Ashmore Group Plc (ASHM) Earnings Call Transcript & Summary

Good morning. Welcome to the Ashmore Group PLC results for the year ending June '21. Let me start. My name is Mark Coombs, Chief Executive. With me, I have my colleague, Tom Shippey, Group Finance Director. Let me start with an overview of the year. Performance was pretty good in the year. We reflect really what's happening, ongoing recovery in the market and the bounce back and manage back from the impact of COVID in 2020. On a 5-year performance relatively was -- is now good across all themes, being fixed income equity and alternatives. And 3-year performance has significantly improved, so responding as we would expect from a market shock. Assets under management growth is up by 13% to GBP 94.4 billion with net inflows of $1.2 billion. Our stature PBT increased by 28% to $282.5 million benefiting significantly from gains on our seed capital book. Our adjusted EBITDA was 12% lower, reflecting where we are in terms of our stage in the recovery cycle. Strategically, with good progress, good momentum in equities, in particular, where we have very strong investment performance and an AuM growth of 61%. Local platforms themselves are doing very well from Indonesia through Saudi and to Colombia, delivering growth and increasing our diversification with a 44% increase in assets under management year-on-year. And our product range in the ESG space and -- expanded significantly and performance is good in all of those products. Where we stand today is emerging market outlook is favorable, particularly relative to developed markets. Vaccination programs are key and the success of those on the social and economic recovery and those are happening at different speeds. The fundamentals are forecast to see growth in EM, 4.5% to 5% in terms of GDP. And relative valuations to the end markets, in particular, support higher allocations. We see an imminent return to offices, which of course, will be driven by safety and government regulation in all the countries we operate, which are looking our culture and our team invest business model. We're looking forward to it. Next slide, please. So a little bit of detail on to the various elements, I mean, we just chatted about the overview. As you know, we're an active manager, and we stay consistent with that, and we're delivering outperformance as we would expect to at this time in the cycle. So there's been a significant improvement in performance in the 1, 5-year and also in the 3-year. June '20, we're only 9% of our assets were outperforming, we're now up to 96%. In the 3-year, we're at 57% where previously, we were at 17%. And in the 5 years, we're at 79% when previously we're 74%. 5-year performance is very strong and consistently so. Next slide, please, Paul. So picking up on the key highlights that I mentioned in the strategic part in the overview. Momentum is doing -- momentum is good in equity. Performance is delivering asset unmanageable growth as it should. And so we're expecting to see continuing growth in that sector. So we have 4 particular global products we're going to talk about here. We also have some very strong local products in various markets from Colombia to Indonesia to Saudi to India. So if you look at how we're doing in performance terms here, we have 4 main global strategies of All Cap, Active, Small Cap and Frontier. As you can see, strong outflow across all of them with an extremely strong outflow in All Cap and Small Cap over the 1-, 3- and 5-year and very strong outflow also in Frontier over the 1 year. Our assets under management in equity has increased as a result of performance as clients following, were up $2.8 billion, which is 61% year-on-year, which is GBP 7.4 billion. And it's now 8% of the group's assets under management across both global and local strategies. Net flow momentum has continued. We've now had net flows of just under $1 billion, driven by new clients in the year. We've now had 8 consecutive quarters of positive flows in equities. So we're pleased with the progress there. But the most important thing is that's only progress so far. We think there's an opportunity of considerable significant further growth. The All Cap investment universe is vast at $37 trillion. We're obviously a tiny player in that. We have a significant opportunity to take market share. We have a broad product range, with global and local expertise. We have strong performance across all of it. And we have an integrated ESG approach, both within dedicated ESG product and within our base product that makes it very scalable set of products. Next slide, please. So this talks -- we're talking a little bit here about that ESG and sustainability area. We are -- as I mentioned on the previous slide, we're able to meet client demand either as a pure ESG product or across broad portfolio as we integrated into our process. Some factors are integrated at all levels. Our dedicated funds are now available in equity; external, corporate and blended debt. So people want to buy an ESG product, they can buy it with us. We're a pretty active participant in what's going on in the world in terms of industry initiatives. We are a member of UNPRI. We're part of the Net Zero Asset Managers Initiative and Climate Action 100+. We also target net zero through carbon offsetting in our Ashmore Foundation, which is our charity. And we've decided to make an annual commitment to society going forward, about 0.5% of our PBT donated to the Ashmore Foundation in particular and other charities where appropriate. We've always been -- we've always cared about ESG in Ashmore. It's been a big part of looking at how we invest in emerging markets, particularly in the old days when the G, the governance part was, if you like, more of an issue than today when they're high-quality first of all, governance activities going on within emerging economies. And as you can see from the table on the right, we have got UNPRI scores that are now As across the piece, having moved from B in some cases, in case of property and some sovereign fixed income. And we now score very high UNPRI in terms of our sustainability credentials. Next slide, please, Paul. so just to sort of summarize financial performance. This is, if you like, a high-level summary, and then Tom will take you into the detail. Well, if you want so you can take into this.

