Man Group Plc (EMG) Earnings Call Transcript & Summary

Good morning, everybody. And hopefully, you can hear us. It looks like we have a reasonable attendance, so we might as well crack on starting on time. Thank you for finding time to join us today, given everything going on in the world and other results. Obviously, our thoughts in the end are with those who are directly and indirectly impacted by what's going on in Ukraine. It's easy to forget when we all think about the financial market impact, but those real-world impacts as well. For anyone new to Man, I'm Luke Ellis, the CEO. I'm joined by Antoine Forterre, our CFO; Antoine took over as CFO from Mark on October 1. Antoine was previously the co-CEO of AHL, before that, the Group Head of Corporate Development and the Group Treasurer. So you can see, he brings significant appropriate experience to the role. As usual, I'll start with some highlights and overview of last year, and then Antoine will take you through the numbers. After that, I'll talk about strategy, some of the recent growth and obviously, the outlook, and then we'll open to questions. Just a reminder, if you want to ask a question today, you'll need to access the presentation by the WebEx link rather than a dial-in option and we'll do that mute, unmuting, which I'll explain at the end. So let's kick off. 2021 was a strong period of growth for the firm with great results for our clients and our shareholders. Strong absolute net after fee performance of $12.5 billion, including $6.6 billion of Alpha and record net inflows of $13.7 billion led to a 20% increase in our assets under management. Our core management fee earnings per share grew by 52% as we benefited from ongoing management fee growth and the efficiency of our operating platform. We saw a near 140% increase in our total core earnings per share, that positive performance resulted in significant performance fees. Importantly, the growth seen in core EPS this year reflects real growth in the business, not an easy comparator in 2020. And to highlight the point, earnings per share is up 84% since 2019. We also begin 2022 with good momentum with our run rate net management fees of $939 million, and performance fee potential from a number of strategies at and above high watermark. As you know, we moved to a progressive dividend policy from 2021 and the Board has declared a final dividend of $0.084 per share. This takes the full year dividend to $0.14 per share, a 32% increase on last year. Also last December, we announced our intention to buy back a further $250 million worth of shares, which together with $100 million share back we announced at our half year in which we got executed in 4 months, results in a total of $350 million of share buybacks announced in 2021. As you will imagine, we've used the recent share price weakness to accelerate the buyback as much as U.K. rules allow. We're pleased with the continued growth and profitability of our business and supports consistent and growing returns to shareholders. As I've said before, and I just want to remind you, the key strength of our firm is the combination of talent and technology to deliver alpha at scale. We're a global leader in technology empowered investment management and in liquid alternatives and solutions. And amongst listed companies, it's a unique position. For us, technology isn't just about making better investment decisions. It permeates our culture and powers everything we do. We have invested heavily in continuously developing our proprietary technology infrastructure to ensure we remain cutting edge. It provides a scalable platform for growth and create operating efficiencies throughout the firm. That technology though, doesn't work in isolation. We are at our core a people business. We hire and develop first-class talent from quants and technologies to portfolio managers and analysts. We have fantastic strength, experience and depth in our teams, and we continue to put a huge amount of energy into our culture to promote innovation and collaboration and to get the best out of our talent working together. Continuing to invest in our people and our technology is critical to our ongoing success. It's the combination of talent and technology that gives us a real competitive advantage and a global leadership position in liquid alternatives quant and solutions. This allows us to deliver for our clients, which drives the sustainable growth in our business and value to you, our shareholders. As I mentioned earlier, we had record growth in our assets under management this year, increasing from $123.6 billion at the start of the year to $148.6 billion at the end of December. This increase includes $13.7 billion of net inflows, our highest since I've been at Man. We think it's probably the highest ever, but we couldn't find enough records going back of all the things. I mentioned in our half 1 and the Q3 releases, that client engagement on a number of larger mandates had been positive last year, and we saw the benefit of those mandates landing in the second half of the year. More details will come later. Absolute investment performance was positive at $12.5 billion, driven by both our alternatives and our long-only strategies. Of that performance, as I mentioned, approximately $6.6 billion was Alpha and $2.1 billion was relative outperformance, which was a very good outcome for our clients and is a reflection of the value of our superior active investment management. 2021 saw excellent engagement with existing and new clients across the globe despite the pandemic, reflected by those record net inflows for the year including our strongest ever quarters in Q3 and Q4. Net inflows were driven by both our alternative and long-only strategies was really across the board. We continue, though, particularly to see high client demand for HR target risk and for our institutional solutions. One of the most notable wins for the year was a large mandate into our numeric Global Sustainable Climate strategy. This marked a very exciting milestone for us and is a strong endorsement of our ability to innovate and deliver a bespoke product designed to meet the particular needs of a client. And of course, in this case, it incorporates proprietary climate research to meet our clients' ESG goals. Our $13.7 billion of inflows was notably strong relative to the industry with our net flows being 9.8% ahead of the flows in the sectors where we operate. It's one of the best signs of the demand for our products and the strength of our business. Absolute investment performance across our product strategies was 10.4%, our alternative strategies were up 8.1%, driven by positive performance across the product suite with noticeable gains from AHL Evolution, AHL TargetRisk and alternative risk premium. On average, our long-only strategies were up 13.4%, having benefited from rallying equity markets and also the rotation into value. Performance in Numeric Global, Numeric Europe and GLG core, Japan Core Alpha were particularly strong as a result. Asset-weighted relative outperformance of 50 basis points in alternatives, was driven by our quant strategies with AHL target risk continuing its relative outperformance since launch. Relative outperformance of 3.8% across our long-only strategies was exceptionally strong driven by their valuation focus. Our systemic long-only strategies outperformed consistently over the year, delivering 5.6% of Alpha relative to their respective benchmarks on average, and Japan Core Alpha as I mentioned, finished the year with over 15% of relative outperformance and has actually done the same again in the first 2 months. That's a great result for strategies that have delivered results for clients over the long term, but suffered a tough couple of years in 2019 and 2020. With that, I'll hand over to Antoine.

