Man Group Plc (EMG) Earnings Call Transcript & Summary

Good morning, everyone. Thank you for joining us today, virtual again. We did offer the attendance option, but we didn't get many takers. For anyone new to Man Group, I'm Luke Ellis, the CEO; and this is Mark Jones, our CFO. As usual, I'll start with an overview of the first half of 2021, then Mark will take you through the numbers. And after that, I'll come back talk about our business development, our room for continued growth and our outlook. And then we'll open it up for the Q&A. As we announced previously, this is Mark's final results presentation as CFO. As part of the freshening up of the management team responsibilities, Mark's moving to become our Deputy CEO, responsible for our quant investment and technology teams. Antoine Forterre, who is currently co-CEO of AHL, will take over as CFO from Mark in the second half. Before taking on AHL 5 years ago, Antoine spent the previous 5 years in our finance area as Group Treasurer and Head of Corporate Development. So I'm very confident that he'll continue Mark's great work as CFO. So as a reminder, if you want to ask a question at the end of this, you need to be on the presentation by the WebEx link rather than the dial-in option. And we'll explain the process for unmuting people when we get there. With that, let's get going. Pleased to say the first half of the year was an excellent period for the firm with great results for our clients and also for our shareholders. We saw strong absolute performance, again, leading to record funds under management, a 51% increase in core management fee earnings per share, and a near 250% increase in our overall core earnings per share as that positive performance for clients also resulted in strong performance fees. At the end of the half, our funds under management were $135.3 billion, largely driven by investment performance and supported by continued net inflows. The driver of that 51% growth in our core management EPS was both ongoing revenue growth and the efficiency of our operating platform. Importantly, that growth in core management fee profits is a reflection of real growth in the business, not a weak comparator in 2020. You'll remember we had a decent 2020. And as a reference, 2021 core management fee EPS is 57% higher than 2019. So strong comparables against 1 or 2 years. As you know, we moved to a progressive dividend policy from 2021, and the Board has declared an interim dividend of $0.056 per share, a 14% increase on last year. We've also announced our intention to buy back a further $100 million worth of shares once we complete the current buyback. My guess is that's probably today or tomorrow. So we are down to the last million. We're pleased that the continued growth and profitability of our business supports consistent and growing returns to shareholders. The key strength of the firm is the combination of our talent and our technology. We are a global leader in applying technology to investment management and among listed companies, it's a unique proposition. Our depth of knowledge and experience enables us to further part of technology across the whole business from Alpha generation to trading and execution and through to our operating platform. That technology doesn't work in isolation, obviously, we're still a people business. Our people develop our technology and our technology makes our people more effective in what we do. We have a fantastic strength, experience and depth in our teams, and we continue to put a huge amount of energy into the culture and environment that enables them to thrive. That combination of talent and technology gives us a real competitive advantage, a leadership position in alternatives, quant and solutions, which are 3 of the fastest-growing sectors in the industry. And this allows us to deliver for our clients, which drives sustainable growth in our business and for our shareholders. As I mentioned at the start, funds under management increased from $123.6 billion at the start of the year to $135.3 billion at the end of the half. This increase includes $1 point billion (sic) [ $1.2 billion ] of net inflows. I mentioned in our Q1 release that the client engagement on a number of larger mandates have been positive this year, and we expected to see increased inflows in in the coming quarters. I stand by what I said that there was a bit of slippage in some of the expected timelines, we see good flow momentum into Q3 and beyond. Absolute investment performance was positive at $9.5 billion, driven by both our alternative strategies and our long-only strategies. Of that performance, $1.4 billion was relative outperformance, which was a very good outcome over 6 months for our clients, and only half of the return came from Peter. I'll give you some details on the next slide, but asset growth from outperformance is by far the most valuable form of asset growth. It's what drives client satisfaction, it's what maintains margin and it what drives future flows. Overall investment performance across the firm was up 8.6%. Our alternative strategies were up 5.8%, supported by positive performance across the entire AHL product suite. Our long-only strategies were up 12.3%, with a tailwind from the rotation from growth into value, which started last October. AHL Evolution, up 7.9% in the half from 15.5% over the last 12 months, made a significant contribution to the performance fee that crystallized at the half year as did a number of our other institutional solutions mandates. AHL target risk is up 6.7 in the first half and again, is near the top of its peer group year. Almost all our discretionary long-only strategies ended the first half with positive performance. GLG JCA, Japan CoreAlpha, was up 26.7 in the half and a remarkable 17.8% of outperformance in the half below. It delivered very strong returns with its value by our strategy, and we're back to net inflows after the period of outflows, which went through a couple of years. GLG undervalued assets also saw strong performance of 11.2%. All of our systematic global equity strategies delivered double-digit investment performance and outperformed by an average of 3.2% during the half. We ended the first half having outperformed our peers on an asset-weighted basis across our strategies by 1.3% overall. This is what we look to do, but it is what makes all the difference to the success of the firm. It was driven by the long-only strategies, which outperformed by 2.5%; and alternatives, which outperformed by 0.5%. We saw particularly strong relative performance across the breadth of the numeric strategies, and as mentioned, from GLG's long-only -- Japan long-only strategies. It's a great return to form for both these 2, which have really delivered for clients over the long term, but they had a tough couple of years in '19 and '20. Net inflows of $1.2 billion in the first half of the year were driven by our alternative strategies with net inflows of $1.7 billion, but partly offset by outflows of $0.5 billion from our long-only strategies. The largest inflows were into AHL target risk and into the Man Institutional Solutions. Within long-only, the team we hired last year to invest in equities in Asia, ex-Japan, has already ramped to almost $1 billion, and I'll come back to that later. In addition, Numeric had flows into their systematic global equity strategy but these were offset by outflows in their U.S. strategies. Most of our outflows in the half were driven by pension derisking as they reach fully funded status. With that, I'll let Mark give you the detail on the numbers.

