Good morning, everyone. Welcome to the Schroders' 2020 annual results meeting. I'm joined today by Richard Keers, our Chief Financial Officer. Even though we're doing this via Zoom, it'll be exactly the same way as we've run it in previous years. I'll talk briefly about the business last year and add a bit more color on some of our strategic initiatives. Richard will go into more detail on numbers, give some guidance on the forward-looking numbers. I'll come back and talk about outlook and take questions. Now, we all know 2020 was an extraordinary year, and for us it was more important than ever to demonstrate how robust and resilient our business is. Against this backdrop, I'm glad to report that both our established business and our strategy, held firm, enabled us to deliver a resilient set of results.
This was only possible last year because of strategic choices we made several years ago, and I want to come back and talk more about that later. We're pleased with today's results, starting with net income, which was up 3%. As a result, profit before tax and pre-exceptionals was slightly higher than last year at just over GBP 702 million, and basic EPS was GBP 2.008. Now, let me highlight this stage, what we said five years ago about our long-term commitment to growth. We launched our Invest to Grow strategy, and it's at the heart with the six things we said, accelerate growth, invest in data science, build a scalable platform, increase the number of strategic partners, diversify towards the fast-flowing waters of wealth and private assets, and see opportunities in North America and Asia, particularly China. We also wanted to be purposeful and ESG led.
I think all of these made an important contribution last year. We hit record assets under management of GBP 574 billion, up 15% during the year. What's really important is we achieved this despite the headwinds, and we're growing faster than traditional asset management industry. Over five years, we've grown our assets at a compound rate of 13%, and over 10 years, still 11%. We achieved this because we pivoted the growth towards areas where we're seeing high client demand. That, to my mind, was absolutely key to the strategy. From a flows perspective, I'm pleased with what we've achieved. GBP 42.5 billion of inflows, that's 8.5% of our starting assets under management. Obviously, we have the last latest tranche of SWs in that, but even ex-SWs, we achieved new business flows of GBP 14.3 billion. Solutions was obviously a big driver.
The nice thing about solutions is they're much less dependent on market sentiment. The one thing to note that they are large and lumpy, and by their nature, hard to forecast. The Scottish Widows mandate is now fully onboarded at GBP 71.2 billion, and we expect that to drip out a little over the coming years. Mutual funds ended the year with net inflows of GBP 3.1 billion. Sorry, the mutual funds with net outflows of GBP 3.1 billion after the pressures of March and April, but institutional was flat. Wealth contributed GBP 1.7 billion of inflows, and private assets contributed half a billion pounds of inflows. The geographic flows aren't on this slide, but it's worth mentioning. All areas were positive apart from Asia, where we saw GBP 5.6 billion of outflows, particularly Australian Institutional in the first half, which we spoke about.
The U.K. generated GBP 33 billion of inflows, Continental Europe, GBP 4 billion, and the U.S., GBP 11.2 billion. If you look at it from an asset class lens, we've added GBP 42 billion into multi-asset, GBP 1.8 billion into fixed income. Equities saw net outflows of GBP 3.9 billion, but actually stripping out quant, our fundamental equities saw inflows of GBP 2 billion, which was really pleasing. Our JVs also had a really good year generating GBP 12.4 billion of inflows, primarily China and India. I want to come back to that. If you aggregate all that together, our flows totaled GBP 54.9 billion. This chart demonstrates the power of active management, and I'm really pleased with the strong investment performance from our clients. It's, after all, what we're about. Over three years, 72% of our assets under management outperformed their respective benchmarks, and over five years, it's 81%.
For the really performance sensitive areas, equities, 83% outperformance, and fixed income, 95% outperformance over five years. Really excellent outcome for our clients. What made the difference, to my mind, is the strength of our investment culture blended with the power of the data insights team, which we set up six years ago and has been incredibly valuable during the pandemic. To understand the investment performance in more detail, I've given you a different set of data here. This is our 25 largest benchmark relative clients, and the chart shows the performance of those over one, three, and five years. To give you an idea, it's about GBP 65 billion of assets. These funds generated 4.9% outperformance over one year and 9.2% over five years. I think if you ever want an advert for active management, this is it.
