Morning, everyone. Welcome to the Schroders Results for H1 of 2024. Thank you for joining us. I'm Peter Harrison, Group Chief Executive, and with me is Richard Oldfield, our Chief Financial Officer. As normal, I'm going to cover the business performance and strategic progress. Then Richard will discuss financials before we return back to the outlook and Q&A. Please don't forget to raise your hand on Zoom if you've got any questions. I'll cover those off at the end of the presentation. So let's begin. Our performance in the H1 has been a real validation of our strategy, pivoting to those areas of fast-flowing water that I previously talked about. We're seeing more and more opportunities to collaborate across the business, and that means we're now seeing the benefits of having a diverse set of public and private market capabilities all under one roof.
To run through the highlights, assets under management up to a new high of £773.7 billion. Wealth management again delivering excellent results with 7% advised growth. In Schroders Capital, we've seen positive net new business come from all four private market pillars. Pleasingly, we saw mutual fund net new business pick up throughout the H1 with good momentum there, particularly in fixed income. We've seen a good return to asset growth in some of our JVs, particularly in China. On the expenses front, operating expenses are down 1% year-on-year, thanks to our ongoing focus on cost discipline. Now let's go into the numbers. The headlines are assets under management up 7% year-on-year, with positive net new business, including JVs and associates, of £3.9 billion, operating profit of £315 million, and an unchanged interim dividend of £0.065 per share.
I'll come down to break down the flows for you in more detail at the moment, and then Richard will be taking you through the financials. But just worth bearing in mind, the mix of our net new business in this period has changed more towards fixed income strategies, and that, together with regional equities being out of favour, has had an impact on our top line for the period. Plus, we've seen lower performance fees compared with this time last year. Onto performance. Obviously, this is absolutely key. Importantly, we've seen a good improvement in these figures. Over one year, 69% of our assets outperformed their comparative benchmark, and that compares with 56% at the year-end. And over three years, the numbers are 62% of funds outperforming and five years, 78% of funds outperforming. So we continue to deliver strongly for our clients over the long term.
Now let me take you through the flows as they stand today. Overall, we're in positive territory. We've got GBP 3.9 billion of net new business, as I said, across the group. Crucially, our diversification means that net new business is coming from a variety of growth drivers, both geographically and by investment capability, which helps us navigate the broader industry headwinds. I want to spend a moment or two on solutions. Firstly, earlier in the year, Scottish Widows announced the disposal of their bulk annuity book, and for us, that's come through as an outflow, which in total, that one client accounts for GBP 6.2 billion of outflows of the GBP 7.9 billion out in solutions. We've also seen some buyout activity there, which I'll come back to those dynamics in a moment.
But if we exclude the impact of Scottish Widows, we're looking at total net new business of £10 billion to the group in H1. And of that £10 billion, half is coming from those strategic growth areas, which we've talked about, which I think is testament to the change in strategy. Wealth management had a standout H1. The advised growth rate of 7% continues to be strong relative to peers, and we had net inflows of £3.7 billion into wealth. On top of that, SPW had positive flows of £0.2 billion. So these charts are just the business area, but if you include SPW JV, our total wealth management assets under management were up 8% since the end of 2023 to £134.5 billion at the end of June.
Now, it's just over a year since our capital markets day that we had in June 2023, and I want to take a moment to update you on where we still have a unique wealth proposition for our clients across the wealth spectrum. Firstly, onto our ambitions for the business. Last year, we increased our net new business target to 5%-7% per annum. Excluding SPW, we saw GBP 3.7 billion of inflows in the H1, which equates to an annualized growth rate of 7%, the top end of that range. Including SPW, it's at 6%, which remains strong.
Last year, we saw operating profit growth of 16%, and with a 10% profit growth this year, we're still on track for the target of 10% compound annual growth rate in operating profit between 2022 and 2025, excluding the impact of markets and FX and acquisitions, which is what we talked about. On the business themselves, first, Cazenove Capital. This business makes up the majority of our wealth segment by assets under management, and it's driving excellent growth. It's the U.K.'s largest charity manager. That is, charities' invested assets, excluding cash. The strength of the business lies in the targeted growth strategy, which looks at those areas of the market where we can really leverage both Cazenove Capital and the Schroders brand. For example, charity clients really value our sustainability expertise.
In the ultra-high net worth family office space, we've benefited from the acquisition of Sandaire, which has boosted our presence in that segment significantly. We continue to perform well amongst finance professionals and also entrepreneurs. Finally, of course, the regional strategy, which we've talked about, where we've aligned those to the hubs of Lloyds Development Capital locations, and that referral flow is ticking along nicely. Elsewhere within wealth and Benchmark Capital, our technology and platform business, we've added 22 new advisors joining the network. We said at the capital markets day we would target assets under management of GBP 200 million per operating staff member. We were at GBP 140 million then when we said it. We're at GBP 184 million now, and we're on track to hit the target by 2025.
For SPW, we've seen an improvement in the conversion rate of referrals that we get in from the Lloyds Banking Group and seeing an average client investment portfolio size increase year on year. The replatforming of that business has progressed slower than anticipated, pushing back our ambition slightly for the business. The power of these businesses is really how they interact. So with our partners at Lloyds for SPW, with Lloyds Development Capital for Cazenove and the regions and the Lloyds Business Bank, or with the wider Schroders Group. So if I give you an example, Benchmark is leveraging our award-winning Schroder Investment Solutions service. Cazenove is able to offer clients access to private markets via Schroders Capital and has collaborated with our solutions group to pitch for combined management of charity, society, and pension fund assets.