Thank you, Luke, and good morning, everyone. I'm pleased and fortunate to start in my role by presenting a strong set of results. I'll first go through some highlights if we're covering our AUM, P&L and balance sheet. Net revenue increased by 57% to just shy of $1.5 billion driven by both management and performance fees. Net management fees were up 20% due to strong investment performance and net inflows. At $569 million performance fees were materially reaching the highest level in over 10 years, thanks to good performance across our strategies. Fixed costs of $323 million were up 11% compared to 2020, driven by the continuing investments in talented technology that we have guided on previously as well as a less favorable FX rates. Although variable compensation increased given the excellent revenue growth in the period, our compensation ratio of 40% was at the bottom of our guided range. This is a very good illustration of the operating leverage that our platform and technology provides, which led to 132% increase in PBT to $658 million. Finally, we continue to have a strong and liquid balance sheet with net financial assets of $907 million as at the end of last year. Over the period, and despite most of our sales teams still unable to travel and meet with clients in person, we saw ongoing engagements on new mandates and continued strong demand for diversified product offering. We had net inflows of $13.7 billion, almost 10% better than the industry, as we mentioned, with all 5 product categories recording positive net flows for the year. Net inflows into alternatives of $9.4 billion were driven by target risk and institutional solutions, partly offset by outflows from alternative risk premium. The net inflows into long-only $4.3 billion were driven by the climate-focused win on Numeric as well as GLG high yields and GLG Asia ex Japan. Both those GLG teams have seen good traction from our clients and continue to grow since the launch in 2019 and 2020, respectively. Long-only outflows predominantly came from Continental Europe and small cap mandates. Finally, as Luke mentioned, we generated $12.5 billion of investment performance, again, with all 5 product categories contributing specifically. On the management fee side, we saw growth across both alternatives and long-only categories. Absolute return contributed the most, reflecting strong performance and inflows over the last year. At $939 million, our run rate management fees are up 15% since December '20, giving us continued positive momentum into 2022. Our run rate net management fee margin at the end of last year was 63 basis points, 3 points below last year's average. This is almost entirely due to the large systematic long-only mandate that funded last December, which attracts a lower margin to both its investment style and low active share. Given the overall trend in management fee margin in the industry, we often get asked about our views. So I thought I would pronounce the question. Our focus is on generating profitable revenue growth in the various product categories that we run taking into account their positioning, performance and capacity. What this means in practice is that net management fee margin is very much an output of the underlying mix of assets we manage for clients, not something we target specifically. The impact of the large systematic long-only mandate, which from the last year was therefore one-off. You can expect the previous trend on management [indiscernible] region going forward. Moving on to performance fees, where I'm delighted to report we had our strongest year in the world of decays. We often talk about the value of the performance fees we generate and last year was a perfect illustration of that point. Overall performance fees, including gains on investments, were $596 million. These were driven by $154 million from AHL Evolution and $224 million from other alternative strategies, most notably from institutional solution mandates. Institutional solutions are customized mandates which combine our investment capabilities to meet clients' specific needs. They are all different, but collectively have grown in size and numbers over time. And last year, we generated $150 million of our performance fees. Although most of our performance fees that were earned indeed from alternative strategies or long-only strategies also contributed. And finally, we made gains on investments of $27 million, which predominantly relates to the performance of our seed book. Some longer-term perspective, better to appreciate the value and potential of this earnings stream over time. Since December 2016, as you can see on the slide, our performance fee eligible AUM have grown by 66%. And the stock of AUM just at high watermark today at $34 billion is broadly similar to the overall stock of performance fee digital AUM we had back then. Finally, at the end of the year, we had accrued in