Good afternoon and welcome to the Record PLC investor presentation. Throughout this recorded presentation, investors will be in listening only mode. Questions are encouraged and they can be submitted at any time by the Q&A tab situated in the right corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question that's received during the meeting itself. However, the company can review all the questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Jan. Good afternoon to you, sir.
Good afternoon, everyone, and thank you for joining the call. I'm Jan Witte, CEO of Record, and with me is Richard Heading, our CFO. This financial year was my first full year since taking over as CEO of the group in April 2024. I have been at Record for nearly 13 years now, and having previously had responsibility for the client and investment teams, this year has brought a new set of challenges. I'm very proud of the progress we have made this year. As we will cover in this presentation, we continue to expand Record's offering by building on our core strengths, and we are well positioned for the future. For those of you who are new to Record, we are a specialist currency and asset management business, and we deliver best-in-class solutions for large institutional investors.
We were founded in 1983 by Neil Record, and Neil remains our largest shareholder, and we have been publicly listed since 2007. We have over $100 billion in assets under management for clients based around the world, with a particular strength in Switzerland and the United States, and we employ just over 100 people in primarily our new head office in Paddington, but also in Windsor, where the company was originally founded, and we have also offices in Frankfurt, Zurich, Amsterdam, and New York. In the following slides, I will cover in some more detail what exactly we do for clients, as well as the progress we have made this year, and Richard will, of course, cover the financials. FY2025 has been a busy year for Record. I took over the role of CEO in April last year, and in June, Richard joined as our new CFO. We also added Kevin Ayles.
Our Chief of Staff to the board in July. Othman Bukhami joined us in July in a non-executive role, bringing a wealth of valuable FX experience, and in March, we announced the appointment of Andreas Denze, our new Chief Investment Officer. Andreas was most recently the Chief Investment Officer for the Credit Suisse Pension Fund. We already know each other well, and he'll be a tremendous addition when he joins next week. We began the year having taken the difficult decision to write off a significant technology project and having recently onboarded a new technology leadership team. The team has made great progress in resetting our tech strategy and aligning our tech development portfolio with client and operational priorities. Not only is this delivering good results, as you saw from the financial highlights, it is also a far more cost-effective approach.
Of course, this year we opened our new head office in Paddington in London, from where we are talking to you today. The new office brings all of our U.K. staff together in a single modern workspace, and we are already seeing the benefits of renewed engagement and collaboration. Record's proposition remains unchanged. We deliver best-in-class solutions to large institutional investors. During the year, we have restructured our client-facing activities to operate the business through three pillars: risk management, absolute return, and private markets, each of which I'll discuss in more detail shortly. In November, we announced the launch of our Infrastructure Equity Fund with EUR 1.1 billion of commitments. We are well progressed with the due diligence on the first series of investments and expect the first capital call in the coming weeks.
In December, we also announced our plans to launch the world's first Sharia-compliant deep-tier supply chain finance strategy, on which we hope to be able to provide more details soon. Just last week, we announced that we have entered into non-binding terms to provide $2.2 billion of funding to the Kohler Potash plant. This deal is at an early stage, but another great example of how our unique ability to structure large-scale bespoke solutions is generating a strong pipeline of new opportunities for the business. Turning to look in more depth at our products and starting with the risk management product pillar, which includes our long-established traditional hedging products and where we still generate the majority of our revenue. Passive hedging includes two offerings. Pure passive hedging is a highly cost-effective way to eliminate currency exposure from client portfolios.
Enhanced passive hedging, which is sometimes also referred to as tenor management, adds value by taking advantage of structural inefficiencies and behavioral changes in FX markets in a structured and risk-managed way. It is in enhanced passive hedging where we are able to consistently earn performance fees by outperforming agreed benchmarks. This year, we earned GBP 3.2 million of performance fees compared to GBP 2.9 million last year. Those performance fees and the switch of a large client last year from an active to a passive strategy resulted in strong revenue growth for this product. Dynamic hedging is an attractive alternative to passive, which seeks to reduce currency risk while generating value by benefiting from foreign currency strength and protecting against currency weakness.