So they really are coming together as one whole and creating a really powerful ecosystem. Speaking of which, onto Schroders Capital. This has been a pleasing H1 for private markets business. We've seen fundraising increase to GBP 5.2 billion, which means our fundraising rate is up to 16% annualized. Net new business was GBP 3 billion. Again, in the H1, we've seen all four private market pillars, private equity, private debt, and credit alternatives, infrastructure, and real estate, all contribute positively to net new business. I've highlighted a couple of recent exits in our private equity business in the H1, with multiples on invested capital of between nine and 11 times, and we continue to execute on deals in the small to mid buyout range. In infrastructure, Greenc oat continues to invest in solar and wind, biomass, hydrogen, and other renewable opportunities.
Earlier this year, we announced we'd agreed to acquire the Toucan Energy solar portfolio, the largest operating solar portfolio put to the market in the U.K.. It was a major achievement for the team, particularly given its size, complexity, and number of stakeholders involved in the transaction, and further extends our lead as the largest solar operator in the U.K. by some considerable margin. We've talked before about strategic partnerships and how we continue to innovate for clients. I'm really excited about our newest initiative, a joint venture with Phoenix, the U.K. insurer. We're going to launch a dedicated investment manager. This aims to unlock investment opportunities in private markets for U.K. pension savers. Future Growth Capital, or FGC, will sit alongside the Schroders Capital capabilities, offering multi-private asset solutions, initially through the launch of two LTAFs. With significant capital at inception, this will provide secure long-term flows.
FGC will aim to deploy a significant allocation of up to £2.5 billion in the first three years from Phoenix Group, an initial £1 billion commitment. In total, FGC will aim to deploy between £10-£20 billion of investor funds into private markets over the next decade, which I think is a really important contribution to powering future growth of this really important subsector. Now, subject to regulatory approval, FGC aims to be the first dedicated private markets manager to be established in the U.K. to promote the objectives of the Mansion House Compact. It's a commitment by a number of pension funds and insurance companies to invest the relevant savings products of private U.K. companies to enhance returns, boost investment in the U.K. businesses, and to create jobs and prosperity. We strongly believe that a 5% allocation will be a starting point.
I think it could significantly increase over time, and we anticipate the upcoming pensions review from this government to be supportive of these trends. So really excited about the establishment of this new joint venture. Onto solutions. Here we saw outflows, as I said, of £7.9 billion, of which £6.2 was Scottish Widows, which I touched on earlier. The other piece of this, we also successfully supported six clients to reach their investment goals and moved into buyout. On the NNB slide, that means a headwind from those six clients of £2.3 billion out. But importantly to remember that these are not regretted outflows. It's a successful outcome where we've performed our fiduciary duty for our pension fund clients, and they've reached their goals. Excluding those two factors, solutions had positive net new business for the H1.
We've seen a couple of redemptions which have impacted on flows within those numbers. One of the multi-asset portion of solutions, the other was a result of a client making a decision to insource given their own significant growth. They've been a client for 15 years. We were pleased to be part of their growth, and we've parted ways held in very high regard and with good ongoing discussions. The real benefit in solutions is how we can provide clients with access to investment capabilities across the wider group. Now, despite the market backdrop, our public markets business has been resilient in the H1. There have been outflows of £0.2 billion in mutual funds and £2.5 billion out in institutional. I want to unpack those two numbers a little bit for you. In both cases, we're seeing a shift out of regional equity and into fixed income strategies.
I'll give you a sense of the magnitude of those flows. For our public markets, combined equity business saw GBP 6.1 billion out and fixed income saw GBP 3.9 billion in. We're in good shape on fixed income performance. 90% of our funds outperformed over one year, 68% over three years, and 85% over five years. That's helping us capture that broader industry demand for yield and a move back into fixed income. Now, specifically in mutual funds, to my mind, the interesting thing here is the shape of the flows. I've broken out those here for the last four quarters for you, and you can see the positive momentum is building as the year progresses. That's coming from flows into our flagship strategies, particularly euro and global credit, resulting in positive flows for EMEA and the U.S. Slightly different dynamics, the institutional business of the GBP 2.5 billion out.
That includes two clients that together make up GBP 3 billion of the losses. On the other side of the coin, as I mentioned, we've seen inflows from our solutions clients. As you know, the flows in solutions can be very lumpy, so I wouldn't say that this is necessarily a feature we'll see in every period. Now, the challenge on the public markets business remains the pricing environment, and we've seen a lower average fee margin coming through from the composition of net inflows to the business, which will take you through the detail on that in a moment. We've talked before about JVs and associates being a high-growth cyclical business, and that's particularly true of our business in China.
We've seen positive net new business of GBP 7.8 billion in the H1 from JVs and associates, as investor sentiment showing signs of turning and money starting to move out of cash and deposits. The challenge here is that while the flow volume is looking good in the BOCOM FMC joint venture, those flows have been into fixed income and money market funds. Coming out of cash into fixed income and money market, in combination with the regulatory changes introduced last summer, we're looking at lower revenue contribution from that business over the short term than we've been used to historically. Clearly, as they move back into equities, that picture will improve as they move up the risk curve.
To touch on our partnership with Axis in India, there's a small headwind in terms of flows during the half, and separately, the other part of this is SPW contributing positively to flows, as I mentioned earlier in the wealth slide. For me, what keeps this business ahead of the curve is our focus on innovation. We've announced some exciting developments which allow us to work smarter and faster. We've got a significant number of use cases in AI across the business as we seek to use this technology as a catalyst for growth. This is a really important change to my mind. To highlight one in particular, we've introduced a GenAI investment analyst into our private equity business. It'll speed up the analysis of large volumes of data in data rooms, freeing up our investment specialist time for more value-added tasks and delivering for clients.
In private markets, we've extended our semi-liquid fund range as we want to move those closer into the wealth channel. And our latest initiative has been for us to launch a U.K. Venture and Growth Long-Term Asset Fund, LTAF, which has been supported by contributions from the British Business Bank. This will be further supported by the LTAFs we bring to market with Future Growth Capital. I'll now hand over to Richard to take you through the financials. Richard.