our funds further $135 million in performance fees due to crystallize over the course of 2022. This number will vary based on the performance of the underlying funds. But as of today, our strategies have mitigated at the beginning of this year fairly well. We now turn to costs. We came in below our fixed cash cost target in 2021, partly through the prolonged impact of COVID and partly through cost discipline. Fixed compensation costs increased by 7% to $208 million, reflecting a strengthening of sterling versus dollar under continuing investments in LTUs. Other cash costs increased by 19% to $115 million, driven by several factors: an increase in related costs, higher occupancy costs following the exit of the main supplement of our London office, increased charge of [indiscernible] and again, adverse FX moves. We expect our fixed cash costs for 2022 to increase to $355 million with 3 main drivers: first, continued investments in certain growth areas such as trade execution and ESG, and Luke will talk about this a bit more later, which accounts for approximately 40% of the increase. Second, ensuring we remain competitive for talent, which also accounts for 14% of the increase. And then for the normalization of pandemic affected costs was to travel accounting for the remaining 10%. As we have indicated previously, we are keen to capitalize on the growth we've seen and invest further in the business, so we will keep applying the same discipline that has guided us over the last few years. Variable compensation costs increased due to higher management and particular performance fee revenues, but strong revenue growth meant our compensation ratio declined to 40% compared to 48% a year ago. 40% is the bottom of our guided range, reflecting an excellent year of performance fees. The result of all this is a PBT margin increasing to 44% compared to 30% a year ago, highlighting the positive operating leverage in our business which [indiscernible] a strong revenue growth. In summary, strong investment performance and record net inflows increased our AUM to a new high of $148.6 million, leading to a 57% increase in net revenue. Together with our cost discipline, which marries prudence with investments in selected growth areas, this resulted in core EPS growing by 139% to reach a new high of $38.7 per share in 2021, thanks in particular to strong performance fee earnings. A few comments on our balance sheet, which remains robust and liquid. We had $907 million of net financial assets at the end of December before payments for final dividend and completion of our share buyback program. Our seed investments at $648 million have increased from $485 million at the end of 2020 due to targeted deployment capital to invest in new strategies. Since 2019, we have made selective use of external financing margins such as repos, as we increase the seed investments and support initiatives, we will consider the most efficient financing available, including drawing our credit facility for [indiscernible] purposes. Our balance sheet strength allows us to invest in the business to support our long-term growth prospects, evaluate M&A opportunities and ultimately maximize shareholder value. As we've done in the past, however, we intend to return to shareholders capital that we consider to be in excess of near-term requirements. Finally, while our cash flows may vary year by year, over time, the support -- over time to support strong, consistent and growing returns to shareholders. Since 2016, we have returned $2 billion to dividends and buybacks, and our share count has reduced by 17%, which means that for every dollar of earnings we generate, individual shareholders get $0.20 more now than 5 years ago. Our total proposed dividend of $0.14 per share represents an increase of 32% from 2020, reflecting the growth in the business and implementation of our new progressive dividend policy. Going forward, we expect our dividend to grow progressively across cycles with interim dividend being around 30% to 40% of the total for the year in line with the broader markets. Given the adjustments to the interim investors' final splits required from our old policy, the Board is minded to maintain the interim dividend constant until such time as a new split is achieved. After completing the $100 million of share buyback announced back in September '20, we announced a further $350 million in share buybacks over the course of 2021, of which $188 million have been completed. Together with an estimated $194 million of dividend payments in relation to 2021, this brings the total announced returns to shareholders for 2021 alone to over $0.5 billion or roughly $0.40 per share. To conclude, these strong results reward the efforts of our people over the last few years demonstrate the growth potential for our firm and give us confidence in our strategy. And on that point, let me hand it over to Luke.