I'm happy to pick up, if you like.

Yes. Go for it.

Okay. All right. Well, thanks, Mark, and good morning, everybody. As you'll see as we go through the detail of these results, the performance for the year very much reflects, as Mark said, the ongoing recovery from the challenging market conditions of early 2020. The strong market and investment outperformance that Mark described delivered a 13% growth in AuM to $94.4 billion, and a meaningful increase in performance fees up GBP 8 million to GBP 11.9 million. However, given the natural lag to average AuM and therefore, management fees, adjusted net revenue declined by 9% to GBP 296.6 million. As you would expect through this most recent market cycle, Ashmore has maintained its disciplined approach to cost management. Operating costs before variable compensation were reduced by 6%. And total operating costs, including variable compensation, reduced by 2%. Consequently, adjusted EBITDA was 12% lower year-on-year, and the operating margin was maintained in the upper half of the 60% to 70% range at 66%. As we saw in the first half of the year, the market recovery and continued strong investment performance has delivered a meaningful gain on the group's seed capital positions, and contributed GBP 92.5 million to the P&L for 12 months. Therefore, on a statutory basis, profit before tax was up 28% and diluted EPS by 33%. On an adjusted basis, excluding FX translation and the seed capital gains, diluted EPS was 11% lower year-on-year. Reflecting this balance between the strong increase in statutory profit and the lower operating performance, the Board is recommending maintaining the final dividend of 12.1p per share to give a total dividend of 16.9p for the year. The strong AuM growth was driven by investment performance of $9.6 billion and -- with $4.9 billion of net inflows from institutional clients, offset by $2.9 billion of net outflows from intermediary retail clients. In terms of growth subscriptions, while investors understandably took some time to consider the implications of the COVID pandemic on their portfolio allocations and activity was consequently lower, there was a decent level of broad-based demand across the group's product range. Of note was the ongoing demand for investment-grade product, continued flows into the equity strategies and good levels of subscriptions from new clients in both equities and fixed income. Importantly, the continued remote working environment has not materially impacted on the distribution team's ability to deliver gross sales from existing clients as well as to identify new client opportunities. That said, we welcome the anticipated relaxation of travel restrictions, which will permit the sales force to get back on the road and physically in front of clients again. Gross redemptions declined year-on-year towards a more typical level of around 20% of assets after the initial impact of the market shock in early 2020. Inevitably, there was some profit taking and portfolio rebalancing after such a strong recovery in asset prices, but overall redemption activity reflected a typical range of client decisions albeit with a higher level of intermediary client outflows measured being corporate debt, local currency and some blended products. In net flow terms, the second half delivered a net inflow of $2.6 billion to give $1.2 billion net for the full year as a whole, with both the institutional and retail channels showing improving net flow trends over the period. By investment theme, the key drivers of the net flow were new client wins and top-ups into the overlaying equity themes. As usual, client activity levels have been somewhat lower over the summer months with the critical time for investor sentiment coming over the next few months post Labor Day. And as we enter this important period, the group's new business pipeline is healthy with a decent mix of product interest. The investment teams are delivering good levels of alpha. And as Mark will cover later in the presentation for a number of reasons, we believe the outlook to be positive. Now as you will have seen from the Q4 assets under management update, we're revising the presentation investment themes to better reflect how the underlying products are managed by the investment themes and marketed by the distribution theme. The group's regular statutory reporting will adopt the same format with effect from the Q1 update for September. The main changes are to move U.S. dollar money market funds into the external debt theme, other liquidity and overlay funds into the local currency theme and multi-asset products move to the equity's theme. The themes will also be aggregated into 3 headline asset classes covering fixed income, equities and alternative strategies. It's important to note that there are no underlying changes at either the product level in terms of the management of the investment strategies or the fee margins generated. And in order to assist with your management fee modeling going forward, we'll continue to highlight the scale of overlay capital within the local currency theme going forward. Now before we move to the detail of the financial results, I thought it would be useful to look at the increasing contribution from the group's established network of local asset management operations. While each business is tailored to its local market that have the common objective of exploiting significant domestic growth opportunities as independent asset management industries across the emerging markets develop and become more sophisticated. In addition to asset and profit growth, they also diversify the group's investment management capabilities, management fees, profits and client base. Together, these businesses grew AuM by 44% over the year and now represent more than $7 billion in total, around 8% of the group. And as you can see, there was particularly strong growth in Indonesia, Saudi Arabia and India. And looking at each of these in turn, Ashmore