GQG Partners Inc. (GQG) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the GQG Partners Inc. 2023 Half Year Earnings Release Conference Call. [Operator Instructions] This call will contain forward-looking statements, including statements of current intention, opinion and predictions regarding the company's present and future operations, possible future events and future financial prospects. While these statements reflect expectations at the date of this call, they are, by their nature, not certain and are susceptible to change. The company makes no representation, assurance or guarantee as to the accuracy or likelihood of fulfilling any such forward-looking statements, whether express or implied and, except as required by applicable law or the ASX listing rules disclaims any obligation or undertaking to publicly update such forward-looking statements. Participants recording this call may use such recordings for their internal business purposes only and are prohibited from making any part of such recordings available to the public without the prior written permission of the company. I would now like to hand the conference over to Mr. Tim Carver, CEO. Please go ahead.

Thank you, and thanks, everyone, for joining us for our half yearly earnings call. We're thrilled to be here. I'm joined today by Rajiv Jain, our Chairman and CIO; Mel Zakaluk, our CFO; and Steve Ford, our Global Head of Sales and Marketing. Now if we go to the second page, I'd like to present the result for the half yearly period. We ended the period with a record $104 billion in funds under management on the back of $6.2 billion of net flows for the first 6 months. Net revenues achieved $237.1 million, an increase of 6.5% from the prior period a year ago. Net operating income grew to $176.4 million, an increase of 1.3%. And the Board declared a second quarter dividend of USD 0.0217 per share, a 90% payout ratio of distributable earnings. If we go to the third slide, there are a few highlights I'd like to share with you from this period. First of all, while our investment performance year-to-date was mixed, our long-term investment performance continues to be very strong. All of our strategies have outperformed their respective benchmarks on a 5-year basis. We have top quartile 5-year alpha and Sharpe ratio on our 4 primary strategies and 11 funds now carry Morningstar Gold Medal ratings. All these were key considerations for clients from choosing to work with GQG. On the distribution front, we are now a top 10 U.S. mutual fund family, a remarkable achievement, and I give great credit to our sales team for achieving this. In Australia, our global equities, net flows were first out of all Morningstar categories. In Europe, our UCITS complex has surpassed $5 billion of funds under management, and we continue to see strong sub-advisory momentum across the board. This demonstrates the breadth of our distribution capabilities and the global nature of our client base. We're achieving great success in lots of different places. Our team has grown to 170 people. We've added 20 new headcount across infrastructure and sales and new business opportunities. Finally, we've been quite active in looking at ways to add new talent to the platform, whether that be a lift-out opportunities, recruitment opportunities and M&A opportunities. On the 27th of July, we announced an indication of intent to submit a proposal to acquire ASX-listed Pacific Current Group. If we go to the next slide, you'll see our investment performance across all 4 of our strategies, both on the short term, shorter term, 1 year all the way through inception to-date. I note that while we had mixed performance with our global and U.S. equity strategies behind on a 1-year basis, EM on a 1-year basis has performed quite well. And all of our strategies over the long term, have performed quite well. We're going to dive deeper into performance in a minute, but I want to present this here early in the presentation because as you've heard me say before, I believe this business lives and dies by investment performance. On the next slide, you'll see what we call our operational value added, that is what is the management team doing to earn its keep? How are we adding value for our shareholders? This compares the real outcome for GQG, as compared to a passive outcome. So you see we started the year with $88 billion in funds under management. And for the period, we added over $6 billion in net flows, we added $300 million in alpha. And if you look down, you'll see we also had the market benefit of another $9.6 billion [ from ] market returns. When you add our excess return plus our distribution, you see that the team added $6.5 billion of funds under management to the platform for the benefit of shareholders. And when you combine that with a very strong alpha -- sorry, beta in the market this year, you'll see that it drives FUM growth of nice double-digit growth in total FUM. So with that, I'll hand over to Mel, who can bring us through the financial results. Mel, you need to unmute.