I want to talk more about sustainability because it's absolutely key in the industry right now. I think as we look forward, it will become ever more important. We've been active in this space for many years, but I want to talk a little bit about recent progress. We are aiming to be the leader in the transition to a sustainable world. It makes both social sense, but it also makes very good investment sense. We've got an extensive range of sustainable funds, and a lot more in the pipeline. Given high client demand, I expect these products to continue to grow in the coming years almost with a very high level of confidence. To support our development, we've been obviously taking a number of important steps. Most importantly, we built our own proprietary tool, SustainEx. It's an award-winning tool. It measures the impact on our clients' assets.
To give you an idea, Schroders' SustainEx score is 3.1%, or put a different way, we create 3.1 units of social value for every 100 units of sales. The average financial services business has a score of - 0.3. We're a founding member of the Net Zero Asset Managers initiative, which is going to be important in the run up to COP26, and we're one of a very small number of asset managers who's adopted a science-based target for our own reduction in our corporate emissions. Again, what we say to others, we want to do to ourselves. That alignment is critically important. I think sustainability is also important to attracting and retaining talent, and despite the challenges of 2020, our employee engagement survey was a source of great pride for all of us.
98% of our people said they were proud to be associated with Schroders, which I was absolutely delighted about. Turning to wealth. Wealth year-end assets were GBP 72 billion, representing 18% compound growth over the last five years. Net inflows, as I've said, were GBP 1.7 billion, of which GBP 1.2 was from Cazenove, GBP 0.7 from Benchmark, a small outflow of GBP 0.2 from SPW. Despite the challenging year, I think the business is growing nicely. Richard will talk more about it. You recall, you saw the announcement we acquired Sandaire, a multi-family office in the U.K. Whilst this wasn't a big deal in terms of AUM, it was strategically important. It gives us a compelling proposition now in the ultra-high net worth family office business, the high net worth business, and with advisor networks run by Benchmark and the affluent sector with SPW.
We've got all areas of the U.K. wealth market covered. Quickly on SPW, all the clients have now transitioned onto the Benchmark platform, which is fantastic. We can now deal with them in a much better way. The level of referrals from Lloyds, now they've been through their branch closures, et cetera, at the middle of the year through COVID, actually the levels of referrals are now 30% higher than pre-COVID levels, and eight times more what they were at the low point. Really pleased with that. Very pleased with the leadership of SPW getting to grips with that. We aim this to be a top three financial planning business by 2025, and I'm optimistic about that outlook. People need a financial plan more than ever now, and we're in a very good position to help with that. Coming to our next strategic focus, private assets.
Assets have reached GBP 46 billion at the end of the year, which is 21% compound growth over the last five years. We talked about Pamfleet acquisition at the half year, in the second half, we've been building organically in real estate debt and in private credit in Australia, both of which we see as attractive sub-sectors. Looking at flows, private assets end of the year at GBP 0.5 billion in aggregate, actually our private assets business was GBP 1.7 billion and the alternatives saw an outflow, particularly emerging market debt and our GAIA platform. We did see strong levels of growth in real estate, private equity, and infrastructure totaling GBP 1.7 billion, which is important. We will be having a capital markets day in June to give some more color on that. I thought it'd be helpful to talk you through product innovation because I think this is absolutely critical.
As our industry gets disrupted and changed, we need to pivot. Over the last five years, we've launched about 300 new funds and closed about 150, liquidated, merged, and et cetera. You can see we've invested heavily. We've deployed about GBP 1 billion of seed capital over the last five years, and just that has generated GBP 11.2 billion of assets under management. If you look at the strategies we've added over the last three years, these now contribute 16% of our assets under management and nearly GBP 180 billion. Sorry, 16% of revenues and then GBP 180 billion of assets under management. I'm pleased with the change in products, and I think it makes us very relevant for our clients. I want to just touch on the performance of our joint ventures. Both JVs had a good year.
BOCOM Schroders generated net inflows of GBP 7.7 billion and their assets are now GBP 68.4 billion. Assets grew by 25%, and profits doubled, a good year there. Again, Axis joint venture with Axis Bank in India, assets grew 42% to GBP 19 billion, and GBP 4.4 billion of inflows. We're now the seventh-largest mutual fund business in India and second-largest equity manager. Again, pleasing progress. We've talked about our strategic diversification in the past. Here's a chart of how our asset mix has changed. Five years ago, 39% came from the growth areas we highlighted. Now we're at 54%. That, to my mind, is just a continuation of the strategy as we diversify further and further into fast-flowing waters. If you look at that from a revenue perspective on this chart, you'll see that last year we increased from 40% to 43% of revenues from these areas.