Indonesia has continued its growth momentum following its IPO 18 months ago, since when the share price has approximately doubled. During this period, the business has launched a number of new products, including an equity ESG mandate. And through a partnership with Bukalapak, one of Indonesia's largest e-commerce platforms, has made a strategic investment out of its IPO proceeds into a distribution -- a digital distribution platform, BIB. Indonesia's online funds industry is growing rapidly and this investment provides the local business with access to a differentiated channel for additional AuM growth. Now while still at an early age, BIB has developed and launched its online offering, including an app, and the initial client acquisition results are encouraging. In Saudi Arabia, the team has delivered strong AuM growth, including significant progress in winning a number of domestic institutional equity mandates. And similarly, the Indian business has generated strong investment performance and enhanced growth in domestic equity AuM predominantly for the benefit of the group's global institutional client base. Ashmore Colombia predominantly manages alternative assets in closed-end funds. Therefore, asset growth is linked to new fund launches. Marketing is currently underway for both private equity and real estate vehicles with first closes expected in the first half of current financial year. Each of Ashmore's local platforms is highly scalable. And therefore, as assets grow, the individual businesses should benefit from positive operating leverage as the operating margins trend up towards the group level. Indeed, Ashmore Indonesia has today reported record profits, an increase in assets of over 50% to $2.4 billion and an EBITDA margin of close to 60%. Ashmore will continue to support these businesses as they become a more meaningful part of the overall group's activity, and we'll continue to seek opportunities to expand the network. Looking at the detail of the P&L. Adjusted net revenues were 9% lower than in the prior year, with a meaningful impact from the stronger sterling against the U.S. dollar meaning that the underlying reduction on a constant currency basis was 3%. Looking at the component parts, net management fees were 14% lower. And here, the FX impact was around 6%. The underlying movement reflects broadly flat average AuM over the period and a 4 basis point reduction in the average net management fee margin to 41 basis points. This move in the management fee margin was predominantly driven by mix effects totaling 2.5 basis points. These include the impact of changes in the headline investment fee mix driven by higher levels of overlay capital, offset to a degree by the growth in equities and the impact of lower intermediary sourced AuM. The other factor, which typically drives the average management fee margin is mandate size effect, which in this period was less than negative 0.5 basis point. Consequently, other factors such as competitive pressure and product mix effects contributed just over 1 basis point to the move. The underlying level of competitive margin pressure is, therefore, not noticeably changed and my guidance, therefore, continues to be for a 1 basis point drift in the margin from like-to-like pricing pressure over the next 12 to 18 months with other factors such as mix, client type and product existing either positive or negative impact. Reflecting the strong investment performance in the period, the group delivered GBP 11.9 million of performance fees, 3x the level of the prior year. It's still early in the year to give precise guidance, but the August year-end funds did not generate any material net performance fees. And based on the very wide range of fees, which is in other funds, my assumption would be a return to lower levels of performance fee income this year, more in line with the levels delivered in 2019 and '20. Other revenues of GBP 4.6 million comprises advisory and project management fees and were broadly flat year-on-year. Finally, the group generated GBP 9.2 million of foreign exchange gains in the period through the implementation of effective hedging and the timing of foreign currency cash flows during the period. This more than offset the GBP 4.9 million of balance sheet FX translation losses, which are excluded from adjusted revenues. On to operating costs. And as you would expect, Ashmore's approach continues to ensure there's firm control of the group's operating costs. Non-variable compensation costs were reduced by 6% year-on-year. And while there was some currency benefit, the underlying cost base reflects stable average headcount and the ongoing benefit of no travel and reduced office occupancy. As you may have seen in this morning's announcement, the Board has approved an annual charitable contribution equivalent to 0.5% of profit before tax, excluding unrealized capital gains, and this is reported in other operating costs. The contribution in the current year was GBP 1 million and it is intended that this contribution will enhance the scale impact and sustainability of the foundations project. The variable remuneration accrual was set a higher percentage year-on-year, which in part reflects the strong and broad-based investment performance delivered. In absolute terms, the charge is 3% lower than in the prior year, reflecting a lower level of operating profit at this stage in the recovery cycle. And finally, as we plan for an imminent return to the offices, which have not yet reopened and look forward to business travel resuming at some point in the financial year, I prudently expect that some of the cost savings achieved over the last 18 months will reverse. When combined with the full year impact of recent and planned new hires, I would expect fixed staff and other operating costs to return to the levels reported pre-pandemic. Turning now to look at the seed capital program. There was a significant increase in the market value of the