Apologies. Thank you, Tim, particularly for telling me to unmute. Slide 7, please. We are pleased with our financial results in the first half of 2023, with our FUM continuing to grow, we believe we have nice momentum into the second half of the year. Looking at the revenue bar charts on the left side, and starting with the first half of 2022, we were able to demonstrate solid growth in revenue. This was due to an increase in average FUM during that period, even as equity markets experienced down draws of around 20%. In the second half of 2022, revenue declined modestly, as did our average FUM, as equity markets were unable to recover during the period, although, we did experience positive net inflows. In the first half of 2023, we were able to deliver revenue growth once again, exceeding our previous 6-month peak from the first half of 2022. Our operating margin for the 6 months ended 30 June 2023 remained strong at 74.4%, even as we continue to invest in the firm's infrastructure and client-facing teams. Comparing the second -- the half year results of 30 June 2022 to 30 June 2023, net revenue, net operating income and net income after tax all increased. As Tim was saying, in the first half of 2023, we crossed the $100 billion FUM milestone, ending June 2023 with $104.1 billion, a 20.1% increase from 30 June 2022. FUM growth in the first half of 2023 was driven by $6.2 billion of net flows, as well as capital appreciation, as the equity markets rallied during the period. I would like to also draw your attention to the top right chart. In the chart, you see dividends paid per share of [ 0.0387 ]. This represents, on a per share basis in U.S. cents, the actual amount we paid during the first half of 2023. We declared dividends based upon earnings in Q1 and Q2 of 2023 of [ USD 0.0417 ]. Slide 8, please. Revenue remains high quality comprised of 97% of management fees with a competitive average management fee of 48.3 basis points, slightly higher than the 6 months ended 30 June 2022 and the year ended 31 December 2022. We believe a high concentration of management fee income is the foundation for quality earnings, creating stability, particularly evident in volatile markets. Costs during the period increased as compared to the 6 months ended 30 June 2022 by 25.2%, as we continue to grow the business with a mixture of ongoing and onetime expenses. More than half of the ongoing expense growth is related to investments to grow the top line and the remainder focused on infrastructure to build scale and sustain a growing business. The timing of our investments in the business is purposeful, as we aim to capitalize on our historical strong relative investment performance, [ while just ] compared to the strategy benchmarks and our peers. We expect to continue making prudent investments in the business during the remainder of 2023. As expected in a human capital business, our compensation and benefit expenses are circa 55% of our total operating expenses. We believe the greatest investment we can make in our existing and new -- is in our existing and new talent. The increase in human capital related to expenses of 23.7% for the 6 months ended 30 June 2023 compared to a year ago and are primarily the result of investments in new hires, annualized compensation associated with 2022 hires and cost of living to market adjustments in the second half of 2022. The 27 team members added year-over-year were across the business with approximately 55% market-facing and 45% allocated to the infrastructure. We expect additional talent in the remainder of the year to be similar in allocation. Third-party commissions at FUM-driven expense increased year-over-year by $1.8 million, driven by the increase of average FUM in our UCITS and our U.S. 40 Act mutual fund complexes. We expect this expense to continue to grow with the excess of our wholesale business in the U.S. and Europe. Comparing general and administrative costs for the 6 months ended 30 June 2022 to the same period in '23, expenses increased by $3.7 million. Approximately 1/3 of the expenses -- of these expenses were related to market-facing activity and half to infrastructure, while the remainder were onetime costs associated with various business activities expected to continue in the second half of 2023. Our increase in infrastructure-related costs is largely the result of leasing additional space in New York City. We recently entered into an agreement to sublet our previous space, which over time will reduce rent expense. IT and information service costs increased modestly, reflecting general growth in the business and GQG's continued investment in cloud-based infrastructure and cybersecurity best practices. As you would expect, the largest single expense is taxes. Our GAAP effective tax rate decreased from 27.59% to 27.44%. The fluctuation in GQG's tax rates are primarily driven by state taxes. In particular, the geographical mix of client form is a driver, as each state has different rules on how income is apportioned and unique tax rates. Slide 9, please. GQG's continues to have a strong balance sheet with no debt. Our revolving credit line with HSBC remains undrawn. Slide 10, please. The primary uses of cash continue to be for working capital and dividends or distributions. The dividends paid in the first half of 2023 are 90% of distributable earnings, as is the dividend we're declaring today of USD 0.0217 per share, a total of $64.1 million. Distributable earnings are net income after tax plus the tax cash savings from the goodwill deferred tax asset resulting from the IPO. Now Tim and Steve will give a business update.

