Good morning and welcome to the presentation of Ninety One's interim results for the Six Months to 30 September 2022. Thank you for joining us, whether here in person or virtually. I will start with an update on the business, and then Kim McFarland, our Finance Director, will present the financial review. I will then cover the outlook before we move to questions. Those of you participating through the webcast can submit questions during the presentation via the chat function at the bottom of your screen.
Before I move on to the first half performance, let me remind you of the key characteristics of our business model. At Ninety One, clients always come first in good times and in bad times. We have, and we continue to build longstanding relationships with our professionally intermediated clients, which we, w hom we serve locally or through our various offices across the world.
Ninety One's origins are in the emerging markets, from which we have grown into a global investment manager. Stability and Owner Culture are key foundations for Ninety One, and we have no intentions of undermining those foundations because of temporary market headwinds. Ninety One has a people-centric, capital-light, technology-enabled business model, which is highly cash generative. Since inception, we've paid out around GBP 1.6 billion in dividends to shareholders. We're building an intergenerational business that can generate competitive returns for our clients through the cycle. It's our belief that when we serve our clients well, our shareholders will also be well-served. All of this is underpinned by our purpose of investing for a better tomorrow. We do this by building a Better Firm, committing to Better Investing, and contributing to a Better world .
This familiar slide demonstrates the resilience of our business through many cycles. Ninety One has been organically built and sustainably built over more than three decades, with a track record of successfully navigating a range of market conditions. This chart tells many stories and highlights the phases we have been through as a business. The latest one started when we became independently listed in March 2020. In this short period, we have encountered two fully-fledged bear markets. Unlike the recovery we saw post-COVID, we expect the current challenging conditions to persist for the foreseeable future. Let me move on to my key messages. In May, when we presented record full-year results, we signaled caution. Ninety One is a risk-on business currently operating in a risk-off environment.
Ours is a predominantly long-only business, inherently exposed to price volatility of financial assets in which we invest our client capital. Our clients are more cautious and taking more time to make investment decisions or de-risking their portfolios irrespective of investment performance. Against this backdrop, we delivered broadly flat revenues with moderate cost growth. We saw net outflows in the period due to lower volumes of new business while outflows remained broadly stable. Our peer relative investment performance remains competitive, and we continue to focus on improving our short-term performance. In spite of these adverse market conditions, our strategy remains consistent. We will continue to apply our well-tested investment processes, currently focusing on our clients and their requirements, ensuring that our people are well supported for the task ahead.
Substantial staff ownership in Ninety One means the interests of our people with those of our shareholders and fosters our long-term orientation. Here are the key figures for the first half. We will cover the financials in more detail later. Assets under management decreased by 8% to GBP 132 billion, driven by net outflows of GBP 3.2 billion and lower markets. Average assets under management increased by 1% versus the same period last year. Our investment performance remains competitive with a three-year firmwide outperformance at 66%. Our adjusted operating profit declined by 7%. The interim dividend of GBP 0.065 per share represents a payout of 71% in line with the prior period and stated dividend policy. The last six months have seen some very challenging markets.
We have seen interest rates rising faster than anticipated from historically low levels. Central bank tightening and increasing geopolitical uncertainty have provided further headwinds for both equities and fixed income. Heightened volatility and increased cross-asset correlations contributed to a difficult operating environment for active managers. Clients de-risking their portfolios and postponing their investment decisions, thus limiting our sales opportunities. We initiated intensive client engagement, making sure we remain close to our clients and ready to act when opportunities arise. In 1831, 1941, and 1969, Treasuries and equities were also highly correlated on the downside. There was not much place to hide for a long-only investment manager. As I have said many times before, we don't change our approach because of short-term market events.
Let me remind you that we have seen net outflows in 25% of the half-yearly periods since 2002. We delivered significant growth over the last 20 years, of which under half has been through net inflows and the other half due to markets. We focus on delivering good outcomes for our clients in the long term, and we will continue to do that. Our assets under management remain well diversified across asset class, client region, and client type. Let us look at the flows by asset class. We achieved net inflows in our South African fund platform and marginal net inflows in alternatives, which is predominantly credit. Unfortunately, those were offset by the remaining asset classes, mainly from Equities and Multi-Asset. The net outflows in equities were largely driven by some of our global equity strategies.