Thank you, Antoine. When we look at our talent and technology, we have a huge competitive advantage. We hire and develop world-class talent across the firm, from quants and portfolio managers to technologists and analysts, and we foster this culture of innovation and collaboration. Our technology isn't just about making better investment decisions, it powers everything we do at Man. We're a global leader in quantitative investing, and we also use that technology to support discretionary investment teams to improve our client service and to constantly automate parts of our platform. In this, we feel we're orders of magnitude ahead of most asset managers and the investments we've made and the culture we've built gives us a huge and persistent competitive advantage. Our technology delivers real benefits to clients and the firm. We can deliver bespoke strategies to our clients only because our tech platform allows us to operate efficiently and effectively in hundreds of markets across the globe. That platform supports the alpha we've generated for clients this year. That then accrues in revenues and profits for the firm with our quant strategies alone generating over $1 billion of revenues for the firm. I'm convinced that our business model gives us the ability to deliver consistent growth for the business over time. Large institutional investors have an insatiable appetite for Alpha to enable them to reach their target returns. Our business is designed to deliver them that alpha at scale. The breadth and quality of what we do and the range of different and distinct approaches to investing at Man Group is compelling for our clients. We're an alpha-focused asset manager, and we aim to have as many different sources of alpha available to clients as we can create. We grow by adding new sources of alpha through organic innovation, recruitment and acquisition. We grow by enhancing our existing alphas and by increasing capacities in those alphas by improved trade execution. There is always excess client demand from large institutions for those alphas as long as the quality of alpha is maintained. Liquid alternatives continue to be a significant part of the solution to navigate the current macroeconomic environment of rising rates. There is a very large demand at the moment for bond-like returns. Well, okay. Well, people imagine bond-like returns look like, I'd say, 4% to 5% returns annually with free [indiscernible]. In reality, that's not what bonds have done in the last 12 months nor is it how bonds will likely perform in the next few years. Alternative managers with excellent risk management skills, who could deliver fixed income replacement strategies with these desired bond-like returns will continue to grow. And that's an area where we're very well placed, and we continue to invest. As opportunities in new markets emerge, we're well positioned considering our long track record of investing successfully in new asset classes, nontraditional markets and frontier markets. We know how to move quickly to collect data, analyze the opportunity and also develop the access and legal structures to enable us to be early movers with commensurate extra returns for clients and shareholders alike. Our research teams are continually exploring new markets. And every year, we push the boundaries of opportunity. There are a few firms with the range of solutions we offer and a proven track record of delivering investment performance without Alpha at scale. It allows us to appeal to a wide range of clients from around the world and to always remain relevant to the client's CIO through market cycle. That takes me nicely on to the next slide. Inflation has hit record highs in economies around the world where central banks expected to begin or have already begun tightening monetary policy. Maybe they're all behind the curve anyway. While there's a question of how far rates will have to rise and by how much, and whether central banks have the stomach to push them far enough to squeeze inflation down to their 2% targets. So we don't really know how long this peer will last. It's clear, investors face the challenge of how to position their portfolios during an inflationary period for at least the next year or 2. In early 2021, we published an award-winning paper entitled, the best strategies for inflationary times. A great example of the academic rigor we bring at Man because it was an academic award, not a publicity one and how we look collaboratively to understand complex topics to add value to our clients. The paper sought to answer a simple question, what investments have tended to do well or less well in environments of high and rising inflation. Our analysis spent nearly a century. The long sample is particularly important because inflation surges in developed countries have been rare in the past 30 years. Luckily, but not surprisingly, some of our findings were particularly relevant to our own business. First, the trend following strategies have done particularly well in inflation episodes. This is primarily due to the dynamic characteristics that don't depend on a positive beta in a single asset class, they're as happy to be short bonds as long bonds. Second, that a number of active equity factor strategies provide some degree of risk mitigation during inflation surges. While our analysis reaffirmed some of what we already knew, it importantly highlights why Man grew with our 35 years of experience investing in these markets is well positioned to help clients achieve their current -- their aims in the current environment. As I've said before, we're a client-focused firm. And by that -- I don't mean a distribution-focused firm. Since I became CEO, we've made it a big priority for the firm to adopt an outward-looking mindset to listen and respond to clients. We understand their unique needs and can create solutions tailored to meet their individual requirements, giving client solutions that meet their needs rather than a standard product that's easy to produce for the manager is really differentiating asset management, and it creates greater flows and stickier assets than a product sale. Man has the creativity, structuring and very flexible platforms to be able to deliver bespoke solutions to clients' needs effectively and efficiently. In Q3, the very strong flows came primarily from 8 different multi-hundred-million-dollar separate account solutions for clients from the West Coast of the U.S. all the way through to Australia, investing across GLG, AHL and FRM, each one adapting our solution to meet the needs of the client. In Q4, a tangible example of our solution delivery was the large win into our Numeric Global Sustainable Climate strategy, partnering with SJP, I mentioned earlier. It was a strong endorsement of our ability to deliver a bespoke product that met the clients' needs for a clear process with significant scalability, their chosen level of tracking risk and hence fees and crucially incorporating our proprietary climate research to target low carbon usage and at worst a 1.5-degree warming world. More broadly, our