Ashmore Group Plc (ASHM) Earnings Call Transcript & Summary

Good morning, everybody. This is the Ashmore PLC Results for the year ending June 30, 2020. I'm speaking into the ether, I hope you can all hear me. I'm Mark Coombs, Chief Executive; and also on the phone/video, you may, may not be able to see, is Tom Shippey. We're both sitting in suitably anonymous wind-out rooms, which shows that, a, we have no lives, and this is how we actually live. This is his bedroom and mine, but they are in fact separate. And b, I've left a little challenge over my left shoulder to see if it's lurking on the screen, you can see what might be by the shade in the window just to brighten up your day. So on that, hilarious note. First slide, please. So overview of how we've been getting on. This is what we would call an operating and financial performance that's pretty solid. The business model is doing what it should do, which is be resilient. A 10% roughly fall in AuM year-on-year, driven principally by Q3, negative market activity. Adjusted net revenue is up a bit, at 5% up, EBITDA, up 10%, and the margin, up 68%. Diluted EPS of 3%. Final dividend held steady at 12.1p to give 16.9p for the year. So 2% increase in dividends over the full year. Strategically, we've continued to do what we wanted to do pretty much. In terms of fixed income, we have a -- we didn't have a particularly strong Q3 in several of the asset themes. We had some good ones, but we had some pretty bad ones, which is as we would expect in crisis, and we're now generating pretty good alphas, as we come out of that. Equities has been consistent and good throughout, relative performance good throughout, net inflows every quarter, which is the -- focusing on that strategic element of the business to give ourselves a balanced book is what paying off. Client base is getting broader. Both existing clients are adding assets when they have the courage and new clients are finding us particularly in equity. And then we listed our first overseas subsidiary Ashmore Indonesia in January this year, which we're pleased to have done, that demonstrates what we're planning to do with building local asset management businesses and then providing them as vehicles for the local market to invest in, not just to give them money to manage. COVID-19 is still running around, messing things up. It's obviously going to keep affecting markets. We think that there are different impacts in different places, some are going to have much worse than others, some are going to, in some ways, live with it, some are not. And so that means there are different places for us to move, and we're active and we do that. The deeper and larger economies have a series of things that they can do that enable them to get through this better than others, not least, very deep local currency and fixed income markets, which help them use their own forms of fiscal and/or monetary stimulus. In DM, developed markets, we're going to get more of that, more and more debt and lower rates for longer, and therefore, the search for growth and yield, both in equity and fixed income, favors EM over DM as far as we're concerned. Next slide, please. We think our operating model and the strength of it is demonstrated by what we do. We have one global operating platform. We were able to all transition to remote working very quickly. We've got a pretty good culture and a strong balance sheet, and we're pretty aggressive in terms of managing our costs. So when a bad thing happens, we think, we're in a better place and shape than most to survive it, and we're doing that quite comfortably. Where we go from here, other than clearing my throat, is that we'll return to the offices as soon as when we can, country by country, employee’s welfare is in the same priority. In terms of our investment processes, we kept doing that consistently, we've done it in several crises before, and this is no different. This gives you an immediate mark-to-market negative impact, particularly in the fixed income space, where bid offer spreads, widened to very wide levels. Liquidity, initially, tightens and then it comes back, and we're in that process now. We've done our thing, we've bought assets, where we saw were cheap prices. And that means, it suffered initially and then it works out over the period. And what else have we been doing? In terms of -- you've got to sit here thinking yourselves, it was all very well working in a vacuum and in a padded room, as we are now. But we've tried to support broader society a bit in the U.K., in particular, where the head offices, we've donated to NHS charities together, and we provided a matching funding scheme for our employees to donate to charities that they and we feel are appropriate. Next slide, please, Paul. So a global market environment, pretty big dislocation in global capital markets. The 2 charts on the right show the external debt index in terms of emerging markets, spreads throughout 2020 on the top and the MSCI equity index performance in '20. And as you can see, pretty blowout in spreads at the end of March, through March and drop of value in the equity price -- the prices. The NIM recovery is steady since then. We're still not back to spread levels in fixed income where we were at the beginning of the year, and we're not quite at equity levels either. So there's still room to go. I think we all know what happened. A pandemic and oil price shock because people decide to have a scrubber about oil prices in terms of Saudi, et cetera, and country-specific economic challenges that arose, created stress liquidity and the dissipation we expect. Stimulus has certainly stabilized the markets towards the end of Q3, but we still want them to go. Next slide please, Paul. So our investment processes are designed to take advantage of this kind of thing. So we focus on liquidity. We manage redemptions. We always want to have adequate plans to get money back, and we've got no issues there. And we've always done that. And we have risk to