firm's investments over the year, broadly equally split between the first and second halves. For the liquid exposures, particularly in equities, the gains were driven by strong investment performance. The MSCI EM index, for example, increased by more than 40% over the 12 months with Ashmore's alpha adding to this. Therefore, approximately half of the total reported P&L benefit was derived from the liquid equity and fixed income seed investments. This market appreciation meant that there was a consequent positive impact on the valuation of exposures in the alternatives theme, which delivered approximately half of the total GBP 92.5 million of P&L gain. Of this, approximately GBP 8.5 million was realized during the year, predominantly arising from the exit from alternatives and equities positions. Therefore, the majority, GBP 84 million, was unrealized at the 30th of June and remains subject to ongoing market movements. While generating statutory profit from the investment returns is, of course, welcome. The primary objective of the seed capital program is to deliver AuM growth by supporting funds as they establish their own investment track records or to provide greater scale for new businesses and/or distribution channels. During the period, new investments were made in ESG and investment-grade credit funds and in support of equities and distribution initiatives in Latin America. Realizations from the program in the year reflect the successful achievement of the key objectives for the seed set at the time of investment. For example, third-party net flows into equity mutual funds, allowing the group to redeem its seed capital as the underlying fund reaches its target threshold set at the point of seeding. The group's total exposure to seed of approximately GBP 345 million has benefited from the strong performance. Going forward and subject to markets and the group's ability to profitably realize its investments, I would expect the average size of the program to trend back towards GBP 300 million over time. Overall, the seed capital program continues to support the group's strategy and is helping deliver AuM growth. In aggregate, seed capital investments and supported funds that today have assets of more than $10 billion or around 11% of the group's total AuM. Finally, on the P&L. As a result of the strong seed capital returns, profit before tax increased 28% year-on-year to GBP 282.5 million. The effective tax rate was 14.4% and benefited from a number of factors compared with the underlying 16% to 17% rate implied by the group's geographic mix of profits. Most of the difference arises as a consequence of the impact of the Ashmore share price on the allowable value of share awards made to employees and the proportion of the group's profits that degenerated in jurisdictions with lower tax rates than the U.K., including Ireland. The other key factor in this period was the one-off increase in the value of the deferred tax asset to take into account the planned increase in the U.K. tax rate to 25% with effect from 2023. Absent these factors, the underlying tax rate continues to be around 16.5%, but as a result of the planned U.K. and U.S. tax changes, is likely to move a couple of points higher over the medium term. Statutory diluted EPS increased by 33% to 34.2p per share. And on an adjusted basis, excluding FX translation and seed capital items, diluted EPS was 11% lower at 23.3p per share. The Board has recommended an unchanged final dividend to give 16.9p of total dividends per share for the year. This decision reflects the balance between the lower operating profit and the strong statutory profit growth. Looking now at cash flows. The group's sufficient model has generated GBP 213 million of operating cash and represented a consistently high conversion rate of 109% of adjusted EBITDA. As you can see from the chart and as usual, the operating cash flow covered the group's cash requirements in the year, including paying tax and ordinary dividends to shareholders, funding the purchase of shares to satisfy awards made to employees and enabling additional seed capital investments. The sterling U.S. dollar rate moved from GBP 1.24 to GBP 1.38 over the 12 months. And this meant that at the period end, the value of the group's non-sterling cash balances was translated at a weaker rate, and consequently, the sterling value of cash reported on the balance sheet fell by GBP 40 million. Finally, before I hand back to Mark, a brief update from me on the group's balance sheet and regulatory capital position. The Pillar II capital requirement increased by 6% to approximately GBP 156 million due to the higher average value of seed capital exposures on the balance sheet. Meanwhile, the firm's capital resources benefited from the strong statutory profit result. And therefore, excess regulatory capital increases to over GBP 600 million, equivalent to 85p per share. As you will know, the U.K. regulatory regime is about to undergo some changes with the introduction of the Investment Firms Prudential Regime or IFPR, with effect from January 22. While there'll be a number of individual changes under the bonnet, the overall impact on Ashmore's reported position is likely to be modest. The introduction of key factors to the regulatory capital calculation is likely to reduce Pillar I, but the group's requirement will continue to be driven by the Board's assessment of Pillar II. IFPR will also introduce a basic liquidity requirement based on items such as fixed overhead requirements and the assessment of wind-down costs. Ashmore's consistent and conservative balance sheet structure with significant cash available and no debt means it's appropriately structured to adapt to these new regimes. In summary, therefore, Ashmore will continue to maintain a well-capitalized liquid balance sheet, in order to support its strategic growth objectives through market cycles. And with that, I'll hand you back to Mark to talk about outlook.

