Impax Asset Management Group Plc (IPX) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to today's presentation on Impax Asset Management's full year results. Today, we'll hear from Impax' CEO, Ian Simm; and CFO, Charlie Ridge, as we always do. There will also be a question-and-answer session at the end of the presentation. Just to let you know that today's session will be recorded for playback purposes, and a link to the playback will be circulated later today. Without further delay, may I please ask Ian Simm to begin the presentation. Ian, over to you.

Okay. And hello, everybody. So we can have the first slide, Slide 3. Thank you. So Impax has had an excellent year. These are the results to the 30th of September 2020, which, of course, is our year-end. So over that 12-month period, we increased our assets under management by 34% to GBP 20.2 billion and as well as market movements, there was a record level of inflows, GBP 3.5 billion. We have, of course, been working through the very difficult COVID-19 period, which has proven a period of resilience for Impax. And looking to the future, we do believe we've got a very solid platform for further expansion. As you can see at the bottom of the Slide 1, quite a number of awards this year, a selection of which are shown here. Next slide, please. Slightly different format for presenting these numbers, which normally appear in a table, hopefully a little bit more digestible. So revenue on the top left increased 18% to GBP 87.5 million. Our adjusted operating profit was up 29% to GBP 23.3 million, and we've had increases, of course, in EPS as well. The top right, you can see not only did we increase our assets under management to the end of September, but we've had a very strong start to our new financial year from 1st of October. So with the 2 months of the new financial year, we've increased assets under management further to GBP 23.4 billion as of the end of November, a few days ago, and that was inclusive of GBP 1.9 billion of net inflows over 2 months. You can see in the bottom right, our dividend proposal of 6.8p final dividend, which would take the annual payout in dividends to 8.6p, which will be a 56% increase on the prior year. Next slide. So just a reminder, we are an investment manager with a very distinctive investment philosophy that the transition to a more sustainable economy will lead to great opportunities over the next decade and beyond as well as risk for incumbent legacy companies. And so the listed equity, private equity and fixed income strategies that we run are really aimed at exploiting those opportunities and navigating the new risk landscape. We've been in business since 1998. We now have a cohort of over 175 staff with 57 of those staff being investment team members, which makes it, the investment team, one of the largest investment groups anywhere globally dedicated to this area. You can see on the doughnut, the pie chart if you like, that our so-called environmental market strategies, which are the listed equity, thematic portfolios that we run 35 to 55-or-so stocks each, represent approximately 3/4 of our assets under management, but we've got good representation in 4 other categories as well. So a little bit more to come on those in a moment. Next slide. The market context in which we're operating, of course, is very positive at the moment, so with another year to run until the climate change conference in November to be held in the U.K. Then there'll be a lot of interest in climate change over the next 12 months. The election of Joe Biden as President should bring about a much more positive domestic environment in the United States around environmental protection and a sustainable economy. And there's clear evidence around the world of societal support now for sustainable development. The investment opportunity set that we're exploiting has grown out of all recognition really in the last 20-plus years, and we are seeing no slowdown in that, well, rapid rate of expansion. Meanwhile, asset owners and allocators around the world are increasingly seeing the attractions of the space that Impax is operating in the transition for more sustainable economy. And so we've seen much more evidence of research, of manager selection, due diligence and general education around the world in this area so that our prospective client base is [indiscernible]. And Impax with its long track record, its solid, dedicated team with great robust products, which fit very nicely into the asset allocation models and a well-established client base around the world is very well positioned. Next slide. So COVID-19, of course, has been a tragedy for many, hundreds of thousands, if not millions of people around the world and Impax has taken a cautious approach to management, both the client money and of its own operations through the period since really became an issue in our -- where our offices are located at the start of the year. So we have moved seamlessly to remote working. We've had no health and safety or operational issues. Investment performance has remained good. Our client take-on has been seamless. And of course, we've delivered a good year of growth. So from an Impax perspective, it's been a -- thankfully a successful period. In the context of where markets are heading, then we do see much more awareness of systemic risk in the asset owner community. And that, of course, is very supportive of Impax' commentary around resource efficiency around climate change and other systemic risks linked to environment. We do see capital markets rewarding