capture the upside, both equity and high-yield and investment-grade fixed income. We've done -- we've started to do that. If you look on the right, you can see 2 things: one is our blended debt strategy, which is the performance profile from January. And as you can see, pretty nasty performance against benchmark in March, typical of severe crisis situations for us and then flat to slightly up in April, and then we're now steadily outperforming month-on-month, and we would expect over the 3 years that this will give us the 3-year outperformance that we're trying to sell to people. That's blended debt. In equities, the All Cap strategy, which is our core, if you like, a global emerging market equity strategy, that had a similar profile and performance in March and then our performance every month since then. This is a strategy that's just about to reach 3 years, in terms of being able to sell to people and 1 of 2 very strong global emerging market equity strategies we have. Next slide, Paul. So then investment performance by graph. We show you this every time we talk, and we've done -- we've slightly changed it this year, just to give you a little bit more information because we think it's quite important, and we guess we would otherwise wouldn't have changed it. But we show you 1, 3 and 5 year. And what we've done in the equity space is when we initially started equities, a lot of the volume came through in businesses like Indonesia, which are our local business [ subsidiary ]. And in India and other places like that, we are raising decent assets on a single country basis. And what we've done -- what we used to do is show you equities as one bar. And it was, therefore, very heavily weighted to local in terms of AuM. Now global is growing, and we've now -- we'll talk a bit about global equity assets in terms of what we've been doing. So we decided to split the equity bar into 2. So you can see 1 year, 3 year and 5 year for both the global pools of capital, which would be active equity, which has grown very nicely this year, All Cap, which has not yet reached its 3-year, but it's performing very strongly, Frontier and Small Cap. And those are shown within global and then the local covers things like the Indonesian business, the Indian business, Colombian business, et cetera, and Saudi, of course, as well. So we've broken that out, we did, to give you a bit more info. But anyway, in terms of investment performance, 1 year, 9% of group assets outperforming, not very good. 3 years, really given a lot of the 3-year numbers have been killed by what happened within the March period. We're getting back. That I would expect by January time will be back into a good 3-year territory. So that number should cross over pretty quickly. And 5 years is still okay because happily, we've done pretty well for a long period of time. So pretty much as we would expect. Within the detail of that, fixed income IG investment-grade strategies have done very well and they continue to do very well, both in sovereign and in corporate and in local. So they're outperforming and generating alpha. Our global equity products are doing well, and our Small Cap equity products doing extremely well. And we're generating alpha in pretty much every investment strategies since April. So we're hoping that we should enter next year in pretty good shape. We need to stay at it, and that's what we're hoping. Thanks, Paul. And in terms of equities, this is something particularly we want to talk about because we've been talking about this strategically if it must be 5 years now. Has been very important to us that we build a balanced book of business because we believe that what we know about emerging economies should translate into the equity spaces as well as the fixed income space as long as we bring in the right equity expertise. Now we've grown our own and we've added it, and it's what -- and we've done a series of things over the years, but we've now got 4 very strong organic teams, managing those 4 strategies, all catering to the Small Cap and Frontier. And what's been going on in the year has been pretty good. Strong relative performance, pretty good through Q3. We've now got over 80% of our global equity asset, assets under management that's All Cap and active, outperforming over the 3 and 5 years. If you look to the box on the right, you can see All Cap has got some spectacular numbers at the moment. 5 years, 700 to 800 basis points, and out for 3 years 500 and 1 year 900. This is highly [ salable ]. And as this goes through in its public equity for -- in its public fund format as the public funds go through 3 years, then we will be looking to do a lot more with this, and we think we could -- this is something we have to [ sell ]. In terms of the active space, that's now through 3 years, that's beginning to raise assets. It's raised quite nicely. A lot of those flows came into active. Hasn't had a great last 6 months, but does have a pretty good, strong performance over 3 years and this is again, [ salable ] and Small Cap, you can see, again, a very heavy short-term alpha and decent 3 and 5 year. Client flow momentum is good. We're having net inflows every quarter. Active, in particular, is driving that bus at the minute because it's been around for longer in a pure separate mandate form. We added about $1.2 billion through the full year, which is 27% of opening AuM. The percentage is a bit meaningless. We don't -- we obviously want to see these numbers grow. It's a mixture between existing clients increasing and new institutional mandates. We haven't lost a client in equity. We don't have that many. So that's not a massive achievement, but it's a good achievement. And so we're adding clients through this crisis, and we've added a couple recently. We feel very good about this. So we think this is where we'll see a lot of good growth. We -- I think I've mentioned that. Okay. Next one, please, Paul. I think at this point, this is where I hand it over to Tom for his padded cell.