Private assets and alternatives has grown particularly well, with a compound growth rate of 20% over three years and 18% over five years. Pulling all this together, you can see we're making good progress in executing the strategy we've talked about. We want to be a strong, diversified, growing business that's pivoted towards wealth and private assets, and I think we're well on our way in all of those areas. We made a big investment in technology, and I have to say that was particularly valuable in 2020, as you can imagine. Importantly, we were ranked first for our digital engagement with clients, which if ever there was a year to be in that position, I think last year was it. Before I hand over to Richard, I just want to give you a little bit more detail on a couple of strategic initiatives, starting with wealth.
I've mentioned previously we want a compelling proposition in all segments, but one of the areas of opportunity is a regional rollout in the U.K. We've currently got a relatively small footprint, despite the amount of money that there is in the regions outside of London. We've aligned with the Lloyds commercial regional network, and we'll be opening offices in Manchester, Leeds, Birmingham, Bristol. Recruitment's well underway, and I think that's going to be an important driver of future growth. Again, the U.S. business we've talked about, but this year the U.S. reached an important milestone of $100 billion of assets under management in terms of dollars, and Hartford also crossed $10 billion. We generated GBP 11.2 billion of new flows in the U.S. last year. Just to put that in context, this ranks us fifth out of 200 firms over $10 billion in the U.S.
If you look, as a percent of assets under management of firms over 50 billion, of which there are 68 firms, we were ranked number one for our speed of growth, which I think was a great achievement and really speaks for the team we've put together in the U.S. Finally, China. I think it's important to talk about this market because it's already the second-largest market in the world. It's probably one of the largest and fastest-growing opportunities in the asset management world. The China onshore market is hard to navigate, and new licenses there are really only available to those managers who've committed to China for the long term and know the market. Given our strategy, you won't be surprised that we are well-positioned in the region, but also in China specifically. We've been in China now for over 25 years.
Really there are three ways of thinking about this market. There's the inbound opportunity of people investing into China, there's the outbound opportunity of official institutions and others investing outbound, and then there's the local-to-local flow. We're active in all three channels, and overall, we're ranked fourth in China amongst our global peers. Outside of the BOCOM joint venture, we've got about 60 people on the ground today, just to put it in scale. Looking forward, I think it's even more exciting. You've seen in the media that we have been granted new ways of accessing the market. To date, we're the only U.K.-domiciled manager who've been able to successfully submit an application to obtain a fund management company license. This allows us to access the vast onshore retail market.
The key here for me is that because of our JV with BOCOM, our brand isn't starting from scratch. BOCOM Schroders is an important brand in the market. Our competitive advantage is going to this market with our investment DNA and a robust governance framework. We'll transfer our existing onshore business into the new FMC. We plan to begin operations mid-2022. What I'm also particularly pleased about is that we've also won an ability to set up a wealth management company JV with BOCOM. We'll own 51% of this. It'll provide us with direct access to the bank wealth management market. As you saw in the previous slides, one of the largest sectors with GBP 3 trillion of assets under management. We'll bring our global expertise with BOCOM's substantial wealth management book. I think that will be a powerful combination.
Bringing that together, what does this actually mean? We now have access to each of these important sectors, most notably the wealth management JV and the wholly owned access to the GBP 2.6 trillion assets in the FMC market. China's clearly a long-term opportunity, but it has got great potential. I'm really delighted with the progress we've made this year. We're the only firm with this configuration of licenses, and I think we've made a really major step forward. I've covered a great deal, and some stuff you've not heard before. I will come back and talk about the outlook at the end. Thank you for your time, and let me hand over to Richard now. Thank you.
Thank you, Peter. Good morning, everyone. To echo what Peter has just said, we have continued to deliver on our strategy in what has been an exceptional year. Today's results show the benefit of the actions we have taken to address the industry headwinds and the value of our diversified business model. Together, they have enabled us to deliver pre-exceptional profit before tax of GBP 702.3 million, a small increase on 2019. That's a good performance given the market disruption this year. You can see the key movements on the slide. First, let me give you a bit more detail about the increase in net income. It is impossible to talk about 2020 without referring to COVID. There are three areas that have been affected. First, net banking interest. This reduced GBP 10 million following the interest rate cuts that were announced during the year. Second, real estate transaction fees.
