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

Right, healthy number now. Just a few bits of administration for people who aren't familiar with the Zoom format. The presenters will go through their slides. The slide deck is available already on the Impax website, so you don't need to take pictures of it. And in terms of external analysis of the results that Ian and Charlie will be talking about Equity Development are published in the note within the last hour, going through in great detail what the analysts have seen and for the outlook. As we go along, I'm sure you do have questions, please use the Q&A button on your screen to submit that, and I'm sure we will be able to get through all of them later on. This presentation is also being recorded. So again, if you want to come back and revisit any points, it should be publicly available next week and after the bank holiday. So I'm glad to say we have familiar friends back with us to discuss Impax's interim results for the 6 months to the end of March this year. We're joined by Ian Simm, who is the CEO and the Founder and by Charlie Ridge, who is the CFO. So I shall now pass over to Ian to start proceedings.

Hello, everybody, thank you for joining and if we could have the first slide, please, after the agenda, which is just to run through the highlights of the first half. So just to recap, Impax is a business, which since 1998 has been pursuing a particularly distinctive investment philosophy. Our view is that the transition to a more sustainable economy, which captures a number of industrial revolutions in energy, in transportation, in materials, in infrastructure and in food, amongst other transformations will lead to rapid growth and opportunities for stock pickers and private markets investment activity to generate excess returns compared to benchmarks. So more than 20 years of experience doing this, we have one of the world's largest teams of investment specialists in this area. We're operating in 3 asset classes, listed equities, private markets and fixed income. We have a very broad global client base with more than 75% of our assets under management coming from overseas. And we have a scalable business model based on organic growth. On the next slide, you can see the highlights for the year, well, first the first half of the year. So in spite of challenging market conditions, we have registered a small increase in assets under management over the 6 months, ending at GBP 38 billion, which during the period was inclusive of GBP 2.5 billion of net inflows. Our investment performance remained strong over the medium to long-term in spite of short-term headwinds. And we've continued to strengthen our investment capabilities and, in particular, our distribution resources and our resilience. Charlie will come back and talk about the numbers in a bit more detail. But on the next slide, you can see the headlines. So the bars, as shown in the key, indicate the performance in the first half of the previous financial year, the second half of the previous financial year in the middle. And then the dark blue bars, the ones that focus on which are the results for the first half of the fiscal year 2022. So on the left you can see a nice increase in revenue. And as we'll describe, we have been investing in additional head count. So our cost base has gone up a bit, which explains why the -- there was a very slight fall in the operating profit and earnings per share over the period. On the right-hand side, in addition to the asset under management growth and the expansion of shareholders' equity, you can also see the dividend. So we have approved and we'll be paying out a GBP 0.047 per share dividend, which is a significant increase on the first half dividend from 2021. Also on the bottom left, there you can see that in the first month of the second half, in other words, April, assets under management fell slightly from GBP 38 billion to GBP 37 billion in spite of positive inflows, that was due to another sharp correction in market levels and stock price falls. On the next slide, quick summary of the market environment, so for those of you who are watching in financial markets and the broader economy, there's no surprise that macroeconomic conditions continue to be challenging with inflation and central bank responses being under close examination. And the tragic war in Ukraine has further exacerbated issues around supply chain and commodity prices. So this has been a difficult environment in which to make and maintain investment portfolios. There has been a market rotation away from the quality growth companies, impacts typically favors towards value, for example, in fossil fuel-related stocks, consumer staples in some areas. So those have been headwinds. However, we are seeing that stock picking does allow us to identify business models that are resilient and have inflation -- positive inflation factor drivers. So that's helped us to sustain performance in many of the portfolios. Meanwhile, taking a slightly longer-term view, certainly medium to long-term view, the drivers of the transition to a more sustainable economy remain very robust. The war has thrown into sharp relief, the urgent need to move away from fossil fuels and with climate change also in the news, then reducing CO2 emissions as well as improving energy efficiency, our top priorities now for policymakers and many corporates. In addition to the strong drivers for renewable energy and energy efficiency there's also, particularly coming out of Europe, an increased requirement for disclosure of metrics for investment portfolio that's linked to sustainable development, and this is giving us quite a strong competitive edge because our portfolios do resonate very nicely with the European Union's green taxonomy and similar green taxonomies that are being developed around the world. So Impax continues to be very well placed. We have an enviable track record, a very strong brand globally, global recognition, not just with clients, but with the consultants who advise clients and a large and stable team who own around 20% of the business. And our scalable business model based on organic growth of and scaling up of existing investment strategies is likely to be able to take us to at least $80 billion under management, if not up to $100 billion without the need for a significant additional product. The next slide, you can see a breakdown of the assets under management change over the second half of last year. That's the bottom half of this slide, moving through to the first half of the current financial year. So this