Thank you, Luke, and good morning, everyone. I'll start with our P&L. Revenues were up a very healthy 83% to $728 million. Within that management fees were up 16%, mainly due to strong investment performance and continued net inflows. Performance fees of $284 million were up materially after that strong performance that Luke mentioned from AHL Evolution and also from Institutional Solutions mandates. Fixed costs were higher primarily due to FX. Variable compensation also increased given the excellent revenue earned during the period. Overall, the increase in EPS was primarily driven by those higher performance fee profits, supported by strong growth in management fee profits and the ongoing reduction in our share count due to our consistent buybacks. Turning to the detail on management fees. We saw growth across both alternatives and long-only. Absolute return contributed the most to growth, reflecting our strong performance and inflows over the last year. Our run rate management fees were up 9% since December, which gives us continued positive momentum into the second half of the year. And our run rate revenue margin remained stable at 66 basis points, as you can see at the bottom of the slide. Just as a reminder, the sublease income in the half included $7 million of lease surrender income. That won't recur in the second half as we've now realized the full amount following that tenant's departure. We're still in the process of subletting the remaining space, and we'll provide further updates in due course. Turning now to costs. Fixed compensation costs increased by 8%. That increase was largely driven by FX, as I mentioned earlier, with an average rate of 1.39 compared to 1.25 last year. We are investing in a number of growth areas across the firm, and we expect a pickup in those costs in the second half as a result. As you'd expect, given that positive performance, variable compensation costs increased due to both higher management and performance fee revenues. The fact that revenue growth was so strong means that we're -- our compensation ratio declined to 40% compared to 50% a year ago. As a reminder, 40% is the bottom of our guided range, reflecting an excellent period for performance fees. Our management fee operating margin improved to 31% compared to 25% a year ago, and that highlights the positive operating leverage within the business during periods of strong growth. In total, our fixed cash costs grew by $13 million, $11 million of that is FX, and then there's some impact from the higher occupancy costs following that tenant leaving our main London offices. One note on asset servicing costs. Following some excellent efficiency efforts from our operations team, we now expect to be at the bottom end of our 6 to 7 basis point range for the year. Moving on to a bit more detail on FUM. Over the period, we saw ongoing engagement with clients on new mandates and continued strong demand for our alternative strategies. For the half, as Luke said, we had net inflows of $1.2 billion, which we calculate as 0.8% outperformance relative to peers on the flow side. We're pleased to have delivered positive absolute performance in all of the 5 product categories, despite their different investment styles and systematic long-only delivered particularly strong performance for clients with one of its best 6 months ever and a great return to form. The net inflows into alternatives of $1.7 billion were driven by target risk and Institutional Solutions, partly offset by outflows from a lower-margin multi-manager account and from alternative risk premium. The net outflows in long-only at $0.5 billion were driven by Numeric U.S. We saw inflows elsewhere, most notably into Numeric Global and GLG's new Asia ex-Japan strategy. Turning now to performance fees. I'm delighted to report a strong first half. Indeed, stronger than some recent full years. You can see time and again from our results that a quiet period for performance fees tells you nothing about their long-term value, and we've seen that value growing steadily for years now. While this may feel like an exceptional half, we think it actually reflects the growing performance fee capability that we've built. AHL was the main driver in the half, and its performance over the last 12 months wasn't actually in the top quartile compared to its history. It was actually the 40th percentile. Performance fees and fee gains overall were $301 million. These were driven by that $129 million from Evolution and $120 million from other alternative strategies, most notably from Institutional Solutions. That was a good first half, and we're also well placed for a strong full year with an increase in performance fee eligible FUM and many strategies comfortably above high watermarks, as we'll see on the next slide. At the end of the half, we've accrued a further $209 million in performance fees within the funds or mandates that we manage. That means if the year had ended of June, we would have earned $493 million of performance fees. If our strategies continue to perform as we would expect, that number will clearly grow over the second half. Equally, if some of the strategies lose money, then that $209 million can shrink. We often talk to you, for those who've been listening to us for the past years, about the average performance fees we can generate, and that's been growing steadily over time as the business has grown. One thing we haven't spoken about as much is the scope for very strong performance fee outcomes. As an experiment, we took the performance we generated back in 2014, which was the last sort of particularly noticeably strong year and applied it to the assets we managed at the start of 2021. That resulted in performance fees of over $1 billion. We don't hope we'll repeat that particular performance, but nevertheless, I think it's a useful reminder of the potential earnings power in the business today. Finally, turning to our balance sheet and returns to shareholders. We had $632 million of net financial assets in the half, and that's before we received the cash from those first half performance fees. We've increased our seed investments as we've seen a strong pipeline of new strategies coming out of the business. As Luke noted, this is the first half with our new progressive dividend policy, and we're pleased to start this new period with 14% growth in the dividend. As we said, at the full year, we expect the interim dividend to be under half of the total for the year, in line with normal market practice. In addition, our ongoing growth means we can continue to return further capital to shareholders, and the Board has therefore approved a further $100 million buyback. In summary, excellent profit growth, a strong balance sheet and growing shareholder returns. That's the results of everyone's efforts across the firm, and it's a trio to warm any CFO's heart. With that, I'll hand back to Luke.