Brilliant. Thank you, Mark, and good morning, everybody. So while markets in our working environment changed dramatically in early March, the resilience of Ashmore's business model and the underpinning of the strong performance in the first half meant that a solid operating and financial results has been delivered for the year, overall. Assets under management fell by 9% over the 12 months to $83.6 million. However, the level of average AuM was 11% higher compared with the prior year due to the strong investment performance and the positive net inflows delivered in the first half. Consequently, adjusted net revenues increased by 5%, driven by a 7% growth in net management fee income. Partly reflecting the more challenging revenue environment in the second half, adjusted operating costs were reduced by 5%, including a meaningful reduction in the variable compensation charge from 22.5% to 19.5% of profits. The combination of decent revenue growth and lower costs means that adjusted EBITDA increased by 10% and the operating margin was 2 points higher at 68%. The business model continues to deliver high levels of cash generation with GBP 258 million of operating cash flow in the period. The impact of marking to market in the seed capital portfolio resulted in an unrealized loss this year compared with the gain last year, a swing of over GBP 18 million. And meaning that profit before tax increased by 1% to GBP 221.5 million. Diluted EPS was up 3% on a statutory basis and total dividends for the year of 16.9p were 2% higher than last year. Looking at the development of assets under management over the 12 months, there was a clear difference between the first and second halves. Performance and net flows were both positive in the first half. However, this reversed in the second period. Therefore, over the full 12 months, net flows were effectively flat and the volatile market conditions in Q3 not described, resulted in a negative investment performance of $8.1 billion, giving year-end AuM of $83.6 million. A good level of gross subscriptions was achieved with $24.3 billion being a touch higher than in the prior year. While the market environment in the second half slowed the rate of gross subscriptions, there were several consistent characteristics of client behavior. Firstly, demand was broad-based across the headline investment themes, with good flows into local currency, corporate debt and blended debt on the fixed income side and strong demand for the global equity strategies. Secondly, consistent with our belief that investors will continue to raise their allocations to emerging market asset classes. The majority of institutional flows continue to be from existing clients, either adding to existing mandates or funding new exposures to additional asset classes alongside their existing accounts. Thirdly, new clients were won, throughout the period, including notably after the travel restrictions were imposed in March, demonstrating the ability of the distribution team to continue to generate sales even whilst working remotely. The gross redemptions of $24.4 billion were higher than in the prior year. And again, reflected the impact of the Q3 volatility, notably in 2 areas: first, a period of weaker performance in the short duration strategy called certain investors to redeem during the crisis period in February and March. And second, as seen more broadly in capital markets globally at the time, some investors saw perceived safety in U.S. dollar-denominated assets and therefore, sold local currency assets to raise liquidity. Overall, therefore, the group had a net outflow of $0.1 billion for the 12 months with institutional net inflows of around $2 billion, offset by intermediary retail outflows. This means that the proportion of retail capital raised through the intermediary channels fell during the year from -- to 11% from 15% at June 2019. Ashmore's consistent strategy remains to increase this percentage over time, acknowledging that this source of capital is likely to be inherently more cyclical than a typical allocation led institutional client. A compensating factor in terms of client mix is that the proportion of capital raised from corporates and financial institutions increased from 18% to 22% over the year as these investors increasingly recognize the diversity and breadth of opportunities available in emerging markets. In aggregate, therefore, despite these underlying moves, the balance and diversification of the client base has been maintained. Turning now to the income statement. The 11% increase in average assets under management drove a 7% rise in net management fee income compared with the prior year. As the chart shows, there was a small tailwind from the lower average cable rate, offset by the average net management fee margin reducing by 3 basis points year-on-year. The main factor behind the margin movement accounting for half of the change is the continuing trend of allocations into large segregated accounts by existing clients, coupled with the funding of new large mandates. Investment theme mix, in particular, strong growth in average AuM levels in external debt and overlay explains 1 basis point of the movement. And finally, as I mentioned a moment ago, the redemptions in the third quarter were concentrated in higher-margin mutual funds and so this has also had a negative mix impact in the second half of the year. Other factors, including competition and other product mix effects broadly offset each other. Looking ahead, I would continue to expect a gradual reduction in the net management fee margin of approximately 1 to 2 basis points every 12 to 24 months. Although as we've seen in the current period, this trend line can be impacted by changes in product mix, client type and mandate size effects. Total performance fees of GBP 3.9 million were GBP 1 million higher than in the prior year. Understandably, the impact of Q3 implies a reduced performance fee generation in the current financial year with no performance fees being realized by eligible funds with an August year-end. At this early stage in the year and with the usual caveat around market levels and the different performance fee structures across the group, I would conservatively assume a