leadership in quantitative investing in technology allows us to deliver intelligent responsible investing by interrogating complex ESG data effectively. We've made significant progress in recent years, now integrating ESG within $55 billion of our assets under management. I would just remind you, it's not sensible to talk about integrating ESG within all of our assets as things such as U.S. treasuries or dollar and FX don't realistically fit into an ESG integration framework. The figures on this slide demonstrate the strengths of the client franchise we've built with the world's largest and most sophisticated investors, and the real progress we've delivered against some of our key strategic priorities over a 5-year period. We think you could see the value of our approach and how clients interact with us. When clients invest in one product with us, they often make a second, third or fourth investment, too. Our top 50 clients invest on average in 4 of our strategies, and we've now seen cumulative inflows of over $38 billion since 2017. So that's in just 5 years. More than 25 clients now invest over $1 billion with us. Over $65 billion of our AUM is from clients invested in 5 or more products and over $40 billion of our AUM is from clients domiciled in the Americas. What we've seen in recent years is the result coming through of a lot of the hard work we've put in. We continue to be focused on increasing the diversification of our business for the future. We're a market leader in trade execution, and we continue to build our firm-wide center of execution excellence. In 2020, we traded 40% more volume but we reduced our overall dollars of slippage by nearly 10%. This is real value creation for clients and shareholders alike. Execution efficiency enables us to capture more alpha for clients, create more capacity in our flagship strategies, and this is a fast-evolving area right for further innovation. The development of systematic ways to trade single-name credit as fixed income markets are increasingly electronic is an example of an exciting opportunity for us. I'm sure all asset managers CEOs has saying, "We're investing into our ESG capabilities further." Of course, we are growing our team and launching a range of strategies across the business, both in liquid and private markets. For us, this is combining our ability to manage messy data with real scientific insight and human engagement to produce intelligent responsible investing. And as we've talked about, we have a technology lead and we invested over $100 million into our technology capabilities in 2021, which will further support our ability to serve our clients going forward. When you have an edge, this is the time to press your advantage and grow your edge. It's about deepening our mode. We're pleased with the diversified range of products we can offer clients today. However, I'm also convinced that the minute you stop innovating, you start to decline. We've been steadily growing our range of products in recent years. We ceded new strategies, and we've seen inflows into a number of these in discretionary and fixed income, for example. We remain focused on expanding our range of alternatives and solutions offering and consider our current pipeline of new ideas and products very strong. This creates multiple dimensions for future growth. 2021 was an excellent period of growth and demonstrates the potential for the firm we've built over the past few years. We delivered 20% growth in management fees and 52% growth in core management fee EPS versus 2020. We had a strong performance fee outcome due to the much larger performance fee eligible AUM we run these days, and we continue to grow our performance fee potential with eligible AUM, up 23% in the year alone. I would love to say it was a blowout performance year. But honestly, it was good, not great. And with our higher AUM, we could achieve truly great things, everything comes together. What we've achieved in 2021 reflects our performance of demand for our products and the value of our technology and paid active investment management. These results were a reflection of real growth, not a simple comparator as we delivered a very resilient set of results during what was a very challenging year for most in 2020. However, it's not just a 1-year phenomenon. We've consistently delivered growth in our core business over the past 5 years. Our net management fees have grown 36%. But importantly, our core management fee profit before tax has more than doubled on our management fee EPS grew by 134%, reflecting the impact of our ongoing share buybacks. They generate real value. This highlights our clients' confidence in our ability to manage and grow their assets and our focus on running the business efficiently and translating performance and inflows into profitable growth for our shareholders. Performance fees, we think this, are a very valuable earnings stream for shareholders. We've increased, as Antoine mentioned, our performance fee eligible AUM by 66% since 2016, which means the same percentage return creates meaningfully more performance fees. If it's not entirely obvious, future performance fee potential grows proportionally with the performance fee eligible AUM. This year, we've really seen the benefits of the diversified range of performance fee earnings strategies we offer. I just think it's worth pausing to reiterate some of those numbers. In 2021, we've delivered greater than 50% growth in management fee profits and an even higher growth, including performance fees. We've announced a return of over 15% of our market cap through dividends and buybacks. Those are numbers you might associate with an asset management firm, but it comes because we're a global leader in applying technology to financial markets. We've grown strongly over the past 5 years, and we're confident that we can continue to do so in the future. It's been an excellent year for Man Group and a very strong outcome for clients and shareholders alike. But really, it's been an excellent 2 years for Man Group as the outstanding work the team did to look after our clients and our colleagues and their assets during 2020 despite the pandemic created the platform for us to take advantage of the opportunities that 2021 gave us. We've always been confident the firm will deliver in periods such as this. It did. And our focus is on delivering more in the future. We're in excellent shape with a solid competitive advantage and good momentum going into 2022. I wouldn't normally talk about the short term, but you're going to ask, and there's obviously been a lot going on in markets the last 10 days and frankly, all year. I'm pleased to say that our processes are doing exactly what they're supposed to do and while with volatile markets, things can change very quickly, our CTA strategies are making money year-to-date, and our clients are behaving rationally. So with that, we'll open up for questions. [Operator Instructions] So Arnaud, you're going to go first. So you should get a thing saying, request unmute, you've unmuted, and you can talk away.