Thank you, Mark, and a pretty good way to finish your time as CFO, very good. We think we have a huge competitive advantage as our industry, like most others, becomes ever more technology-driven. Technology is at the heart of how we see our business and financial markets. For us, technology isn't just about making better investment decisions. Yes, it does that, but it also powers everything we do at Man. We hire the best technologists, and we provide them with an environment where they can thrive. We're a global leader in quantitative investing, and we also used our technology to support discretionary investment teams to help improve our client service and to constantly automate more parts of the platform. We have hundreds of experienced technologies, decades of experience and a lead that continues to expand as we invest further in our capabilities. We extend our lead through our internal capabilities as well as through partnerships with academic institutions like Oxford and by being highly active in the open source software community. As you all know, responsible investing is one of the fastest-growing areas within asset management as ever more clients focus on the impact of their investment decisions on wider society in the world around us. In order to actually invest responsibly rather than just talk about it, you need a huge range of new information and data to objectively interpret that information. Asset managers will need to overcome major data challenges. As data becomes increasingly important to ESG capabilities and propositions, firms that have to rely on third-party process data without building in-house capabilities, will likely struggle to differentiate themselves. As you'd expect, at Man Group, our ESG process is already technology and data-driven. $46.1 billion of our funds under management integrate ESG into the process. Our proprietary quantitative scoring framework is centered around 15 key ESG pillars. Here on this slide, I'm showing an example of 2 well-known car manufacturers, contrasting Toyota and Tesla. We're taking data from multiple sources, adjust, clean and normalize it and then present it cleanly and simply out to our investment teams to incorporate into their decisions, whether they're discretionary or quantitative. The investment teams can then tailor clients' portfolios to that client-specific priorities and desired outcomes. Scientific evidence that human activity is resulting in climate change is near unequivocal today. Honestly, I'd say, it's unequivocal, but I was told to near in. We can all help to mitigate the impact of climate change. Asset managers have a unique opportunity to shape the global transition to a low-carbon economy. Collective action can be a powerful tool when facing such an intimidating issue. We recently joined the Net-Zero Asset Managers Initiative, committing to reducing greenhouse gas emissions to net zero in investment portfolios by 2050. And we expect to outline a path to an interim 2030 target across our corporate issuer specific holdings through both decarbonization and increasing investment in climate solutions. Climate change and modeling its impact is also a key focus research area for us. We're developing and launching climate-oriented strategies across the business, and we have hired climate research capabilities in-house so we can build our own models. For instance, in June, we launched a fund that aims to make a decisive contribution to the world's transition away from carbon fossil fuels to lower and zero emission generating technologies. ESG and particularly, impact analysis are obviously at the core of that investment process. Despite the COVID-created challenges of the last 1.5 years, we've remained focused on growth and innovation, strengthening our client relationships and building a more diversified business. We've been steadily growing our range of products in fixed income and credit in recent years. We see the growing amount of data available on and electronic execution in the fixed income and credit markets as a great opportunity to apply systematic techniques to generate a significant edge in those markets. We see the new strategies and seen inflows into both our discretionary and quantitative high-yield strategies. Our discretionary high-yield team have performed incredibly well since joining us, ranked literally top of that peer group after delivering excellent results for their clients. Their AUM has been growing nicely and the performance is likely to see that AUM growth continue. Earlier this month, we took the next step in building out this platform when we added another senior highly rated hire to build a GLG team, this time focusing on investment-grade corporate bonds as well as other income strategies. We see opportunity for further growth in both discretionary and systematic strategies, investing across markets in Asia. Asia is a big growth opportunity for everybody in asset management. We continue to be an early innovator in producing differentiated strategies in China as regulatory