much lower level of performance fees for the current financial year. Overall, therefore, the good growth in net management and performance fee income was tempered by smaller reductions in other revenues and hedging activities, meaning that the group delivered a 5% increase in adjusted net revenue over the year. Looking now at operating costs. And as you would expect, we've continued to remain our strict focus on controlling operating costs and even more so with market conditions deteriorated in the second half. Overall, a 5% reduction in adjusted operating costs was delivered. While there was some benefit from technical factors, such as the adoption of IFRS 16 and a lower charge for the amortization of intangibles, other operating costs were actively reduced by GBP 1 million in the second half as the remote working environment was implemented and travel restrictions came into effect. The cost base absorbed the impact of a weaker sterling, and the group made charitable donations, as Mark mentioned, including March donations to employees, chosen charities taking GBP 300,000 in support of COVID-19-related charitable efforts. While the group delivered a solid financial and operating performance for the year as a whole, the second half was markedly different to the first 6 months. For example, in terms of client flow and investment performance. And therefore, the remuneration committee has set the bonus accrual at 19.5% of profits compared with 22.5% in the prior year, reducing the P&L charged by 5% to GBP 55 million. More challenging revenue and operating environments, such as that seen over the past 6 months highlight the benefits of the inherent cost flexibility of Ashmore's business model. It's, therefore, notable that despite the market and operating challenges faced, the 5% reduction in operating costs contributed to a 10% growth in adjusted EBITDA and resulted in an adjusted EBITDA margin of 68%, 2 points higher year-on-year. Another consistent feature of Ashmore's business model is the active management of our seed capital investment. During the year, a total of GBP 51.4 million was invested into funds to support diversification of the Group's product range and to provide clients with access to the ever-growing and developing emerging market opportunity set. For example, investments were made into new funds, managing investment grade credit, global emerging market equities and also an equity ESG strategy to complement the blended debt ESG fund established last year. Over the past 12 months, client inflows have enabled the profitable realization of previously seeded investments, totaling GBP 84 million, primarily from the corporate debt and equity themes, there was also a return of capital from funds in the alternatives theme. Over the year as a whole, there was an unrealized loss of GBP 7.6 million as a result of marking to market seed positions. However, the successful realizations in the year crystallized a profit for shareholders of GBP 4 million. And while this realized gain is a welcome outcome, it's worth remembering that the real strategic objective of the Group's seed capital program is in driving longer-term growth in client AuM. And to illustrate this, the Group's seeding activity to date has supported funds with more than $8.5 billion of client assets, representing about 10% of the Group's total assets under management. In aggregate, therefore, profit before tax increased by 1% to GBP 221.5 million. At GBP 31.6 million, the tax charge was 4% lower year-on-year, and implies an effective tax rate for the period of 16.6%, below the current U.K. Corporation Tax rate of 19% due to the geographic mix of profits with some earnings being in lower tax jurisdictions and an increase in the value of the deferred tax asset relating to employees' rewards. Based on the current geographic mix of the Group's profit and recognizing that other factors will continue to influence the achieve rate, the forecast underlying effective tax rate for the Group is between 16% and 17%. On a statutory basis, therefore, diluted EPS increased by 3%. However, excluding foreign exchange translation effects and seed capital mark-to-market impact. The adjusted diluted EPS increased by 12% to 26.1p, reflecting the solid operational performance in the period. In line with the Board's dividend policy and its target cover level of 1.5x, the final dividend has been maintained at 12.1p per share to give a 2% increase in total dividends for the year of 16.9p. Consistent with the solid financial performance, the Group generated GBP 257.9 million of operating cash in the year. In addition to the payment of corporation tax and ordinary dividends, the EBT purchased shares worth GBP 89.5 million to satisfy future equity awards to staff and was able to buy opportunistically at lower market prices in the second half. The seed capital program realized cash in the period and the other notable cash item was the proceeds of the IPO from Ashmore Indonesia in January, delivering GBP 11.3 million. Therefore, the Group ended the period with a GBP 27 million increase in cash to GBP 490.1 million. And finally, from me, a quick summary of the Group's balance sheet and capital position. The structure of the balance sheet remains conservative and consistent, which, as we have seen before, delivers operational and strategic benefits through all stages of the market cycle. The Pillar II capital requirement increased by approximately GBP 26 million this year to GBP 147.3 million, as a result of higher average seed capital and foreign exchange holdings and an increase in market volatility in the second half. Nonetheless, with total capital resources of over GBP 700 million, the Group continues to maintain the significant excess regulatory capital position, which is primarily held in liquid assets, such as cash or readily accessible seed capital positions. The Group's foreign exchange exposure continues to be weighted towards the U.S. dollar and the sensitivity to changes in the cable rate is largely unchanged from a year ago at GBP 5 million of profit before tax impact for each $0.05 move in the rate. I'll now pass you back to Mark to share his thoughts on the outlook for emerging markets before we take your questions.