The bulk of these outflows related to two clients de-risking their portfolios unrelated to investment performance. As I have mentioned in the past, our clients include very large, sophisticated institutional investors. Thereby, therefore, our flows can be lumpy, as we've seen in this period. Only the Africa client group saw net inflows in the last six months, largely into fixed income strategies and our fund platform business. The Asia Pacific client group saw the biggest net outflows in the period, driven by global equity strategies. The net inflows in the advisor channel were more than offset by the outflows in the institutional channel. The advisor channel experienced net inflows from the Africa and UK client groups. A combination of de-risking and LDI related liquidation towards the end of the period drove institutional outflows. Moving into investment performance.
Our firmwide aggregate asset-weighted performance remains competitive, with 66% of our strategies outperforming benchmarks over the three-year period. Over five and 10 years, our outperformance as at the end of September stood at 75% and 83% respectively, leaving us well positioned to compete. We are aware that our short-term performance, while slightly better, compared to six months ago, still needs improvement. Our mutual fund investment performance improved significantly since year-end. This is a good, albeit imperfect, proxy for peer relative performance. We are now in a better place, but we are not complacent. As ever, our focus remains on delivering competitive long-term investment performance for our clients. Over the last two years, we have focused our sustainability efforts on climate change. This will remain our priority for some time to come, given the urgency of the issue.
We have spent significant time considering how we can contribute to the thinking of our clients while achieving real world change. Decarbonizing portfolios does not guarantee real world decarbonization. In our Sustainability Mandates, we've been encouraging asset owners to invest in the climate solution providers and to support the transition of currently heavy emitting companies and countries. Working largely within the Sustainable Markets Initiative and the Glasgow Financial Alliance for Net Zero, Ninety One has actively contributed to the now established framework for transition finance. These will be crucial in the years to come, and we have advocated loudly in our industry for measurements that support allocations into these areas which do not leave emerging markets behind. Our targets submitted to the Net Zero Asset Managers Initiative were accepted by the Institutional Investors Group on Climate Change in July.
This gives credibility to our transition plan, something we expect companies in which we invest in to deliver themselves. Without substantial investment in the required transition, the world will not improve. Ninety One is committed to aligning its business with this imperative. Our range of sustainable strategies have achieved positive net inflows, and we launched one additional strategy in this reporting period. In these testing times, we gain confidence from strong, deeply ingrained Owner Culture at Ninety One. Our stable and experienced staff complement provide us with confidence. Talent density and diversity are key objectives for us. We are direct and honest with our people about the challenges we face and about the high expectations we have of them.
Staff ownership in Ninety One now exceeds 28%, which is in line with our intention to build an intergenerational business. I will now hand over to Kim, who will take you through the financial review. Thanks.
Thank you, Hendrik, and good morning to all of you. I'm presenting a set of interim results which reflect the current environment as Hendrik has already summarized. The highlights are as follows. Adjusted operating revenue increased by 1% to GBP 330.9 million. Adjusted operating expenses increased by 5% to GBP 223 million. This resulted in an adjusted operating profit of GBP 107.9 million, a decline of 7%. Adding the increase in adjusted net interest income and the gain on the disposal of Silica in the prior year, profit for tax decreased by 16% to GBP 110.6 million. The effective tax rate for the period was 23.4%. It is pretty much in line with the prior period.
The above factors result in profit after tax decreasing by 16% to GBP 84.7 million, and the adjusted EPS declining by 7% to 9%, in line with the fall in adjusted operating profit, as I showed above. Consistently, I've reported adjusted operating profit by adjusting for 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 decreased from 35.2% to 32.6%. This is due to an increase in fixed expenses being higher than the increase in revenues. As I cautioned back in May, it's been a more challenging period, and 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 increased to GBP 330.9 million. Management fees decreased by 1% to GBP 312.8 million from 314.8 million in the first half of 2022. This compares to a decline of 2% from GBP 380 million in the second half of 2022. However, the average AUM increased by 1% in the comparable six-month period to GBP 138.2 billion. The average fee rate, however, declined from 45.7 to 45.2 basis points.
