Macquarie Group Limited (MQG) Earnings Call Transcript & Summary

Well, good morning, everyone, and welcome virtually to Macquarie's 2021 Operational Briefing. Before I hand to Shemara, I'll just run through the agenda. So as is customary, Shemara will do the third quarter update this morning. We'll then, as you know, hear from 2 of our operating groups, Macquarie Asset Management and Macquarie Capital. And then finish off with our Corporate Operations Group. So with that, I'll hand over to Shemara. Thank you.

Thanks very much, Sam, and hello, and welcome, everyone, from me as well. So as is usual with these updates that we do, we'll kick off with noting our business footprint. And as you know, this is constantly evolving. But today, it's streamlined into 4 main operating groups. And each of them is positioned strongly to respond to structural growth themes that we see over the medium term. And in addition to that, they've each built deep capability and expertise to position themselves well in responding to that. Now as you can see along the bottom, they're backed by 4 support groups, which are also self-directed entrepreneurial teams that are delivering solutions to our external customers by empowering their internal customer, being the operating groups. And when we do our results update, we don't really have time to give justice to the capability of these teams. So we have these operational briefings each year to let you get a deep dive from some of the businesses. And this year, the deep dives will be from Macquarie Asset Management and Macquarie Capital and our Corporate Operations Group. And these groups are more and more collaborating across the groups as well across some of those structural themes like decarbonization, urbanization, et cetera. But the other thing they give us across the groups is very good diversification. So in the financial year before last, which was not COVID pandemic-impacted, at our peak earnings we had 47% of our earnings contributed by the market-facing groups. Whereas in the first half year, this year, as you saw, we had 30% contributed in a very different, more challenging environment for markets and 70% coming from the annuity-style businesses. Now speaking of those challenging COVID-impacted markets, before talking about our results I thought I would touch on how things have evolved for 4 of our key stakeholders in this COVID impacted environment. So starting with our staff, you may recall that at our peak, we had 98% of people working remotely over last year, and we now have 82% of our locations approved to start returning to office but in a very safe, managed, socially distanced way where we protect staff while they do that. And despite this remote working, our Corporate Operations Group particularly, who you'll hear from, have stepped up with technology solutions and equipping our leaders and communications such that at our global staff survey at the end of last year, the engagement results from our staff were actually up 5% on already high numbers, in that year of working remotely for a large part of it. Then turning to our clients, the next stakeholder. At the peak, you may recall, we had 13% of our BFS clients seeking hardship assistance. That's now come down to 1% as things have improved in global economies, and particularly here in the Australian economy, and stimulus has helped as well. But that 1% now is the really challenged part of the community such as our airline customers, and we're continuing to help them with hardship assistance, raising capital, et cetera. And then turning to our portfolio companies, where we're serving 100 million people using these essential services every day, and we have 130,000 employees in these businesses. We've been focusing ongoing on the well-being of the people working in the businesses as well as maintaining the resilience of delivering service and also responding to the new needs by things like investment in digital infrastructure. And then lastly, looking at our communities. As I mentioned, we'd allocated an extra AUD 20 million to our foundation over this year to help responding to COVID impacts, and we've now allocated AUD 17.7 million of that to community partners. So then turning to another important stakeholder being our investors and what we've been delivering over this period for investors and the third quarter results. You will have seen from the reporting of our global peers, that we all experienced much improved trading conditions across our businesses in the third quarter of this financial year. And that included the environment for asset realizations, client activity and trading activity. So that the annuity-style businesses over the third quarter combined were up on the prior comparable period and also on the financial year-to-date, we're now broadly in line across both BFS and MAM. And in the case of MAM, both performance fees and base fees are broadly in line for the financial year-to-date compared to the prior comparable period. In the case of BFS, because of the COVID environment, we have experienced increased credit impairment charges and higher costs as we've had to support clients. But that's been -- also, we had margin pressure with the low interest rate environment but offset by the volume growth that we continue to enjoy in BFS. In the market-facing businesses, they were actually significantly up in the third quarter on the prior comparable period. And again, in the financial year-to-date, are broadly in line with the previous period. And that included stronger activity across the majority of businesses in CGM and it also included income recognition timing associated with transportation and storage agreements in CGM. And in Macquarie Capital, this was partially offset by lower fee revenue and principal income, albeit with a reduction in expenses. So looking in a little bit more detail at each of the groups and starting with the annuity businesses, first of all, Macquarie Asset Management. Our assets under management were down slightly, just down 1%, and that was principally due to foreign exchange movements. In the MIM business, we had both positive net flows and positive market movements, but offset partially by FX. So we were up 3% in assets under management. And in the MIRA business, the equity under management was down 2% despite having a good period of fundraising of AUD 6.6 billion of equity raised, which is above the typical quarterly run rate and also being able to invest AUD 3.4 billion. We had that offset by AUD 6.6 billion of realization of assets and also by FX. So the equity under management was down 2%. And in relation to those asset realizations, I mentioned it was a good period for asset realization. So in the U.S., we realized InSite Wireless, WCA Waste and IMTT, which is a bulk liquid storage business. And in Europe, the Viesgo business in Spain. In the MIRA business, the only slight negative, of course, is that in the air finance business, our customers continue to experience challenge, but it's a sector to which we're very committed for the medium term, given our deep expertise and we are positioning ourselves to respond through this more challenging cycle that we think will persist for a bit longer. In the MIM business, the big item to note is that the Waddell & Reed agreement was entered into over this last quarter. And that will materially lift the scale of the MIM business. And Martin and the team will be talking in more depth in a little while about MAM and how it's positioned for growth, and that will include Shawn giving an update on the Waddell & Reed acquisition. Then turning to banking and financial services. As I mentioned, we continue to enjoy good growth there. The home loan portfolio is up 9% and is now at over AUD 60 billion as we also continue to grow share based on our very consumer-focused [ tetrin ] offering that we have. And the business banking portfolio is also up 5%, and our deposits are up 3%, now at about just over AUD 76 billion. Also, the funds on platform were up 9%, but the vehicle finance book was down 3% as we look at slightly changing our risk appetite in terms of what we do in that sector. Then turning to the market-facing businesses and starting with Commodity and Global Markets. You'll recall at the end of the first half, we were guiding that we expected the second half to be significantly down on our first half because we experienced very subdued market conditions in July, August, September. But we did guide that volatility could create opportunities. And what we saw over the third quarter was increased volatility as well as market dislocation and that drove client activity and trading opportunity for our teams across just about all of CGM. And so in our commodities business, we had good results in base metals, precious metals, oil and gas and power. And in our foreign exchange credit and interest rate business, we also saw good client activity in North America and in Asia. And the vaccines and the election results in the U.S. particularly drove opportunities there. And then in our equity derivatives and trading business, again, good results across the board, particularly in Asia and Europe, but across all of equity finance, warrants and trading, and that was supported by consistent contribution again by the Specialised and Asset Finance business. And then lastly, turning to Macquarie Capital. In Macquarie Capital, fee revenue and debt capital markets revenue was down on the prior comparable period, offset slightly by equity capital markets revenue, but we saw a significant increase in investment related income over that period, which included the realization of Nuix here in Australia and an offshore wind asset in our Infrastructure and Energy group in Europe. Now pleasingly, also in Macquarie Capital, we've been able to get money invested in these more buoyant markets, particularly in credit markets and in providing bespoke financing solutions to clients by bringing the Principal Finance team together with the Macquarie Capital team and being able to access those opportunities from our sector specialists in Macquarie Capital. So AUD 3.4 billion invested year-to-date and the Macquarie Capital team will also, as I said, be presenting in more depth about how they're positioning opportunities for their business and the Corporate Operations Group led by Nicole Sorbara will also be giving you an update. Now across the 4 groups, we have a footprint in terms of our people of over 16,000 people now, with 56% of them being outside of Australia. Turning then to our funding and capital position. Our funded balance sheet remains strong at the end of the quarter with our term funding comfortably exceeding our term assets. And