Towards the end of the year, we saw some clients reduce their hedge ratios in response to US dollar weakness, but in general, AUM and revenue in dynamic hedging were very stable. While our passive and dynamic clients are typically institutional investment funds such as public pension funds or endowments, hedging for asset managers has been developed to meet the specific needs of asset managers in private equity and private credit, which typically have lower liquidity and require a more bespoke hedging solution. We have seen strong growth this year from both new clients and existing clients growing their asset base. These risk management products remain the core of our business and all have performed well this year. We expect continued growth in these products, with the majority of the growth coming from hedging for asset manager products. Moving on to look at absolute return.
Absolute return products aim to provide clients with attractive returns while maintaining low correlation with traditional asset classes. This is our smallest pillar by revenue and can be more volatile than others, being more discretionary from a client perspective and where clients change asset allocations more frequently. FX also grew revenue during the year, but a reduction in AUM at the end of the period will weigh on revenue next year. Custom Opportunities comprises a range of bespoke strategies. We saw a large reduction in AUM and revenue during the year as two of these mandates were terminated. Private markets are our newest offerings and where we see the most potential for rapid growth. These most clearly demonstrate our ability to develop bespoke solutions at large scale, including beyond our core currency competency.
In FY22, we launched the Emerging Markets Sustainable Finance Fund, offering investors higher yield, carry, and return opportunities relative to traditional EM debt. In addition to financial returns, the fund also seeks to have a positive impact by mobilizing capital for the development of emerging market economies. As previously mentioned, earlier this year, we announced the launch of our Infrastructure Equity Fund with EUR 1.1 billion in commitments. This particular fund has been tailored specifically to the needs of our Swiss pension fund clients, again demonstrating our ability to develop complex solutions to meet a broad range of client needs. We are very far advanced with the first capital deployment, which we expect to announce very soon. In the private credit and private equity space, we have two very exciting developments.
Last December, we announced that we are working to launch the world's first Sharia-compliant deep-tier supply chain finance fund with a target of $1 billion of initial funding. Deep-tier supply chain finance specifically targets the needs of SMEs within the lower tiers of the supply chain. We are well advanced with the structuring of the fund and sourcing of portfolios and expect to announce the launch of this fund in the second half of this year. Last week, we announced that through a joint venture owned by our German subsidiary, we have signed non-binding term sheets on a $2.2 billion financing transaction supporting Kohler Potash. We expect that deal to close in six to nine months' time from today. Overall, I am very excited about the progress we are making in the private market space, where we have the opportunity to deliver impressive growth and profitability.
At the start of the year, we laid out three strategic objectives, and we have continued to make good progress on each of those. As I've discussed on the previous slides, we are building a strong platform for organic growth in our traditional currency products, but in particular through a broader offering which leverages our unique strengths. Our growth plans will simultaneously improve quality of earnings, which we define as earnings that are consistent and recurring over time and less sensitive to market conditions or to individual client or market dynamics. Our core risk management products create a high-quality, profitable revenue base, including a reliable component of performance fees. Private markets will deliver locked-in long-term revenue. For example, the Infrastructure Equity Fund will lock in revenues for 15 years.
Our success and reputation is built on exceptional client delivery, which requires excellence in everything we do, including the operational platform on which we build our business. During the year, we have reinvigorated the concept of operational excellence through our new technology team, aligned to our operations, and our new office, which will facilitate better engagement and collaboration. The appointment of Andreas Denze as Chief Investment Officer will bring valuable new experience. With that, I'll hand over to Richard for a more detailed review of the financials.
Thank you, Jan. Good afternoon, everyone, and thanks for joining the call. Fiscal year 2025 was a year of major management transition and rebuilding, during which we nevertheless delivered a solid financial performance. Assets under management passed $100 billion at the end of last year and have remained above that figure throughout the year.