Thank you, Peter, and good morning, everyone. I want to start by setting out what I've taken away as the four key aspects of these results. Firstly, we generated good inflows during the half despite the adverse impact of the Scottish Widows' decision to sell their bulk annuities portfolio. Secondly, the emphasis on our strategic growth areas continues to bear fruit.
Wealth management and private markets have performed really well and continue to deliver solid growth. The solutions business saw net outflows, but they continue to show why this capability is so important to the wider group by introducing new business opportunities into both public and private markets teams. Thirdly, we did see softening in some margins as our business mix evolved. Peter's already talked about the strong performance of our fixed income products, which drove good flows into that asset class. But at the same time, flows into equities were towards lower margin products and away from the higher margin regional strategies. Together, these factors combined have led to a softening in margins for both our mutual funds and institutional business areas. We also saw some softening in private markets, principally driven by the absence of any real estate transaction fees. Finally, and importantly, we've continued our focus on costs.
We reduced operating expenses by 1% while continuing to invest in change and growth initiatives. Now, let's move on to some of the details, starting with net operating income. As you can see on this slide, although we benefited from growth in markets, it was not enough to offset the other headwinds. So let me talk you through each of those key items. The appreciation of sterling led to a reduction in revenues of 2%. At a constant currency, our management fees were actually stable year on year. Next, net new business reduced revenues by £30 million. Now, this reflects both the flow impacts from 2023 and the mix of our new business in 2024. You'll see the impact of this coming through in our fee margins when I talk about the mutual funds and institutional business areas in a moment.
Performance fees and carry were down £18 million from the H1 of 2023. Now, these two areas can, of course, be really volatile from one trading period to another. Performance fees are generally linked to the outperformance of a benchmark over either one, three, or five years. While most of our performance fee earning mandates are above benchmark, in this half, they're currently below their high watermark where we can start to accrue more performance fees. Our carry was lower. Peter mentioned that our private markets business generated some fantastic exits for our clients. But under accounting standards, we were required to recognize the associated carry in prior periods.
As we look forward to the full year, as you know, we can't precisely predict the level of performance fees and carry, but given where we are at the half and the uncertainty over rate moves, there's clearly some downside risk to the GBP 75 million I told you we had in our budget at the start of the year. Finally, and before I move on to the segments, our returns from associates and joint ventures reduced by GBP 11 million. There are a few parts of this, so let me unpack them for you. In February, I said two things about China. Firstly, that we are confident in the medium-term outlook for the China market. That is totally unchanged. And secondly, I noted that there will be some short-term market volatility. And that's what we've seen in the H1.
Our FMC joint venture recouped almost all of the assets that we saw leave in 2023. The impact of this growth was, however, offset by the market-wide fee caps that were introduced in China in July 2023, which was the primary contributor to our share of profits reducing by GBP 12 million. Also on China, the WMC is still at a very early stage and has not yet reached a level of profitability. We expect 2024 to be the lowest point in terms of the contribution of that business. So in some ways, 2024 really reflects a rebasing of our China interests. These movements were, of course, offset partly by our India venture with Axis, which continued to perform really well in the period, with our share of profits increasing by 18% compared to 2023. Let's now move on to the performance of each of our operating segments.
Our wealth segment once again delivered excellent performance. The business now accounts for 27% of the group's operating profit. As you can see in the chart at the bottom, a large part of that is driven by the Cazenove Capital business. Peter's already spoken about what makes that business so valuable. Our success with family offices and charities is a result of our leading position in sustainability and in providing access to high-quality products, including private assets, both of which are supported by the broader group. Our net operating revenue margin was 41 basis points in line with our guidance. As I mentioned before, there's potential upside in this margin when we start to see movement from cash and gilts back into risk assets. One additional point on wealth before I move on. You're all aware of the current industry scrutiny of the fees charged for ongoing services.
We performed a detailed review of the support in place for the fees we've charged in respect of these services, and we don't expect any significant issues. We are, however, keeping a close eye on industry developments, and frankly, I look forward to the FCA's additional guidance that we're expecting later this year. Now, moving on to asset management, let's start with private markets. As I've got to know this business, I am increasingly impressed by its focus on creating long-term differentiated outcomes for our clients. And of course, this is all achieved through the breadth of capabilities leading to a range of solutions tailored to clients in all segments of the market. We also have good diversification in terms of product structures through evergreens, traditional LP programs, and mandates.
This not only means we can appeal to a broad spectrum of clients, it also provides us with diverse revenue streams. We have both the locked-in fixed revenues and clear pipeline that LP structures offer, and from evergreens, the opportunity for existing products to grow. Our private markets business has delivered solid growth in the half. And as you've seen, we had good fundraising with an annualized rate of 16%, and the growth in AUM helped drive a 4% increase in management fees. We saw positive net new business across all four pillars of the business. The net operating revenue margin was 56 basis points, two basis points lower than our guidance, and one basis point lower than 2023. That reflects the absence of the real estate transaction fees and the product mix of our fundraising in the H1 of the year.
Now, for the full year, we're anticipating the margin will remain at the 56 basis points level. The solutions business was impacted by some of the LDI outflows we've already talked about. The net operating revenue margin was 12 basis points in line with 2023 and our guidance. We expect the margin to stay at this level for the remainder of the year. So moving on to mutual funds, and this is where the impact of the new business mix that I talked about comes through most strongly in the revenues. We've been successful in attracting those fixed income flows, which has a mixed impact, but we've also seen this mix shift within equities, which have generated good flows into lower margin products, but with outflows from our higher margin regional products.
As a result, our net operating revenue margin was 1 basis point lower than our guidance at 67 basis points. Now, given the change in mix that we've experienced, we expect the margin to stay at this level for the full year. And there's a similar picture, of course, for our institutional business. In 2023, we had net operating margins of 35 basis points. And at the year end, I told you we're anticipating 1 basis point improvement from the impact of lower margin outflows in 2023. However, instead, what we've seen is that the mixed impact from our net new business in 2024, which I've just talked about, has more than offset that and meant that the margin has decreased from 35 to 34 basis points. Given the current mix of the business, we expect to stay at 34 basis points for the full year.
