and therefore, people actually withdrew capital in spite of benchmark relative performance. So I think we... Herman, that is on. Then there are other opportunities as asset owners globally re-risk.
And, you know, but we will talk at the end of the year about what we're doing in the Middle East and other areas, and then we'll see. The big disappointment for us, if you've listened to our growth story, was five years ago, we were ready, locked and loaded to take an enormous amount of capital from the West into China.
That has dried up completely because of geopolitics and because of interest rate dynamics. That may come back, but it's gonna take a far longer time, and therefore, it's not, you know, a growth driver, but it is a business—it's an area we will continue to invest in because China is such an important part of the emerging market universe. Any other question?
No more questions.
Going, going, gone. Thank you very much. Thank you, ladies and gentlemen.