In the main, this is once again due to an increase in AUM from below average fee rate clients and the change in the mix of strategies held by clients, and this is predominantly in our offshore fund range. With the current market conditions, we will continue to guide cautiously to downward pressure over the period ahead. As previously guided, performance fees decreased from the prior period by 19% but were still GBP 11 million. These fees arose as a result of relative investment outperformance in a selection of strategies.
Other income primarily comprises the material foreign exchange gain of GBP 7.4 million, which was predominantly due to the translation of the U.S. dollar assets or the weakening of the pound sterling over six-month period from 1.31% to 1.11% as at the end of September 2022. The next slide shows the buildup of the adjusted operating expenses between H1 2022 and H1 2023. All areas showed an increase over the prior period. The total adjusted operating expenses increased by 5% to GBP 223 million. A key expense is once again employee remuneration, which reduced to 66% of the total expense base, and the comparative period was for 69%. Total remuneration expense increased marginally by GBP 1.5 million or 1% to GBP 147.3 million.
This was driven by an increase in fixed remuneration due to the annual inflation and market related adjustments, which was largely offset by a lower accrual for variable remuneration in line with the lower adjusted operating profit. Let me remind you that over 50% of employee remuneration is variable, and overall, this resulted in a compensation ratio of 44.5%. Now turning to the business expenses, these increased by 13% to GBP 75.7 million. Let me take you through each of the business expense categories. The largest expense is client and retail fund administration, and this has increased by 8% or GBP 1.6 million, driven mainly by the weak sterling on the U.S. dollar-based expenses here. The same can be said about information expenses, which is actually included in other.
Fortunately, only around 20% of our cost base is USD, while the balance being predominantly in GBP and ZAR. As mentioned earlier, we did benefit from a high proportion of dollar-based revenues. Travel expenses in absolute terms have increased significantly from the prior period following the easing of COVID-19 related restrictions, but do remain lower than the pre-COVID period. Systems expenses increased due to ongoing investment in underlying platforms, but there's nothing notable to highlight here. Overheads, also included in other, increased largely with inflation, plus a few one-off charges which we're not expecting to repeat in the second half. The comparable period split of these expenses remains largely unchanged. Looking ahead, we anticipate that the business expenses will increase with a mixture of inflation and FX pressure.
At the same time, there's a strong cost discipline in the business, and as a result, we guide for a lower increase rate in the second half. We expect and guide that total remuneration expenses to be marginally flat as we flex the variable element there. This slide simply shows the total and business expenses as a percentage of average AUM in basis points over now a 6.5-year period. This covers a period both pre- and post-listing in March 2020. The key message here is the consistency of business expenses as the business has grown and developed. I stated earlier, the slight uptick here can be attributed largely to FX and inflationary pressures, albeit marginal. Both are out of our control, but where we can, we'll continue to tightly manage the total cost base going forward.
To summarize here, this is a graphical representation of the absolute movement in our adjusted operating profit before tax from H1 2022 to H1 2023. Our adjusted operating profit for H1 2022 is GBP 116.6 million. Management fees decreased by GBP 2 million. Performance fees decreased by GBP 2.6 million. Employee remuneration increased by GBP 1.5 million. Also increased by further GBP 8.7 million. The foreign exchange loss in the prior period were reversed gains with a resulting impact of GBP 7.7 million. Adjusting for the small decrease in other income items of GBP 0.6 million, the adjusted operating profit for H1 2023 was GBP 107.9 million, as reflected earlier.
My final slide summarizes the Ninety One balance sheet and the capital position at the end of September 2022. Ninety One's qualifying capital decreased to GBP 307.9 million. Estimated regulatory requirements also decreased to GBP 111.3 million. In line with our dividend policy, the board has declared an interim dividend of 6.5p. This is a decline of 6% from the 2021 interim dividend, and is in line with the 7% fall in adjusted EPS to 9%, and translates into a payout ratio of just over 70%. Ninety One remains committed to its stated dividend policy. After its dividend payment, there'll be an estimated capital surplus of GBP 136.7 million.
This results in a capital coverage of 223%, which the board deems prudent. Furthermore, at this time, there continues to be no plans to increase the number of shares in issue, nor to encumber the group balance sheet with debt. Thank you. I'll now pass back to Hendrik.