should be self-explanatory, but you can see there, positive market movements in the prior half up to the end of September 2021 and then negative market movements across the first half of this period. But in both periods, inflows exceeded outflows. Next slide, this is a traditional impacts slide showing the breakdown of our client base, assets under management into various analyses. So on the top left, you can see the breakdown by product. So in the blue shades, so anything from light blue to dark blue, around 2/3 of the assets under management are in our thematic environmental market strategies, which are typically Article 9, which is the top criteria or top category for European Union's SFTR classification, so highly sought after by many investors. On the bottom pie chart, then you can see the breakdown by client type, showing actually that BNP Paribas related funds, distributed funds are slightly less than they were 6 months ago, down from 41% to today's 38%. On the top right you can see, as I said earlier, that our non-U.K. client base is around 75% of the total assets under management. And the U.S. has grown -- U.S. and Canada has grown slightly at the expense of the EMEA region. And the bottom right still very strongly concentrated in the listed equities asset class rather than fixed income on private markets. This next slide is also an update on what you'll have seen before. You've seen previous impacts updates. So this is how the inflows or net inflows break down. Again look at the dark blue for the current period compared to the mid-tone blue which is the prior period. So the left-hand column, which is the U.K. and Ireland, shows continued strong positive performance in terms of flows for our Irish UCITS funds and the St. James' Place relationship. The middle column is interesting because the funds that we run for BNP Paribas Asset Management showed on average pretty much flat performance for the period. By contrast, on the right, you can see that the distribution that we do either by ourselves or with other partners outside the U.K. and North America generally did very well with notable success in North America with partners and all own mutual funds, Impax mutual funds, and then in the Asia-Pacific region, which was strong progress with our Australian distribution partner. The next couple of slides, a bit busy. They show the investment performance of our, first of all, environmental markets, thematic strategies on this page. And again, if you just sort of eyeball the dark blue, compare it to the light blue, which is the benchmark for the various strategies and look at the 1, 3 and 5-year performance, then you can see that with the exception of the food strategy that has been very creditable and sustained 3 and 5-year performance and some headwinds in over 1 year for the reasons that I mentioned already, given our growth quality biases, which is effectively reflected de-rating of those sorts of stocks. The food strategy is -- has been pitched as a defensive strategy and although the 1-year performance looks looked poor, over 6 months it's actually done very well, which does reflect what it's supposed to be doing, which is acting as a sort of diversifier and more value-oriented funds. So that's actually picking up a lot of flows at the moment. Second of these sheets, on the next slide, sustainability lens strategies, non-thematic, in particular, our flagship Global Opportunity strategy, which is the one we run for St. James' Place. And then 4 of the strategies that we run for U.S. investors, again, very long -- very good long and midterm performance and some outperformance in the short-term as well, notably the U.S. small cap and core bond strategies. The next slide, just a quick note on plans for growth. So as I've already said, organic growth scaling up on existing strategies is the heart of the business plan, but we are developing new products in a systematic and rigorous fashion. And we're also looking at opportunities to expand our product range by bringing in additional talent, for example, in the private market space. On the next slide, just a quick note about people, systems and infrastructure, so we are expanding our headcount carefully. We've slowed down the rate of hiring, but are still hiring people rather than freezing hiring because we do believe that the business is very well placed for midterm growth, and we want to be ready for that growth opportunity, and our pipeline remains very healthy. So we have in the period, hired or created and hired into 2 new roles in distribution, Head of Distribution for North America. And as of next week, we're going to be joined by Paul Voute, who will be coming to us to run our European and Asia Pac -- Asia Pacific distribution. In terms of office space, we have post-COVID decided to open an office in Midtown Manhattan, and we'll be keeping a watching brief on whether we want a Greenwich Connecticut office as well. We still have a majority of our North American staff based in Portsmouth, New Hampshire. And then with the systems and infrastructure, incremental investments have continued and we are potentially going to be investing in a new CRM system for our client service and business development teams later this year. But apart from that, there's no other significant IT investments planned. We have recently completed a big planning exercise called Impax 2025, which, as it probably says on the tin, is the roadmap for how we intend to expand the company and resources over the next 3 or 4 years with a view to realizing on our potential for scaling up. Then on the next slide, I think just a quick note about what else we're doing around the edges of seeking great investment performance. This is in 4 areas. So our clients really appreciate the work that we're doing to both gain insights from policymakers about the direction of the transition to a more sustainable economy. We're also doing some advocacy work. We're doing research with academic institutions in areas like biodiversity and physical climate risk and resilience. We are running a relatively small charitable partnerships program, which allows us to enhance our brand and also provide opportunities for volunteering for our staff. And finally, we're doing a lot of reporting and engagements, particularly around the European Union Sustainable Finance Directive Article 8, Article 9 criteria, but also there is increasing amount of green taxonomy work and alignment reporting that's potentially coming down the road. So we're very well placed for all of that, but continuing to have to invest in resources to do that.