Hopefully, you can hear me.

Yes.

Yes.

Great. I've got 3 questions, please. First, could you talk about the M&A environment. Obviously, we've seen a significant derating amongst the asset managers in the private market space, purchase multiples have come down for stakes being purchased. I'm just wondering how you are seeing pricing evolve. And especially the way to maybe are, I think of it thinking back in time is generally, when public markets come off, then the bid-ask spread, if you will, between buyers and sellers tends to widen and that kind of makes it difficult to execute on transactions. So I'm just wondering how we should think about the M&A opportunity going forward here considering markets. My second question is regarding tax, I think, in the appendix, you give some guidance on taxes. So could you come back and revisit the tax guidance and what are the key inputs there that would be helpful. And thirdly, on the big guys and James Pace mandate when -- does that account for the vast majority of the run rate management fee drop from 66 to 63? I'm just trying to think about how we should think about that margin going forward.

Sure. thank you for that. The short version on the last question is yes, but Antoine may have longer answers in a minute. Let me talk about the M&A situation. Obviously, the change in tone in markets is fairly recent, and it will be interesting to see whether it does bring down people's expectations more in line with where we are. We continue to look at things. We continue to be extremely disciplined. We don't think it's a good idea to chase prices. We hope prices would have come down, commensurate with what's going on. I think one of the interesting things in December, I talked with a couple of investment banks and they were telling me how many IPOs they had planned for private markets businesses in January. As you'll have seen very little got done in January and the performance of some that have been done is not particularly exciting. That presumably takes the IPO market off the table and might create opportunity. But we continue to look at alternative managers, we continue to look at long-only managers. We continue to look at private market managers. We will keep looking at things until we find something which is compelling for clients and shareholders alike. And if we don't find something, we'll keep buying back the shares.

Tax, you did spot the guidance that we give at the end of the presentation. The main driver of zero tax rate is the location of profits, across the group, we operate several jurisdictions, as you'd imagine. The U.K. is one of the key jurisdictions in which we operate, and the U.K. corporate tax rate is due to increase to 23% from 19%, if I'm not mistaken, over the last 1.5 years -- over 1.5 years, that accounts for the increase in guidance to 2023. The second driver is the stock of accumulated tax losses that we have in the U.S., which has been enabling us to an effect pay very little if any tax federal state taxes -- federal taxes in the U.S. as we grew in the U.S. and generating more profit, those tax loss will be consumed and we'll start paying taxes in the U.S., and that's what you see guiding on sort of 2024 and forward. And then on syndrome placement mix sort of -- yes, the vast majority of it is syndrome's place, which accounts for the drop, the guidance that we gave, as you can expect the trend that you've seen over the last year, 1.5 years before to resume going forward.