We've seen a couple of large clients terminate absolute return mandates, which has impacted revenue in the year and impacted AUM, and management fees ended the year down 4%, which, combined with lower performance fees after two exceptional years in FY2023 and 2024, resulted in total revenue down 8%. We're very pleased with the progress we made to control costs. Costs were down 6% year on year, and even excluding the large IT write-off taken last year, costs were flat. The net result is that EPS increased by 4%- 5.03 pence per share. Our balance sheet remains strong, and therefore we've increased the ordinary dividend to 4.65 pence per share. Looking at the income statement in a bit more detail, total revenue decreased 8% during the year, as I said, and the detail of which I'll cover shortly.
We also recorded higher cost of sales in the year, which represents some fund administration expenses incurred ahead of revenue that will be recognized in the current financial year. We made good progress controlling operating costs, even as we continue to make important investments for the future. As I said, overall operating costs were down 6% during the year. As a reminder, last year we recognized a GBP 1.9 million write-off of capitalized IT development costs and brought in a new IT leadership team and a new IT strategy. Excluding the impact of that write-off, costs were flat, and within that flat cost envelope, we have continued to invest in our private markets business in particular through our German subsidiary. We earned a small amount of income on the small portfolio of investments that we hold on our balance sheet.
Operating margin was down from 27.8%- 25.6%, driven by lower performance fees, resulting in an operating profit for the year down 15%. Net finance income was once again positive as we earned interest on our surplus cash balances. Surplus cash, which we hold to meet regulatory capital and liquidity requirements, is managed by our investment team and held primarily in money market funds. Our tax rate this year was low because we recognized a tax credit in respect of the inception-to-date losses in our German subsidiary. This reflects our confidence that that entity will generate taxable profits to offset those startup losses. Profit after tax of GBP 9.1 million was therefore only slightly down on the prior year. After adding back the share of losses attributable to non-controlling shareholders, profit after tax attributable to Record shareholders is up 5% to GBP 9.7 million.
Earnings per share is 5.03 pence, up 4% against a prior year figure of 4.84 pence. As I said previously, assets under management remained above $100 billion throughout this year. We did see some net outflows during the year. As we reported at the half year, the discontinuation of a tactical interest rate swap portfolio reduced AUM by $2.3 billion. We also saw the wind down of an FX Alpha mandate towards the end of the period. Nevertheless, inflows in Hedging for Asset Managers products in particular have partially offset those outflows. Underlying movements in existing exposures were very small, while the impact of foreign exchange was positive. We present our assets under management in US dollars. However, assets are denominated in multiple underlying currencies, and we earn management fees in the underlying currency.
As shown in the breakdown on this slide of assets under management by underlying currency, the majority of assets are denominated in Swiss francs and US dollars. The foreign exchange movements were driven by a strengthening of the Swiss franc against the US dollar, and the impact on our GBP revenues is limited because the exchange rate between the Swiss franc and sterling has remained relatively stable. Looking at revenue by product, I've presented our product revenues by the three pillars that Jan described earlier. A reconciliation between the new and old presentation has been provided in the appendix to this pack. Revenue increased in all products except Custom Opportunities, whereas previously described, we experienced some one-off outflows last year and in the first half of this year. Management fees in risk management increased across all products by 9% overall.
The 18% increase in management fees from passive hedging reflected primarily the switch of a large client mandate from an active custom opportunity strategy, while dynamic hedging management fees were flat year on year. Hedging for asset managers made good new business wins during the year, growing management fees by 24% as a result. Revenue of GBP 3.5 million from absolute return products was down just over 50% due to the impact of lost and restructured mandates in custom opportunities. FX Alpha, however, continued to grow. The EMSF fund delivered management fees of GBP 5 million, slightly up from the prior year. As Jan described, we expect the first deployment of capital into the Infrastructure Equity Fund very soon. We'll earn a closing fee on each deployment and an ongoing management fee on deployed capital.
We also earned exceptional performance fees last year, but that was not repeated this year due to more challenging trading conditions. However, performance fees on enhanced passive hedging products increased to GBP 3.2 million from GBP 2.9 million last year. This is important to note because while some performance fees are impacted by market conditions, on passive hedging mandates, we're able to more systematically and consistently outperform benchmarks, creating a more stable revenue stream. Moving on to operating costs, overall operating costs were down 6% to GBP 30.8 million. Average headcount during the year was up very slightly from 96- 99. However, overall staff costs were down 5% to GBP 15.9 million. We've eliminated some expensive resources, particularly in technology, and have also reduced one-off staff settlement costs.