Right, I'll take over here now to provide the financial update. Good afternoon, everybody. So firstly, on revenue. The revenue story pretty much tracks what we've seen on the assets under management with the strong market rally up to the end of our first quarter and then the fallback in the second. But with flows -- positive flows in both quarters, in particular in the first. So those combined leads to a 7% increase in revenue as compared to the second half of last year, which is primarily driven by the flows, but also the annualization effect by which I mean the flows that landed in the second half of last year will have only contributed a part period contribution to the revenue, but now of course they've contributed for 6 months of revenue. Other things to note is the fee margin remains very stable, around 47% basis point mark. And finally, the exit run rate, we provide that to give as up-to-date as possible a view of income and profitability, as we'll see in the next slides. In terms of revenue, that is approximately GBP 177 million. That's determined basically on March revenue x12 simplistically. If we can move on to the next slide. So this is a similar slide to what Ian has already talked through on the asset side. So you can click back and compare if you wish, the messages here are that we've got strong diversification in terms of our revenue base in all of these different dimensions. And I'll particularly highlight the bottom right chart where we have revenue by client type that shows the first 3 segments from 12 o'clock, clock wise. So that's the own label funds for Europe. First 3 segments are all own label funds of one form or another and that now makes up 44% of our revenue, which is great to see and is as a result of the investment we've been making in our own internal distribution capability. Moving on now to costs, on the next slide. So costs have also gone up. As Ian has mentioned, we have been continuing to hire to build our capability to support the existing and future business. And again, we have an annualization effect, people that joined in the second half of last year are now drawing a salary every month in the current period, so there's a catch-up effect there as well. So staff costs are the main increase as people have come onboard. We are hiring for the most part into client service, distribution and the various different corporate services areas such as operations and IT and compliance. As evidenced on the right where you can see the top right for the total staff, the increase in the investment team, who are the -- the core of our product, our investment products, is increasing rather slower than the rest of the firm, demonstrating the scalability of our investment platform. So it's good to see how it comes through. In terms of non-staff costs, we've also seen some increases there. It's quite well spread around different individual drivers. So a bit of travel increase as people have started travelling again and small amounts of IT, and about 1/4 of this is actually the flip side to the revenue increases, some of our clients, we make a pay away to a distribution partner. And so as we've grown the business, and I just reported, the non-staff cost also picks up an increased charge relating to those payaways. I think those are the main points on the costs. So if we move on now to profitability side of things. So talking about looking at this, you can see very strong increase in profit over the 12-month period, albeit it's more stable, slightly behind comparing to the second half of last year, which is all down to the basic between the revenue story and the cost story. So the costs are edging upwards due to the highs I just described. The overall operating margin, which is how we particularly looking at the efficiency of our business model, 38.3%, we think is very credible noting the market context. Again, you can see on here where we were a year ago, 34% in spite of the market situation in this calendar year, seen strong development in the operating margin, which is