resilience around cash flows and that does favor our investment style of seeking companies with those characteristics. Fiscal stimulus should continue to benefit those businesses that are in the environmental infrastructure space, so we're looking for positive commentary from boards and management teams around that driver as well. And of course, a global approach, which Impax has been taking now for a couple of decades, is very helpful in understanding how markets are developing in the context of COVID-related policy. Next slide. Summary of our investment performance here is a bit more detailed in the appendix, but we've had a very solid and successful period. So the environmental market strategies have all performed well, so you can see the numbers there. The sustainable food strategy is behind the all-country world index, but that's not actually its benchmark because it's a defensive strategy, which is benchmarked against a more narrowly defined index, which has actually outperformed against the so-called sustainable lens strategies, which encompasses both our very successful global equity or global opportunity strategy as well as some of the strategies run out of New Hampshire under Pax World label have done well. Global opportunities, in particular, be more than 7 percentage points ahead of the index over the 12-month period. And you can see there the Pax strategies, U.S. large and small cap, high-yield have beaten their benchmarks in that time period. Core Bond Fund has been slightly behind its benchmark, but nothing notable. And then in the rest of the strategies in listed markets, the systematic beta strategy in the global women's space has had an excellent 3- and 5-year track records, slightly behind the market, which is MSCI World. That's the benchmark for them in 12 months but still very much at the top of the peer group and yes, a good performance in most other areas as well. Next slide. So you can see here another new slide from us. We've tried to provide a little bit more detail in this presentation that we've done in the past. So feedback welcome. So starting on the top left, you can see that the assets under management have broken down very broadly across the different strategies with the environmental market strategy still being the majority of that specialist leaders, Asia water and sustainable food for the Pax World Funds, and global opportunity is now being quite material. Top right, you can see that Continental Europe is still a slight majority of our assets under management, but the U.K. has been growing quite strongly. The bottom right shows that we are still more than 90% exposed to equities. We do have small fixed income and private equity and systematic beta strategies, but equity is the -- obviously, equity is the largest slice by far. And then by client type, you can see good diversification there. The BNP Paribas Mutual Funds will represent assets about 31% of our revenue. And I think the rest is probably self-explanatory. The Impax label funds have been expanding quite nicely and Pax World funds, obviously, growing, too. Next slide. Again, a new slide, this is slide showing the -- typically, the increase in funds in the different categories. They're not absolute levels but the amount of money coming in, so calling out the U.K. and Ireland as a notable area of growth this year. So we have benefited quite significantly from stronger consultant relations, more consultant endorsements. The St James's Place relationship has grown very nicely, and we've also seen a very significant uptick in segregated accounts in the U.K. as we have done with inflows into our Irish platform. The 5 BNP Paribas funds that we manage for them are shown there, so good positive flows in all of them. As I said, these funds represent just over 30% of our revenues. And you may have noticed that we signed a distribution agreement with BNP Paribas Asset Management a few weeks ago. That replaced the 13-year-old memorandum of understanding, which both parties realized was a very flimsy basis on which to carry on for long-term distribution, but we do now enjoy a much more comprehensive distribution arrangement with that core partner, which also remains our largest shareholder. A little bit of detail on the right around other European distribution, which we're working to build up in certain peripheral areas. But also, there's some more positive news about the U.S., so Pax World Funds going from negative to quite sharply positive over this time period in terms of net flows, and our institutional business in North America has also registered good positive net flows. So I think, overall, this picture shows a very nicely diversified client base that does have quite a big uptick in exposure to the U.K. and Ireland, but it's still very much dominated by non-U.K. assets and clients. Next slide. A bit of a busy slide, this -- but I think the key point to take away is that, in the second half and as well as in the first half, we had positive flows. You can see we're focused on the inflows and outflows, which is shown first half up to 31st of March and second half to 30th of September, both for the Impax London strategies and then the New Hampshire managed strategies or Pax World Funds, so a positive story for flows in spite of negative market movements in the first half, which is [indiscernible]. Next slide. We're coming up to the third anniversary of the acquisition of Pax World Management, which closed in mid-January 2021. We are about to complete the acquisition of the remaining 16.7% of the shares of that company, which