Thanks, Mel. I'm going to start with performance, and then we'll turn it over to Steve to talk a little bit about the distribution strategy. If we go to Slide 13, when we see our performance again, this harkens back to the slide earlier in the presentation, where you can see our 4 key strategies, where we plot relative to the market and where we plot relative to our peers and competition in a quartile basis. Again, you can see here in the short term, we've had mixed results. Long term, we're solidly in the top quartile across all 4 strategies and well ahead of the benchmark. If we go to Slide 14, I think the most important thing to understand is the journey of our clients and why clients hire us. Here, we are the green line across this chart. As you see over time, this is our global equity strategy. As you see over time that we are very solidly in the top quartile and in most periods at the very top of the top quartile of our peer groups. Importantly, the yellow highlighted sections are when we've had significant drawdowns in markets, and you note in those periods, we tend to perform far better than our peer group and far better than the market. That lower risk profile compounds over time and has driven us to this long-term investment performance, which mixes high alpha and structurally low beta. If you go to the next slide, you'll see that across those 4 strategies on every rolling 5-year period, we are meaningfully ahead of the benchmark. And Slide 16, depicts us in a slightly different way. Here, what you see is long-term outperformance relative to the benchmark and our peer group with significantly lower volatility. Hence, our risk-adjusted returns are really what stand out. Because we've had such persistence in long-term performance being both lower volatility and structurally above the benchmark, we view that our clients are continuing to be sticky, and we believe that this underpins the reason that we're able to raise money even in try market environments. On Slide 17, finally, we see that over time, we've had structurally high alpha. Here again, we are the green line at the top of the top quartile over time and persistently low beta on the right-hand chart. Steve, why don't you take it from there and talk a little bit about how you use that performance to drive distribution.