Now, let's move on to operating expenses. I'm really focused on the fact that we have to save to invest to drive growth in our business, and we are all working super hard to achieve that. You remember that last year we took a restructuring charge, and you can see from the chart the benefits of the resulting savings of GBP 23 million coming through in the cost base. The savings have been critically important in offsetting the salary inflation that we've experienced and broader inflationary pressures on the non-compensation costs. Overall, our operating expenses have decreased by 1%. We've delivered that reduction while continuing to invest in growing our business for the future in multi-year initiatives like the China FMC and the operational transformation that Peter talked about that's being driven through AI.
The strategic partnership with Phoenix is the latest example of that investment, and it will lead to additional costs incurred through to the end of 2025, alongside the potential for significant growth in the medium term. In total, around 7% of our 2024 expenses relate to these investment costs coming through the income statement, including the impact of depreciation of prior period investments. Our non-compensation costs were GBP 315 million. Now, as you know, these costs are weighted towards the second half of the year, and we expect them to come in no higher than the GBP 675 million guidance I gave you in February. We continue to accrue compensation costs at a 46% operating compensation ratio, although, as you can imagine, given the pressure on the revenues, this is something that I'm keeping a really close eye on as we go through the second half.
Now, let me talk you through our capital position. One of the things I have looked at really closely since joining is the efficiency of our capital structure. And in April, we had the inaugural subordinated debt issuance of £250 million. This has provided us with increased financial flexibility and diversifies our source of capital and liquidity. The debt issuances helped to increase our capital surplus to £904 million. Now, we're not changing the capital allocation approach I outlined in February as we remain focused on further executing our strategy in the coming months. So let me summarize what all that means. These half-year results continue to demonstrate the benefit of our strategy.
We have had solid growth from wealth management and private markets, with solutions contributing new business opportunities to the rest of the group, all of which has helped to offset some of the structural changes in other business areas. We had operating profit at £315 million. That's 8% down compared to the prior year. Now, our effective tax rate on operating profit is at 22.8%. This increased from the 19.4% in 2023, principally due to the revaluation of some of our deferred tax assets and a change in the geographic mix of profits. This resulted in an operating earnings per share of £14.70. And I'm pleased to say that we have maintained our interim dividend at £6.50 per share. Acquisition-related costs were £31 compared to 43 million for the same period last year. Now, these principally comprise the amortization of intangible assets and expenses related to contingent consideration.
For the full year, we expect these to amount to GBP 70 million, which is GBP 10 million lower than the guidance that I gave you at the start of the year. And all of this has resulted in a profit before tax of GBP 276 million, flat on last year. Thank you very much. And now I'll hand back to you, Peter, to wrap us up and talk about the outlook.
Thanks, Richard. So let's go to the outlook. The execution of our strategy has enabled us to deliver inflows and net asset growth. I think that's really important that investing for growth remains absolutely heart of our strategy. So we remain very focused on delivering growth in wealth, in private markets, and in solutions, the fast-flowing waters that we've talked about before.
Now, absolutely in the period, net new business mix and the ongoing pricing pressures in the public markets business has led to a softer margin outlook. And that is why we need to continue to remain focused on delivering that growth in wealth, in private markets, and in solutions. So very much the focus. But our diversified business model will enable us to deliver for clients and shareholders over the longer term. We're very clear about that. So thank you all. That's it from us in the room. We'll now go to questions. Please remember to raise your hand on Zoom. And if I could ask you to state your name and firm for the record, that would be great. Thank you.
Our first question is from Arnaud Giblat. Arnaud, if you could please come off mute, restate your name, your company, and who your question is directed to.
Hi, good morning. It's Arnaud Giblat from BNP Paribas Exane. I've got three questions, please. Firstly, can you talk about the fundraising efforts that are currently ongoing in private markets? I suppose you have a number of funds in market. If you could give us a bit more granularity, that'd be useful. And specifically, if you could zoom in a bit on real estate. I mean, we've seen a lot of headwinds in the market in general. I'm just wondering if that's something you're experiencing. My second question is on the wealth management business. Given the current environment where we're seeing quite a bit of volatility and news flow around possible tax changes, I'm just wondering if this is creating a bit of an opportunity for new client referrals to Cazenove. And finally, my third question is on M&A.
We've seen quite a lot of deal activity going on with regards to private managers being acquired. Your private offering is quite complete, but not fully complete. I'm just wondering if you're seeing opportunities to be a bit more active on the M&A front there. Thank you.
Thanks, Arnaud. Yeah, let me take those first on the fundraising side. Actually, the interesting thing on real estate is we've actually seen some good inflows during the Q1. And I think almost the disconnects in that market are throwing up opportunities. So we actually see that as a really good thing. We've got some good wins also coming through in 2025, which won't be onboarded this year, but have been won. So that actually real estate feels like a good place.
What was nice for the period was that they were pretty well balanced across all segments with all areas, and the performance across all the segments is also good. So it feels to me like that's the right way to look at it. There's many, many more moving parts in that, but I think we look out, it's right to think about a balanced array of fundraising across those segments. If I just get on wealth management, look, I think it's not really about tax changes. The tax environment in the U.K. has always changed a great deal. I think it will continue to change a great deal. I think there's a market share opportunity because there's obviously quite a lot of dislocation going on in the wealth management sector. We're definitely seeing share gains there. And we're also seeing the benefit.