in the period, we raised AUD 4.9 billion of long-term funding, and we're sitting now with deposits of AUD 79 billion, up 2%. And in terms of our capital as well, still a strong position. At the end of the first half, we had a AUD 9.4 billion surplus above the APRA Basel III levels. That's come down now to AUD 8.1 billion, still a strong surplus but the main impact there has been absorption of capital into our businesses, you can see there, AUD 1.6 billion absorbed by the businesses over this quarter. And that was quite a change from the first half, where you can see in this chart businesses were principally releasing capital apart from BFS. And then in this last quarter, they all saw opportunity to put capital to work. And in Macquarie Asset Management, that was the Waddell & Reed acquisition, offset slightly by the realizations I mentioned that happened. In Macquarie Capital, that was the principal financing investments that I mentioned and also some debt capital markets underwriting, offset a little by the asset realizations that I also mentioned. In Commodities and Global Markets, we saw capital being absorbed into loans and commitments as well as the derivative trading volumes and then in BFS, ongoing growth in both our residential mortgage and our business banking books, partially offset by the runoff that I mentioned in vehicle financing. And the last absorption of capital was in Corporate where 1 of the material things that happened there is that we transferred our group services entity from the group to the bank and are holding more capital against it as part of our resolution discussions with our regulator. And speaking of regulator, our regulatory ratios still remain comfortably above the Basel III minimum levels. And I particularly note that our APRA CET1 ratio at the bank group is at 12.1% at the end of the quarter. And speaking of APRA, we have a number of things going on with our principal banking regulator there, as you can see on that slide. A few I'd note is at the top of the slide on the December 08, APRA released a consultation paper aimed at embedding unquestionably strong capital levels in ADIs. And we are responding to that consultation as well as the many other items noted in the table there where the status is given. But our view is, based on current information available that we expect that we will have sufficient capital to accommodate any additional Tier 1 capital requirements from these changes noted above, noting that they are still in consultation phase. The other item I'd note on that page is, as I mentioned, as part of our resolution and intragroup funding work with APRA, we moved the group services entity from the group -- from the non-bank to the bank at the November last year. And then finally, at the bottom of the page, we've noted that in relation to dividend payments, APRA has provided an update on its capital management guidance and said that it will no longer require ADIs to hold -- retain a minimum level of earnings, although it would still like us to look at moderating dividend payout ratios and looking at dividend reinvestment plans. And in terms of regulation outside of Australia, in Europe, there's no change here really. The only thing to note is that we did get our MiFID investment firm license in France. So before I move to the outlook, the -- I did want to update you on some management changes and Board changes that we've had. You may recall, Gordon Cairns mentioned he would defer stepping down from the Board to support Board evolution. And pleasingly, we've had Rebecca McGrath and Mike Roche join our Board last month in January '21. And given that Gordon has now indicated that he will step down from the Board on the 7th of May when we announce our full year results. Then at the management level, Mary Reemst, who has been with us 22 years and the CEO of Macquarie Bank Limited, has decided to retire in July. And so Stuart Green, who is currently the treasurer of Macquarie Group and someone very familiar to investors, who's been with us 20 years, is going to be stepping up into Mary's role as of the first of July, and will be joining the Executive Committee of Macquarie Group as well as Macquarie Bank Limited. And I'd really like to thank Mary for her incredible contribution. It's been a delight to work with her as a partner. And also congratulate Stuart and wish him the best for his new role. And then also Martin Stanley, who is the Group Head of Macquarie Asset Management and who has been with us 16 years and whom I've worked closely with for the last 10 years, has decided to step down as the Group Head of Macquarie Asset Management and take a Chairman role in Macquarie Asset Management, which will include staying on the investment committees of all our major fund groups as well as Chairman of Macquarie Infrastructure Company, and that will take effect from the first of April. And Ben Way, who has been with us for 14 years and led building businesses for us in Macquarie Asset Management for a very long time, will be stepping up into the group head role of Macquarie Asset Management. Macquarie Asset Management obviously has a very deep bench of leadership in all regions and across all sectors, and you'll hear from them in a little while. So again, I would like to thank Martin. It's been a pleasure working with him for all of the time we've worked closely together, and I'd like to congratulate Ben as well and wish him the best. So with that, I'll just finish on making some comments on outlook. And as usual, we look at this in terms of factors impacting short-term outlook for each of our groups. And starting first with the annuity-style businesses, Macquarie Asset Management. We expect base fees to be broadly in line with the previous year. But in relation to net other operating income, we expect it still to be significantly down on FY '20, and that's because we had very strong realizations in FY '20, particularly in the fourth quarter in investment related gains, you may recall, we had the LOGOS realization. We also had the internalization of APRR, the French toll road. And we also expect a prolonged impact, as I mentioned, in Macquarie AirFinance and the implications for customers there. Then in banking and financial services, we expect to have to do ongoing monitoring of provisioning to support clients in this COVID-19 environment. But as I mentioned, we have higher both deposit and loan portfolio volumes across home loans as well as business banking. And our platform volumes, which are impacted also by market movements, are up, but this is being offset partially by the competitive dynamics due to the margin pressure we're seeing in the market. Then turning to the market-facing businesses. Macquarie Capital, we're seeing improving transaction activity, but we still have challenging market conditions continuing and impacting the completion rate of transactions. And the strong ECM activity that we saw in Australia in the first half so far has not persisted in the second half to date. As a result, we expect FY '21 still to be significantly down on FY '20, which again, like the fourth quarter of Macquarie Asset Management FY '20 had a period of very strong realizations in Macquarie Capital. But we do expect the second half of this FY '21 to be significantly up on the second half of FY '20. And then lastly, with commodity and global markets. We expect the second half '21 market conditions to continue to be more favorable than we previously anticipated, given the increased level of volatility that we experienced in this third quarter that I've talked about. So we're now expecting the second half of '21 to be just slightly down on the first half of '21 as opposed to significantly down, which was where we saw it at the end of the second -- end of the first half. And we expect the ongoing consistent contribution from the Specialised and Asset Finance business. And as we've said, the diversity we have across products and client sectors in that business we think positions it very well to keep delivering for the medium term. Then lastly, on the compensation ratio and the effective tax rate, we expect those both to be at the range of historical levels, and particularly in relation to the tax rate, we expect it to be broadly in line with the FY '20 rate. So putting all of that together, it is important to note that market conditions are likely to remain challenging, especially given the significant and unprecedented uncertainty caused by the COVID environment that we're in and the uncertain speed still of global economic recovery that do make short-term forecasting extremely difficult. But with that, we currently anticipate FY '21 to be slightly down on FY '20. Now there's a range of factors that are going to impact this outlook, and they do, of course, include the duration and severity of the COVID-19 pandemic, the uncertain speed of global economic recovery, the global levels of government support for economies and the completion period -- completion of period end reviews, which will include asset impairment and expected credit loss allowances. And then as with all years, the completion rate of transactions, the geographic composition of income, the impact of foreign exchange, potential regulatory changes and tax uncertainties and market conditions and the impact of geopolitical events all have to be taken into account. And given all this, we continue to maintain our cautious stance with a conservative approach to both capital -- to all of capital funding and liquidity, which we think positions us well to respond to the current environment, both with downsides and as we've seen in this last quarter, being able to support the businesses with capital where they see opportunity. And for the medium term, we continue to believe we're well positioned. As I mentioned at the beginning, we have operating groups that are focused in niches, but have very strong structural change opportunity over the medium-term as well as very good diversification across those capabilities. And we support that with our ongoing efforts to identify cost savings and efficiency and our strong and conservative balance sheet and our prudent approach to risk management. So as you have seen over the medium term, that's allowed us to deliver, in our annuity-style businesses, a return on equity of 22% over the last 14 years and 24% in the first half. And in the market-facing businesses, 16% over the last 14 years and 10% in the first half of that COVID-impacted first half financial year this year. And net of our surplus capital, we delivered 9.5% return on equity in the first half of the year. So with that, I'll hand back to Sam to take any questions you may have. Thank you.