Thank you, Tom. Yes. In terms of how we see emerging markets from here and the outlook generally for what's going on, as I mentioned at the beginning, vaccination programs are key. They support social and economic recovery. And within emerging countries, there's been a big acceleration of vaccination rates over the last 6 months as they've begun to get more supply and get organized in terms of distributing, so excepting to catch up with the above markets over the next 6 to 12 months. We are in a much better post-pandemic position than developed countries. Stronger growth, lower debt and continuing to reform to improve what's happening within the domestic economies. Inflation is pretty much under control in emerging markets. Central banks are spending consistent, if you like, and strong in terms of managing what happens in inflation, and they're taking a hawkish start, generally. Credit policy remains supportive. We think that continues. We think taper tantrum, although always possible, a repeat there on, is unlikely given emerging markets is a much stronger position than as a group of countries than they were in 2013. So stronger fundamentals sit behind what we think for emerging countries, but also we think valuations are relatively attractive as well. And we think we're going to see steadily higher investor allocations, a continuation of the trend over the last 10 years. If you look at both equities and fixed income, this is pretty apparent. There's much better equity growth prospects in the EM than there is within DM, significant price earnings ratio discounts to developed markets. And in the fixed income space, real yields are higher in emerging market bonds as they have been for a long time. So the outlook, we think, is good for EM relative to DM. So just in terms of a summary of how we see where we're at and concluding this part of our presentation of the numbers. Our performance reflects what we would expect at this time in the cycle. So continuing an ongoing recovery; steady and consistent across products; performance being strong, obviously, therefore, leads as clients get around to understanding that and seeing that and to increasing their activity levels coming out of COVID should lead to positive net inflows. And that's a typical cycle, and we've been through it before. Strategically, we're happy with the progress we're making, both in the local businesses in the equity space, within ESG. We're happy to continue developing on those lines as we plan for a long time, and we're happy to see progress. And EM as a whole, we believe, is a pretty good outlook. So we sit here today saying we're in pretty good shape, and we recognize that has happened in terms of margin impact and in terms of client activity, and we're looking forward to continuing to grow the business platform and develop across a broader range of products. So with that, at this point, I think, exactly the slide says here Q&A. So we're -- we're perched waiting to answer any questions you may have.