A couple of years ago, we talked a lot about the regional buildout. If you look back at that now, we've seen really good growth in those regional centers. So we do expect, we're reiterating the 5%-7% net asset growth guidance. We feel comfortable about that. But I think we should see that from market share gain and new wealth creation. We're particularly good entrepreneurs and financial sector. Two big areas and obviously charities has been a good source of money for us. On M&A, we're not fully built out. We don't have the direct lending business. But I think if you look at the dynamics of that and the overcapacity piece, I think we feel very comfortable not having that at the moment. It's not a priority for us to get it. Our focus is very much on organic.
We do think, I mean, almost every day you see it as well as us. There's an awful lot of deals being announced and partnerships, etc. We expect that to continue because we've seen more public firms wanting to be in the private space. I think that shift is now very well documented. So we're more focused on privates rather than M&A in that area. Although clearly, you saw yesterday we did this transaction with Phoenix where we can secure flow by being embedded in a pension fund provider. And that for me is a really good way of building a private markets business. Hope that helps, Arno. Next questions.
Thanks, Arno. If you could please lower your hand and go back on mute. Our next question is from Nicholas Herman. Nicholas, if you could please restate your name, your company, and who your question's directed to.
Yes, hello. It's Nicholas Herman from Citi. Thanks for taking my questions. I have three, please, all on private markets. Just on Future Growth Capital, which I thought is a really interesting development. Just curious, is that something that you originated directly with Phoenix, or were they also looking at different partners for that initiative? If you could just talk about the kind of discussions to form that initiative. And as part of that, should we now infer that your net new business target for private markets, or sorry, just Capital rather, is now more like GBP 8 - 11 billion rather than the GBP 7 - 10 billion? Just a related question on the DC opportunity. It seems like that market is now really poised to start increasing allocations to private markets.
Would you agree with that, or are there any more operational niggles, so to speak, that need to be worked through before we start to see that really taking off? And then just finally, just I guess more of a technical question. Do we think about private markets and I guess as we think ahead rather to a recovery in private markets, including real estate, just curious, do all of your products charge on invested capital or NAV, or do any, and if so, can you quantify what proportion charge on committed capital, please? Thank you.
Brilliant. Thanks, Nicholas. So yeah, FGC, we were really pleased to do that. So we did start the Phoenix and ourselves were at the beginning of that conversation.
So it wasn't as if they were running a process, but the reality was that once we started talking, they had to do their due diligence to make sure that our expertise was absolutely top of the market. So they needed to satisfy their boards that what we were doing was right. And we've left the way open that this JV can buy third-party funds. But I think there was a good cultural fit. We've both been very involved in the Mansion House Compacts and the thinking behind that growth dynamic. So for me, this is 18 months in the making. So it's really good to see it come. But for me, it was a very, very logical pairing between the two of us. In terms of future private asset guidance, at this stage, we're not going to change guidance.
We need to, there's quite a lot of wood to chop to make sure that those flows come through. In terms of the timelines, we're hoping that we've got to get the business approved by the FCA. We've got to get the insurance assets, the local boards to give the approvals to move in. So as we get more certainty, we'll give you greater guidance on the exact timings of those flows and be very transparent about where they're coming in, etc. So I think it's just a little bit too early to do that at these figures. In terms of increased allocations, look, I don't see other operational niggles. The big thing was getting the U.K. government to agree to the LTAFs. I mean, and we've now got that approval scheme working.
You recall that we won a nice piece of business from the U.K. government in terms of LIFTS, which is putting money into life sciences, which we also did in partnership with Phoenix. Our semi-liquid fund in private equity has now hit GBP 2 billion. So that's at a good size. So that's no longer we've got a real estate fund, which we still want to get to size. It's not an operational niggle, but it needs to scale. But I think you're right that the flows are starting to happen, particularly in the U.K.. There's a huge amount of discussion. And this pensions review that the government's announced is definitely a positive for us because it's all about the things that we've been talking about for a while. So that side of things, I think you're right to say that flows will increase.
In terms of invested or committed, which I don't know if you have the number, mainly we're paid on invested rather than committed. But I think we do have a little bit on committed. But you know. We do with it. And nearly all of it, Peter, is actually on NAV, on invested, except there's a little bit, particularly in private equity where we have it on commitment. But the majority is definitely on NAV. And the dry powder number for the period was about GBP 4 billion. Yeah, GBP 4 billion of dry powder, which we're not being paid on, which is why we don't include it in our net asset figure. So the money that we record in our AUM is only the money that is invested and receiving fees.
Very helpful. Thank you.
Hope that helps. Thanks.
Thanks, Nicholas. The next question is from Hubert Lam. Hubert, if you could please come off mute, restate your name, your company, and who your question is directed to.
Great. Thanks. This is Hubert Lam from Bank of America. I've got three questions. Firstly, more on FGC. Is it a joint venture set up with Phoenix? Maybe you can talk a little bit more about the economics of the venture with Phoenix. How do you share the revenues and just anything about a little bit more about how we should think about modeling it going forward? First question. Second question is on the solutions business. I know the solution has been a bit tricky right now with the trend we're seeing around buyouts, and you also mentioned some insourcing. And these trends do not seem to be abating. I'm just wondering how we should think about the solutions business and the flows going forward.
I know it's a bit lumpy, but just any feeling around the direction. And lastly, on these LTAF funds, can you talk a bit more about the funds you have in place? What do you think is needed by the market to get more traction in it, and what are the obstacles in terms of acceptance around it by the broader market? Thank you.
Perfect. Thanks, Hubert. So what are the economics? So we majority own, but basically think of it as a sort of 50/50 JV, but we actually have slight majority control. The two levels of revenues that we will receive, one is the revenues from future growth capital, the company, and the profits that they make on that. And then we will receive separately a manufacturing fee for things that are delegated into Schroders', which will be part of the assets under management that run Schroders Capital.