Thank you, Kim. These are challenging times, and we remain cautious about the foreseeable future. That said, Ninety One is a resilient business with a diversified offering and a long track record of operating in bull and bear markets. We see ample long-term growth opportunities ahead in spite of current market conditions. We will maintain cost discipline, but we will not sacrifice long-term growth and organizational stability just to meet near-term targets. We intend to navigate the turbulence with confidence. This is not a time for distractions. More than ever, we will focus on the investment task at hand and do our best to meet the needs of our clients by staying engaged with them and doing what they expect of us. Our focus is firmly on execution. To execute well, we need a motivated, highly skilled staff complement. The people of Ninety One are up for the challenge.
Thank you very much for your support. Before Q&A, I just want to pay our respects to a colleague who sadly passed on yesterday. André Roux, who was one of our Senior Fixed Income Portfolio Managers and a previous Head of Fixed Income, passed away in London yesterday after 23 years of service with us. The cause is not clear, but he just got ill over the weekend. I think a few moments of silence would do. Thank you very much.
Questions. Hubert, yours first out of the block. You always take a day longer than the other Analysts, and then you write more. Your question's first, so go for it.
Thanks. Thanks, Hendrik. A few questions. Firstly, on the operating margin. It was 33% in the first half. I think Kim, you mentioned some headwinds in the second half around costs, inflation effects. Just wondering how we should end guidance around operating margin in the second half. That'd be helpful. Thanks. Hendrik, one for you. Personally, in Asia, there seemed to be pretty big outflows in the first half. It could be due to the one-off, I think, mandate losses potentially.
I'm just wondering if you can just talk about the dynamics there. And also if that's a set back to your goal in terms of improving institutional growth in Asia. And lastly, I know your comments are quite cautious on the outlook. Is it both on the institutional side as well as the advisor side? I notice that your advisor flows were actually quite resilient. Just wondering if you're also downbeat on that in the second half? Thanks.
I'll leave the operating margin point to Kim just to say that operating margin for us is an outcome, not an objective. Maybe Kim, you can just say what you expect now.
Absolutely. I think, as you said, we've guided the fact that we are gonna have, you know, the costs are gonna be there. We've got inflation. We'll obviously see what the impact of the FX costs, which hit us quite hard in the first half of the year. We will guide on it being. It's not gonna go up, it's gonna be slightly down in the second half, but not by anything. We're not anticipating it to be material. Again, because we're not expecting any material cost to come through.
What we're gonna try and do is really contain cost growth rather than destroy capacity. Because we see in a number of our markets, structural growth opportunities that we don't want to step away from. I mean, we're just fully invested in our North America platform. We're not gonna step away. You know, we can be ten times larger there than what we are. So if we're gonna tinker now. So that's the balance we're trying to maintain and therefore not willing to commit to a particular target. I think as far as Asia is concerned, these were very specific accounts and it was related to them. So I think we're as committed to the regions we're in and essentially large asset owners and asset platforms in those regions.
They behave similarly, whether they're in California or whether they're in China. They actually have the same decision-making processes. Where the pots of money are, we're actually quite optimistic about both the Australian opportunity and, of course, the Middle East, where, you know, money is coming out. Many economies are growing. We're not negative on that. Clearly, some of you may ask the question which you asked at year-end, what about China? I was very clear. Until we have free travel and, you know, COVID free, you know, or the COVID restrictions are off, there's no point in going except serving your existing client base. And at the moment they do business remotely, but not in large volume, and fundings are slow.
You know that's gonna be in place for the next reporting period. I think as far as the outlook is concerned, we haven't seen. Remember we deal with the upper end of the, call it retail market or advisor market. Our clients are wealth managers, sophisticated financial advisors. Not directly with a man in the street and definitely not with the sort of small accounts that are quite heavily exposed to crypto right now. That's not our market. They have not panicked. They've behaved very similar to institutional investors. We are not sure when an economy goes into recession that people will not need their money and call on their savings, even if it is to look after family members. We haven't seen that.
Neither have we seen fear. With big movements in markets that may still come. We haven't had the negative from that. We've actually had a fairly disciplined experience from our clients. It was more institutions repositioning, and I gave you the reasons. I think from an investment performance point of view, we've been good enough to keep the clients. I think it's important, if you really want to open the front door, you've got to have exceptional performance in your relevant strategies. That's what will determine a big year or not, and we have to wait and see how it unfolds over the next few months.