changes there allow -- gradually allow foreign investors more access to the onshore market. You can see the Chinese have an interesting view of our offshore markets when it comes to Chinese companies. We've seen a lot of that in the last few days. So operating in the onshore market is very important. Interestingly, though, the nature of the Chinese onshore markets creates lots of alpha opportunities, especially for systematic strategies as can be seen by the 2020 return for AHL in China here and Numeric being nearly 10% above the benchmark in the first half of this year in China. Over the last year, though, we've also hired an experienced team to develop discretionary Asian equity strategies. Within its first year, the team has grown to manage $1 billion in FUM, and we've also seen good traction with systematic and absolute return strategies focused onshore and offshore in China, which attract interesting investor interest, both directly and particularly through institutional solutions. Of course, our capabilities are not just about the recent launches. One of our most established strategies, JCA, had an excellent first half, as mentioned, returning to inflows and setting itself up with some exceptional performance for a good future. Fortunately, and due to the diversified and tech-enabled nature of our business, our results during the onset of the pandemic in the first half of last year were very resilient. I'm making this point because when we look at our performance so far this year, I'd like to stress it's real growth, not the result of the depressed comparator. The numbers on this page show what we can deliver. We delivered 16% growth in management fees. We delivered 47% growth in core management fee earnings per share versus the half 1 of 2020, demonstrating the powerful operating leverage in our model. We've had very strong performance fee outcome, and we've also seen excellent growth in future performance fee expectations with eligible FUM up 37%. But it isn't just a 1-year phenomenon. We've consistently delivered growth in our core business over the 5 years that Mark and I have been in charge, even though it's often obscured by the runoff of the legacy business. Our management fees have grown by 30%. Our management fee EPS has more than doubled, growing by 131%. This reflects our clients' confidence in our ability to manage and grow their assets, but also our ability to run the business efficiently and translate performance and inflows into profitable growth for our shareholders. On top of that management fee growth, as mentioned, we've seen this performance fee optionality grow as well. Performance fees are a very valuable earnings stream for shareholders, as we've just really demonstrated. We've increased our performance fee eligible fund by 54% over the past 5 years. This means the same percentage return creates meaningfully more performance fees, and we've seen the benefit of that in the first half. We saw the last of the legacy earnings streams runoff in 2019. That runoff has hidden our real growth over the previous few years. Last year, 2020, we reached an inflection point with the headwind gone, and we generated modest growth, despite the pandemic. This year, despite more pandemic, but still this year shows what we can deliver from our core business and their history shows that core business has been growing steadily over the last 5 years. This growth and profitability of our business supports consistent and growing returns to shareholders. We've returned more than $1.5 billion to the shareholders through dividends and buybacks from 2016. Given our consistent share buyback program over the last 5 years, we've reduced the share count by 15%, meaning shareholders get materially more of our earnings for each share they own. I think you could see, we've had a consistent approach to reducing our share count. And for those of you building models, I think it's pretty fair to look at -- you can put the same thing in looking into the future. We moved to a progressive dividend policy, reflecting our confidence in the business and its growth. And today, we announced a 14% increase in the interim dividend and as we mentioned, a further share buyback. This has been an excellent first half with a good outcome for clients and shareholders alike. We've always been confident the firm will deliver outcomes such as this. Our focus is on the future. The immediate focus, I guess, for most people on the call is the second half of the year. As you've heard, we're very well placed with many strategies well over our watermarks and a strong client pipeline. Our longer-term goal is to keep investing in the talent and technology that underpin the firm to grow that edge that we have over our competitors and to deliver the growth we've seen over the past 5 years over the next 5 years and beyond. As a firm, we're in excellent shape with a durable competitive advantage and excellent momentum. So with that, let me open it up to questions. [Operator Instructions] So with that, please first.