Great. Thanks, Shemara. Before we go to the Q&A line from -- to the operator, I would just say we've got a little bit less than 10 minutes, just to keep us on schedule. So I give you over to the operator. Thank you.

[Operator Instructions] Your first question comes from Jonathan Mott from UBS.

Just a question on the commodities business. If you look through this year, we're seeing some extreme volatility, you go back and you had a really good April and May, then it got really weak through that sort of June too. And the full year is result in early November, you're still guiding down, although you sort of gave yourself that out clause at the time. And then it looks like it's been an absolutely great end of November and December and into January as well. So can you go through into this, like, are you comfortable with this extreme volatility that you're seeing almost on a month-to-month basis across all of the businesses that you called out? And secondly, what are the best indicators that we can look at for predicting where you're going to be on a near-term basis? Because I don't think there was anyone in the market that was expecting you to see such a great recovery coming through in the commodities trading businesses over the short period, short time frame. If you can help those 2.

Thanks, Jon. Yes, you're right. We did see, as you said, increased volatility over this third quarter. And we saw quite a bit of market dislocation as well. And that played out across all of our sectors. So gold in precious metals, oil, gas and power in North America and Europe. We had weather events in Japan that played into those sectors. So we did have a particularly positive environment for us in the third quarter. But that was contrasted with a particularly subdued environment in the second quarter. So we have previously given guidance on the commodity and global markets' customer numbers and how they're growing across products and regions. And that's probably a good indicator of how the underlying business is growing. I'll let Alex comment because we are working on trying to help guide investors on CGM.

Thanks, Shem. Jon, yes, look, I think Shem covered it pretty well. I mean, obviously, they're market-facing businesses. And so I think what we saw in the latter part of the third quarter was just an improvement in confidence and activity levels, generally speaking. And as we've said before, the customer base that we have has been growing for some period of time. And obviously, those customers got more active in the latter part of the quarter, coupled with the volatility that we saw in precious metals, base metals, oil and gas, I guess, consistent with what you've just observed, I think, generated the result that we saw in the third quarter. Yes, beyond the commodities business, we also saw improvements in the equity, derivatives and trading business. If you look at the volume of trading, particularly in the Asian markets, we saw some benefit from that, and that obviously plays through into the warrants business. Now then we saw as a pickup in volatility in FX. And again, the FICC business, which is much more, I guess, structured FX for clients saw the benefit of that increased volatility in providing our clients with solutions to help manage those risks. So I think if you're looking for the indicators, it's really that client base and the continuing growth in the client base. And then as you say, the market recovering and confidence coming back in, we typically see a pickup in transaction activity, and we saw that through the third quarter.

Okay. And we're now part way through February. So a pretty clear view. Has that continued into January and especially in the trading businesses, where you have a pretty clear view on how the trading activities continued so far in the fourth quarter?

Yes. I mean, obviously, if you look at the short-term outlook, we obviously make the point, which Shem made the point before, that we continue to see there's more favorable activity, those more favorable conditions versus the second quarter. We're obviously more optimistic about the second half. We've continued to see in the early part of January, good activity levels. And obviously, that's consistent with the point I made before, the world generally feel, generally speaking, it feels like it's getting slightly better, albeit it's been a bit uneven in terms of the recovery. The other thing that plays in, we talked about this before in these forums, Jon, obviously, is the Northern Hemisphere winter. So that obviously tends to be a stronger period of time for our gas and power and oil businesses in particular. So we're getting toward the back end of that. And March tends to be, just as a shoulder month, tends to be a quieter time for the business. So I think we think that the sort of underlying view of the business and transaction activity is improved from where it was in a very subdued Q2. We obviously had a very strong Q3 with clients, I think, repositioning to get in front of or position themselves as a result of the pickup in confidence and volatility. We see some of that continue in the early part of the fourth quarter. But obviously, there's some other factors that play into the fourth quarter that I think mean that in terms of our overall guidance, obviously, we're saying second half, we expect to be slightly down on where we were for the first half of FY '21.

Your next question comes from Andrew Lyons from Goldman Sachs.

Shemara, just a question on the qualitative divisional outlook comments, which suggest a more prolonged impact on Macquarie AirFinance given COVID. Can you perhaps just talk about what that might mean for the P&L over the course of this year and going forward? And particularly what the magnitude of any write-downs of that stake might look like?

Yes. Well, you'll recall, Andrew, that we have now sold down 50% of the AirFinance portfolio. So we own it together with 2 partners for whom we manage the portfolio. So that's reduced our size of exposure. And we account for our share of any losses in the underlying business. Our airline customers were starting to recover a lot towards the back end of last year, and then things picked up a lot with the pandemic again, so travel levels came off, particularly in Europe. We do have a narrow-body fleet and a younger fleet that's more exposed to domestic travel than international. So it's quite well positioned. But as I said when presenting in terms of using that word of prolonged downturn. We think it's going to take a while for recovery even in the domestic travel area. And we're seeing the cash flows in that business stabilize, rather than we'd hope they'd pick up even more. So we may well have to take impairments in the short term in terms of the Macquarie AirFinance business and take our share of those impairments. But we and both our partners are very committed to the sector. We have a good portfolio. We have a team with really deep expertise. We believe air travel will come back. We believe we're 1 of the players that's positioned to do better as it does come back. So -- and we and our partners have strong balance sheets. So to the extent there are opportunities, we're also standing ready to grow our portfolio through this period. And you may recall with the GFC, it was a couple of years after the GFC, we were able to make material investments and grow our footprint in that sector. And I guess we'll just be watching carefully how things evolve and both protecting our existing portfolio and looking at any opportunities together with our partners to invest further in the sector if there is distressed. Anything to add?

No. I think that covers it.

Okay. If there's no other questions on the line, we will -- we can come back towards the end, perhaps, if we've got time. We're now going to go to the Macquarie Asset Management business and hear from Martin Stanley and Ben Way and team. Before we do, we'll have a short client video to show you, and then we'll start with Martin. Thank you. [Presentation]