Thanks, Tom. Yes. So our outlook from here. Big challenges in the developed world. Emerging markets fundamentals, the demographics continue to be attractive, better GDP growth, lower debt, et cetera. I mean, these are all things we've been saying before. But if anything, it's the same, but in spades now after enormous additions of debt to the developed world. We think we've got both superior equity growth prospects and attractive yields in dollars or other currencies to attract investors sort of high-yield investment-grade markets. So a relatively strong place to be compared to DM has probably just got a little bit stronger. COVID-19 is going to be running around for a while. We hope we're getting a recovery in 2021. We would expect and plan for that. But the impact is going to vary in different places, depending upon different strategies and how to deal with it, both in the developed markets and in the emerging economies. And within the emerging economies, that gives us places to move around and be active. Next slide, please. So to summarize where we're at before we take some questions. Solid financial performance, doing what it should do, given the way we've always been structured, that operationally resilient, which is great. We've put a global operating model in place for a reason and the guys in that area have done a stellar job, but on a model that works. So the model has been well and truly stress tested and has worked well. So touchwood at all the performance, desk wise and mental. It's gone very well, and we expect it's in a position where it can continue to do so. Fixed income themes are generating strong alphas since April as they should do, given that's the way the things always work. Equity performance has again been strong, relative and absolute. COVID-19 impact, medium term, we don't know, but it does give us opportunities. And so the trick here is to be nimble, keep your people safe and to keep doing what you've always done, don't mess with your process, talk to your clients, grind out the returns. Emerging markets are diverse. You know that. We offer attractive growth and yield, both for equity and fixed income. Market has recovered significantly. We are generating alpha and client flows, you've always give the initial knee-jerk reaction that some of that kind of over a period of time, that slows down, and that's all happening as we would expect it to be. So we're doing what we always do, and I'm looking forward to continue doing it. And thank you for your time and listening to us and your interest in us. And now we'll take Q&A.