Thanks, Tim. It's good to connect with all of you again, not only as the Head of Distribution at GQG, but also as a shareholder in the firm and certainly affirm Tim your comments on what I think matters to clients, and it's very much about what their expectations of the performance pattern are, and in our case, I think that's very much about downside protection, it's very much about high risk-adjusted returns and then the persistency of those returns. And it is that foundation that allows us as a distribution team to go out and capture market opportunity. And so I want to start with Slide 19 and actually talk a little bit about the diversification and the granularity that is our client base and how our distribution is able to create this kind of moat around our business. And so you see the diversification, which Tim has talked about by strategy, which is obviously very important. You see it in the granularity of the client base, where in our institutional client base, where you might expect to see outsized exposures to individual clients, that is not the case. And I think most importantly, you see it through the channel diversification that we've been able to achieve. So our core institutional business remains very much in a strong position. Our sub-advisory business headlined by our partnership with Goldman Sachs, among others, constitutes a meaningful portion of what our opportunity set is. And then our GQG branded wholesale business being the fastest-growing part of our business represents, again, a meaningful diversifier to what we're doing. Now the one chart that probably seems a little bit less diversified on this slide is the bottom left, and looking at year-to-date net flows, and you see quite a tilt towards the Americas, and that is representative of the opportunity that we saw in the first quarter. But what you're missing there is there's some idiosyncratic behaviors that are going on in the institutional market outside of the U.S., in particular, that I think will abate at some point that are causing lower risk appetites, et cetera. And what you're missing is the picture of what the top line sales opportunity looks like, which is much more equalized and robust across our geographies. So I do not expect that picture to remain the same. I would appreciate some normalization of that over time. So moving to Slide 20, you see some granularity then of the time periods broken down, and it's a pure coincidence, but we did $6.2 billion in the first half of this year. We did $6.2 billion in the first half of last year. You see the strength in the sub-advisory business, as we spoke about. You see the strength in the wholesale business. Our institutional business is still performing well, but seeing some pressure from client reallocations. And if I look forward to what I think are likely to be anticipated areas, where we could see future growth, I think that's going to come from, again, the robustness of the wholesale distribution effort that we have built in Australia, the U.S. and the U.K. We've expanded that opportunity set through the launch of retail SMAs, which we've addressed before. There has been minimal platform adoption of that at this point. So it creates a significant headroom for growth for us in that channel. And our sub-advisory business, not only will -- I think we are likely to see continued strength in our existing client base, but also potential new opportunities and other diversifiers there. And then finally, in the institutional space, one of the things that we are seeing at this point for new opportunities for us, is replacement searches for managers, who did not meet their clients' expectations, in particular, last year in terms of downside protection. And so that creates a new search opportunity in the institutional space, where we're well positioned to capture market share. So moving to Slide 21, I want to take just a minute and highlight our U.S. wholesale distribution effort. Tim mentioned that we were a top 10 mutual fund family by net flows in the first half of the year. Here you can see that breakdown amongst some of the most largest and well-known and well-resourced firms in the world. And this has been a big investment for the firm in terms of our distribution effort and infrastructure to support this business. So today, we've got 27 platforms in the U.S. that carry GQG funds, many of which have our funds plugged into discretionary models, where it's not just a single GQG fund decision, but we're benefiting from the broader flows from those platforms, which is very powerful. We've got a 9 territory sales team in a total of 17 people solely dedicated to this channel in the U.S., and we've invested significantly in our marketing and support of our wholesale business globally, not just in the U.S., but it very much matters, as we seek to address a 300,000 market of finance -- [ 300,000% ] market of financial advisers here in the U.S. for brand recognition, for content and digital distribution and delivery. And ultimately, the data that we collect from that has value as well, and we are actively working on strategies that help us better prioritize that data to better engage our sales team moving forward. So I want to move to Slide 22, and as you've heard Tim and I speak before about leading indicators for distribution, the best leading indicator is performance. and in particular, risk-adjusted performance. And so if you look at the GQG funds on a star rating, which is simply MorningStar's version of risk-adjusted performance, 4- and 5-star ratings, of course, I think, portend very well for what clients will be evaluating. And then, Tim mentioned the Medalist ratings as well, which I think are worth revisiting. So again, Morningstar's proprietary way of doing this, but it's a mix of their quantitative and qualitative review of GQG's funds and the funds that they believe are likely to outperform the benchmark on a go-forward basis. And of course, 11 of the 12 available funds for rating at GQG carry the Gold Medal rating, which I think, again, portends well for a leading indicator. And the final piece is about engagement. So as a team, we're out with the risk-adjusted return story and everything else that is GQG's performance pattern. And then it's our job to get the best allocators in the world to pay attention. And eVestment Alliance is the world's largest institutional database, and you can see on Slide 23, they rank the profile views of every product and every category. And in our 4 primary products, we are the first percentile across the board. And so I believe that is a combination of the performance results and our team's ability to engage allocators around the world. And it doesn't make anybody allocate, but it certainly puts you in the strongest position possible, so that if there are opportunities, we're allowed to compete and hopefully win those. So with that, I'll pause there. I'm going to turn it over to Rajiv Jain, our Chairman and Chief Investment Officer, and he's going to share his thoughts on the current investment environment.