These decreased GBP 16 million due to the slowdown in property deals. Lastly, the market volatility itself. This impacted the mix of our assets, with higher margin products particularly affected. Together with FX and margin attrition, mix changes reduced net income by around GBP 23 million. What's important is that despite this headwind, we still grew our net income by 3%. We closed the year with record AUM of GBP 574 billion. That's up 15% from the start of the year. A key element was the net new business we generated. Peter has already talked about it. It helped increase revenues by GBP 41 million. That's the combined impact of 2019 and 2020 net flows, and it reflects the benefits of the steps we have taken to develop our solutions, private assets, and wealth management businesses.
The chart on the right shows the profile of those flows, and importantly, the impact on annualized revenues. You can see the positive momentum we built up in the second half of the year, which has continued into the first two months of 2021. Let's look at the breakdown by business area, starting with wealth management. Wealth continues to be an area of growth, and here is a summary of what has been happening. This year, we have seen the benefit from SPW, which launched in October 2019, and as Peter said, the acquisition of Sandaire, which contributed GBP 2.4 billion of AUM. These developments helped grow our average AUM 27% to GBP 65 billion. You'll remember that SPW is proportionally consolidated in our segmental results, and it has helped drive the increase in net income of GBP 73 million. Revenue margins excluding performance fees were 56 basis points.
That's a bit lower than at the half year. As we said at the time, we expected this decrease due to the impact of lower net interest margins and changes in asset mix. For 2021, we expect the margin to increase by around a basis point. Overall, this is a strong performance, and we continue to see significant growth opportunities in this space. Let's move on to asset management. Average AUM increased 17% as we benefited from the strong net new business Peter has talked about. Despite this increase, management fees fell slightly as a result of the mix changes and margin attrition I already referred to. This reduction was partly offset by GBP 95 million on record performance fees and carried interest as we benefited from our strong investment performance. As you know, performance related fees are always difficult to predict.
Looking at a three-year average, I would expect to see performance fees and net carried interest of around GBP 70 million in the future. Net income includes profit from associates and JVs, which increased significantly, and I'll come back to this shortly. First, let me show you the breakdown of net operating revenue across the four business areas that make up asset management. Beginning with private assets and alternatives, we continue to expand our capability here, both through acquisitions, such as the purchase of our stake in Pamfleet, which contributed GBP 0.6 billion in AUM, and organically, for example, through the development of our real estate debt team and our private debt capability in Australia. Peter has already talked you through the net inflows, and you can see from the chart that these were weighted to the latter part of the year, providing good momentum as we go into 2021.
Net new business, together with acquisitions this year and last year, notably BlueOrchard, helped increase average AUM by 14%. You can see the benefit of that growth in our management fees, which increased GBP 29 million to GBP 280 million. Clearly, market conditions had some impact, and as I mentioned, real estate transaction fees decreased GBP 16 million. Together with a small reduction in carried interest, this meant net operating revenue decreased a little to GBP 293 million. Net operating revenue margins, excluding transaction and performance related fees, reduced to 62 basis points. That's a bit lower than the guidance we gave at the half year, mainly due to changes in mix. We expect the margin to remain at that level for 2021. Looking forward, we have a good pipeline of commitments that are yet to be recognized. Now on to solutions.
Average AUM increased more than 60% to GBP 173 billion, driven by strong net new business. Net operating revenue increased 12% to GBP 253 million, while the net operating revenue margin was 15 basis points. That's a bit higher than we guided to at the half year. For 2021, we expect margins to drop 1 basis point as the full year effect of the lower margin business we won in the first half comes through. As I said before, the nature and size of these assets means that while they typically attract a lower revenue margin, the incremental costs are low. This means the profit margin is similar to the group's overall margin, and the assets have significantly greater longevity. You put these factors together, you can see why this is an important part of our growth strategy. On to our mutual funds and institutional business areas.
Both of these areas have, of course, been more exposed to the market-wide pressures we've been talking about for some time. They have shown good momentum in the second half of the year, and into the start of 2021. You saw at the half year, our mutual funds business was impacted by the risk-off environment at the start of the year. Since then, it has rebounded, helped by the strong investment performance that Peter and I have described. The net outflows in the first six months were partly offset by good demand in the second half, where we generated GBP 1.7 billion of net inflows. That momentum has continued into the first few months of 2021. Notwithstanding this performance, net operating revenue decreased by 7% to GBP 686 million, mainly due to lower average AUM, together with the effect of mix attrition that I referred to a moment ago.