Although we're capitalizing some internally developed software produced by the new IT team, we're doing so prudently, and capitalization is not a significant driver of lower costs. Technology costs represent the cost of third-party systems, consultants, and market data, and included in the prior year figure is the GBP 1.9 million IT write-off. Our new tech leadership team has made a good start on rationalizing and reducing those costs and excluding the impact of the IT write-off. These costs are down 9%. We've increased spending on professional fees, which includes legal fees, primarily in relation to the setup and launch of new private market products that we expect to launch soon. Occupancy costs are higher due to the temporary double running of office space during the transition to our new office, and going forward, our overall occupancy costs will be lower.
Bonus costs, the cost of the group bonus scheme, increased slightly from prior year. In turning to the balance sheet, Record is a highly cash-generative and capital-light business, and maintaining a strong balance sheet is an important priority for us, one which our clients value and which we believe should also be valued by investors. Our first priority is to ensure that our regulatory capital and liquidity requirements are met. During the year, our surplus of net assets over our minimum regulatory capital requirement was largely unchanged. Cash and cash equivalents remain high and together make up just under half of our net assets. During the year, cash decreased due to lower profits and increase in fixed asset purchases, primarily the fit out of the new office and the timing of tax payments.
Our healthy surplus over our regulatory capital requirement and strong cash position allows us to continue to pay an attractive ordinary dividend, which this year has increased from GBP 4.6 pence to GBP 4.65 pence. This equates to 92% of EPS. As Jan described in his remarks, we've started FY2026 with a well-positioned pipeline, and over the medium term, we expect the deployment of new funds in the private market space, in particular, to drive revenue and EPS growth. The outlook for the current year is highly dependent on the timing of closing the large and complex deals in the pipeline, but we are anticipating low single-digit revenue growth and with the effective tax rate reverting to a normal rate, flat EPS year on year.
Recognizing the importance of the dividend to investors and the uncertainty in timing of new revenue growth, we remain committed to paying a healthy ordinary dividend while always balancing that with the aim of maintaining a strong balance sheet, which is valued by investors and clients alike. I'll hand back to Jan to wrap up.
Thank you, Richard. As I said in my opening remarks, our unique selling point remains the same. We deliver best-in-class solutions for large institutional investors. We have been doing this for many years in our risk management products, which continue to be the core of our business, and we are growing and expanding absolute return and private market offering. We are starting to see meaningful synergies across our product lines as more of our risk management clients turn to us for complementary offerings such as infrastructure and credit.
We are well-positioned and remain optimistic about the future, both near and long term. Now we would welcome any questions.
Perfect. That is great. Jan, Richard, thank you very much for your presentation. Just bring your cameras back up for Q&A. Ladies and gentlemen, please do continue to submit your questions just by using the Q&A tab that is situated on the top right corner of your screen. While the company takes a few moments to review the questions that have been submitted today, I would like to remind you that the recording of this presentation, along with a copy of the slides and the published Q&A, can be accessed by your investor dashboards. As you can see, we have received a number of questions throughout today's presentation, both pre-submitted and throughout the live presentation.
What I'll do is I'll hand back to yourselves just to run through the questions, and I'll pick up from you both at the end.
Thanks, Alexander. I think probably, King, there was a couple of pre-submitted questions along the same lines around buybacks, which I guess is a question that comes up from time to time. As I said in my remarks, we've got a good surplus over our red cap requirements, and we've got a good cash balance. Buybacks is, I guess, we keep our capital allocation under review, and buybacks is something we've not considered at great length. The surplus that we have on our balance sheet, we think, is at the appropriate level. It's something that clients value very much. It's what allows us to continue to pay that very good dividend, which is important to our shareholders.