Thanks, Steve, and thanks, everybody, for joining. As particular this audience is very well informed what's happening in the market, so I don't need to be redundant here. But from our vantage point, I think [ few other things ] have happened. I mean, if you were sitting here in 12 months ago, we had significant overweight to energy, and that has helped us navigate what was probably one of the worst periods for -- particularly for growth managers, especially quality growth managers reasonably well. And if I look back, interestingly now on a 12-month basis, we are ahead of all the strategies except the U.S. equity. And then the portfolio looks remarkably sort of different in certain ways, although, we still overweight energy, but we're now actually meaningfully overweight tech in a lot of these portfolios. And this just talks about the longer-term dynamic -- the dynamic nature, which is very, very data dependent, where the corporate earnings started reacting to that rather than being [ dogmatic ] in particular -- any particular area. So we feel good, where we -- where the opportunity set is. Corporate earnings by and large in our book has been reasonably strong. And I think if I have to comment a few different things is that there seems to be a shift in favor of some of the emerging markets in terms of the -- just the fiscal discipline you've seen in monetary policy. Interest rates are already very high in a lot of these countries, so -- which are likely to be cut. So as we get closer to the end of monetary tightening, I think some of the emerging markets could be particularly interesting in the global context at the expense of some of the other markets, maybe, I mean, outside of North America. So our portfolios at this point, again, subject to change are much more heavy in areas, where we find fairly strong corporate earnings, particularly the North Americas, the parts of emerging markets to the -- and to the expense of Europe and Japan and so forth. So I'll just -- so leave it at that, and obviously, happy to answer questions in the Q&A session.

Great. Thanks, Rajiv. And with that, we are going to go to Q&A. But before we do so, I'm going to read a quick statement about the questions we'll accept. As most of you are well aware, GQG Partners launched an announcement with the ASX on 27 July 2023, noting its intention to submit a non-binding indicative proposal to acquire all of the issued ordinary shares of Pacific Current Group Limited. Our intention has not changed. At this time, it would be premature to comment further on the announcement or Pacific Current Group in general. And accordingly, we will not be taking any questions related to those matters on this call. With that, I'm happy to open it up to Q&A.

[Operator Instructions] Your first question comes from Gerardo Covarrubias from Barrenjoey.

Congrats guys on good results. I guess, fair enough on the acquisition, but -- if we can just move on from that. Firstly, employee expenses. You've added several employees in the half. Can you give us a sense of the timing of the hires? I mean, how much of the full run rate is captured in the first half '23 already? And beyond that, just what can we expect in terms of new hires into the second half? And at what point do you see this stabilizing?

Thanks, Gerardo. I'm going to let Mel take the timing question, but let me before -- before she does that, let me [ start ] to give a general picture. So we have added a number of people. And my expectation, as Mel indicated in her commentary is that we'll continue to do so through this year. They are slightly weighted more than half both headcount and expenses generally to what I would call investments in opportunities that we believe will drive future revenue, and then slightly less than half in infrastructure that's required to keep up with the growth. And I think it's really important to make a couple of comments here. First of all, just to reiterate to everybody, we think, first and foremost, as shareholders, so for Rajiv and I, we are -- the vast, vast majority of our income comes through our ownership of GQG, where we are shareholders first. Steve and Mel are in the same boat, having very significant holdings of GQG. So when we make these hires and make these investments, we're thinking as shareholders, not employees. And therefore, we are hypersensitive to making sure that we are seeking a return for the investments we make. Second point is we're an investment firm. And so we do think pretty tightly, pretty strictly about the investments we're making in having a tight ROI. So for those expenses that are related to driving new business, we do that as Mel noted, because we think our performance is differentiated and there are new opportunities for us to pursue. But if we're unsuccessful in that, we can unwind those expenses. So I would take, as an example, the infrastructure costs of, say, for example, adding to Mel's finance team, those are quasi-fixed. They can be reduced, if we got a massive redemption of assets. But you should think of those as more fixed, whereas as we open new offices, and we have onetime expenses related to legal or compliance or regulatory or accounting needs, the service provider costs that show up in G&A, for example, those are either onetime or they can be unwind quickly if we believe that the investment we made is not going to bear fruit. Our view, of course, is when we're making those investments is to the end of driving high-margin revenues in the future that we'll have a high payoff for the investments we made. So the contexture that's the way we look at it, Gerardo, and I think my expectation, as Mel said, is that we will continue to have some growth through this year, but the growth is all very idiosyncratic based on real-life opportunities like M&A opportunities and like expansion into new offices. So it's not a general high-level addition of people, it's tied directly to specific opportunities that we're working on right now. Mel, do you want to add to that?