Cool. Hubert, you are next there again. There you go. Well done. You've unmuted yourself, and off you go.

I've got 3 questions. Firstly, can you talk about the full flow pipeline into this year? Obviously, you had a great second half of last year, and you -- you talked about how well placed your products are for this environment. So maybe talk about how that current momentum is like and also about what products are -- you see a strong interest in? First question. Second question is on dividend. Now that you've rebased your dividend, assuming the $0.14 is the floor now. But -- how do we think about the dividend growth going forward? How should we -- should it be based on not the fee growth or this is a new territory for us. I'm just wondering how we should think about dividend growth. And lastly, can you also -- I think, I may have missed it, but can you say how much assets that with performance fees is currently of the high water mark? And also, the number you're going to give me, as of today or at the end of last year, if this has changed?

Cool. Look, you know we don't like to talk about current year flows. I think the way to think about it was the third and fourth quarters were truly exceptional, but we've shown consistent inflows. We came into the year with a forward-looking pipeline that look consistent with our achievements in the past. Exactly what happens, it will depend on what our friend in Russia does and quite how bad that situation gets. But as I say, so far, clients are acting extremely rationally and sort of the business is progressing as normal, as you can imagine in this sort of environment, people are interested in the alternatives. But -- or maybe the better way of putting it is they're very, very nervous about equities. But I think we're right in the teeth of the storm at the moment. So let's see how it develops over time.

I'll do the next 2.

Sure.

Dividend policy is now progressive as you highlight, which means that the intention is to grow our dividends progressively over the cycle. Last year was a particularly strong year of growth for core earnings. So not surprisingly, we [indiscernible] dividend slightly less than core earnings, although it's worth flagging that if you add the share buyback that we announced in relation to 2021, overall returns to shareholders are marginally higher than core earnings for last year. Going forward, you can expect kind of similar level of returns that we've done in the past, but with a sort of smoother profile over the cycle. You have seen a sort of a growth prospect for our business. On the one hand, you kind of guide you on how to grow that. And then last point on share buyback, asking about the attractiveness of share buyback at times when we believe our share price is not representing fair value remains something that we keep in mind. AUM at [indiscernible] market is $34 billion as of the end of last year and the numbers at the end of December, as Luke mentioned, our strategy have performed fairly well. And overall, some of the key drivers of performance fee are at levels and you'll see that on [indiscernible] of the screens, and is fairly similar to whether we're at the end of last year.

So no meaningful change. Thank you. Now at the moment, we have no other questions. [Operator Instructions] Bruce, I've sent you the unmute. There you go. You're all with us.

So just to -- so going back to some of the recent answers. On the fee margin point, so should we -- looking at your pipeline, would you assume that it's more kind of 65-ish bps? And therefore, we get a slight sort of improvement over time after the step down because of Q4, or are you saying 63 bps is kind of a goodish number to use? And then linked to that, in terms of the gross fund pipeline, is it very heavily skewed to target risk? Or is it pretty well diversified? I guess you've probably got some reasonable visibility on the growth pipeline. The redemptions is the debt you have less visibility on. Is that the way to think about it? And how diversified is that pipeline?

So on the pipeline, yes, that's sort of always right that we have -- we have a projection out 12 months on our inflow pipeline with some sort of weightings on it, and it generally proves to be extremely accurate for what we expect. The outflows is always market dependent in some form or another or what's going on with the client. So the flows are really quite well spread across -- the potential inflows are quite well spread across most of the things we do. So it's not heavily dependent on any one piece of the puzzle at all. If anything, the thing that is most dominant is solutions, which is really where we are building something bespoke for the client. And so we have to then back it out into the categories, but clients are looking for us to give them answers to their problem.

And you partly answer the first question, given the flows that we see and the distribution of the flows across the product categories, our guidance is that we expect the trends you've seen in margin before the one-off impact of that large mandate to resume.

So it's all there or thereabout.

Exactly what I come in at 1 or 2 basis points.

Yes, exactly. To try to work out the asset weighted thing to a nearest basis point. On future flows, minus future redemptions is an impossible calculation. I would say. Yes. Look, the flow from St. James's Place is a fantastic piece of business for the firm. I'm sure it will be a fantastic thing for their clients. It operates at a different level of risk than numeric normally runs out, but -- and so it commensurately runs with a different level of fees, but it's obviously at a different level of scale. So as a return for shareholders, it's a very good piece of business as well as being good for the client. We are sort of questions unless anybody else has got one. I guess this is what happens when you have a good set of results. [Operator Instructions] Arnaud is back. Arnaud, you should be unmuted, and off you go.