First question is from Bruce Hamilton. Do you see any need to change the approach with retail given the experience of the past year? Do you have the right products and distribution partners?

Let me take that initially, if I may. No, as in we need to continue to talk to retail and to provide them with product. We think we have a broad range of products there. We have the product that our sales teams want us to provide. We need to continue to talk to the channel. We need to be able to do that consistently, and we need to perform. So as long as performance remains good, we will do relatively well in that channel. Retail as a channel has always been something that can be quite volatile around immediate performance, both good and bad. And recognizing that retail is one element of what we're trying to do. It has relatively high margin, but relatively volatile in terms of flat. So we're happy to have it as a piece of our business. We wouldn't buy a design to be 100% retail manager, and that's obviously we started the business as an institutional one. And we continue to have retailers and diversify what we do and we're very happy to have it.

The next set of question is from Hubert Lam. First of all, what was the exit fee margin at the end of the financial year? Secondly, what is the pipeline and nature of flows from existing clients versus new clients? And finally, how has fund performance developed since June?

Do you want to start those off?

Do you want me to take the first 2 of those, Mark? Yes. So on the revenue margin, you can see that the first half was 42. The second half was -- sorry, the year as a whole was 41, therefore, implying that the second half was 40. In the second half, we had some meaningful overlay inflows, so there's a little bit of full year impact to come from those overlays in the current run rate. So it's a touch under 40 basis points as we enter the new financial year. The second question around the balance between new clients and existing clients. As we've seen for a couple of years now that the balance of flow has tended to come from existing clients, indeed, over the last year, it was about 80% existing clients topping up or adding to the range of products managed by Ashmore. And that's broadly representative of the pipeline and how we see things going forward from here. And then maybe, Mark, did you want to comment on the performance picture, July, August?

Yes, happy to. Markets had a pretty rough July and a mixed August, depending on what you were doing and the way you were doing it. We obviously, to some extent, performed with the markets and create a degree of alpha above or below benchmarks reasonable. And then not stellar outperformance across the piece and not dramatic underperformance across the piece. So a reasonable performance over the last couple of months.

Next question is from Samarth Agrawal at Citi. To do with the local platforms, is the higher fee margin with the local funds a function of asset class? Or is there a margin premium attached to local clients? And secondly, what drives the higher cost margin in locally managed assets? Is this due to growth investments being made or recurring costs and therefore, can EBITDA margins trend towards the group level?