Haley is first.

So Haley, if you can unmute yourself and ask your questions.

Just a couple of quick questions from me, and congratulations on a fantastic set of results. So my 2 questions, please. Firstly, in terms of fund flows, thank you for clarifying that you still expect good flow momentum into the second half and beyond. I think that's really important. In terms of some of the areas you've highlighted, first continued strength in AHL target risk, Institutional Solutions and some of the newer areas, such as the long-only Asian discretionary systematic strategies. I guess because you've already had such strong entry in these areas, what lies behind your confidence in second half? Is it actually an expectation of reduced redemptions from here? Or is it genuinely sort of topline momentum that's increasing? Be really interested to understand that. And the second question, just on performance fees, if I may. The $121 million by other alternatives is now obviously getting to be a bigger and bigger number. Is there any more color you can help give us to help us think about how to model or think about that for the future? That would be great.

So I'll let Mark have a go at the second one. I think on the first one, so predicting the outflow side of the equation is always rather hard because as I mentioned earlier, a number of the outflows that we had in the first half came from clients where we've done nothing wrong. They were totally happy with their investment, but they've gone from an underfunded corporate pension plan to a fully funded corporate pension plan. And they just said, thanks to the performance, but we're going to defease and go into bonds now and basically just take no more risk. But when we look at the performance we've been delivering, I think it's -- as we saw with JCA, as soon as it started to deliver performance, the flow picture changed around very quickly. I think we're seeing the same thing in Numeric. And so I -- within the boundaries of what the market allows, I do feel more confident on the redemption side, but that's always the slightly uncertain one. But really, there is a lot of confidence in the discussions we've been having with the clients on significant mandates, and we expect those to come through. We've always said our flows are lumpy. I try to avoid putting lumpy into the speech because I realize that's become my pet word in every time I've done the thing, but this is a good example. Worrying for us -- we never push a client for whether a mandate starts trading in the middle of June or the middle of July. You just have to do it in the time it takes the client to be ready. But those lumpy flows are real, and we do believe will come through over the coming quarters.

And on the performance fee side. So the Institutional Solutions is what's driving that $121 million. And in particular, that's a blend of different AHL sub strategies, including allocations to Evolution as one of the subcomponents of it. We understand that that is harder for some of you to look at externally. We've been adding disclosure into the data pack to help with some of that modeling around where things are against high watermark. But I would think of the core of that bucket as being a blend of the different AHL strategies. There's a mix of other things in there as well, but high level, that's the right way to think about it. Perfect. Haley, unless there is any other follow-up on that, we'll go to the next question. Perfect. Hubert, you are up next. So if you unmute yourself, you should be able to ask a question.