good to see. The bottom half of the page gives you a feel for the longer-term trend where we can see that revenue has risen very dramatically over a number of years. Costs have of course, also risen, but rather slower than the revenue, and that's led to the solid line being the operating margin trending upwards over that period. And we would expect to see that pattern continue in the future, although quite calling exactly where that will land is impossible because it does depend upon uncontrollable factors, such as the stock level. So it's not market level. Final thing to note on the operating profit and margin is that we do have an element of built in defense in the terms of how we determine variable remuneration, which, as a reminder, we take by paying up to 45% of the pre-bonus operating profit has variable remuneration. So if we do hit choppy times, market downturns, et cetera, and profits do move backwards, then 45% of that fall is damped from the overall net results so sort of further solidifying that the level of our operating margin. I think that's everything on that slide. So Andy, if we can move on to this slide is showing the dividend story and some balance sheet. In terms of the dividend, 31% increase in the interim dividend is hopefully a strong message to indicate the strength and growth of the business and the potential. I'd also note that it is in spite of being a big increase, still probably at the conservative end of our policy range. Note that we are not trying, to by saying that give any guidance as to where we expect to be by the end of the year. Indeed I'd say, as of today, we are well positioned for a further progression at the year-end as well. But as you I'm sure appreciate the market context means that it's not possible for you to give a steer other than to note that we're well positioned. Cash in the middle. We are a strongly cash-generative business. We have a cyclical behavior such that we tend to pay out our biggest costs in the first half. So you can see on this graph, dividends paid. We also pay out bonuses in December. So the cash generated from operations, you can see, is net of paying away the bonus in the period. So strongly cash generative, but due to that cyclicality, it's actually slightly down at the end of the first half compared to at the end of the year-end, which we always see. The other thing I'll note is that we spent GBP 3.9 million on buying shares into our Employee Benefit Trust, which is a mechanism we use -- to use this free cash flow to mitigate the dilution effect of staff equity awards, assuming that we have -- we deem it to be a good use of cash in terms of pricing and other potential uses of cash. Final graph on there on the right is capital resources. So it's quite a different measure as compared to cash in terms of capital. We have we estimate GBP 40 million of capital at the end of the second -- the first half. When you look at the requirement were required to earmark from a regulatory perspective, it leaves us with a buffer of GBP 17 million, which is a 74% surplus so strong balance sheet. Moving on to the final slide, we can see on the left, Impax shares and how we manage the shares with a little bit more color on the comment I just made a moment ago around the Employee Benefit Trust purchasing shares. You can see here the net purchases that we've made to-date, 2.8 million. However, further down the page, you can see that there are currently GBP 5.1 million of open outstanding option and share awards to staff, meaning that there's something like a GBP 2 million to GBP 3 million of shortfall of shares that we would need to either buyback or issue depending upon what we think what is best for the shareholders. And then final point to notice that the donut from the right shows a very stable shareholder base similar to the last time we presented by highlighting the BNP cornerstone holding plus the employee ownership of 20%, which we think is very stable and comfortable shareholder register. And with that, I'll hand back to Ian.