have been held by management. That will take place in a few weeks' time for a fixed consideration, $7.8 million for the total. And there is a slim possibility that there'll be a little bit of contingent consideration to be paid. I don't really want to get into the details now but happy to come back in Q&A if you like. But essentially, if the assets under management hit $6.25 billion relative to $6-point billion at the end of November, if they hit that $6.25 billion by the end of December, so a few weeks from now, then there will be a small amount of contingent consideration to be paid. We have just completed the review of contracts, management structure and remuneration for the New Hampshire team. Just a reminder, we've not had any departures or loss of clients as a result of that acquisition, and we now have everybody on a long-term incentive package where appropriate. So that's been very successful. Business integration continues to go well, so we are focusing on global teams. We have an integrated sales team now where we brought our Connecticut and Oregon offices together with the New Hampshire team under what we're now calling Impax North America. And as I've already mentioned, the flows for the Pax World Funds have been positive. We're also working on some new products. Next slide, please. So in terms of the future, then there's still plenty of capacity left in our current strategies, strategies that we're running at the moment with the exception specialists, which we've soft closed for European and North American clients as of the summer this year. But we have created a derivative product called climate impact, which is allowing those wholesale clients or intermediary clients to still put money into this general area, albeit not as exposed to the small capital, micro-cap specialists. We've got a very good track record of developing new products. So the global opportunity strategy -- the leader strategy actually were both seeded by Impax and then picked up by clients that are now major parts of our business, and we are working on developing track record for the 2 new strategies. And meanwhile, our real assets business is showing great potential. The third fund that we've been running now since 2017 should reach its -- the completion of its investment period by the end of 2021, and we are working on developing new product in this area. Next slide. So I promised to a couple of investors that we were putting something about our people strategy, HR and here it is. So we do have just over 175 staff, which is 12% increase on the position 12 months prior. We've enjoyed a very good culture and very high levels of staff engagement at Impax. And yes, as the business has grown, there have been, of course, challenges around management expertise, the leadership of smaller teams and providing exciting and rewarding career development for the staff. So we've been investing quite significantly in this area now for nearly 2 years, and I think the dividends are paying off in terms of staff retention and productivity. This is a core area of focus for the firm. The equality, diversity and inclusion topic is, of course, very current, and we have been spending a lot of time not just this year but in the last 3 or 4 years in trying to strengthen our diversity, our U.S. colleague, particularly the Pax World Management Group, has been known in the U.S. for its gender policies and gender investing for well over 10 years, so coming from a strong foundation there. In terms of leadership, then we're looking at ED&I from a talented attraction perspective. We're also trying to gather some to data, so we can start to benchmark our performance, and we're thinking about raising awareness and having more impact within the community, particularly around the development of talent in the asset management industry in more diverse communities. A bit of data there on our female representation, which is good, could be stronger, particularly at senior management level. Next slide. And also to draw attention to the work we're doing alongside investment management, this is increasingly valued by our clients. So we have, as of just over 12 months ago, hired a full-time policy specialist who is working on the investment research agenda but also helping us with our advocacy work around climate change policy, policy around taxonomies, for example, where we are a valued voice in the community. Our engagement stewardship continues to deepen. So we do think of ourselves as long term owners, critical friends of the companies we invest in, and our clients really value the engagement reports that we put out. Similarly the impact reporting, which we've now done for 6 years, has been groundbreaking and is a key differentiator when it comes to reaching out to prospective clients. And then finally, in terms of thought leadership, we do think of ourselves as so curious about the challenges facing the world and how money can help address those challenges. So we've recently brought out a new white paper on physical climate risk, which is a very topical opportunity. Just to take a step back then, the clients are increasingly seeing whether they can align their our own work in these areas with what we're doing. We're finding ourselves getting ahead of competition because of our strong credentials in this sort of nonfinancial area. And we can obviously see that trend continue. So it's an area that we're investing a little bit of money in, but I think the return on that investment is extraordinary. Next slide, please. So just going to hand over to Charlie.