As we go forward, as we've talked about, some of the things that are in the pipeline that we hope will be very accretive to profit, and we'd expect to therefore start to see our surplus continue to grow. Obviously, we'll continue to review our capital allocation approach. We've got a range of questions here. I think there's a few around perhaps this one might be, this is a question we have quite a lot. There's a question here that says, "Leslie Healy says she really likes volatility." On that basis, will you be having a cracker of a half year? Talk about that, please.
Yeah. I mean, it is true.
It is true that as a business with a focus on risk management as strong as ours, volatility is helpful simply in the sense that, on the one hand, it reminds existing clients why they have us, and it also always presents an opportunity to demonstrate that our products and services on the risk management side perform as intended. In that sense, that's reason number one why Leslie would have rightly said that, yes, we do like volatility.
Secondly, volatility and in particular currency volatility, the way we've seen it this year, or discussions like the ones we've seen this year around what might be the future strength or weakness of the US dollar, or what might be the world's future reserve currency, any such question or discussion is helpful in that it makes it easier for us to engage with clients in conversations around how they might be risk managing their currency positions today and what they might want to do in the future. In terms of the second half of the question, does that mean we'll have a cracker second half of the year? Most of our clients, so our client retention periods are very long, and most of our clients make strategic decisions when they appoint us.
That has a lot of advantages in that if we get an offering right and we get to a point where the offering we have designed matches exactly the client's requirements, then that's a fantastic basis typically for a long-term client relationship. It also means that we don't win clients quite as quickly as the question suggests. In that sense, we would expect a long-term or medium-term even benefit from volatility and the discussions ensuing from that. The size of clients that we onboard does not translate quite as quickly as the question suggests in that we can't see the benefits and don't expect the benefits of that in the second half of this year immediately. Thank you.
Another question here that I think we can, another question here about FX impact.
As a certain-based shareholder, I want to make sure I understand the effects of FX rates on your accounts in terms of revenue. What's the relative importance of Swiss franc and dollar relative to sterling? In terms of expenses, what's the percentage of sterling expenses?
As I alluded to in the remarks that we made, our assets under management, we present them in $US dollars. The biggest underlying currency is Swiss francs, and we earn our management fees on that underlying currency. So Swiss franc, to some extent from a revenue perspective, Swiss franc is probably the most important exchange rate because that's where we earn a good chunk of revenue. $US dollar is also important because we have a good chunk of assets under management in $US dollars and actually some of that's in slightly higher margin products. Expenses are primarily in sterling.
We do also have some expenses in euro and some in Swiss franc. That is the makeup of the business. You will not be surprised to hear that we hedge our receivables and we work with the investment team around the appropriate hedge ratio to apply there. Overall, I think FX does not have a huge impact on our underlying accounts, clearly as the business that we do, but from an accounting perspective and how we present the financials. I think the key point to bear in mind is that our AUM is in a range of underlying currencies.
A couple of short questions here. One, is the Infrastructure Equity Fund a separate entity to the tertiary fund? Yes. Those are separate vehicles with different clients and have no relationship with each other. Another question, is our EM business just local currency?
Yes. We have been trading EM and frontier currencies since 2008. As a business, we are large in that space. We are one of the largest global participants in a lot of less liquid or illiquid EM and frontier markets. Our EM local debt fund is a fixed income fund that one might compare, for example, to the JP Morgan GBI-EM local currency EM fund as a comparable benchmark. In that sense, yes, currently our EM business is just local currency, in part because that plays to our strength. With the teams we have and the operational setup we have, it would be easier for us at this point to trade hard currency EM debt, but it is not a product we offer today.
The question here, "I was bracing myself for an increase in staff costs as you go into new businesses, which presumably means you take on new staff who are not immediately productive. And even after the increased bonus, staff costs have decreased. Should I be surprised?"
I guess pleasantly surprised, hopefully. As I said, I think we've done a lot of work this year on managing the costs. There has been some change in mix in the type of staff that we have within the organization and the relative cost of those. Those new businesses that we're going into, and you're right, within the cost base, there is now the cost of an infrastructure team and a credit team. Some of those have been brought on this year.