No. Tim, I think you said that exactly right. Regarding timing, there's no specific timing. I mean, we have added people throughout the 12 months since 6/30, 2022 and throughout the first half and kind of a -- not a ratable format, but just as we find the right people and are able to bring them on to serve the business and the capacity Tim was just discussing.

Yes. Great. That's clear. Just, I guess, related to that, the progress you've seen in Australia. I mean, we've talked about this, but you've made an important number of hires. I think last time we touched base, maybe you had a distribution team of probably around 15, 16 here in Australia. However, in the net flows number you disclosed today of $0.2 billion in the APAC region, that kind of seems to suggest there's still -- there's still isn't a lot of traction. So can you share with us what are your main obstacles to-date here in Australia? And just generally how the business is progressing here?

Yes. So I respectfully think that, that's not the right thing to take away from the commentary. Our global equity fund is the #1 flows in all Morningstar categories in Australia. We continue to have -- to be one of the top gatherers of assets in that market. I think as Steve explained, there are 2 factors. One is that the market as a whole has been softer overseas relative to the U.S. in terms of fundraising; and number 2, on the institutional side, it's obviously episodic. And so it's really hard to extrapolate one quarter to have sort of perfectly consistent growth quarter-over-quarter. But we're very confident in the investments we've made in Australia, and I think we're -- we see real-time success with the distribution efforts in that market.

Your next question comes from Brendan Carrig from Macquarie.

Look, I didn't have too many. Just a quick follow-up just on performance fees. I know we've talked about it in the past that it's not a huge driver of the total fee income. But are you able to provide any additional context or details, as to how we should be thinking about the performance fee, as a percentage of total FUM -- or are you able to let us know what proportion of FUM is exposed to performance fees for us to sort of better estimate performance fees given the last few halves have been fairly encouraging at that sort of mid- to high single-digit range [ per half ]?

Yes. What we've always said is my belief is you should expect performance fees to not exceed single-digit percentage contribution to revenues. And I think that -- I stand by that. I don't think that we, over time, will have meaningfully -- meaningful growth in performance fees relative to the business that comes [ into base ] fee. We've disclosed prior the performance fees come from a handful of large institutional mandates and sort of geographically spread. But we don't give specific guidance, as to exactly for competitive reasons that are probably obvious exactly, who those clients are or what the exact structure of performance fees are. But in aggregate, I continue to believe that it should be -- should not constitute more than sort of single-digit contribution to revenues.

Sure. Okay. And then on -- just on the flows, just sort of following on from the commentary you just made there Tim. So in terms of geographically, looking ahead, I'd just be interested in any sort of thoughts on where -- whether you think the U.S. is likely to remain the stronger area or a stronger generator of flows? Or are you starting to see signs that may be parts of APAC and/or EMEA are showing signs of improvement sort of post-Brexit over in the U.K.? Or any sort of thoughts there?

Yes. If you looked at our last FUM report, you'll note that we continue to see outflows from the U.K. So U.K., I would call out the U.K. institutional market, in particular is the -- is probably the weakest market, and it's really hard to see when that ends. This is to my way of thinking, exogenous to us, or for that matter, other managers, it really is about derisking in the U.K. away from equities generally. I do believe that the U.S. will continue to be a very strong market. I think Australia will continue to be a strong market for us. I believe Canada will be -- continue to be a strong market for us. We are making investments in the Gulf region, and that's been a strong market for us historically. And I believe, structurally, if I take a 10-year view, that could be a very strong market. So as Steve noted, we did have very disproportionately strong flows in the U.S. region, but I'm actually -- if I take a long enough view, I'm pretty bullish on the Middle East, certainly on Australia, certainly around Canada, and we will, I think, continue to do well in the U.S. Steve, is there anything you'd add to that?