Let me take -- I can take a bit of that, in fact, will be both of us. That's a really nice picture of you. I hope you'll -- I was loving that. There is a bit of love in the presentation. Local businesses are growing really well. But they tend to have certainly -- obviously, at the gross level, higher margins, not least of which where they're a mixture of institutional retail, they can be a higher proportion of retail given the whole service asset management often in the countries in which they -- so for example in Indonesia, it has a much higher proportion of retail assets in the group, which is good. Which is what we're looking for diversification by type of investment and by country. So there is a traditionally higher gross margin there, which is good. In terms of the net margin that you mentioned and whether it is being lower than the group, will it trend overtime higher? The answer is yes. It's about scale. Will it ever get -- are we saying it's got to be exactly where the group is? No, but we would expect, as all the businesses scale, the net margin gets higher. And they're at the stage where they're all hitting a sensible growth patch having invested in quite a lot of people to make sure that we have the right set of people managing the money, supporting the management of the money and distributing the product.

The next question is from Andy Lowe at Berenberg. Please can you explain why a 6 percentage point proposed increase in the U.K. corporate tax rate increases your effective tax rate by a couple of points and is this sustainable?

Yes. It's down to the geographic mix of where we realized profits. So we have operating businesses. The key operating platforms are in New York, Dublin, London, Singapore and Tokyo. And then obviously supplemented by the local office management platforms domestically and in Bogota, et cetera. So the overall deferred tax -- I'm sorry, overall marginal tax rate is a blend of the various different tax rates that we experienced, which range from 10% in certain jurisdictions to mid-30s in others, the U.K. rate going from 19 to 25 is 1 component part of that.

Next couple of questions from David McCann at Numis. First of all, the variable compensation percentages increased to 22%. Is it still a fair assumption that 20% should be seen as a baseline for forecast? And secondly, you mentioned the investment point has been improving. Why does this not seem to be borne out by some of the fact sheets in a number of funds, factsheet funds, and indeed your cautious guidance on performance fees for this year?

Do you want to take some of that, Tom? Do you want to start off on that?

Sorry, yes, I can. Yes, absolutely, our base assumption going through the financial calendar is the 20% is an appropriate assumption. And then as you've seen in the last couple of years, what we do is we determine after the year-end, how the organization has done strategically, financially, operationally in terms of delivering for clients and then we adjust around that 20%. So our budgeting assumption is 20%, and we will accrue at 20% at the half year with a true-up at the full year point.

And the second part of that question was about performance. I think it depends by fund. So there will be some funds that are doing relatively well, some are not. Remember, public funds are in service entities of our business and there is separated account activity, too. And so it really depends across the piece. It's not just about certain public funds.

Next question is from Mike Werner, UBS. The last time the intermediary retail mix of AuM was 15 -- was at 15% 2 years ago. And a large proportion of it came from the short duration bond fund. In order to get back to 15% share of retail AuM, can that be achieved without relying on a single flagship fund?

Well, we’d like to hope so. It relies on performing across the piece in a variety of different products and the distribution team being able to sell them. What tends to happen in retail a little bit is things catch a bit of a wind to their back or a wind in their face. And that's exactly what has happened several times. And we've seen this since we began retail in Japan -- how many years ago? 10, 15 years ago. The good thing about something retailers -- sometimes people find it because your distribution team do a good job. They buy the stocks of it, and then they change their minds at times if they're high performance or they think there's a tactical asset allocation reason to move it. Typically, reading analysts and thinking there are times to move things around in terms of different products. So you do tend to get swings within the product. We would love to have 20 very large products. But what tends to happen is you tend to get several products that have grown scale steadily. And then 1 or 2 that tend to gain assets quite quickly and lose them quite quickly. It's the whole point of retail investment management, I don't know everybody knows. And that's one of the reasons that we wanted to be a part of, not all of it. But we'd like it to be a bigger part because it's higher margin, and we believe we've invested in the teams to be able to talk to the space, and we like -- as long as we continue to perform, we'll grow that.

Second question for Mike is, what opportunities do you see in private markets and your alternatives theme to launch new products?