If you deliver that and you're in the top end and you're one of the firms they looked at. I mean, we've won a few landmark mandates which have funded much slower than we would have expected. Exactly. Because asset owners have been slow on the cash. You know, when we pitched, they were very big mandates. Money's starting to dribble in, or they say, "Look, we'll take our time. Thank you. You've been selected." Okay, we have to wait. That's just the game. That's the outlook. We haven't suffered from panic selling by anyone that one could either say, "Well, actually, we're a great client base," or you could say, "Well, there could be a risk further in the flow picture," depending how you feel in the morning. Thank you. David?
Morning. David McCann from Numis. First one, you mentioned LDI being a factor that drove some of the outflows. Obviously when you broke it down geographically, it looks like Asia Pacific was actually the main region, which isn't really where LDI is. We're really talking about the UK there. Maybe just give a bit more color on what it was you were seeing. I'm presuming this is not directly LDI related because you don't do LDI. More because if LDI, the pension funds that were in LDI were selling other assets, which you may have had some of those. Maybe just a bit more color there would be useful. You know, obviously given the quarter's outlook. Second question, just given the obvious quarter's outlook, given you know, you said the foreseeable future, I mean, how long is the foreseeable future?
To that, I mean, you don't seem like the kind of operator that would just kind of sit on your hand and do nothing. If the environment does stay, you know, difficult for a longer time, I mean, what do you do differently? What, you know, do you double down on particular basis points of the business? Are there still things which are, you know, looking better than other parts? Just be interested.
David, you've listened carefully. You listened carefully to the words. Now, I'll start with that. The foreseeable future was carefully chosen. I didn't wanna give an exact timeframe because I don't know when the Fed will finish. I don't know when the politics will improve. I don't know how many countries are gonna blow up between now and then. I don't know how big the crypto scam is gonna be. So those are things. When the illiquid guys are starting to revalue their assets lower, I don't know what the level of selling is gonna be. So those are all, you know, variables which will have an impact on this. What we will do in this business is we're preparing the business and have been doing so.
If you.. I wrote a staff note in, was it June? July. To people saying, "Look, guys, sort yourselves out. Let's get the costs under control. Otherwise, you know, we'll have to help you." We work. We're a firm of volunteers. Our people are sensible. They will look at the easily controllable costs. That's not the problem. I think we've got variable flex, as Kim has explained to you. We'll use it to the extent we have to. The more challenging thing, if this thing goes on longer, is what is the next response? The next response is to really focus on the areas where one can make a difference to the business and start de-emphasizing what are, and they're not many of that in this business.
It's very easy to take a badly managed business and run it through a down cycle because you could just cut a whole lot of excess costs. We don't have a lot. What we can do is focus our efforts and be more clear, and therefore reduce diversification down the line and say, "We'll do fewer things better with more focus, and then come out with a better recovery after this." That is under discussion. I'm not gonna go into detail. At year-end, you'll see a more clear articulation of that if the situation persists. There's a very active conversation here. I go back to what I said. First and foremost, we have a client base of GBP 132 billion to look after. They pay fees. They pay decent fees.
Our obligation to them is first. What we won't do is just cut for the sake of meeting a near-term target. We must consider organizational viability, because otherwise you won't attract and keep talent. I think there's actually a big opportunity here to both tighten in areas and actually expand the aggression in some growth opportunities and make sure that we capture that, while others are inward-looking. That's probably what's gonna happen in and throughout 2023.
The real answer then, David, you can then write either a positive or a negative report in 2024 saying, "These guys did it, they're in really good shape," or, "Actually, they were just too passive and missed a few tricks." But the typical risk in these downturns, and we've seen that many times, is that when you pull in your horns too much, and then you don't capture the opportunity others leave on the table. Actually, there are quite a few others around us who are busy. I had a line in there, if you listen carefully, about distractions. This is no time for distractions, so investment bankers aren't gonna make huge amount of fees out of us doing all sorts of deals, particularly chasing the marginal growth opportunities that may look compelling, but will not move the dial.
will eat up our capital, eat up our bandwidth, and eat up our valuable ability of resources, which should be serving clients. In a sense, I quoted something to the board the other day, and they were asking me, "Well, what about, you know, the things you do?" I said, "Well, actually, you know what? It'll be. It's quite. If you're one of the Last of the Mohicans, to quote Sir Evelyn, the late Sir Evelyn de Rothschild, who actually maintained a very good investment bank business in spite of lots of corporate activity, you can do pretty well." I think that's roughly our strategy. Yeah. LDI. Okay. LDI, I just put in to. Firstly, it's over the.