Okay. We have 4 questions from Haley Tam. First one, costs. Can you quantify, please, how much of the 5% decline year-on-year was due to travel restrictions and remote working benefits in the second half and whether you anticipate any of these benefits continuing into the longer term?

I think that's one for you, Tom. It's pretty scary, this voice from the out of the -- it's like, God. Anyway, over to you. Can you respond to God?

Another padded cell, presumably. Yes. So the controllable cost element in the second half was approximately GBP 1 million of reduction in other operating costs. The bulk of that, as you would anticipate, comes as a consequence of being more efficient in terms of running an office network that we're not inhabiting and restricting travel. But we've also been around all of our cost line items, as you would expect from us to make sure that we're not buying data that we don't need. We haven't got Bloomberg licenses that we're not using. And just making sure that we've buttoned everything down as tightly as we can. Of that, approximately, GBP 1 million that we saved in the second half, about 2/3 of it, I would estimate, relates to sort of COVID efficiencies from not being in the offices or traveling. So there's probably -- there's a couple of hundred thousand of sort of ongoing benefit and about GBP 600,000, GBP 700,000 worth of costs that I would expect to come back sort of online, if you like, once we get back into offices and start traveling again.

The second cost question is the variable remuneration ratio of 19.5% was lower than we have seen for some time. Given the recent alpha generation for clients, would you encourage us to think about a return in the 2021 financial year to the 22% to 23% levels seen in recent years?

Should I take that one? If performance is good then -- across the business, then we expect to pay people for it. If it isn't good, then we expect those of us who may not done that well, will not get paid and will not get paid so well. So obviously, it moves up and down, depending on how we're doing. It will depend on a lot of factors. Investment performance, of course, is one, client management is another, continuing the excellent job in the operational side of things is another -- we'll look at it at the time. But as you will probably remember, I think we've been down as low as, God, 11%, 12%, 13% before over the 25 years of the business, and we've been as high as 22.5%. And I think we've told everyone, we capped at 25%. So it will stay within that range. We thought it was appropriate this year because particularly from investment performance reasons that it should have been lower than last year.

There's a question on client behavior. You highlight 3 key categories of client response to market dislocation. Some redeem capital quickly, others see an opportunity to increase allocations and a third constituency take longer to decide what to do. Do you believe we've now already seen all the activity from the first 2 cohorts? So it is now a question of waiting for the third constituency to decide what to do? And what proportion of your clients fall into that third category that are waiting to see what to do?

Yes. I think certainly, #1 has happened. Number two, as I think I must have -- for those of you who've been with us over the years, there's never enough of them. Nobody ever buys when you tell them to. So what tends to happen is #2 is a bit of a 2a and a 2b, but I guess it could creep into 3 as well. 2a sort of has happened and 2b, where they might be thinking that now, given what they see the outlook for U.S. interest rates and/or EM growth with DM growth and how expensive they see the tech market in the U.S., for example, we might get some people in 2b moving now. Number three, deciding what to do kind of starts, it's at different speeds. But I think this quarter, September through December and through to March is kind of a typical time you would get for people to think about that, running across the western world through to the eastern world. So yes, I think we're in that place. And the answer to that follow-up question is, I really don't have a very strong feel for that because every time something like this happens, you're a surprised one way or another. You're surprised by how rapidly people take decisions or don't and then you're surprised by how certainly they do. So my view is that the retail product tends to see the most rapid reaction. So we're probably through a lot of that. And people now, they are deciding what to do in retail, will now be a second order set of decisions around, okay, so we had a terrible drawdown in life in some of the funds that did, not in equity, but in fixed income. How do we deal with that as we've seen a great recovery, where do we go from here. So I think the last quarter is a key quarter for investor intention. So we'll get a very strong flavor of investor intentions, having -- when you have a nasty draw and a strong recovery, you think it -- I think we're about -- we're hitting #3 now in terms of what type of the client -- percentage of the client base. You could say it's -- I'm really making it up. I would say in the institutional space, it would be more likely than the retail space. And I think it's, therefore, 90% of the assets are institutional. And who knows, it could be half of them, it could be 10% of them. We just don't know until the conversations I had and the conversations, they tend to start them and they tend to be ongoing. They're not like an immediate conversations.

I have a couple of questions on investment performance. Haley is asking, with the assets under management that are quite close to benchmark, but underperforming over 3 years, is there a particular bias by investment theme? And how long do you expect it to take for the 3-year track records to return to above benchmarks?