Okay. So that was a terrific introductory film, which gave you some insights from some of our clients from around the world. And that's captured here on this slide that I've put up, which is basically showing our business model with clients at the center of everything we do because we're a fiduciary platform. And so we operate in order to provide great service to clients and provide products and experience to them that meets their needs across a range of product offerings. The product offerings that we offer on the right-hand side of this chart you can see that we're operating across both public markets and alternatives and the individual subproducts within those are set out on the right-hand side as well. We have something there called Global Solutions, which is something that we're seeking to promote over time where we try to capture the best of the public markets platform and the alternatives platform as well. You can see at the bottom, we've got our vision statement, which is designed to capture the sense from the Macquarie purpose statement. But what we're doing is we're saying that we're here to invest to deliver positive impact for everyone: our clients, our stakeholders and our staff, of course. This business is a business that has innovated over time and is a business that has at its heart innovation. And you can see here on this slide, the way that our platform has actively evolved over time. And what we've captured here is not everything that we've done, of course, but the funds that have been launched and closed and the acquisitions that have been made over this period. Culminating, of course, in the Waddell & Reed acquisition that we'll talk about a little later when Shawn comes to talk to you. On the right-hand side of the chart, you can see some of the statistics about where we stand today. This is a business that manages assets under management of around AUD 550 billion. We're a top 50 global asset manager based upon size. And you've got the MIRA metrics at the top, the alternative business at the top, and you've got the investment management, the public markets business at the bottom. There's a couple of things here that I want to pull out. Of course, the first is that we operate in this space by the grace of our clients. And of course, they're really looking for us to make sure that we're delivering good performance to them. So you can see here at the top, this is an infrastructure statistic. 14% realized asset IRR. So this based upon all of the assets that we've sold over the life of the existence of this business, which stretches back beyond 2010, you can see there's everything good or bad in that period. And then similarly, down the bottom, our Investment Management business, delivering an 86% performance. So 86% of funds exceeding the 10-year benchmark across all strategies. So you can see that it's performance that drives investor support. And in the middle there, we've picked out some statistics from the MIRA business which is showing how that is culminating. So over the last 5 years, around AUD 93 billion of new capital raised for our funds, AUD 75 billion of which being invested and then AUD 42 billion being returned. If we go -- if we look now at the breadth of the business, this is a business that we refer to as being a global platform with a local presence, whether you're operating in the public market side of our business or in the alternative side, of course. And you can see the stats here of the number of people that we've got around the place, the number of assets that we manage, the types of assets that we're looking at are all set out on this map on the left-hand side. On the right-hand side, we operate as a business that has a lot of specialist expertise, a lot of professionals that are really deep sector expertise in the areas in which they operate. And so what we're trying to do is we're trying to bring local knowledge to local solutions to provide a global solution for our clients around the world. And you can see that from the range and diverse nature of the people that we have in our business. The other thing that we're doing is we are leading or seeking to lead in the sustainable value chain. And what we're doing here is we -- as you saw recently, we made this very bold commitment to move MAM to a net 0 position by 2040 when it comes to carbon. And that's a leading position in terms of the way the industry is operating. But we didn't do this lightly. We thought about it very deeply. We've got good processes and procedures to support that. And we think it's really important as we go forward, as this becomes increasingly important from a client and community perspective. So you can see lots of other things on this slide here, including the fact that we have over 100 million people, the services that we provide through our assets every day. And of course, that makes this commitment even more important and makes the commitment to community support vital in the sense of making sure that our business operates going forward in a resilient and sustainable basis. As far as asset resilience is concerned, we're also showing this on the right-hand side, as climate does change, it's not enough just to adapt to that. It's also really important to make sure that the investments that you're making are resilient to those climate, climatic changes as well. And you can see some of the examples of the way our businesses are adapting and operating on the right-hand side. Whilst we're on the subject of resilience, I think it's -- it would be remiss not to talk about how this business has performed through the current period, the pandemic. And this is, as we all know, has been a very significant shock to the system as we've come through the last few months. And what has been extremely pleasing from the whole portfolio perspective has been that this platform has performed extremely well. It's proven itself to be extremely resilient, and that is down to the way in which those portfolios were set up as we came into this period, not in anticipation of a pandemic, of course, but certainly in anticipation that we were a long way into an expansionary economic cycle and making sure that we were prepared for that. So the platform has performed very well, and that is reflected in the results that Alex has talked about earlier. If we think about our alternatives portfolio, which is captured in the middle, you can see some of the metrics there about how that platform is set up. And you can see that less than 5% of our portfolio is captured by aviation. And the reason that it's at that level is because of the divestitures that we've made during the course of the last several years, but also because of the mix that we've constructed over time. So you can see that our -- whilst aviation has suffered as a result of this downturn, the bulk of our portfolio has been extremely resilient. And you can see the mix of the portfolio on the right-hand side of the chart. The other thing that this business does extremely well is that it manages actively through the life cycle of the investment horizon. And it does this both in the public investment side, but also on the alternatives side. The example in the middle is talking about the alternatives business, where we look at creating value right the way through the life cycle of the investment through from acquisition, transition, optimizing assets through the ownership period and then looking very carefully to the exit and making sure we plan that very carefully. That's also the case on a different level in the public investment side of the business, where we're thinking very carefully about how we can drive real value for our clients through the things that we're investing in and the approach that we're taking. What I'd like to now show you is a case study, which Verena is going to present, which is about the way in which our business has adapted during the present downturn when we haven't actually been able to do the usual things that we'd like to do in terms of managing a divestiture for 1 of our assets. Handing over to you now, Verena.

Thanks, Martin. In 2014, MIRA through its Philippine fund acquired a 100% stake in Philippine Coastal Storage, which is the largest independent oil storage terminal in the Philippines. It was 1 of our first investments made in the Philippines, but in a sector that was very familiar to MIRA. As is our approach post acquisition, we set about trying to enhance the value of the business. Firstly, by setting the strategic vision and HSE focus on day 1. Some of the strategic initiatives included optimizing the utilization level, attracting international customers, expanding our capacity and really elevating our HSE practices to international standards. Secondly, we were really wanting to align the management structure to the incentive scheme. So effectively, a lot of that was linked to the strategic KPIs. Thirdly, we were very proactive in trying to expand the facility to accommodate the growth in the customer demand for oil storage in Philippines. And in parallel, we optimized the capital structure to support that expansion. And finally, we basically restructured some of our customer contracts from shorter-term contracts to longer-term contracts to really build the resilience in the cash flows. All of these initiatives basically meant that the investment was able to outperform investment case year-on-year, and the EBITDA basically grew from USD 18 million to USD 30 million in the ownership period. Early last year, as the fund is now nearing the end of its life, we actually launched the divestment process for Coastal Storage just as COVID was emerging. Normally, we would run management meetings physically, site visit physically and obviously conduct SBA negotiations face-to-face. But obviously, in the circumstances, we really needed to adapt and be a bit more creative in our approach. So quickly, we became very used to holding virtual management meetings as well as for some buyers, site visits virtually. Despite these challenges, pleasingly, we were able to complete the divestment within the planned time period, delivering an IRR of 28% and money multiple of 4x back to our investors. Certainly, COVID did not slow down our process or the result. Back to you, Martin.