In the latter period of the six months, LDI really became an issue. In the last sort of month and a half of the reporting period, you started feeling the stresses. I can't remember when that mini budget was. It's not that long ago. It feels like a world ago. Quite clearly we saw some panic selling, and there will be more panic selling or more de-risking happening. Initially, it was panic to meet derivative requirements. Now, if you work the 3.2 minus the Asia number, there's still a reasonable number in there. We don't have a huge UK institutional business, but we saw some flows which, quite frankly, were driven by motivations other than asset allocation. There is still, as far as I know, and some of you will know more.
I see some big banks in the room here will know more. There's still some big books out there that need to rebalance, that they've met their temporary liquidity requirements, but they may not be in the shape they want to be. I also couldn't resist but putting it in because when it started, we were very clear. We don't go into a 10 basis point business where the reputational risk is our, the value of our entire business.
We're not implementers of other people's strategies. That's for banks to do. We are active asset managers, and I think we feel a lot better on the risk management side than being involved in things like that. That's maybe the other hint why I raised the LDI thing. We have no interest in that market. We will serve clients who have LDI'd, but they will deal with the existing providers, and I expect many court cases and many disputes to come out of the experience we saw in September. We will not be part of that.
Morning. It's Rahim Karim from Investec. Three questions, if I may. One, just to get some guidance perhaps on performance fees, 'cause I think they held up relatively well in the half. A question on the Africa business. I mean, flows, as you highlighted, were particularly robust. Could you give us a sense of what was driving that? And obviously there's some exchange kind of regulatory changes that are going on. Could you just help us understand how that plays out and whether there was an impact in the period?
The JSE changes?
Yes. Yeah. Third was just to get a sense of whether competitors are acting in an irrational way to try and protect flows from a pricing perspective and what you're perhaps seeing in that regard.
Let me. I'll ask Kim to answer the performance fee question because we don't really know, but we can answer.
Yeah. Well, I think the key point of the performance fees, I think it was higher than I think a lot of the consensus we actually saw there. I think back in May, we did say that we would only see performance fees coming from relative and not absolute performance because there wasn't any. It is slightly higher. There was a one-off performance fee in those particular numbers. So we're guiding to it being don't take the figure multiplied by two and assume that's what the performance fee is gonna be for the year. It'll actually. There will be performance fees the second half of the year, but it'll be down relative to what you saw in the first half.
I think it's important to note that at a point when a fee crystallizes, sometimes your alpha looks great, and then one or two months later, the alpha backward doesn't look as great. This one was a sort of a slight positive surprise. But I do wanna make you aware that absolute may get even if we're in a flat market, we may get some of the absolute or cash plus benchmarks start to deliver again. Remember, they were all off the table. That's one of the reasons why.
Cautioning on the low side.
Why Kim cautioned. No, no, I'm saying there's both sides. For this period, it's still low, but the part that hasn't fired is the absolute ones. You know, at some point, they're gonna come back. Performance fee is not big enough at all. That's the first one. The Africa business, the reason why it's done well in South Africa in particular, is because the central bank there was ahead of the curve. They've been used to some kind of the kind of inflation we're panicking about in the U.K. They've been used to for years. There wasn't this panic in the world. They're used to real interest rates. They had it all along.
Assets were priced accordingly, and therefore, there wasn't in the savings market the kind of panic. I wouldn't call panic, but the kind of shock that we saw in the developed world. Neither was it a frontier market where you had major issues on the balance of payments or on the capital account. It was just commodities were doing quite well. I mean, if you look at the contrast to the South African budget to sort of the U.K. budget, you'll see the difference in spite of other issues in that society that may blind you. The financial ecosystem is robust, healthy and stable. That's why we are a leader there, and therefore it's not a bull market by any means. It's a marginal positive flow.