Two levels to think about the assets there. I think what we're planning on doing is a proper Schroders Capital markets deep dive so we can unpack all that for you. Probably the beginning of next year, I think will be a good time to get in to do that. Solutions, look, I think the underlying dynamics of the solutions business are still very positive. But as you see rates rise, you should expect to see buyouts. We saw GBP 2.3 billion in the quarter. That's not a completely out of whack number. But the underlying growth of this business was much more impacted by the GBP 6.2 billion of Widows. There was another, I think it was GBP 3 billion or so of an insourcing of a big client we'd had over many, many years that took the money back in-house because they got to scale.
But the underlying dynamics still feel very positive. And I think the other thing we're seeing, obviously, is the flywheel effect. That the more we can bring in clients with a big solutions mindset, the more we can then throw up other mandates for other parts of the business. And I think that circular piece of getting that flywheel working is the other thing that makes the solutions bit important. So we're feeling positive about the direction of the business, Hubert. It's always been lumpy, as you say. We did Centrica two years ago. We did Tesco the end of last year. So bringing these big things in, it takes a bit of digesting. But there is definitely a decent pipeline of interesting other mandates. And I think out of the pensions review, you're going to see a greater focus on pension fund consolidation.
And also perhaps something which everyone talks about going to buyouts at the moment, there is a growing set of thoughts that funds may carry on investing through buyout into a sort of much more of a continuity position, which is not insurance-backed. Now, that would be a great business for us. So we're excited about those prospects and the opportunities for product innovation and also more international expansion. So dynamics there are still positive, but frustrations about individual flows over this half year. On LTAFs, so we've launched a range of different LTAFs. We'll also be launching a number of new LTAFs to go into the new JV with Phoenix.
They basically cover both sort of wide-scope things and wide-scope, so if you want access to private assets generally, but also narrower things, if you want access to Climate Plus or something like that, which is a sort of renewables type focus, you can have that as well. So if you think about it as almost like building out a mutual fund range, but for private markets, that's probably the right way to think about it. Then outside of the U.K., we should also mention that the growth of ELTIFs, ELTIF 2s, semi-liquid funds in Luxembourg, etc., so interval funds in the U.S. So there's a whole panoply of as more people want democratized private assets, they're going to access different vehicles. We've got to be at the front edge of all of those.
We think that as a firm that's used to providing wealth solutions and mutual funds into these platforms, we're pretty well placed to be able to then provide democratized private assets in. But LTAFs is the vehicle of choice in the U.K.. It feels as if that's becoming the default. And you're seeing a lot of these big DC funds now, having signed the Mansion House Compact, having to say, "Right, how are we going to fulfill our obligations?" And that's the bit that we're working on in the coming months because it's not just Phoenix. There's many other signatories to that compact who are going to have to figure out how they get their allocations up as well. And sorry, the final thing I'd say is we're all talking about 5%, but I don't think anyone for one moment thinks 5% is the final stopping point.
So there's a lot more to discuss in this area over time. Thanks, Hubert.
Thanks, Hubert. Our next question is from Mandeep Jagpal. Mandeep, please come off mute, restate your name, your company, and who your question is directed to.
Thank you. Mandeep Jagpal, RBC Capital Markets. Three questions from me as well, please. The first one is on mutual funds. You showed an improving trend in net flows quarter-over-quarter. But within this improvement, what was the trend of active equities as the GBP 6.1 billion net outflows over the half was quite high? And how do you see the outlook for active equity net flows over the second half, in particular for regional equities, which you mentioned were relatively higher margin? Then on Schroders Capital, what are the types of assets that will be included in the Future Growth Capital strategy?
And what's the level of fee structure level and fee structure in place there split between management and potential performance fees? And then finally, you spoke about the government pension review and Mansion House reforms. So along this line of thinking, and Peter's already touched on this, what are the implications for Schroders from the DWP consultation into options for DB pension schemes? This includes surplus extraction and public sector consolidator for the U.K. DB schemes. For example, are you seeing early signs that there are CFOs who are considering running on their DB pension schemes instead of buying out?
Yes. So thanks, Mandeep. Great stuff in there. Look, on the mutual funds, I think there's two different trends going on here. There's a switch from equities to fixed income, which is very evident across the whole market.
I think that trend I can see with rates being higher, you'll definitely, I think that normally fixed income is the stopping off point as you go back into equities. I think that move will happen at some point. But if you look in Asia, for example, the move is out of bank deposits into money market funds and fixed income as Asia gradually re-risks. And you saw that in the JV's line of people moving back into risk assets. All of the flow is inactive. And most of our fixed income flow was in credit, credit income, global credit income, Euro credit, etc. Those are the real sweet spots. The other trend that was going on was the move during the period of, so the beginning of the H1 was really quite negative.
Then by the end of the second, by the end of the first period, we saw inflows. I think that's the pattern which we've seen coming into July in this H1. So I wish I don't know if you want to add anything to that, but it feels as if that was a sort of a re-risking going on during the period. Yeah, I mean, what we've actually seen, Peter, as you say, is just that continual improvement month-on-month. We've seen that continuing through into the early weeks of July. So I wouldn't really add anything else to that.
Second question on FGC, what fees are included? So effectively, we haven't launched the products yet, so I don't want to front-run those. But if you thought about these products come to market, sort of 120 basis points-ish, that's 100, 120, that's the sort of level that we think is probably where they'll end up, but work to do on defining all of that. The implications on pension fund consolidation is, I think it's huge. Look, there's GBP 1.6 trillion of U.K. DB pension funds. And there's another GBP 800, sorry, GBP 650 billion of U.K. defined contribution pension funds. And then there's all the stuff that was sold by the man from the Pru, etc., years ago. For me, if you think about most of that money today is in either in de-risked DB schemes or in indexed DC schemes.