Okay. Thanks very much, Verena. That's a terrific story, as you can hear. And of course Verena has been on the journey with that particular asset since we acquired it, right the way through to the divestiture. Now turning to this next slide. I'm now moving on to talk about the earnings history, so the net profit contribution of MAM. And again, we go back over a 10-year period just to look at this. And what you can see here is a really nice progression of earnings over a long period. It's a story of sustainable growth. And you can see simplistically, the growth driver of that at the top: equity under management shown in blue, which is the MIRA business coming through that. And then you've got assets under management at the top. So a nice, steady, left to right chart on both of those. The AUM includes the MIRA assets under management, which obviously includes the proportional net debt of the MIRA businesses as well. But as you know, we like to show the equity under management as well. If we turn to the next slide that I've got up here now, you can see the composition of income. And I've talked about this a little bit before, but I wanted to elaborate a little bit on this, for you to get a better feeling for how the business actually makes money on a sustainable basis. And we've got 3 components of income, and this is consistent across the whole group, whether you're on the public market side or the alternative side. We've got 3 components: asset management net income, which is base fees minus operating expense. So this is the underlying sustainable income of the business that grows as base management fees rise and over time. Then we've got the performance-related income, which is performance fees and net investment income. The bulk of that, of course, is coming from the MIRA business. The net investment income coming from our proportionate investment income on the co-investment that we're putting into our funds and co-investment platforms. And then net other operating income is the final component, which is predominantly operating lease income from our aviation assets, but also some other income that comes through from time-to-time, and that comprises the overall picture. And I'll talk a little bit more about that later when I get to the next slide. But sticking with this for a moment. The other thing I wanted to bring out was how our equity under management has changed over time. And you can see this by the 2 pie charts on the left-hand side, which are basically showing that back in March '16, when we showed these numbers, about 88% of our equity under management in the MIRA business was coming from infrastructure and about 12% from other alternatives. You can see that despite the fact that our infrastructure business has grown materially over this period, around 27% of our equity under management now comes from alternatives that are outside the infrastructure asset class. This is really important when we come on to hear from Ben later today, given our aspirations to grow in the Other Alternatives asset classes. When you look at the right-hand side, the other thing that's important is to understand how sustainable our performance fees are going forward. And this gives an indication of that as well. On the left-hand side, you can see that this is based upon all assets in our portfolio, in the MIRA portfolio, that have a performance fee component attached to them. And that's just over AUD 100 billion of equity under management that falls into that category. So here, we're saying that 82% of our portfolio have a maturity that is longer than 5 years. So longer than 5 years to run, which is a great thing, a strong annuity business. And on the right-hand side, we're saying that despite only having 18% of our assets that have less than 5 years to run, so effectively in the zone in which you'd expect to see performance fee, 35% of our overall portfolio is in performance fee territory. So essentially, what we're saying here is, not only do we have longevity in our portfolio, but we also have a portfolio that is in rude health and is in performance fee territory on a number of funds. This slide now goes into a little bit more detail. And I'd remind you that I showed something similar to this around 5 years ago, and what we've got here is the earnings track record here, and the equity under management is in the yellow line. The dip at the back end, of course that is caused by foreign exchange movements. That's the predominant movement there. And what we've got here is we were showing that our base fees accounted for around 100 basis points on average when we stretched right the way back to 1997. We also showed that performance fees on average over that same period were amounted to around 40 -- around 50 basis points, sorry, and our other income amounted to about 25 basis points on average. And what's happened over time over the last sort of 5 years is as we've added things like private credit to the platform, you started to see a decline in average base fees. So over the 5-year period, our average base fees were about 90 basis points. But our performance fees and other income has gone up, and you've seen that in the results that we've reported over the course of the last several years. So today, our average performance fee over the last 5 years has been around 55 bps, and our average other income has been around 40 bps. So slightly up on previous. By the way, these are not forecasts of what the future might hold. They're basically a report on what's happened over the course of the last 5 years. Now of course, we are a fiduciary platform and as a fiduciary platform, as I said right at the very beginning, we need to make sure that we're focused on the needs of our clients and making sure that we're keeping them with a great client experience and giving them what they want, but we also have to operate within this really strong risk management framework. And actually, this is an important selling point for our clients, that there's an institutional risk management framework that supports them and supports their needs and gives them comfort that what we're doing is always in their best interest. So we have a disciplined approach, we have a resilient culture and we have a framework that's consistent with the overall group. So look, with that, I'd like to now hand over to Ben, who's going to pick up on the future of the business. But before doing that, I just wanted to make a few comments about Ben. It's been a great privilege for me to run this business over the course of the last several years in combination with both MIRA and MIM. It's been a period of around 12 years, and I've been with the group now for 16 years. So handing over to somebody is not an easy thing for me to have done, but making sure that I'm handing over to someone with the quality and the competence and the humanity of Ben has just been fantastic. He's a great leader of this business. He embodies the values and the culture of the wider group, and I've got every confidence in him as a leader going forward, as I have in the rest of the management team. So handing over to Ben to take us on to the next stage of this journey. Thank you.

Thanks, Martin, and good morning, everyone. I'd like to start by obviously recognizing Martin and the extraordinary contribution he's made over the last 16 years. He's led with enormous warmth and empathy over that period. Martin is a very understated leader. He never takes credit. However, it's only right today that we acknowledge his very prominent role he's played in our success. So thank you, Martin. And importantly, we're really excited that he'll be continuing on as our chairman. If we now start with the market environment, the industry continues to see good net inflows, and that's expected to continue. This is driven really by 2 things, a rise in savings rates but also low interest rates. So what that means is investors are searching for returns and that drives capital into our industry. The alternative sector is a really good example of this. We expect that sector to be about $17 trillion by 2025, and we're also seeing good growth in other areas, particularly things like active traditional assets. As we've discussed before, the industry is seeing some fee compression, but this is largely being offset by the growth in assets. From our perspective, we don't try to compete on price. We don't try to be all things to all people. We are a global specialist. So what we really focus on doing is building enduring relationships based on the best client experience. Lastly, there is certainly a growth and an increased focus on ESG. And as Martin discussed, that's creating opportunities for managers, and it's an area where we're really seeking to lead. So if we turn to then our outlook, we're really excited to build on our strong heritage of growth and innovation, especially given our track record and our footprint. Now we've got 3 key areas of growth. The first one is building on and extending our leading infrastructure position. The second one is growing our other alternative businesses in adjacent areas to construction, such as real estate and private credit, especially given the scale and the growth of these sectors. And thirdly, it's about advancing our public investments platform, particularly our scale and capabilities. Shawn will talk about that in a moment. As always to achieve these focus areas, there are a few key enablers that we really need to get right to make sure we can deliver on this plan. And they are continuing to foster our strong culture, particularly around our experienced teams. It's having a client-centric approach, which is really focused on delivering a great client experience. It's leading on sustainability. It's a strong risk approach, and it's also a continued investment in technology. So turning to our infrastructure business. Importantly, here, the market continues to experience good growth. We expect about $1.2 trillion of net inflows over the next 5 years. Importantly, there continues to be good deployment opportunities, which are driven by mega trends such as urbanization, digitalization and energy transition. And we are very well placed to extend our leadership position, given our long track record, our 300-plus specialists and our global presence. Importantly, we think there is very good scope for us to continue to grow our product suite both up and down the risk curve, but also launch new types of products, such as open-ended infrastructure funds. A really good example of the investment opportunities we're seeing from the mega trends, but also a great example of our approach to active asset management is our investment in AirTrunk, and [ Annie ] will now speak to this case study.

Thanks, Ben. We've been evolving our portfolio to respond to the rapid pace of digitization for some time, and demand for digital infrastructure has been further accelerated by the events of the past year. The world's communication needs has never been greater. We expect to be connected all the time on multiple devices with low levels of latency. From remote working and learning, to online shopping and streaming services, these experiences have become an everyday part of our lives. Developments such as the advent of 5G and move to the cloud mean this unprecedented data growth shows no signs of slowing. MIRA is investing in infrastructure, underpinning innovation in this rapidly evolving digital economy, supporting the development and operation of assets such as towers, fiber, wireless networks and data centers. Each year, businesses in which we manage investments reach more than 110 million people through digital infrastructure. In Australia, we manage interests in 5 digital infrastructure assets, 3 of which have been acquired in the last 3 years. One of these, which we acquired in April 2020 is AirTrunk, a leading Asia Pacific hyperscale data center provider. AirTrunk is capable of delivering a total planned capacity of 750 megawatts across 6 data centers in 5 Tier 1 markets. Since acquisition, we have deployed material amounts of growth CapEx and our asset management teams in multiple locations across the region have been working with management to support the ongoing growth of the business, enabling AirTrunk to serve new and existing global hyperscale customers in even more locations. Thanks very much, Ben, and back to you.