Great. Good morning all. It's now my pleasure to take you through the financial highlights, where the strong flows that Ian's talked have led to significant increases in profitability. One point of detail, we're talking here about adjusted measures, where we strip out the effects of certain nonoperating items. These are transparently reconciled in Slide 30 and in Note 4 of the RNS. Firstly on revenue, we can see here that revenue has risen in both London and New Hampshire and is strongly dominated by the effects of the flows predominantly into the London business. Overall, revenue up 19% to GBP 87.5 million. And on a run rate basis, due to the fact that a lot of these flows and performance happened over the course of the year, on a run rate basis, which is basically the month of September times 12, but simplistically, we are GBP 96.5 million run rate. We should note that there's been a strong note start to FY '21 with positive performance and flows in October and November, so that number would be rather higher today. On the right, we've tried to add these slides as well to provide a bit more transparency. And firstly, on the top, we can see how the revenue lands by client domicile, demonstrating the very strong diversification that we have from a geographic basis. And then secondly, at the bottom, the established fee margin by the different business units, showing that the fee margin is stable across all of those 3. You look at the overall results, you'll notice fluctuations, and that's simply a question of mix as to exactly which bits of business are seeing the biggest flows. Next slide, please. So this slide is there to help demonstrate the scalable operating model that we have, in particular, in respect of the core investment engine. So staff has risen over the period by 12%, but it should be noted that these staff rises have been in the, what I'd call, support areas. That's client service and the various control functions rather than the investment team, which you can see on the right, is only slightly edged up. As a result, the assets under management per investment staff member, the bottom right bar chart shows that 29% more assets are being managed per investment staff member, which really is the key point I'm trying to make, the scalability of the investment platform. If we move on to the next slide and look at the overall cost base and effect on profitability, apologies for the busy slide. At this point, we are still reporting New Hampshire and London separately, which is why the [ 70 ] bars. As we come into the end of the integration, that -- as Ian has just referred to, this is probably going to fall away in the future, as the business is now being run very much on a fully integrated basis. But for now, we're still providing this transparency whilst it has a meaning. What we can see here is that the non-staff costs, which is the left-hand bar in all cases, is basically flat year-on-year. There's some slight saving effect due to lack of travel and reduced conference activity and slight increases from IT and other items, but there's no major trends within that. Even when flights resume at some point, I wouldn't expect this to move dramatically. The middle bars in each case are the fixed staff costs, so salaries and fixed benefits. I've already explained that those have edged up due to hires. And then the third bars are the variable remuneration, which have also increased due to rising -- the strong years that's been had by staff. Just as a reminder for the Impax London business and as you recall, this is really how we're looking at it overall for the whole firm, but for this year, for that Impax London business, the way we determine the bonus pool is quite straightforward. It's this 45% of the operating result pre the PRP charge itself. And that 45% pot covers cash bonuses, any equity charges related to staff incentive schemes and the national insurance, and that rises and falls with profitability. So when you compare that to revenue, you -- produces an operating profit of GBP 23.3 million and a operating margin at 26.6%. So you can see very effective operational gearing going on here, where the operating profit has risen by 29% from last year, so significantly ahead of the increase in revenue and the rising operating margin as well. And -- yes, let's move on. Thank you. Next slide. So in terms of what this means for earnings and dividends, the earnings per share is very straightforward this year. It's basically risen in line with the profit after tax. Not much more to say there, 14.5% (sic) [ 14.5p ] earnings per share. The dividend, you may recall a year ago, we announced a new policy of intending to pay between 55% and 80% of adjusted PAT. And this is the first year that we've applied that policy, and the Board has determined that 60% is an appropriate measure, which produces a full year dividend of 8.6% (sic) [ 8.6p ], which is 56% up on the total dividend from the prior year. That 60% figure is clearly above the 55%, and it's determined at that point in the range in respect to the very strong year we've had but also mindful of the sort of background market conditions, which remain with our challenges. And also noting the other needs for cash that we have within the business, which I'll comment to next. So next slide, please. Looking at the balance sheet. The balance sheet is very strong. It basically comprises no debt, cash, which I'll talk to now; working capital items and then various acquisition-related balances such as goodwill and intangible assets, so quite straightforward balance sheet. The cash is the main item, of course, and we can see here that cash is built over the year from the bottom to the top due to the very strong cash generated from the operations after tax. We've paid dividends over the year, purchased shares, GBP 4.2 million spent on acquisition of owned shares. [ Cusp ] of that is that we have an ongoing policy to seek to buy shares in the market into an employee benefit trust to use in respect to employee share schemes. The policy is to seek to buy them where there is availability of shares, we regard the pricing as attractive and mindful of other potential uses of cash. So to date, it's been a successful scheme. It's not guaranteed that we would always do this, but it is an ongoing policy. And then the final noteworthy item Ian's already referred to, the seeding of funds that we do from time to time. During the period, we successfully redeemed out of one fund and invested into a new fund. So net-net, that was a bring up of GBP 1 million of cash. The GBP 37 million net balance is shown on the right. And the way that we think of that GBP 37 million is firstly to aim out GBP 11.7 million as a risk buffer, which we're required to do under regulatory purposes to create available cash of GBP 25.7 million at the end of September. And then looking forward over to the items that we can foresee being needed, during the next quarter, there was a net working capital requirement of GBP 8.9 million, primarily because we pay the year-end accruals during this current quarter. We've got another seed investment opportunity that Ian's already referred to and the final dividend that I just described. So overall, GBP 6.6 million of unallocated or war chest, you may wish to call that, which is available, therefore, for other EBT purchases, further seeding, business developments, et cetera. So we think that's the right, strong position. We move on, please. Finally, in this section, looking at the shareholder register on the left. We're aware that there are a number of different measures for numbers of shares for different purposes. So this is here to reconcile and demystify the numbers. Firstly, we note there's 130 million shares issued at this point. The employee benefit trust that I've talked about is currently sitting on net 5.2 million of those shares. However, there are active RSS, which is restricted share scheme, and staff option awards of 7.2 million, so slightly more. So there's a slightly currently diluted effect in respect of those awards taking the gross number to 132 million. We should also note that when we buy the remaining stake in the Impax New Hampshire business in January, we have the option, not the obligation, but we have the option to do so using Impax shares to do that, and were we to take that option, then there would be a slight further dilution of another 0.5 million shares. On the [indiscernible] finally, we note the ownership model and the 132 million has been used for the denominator for this chart. BNP Paribas, Ian's referred to our major distribution partner of 14%. There was a recent transaction to sell down to 14%, but that is -- remains considerably the largest shareholder in a very core stable part of the shareholder base. Employee ownership, 26.9%, as already referred to, the use of employee share schemes that we've successfully used over the years to create alignment and incentivization and then [ free flowed ] 59%. Again, we think that's a very healthy mix of shareholders. So I think that's my slides. Ian, you're on mute.