Excluding performance fees, our net operating revenue margin was 71 basis points, which is around a bit higher than the guidance I gave at the half year. We expect margins to remain at this level in 2021. Our institutional AUM grew 11% year-on-year, as we delivered GBP 16 billion of investment returns net of currency movements. Reflecting these strong returns, performance fees were up GBP 35 million to GBP 74 million. This increase more than offsets the impact of lower management fees and resulted in net operating revenues increasing GBP 13 million to GBP 515 million. The net operating revenue margin, excluding performance fees, was 30.5 basis points. That is a touch higher than the guidance I gave at the half year. We expect margins to remain at this level in 2021. Returning to the net income slide now.
You can see the positive contribution from net new business, together with a GBP 22 million increase in performance- rated fees that I've just taken you through. Acquisitions also had a positive impact, as they increased net operating revenues by GBP 35 million. That's mainly driven by the acquisitions we completed in 2019. The acquisition of Sandaire, on the other hand, was completed at the end of the year, and so the benefit will only come through in 2021. Peter has already described the increasingly important role of our global partnerships. Our existing associates and joint ventures again showed good growth, with our share of profits increasing 77% to GBP 51 million. That excludes SPW, which I have already talked about as part of the wealth management business. Given the growing importance of these businesses, you will hear us talk about them more.
Going forward, we will show our AUM both with and without these assets, and provide you with more detail to help you understand their contribution. Peter has explained the significant opportunity in China in some detail. Building on that, I'll talk you through the strong performance of our existing BOCOM JV. AUM increased 25%, with significant growth in higher quality equity products. That has translated into the fee margin increasing 11 basis points to 35 basis points. Combined with the strong growth in AUM, this has driven an increase in profits of over 100%. With our share of profits increasing GBP 23 million to GBP 43 million. To finish on net income. Other income increased GBP 21 million due to the strong gains on our financial instruments. This largely represents the returns on our seed capital, co-investments, and investment capital. We continuously look to develop new products for our clients.
18 months ago, we seeded a new fund called GAIA Helix. This is a market neutral fund that brings together the best of Schroders in order to deliver robust returns, with low correlation to equity markets and a focus on alpha generation. It has delivered strong returns for both our clients and the group. Having initially invested GBP 150 million of seed capital, it generated GBP 22 million of returns in 2020. Bringing all the components together, our total segmental income for the year was up 4% at just over GBP 2.2 billion. I now move on to costs. We continue to maintain strong cost discipline, but we balance that with the important role we play as a responsible employer. We took the active decision not to furlough any employees and have not accepted any government assistance.
In parallel, we reduced our travel marketing spend as we adjusted to new ways of working and leveraged the investments we have made in our digital platform. As a result, we have delivered non-comp costs of GBP 502 million, which is lower than the guidance I gave you last year. I previously highlighted that you should expect to see our non-comp costs trend downwards as a percentage of our average AUM. You can see that reduction in this year's results. The ratio has fallen from 11 basis points in 2019 to close to nine and a half basis points this year, including the savings I just mentioned as a result of the pandemic. I would expect non-comp to remain similar in basis points to last year, but this depends on AUM growth and FX.
Our comp costs were GBP 975 million, which is slightly below the 45% comp ratio I guided to at the half year. We are continuing to invest in the business, both in our people and in our infrastructure to support our strategic ambitions. Peter described the opportunities in China, the U.S., and regional wealth. We expect to invest a further 1% of net income in these areas. Turning to our capital position. We continue to maintain a strong balance sheet with total capital of GBP 4.1 billion. We have a capital surplus of GBP 1.2 billion, up GBP 200 million from last year, which means we are able to continue to invest in our future and execute on the strategic initiatives we have talked about today. In summary, and pulling everything together, we have delivered a strong performance with profit before tax and exceptional items of GBP 702 million.