Thanks, [ Annie ]. Moving to the next slide, real estate, this is a very large sector with good growth where we feel we can expand our presence. Today, we've got $19 billion of AUM in some 500 properties. Significantly, we've got more than 210 specialists in 28 locations after the integration of GLL. As with the infrastructure, we focus on identifying opportunities aligned with tailwinds or trends. So this means for us a focus on beds, sheds, bytes and desks. The way we execute is really via 2 strategies. The first one is core and core-plus. This is where we invest buyer funds and manage properties such as office and logistics. And the second is opportunistic. This is where we partner with a specialist platform or management team, leveraging our principal track record. The LPC case study, our U.S. logistics platform, is a good example of our opportunistic approach. This is where we find an opportunity that aligns with a really good thematic and then partner with an excellent management team to build a platform from development to core, which enables us to create assets to sell down to our clients. Moving to the next slide. Private credit and asset finance, our third areas of focus, are further examples of how we're looking to expand our alternatives business. In terms of private credit, we've got $12 billion of assets under management, which is primarily infrastructure debt. We've built a really high-quality portfolio of some 120 investments with 0 losses or impairments. So given our scale and our track record, we're very well placed to move into other infrastructure and non-infrastructure areas such as secure income real estate. The case study that we've got here on our sub investment-grade fund highlights how the team has built really well diversified portfolios with strong client support. And so we believe we can re-replicate these funds but also replicate them in new areas. In terms of transportation finance, we've got a 15-year track record of investing in many types of movable assets. Today, we've got about 300 aviation assets. As we know, this sector is currently challenged by COVID. From our perspective, we're well placed to get through this period, given our team's depth and experience, the quality of our portfolio, the strength of our balance sheet and our long-term partners. If you look at our aircraft portfolio today, we have primarily narrow-body planes used on domestic routes with a diverse customer base. In the near term, given our experience and track record, we expect to secure opportunities arising from dislocation, from transition to lower emissions or through new technologies. Let me now pass to Shawn to talk about public investments.

Thank you, Ben. Our Public Investments business is a strong investment manager that provides active specialist strategies to institutions and retail clients. The business is well diversified across equities, fixed income and multi-asset capabilities. We manage over $360 billion for clients in multiple regions with a strong presence in both the U.S. and Australia, 2 of the largest pension retirement markets in the world. In the U.S., our Delaware funds will be ranked in the top 25 of active mutual fund managers upon completion of the Waddell & Reed acquisition, and we are 1 of the top 10 managers of global insurance assets. These are 2 very important areas of growth for us and the industry going forward. Most importantly, our top priority is investment excellence. 86% of our investment capabilities are outperforming markets over the long term. Our goal is to have 2/3 of our strategies outperforming, even through very volatile times like we have seen the past year with this pandemic. And our goal is to outperform over rolling 1-, 3-, 5- and 10-year periods. This is a leading indicator of the growth of our business going forward. Over the past few years, we've continued to globalize the firm and have implemented Aladdin now in all regions, which makes our business both more scalable and efficient. Also, the platform is benefiting from greater collaboration and cross-selling in our MAM Client Solutions group, which has client people for all of the various pillars of the MAM business. We're also focused on growth for the future. We have several flagship strategies that are gaining assets, and there are also several new capabilities that we've acquired over the past few years, such as small-cap growth, global value and emerging markets debt that are seeing success and will be future flagships. We're also focused on bringing alternative capabilities that Ben talked about to the wholesale channels globally. We've already launched products in both the U.S. and Australia and have plans for others in the future. Another key driver of our growth in the future is the acquisition of Waddell & Reed. The combination of Macquarie and Waddell & Reed is very compelling and will strengthen our position in the largest market globally, which is U.S. wholesale. The acquisition increases the scale of our U.S. business and provides us with several strong new investment capabilities that complement our existing flagships. The acquisition is also building a very strong partnership with LPL, the largest and fastest-growing independent broker dealer in the U.S., which will increase our positioning in the important wealth management segment. When you look at Waddell & Reed, the business is actually 2 different firms within one. There is an asset manager with $75 billion of assets under management and then also a wealth manager with almost $70 billion in assets. Upon completion of the acquisition in the second quarter of this year, we plan to simultaneously split the business and sell the wealth management portion to LPL. The remaining business on the asset management side complements the rest of our MAM business very well, where our business will become 1/3 equities, 1/3 fixed income and 1/3 alternatives when you look broadly across Macquarie Asset Management. Also, in addition to selling the business to LPL, by optimizing the balance sheet post close, we believe that we will be able to achieve a 6x EBITDA margin on the -- return on the overall business. With that, let me turn it back to Ben for the close.

Thanks, Shawn. We're really excited for the future. We think we're very well positioned for growth, given our track record and the areas we've identified to continue to focus on. We really believe we've positioned the business in areas where we can continue to realize opportunities that allows us to build not only on our long track record, but really to harness the experience of our teams around the world. Now importantly, we're going to continue to position ourselves as a global specialist, doing the things that we're good at, where we think we can add value to clients. And so that really means that clients are at the center of everything we do, and we're focused on providing them with a great experience. Just as importantly, we're committed to continuing to invest where we can deliver a positive impact for all, and really what underpins all of that is our culture and our track record. And so we're going to continue to foster that and grow that so we stay relevant and competitive. So with that, I'm going to pass back to Sam. Thanks very much, everyone, for listening today and I look forward to interacting with you, all of you in the future.

Great. Thanks, Ben. Again, before we go to the Q&A, we've probably got about 10 minutes with Martin, Ben and Shawn on the line, obviously, Shemara and Alex here as well. So I'll pass it over to the operator.

[Operator Instructions] Your first question is from Andrew Triggs from JPMorgan.

Interested, Martin, in this -- I guess, this question could be asked of any of the divisions, given the deployment in capital during the quarter. But how quickly do you think the window for capital deployment is closing, given you're really seeing unprecedented support from both government and central banks? And sticking with that theme, is Europe throwing out more opportunities, given the more difficult macro environment there?

Look, I think at the moment, capital deployment is very strong and the deal flow looks extremely -- it looks extremely strong across all sectors of the alternatives platform. So no, I think one of the things that we've got to watch out for is that, which I think is what you're alluding to, is that as risk-free rates continue to fall and money becomes more plentiful, that asset pricing will start to elevate somewhat and that's something that we're going to have to watch out for. Because certainly, at the moment, it's a favorable market to be selling into, and we're having to work hard in terms of finding opportunities and constructing those that fit the mandates of the fund. But at the moment, we're right the way around the world, we're doing that. And I would say that deal flow today is as strong as it has ever been.

Your next question comes from Ed Henning from CLSA.

I've just got a couple. Your ability to raise capital has been well noted going back over time, can you just talk about going forward, do you see that coming more from existing customers or new customers? And then just a second question, you've talked a lot about the opportunities today, which look compelling. Can you just touch on the risks or concerns you see for the business impacting the growth, both in the short and the medium term?

Look, so capital raising has been strong. Of course, that's also being helped by what I described earlier in terms of the quantum of money that is in the system at the moment. But we've been favorably surprised, very pleased with the way that capital raising has gone through the balance through this year from the moment that we ended up hitting the pandemic. Things have actually -- people have still committed to funds, people have still been interested in committing to transactions and that's been very positive. That's not only been the case on the alternative side of the business. We've also seen a lot of activity, of course, in the public investment side of the business, too. So that's good. I think we can continue to see that going. And as Ben referenced in his presentation, there's more money flowing into the asset management sector. And as part of that, there's more and more money flowing into both active strategies in the public investment side but also alternatives. So I think we're in a favorable period going forward. In terms of the risks that we're looking at, I think one of the things that we are a little bit concerned about and focused on, I suppose, in the alternative side of the business is that the world has got used to governments intervening in everybody's lives in terms of the amount of people that we have on furlough around the world, particularly in the Northern Hemisphere, the amount of engagement that the government has in terms of supporting people, there is a risk, of course, that, that continues going forward and that creates a competition between the public sector and the private sector, which I think would be -- which would be unwelcome. But at the moment, feels less likely than it did perhaps at the peak of the crisis. So I think continually, the things to watch out for are regulation, the role of government going forward and the importance of making sure that we continue to serve the needs of communities because that's going to increasingly be a pressure point for all people that are operating in the [ Northern ] sectors that we operate in.