Can't hear you yet, Hubert.

First, I'd like to wish Mark all the best in the new role. Three questions. Firstly, on fee margin. How should we think about the margin to develop for the rest of the year? It's probably held up a little bit better than what we expect. Given the mix of flows that you anticipate in the second half, should we expect the fee margin to be stable for the year now at 6 basis points? Particularly on costs, I think Mark previously mentioned that you expected a fixed cash cost guidance of $335 million for the full year. Should we expect this to be the same, if that changes at all? And lastly, on M&A, can you talk about potential for M&A? You've been obviously quite quiet on this front for some time. Has anything changed? Or is the backdrop is still pretty difficult just given where valuations are?

Sure. So on the fee margin point, I mean it's -- you've heard this again and again and again from us, but I'm going to go again. So it is all about mix. It's about where the growth comes from. There is no particular trend that we see through the second half that should change it, but it will bounce up and down sort of around that sort of number, depending on whether mandates come in at the higher end or the lower end and actually, importantly, about the performance from each of the categories. So we got a positive mix in this period because the absolute return funds did well, and they tend to be higher. I would just say on that. Everyone always asks about the revenue margin. We have just delivered a big step-up in the management fee profit margin, and we quite like people to focus there a little bit more than just the revenue side. We've delivered good revenue growth. We've delivered good operating leverage. And I think that's what really drives outcomes for shareholders. On the cost side, we're a bit under where we would have expected to be through the first half. We're still looking to invest through the second half and catch up there. So we're looking to get back up towards that guidance for the full year. We're not changing the target now, but we've got teams where we want them to speed up and get on with the growth side within the business in line with that guidance. And then lastly, on M&A, I mean the message and the policy is the same as it always has been. M&A for us is extra value on top of the core value we can deliver organically within the business. If we find something which is an attractive investment for shareholders, adjusted for the risk, that's great. If we can't, then we'll continue to return capital in the way that we have for the past 5 years. And we've just announced, we're going to continue to do today. The environment is not any more benign than it has been in the past. It's still pretty pricey. So finding that risk reward has been harder, but that doesn't mean that we won't find something at some point.

Yes. But I think importantly, look, we've demonstrated over the last 5 years, we can deliver real shareholder value through organic growth. We're confident in our ability to do that over the next 5 years. And so M&A is just a sort of nice to have cherry, if it becomes available on top. It's not a core bit of what we need to do to succeed.

And now on to Paul. If you unmute yourself, you should be able to ask your question. Can't hear you at the moment.

Most of these things might be because people both have to unmute themselves on the system and on their phone. But yes, we got you now. There we go.

Two questions. please. Just firstly, on the Numeric flows. Obviously, negative in first half. Given as you say, a couple of years of relatively weak performance, but a very, very strong in this 6 months. Are you able to say whether any of this pipeline that you've got visibility over for the next quarter or half is specifically from within that area? Or will the lack between improved performance and flows likely take a bit longer in that area? That was question one. And then secondly, just with respect to buyback. Obviously, it's taken best part of 12 months to complete the 100 million. Now you've got market share issues in terms of the daily flow. If the performance fees do turn out to be as strong as they currently look like they'll be, obviously, under the old policy of the year, it was to buyback or used excess profits from performance fees to buy back shares. But it is not possible to buy back sort of quantity that would potentially be enough to satisfy that. Is there other mechanisms that you would look to potentially a special dividend? Or do you regard that as contradictory from a value signal in terms of both buying back and paying a special at the same time?

So on the Numeric question, I think that the -- yes, we're definitely seeing a noticeable change in the dynamic of conversations with clients around conversations with Numeric. Existing clients were pretty patient during the tricky period. Having delivered a very strong, very broad performance over the last and now 9 months really, I think we are definitely finding the client dialogue has changed quite noticeably.