Some of them have been there for a bit longer, something like the infrastructure fund, which has taken quite a long time because of the complexity to get set up and get off the ground. We have effectively been paying for some of that ahead of launch. As I said, we have done quite a lot of work on the cost base this year. A lot of the costs of the new products and new projects that we have got is effectively already in there. I think we are well-positioned for the coming years. Yeah.
One second. Yeah. I can sort of trade those. Short question here. Is the DTSCF only being provided by the Sharia fund, or are there other provisions of DTSCF in the pipeline? Generally, we have a growing credit business, not all of which is Sharia compliant.
The particular announcement we made about that particular structure is a Sharia-compliant offering, which we would also be able to offer in a non-Sharia-compliant way if it was a client requirement. However, in the specific form in which we will launch the fund, Sharia compliance is a requirement.
A question about how the new IT system is progressing. Is it all designed and operated in-house? The change that we made during the year or the beginning of the year was bringing the IT team in-house. So we had quite a lot of our IT development was effectively outsourced, outsourced outside of the company and in some cases overseas. We have now got the IT development team in-house here in the building.
It is a much more cost-effective solution, but also just a much more effective solution overall because we now have an IT team that works very closely with our operations teams. Their development portfolio and development plans are responding to requests for immediate requirements as well as longer-term future requirements. We are very pleased with how that is working. Across the company, we are now seeing new pieces of development go live, and that is obviously great for everyone to see and is proving very effective in terms of how it enables us to deliver services to clients. We are very pleased with how that is going. To answer the question, that is now all effectively in-house, which really works from a point of view of better alignment.
Two questions here from Leslie. One, what impact would capital controls have on our ability to offer our core hedging products and services?
Then second question, a lot of asset managers claim that they have a capital-like business. The majority of capital is quite expensive human capital and are required to maintain capital surplus for ordinary business activities. Do you think it is accurate to describe asset managers as capital-like businesses, capital not being on the balance sheet, notwithstanding? On the first question, could capital controls have an effect on our ability to offer our core hedging products and services? The way we service our clients, be that pension funds, foundations, or other institutional clients, is that these clients will trade the necessary derivatives. In many cases, these are OTC derivatives with a number of counterparties. A lot of these counterparties are banks. The clients will trade with a lot of banks, and we will do their trading for them in their name with these banks.
Typically, there is a desire in addition to having a choice of counterparties. There are different criteria in choosing the choice of counterparties. One criteria is obviously the pricing. One would want a number of counterparties to choose from where whichever currencies I may want to trade amongst these counterparties. There is a degree of competition between the counterparties when it comes to pricing. Other factors that influence this choice are counterparty risk because I might have a certain derivatives exposure towards these counterparties. I might want balance sheet-strong counterparties. There is also political and regulatory risk.
In creating a counterparty panel for a client, one of the criteria that features in creating such a panel or such a counterparty panel is also geographic and political diversity, typically to guard against sudden changes in regulation or rules that might affect a bank's competitiveness in providing certain prices. Capital controls are hard to imagine being effective because at the end of the day, a client could also trade with only counterparties in their home jurisdiction. Typically, the counterparties we would advise clients to work with are in jurisdictions where capital controls are not a concern. What can happen is that rules change. It happened a few years ago in the U.S.
There'll be subtle changes to the rules, which means that some of the banks, depending on where their headquarters are based, all of a sudden have balance sheet requirements that change their ability to participate. Those are the things which, as part of the day-to-day business, we're used to managing and which indirectly would also take care of any capital controls if there ever were to be a problem. As I said, we don't foresee that really as an issue on this list.
Just, I mean, with a point on capital-light or capital-intensive business, just relating that to what we view as our unique selling point or particular strength, where we say, where we're positioned with the size we have today and the ability to create what we call best-in-class solutions or customized large solutions for institutional clients, we're heavily reliant on the expertise of our workforce and the strength and experience of our teams. I mean, in no way do we want to diminish that by not sort of highlighting that as part of what makes the strength of a business and part of the things that makes us unique. I think in sort of the normal use of language, capital-light here refers to sort of cash capital.