And just going back to my first question, do you see more new customers coming in and raising the funds or are more going to existing customers going forward?

There's more -- we're doing very well from existing customers. There's a lot of capital that we raise from what we call re-ups. But also, we're seeing new people coming into the -- with greater allocations to the alternative space, in particular. And increasingly you see, every day you're seeing pension funds and sovereign funds making revised allocations to the alternative space. So I think we'll see new customers coming through. But I think the success of the business is also going to depend very heavily on keeping the confidence of our existing investors to keep supporting us going forward.

Your next question comes from Brian Johnson from Jefferies.

First off, I just feel compelled to say congratulations to Martin, what an outstanding job. I actually had 4 questions, if I may, so I'll make them pretty quick. Can we get an update on the relationship between MIRA and Green Investment Group and this perceived property issue between MIRA buying assets off Green Investment Group? The second one, if I could, you're saying that basically, you've got this aspiration to be green by 2040, but you still own 50% of the aircraft leasing book. I'd just like to understand how we can reconcile that? Does that mean ultimately you divest it or do you buy carbon credits to offset it? The next one is just on Waddell & Reed, when you actually have a look at it, the style of funds on Slide 44 that Waddell & Reed does is all the pretty groovy stuff, and it just doesn't seem to reconcile with the performance. Could we get an update on what's just basically happened in the last few months on the assets under management in Waddell & Reed? And then the final one is under the real estate section, you talk about beds, sheds, bytes and desks, could we just get a kind of explanation of what you're targeting in that space? So MAM and MIRA, that was the first -- MIRA and GIG was the first one.

Yes. Well, thanks, Brian, and thanks for your comment. Much appreciated. I'll take the first 2, and then I'll hand -- I'll get Shawn to answer the Waddell & Reed question and then get Ben to pick up the real estate one, if that's okay. So the first one on GIG, it's very simple, really. When we acquired the Green Investment Bank as it was called at the time, we split the various components of it between the asset management business and Dan Wong's area, which he will talk more about when he comes to it. So the fiduciary side came over to us, and the principal investing side and the development side, if you like, went over to Dan. We obviously work together and share experience, but there is no -- we don't buy assets that are developed by Green Investment Group on Dan's side to sell down into our funds. So we avoid all those related party issues, and that's a policy that we've followed for many years now. So not buying assets off the balance sheet from Dan's development area. So I don't think there is an issue that you're referring to, Brian. And then as far as the net 0 commitment, the way that we've approached that is consistent with the Paris Accord. And if you are familiar with the Paris Accord, what that's basically saying is that you have to be on a glide path to get to net 0 by 2040. And each different asset class has a different glide path to get to that net 0 commitment. So just because you have an asset that is carbon-heavy or relatively carbon-heavy today, doesn't mean that you can't continue to own it, you need to make sure that you're on a glide path to deliver that to its net 0 position, which is net 0 position consistent with the Paris Accord. So that's what we're talking about. So each part of our portfolio will have a plan that will get us to that position by 2040, and that includes our aviation position as well. So no, it doesn't mean that we'll have to divest those assets immediately, Brian, no. So maybe Shawn, if you could pick up the Waddell & Reed point?

Sure. Sure, Brian. Sure, Martin. Yes, Brian, when you look at Waddell & Reed, the underlying investment capabilities that they have, there are a number that we think are very attractive and are very good complements to what we offer within the public investments business and specifically within the Delaware funds, which are our U.S. mutual fund platform. In keeping with our stated goal to have strategies that outperform over rolling 1, 3 and 5 and even 10 years, there are a number of strategies and teams within the Waddell & Reed team and the Ivy fund family that are very attractive, and we think are going to complement the rest of our Delaware funds lineup very well. From an AUM standpoint, we're very pleased to see that assets have been up since we started negotiating this transaction and are up since the announcement of the transaction back in early December, and Waddell & Reed just recently posted their most recent quarterly and monthly flows. So very pleased with the progress that the transaction is making and do believe that post close, we will be able to offer an even broader lineup of some very compelling and higher-performing strategies to clients in the U.S.

Brian, it's Ben here. So in terms of your question around beds, sheds, bytes and desks, what that really relates to is just, I suppose, an easy way for us to identify the sorts of areas that we're focused on. So really what they relate to are areas where we think that are good thematics or trends, and that's where we're spending the vast majority of our time looking for opportunities either as a core asset -- core property asset manager or as an opportunistic developer of assets. And so if you think about beds, that's where you're identifying a particular market where there may be a real shortage of, say, rental properties for a certain demographic. And what we'll do then is go away and develop, often with a management team, a platform there that allows us to build to rent accommodation facilities for certain demographics in the market. And so that's really what they represent, and they are the areas where we think, at the moment, there are good thematics and where we have the right expertise and also, most importantly, the right partnerships to keep finding opportunities and drive growth.

So can you just elaborate on the desks bit? Is that just office buildings? What is desks? The other 3 are kind of obvious, but what's desks?

Yes, sure. So desks is not so much office buildings per se, but it will be where we can do, say, a mixed use building, where there may be a component of office space and/or desk space that's suitable to that particular city or market and suitable to the demographics of the people and the companies that we think are occupying that area.

Great. We have gone over. We've probably got time for one last quick question.

Your final question comes from Brendan Sproules from Citi.

I just have a question on the fee income trends within the MIRA business. So my first question is on Page 35, you show the base fees being a little bit lower, averaging 90 basis points in FY '17. So I wonder if you could talk around the outlook for that? And then my second question is just on performance fees. You show on Slide 34 that the equity under management up for maturity over the next 5 years is only 18%. Just wondering how we weigh that up against, obviously, the good performance that you show in the chart next to it where you've got almost 1/3 of your equity under management already in performance fee territory?

Yes. So dealing with the first question. Look, so our -- what we're showing here is the average fees across the whole of the equity under management. And obviously, that equity under management in the MIRA business includes private credit assets. And it includes real estate assets, and it also includes co-investment. And so what you have on those type of products is generally a lower fee load than you would get on the traditional infrastructure funds. So when we take the blended average across the whole of that equity under management, you end up with a slightly lower average fee rate over the last 5 years than you've had over this prior period that I was showing here over the longer period. Now the point that's worth bringing out here, which I think is what you're getting at, is what does that mean with respect to the headline fees on our core products, so on our main infrastructure funds. And what we've been seeing over time is that those base fees have been very robust. And if we were to go back over a period of 10 years, you'd have seen the average fee level on those funds actually rising over that period. So as I say, this is a blended rate so the whole of the equity under management. As far as the question you're asking on the performance fees is concerned, I think you were referring to the slide with the little pie charts on it. Worth explaining this a little bit more. The graph on the left-hand side is all of the equity under management that we have, and the graph on the right is relating to the equity under management that has a performance fee attached to it. And so what we're seeing here is we've got 35% of the equity under management that has a performance fee attached to it, which is just over $100 billion in performance fee territory. Now this changes over time as we start to get closer to the end period and start to monetize assets. But as I was saying in the presentation, this is basically demonstrating that the portfolio as a whole is in very good health and that we should feel reasonably confident, subject to what else happens, of course, as we move through time, of the performance fees into the future.