The JSE has gone through, you know, major business changes and particularly as far as listed companies are pertaining. Our discussion with them is still to. We hope that we could synchronize with the rest of the world and not add small differentiations. For example, one of the big requests we have is that we just all do go to the, you know, ISSB, and we don't complicate our sustainability reporting. At the moment, exchanges, regulators are all thinking, you know, they're thinking individually. Maybe we should start thinking together. Maybe it's a G20 thing. Right now, one of the cost areas in our industry is that the world is becoming multipolar. It's not just Brexit. It's all over the world where regional regulators are doing their own thing.
I mean, even in the U.S., you've got to understand the state in which you operate now, not just the federal system, to know exactly what to do. There is a burden on cross-border businesses like ourselves, which is probably underestimated. I think that was probably, Rahim, what was, you know, behind your question. But we have a very good relationship with the Johannesburg Stock Exchange, and we have a good engagement. We're, you know, a large player in that market. We're pretty comfortable that whatever however things are unfolding. What we don't see is, you know, a booming growth in the savings market relative to the rest of the world. In fact, we probably see, you know, we probably look for growth into the Americas or Asia.
That was all your questions, right?
Just on competitive pricing.
Oh, pricing. Kim, you sit on the pricing forum. What was your question?
Just to see if there had been any kind of irrational behavior by competitors.
There are irrational guys out there. There are people going. It's pricing to get business.
Yeah.
We've seen that. We walk away if it's. What we do, though, is we adjust for consistency. In other words, really high quality relationships that stay the course and don't rent your capacity for three years deserve a better price than those who just rent your capacity for a limit. It's not just price, it's quality of price. We have seen people willing to really work at extremely low fees. What we do is we walk away, and typically, the kind of clients we work with, and I've repeated that point. I've said it in the past. Given that there's been such a big shift to passive, they actually have bigger, not smaller fee budgets.
Most of them just come out of the room having dealt with private markets operators who are multiples above us, so they're not that shocked about our prices. It's really moved on. They look at the quality. They wanna understand what you're gonna do for that price. There's no doubt that everyone in the investment management business is doing more for the same fee. That's probably the bigger erosion rather than the fee level. You have to do more. You have to be better. Yeah. Yeah. Yeah. That's why our costs are less elastic or less flexible to the downside, excluding variable remuneration than you think.
Because the technology requirements that our clients have, the immediacy of looking into our portfolios much higher than in years gone by. Yeah. Great. Any more disagreements? Eva? Any questions external? Where are the questions from? There are none. Are they gonna give us hard questions in one-on-one meetings then? If anyone wants to ask questions, those on webcast, please type it into the chat function. Or phone us on our mobile if the chat function doesn't work. We've got that here. I think just one last point to the sell-side guys here in London. A lot of our leading sell-side people. I think it's really important you understand this bet we have in our business.
We think at our scale, the long only business is a large market for us and to an extent related and ancillary alternatives business, which in our case is credit. Okay? We want to build a proper positioning in credit in a world where duration is not necessarily gonna be your friend. Okay? We think at our scale of $150 billion or GBP 130 billion, we have ample opportunities if we're good enough. Without deploying capital, taking a little more volatility on the revenue stream or the earning stream and sticking to it and gaining scale, as Kim showed you in her cost basis point cost chart over time, is a rational and a sensible thing to do and becoming a haven for talent.
I mean, I didn't mention to you, but you'll know if you're in London, we hired, you know, two very significant or very, very well-known investors across to us 'cause they wanted to be here, not because we went out there with, you know, mad recruitment ideas. I think if we build that base carefully, solidly, and we get back into the good times, this business will do as well as it's ever done. We are not part of this very negative narrative on the industry. It's always been an industry where the losers got taken out. It's always been an industry where the winners won. You just gotta try it.
The optionality or the odds are so stacked in favor to try that we think it's worth trying and not becoming capital heavy by buying all sorts of businesses in ancillary areas in order to hope that we can manage them better than other people. I think that's the key part of this model. What? Why are we comfortable about that? Because we've built the underlying diversity into our revenue streams that we can live through Regional Hiccups, as we've just seen in the UK or in some regions your mandate may not compete and do well. That's the message I just wanna leave with you at half year stage. Let's talk detail at the full year, and I'm sure you're gonna send lots of questions to us. Please do. Thank you very much.