So just wrapping up on the final slide, which is after this one. Thank you. So yes, just to recap, we believe that we're really well positioned in a particularly attractive market, an area of investment management that asset owners around the world are looking to allocate to our strong brand. Our large stable team, which owns a significant chunk of the business and our very long track record really stand us apart or set us apart from competition and with a broadly diversified global network for distribution a well-rounded product range, ability to add new product and a focus on risk and resilience that we do think - we're well placed to scale the business. In the short-term, there may well be further market headwinds, but we have demonstrated our resilience over the last 4 months or so with quite significant market headwinds. And therefore, we're really well experienced in how to handle such challenging conditions. So I think that's a pretty good place to pause and hand back to Andy as moderator for questions.

Yes. Thank you very much, gentlemen. Very clear and very impressive progress in these topsy-turvy markets. A number of questions already have come in and I shall remind viewers, you just have to submit them via the Q&A button? So rolling straight on, one probably for you, Ian, to start with the SFD, the Sustainable Finance Directive, and operating within Europe. As much as you can within a minute or 2, can you give the uninitiated a little more detail how that is changing the landscape in which you are playing and also explain the difference between Article 9 and Article 8 status?

Yes, so the European Union has created a green taxonomy and has produced the Sustainable Finance Directive regulations to use that taxonomy in 2 ways, first of all to categorize and label funds along the lines of their overlap or resonance with that green taxonomy. So there are a set of articles which describe increasing levels of overlap with Article 9 being the highest. And so the funds of Impax are managing in the thematic space are largely Article 9 with high overlap. And the next level down, next best, if you like, is Article 8, which has slightly less overlap, but still quite significant. The other requirement of SFDR is to impose on advisers, all those dealing with retail investors. The requirement to assess the investors' interest in sustainable investing, i.e., investing along the lines of the green taxonomy, which is going to be rolled out formally from next year. And that should provide further impetus and grassroots demand for funds and accounts linked to these articles and the green taxonomy in particular. Is that about a minute?

It's well 62 seconds I think, we'll allow you to go. And now we have quite a broad and specific question at the same time coming in about governmental intervention into energy and potentially into utilities. So the broader question is, do you think that is going to become more of a factor in your investment decisions going forward? And then more specifically, looking at the U.K., where, of course, the government has just imposed a windfall tax in the energy space. Do you think there are benefits to you there from increased use of electrification? And how do you think any investments you might have made in solar or wind in the U.K. where they may have taken subsidies might be vulnerable to changes in government policy?

The first thing to say is that the renewable energy sector and even energy efficiency to a significant degree, have been shaped, if not completely dominated by regulation for the last 25-plus years. And therefore, we are no stranger or we're not new arrivals in the world of analyzing government regulation that affects the energy sector, in particular, the power sector. The high and quite volatile energy prices have, of course, made it more difficult for investors in renewable energy, in particular, to get stable long-term contracts from the market from merchant-type arrangements. And so the continuance and availability of auction-based feed-in tariffs, which is very common regulatory structure around Europe is welcome. However, from a broader perspective and taking a medium-term view, then high primary energy prices do provide significant economic drivers, not just for energy efficiency, but also for renewables, which you've got no fuel cost if they're wind and solar. So the acceleration towards a fully low carbon or even 0 carbon power system over the next 15 years is accelerating, and that's evidenced by further commitments from Brussels, in particular, around tougher ambitions, higher levels of ambition for renewables penetration in the -- by 2030. The windfall taxes have just impacted the fossil fuel sector so far, and that's probably going to be the norm for the U.K. The U.K. does of course, have quite an ambitious program in the nuclear sector, which we will have indirect exposure to through control and instrumentation type companies. We don't invest in nuclear directly. But meanwhile, the high energy prices, high electricity prices are giving quite a strong signal to developers. And in particular, we're seeing offshore wind as a major growth area where there's much less of a problem around planning process. So overall, net positive so far.

So Ian sounds that way. Charlie couple ones probably best for you to deal with -- coming back to operating margins and one of the questions fully accept that there are a lot of variables outside of your control than that. But can you be a little bit more specific on the decline in the half just recorded? And presumably that has a lot to do with investments. And then secondly and perhaps related to the answer to that, how easy has it been for you to find the heads that you have been recruiting? And because of the attractions of the sector, have you been surprised at prices increasing for talented individuals with a war for talent?

Sure. So in terms of the operating margin, first, I think it's a couple of things going on here. One is that H2 last year was possibly slightly flattered by the rate of business accumulation and asset gathering running ahead of staff hires. So simply at the end of September last year, the team felt pretty busy handling the business that has come on board. So there's a little bit of bad effect that the operating margin was slightly boosted by revenues growing a bit faster than we had expected compared to costs, which we've now caught up on. So there's a slight catch-up effect there. The main reason, however, is just the fall in the markets in the second half of this period had the markets continued at -- a sensible broadly stable upward trending level for the second quarter then we would receive more revenue. And that we probably had similar cost base. So we -- I would estimate achieved an operating margin above the prior period rather than below. So to that extent, it is non-controllable. And then as we mentioned, we have also continued to hire in this period as well over and above what the positions that were opened at the end of last year. So it's a combination of those 3 factors. In terms of hiring staff, we have been very successful in bringing people in. This has probably been taking slightly longer than we would have been used to hire, but I say only slightly. And we do find that our purpose, our brand, our mission and type of talent that we are in terms of being focused on our investment areas and related activity is a very effective way of attracting top talent. So we have been successful in bringing people in very proud to have our counters colleagues, but in truth has taken probably a little bit more time to achieve that and there is some cost inflation as well.

And possibly one again to you, Charlie, because you mentioned this point. You seemed pleasantly surprised that direct sales moving to, I believe it was 44% as the revenue is generated. The question is, does this affect your thinking on how much going forward you will rely on partners and their extended sales force or will you perhaps more aggressively build up your own sales force.