So to conclude with this final slide, then hopefully, we have been able to demonstrate that Impax' position is extremely strong, our investment philosophy is very well placed for the next 5, 10, 15 years. And with the arrival of Joe Biden as President of the U.S. with the new Chinese 5-year plan being more certainly oriented towards further sustainable development with the run-up to COP26 Climate Conference in 12 months' time, then we expect 2021 to be a year of positive news in our area. The company does benefit from quite now -- now quite a significant number of scalable investment strategies. We've got a global distribution model, which is proving itself in terms of a diversified set of the flows, and we have a critical mass of expert staff who are well aligned with the business. So we are very optimistic about the future we have seen, in the first 2 months of the year, a further acceleration of the growth of Impax, and our pipeline remains very, very healthy. So I'm going to pause there. I'll hand back to Gay Collins, and very happy to take any questions.

[Operator Instructions] I see, Paul Bryant, you have asked a question.

Could you talk a little bit about the competitive environment on winning new mandates? So obviously, much bigger focus on sustainable investments but lots of asset managers also building offerings there. So is it actually becoming easier or harder to win new mandates?

Yes. So let me break this down to 3 areas. I think the first thing to say is that we're not dependent on winning mandates in a head-to-head shootout as -- for all our businesses. There's a lot of money coming in through the intermediary channel, which is bringing flows in most days. Where we do have head-to-head competition, well, I think there's sort of 2 further points. Firstly that's in the environmental market area, which is 3/4 of our assets under management with still plenty of headroom. Then there's very limited institutional quality competition around, so we're very well placed to be in shortlists, finals and in many cases, to win. In the second category, which is more generic product, so I would put global equities or a global opportunity strategy and also the Pax World Funds, then there's much more mainstream competition, which is coming our way in the context of tilt towards sustainable development and more environmentally aware or ESG aware investment pitches and so a lot more competition to fight against. But also many more opportunities, many more asset allocators are identifying and falling through with mandates in the space. So we're not dependent completely on mandates. Where we underpin our mandates, we're doing very well in terms of getting to the finals with environmental markets. And in the much more competitive but much larger areas of more generic products, we're doing well, but there's more to fight against. And therefore, for example, the comments I made about thought leadership and impact of engagement are important differentiators.