In that sense, I think we are a capital-light business, but absolutely reliant on very, very strong expertise and strong workforce. What role does gold play in the risk management product, if any? Has its role increased, assuming it had a role in the first place? It does not feature much, is the honest answer. I mean, we have seen a number of clients increase their investments in gold or sort of approach us about helping them run portfolios of gold derivatives or sort of finding a way of having exposure to gold or going long gold using derivatives. It has picked up a little bit as a conversation and as something that we might offer here or there. Broadly speaking, in terms of the role of gold in our clients' portfolios, it is very small.
Even an increase in gold positions that we would see our clients have will have and is not having a noticeable effect for us on the portfolios we manage.
We also got a question here. Your predecessor seemed quite bullish on the role of digital assets for clients, the universe of financial assets. Do you share that view? You have not mentioned it in the presentation. I think one of the—that is correct. Record had some investments in digital asset products, I guess, over the last couple of years. One of the changes really, I guess, when Jan took over as CEO was discontinuing that activity. What we laid out today in three product pillars is the products we are focused on, where we think we can deliver most value that respond to client demands and play to our skill set.
Digital assets, while it may become an important part in the overall universe of financial assets at some point, is not something that we are heavily involved in or have an expectation of being involved in, certainly in the medium term.
Somebody is saying, "Could we provide some comments on the threat or benefits of AI on the business?" I think there are a lot of potential benefits of AI to the business, and also the use of technology for us is increasing steadily. If one imagines the typical workstream that we operate in, oftentimes starting with an extensive data collection process where a lot of data points regularly, once a month or multiple times a month, need to be obtained from a client, custodian, their other asset managers, their funds, and that data then needs to be structured and sent through our operational machine, which really means this.
Taking that data, calculating what that means in the light of the client's strategy, turning it into trading instructions, and then ultimately passing it to the trading team. There are sort of two elements which are evolving fast with the use of technology. One, of course, the whole process these days has fewer and fewer human touchpoints in that to the point that clients can connect now by API to our systems and really send the data directly if their technology allows it. Also, the other component is there for us because the volumes we trade are so high. If we look at the total trading volume of the business this year, probably breaching $1 trillion for the year, we are heavily reliant on an excellent risk management process where the sequence of pre-trade and post-trade checks is extensive. A lot of these checks are direct checks.
are also indirect and plausibility checks, which, in addition to comparing the data we've received, the decisions we've made, and what was traded, in addition to comparing that directly to what the system expects, we run a number of indirect checks that check for plausibility. Does this make sense from what we would expect the client to do today? Does this make sense from the point of view of what the markets have done today? Those are tasks where AI can be very powerful in adding to these plausibility checks and making our systems not just faster, but also safer. A couple of other questions. A question about how much, if any, of the money being invested in the core project is provided from Record, owned capital, and/or OWL RAMS. That project is the same as the Deep-Tier Supply Chain Finance Fund and the Infrastructure Equity Fund.
Our investment is—we have an investment in the creation of the fund structures and, in the case of supply chain finance, in the distribution of those funds into underlying portfolios, not an investment in the underlying assets that those investments would ultimately go into. As I described, we're making an investment in the sense of the teams that we've brought on board that will deliver these, but not putting our own money into those projects themselves. Also, a question around client concentration and the concentration of revenue, which, I guess, is also a question that comes up quite a lot. This last year, three clients produced $16 million of revenue. Previous year, two clients produced $11 million. Does this concentration make you feel comfortable or uncomfortable? I think the thing to weigh against that is the client tenure.
As Jan described, we have large clients who put large mandates with us, long-term strategic allocations, and we have many clients who stay with us seven, 10 years, and beyond. It is true that we have some very large clients that contribute important components of our revenue, but we also have a track record of very good client service and long-term client relationships, and it is something we spend a lot of time focusing on.
Here from Matt's House, Record adapting its current hedging strategy to addressing rising geopolitical risk and potential shifts in global currency regimes. I mean, the biggest shift that I think this relates back to what we discussed earlier about the role of the dollar, currency market volatility, and the perceived outlook in which currencies will be strong, which currency will matter most in the future.