If the pensions review starts to say returns are more important than low cost, which I'm pretty certain that's where it's heading, and it's pretty explicit in the terms of reference, and people start to say, "How can we take the DB world through into post-buyout?" That's a really exciting prospect for a firm like ours. We are having very active conversations with pension funds to say, "What's the alternative to buyout?" Because buyout is not a cheap option. The capacity for insurance to take all these risks is finite. I mean, if you look at it a different way, the U.K. has 4,500 DB pension funds. Is it really the right answer that all the risk gets consolidated in three or four big insurance companies that take all that risk on their own balance sheet?
I think a lot of companies are saying, "We don't want this risk sitting with us, but we're actually not sure that the right way of putting it is all into a consolidated pot." So I don't want to prejudge the review, but I think what's being drawn out of it is we've got to get returns for savers. We've potentially got to increase the rate of auto enrollment even. That's perhaps a more political question. But we've also got to create a better outcome for the U.K.. And I think all of those things have got to be good for a major pension fund player in the U.K..
And Peter, I was just maybe just to add a little bit to your point, Mandeep, there's certainly one CFO of a FTSE 100 company who's very focused on a run-on strategy because I believe that our pension surplus is actually a valuable asset for our shareholders. But actually, increasingly, we're having conversations. I'm having conversations with other CFOs who are in a similar position. So I think the entire mood, Peter, around run-on has actually changed over the last 18 months as the proposals have been exposed. Thanks, Richard.
Thanks, Mandeep. Can we ask the next question?
Thanks, Mandeep. And please lower your hand and return to mute. Our next question is from Bruce Hamilton. Bruce, please come off mute, restate your name, your company, and who your question is directed to.
Hi there. Thanks, yeah. Bruce Hamilton, Morgan Stanley. Thank you for taking my questions. I've got three as well. Probably the first for Peter, maybe the second two for Richard. So you mentioned product innovation in the kind of retirement solution space. I was intrigued by that and just wondered, given the changing trends, how are you thinking about products? Because annuities don't solve for everything in the post-retirement market. And in the new world, do you need to change your relationship with insurance and get closer to insurance? And how are you thinking about that given the dynamics in the solutions piece?
Second question on fee margins that you gave for the full year, is that guidance assuming any sort of continued improvement in risk appetite or sort of a similar mix of flows as you saw in the H1? And then secondly, on the costs, it sounded as though I think your comment was no more than GBP 675 million of non-comps. So it's plausible that it could be better, or did I misread? And then on the comp to revenue, you said you'd be keenly focused on it. Is that you think the risks are more on the upside or you can manage to that or lower? Thank you.
Thanks, Bruce. Thanks for giving me a break as well, actually. I get to give Richard some of the questions. So look, on product innovation, I think retirement solutions, post-retirement is the Holy Grail, right? The product innovation in that space has always been, to my mind, a real challenge. So we've got to get that right. I think there's two areas. One is relationships with insurance, and the other is relationship with banking.
Because if you think about housing as a major asset, how we actually work that through into having a different set of lifetime savings thinking rather than a narrow, "This is a pension problem, and your insurances are something different, and your housing is something different." So the conversations that we're having with ministers is, "Look, let's raise ourselves up and talk about lifetime savings." And then there's a much, much richer conversation, and it expands our opportunity set quite significantly. So I think it's about individual products, but it's also about the context that we set it in. And we've got a lot of work going on on individual products, everything from micro LDI right the way through to entirely new ways of working on it. And I think the market has not yet settled on what the right solutions are.
I think it's going to be driven in part by the tax regime, in part by the Solvency U.K. regime, and in part by the advice guidance boundaries, which are going to be set soon as well. Lots and lots up in the air, but all with a mindset that what we've got isn't working well for U.K. savers in terms of getting the right returns. I agree with you. Annuities is not the answer to this question. Richard, over to you on fee guidance.
Thanks, Bruce. Let's take the margin question first. What we've assumed is actually that the current mix of flows that we've had in the H1 just carries on through the second half. To your point, we haven't assumed that there's any improvement in re-risking or shifting to higher margin products, just the same continuity of H1.
On costs, in some ways, thanks for asking the question because I suppose what I said earlier was a little bit coded. As I look at the H1, we had the benefits of some of the restructuring charge that we took in 2023. But also, I think what we actually benefited from is just a general good housekeeping about running a healthy business and people focused on spending money the right way. So that is totally going to continue as we go through into the second half. But as we talked about, I think before, we do have a H1, H2 imbalance in our cost base. So we know that we, for example, do more sales activity in the second half, so our marketing costs go up.
We know we've got a couple of technology contracts where we start to get inflationary pressure in the second half that we didn't have in the H1. And we actually do have some opportunities for investment. We have some costs, for example, that we'll pick up in relation to the FGC launch. But I will be disappointed if we don't continue our good focus on costs through into the second half of the year. I'm just not ready yet to come up with a lower guidance number, but we're working pretty hard to make sure that we do, if we can, beat that number on non-comp. When I look at the comp to revenue ratio, what we're really trying to balance here is making sure we're paying people the right amount of money. And I think there's an absolute level at which we can't pay people less.
And so we're very focused on keeping talent, retaining the people that we've got, but at the same time, managing that headcount really tightly. So I feel pretty comfortable at the moment that 46% is the right number. But actually, that will depend, as we always say, I think probably at the half year on how markets do, our performances in the second half, and we'll keep it under review. And no doubt, Bruce will keep talking about it over the next few months. Thanks, Bruce.
Thank you.
Thanks, Bruce. We've got a question from Angeliki Bairaktari. Angeliki, please come off mute, restate your name, your company, and who your question is directed to.
Good morning. This is Angeliki Bairaktari from JP Morgan. Thank you for taking my questions. First of all, with regards to wealth management, you mentioned in your remarks that you are seeing market share gains from the dislocation in the market. What we have seen is also an increased level of M&A activity in the U.K., sort of wealth and platform space recently. Would you consider M&A in the wealth space in order to increase your exposure there, also considering the headwinds in the traditional sort of public markets, asset management part of the business, and also in light of the higher capital surplus now that you've raised the sub debt?