And then, I mean, on the point around buybacks, I mean you're right in it. It's a frustration of us that the U.K. rules slow us down in terms of the ability to buy back the shares. We've obviously just announced this buyback. We'll work our way through it, and I wouldn't want to comment on when we get to the full year now, but that potential issue of capital growing faster than the buyback. It's true, it's on our mind, but that's an issue for the future rather than today.

It's a problem we really hope to have.

Yes. Problem is the wrong word. That's very wonderful position to be in. Perfect. At the moment, that is the last of the questions. [Operator Instructions] Okay. We got a couple coming in. Anna, let me -- if you unmute, you should be able to ask your questions.

In general, let's remember to unmute both on WebEx and whatever system your own, phone. Still can't hear you, Anna.

Yes. So let us just move on. Anna will have another go at getting back to you, if you can sort of the technical piece. So Samarth, across to you if you want to unmute.

Can you hear me?

Yes.

Yes.

So congratulations on your great performance. Three questions from my side. First, on ESG. I mean I did see that you launched some sustainability team funds in first half. Can you comment on the interest in these ESG team funds? And what is the growth pipeline for the remainder of the year from ESG funds? The second one is mostly on your Asia focus. So I did see that you are launching the strategies focused on Asia, but growth from Asia domicile clients have been relatively muted. So I mean, I just want to understand how do you plan to grow that share? And the third is just on your market share in alternatives. I mean how much has this share increased versus end of December or end March, given outperformance in both flows and performance?

Let me have a go at those. So in terms of ESG, it's very clear that the vast majority of clients are very focused on the ESG question. What they mean by that is quite different between different clients. Certainly, in Europe, ever since we had the new regulation, a lot of clients are immediately saying, look, I really only want Article 8 funds and what have you got in Article 9 funds? And so we've done a lot of work, both in launching new strategies, but also making sure that existing strategies comply with Article 8, if they have a significant European client base so that we're able to do good things with those clients. It gets more complicated when you move away from these fewer specific things. So once you start talking about trading FX and futures and whatever. It's a more complicated conversation, but it is definitely where the demand is. I tend not to think of ESG as a sort of growing segment of asset management, I tend to think of it as something that is going to be required everywhere in asset management. And so it's a necessary condition of a product rather than it's sufficient on its own to generate your flows. We've tried within ESG to look at where can you make a substantive difference, and we found climate to be one of those areas where -- actually, there is some real science you can apply, and we can do some really interesting work. And we think climate-related products, it's also something clients can get their head around. Everybody has heard the question of trying to keep the world to less than 2 degrees of warming. Well, if you talk about a portfolio which is designed to help the world be less than 2 degrees of warming, that rings a bell for a client. Whereas, if you say, it's got good ESG scores, sort of they sit there and, hey, what is it -- what do I get? So we've definitely majored on the climate end, and we have some sort of really interesting conversations going on there. From an Asia point of view, I think you've got 2 sides to this. What we were talking about earlier was content using Asian securities. So whether that's broad Asia or China as well. We think that bringing Asia to the rest of the world is something where there's a lot of demand and a lot of opportunity to do that well. On top of that, there is the question around Asian clients where in 3 or 4 of the markets in Asia and broad definition of Asia, they've become more and more interesting client bases. We're not particularly likely to grow in a hurry in, I don't know, pick Thai onshore business because that's really a retail distribution thing. And as you know, retail distribution isn't our game. But in the institutional markets in Asia, so that's China, it's Hong Kong, it's Korea, it's obviously Australia and Japan, those are significant client segments for us and have been growing client segments, and we would expect that to continue. In terms of market share and quant alternatives, I guess, if you look at the public data, it always slightly depends who you do and don't include in these things. And sort of one of the big questions is is Bridgewater a quant alternative or not a quant alternative, is it discretionary or quantum exactly how that works. The -- what we've seen is, we've definitely been gaining market share, both in the CTA systematic directional world and in the quant alternative equity and the sort of quant multi-strategy things. But equally, what we see is, there's lots of room for growing those areas. The client demand is very significant as long as you can deliver decent returns, and so we don't feel in any way constrained by our market share.