This is predominantly—these are very useful conversations for us, and it is predominantly a good thing for us as a business. It puts currency in the focus. In terms of shifts in global currency regimes that would affect the business, I mean, I think what we are seeing is a gradual rediscovery of the euro. That is probably the currency that is the strongest competitor really to the US dollar in terms of the capacity it has. There has been a lot of strength in the Swiss franc, but the Swiss franc is not quite as—it cannot absorb the same number of volume that the euro can. If anything, if it is true that current US political direction will reduce the role of the US dollar as a reserve currency, it will likely benefit the euro and indirectly Swiss franc, sterling. That, for us as a manager, is a good thing.
That means there's more complexity and more diversity in the portfolios that we'll have to manage because there'll be more currencies in the portfolios where clients are invested in if clients then invest in these jurisdictions in line with the renewed strength of these currencies. Openly speaking, the one thing that would be challenging if the new world reserve currency was going to be the renminbi because, obviously, that's not a jurisdiction where we're particularly strong in our positioning today. While we can trade it, we don't have teams on the ground or offices in the country. I think we're probably a long time away from that becoming a realistic issue. I think, broadly, all of the conversations that we see ongoing in the world are positive from our point of view, and the renminbi is largely held back by ongoing strong capital controls.
The is no other questions in the chat currently.
Jan, Richard, I'd just like to thank you very much for answering those questions for investors. Of course, the company can view all the questions that have been submitted today. We will publish the response out on the Investor Meet Company platform. Just before redirecting investors to provide you with their feedback, which I know is particularly important to the company, Jan, could I just ask you for a few closing comments?
I think, yeah, thanks everyone for the questions. We're excited about the potential of the business going forward. I think we've got one more question coming in. Yeah. Is there a risk that more clients will shift from absolute return, and will that result in fee pressure?
I'll briefly take that question, and I'll sort of use that also as a way then to go back to closing comments. I think the way we've now positioned the business with a strong risk management pillar, a strong private market pillar, and an absolute return pillar highlights quite nicely what the products are that we offer and also what they do for us as a business and, by extension, for our shareholders. The risk management pillar of the business, I mean, as Richard says, these are long-term client relationships. They're very reliant on our operational abilities, our operational systems, and our ability to deliver an excellent service. In that sense, yes, we put a great emphasis on ensuring that all of these client mandates are managed to the best of our ability.
Largely, that product positioning, the risk management side of the business, forms a very stable basis of the business for us to do other things. The private market pillar of the business, which we now put out sort of more clearly this year, which we have been working on for many years, it has been happening in the background, but where we now feel where we have demonstrated through a number of large examples that we can do this, that this is something that we are doing, which now forms a firm part of Record as a business, has a lot of the similar features in terms of long-term relationships, long-term investments, but offers fee scales that are higher than on the risk management side.
In that sense, for us as a business, what we classify as private market, even though these are, in essence, still customized solutions for large investors, is very attractive for us as a business compared to a traditional business. Therefore, we are very excited and think that gives a great and exciting upside to the business over the years.
The absolute return part of the business is the part of the business that's most similar to a lot of other companies out there in the market, where that's absolute return products, where we have a number of products which we're proud of, but where these products, like with other asset managers, depend more strongly in their performance on the market environment, on the performance of our portfolio managers, or on a client's requirements, on a client's outlook even, in terms of what the client believes might be the right positioning in the future. We are used to a high degree of volatility in that part of the business, the absolute return products. At this point, not particularly concerned about anything in particular there.
In general, we think that the combination of these three pillars with a strong foundation, a big and growing private market pillar, and an ongoing and healthy absolute return business positions us very well for the future. I think with that, we'll end the session here. Thanks, everyone. Thanks very much, everyone.
That's great, Jan, Richard. Thank you once again for updating investors today. Could I please ask investors not to close the session? You should now be redirected to provide your feedback, and the management team can better understand your views and expectations. This will then take a few minutes to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of Record, we'd like to thank you for attending today's presentation, and good afternoon to you all.