I see that, Stuart Duncan, you want to ask a question.

Two questions if that's okay. The first one is really about sort of investment required in the business, and so you've made the point about the increase in headcount over the last year. Just how much more of the -- is that required? And do you actually need to start to build more investment capability given the growth in assets in the last -- particularly the last couple of months? And then the second question is really just -- you made the point about a relatively small exposure to fixed income and just whether there's opportunities to grow that more strongly in the coming years.

Yes. So on the investments, Stuart, let me take the first part of that, and maybe Charlie can comment on investments in other parts of the business. So in terms of investment management capabilities, we do have quite significant headroom in strategies that we are currently running. As I mentioned, we are incubating 2 additional strategies, which are both equity strategies, and we're anticipating those bringing material additional headroom -- capacity headroom as and when they're proven. They are being run by the same teams, so the 57 [ test ] management staff are running those. Some of those staff are running those new strategies, so it's not like we've brought in new teams. So I think the scope to double the size of the business without bringing in any more teams, we will certainly have to add to the analyst headcount if we're going to reach higher levels of assets under management to that sort of quantum growth but sort of quite nicely positioned for that sort of expansion. Just quickly in terms of fixed income, then, yes, that is subscale in the context of fixed income management. And I think it is an area that we should be looking to expand over the next few years. It is an asset class, which is showing signs of alpha if one takes a sustainable economy or ESG approach. And so that will be a logical area for us to work more deeply at. Charlie?

So in terms of the other parts of the business, Stuart, the -- we're very pleased with the overall structure we have in terms of senior management and then the integration [ perhaps ] has created global teams in all different disciplines. So to the extent we need to expand, it should be a question of building people in the mid and junior levels for those. Most of the teams would need to expand with the type of growth potential that we see in front of us, but that is predominantly focused on the client service areas. Depending on the type of business we get, if we do bring on new mandates, then these mandates do require services. So there is some requirement there. And within the control and infrastructure side of things, compliance, operations, IT, they all do require incremental highs as well. But I stress it's going to be at the middle and low levels, but that is definitely going up. But as I've illustrated already, for this year as an example, it went up by sort of half the level of the revenue growth, and I'm not going to give that as a fixed number, but that's the type of overall net effect I would expect [ noting ] at the middle and junior levels.

James White from Berenberg, you were the next with your hand up.

It's James White from Berenberg. Sorry, you've already said that. Moving from the memorandum of understanding with BNP to the distribution agreement. Are there any changes in practice in how that's working, ignoring the kind of legal framework? Perhaps, is it the same generally, the relationship?

There are a few changes around the edges, so we've clarified a little bit more detail how the arrangements work in Asia Pacific region. We've also put in place a more -- more structure around the pitching to global clients, for example, global private banks, where there are quite often research teams and allocators in different parts of the world. And we found that if we don't coordinate, then there's a possibility or likelihood that we'll sort of trip over each other as we go around the world. There's a little bit more clarity around which products they will sell and which they won't. So they are just going to be selling 5 thematic strategies, and we will be selling everything else. So although there are exclusivity arrangements in, for example, France for BNP Paribas' management for our environmental thematic products, we're free to sell our other strategies, fixed income, even global opportunities in France and elsewhere without any restriction. So yes, one of the reasons we're going to a full distribution agreement rather than an MOU was to tighten up some of those areas where we haven't really defined exactly what was supposed to be happening.

Charlie, so ask a question on the numbers. In terms of the acquisition of shares of GBP 4.2 million, which is about 20% of the cash generated after tax, is that a fair proportion? Is that kind of run rate? Or is it lumpier than that?

It's more lumpy. If you go back over years, which we [ -- since this project ] would show we bought every year, but the amount we've actually spent has been very opportunistic. I think we [ shaped ] the policy to not have a committed program for a fixed amount per annum, so it's much more lumpy. It could be could be high, could be lower.

Could I turn to David McCann from Numis, please, for your question?