I'm glad I was -- of course enthusiastic about that. I wouldn't say it was surprised to it I'm more pleased more pleased. Because this does mark a very conscious and deliberate effort on our part being back a few years to build up the in-house capabilities to further diversify the business. By this, I don't in any way to underplay the importance of distribution partners who have been and continue and we would expect to continue to be very important as parts of our distribution platform. It's just that we like to see that balance. The combination of the 2 working together means that we simply had a broader ability to hit different types of investors with -- and so we expect both to continue. In terms of our plan for the future, the scalability of the platform we've touched upon a few times, notwithstanding, as Ian mentioned earlier. Our desire to bring 1 or 2 new products to market, which is part of our product development life cycle means that we continue to expect the majority of the growth to be around client service and sales and then behind that, then the compliance operations areas to support that. So we are expecting to continue to push similar products, but through the combination of internal and external channels, and we expect to see sales teams continue to grow to support both of those.

And then we have a question would you like to focus on the core authenticity seeing that it's up on the top left of the slide at the moment. But within the U.K., there's been a parliamentary committee talking to investment companies and assessing whether their actions on ESG criteria are perhaps matching their marketing claims and Impax is in the kind of strong position of having done this job very well over for 20 years. How do you think the competitive climate is changing as perhaps investors who are committing capital are becoming a bit more, savvy as to where they might put it?

It's a very good point and spot on. So it's not just the U.K. but also the U.S. where regulators are asking tough questions of investment managers who are using terms like ESG, just to explain clearly what they mean, what they're doing, what their reports actually constituted and what's behind them. So because Impax has always been very thoughtful and disciplined in using defined terms and being transparent about processes and the numbers that we're producing in our reports. Then I think we have a rock solid foundation in which to respond to those sort of questions and request for information. And although some of our peers and competitors may stumble, I think will remain robust and probably emerge slightly stronger as a result relative to the payer group.

Okay sounds very sensible. And then I suppose a more generic question, looking at the methodology of asset management. The question is in these nervous times, how much do you centrally give directives or allow freedom to individual fund managers to adjust their cash levels within their funds or is it centralized risk aversion?

No, the contrary, the funds and accounts that we run are almost exclusively fully invested -- that's the agreement that we have with clients. If clients want to go to cash, they will take money out of our funds, not ask us to market time. So there are upper limits on how much cash we can have within our mandates usually a couple of percent that sort of level. So yes, individual fund managers or co-managers have got discretion to manage cash up to those sort of limits, but that's obviously pretty much on the margin.

Yes very clear and then perhaps the last question, which is, again, can be summarized as one word, which is inflation. But can you just give a summary of the various levels, how that might affect the sectors and therefore, the companies that you're investing. And I think you alluded a little bit to that within the energy or the utility space. And Charlie and perhaps one for you, how much it might have an impact on internal costs going forward. And all of that sort of comes down to a request just your view on the pricing outlook that you are seeing in terms of talking to potential allocators of capital and whether your, again, preeminent position is defending you from those competitive pressures. So 3 and 1 agree?

I think was the first one for me around the market?

It's one for sectors to invest in -- but bearing in mind, a high inflation environment?

Yes so I think, as I said earlier, the inflation is a bit of a double-edged source for some companies, it's very positive if they've got pricing power and they can pass on cost increases to their customers, particularly in the sort of B2B area. So we're obviously favoring those companies increasing ratings while really trying to avoid exposure to B2C type businesses with weak consumer spending power and/or highly competitive end markets where cost inflation can't be passed through. So it's another sort of complexity driver or source of complexity which, we're having to sort of navigate but should give us an edge if we're able to continue with the sort of skillful management of that.

Okay Charlie, any direct cost pressures?