It's -- in the 3-year space, it's biased towards the higher yielder elements of external -- that's investment-grade actually are all above, I think, with no exceptions. So investment-grade in external and corporate, et cetera, are all filing. In -- it's in the high-yield space. So it would be more in the external space, where there's high-yield components in the blended space of higher components and to a lesser extent, in corporate. In equities, there's not really an issue. Is there another part to that question?

How long should we expect it to take for the 3-year track record overall to be backed by benchmark?

Well, if we do -- if we keep going as we are, we would hope relatively rapidly. These things can take anywhere from 6 to 12 months. So we're 6 months in, and we would hope that progressively things will start crossing over, over the next 6 months or so. But we need to keep performing. Happily, again, touchwood, we've been performing pretty well in those themes since April. So let's keep it going.

There's a point of detail from David McCann at Numis. You highlight investment for the -- investment performance improving since March. This doesn't seem to be featuring in some of the public fund fact sheets on a 1, 3 and 5 year excess return basis. Is there a difference between the public fund fact sheets and the overall group picture?

No. There -- we use composites, obviously, and this data comes from -- the data we're giving you is the overall group picture. So I don't -- we should look into that. And find that what that issue is. So if you -- Paul, if you want to run with that, and give David some feedback directly, that'll be great.

Certainly. Next question is Paul McGinnis at Shore Capital. You say in the statement that Ashmore's investment process and team culture works better if office based, has office attendance picked up from the low point?

Well, as you can see, I'm still a low point for me. No, the answer is what we've done here is we've -- we're in 11 countries, I think, the last count. And what we do is, we do everything in each country based on local government advice and on the management of the office. And so what we do is office by office, we have -- we create a return to work protocol, and that's cleared through London, through the head office and then between the local office and the London office, they agreed that it's a good time to go and they go back to work on a variety of different bases and we flex it. So in some places, we've been back and we've had to go back out again. So for example, in Jakarta, we were back in the office for a period, and then there's been a flare-up in Jakarta, we're back, working from home again. And it's very much driven by what's happening on the ground. So it's country by country. So it's not like a group global solution. In terms of U.K., for example, we're not back in the office. We're still working from home fully. We're looking at what happens to infection rates, the government advised to people using public transport again over the next month or so. And obviously, we would like to get back in office when we can, but we're not going to do anything that we think overly jeopardizes the health of our colleagues in France. So we'll take it case by case.

Tom Mills at Jefferies asked, do you think the Fed can stimulate inflation? And will you need to rebalance in response?

Well, the only -- yes, the answer is, it believes it -- it's kind of hoping -- they're kind of hoping they can. I think the real way to stimulate inflation is a big jump in economic activity, and that it tends to be preceded by a boosting confidence. They're in a situation now where confidence is pretty low in the U.S., not simply because of economic activity and because of what's going on in various companies, but because of what's happening politically. So I think they need to get through the election, and they need to do a bit of healing in terms of politics because this is always a very divisive period coming up to presidential elections. They need to get through that, they need to get a healing, as you get a bit confidence back, they need to have a strategy. And once confidence starts, economic activity increase, and then you can simulate more inflation. We will, of course, need to adjust to that. Our view at the minute is it's unlikely they can stimulate much inflation in the next 6 months or so, maybe longer. So we're not frightened as a day of U.S. inflation. Having said that, what you do get, and this is a -- so the inflation point is -- it's a bit -- sometimes a bit too general a statement. You are getting within different industries, and we're seeing this in the U.K. as well, you're getting bottlenecks in the supply chain for certain kinds of parts or product. So things that are beginning to pick up in terms of growth activity, the thing -- all the businesses that are benefiting from people stopping traveling and having more money and people sitting at home, looking at their padded cell going, Jesus, I want a different color curtain. Those kind of people are stimulating domestic [ moment ] activity, but that can only be produced, there's enough people to manufacture it and there's enough product for it. So some of that home supply stuff, there can be shortages of different kinds of things, and that can create inflation within certain sectors for certain goods. But anyway, on a broad basis, I think they can eventually, but I don't think they can in the short run.

2 questions from Arnaud, Exane. One on the dividend, one on the local businesses. How should we read the flat dividend in the second half after growing 5% in the first half? And how much headroom would you like above your 1.5x target?