And then Anna just sent her questions through separately. So let me read them out and then we'll answer them. The first is, can you give an indication of what the comp ratio on performance fees across AHL, GLG and the Americas? The second is, can you discuss investment capacity in AHL fund ranges? And finally, are you seeing more interest from new prospective clients, given recent strong performance at AHL? On the comp ratio point, I mean, I think we'd just point you back to our overall guidance, which is the 40% to 50% range, and we'll be at the bottom end when revenues are strong. We don't really break it out in more detail than that. Then you can see a very strong relationship between overall revenue, if you look at the past. So we think that's a very good step for where we end up in aggregate.

And what was the second question?

Capacity on AHL.

Capacity on AHL funds. Look, I think the -- we work continuously to create extra capacity. The great thing of both the flows we've had in AHL and the performance in AHL, performance really, really matters in alternatives. If you generate performance, your AUM goes up, your fees are at the historic fee rates. Those are very, very good ways of generating extra future management fees. So we've been growing the assets very significantly over the previous years. We put a lot of effort into seeing what we can do to grow capacity in the future while maintaining the quality, whether that lets us have net inflows or just hopes with the extra capacity is a slightly moot point. We sort of thought that we had created extra capacity for evolution for this year, but with a 15% performance since the last time we took client money in funding of that sort of used up the extra capacity we created, but we haven't had to give any money back. So -- but we are -- the AHL team has demonstrated an ability to generate alpha and high-quality returns at scale. And we put lots of time and effort into whether it's expanding markets that we trade in, checking whether we're missing any liquidity somewhere in markets, whether it's adding new models that trade different things, whether it's improving our execution. These are all ways you can create extra capacity, and it is absolutely where we're focused within the research effort in AHL and beyond.

And then the last question on whether recent performance helps on sort of future inflows. I mean, at some level, clearly, performance always helps with client demand. I do think, we would say, within that, though, a lot of the clients are institutional. People ask us the flip-side question. If you're down a couple of percent in a quarter, are you worried about outflows. These are strategies with strong long-term performance. Hiccups in the short term definitely help, but people understand the quality regardless of where the last 3 or 6 months have been. So we have a good pipeline. That's really about the long-term strength of the products. The fact that it's a good 6 months definitely helps, but that isn't the core driver. It's the long-term quality of what we do. And I think with that, firstly, Michael, I just think you if you want to come off mute and ask a question.

One of the troubles of these systems, WebEx and Zoom or whatever, they update them so frequently to try to make them better, but they make them a bit clunkier. Oh, sounds like you.

Just one question. You're talking about the redemptions that you saw related to pension funds that were -- that became fully funded in the first half. And again, apologies if I missed this earlier. Is this something you expect as a bit of a trend? Is this something that you track closely with your pension clients so you can kind of gauge the potential appetite or lack of for your products going forward?

Yes. It's something we keep a very close eye on, and of course, our whole job is to help pensions get fully funded. But when they get fully funded, the danger is that they say thank you very much, and that will do. It's much more of an issue in the corporate pension plan than it is the public pension plan world. So we're looking at -- this is a defined benefit corporate pension plan issue, where companies having sat, looking at some quite big deficits in the last 10 years and thinking about the impact on earnings. At the point where they don't have a deficit the temptation to lock it in is quite high. And particularly in the U.S., you've seen people with very high equity allocations in a corporate pension plan and with the performance of the U.S. equity market, that's sort of given them a chance to get to fully funded. We don't ignore clients who've got shrinking flows who are going to be redeeming naturally. You can still do interesting things with them, but it's definitely more fun when you get a mandate from a client with a growing -- sorry, with the growing inflows, whether that's a public pension plan who continues to offer defined benefit pensions or it's sovereign wealth fund with net inflows or even 1 of the sort of wealth managers with growing asset flows, delivering products to them is it definitely makes future inflows easier to get than the ones where they have shrinking risk appetites, but it's important to keep delivering returns to clients. And I can think of a couple of Japanese pension plans where we started working with them 20-something years ago, and they're still invested with us. And I'm pretty sure they'll be invested with us all the way until the pension plan is entirely matured. So those are pretty good clients to have in the long run.

I think that is all of our questions.

Great. Thank you, everybody. Hopefully, we gave you a decent update on the firm in a sense that we had a fantastic first half of the year, but actually, we think this is just part of the ongoing growth. And with that, have a good day and good luck out there. Thank you, everybody.

Thank you.