We had exceptional items of GBP 92 million, which, as you know, principally relate to acquisitions including amortization of intangible assets. In 2020, we also had GBP 16 million of costs as we exited two property leases, enabling us to bank some of the efficiency gains of remote working. For 2021, we expect exceptional items to be at a more normal level of around GBP 70 million. This resulted in profit after exceptional items of GBP 611 million. The tax rate after exceptionals was 20%, which gave us profit after tax of GBP 486 million. Reflecting this performance and the strength of our balance sheet, we have declared an unchanged final dividend. Overall, a strong set of results. I now hand you back to Peter.
Thank you, Richard. I just want to talk quickly about the outlook, and then we'll go to Q&A. We've talked a lot about the strategic choices we've made over the last five years, and I think these are continuing to pay off. I'm confident that they will do. Let's take a step back. Our two big advantages are that we take a very long-term perspective, and we're very diversified. That long-term perspective allows us to invest behind things like China, which will pay off handsomely over the long term. The diversification allows us to stick with things when the going gets tough. I think the breadth of our product range and the ability to keep on bringing new things in has really been incredibly valuable during the last 12 months.
Looking forward, we've entered 2021 with strong investment performance, a very relevant product range, and we'll continue to invest behind that for the long term, but very much with a focus on the long term. With that, I'll stop, and we'll move over to questions. If you could raise a hand on Zoom in a normal way and the moderator will unmute you. Thank you.
Our first question is from Nicholas Herman. Nicholas, we've invited you to unmute yourself. Please say where you're calling from before asking your question.
Yes. Good morning, thank you for taking my questions. This is Nicholas Herman from Citigroup. I have three questions, please. Two on wealth management, and one on private assets or on wealth. First of all, on the guidance around net operating revenue margin, can I just clarify some of the moving parts driving your expected higher wealth management margin in 2021? I realize that asset performance or recent market performance should be accretive to margin. Equally, I would have expected some dilution from onboarding Sandaire, from the ongoing mix shift towards ultra-high, and generally more wealthy clients. Even, I guess, also Benchmark Capital as well to some extent. Curious in terms of what is driving the wealth management margin higher, please. That's question number one. Question two, on the wealth management JV that you've just announced this morning.
I realize it's quite early on, but I'm just kind of curious if you could just give us some details on your expectations for the wealth management JV. Certainly Amundi, which has also launched a wealth management JV in China. They're targeting GBP 60 billion of assets within five years at about 25 basis points gross margin and about a 50% operating margin. I'm just curious if you would expect broadly similar, albeit with a lower operating margin closer to your group's average. Then final question on private assets. Actually two questions, if you don't mind. One, I was just a bit surprised to see negative market performance in the second half. Could you just provide a bit more clarity there? Also at the first half, you talked about outflows from liquid alternatives. Just could you give us an update on where we stand there, please?
Thank you very much.
Thanks, Nicholas. I'm going to ask Richard to take the first one on wealth management margin.
Thank you, Peter. As I guided, we're expecting a 1 basis point increase. Largely, that is down to a full year of benchmark platform fees for the SPW assets as they've been onboarded. Broadly, everything else is more or less offsetting each other, so that's really driving the one basis point improvement.
On wealth management in China, I think we're not going to make a long-term asset forecast. I think what I would say is that Amundi doesn't seem an unreasonable set of assumptions, but I think it's very early days to be doing that. We know that this is a vast market. It's developing quite significantly. BOCOM's got a very good place in it. We're not going to put numbers on that, I'm afraid. On private assets, the split between, if you like, the less liquid private assets, all of those areas saw inflows. Private equity, infrastructure, real estate, insurance-linked securities saw inflows and the less liquid, particularly emerging market debt, and the GAIA fund range. I think private assets was a little over about GBP 1.5 billion of sticky flow, and the balance out was from less liquid strategies.
The negative markets in the second half was partly a reflection of the fact that for private assets, you have to strike your NAVs for year-end reporting in September, and there's a little bit of a lag in that. I think what you didn't do was pick up the very strong end to the year. I think there's a bit of latency in those numbers.
Our next question is from Gurjit Kambo. Gurjit, we've invited you to unmute yourself. Please say where you're calling from before you ask your question.
Hi, can you hear me?
Yep.
Right. Gurjit here from JP Morgan. Just a couple of questions. Firstly, on the U.S., congratulations on obviously making a good success of that. Just in terms of how much of that is coming from The Hartford business and how much is coming from, I guess, outside that and what's selling in the U.S., what are the sort of key strategies that clients are buying from Schroders in the U.S.? That's the first question. Secondly, just on the cost side, Richard, just a bit of clarification. On the comp ratio, I know you said there's a one percentage point increase from sort of investments you're making. Do we still go for a 45% comp ratio for 2021? That's on comp ratio.