Second question with regards to the FCA review on conduct risk and advice. I think, Richard, when you made your comments there, you said you're looking forward to seeing what is going to come out. So can you give us a little bit more detail? Is there any concern we should have that could result in any changes of how you run the business and how you record interactions with clients? And thirdly, just a clarification with regards to the sub debt interest, where is that booked in the P&L, please? Thank you.
Thanks, Angeliki. If I take the first one, and Richard will pick up the second too. Wealth management market share gains, we're confident of those. I think there has been quite a lot of M&A, both in the discretionary space and in the platform space and in the advice space. And there's an awful lot of private equity roll-ups, which are sort of coming to the end of their life, which is going to be quite interesting to see what happens next in that space. We've said that wealth is strategically important to us. It's up to 27% of the group.
It's growing quickly. We've made tuck-in acquisitions there in the past. You'll recall that we bought C. Hoare & Co. But we will always be alive to thinking about how we get wealth as a larger percentage of our group because we think the dynamics are really good. So I hope that helps, Angeliki. Richard, do you want to take FCA guidance?
Of course, thanks. So Angeliki, on the FCA guidance, I think what I said earlier was that I'm pretty comfortable with where we are. What we've done is quite an extensive review to look at our potential exposure. Of course, we feel pretty comfortable.
That's for Mel.
Because we actually have got all the systems in place. Recall when we actually saw clients and the nature of the advice that we gave. And I think that's the benefit of having that record-keeping system. But of course, we're always going to have a few cases where we might actually have some exposure.
But I can assure you there is absolutely nothing material at all. I think the reason I said I'm looking forward to the FCA guidance is because from an industry perspective, we need clarification about the expectations because we're all making assumptions about what we think is acceptable. And we need real clarity from the FCA about what their view of that is so that we can move forward and make sure that we actually have done everything that they would expect and our customers would expect to put them right. But anything from a Schroders perspective, Angeliki can assure you, is not material. When I look at the sub debt, it's actually the interest cost is sat in the interest line that's below operating profit. At the half, it was around about £700,000 worth of interest.
Actually, when we look forward for the rest of the year, it's about GBP 2,500,000. And the reason it's those sorts of numbers, if you're trying to do the math, is of course, we've taken that cash, and at the moment, we have it on deposit. So they're the net interest numbers I've given you. And the question was, where was it booked? In the interest line below operating profit. Perfect. Hope that helps, Angeliki.
Thanks, Angeliki. Just a reminder, if all participants could please go on mute unless you're asking a question. We've got a question from David McCann. David, if you could please come off mute, restate your name, your company, and who your question is directed to.
Great. Thank you for taking my question. Two for me, one for Peter, one for Richard. Sorry, it's David McCann here from Deutsche Numis. So first question directed at Peter is, what do you think the key challenges and opportunities will be for your successor, given where the business is today and indeed the state of the industry? That's the first one. And then the second one for Richard. Could you maybe apologize if I missed this. Could you just remind us what your updated guidance is for the effective tax rate and performance fees for 2024? Thank you.
Thanks, David. Thanks for the question. Look, for me, strategically, I think the way in which we've moved towards what we call fast-flowing water, private markets, wealth solutions feels to be very much the right thing. And to do that by making sure that we've got the cost base in line is right.
But I think that as we rebalance the business and make the pivot towards those faster-flowing waters, it's critical that we keep up on product innovation. We make the most of the democratization of private markets. We make the most of embedding ourselves close to customers in wealth, etc., and also managing the challenges of a public markets business. And those challenges don't go away. They will always be there. They just become a smaller part of the overall group. So for me, it's managing that transition, which is the key thing, and managing the cost to be reflective of the fact that there are some headwinds in that business, and we've got to bring down our costs accordingly to do it.
So I would suspect there's nothing other than the same sorts of things that we've both been talking about for the last eight years, nine years on this call, of just making that pivot and driving it through successfully. Richard.
Thanks, David. Actually, our tax team, I'm going to be delighted that someone's asked a question about the effective tax rate. So we anticipate that the effective tax rate for the full year is actually the 22.8% that we've shown in the half year. And that's because we actually gaze into the crystal ball and work out what we think it will be, and then we use that for the half year. So you can assume what we've told you for the half year carries on for the rest of the full year. And the second thing on the guidance on performance fees.
So we didn't change the guidance, but I think what I said is, given where we are at the end of the H1, we are going to have to see quite a big movement in both performance fees and carry to reach that GBP 75 million that we told you we had included in our models. So I think we're going to be probably on the downside of that, right? A little bit off. But I think given the difficulty of forecasting that, I haven't updated what we've got in the model internally.
Thanks, David.
Great. Thank you for that. Can I just ask a very quick follow-up on the effective tax rate for the future years? Is 22.8% still a good one to use for future years? What do you think the right medium-term number would be just to follow up on that? Thank you.
Right. So, David, I think there's two things going on with that number. The first thing that's causing an impact is, remember, compared to the prior year, we had the full impact of the tax rate change, and we've got a mix in revenues. That's likely, therefore, to continue going forward. That's probably about two-thirds of the annual impact. About a third of that impact is all the technical boring accounting stuff, I'm sorry to say, which is we have these deferred tax assets that arise from giving our stock awards. Suddenly, when our share price comes down, our deferred tax asset comes down. That impact will moderate slightly as we go forward, so I hope. I think as you look forward, I'm not going to give you a long-term guidance for the tax rate, but it's going to be in that same region.
But again, maybe to the downside from the 22.8%. I should say, go to my downside, not so right. Probably better than the 22.8%. Lower than 22.8%. Yeah.
Thanks, Richard.
Thanks. We've got no more questions online.
Brilliant. Thank you all for all the questions and some great insights from you. So thank you for that. And I hope you all have a very good summer. So very best wishes. Thanks.