So at this point, I think I mentioned you've not particularly seen inflationary in terms of non-staff costs. So we have office buildings on loan leases, a lot of IT costs are internal, although we do subscribe to various packages. And every year, we have a robust negotiation round with our bigger suppliers. I'm not going to rule it out, because I can't predict what's going to happen towards the second half of this year. But at this point, we've not actually seen it come through. I would observe that we're primarily a people-driven business. So to the extent that some inflation is inevitable and whether that's going to be above trend, there's frankly speculation at this point. It is only a small minority of our cost base is that sort of non-staff character. In terms of staff, I think I have mentioned this in response to the last question that we have seen some cost inflation with the -- in the new higher markets. And when it comes to looking at staff remuneration, we do that for once a year to have a very strong process to look at our staff, assess them and do the right thing in terms of paying the appropriate market levels. Again, it's too early in the year to say quite how that's going to come through, but we've been doing this for a long time now. And we don't lose staff for paying the wrong salary. We think we've pretty much got a grip on how to get about doing that. And then the final part of variable remuneration, as I've already mentioned, we do have this approach of paying up to 45%. So that gives us quite a lot of leeway in terms of flexing upwards and downwards to what we need to do to ensure we're paying the appropriate sort of market competitive and attractive packages for staff. So I'd like to think we've got the levers that we can pull. But I can't make strong predictions until sort of get complete this year's negotiation rounds.

Note that's very clear and very clear. And then the last part was how is your strong position defending or need advancing prices that you can charge to investors at the moment?

So in terms of the last couple of months, it's a quite a short time period, first be able to make any generalized observations around what if anything has happened. It's fair to say that as you can see in terms of our flow momentum that has slowed as well over that period. So - I probably don't have a lot of sort of current data to draw upon. However, anecdotally, I don't think at this point, really been anything observable in terms of there being a different price for the services. We have -- this sector has been under fee pressure for many years and a lot of firms with more generic products have seen their margins cut quite considerably, Impax being the specialist with our more niche focus has been very successful in maintaining our fee levels, noting that there are quite different levels for different channels and different geographies. So at this point, I think you're quite optimistic that it's not going to be that material effect. But like I said, it's in a couple of months or so into this market position we like to see how things play through.

Great and I think just a couple of more questions have come in, and then we'll be done. First of all, quite specific the Global Opportunities Fund has had an exceptional medium-term 5-year period of outperformance against the benchmark. But again, in the very short-term recent past, that seems to have slowed down or unraveled a little bit. Is there anything specific relating to that, that you can point to?

Well, as I said in the earlier part of the presentation are biases towards growth and quality when we're looking for stocks rather than value because of the rotation away from growth to value, then the stocks that we're investing in most of our strategies, particularly global opportunities have tended to be de-rated. So that's the explanation for the drop back in the alpha. But the clients who've come into that fund, generally speaking, have been sold correctly what we do. In other words, that they should be taking a medium to long-term perspective and expecting a tracking area in the sort of 4% to 6% range so that does mean that the fund won't outperform in all market conditions.

Yes and then final question, very much a top-down view, someone hoping to draw on your considerable experiences and again, I'm sure you're saying in the short-term, it's a very immediate period of reaction to what has happened in particularly the energy market, the Russian oil and gas supply, et cetera, et cetera. But if you were looking down at the various continents of the world, are you more encouraged in Asia, America, Europe in terms of how the momentum to embrace and move towards a sustainable economies and other things?

In terms of the end markets rather than a source of capital, then I think Europe remains in full position with regard to the breadth and depth of the commitment the policymakers have to this transition to a more sustainable economy, coupled with the level of consumer interest and demand. North America is a bit mixed. There's very strong momentum now towards clean transportation, zero-emission vehicles, in particular, and in certain areas towards renewable energy, but there's also a very strong fossil fuel sector as well and consumers tend to be across a wide spectrum of interest in sort of more environmentally friendly products and/or the energy, clean transportation. Asia is also mixed, a huge amount of relatively new coal-fired generation Australia is a very portent example where they've got enormous mining and fossil fuel generation, but also very buoyant renewable energy and clean economy sector and the new administration, which is very much in favor of trying to mitigate climate change and adapt to it. So yes, if we had to pick one place to be concentrated, it will be European area, U.K. and the European Union. But we've shown over the years that we can make quite strong returns in both the North American region and Asia Pacific.

Great, well thank you very much to the live audience for all of your questions. For those of you who are watching this as a recording, I should just repeat that the slides that Ian and Charlie have been talking to plus a great deal of other information is available on the Impax Investor Relations website pages and analysis of these results and previous results is available with research on the equity development website. And then last and certainly not least, our thanks on behalf of the audience to Ian and Charlie very clear presentation. Thank you for going through the questions, and we wish you all the best going forward in these challenging times.

Thanks, Andy, and thanks, everyone, for joining.