Then just on the non-comp, the 9.5 basis points, is that a percentage of the average AUM for 2021 or is it like the year-end number, just so we know where to strike that non-comp number? Those are the three questions. Thank you.
Thanks, Gurjit. Hartford, in the U.S., was just shy of GBP 1 billion of inflows. The balance was in institutional and sub-advisory. All three channels contributed into that, but Hartford was GBP 0.7 billion, which in the context of U.S. mutual funds, we're very much focused on emerging market equities, global equities, EAFE equities, which is where there was some positive movement last year. Those were the main channels. Richard?
Yes. Gurjit, I'll pick up non-comp first. The 9.5 basis points is on average AUM. The reason I haven't guided to a specific number this year is there's obviously a lot of moving parts. We don't know when the world's going to return to normal and marketing and travel. In some ways, we hope we can pick up some of that activity. Sterling is strengthening and broadly a third of our costs are outside of the U.K., so there's a depressing factor there. Increasingly, a larger part of our non-comp is attached to levels of AUM, so LDI and market data cost. There's a market and FX assumption within AUM growth as well. I think the best estimate I can do is the 9.5 basis points on average AUM.
If you look at the guidance I gave last year, I was guiding to GBP 525 million and it came in at GBP 502. I'm just worried about giving a specific number, which is why I've veered away from that. In terms of the comp guidance of 45%, I need to clarify that comp guidance is 45%, on top of that, we are making a larger than normal organic investment into China, into U.S. distribution and U.K. regional wealth. In aggregate, that is likely to add 1% of costs on a net income basis. There will be an element of comp cost within that. There's an element of non-comp, there's a sort of an exceptional overrider of accelerated organic build-out in those three areas.
Just a reminder to raise your hand if you want to ask a question. Next question is from Hubert Lam. Hubert, we've invited you to unmute yourself. Please say where you're calling from before asking your question.
Hubert, we can't hear you.
Yep, we seem to be having.
Yep. Can you hear me?
Yep. Hi, Hubert.
Hi. It's Hubert Lam from Bank of America. I got three questions. Firstly, on China, you talk about your new FMC license. How does that fit in with the existing BOCOM joint venture, and do they compete against each other, or is it addressing a different client base? That's the first question. Second question is on SPW. Can you give us an update on the number of advisors you currently have, what your target is, and when do you expect to achieve that number by? Lastly, on M&A, do you expect to do more bolt-on deals this year, and in which areas are you looking at for these type of deals? Thank you.
Great. Thanks, Hubert. First of all, on the FMC, it is broadly in the same sector as the BOCOM JV. It's a GBP 2.6 trillion sector, so it's a massive piece of the market. Slightly different product set. I mean, BOCOM is a very locally driven product set. We think there's a lot of white space to go at in that space, and we've obviously been working closely with BOCOM to make sure that the two sit alongside each other appropriately. It's an area of the market where I think you should expect to see good growth and also where there's a lot of opportunity, and you saw that in last year's numbers. If you look at the detail of how those market dynamics are working, I think there's a lot of attractive features in there. SPW has got just shy of 300 advisors.
We've started the training program to bring through more academy advisors and bringing them in, and we may see if we can add more mature advisors. We think actually the nature of the Lloyds referral business lends itself really well to people coming through academy. As you know, Mark Duckworth, who runs that business, long history at Openwork, where he had a very successful academy process. We'll bring the academies through. We're not targeting numbers. What we're targeting is meeting demand through the Lloyds network. As the Lloyds network ramps up, we'll basically bring through people as we need them. There isn't a target number, but I would underline both our ambition and Lloyds ambition to make that a meaningful business. We're not talking ones and twos. M&A, really hard question to answer.
Look, we've always managed to find businesses where we can find a good cultural fit and where we've got a gap. Last year, we found Pamfleet and Sandaire. I think the areas where we're attracted is more in private assets, where particularly on the loan side, there's space in real estate to do more. There's lots in private debt is obviously it cuts across a number of different sectors. Some of it we've decided to do organically, so we've just hired a real estate debt team. We're doing some further work in Australia on the private debt team there. If we could find something in that space, private assets, and also in wealth. I think there's a lot going on there, both on the advice side, but also in the high net worth side. Those are the two spaces.