Just a question really on -- I mean, from your kind of client perspective, how important is kind of our actual investment performance, relative investment performance when they're selecting funds versus just the ESG nature of the funds and the process itself? So what's kind of the balance there? And I guess, secondly to that, if ESG funds were to experience a period of weaker performance in the coming period, for whatever reason, and what do you think would actually happen to industry flows? Do you think they'd still continue in a very robust way they have been? Or do you think there would be some performance sensitivity there?

Thanks, David. So one of the reasons we don't badge ourselves as an ESG investor is that it's not a well-defined term. And so if I can go back to the way that we position our shop window, if you like, or arrange our shop window, we've got the thematic strategies, which very much appeal to those investors who want to tilt either towards high-growth environmental markets because of their growth characteristics and/or because of their environmental impact where the metrics are very clear and compelling. So that's sort of -- that's one bucket. The second bucket being the more generic products where investors don't want the thematic tilt, but they do want something which is oriented or flavored in some way towards sustainable economy or ESG. So in the first bucket, to come to your question, then what really counts, I think, is the definition of the mandate. So the boundaries around what we will and won't do because investors that want that thematic tilt don't want greenwashing. They don't want to find that they've got a sort of Facebook and a shell in their environmental funds. Secondly, investment authenticity, so the depth and strength of the team plus the robustness of the investment process. And then probably thirdly, performance, where -- that's the evidence of what you say you're good at and you're actually turning into to strong ROIC or profits. So that will be the sort of the hierarchy. In the more generic product range, then I think the investment capabilities and investment remit questions are either sort of low relevance or everybody is kind of doing the same thing because everyone's -- everyone -- meaning other investment managers are active in equities in particular. So what really counts there, I think, is the insights that we have around applying sustainable economy or ESG thinking to stock selection and risk management and our very deep analysis and sort of research -- intermediary research products that we can put in front of a consultant or clients are very persuasive. And then the thought that we put into using ESG type insights and how we engage with the companies that we invest in to help them strengthen their resilience and improve their strategies is also a differentiator. So I think in summary, the fact that Impax is authentic and experienced and are critical mass in this area, however you define it, does allow us to stand out. There's a lot of other groups getting into our space, so we do have to continue to invest, but as I'm sure you know very well, as allocators, consultants really value that sort of authentic offering.

[Operator Instructions] Could I ask -- I think it's Andy Edmond at Equity Development to ask you a question.

Gay, you are correct. It's Andy here. Congratulations. A lot of the good news this year have been chronicled by your regular updates, so the really pleasant surprise was the strong net inflows into the new financial year. So I wonder if you could just give a little more context about where that's coming from. Is it just coincidental timing? Because, obviously, a lot of larger institutional mandates are on a long gestation period. Or is there some immediacy from the surge in overall cash flow into equity mutual funds that we're particularly seeing in the U.S. in the light of the, first, the election and now the vaccine news? So is it a combination of the 2? Over to you.

Yes. Thanks, Andy. So the results in terms of flows for October, November, I think, reflects a number of factors. So first of all, it was very broadly spread. The flows across the different channels that we're operating was healthy. One notable component of that was a new fund launched by Nomura in Japan, which is in the environmental space and has been channeled into our leader strategy through to BNP Paribas global environment fund. And so that is something like GBP 300 million out of GBP $1.9 billion, and that's set to grow being 1 of the largest and most powerful distributors in Japan. So that was the largest component. Everything else was the smaller -- St James's Place, I think it was notable in that but a slightly smaller level. So yes, why has it happened in October and November? Well, I think this is sort of reflective of general allocation around the market that's, I think, with the run-up to the U.S. presidential election and after the election in the context of expectations around fiscal stimulus and more recently, the vaccine news. And I think probably the world's awash with cash. And so allocations to equities have been strong in Q4 across the board, and we've benefited, [ we've not ] more than average from that.

Stuart, you have your hand up. But do you want to -- do you have a second question? Or is your hand just remaining up from before?

I think my hand is just remaining up from before [indiscernible].

Okay. Any other questions from anyone? It looks like not. So I think it only remains to say thank you to Ian and Charlie for their presentation. Thank you to you all for attending this morning. If you do have any questions or if you want to arrange any meetings with Ian and Charlie, please let the team know at Montfort, and have a lovely day. We will now finish the presentation. Bye all.