Private markets obviously have become a sort of a very popular destination for asset allocation from institutional allocators. And to a lesser extent, from retail, but really from institutional asset allocators. Private markets are a bit patchy in terms of where the opportunity is and how much is provided. We've always looked at private markets as part of what we do in investing both in equity and in fixed income. We find that there are particular themes that we like to pursue that we think are growth themes within emerging economies, particularly in the equity space, private equity space that is. And so it's a part of what we do. The key to investing in private markets as a dedicated product, and we've done this in the past, is making sure that you get the variety of opportunity. And you're in a structure that is appropriate in terms of liquidity. And what we've -- and we've -- several times, and we think there's enough interest to create dedicated product. We're not seeing a huge amount of demand for dedicated private market product within the fixed income space, and there's ongoing demand for private equity, and we'll tend to pursue and grow that, and we expect to grow that through our alternative asset box, very much on a sectoral basis, looking at things that we feel very comfortable doing that we've done well, health care, education, real estate, et cetera.

And final few questions so far from Arnaud Giblat at Exane. First of all, what plans do you have to accelerate the mini Ashmores around the globe? And where can you open new subsidiaries to accelerate this over the medium term? Secondly, can you comment on the retail versus institutional margin development over the year? And finally, are there any redemptions within the institutional pipeline to be aware of? And how do you expect the pipeline to fund?

Let me deal with the first one, and then Tom second. And then I can perhaps talk about the third. Mini Ashmores. Well, as you know, it's been a part of our strategy since we started to find quality people that we think we can get on with in markets where we think demographics makes sense to build asset management businesses within emerging economies. It's the core tenet, third tenet of our strategy. We continue to want to do that. The trick, of course, is to find the right people in the right place. And that means that we would expect that as we -- there are markets we've identified where we'd like to be active. We need to find the right people, and we need to be, if you like, the right partnership together to justify investing in the time and money to grow an investment management business over 5 to 10 years, not over 5 minutes. So we think there is the opportunity for other mini Ashmores. It's a little harder to start them in non-traveling COVID basis than it would be if we were back to how the old normal was. So it's interesting that I think there's some impact on being able to develop them from scratch. In our existing businesses, we need to support them doing what we're trying to do, which is make sure we have a common platform, allocate capital to grow assets when we need to in products. And make sure that we're working together in a way that we get the benefits of being together. So we want to do more of them. We need to be able to meet people, travel actively, et cetera, to be able to do so. That was the first part wasn't it? Tom, over to you.

So the second question was the margin impact of the change in mix between retail and institutional. And as we've talked about before, there exists a net revenue margin premium from the retail channel. It's net to ourselves or any trail fees or pay aways to the distributors. So that still exists somewhere in the region of 10% to 15% versus the comparable institutional product depending on where you are in terms of fixed income or equities. Over the course of the last year, the reduction in the -- or the shift in balance, the reduction in the proportion of intermediary retail capital was about a 1.5 basis point impact on the net revenue margin reported at the group. Now that can reverse, obviously, the other way in that period where we grew intermediary retail balance to over 15%. It was a positive 1 basis point impact. So yes, as Mark said, we're absolutely committed to the channel. We want to grow it from here. We think we've got good products and shelf space in place. So it's possible that, that mix effect will turn around and it can be a positive contributor to the net revenue margin going forward.

Yes. Thanks, Tom. And in terms of flow, obviously, we can't be specific, but we're seeing normal client activity, and we're expecting to see -- we're seeing pick up already in terms of decision-making allocation for the last quarter of the year, we are set to see more activity. So we're hoping that will be a positive one. We have a pipeline that we think is fine, and we're looking to reap it, harvest it.

And no more questions.

Well, thank you very much for coming, so to speak. It's nice to see you not, I guess. I'm looking forward, I really do hope that the next time we do this, we'll be face-to-face. And thank you very much indeed for your interest in what we do. And thank you for where you're an investor for investing and where you're not an investor, please become one. And we look forward to seeing you again, as I say, in the near future. And thank you very much, Paul, for organizing and for demonstrating that you are wearing a shirt. Thank God. If you've been in the vest that would have been a bit nasty. And to Tom for all the detail on everything else. Thank you very much, everybody. And we look forward to seeing you again soon, as I said. Bye-bye.

Thank you.