Yes. No. The only thing also I would add to that is just on a bigger picture, if you zoom out on a country-to-country comparison, the U.S. market is somewhere in the order of 8x to 10x bigger than Australia, right? So depending upon which channel you're looking at. So there -- it's not exactly an apples-to-apples comparison. It doesn't mean there isn't a lot of headroom for us in Australia. There certainly is. But just by sheer -- by sheer size and magnitude, I think the U.S. is -- would likely to be a dominant market for us.

Okay. That's clear. And then just a final one. [ Look you said it is on ] M&A, but more broadly, so not pack specifically, but I'd just be interested in sort of your overarching commentary in terms of how you're thinking about M&A when assessing opportunities and sort of when you're weighing up, yes, so what factors are you weighing up when assessing M&A opportunities to sort of decide whether you're going after pure-play asset managers or boutiques and obviously, [ how it could ] fits into one of those categories. But just more broadly, what are the sort of check boxes that you're thinking about with the M&A strategy?

Yes. So first, I'd note that we've been very, very active and increased our activity in looking at adding talent to the platform. And you've heard me say this before, but I believe that -- this is a business, where we want to attract as many key people and talented people to the platform, as we can. And in the long run, our ability to attract talent is what will perpetuate the value of this business. So we are very active in looking at everything from recruitment to lift outs to M&A. In terms of what we're looking at, it's sort of like our own business, where we say this business begins and ends with performance. No matter what we do, we have to believe that the investment talent is really deep and that there's a differentiated story that will add value for clients. And so that is the key consideration, the first consideration, and the one that [ Sachs are saying too ] is that we have to believe that there's investment talent that's coming on board that will benefit clients. The second one is that will there be a strong cultural fit, where we believe that it will be additive to our team, not distracting to our team. And if we have those 2, then we're very open-minded about where we can source or find opportunities and what those might look like. So we're happy to be very broad. We're not constrained geographically. We're not constrained by asset class. We're willing to look at anything that we think can benefit clients and be additive culturally to GQG.

Your next question comes from Dylan Jones from Ord Minnett.

Apologies, if I missed this in the presentation, but I don't believe you called out any new sub-advisory relationships during the [ half ]. Firstly, would that be a correct assessment?

I think we did not call out any new sub-advisory arrangements that were added in the period. That's correct.

Yes. Cool. And just following on from that. I guess the [indiscernible] highlight some large opportunities in the sub-advisory channel. Can you maybe just expand, I guess, on the sort of [ late ] and are these typically tied to secure and whether any of these sort of larger opportunities or be it further along in terms of progression?

Yes. I'll let Steve elaborate on this. But what we're referring to there are really what the sub-advisory opportunities that are in place, we have more than a dozen in place around the world today, many of which are -- have very significant headroom for growth over -- over time. And when we take them in aggregate, we believe that there is a significant opportunity for us in aggregate in sub-advisory. And we've talked about this before, but part of what's so attractive about sub-advisory is that it enables us to get into markets that are -- that a small boutique would never be able to get into, where we don't have to build the infrastructure cost. And so Steve can speak to, for example, the variable annuity market in the U.S. or Canadian retail, but there are lots of different places that we're partnered with sub-advisory distribution partners. The largest, of course, being Goldman Sachs in the U.S., but there are lots of different opportunities that we're pursuing. And when we look at those in aggregate, we see quite significant headroom for growth. Steve, do you want to add to that?