Great. Thanks, Martin. Thanks, Brendan. Thanks for the questions. Thanks, Martin, Ben and Shawn. We're now going to move to Macquarie Capital. We're going to hear from Dan Wong and Michael Silverton. Before we do, as per MAM we will show a short client video. [Presentation]

You've just heard some stories from our clients and our staff, giving you their perspective on Macquarie Capital. Today, Dan and I, along with some of our senior management team, will give you an overview of Macquarie Capital and our strategic focus. MacCap is a unique combination of specialist advice and access to capital with clients at the core of our business. We provide ideas and solutions to clients across the full suite of market-facing services, including advisory, capital markets and equities sales and trading. We also invest the balance sheet to create opportunities. This investment, in and alongside clients, is across the capital structure and life cycle from debt to development capital and equity. And through this combination of ideas and capital, we empower our people, clients and partners to innovate and invest for a better future. Our business today is a product of decades of evolution. Many businesses incubated in MacCap have become substantial businesses in their own right and moved into other parts of the group. And we continue to be a creativity engine within MacCap and for the group. Our business will continue to develop in response to market opportunity and where our clients and partners need us to go. Starting from the integrated business in Australia with its strong heritage and market position, we've moved into more focused offerings offshore. We've evolved by progressively moving from positions of strength into new adjacencies and geographies, through both organic growth and acquisitions. Today, we are a global business structured into 3 distinct divisions, each with a specialized focus: Infrastructure and Energy, focused on infrastructure, renewables and the energy transition. Advisory and Capital Solutions provides advisory, capital markets and principal investing solutions to targeted client segments and sectors. And Equities, with its focus and strong position throughout the Asia Pacific region came back into MacCap last year and the combination of that business working together with our market-leading business is incredibly powerful as demonstrated by how we raised $0.50 out of every $1 for ASX 100 companies in 2020. A core part of our agility in delivering solutions is our people and our culture. Over to you, Dan, to cover what makes the team so unique.

Thanks, [ Silvo ]. Macquarie Capital is a large global team of over 1,800 people spread across 28 countries, spread across all regions reasonably evenly, as you can see there. This is a diverse team of almost 50 nationalities speaking over 45 languages, and we also have a diverse range of professional backgrounds to drive our business activity. We have people on the team with operational experience within our key sectors of focus such as in renewables or infrastructure or technology, and we have development and construction experts. And these are engineers and geologists and project managers. We also have principal investment specialists and advisory and equity specialists, too. And it is this combination of financial and transaction expertise with deep technical and industry expertise that I think makes Macquarie Capital unique and it enables us to deliver for our clients and partners and also superior returns on our investments. But critically, there is also our culture. This is the entrepreneurial spirit of MacCap and our team that helps us to identify opportunities and be accountable for driving them forward with urgency. And we've also been doing this for a long time. Our leadership team has been working together on average for over 15 years. Macquarie Capital is in the principal investing business. We currently have over AUD 13 billion of balance sheet deployed. So risk management and risk culture are absolutely central to the way that we do business. Fundamentally, in Macquarie Capital, our team owns the risks that we enter into, because we consider it a privilege and a responsibility to invest the balance sheet, and we're really conscious of that. So our transaction team, together with independent oversight from the risk management group, undertake fundamental analysis to understand each project or each business or counterparty we enter into business with. And we try to mitigate all of these risks to the extent possible, and we try to understand worst-case scenarios so that we can manage our risk exposures all the way through the life cycle of the investment. And then we look at the overall portfolio, and we apply a macro stress test to it to ensure that the risk profile of our overall investment doesn't change beyond our expectations during the period of ownership. And this gives us confidence in the investments that we've entered into and that the overall portfolio is in good shape. So of course, we invest in real businesses and real assets. And in many cases, with the development and construction projects, we have hundreds, if not thousands, of people on site. So as a result, we manage our nonfinancial risks really carefully as well, because this is the responsibility that comes with running real-life companies and projects. So WHSE is an absolute priority to the way we do business, along with anti-bribery and corruption, operational risk and compliance, and other nonfinancial risks as well. These are all essential for us to have an enduring and successful business for the long run. So turning our attention now to the Infrastructure and Energy Group. I'll shortly be joined by Mark Dooley and Kate Vidgen, but let me start by explaining where we're positioning the business. At the beginning of 2020 we were confident that we had built a business around 3 global mega trends that provided a long runway of opportunity where we can add real value to our clients and communities. And these key themes were decarbonization, digitalization and urbanization. So here we are now at the beginning of 2021, and this feels even more true now. Governments are accelerating their ambition, and they're investing in their countries to build back better. And they're backing their words with enormous stimulus plans. And infrastructure sits at the very heart of these plans because infrastructure is an enabler of growth and productivity and is a way to strengthen communities and also level up communities. And as we know, now more than ever, the importance of digital connectivity because in the past year, both people and industry have relied intensively on the digital infrastructure to connect themselves and to transact on. And then there's the global energy transition, which already was accelerating, but now has been supercharged with initiatives like China's commitment to reach net 0 by 2060 as well as President Biden's plans to decarbonize the U.S. And in all of these areas, there is a big, big role for private capital because governments cannot possibly fund it all themselves. And where we've positioned the IEG business is right at the front end of all of this. That is, building the new infrastructure that the world needs. And we meet this opportunity and challenge in IEG with a team of technical and industry experts who specialize in the development and construction of these real assets and real projects, whether it be the offshore wind farm that we are constructing in Taiwan at the moment or the fiber network we're rolling out in rural Spain or, say, the Silvertown Tunnel that we're digging under the Thames River in London. And we really believe that our activity in these areas is contributing to building a lower carbon and more connected world, and we're building this better future one project at a time. So let me take a moment now to talk about where and how we work in these markets and to explain a little bit more specifically what our role is. So we positioned the IEG business at the development and construction end of the asset creation journey. So what this means is that we take projects from the first dollar of investment towards construction and then through construction into operations and the first dollar of income. And what this means is leading a project through the higher risk and higher return development phase and then eventually delivering a derisked operational project into the hands of longer-term investors who want to hold these investments for long-term yield. So this is a model that we apply across all different types of projects, whether it be a bridge or a solar project or a commercial scale battery. It's a similar concept across these different industry sectors. And there are many examples of this, but as you can see on the screen here, we've got a few pictures of our Murra Warra Wind Farm, which is located in Horsham in Western Victoria. So this is a project that we developed from 2017 with our partner RES. We acquired this wind farm during the development phase. And through this phase, we measured the wind and we assembled the debt and the equity required to fund what was ultimately the construction. We also pulled together the long-term Power Purchase Agreement, which we signed with the utility company, Snowy Hydro. And we also arranged the EPC and the wind turbines to ultimately construct a 429-megawatt project. And this project will generate enough clean energy to power the equivalent of 420,000 homes in Victoria. So with that introduction, an example of how we create assets, I'll now turn to some other examples of how we are working with clients and partners. So these clients and partners can range from governments and cities who set the direction and create the investment frameworks and specify the needs of their community. It also includes investors. So these are the infrastructure funds, the pension funds, insurance companies who are looking to invest their dry powder, which is well over USD 200 billion at the moment. And these are long-term investors looking for long-dated assets yielding stable returns. And then there are the project partners ranging from EPC firms or developers, utilities or large industrial companies, who we partner with to develop projects. Now we organized the infrastructure and energy group into 3 main businesses. So firstly, there's our Infrastructure Advisory team. This team advises our clients on buying and selling infrastructure and energy companies and projects, its M&A. And this business is a market leading business. It's a world-leading business. We're ranked #1 in the league tables, in global infrastructure as well as in renewables advisory. And this team was recognized last year as the world's best investment bank in infrastructure by Global Finance Awards. Secondly, we have our Infrastructure Projects and Principal team. This is the team that works with a combination of government and construction companies to deliver PPPs as well as private infrastructure. And this includes things like transportation infrastructure, social infrastructure and importantly, now digital infrastructure as well. At the moment, this team has over 15 projects under construction around the world with a total of over AUD 10 billion worth of contract value. And this team is growing not only in terms of projects that it's doing, but also moving into new regions, such as in Latin America. And thirdly and very importantly, there is also our renewables investment platform, the Green Investment Group. So now I'll hand over to Mark Dooley, who will talk more about the GIG.