We've found that it's key to make sure that the cultural fit is right and that the people you bring on board do so because they want to stay with you and grow the business. This is about invest to grow, not about consolidation. Those are the segments we're looking, but we're pretty active, and price sensitive, and we've missed a couple of things last year on the back of price, but I think that's probably right that we should. Thanks, Hubert.
Our next question is from Nicholas [inaudible]. Nicholas, we've invited you to unmute yourself. Please say where you're calling from before asking your question.
Hi, can you hear me?
Yeah.
Hi, very good morning to you. I'm calling from Exane BNP Paribas. I just have two questions. On your JV, the contribution from JV has been, I've seen quite a step up from 2019. I was wondering if there are any one-off items or maybe things more related to performances there or what can we expect on this front for 2021? If you could maybe elaborate more on what you see on flows for BOCOM and Axis in 2021. My second question would be on ESG. I was wondering if you can give any numbers on the flows you have seen in 2020 on your ESG products. Thank you very much.
Richard, do you want to take the one on JVs?
The BOCOM JV in terms of profit step up, there's no one-off exceptional items in there. What's really driving that number is the quality of the net new business that's coming in. It is a much higher margin. It's largely equities and the business that has been lost, it was relatively low margin, more traditional wealth management product. It's a positive mix increase. The assets we're managing at the end of the year are richer than at the start of the year.
Nicholas, looking forward for flows, I think we should bear in mind that China last year was a very strong mutual fund IPO market. Mutual funds got IPO'd and that market was very strong. Yeah, we don't forecast future flows. You saw the strength of Chinese equity performance. It would be wrong to put a straight line through that up forever. We've all realized the world doesn't quite work like that. That would be my only one-off element of it. There's nothing in numbers, there is in the market just slightly. On ESG, look, I think for us, we come at it in a slightly different way, that we need to integrate ESG thinking into all of our funds and have those considerations taken right from the ground.
For me, it's about how do we green the whole piece of making sure that we've got considerations when we're looking at oil companies, as well as when we're looking at resource companies. That is, I think, where this is going. Yes, some of our thematic funds in this space saw good asset flows. For me, we think this is a broader-based shift. As you know well from BNP's experience, there's going to be much more flow into this area. It was a decent positive, but I think we need to look at it across the whole range rather than in isolation.
Just a reminder to raise your hand if you want to ask a question. Next up is Mike Werner. Mike, we've invited you to unmute yourself. Please say where you're calling from before asking your question.
Thank you. It's Mike Werner from UBS. three questions, please. One, on the mutual fund momentum that you saw towards the end of last year and in the first two months of this year, can you just give us a little bit of color with regards to which products or which asset classes you're seeing the greatest momentum? Second, in terms of the JV businesses, I'm just thinking about this. I was just wondering, the cash flows from these businesses in terms of the dividends, how should we think about that as a percent of the reported earnings? Finally, we see corporate tax rates will be rising in the U.K. in 2023. I was just wondering if you could provide what percent of your group earnings is generated in the U.K. and is taxable by those rates. Thank you.
Mike, let me take the first question on flows. You'll see from the numbers that the first half, second half experience in mutual funds was really very different. Even that was much more coming through in Q4 rather than Q3. Big areas in U.K., Europe were around Europe, Asia, a lot of the thematics, sustainability, but all those areas. Big funds like global sustainable growth, climate change, saw flows, but also mainstream European funds. It was fairly broad-based. We've seen that continue into the early part of 2021 as well. Richard, do you want to take the second one?
In terms of associate profits and cash flows as receiving those as dividends, in China historically, we have seen very strong cash return to us as a parent in the U.K. We are investing very significantly organically in building out the WMC and FMC license, more recently, we've been retaining that capital in China to build out those new businesses. Assuming no changes in the political environment or the taxation rules, we would anticipate profits equating to future dividend flow in China. India is at an earlier stage, and it is slightly less developed, but certainly in China, where we've seen significant historic profits, that has been remitted back to the U.K.
Fine.
Okay. If you have any more questions, please raise your hand.
No. Well, listen, thank you everybody. It would've been lovely to see you in person, but I look forward to next time, maybe we can. Stay safe, stay sane, thanks ever so much for your input and questions. Thank you.