Yes, for sure. I'm not going to speak to kind of timing of anything or specific expectations. But I would say that, yes, the existing relationships have their own distribution in many cases and are in a strong position to continue to capture and/or accelerate flows. And in terms of new opportunities, one I might have you think about is in the defined contribution market, it often requires longer track records, more assets, et cetera. And some of those opportunities have not been, as open to us, as they were in the past. And yes, would be one example of where there might be new opportunities and relationships with sub-advisory that don't exist today. So that's not the only one. There are many others that could avail themselves to us and we're actively pursuing all of that.

Got it. And maybe just got one last quick follow-up. I know you just spoke about performance fees before and I accept you obviously don't want to go too much into the structure. But are you able to provide a bit of a sense and maybe just remind us, if there's typically sort of the first half, second half [ bias ] within performance fees and the timing around when those are accrued?

I don't believe we've talked historically at all about the seasonality of the performance fees. So I don't feel that I don't want to comment on that now. But we'll take that away as soon as we can look at.

Actually, just one comment I want to make on the performance fees just to clarify because this is a big issue in Australia, as you know, is that this is not a 6-month performance fee. I mean, we -- it's much more longer-term oriented. So I don't believe, Steve [ covered it wrong ]. There's anybody who pay us anything on a 6-month performance fee. So unlike most of the hedge funds, where 6-month bad performance, all of the wheels come up. This isn't that story so.

We have a follow-up question from Gerardo Covarrubias from Barrenjoey.

Two follow up on that sub-advisory theme. There's been a lot of change at Goldman recently with several high-profile departures, particularly from the Asset Management business, clearly, GSAM has been instrumental for your growth. So just curious to hear your thoughts on the current state of that relationship and whether some of those recent departures post any risk to the current arrangement that you've got with them?

Yes. Thanks, Gerardo. No, we met with all the senior management of GSAM, particularly the folks that we interact with on our relationship, and no, I'm very, very confident that, that relationship remains strong. I don't see any risk at all to our relationship with Goldman, nor do I see any risk to the team at Goldman not performing at the level they performed historically. The changes obviously make the headlines. But I think the grassroots on the ground activity remains very, very strong. We don't see anything in the data that would suggest to us that there's risk in either their performance execution or their intent to work with us.. And I'd just remind everybody that this is not only a very good relations for us, but it's one of the most important funds for Goldman as well in their lineup across the whole business. So very strong relationship. I'm very confident, I don't see any risk at all.

Yes. That's clear. And maybe just one more. On management fee margin, that was obviously one of the most pleasing elements of the half. I acknowledge some of your earlier comments, Tim, that it's hard to extrapolate. But given you're [ calling up ] continued strength in wholesale, can we expect perhaps further support into the second half, as your FUM mix continues to shift towards wholesale. Maybe any comments on that?

Sorry, Gerardo. I didn't -- I'm not sure, I fully followed the question. Were you asking whether we expect our blended fees to increase if the mix shifts?

Yes. That's right. Your management fee margin increased slightly sequentially, and given that your mix -- given that you're continuing to perform strongly in the wholesale channel, which is higher margin, should we expect a little bit of a further sequential increase in the second half, as your FUM mix continues to shift towards wholesale?

Yes. It's -- I think, you heard me say this before. I think that if I were predicting, if I were trying to sit in your seat and predict this, I would use the most recent data point to extrapolate out versus trying to predict something different because there are so many variables. It's not only channel, it's geography, it's strategy. I think you've seen EM perform well. So to the extent that you have a mix shift that favors emerging markets and favors retail, you would expect management fee margins to expand, to the extent that it's developed markets and institutional, you'd expect it to probably contract a little bit. So it's very, very hard to predict. And unfortunately, I can't give you any real meaningful guidance there. But your assessment is right to the extent that the basis of it is right. So if you see increased EM, retail, one would expect management fee margins to expand.

Thank you. There are no further questions at this time. I'll now hand back to Mr. Tim Carver for closing remarks.

Thank you. Well, I just want to thank everybody for joining us today, and we look forward to continuing to deliver for you, as shareholders ourselves and right alongside of you, we'll continue to do our best to execute, and appreciate the time and the interest.