Great. I thought I'd take advantage to ask a few more then. On AHL, could you perhaps give us a bit of an update as to where capacity might be done? I note that you talked about the electronification of fixed income markets. Perhaps there are other markets that are evolving quite favorably like electricity markets. Where can capacity go for your more constrained strategies?

I think the answer is there will always be some parts that are constrained. EVO last year -- we did a lot of great things to create extra capacity, and then it made a double-digit return, which uses up a lot of extra capacity. The team in AHL is constantly focused on generating future dollars of P&L that we can then allocate either into solutions or into individual products. I think we feel like there is plenty of capacity going forward, even if some of the individual products themselves will be shut. But I think we feel like there is room to do [indiscernible] within AHL where we are today.

Any particular target risk has plenty of capacity as well.

Yes, exactly. That's extremely scalable.

Cool. Thank you, Arnaud. And then R560502, you get to ask the question. I'm unmuting you, but I don't know who you are. So you'll have to help.

It's my code name. It's Gurjit from JPMorgan. Just a couple of questions. Just regionally, where have you sort of been seeing the strongest demand? And obviously, ex SJP mandate aside outside that where is the sort of strongest demand being from clients? And then just briefly, on the seeding obviously, that books increased now to about $650 million. Where do you see the most exciting opportunities for seeding new strategies?

So in terms of client demand, it really is remarkably global. In any one quarter, there's some market that is more or less exciting, but -- in the second half of last year, we saw good flows from Australia, from Japan, from a sort of pan-China region, from Europe, from the U.S. sort of -- I think, the -- look, what's striking is corporate pension plans, defined benefit pension plans are the most cash flow constrained. Away from that, what you're seeing is significant positive cash flows in the sovereign wealth market and particularly in a world with oil at $80 and $100, you can imagine there's significant flows there. In the public pension plan market, there's a lot going on. So that is there's really a lot of demand. We don't have a problem with finding demand. Our thing is to build capacity and things that maintain the alpha quality we've got -- and then really, we find client demand for it. So a lot of the new things we do, we never even get to build a new product because the capacity gets bought straight off the bat by sort of the solutions clients who've got solutions where you can add in extra pieces.

And on the seeding side, the Slide 23 is a good proxy for where you end up seeing our seeding as it mimics the areas of growth in our business. I'll call a few of them, ESG capabilities across the business, both discretion not only is one profit market is another area where we're putting some of the balance sheets at play. Credits in various guidance and forms is another one that we've increased seeding and looking to increase in the future.

Yes. That was nicely avoided saying a specific fund because, Gurjit, I always hate picking an individual fund for the future. We have an amazingly consistent 50-50 hit rate with new products that we launched. We've spent time trying to work out of that too high or too low, but it's very, very consistent. So if we've got 10 things in the seeding book and with confidence, I would say, 5 of them are going to succeed and be real revenue contributors for the firm and 5 won. So far, we've been able to not have any disasters, so the ones that don't succeed, don't cost money; the ones that do succeed become significant contributors. But we've demonstrated we have no ability to say which of the 5 great ones and which are a 5 that don't work. A lot of it is just like in terms of the timing when you launch something and what happens in markets next. So thank you for that question. [Operator Instructions] There we go. We've got one more. Ben, welcome.

I was just really interested to find out what percentage of that amazing net new business came from existing clients, please?

That's a good question to which I'd have to go and look up the answer. You can assume 50% of it came from existing clients and 50% from new clients, but that's partly heavily favored by a couple of situations.

Understood. Understood, understood.

I think we definitely -- there are 2 dynamics that have been going on, one of which may loosen up, we'll see how COVID goes, the other which one. The first one being in a COVID world with less travel, clients really feel comfortable with relationships they trust. And so topping up existing mandates or giving new money to us when we already do 2, 3, 4 things where somebody has been a big opportunity for us because that -- in a low travel world, that's significantly there. It's an interesting question how much clients will be traveling. At the moment, I would say, clients are in the office much less than the banking world or the asset management world, and we'll see over time where they go. But the second thing, which is a strong trend for clients to want to do more things with their core relationships and have less line items in their portfolio. That trend is, I think, very strong, and you've seen, particularly in the liquid alternatives world that the larger hedge fund players are getting larger, the larger hedge fund players are generating the most alpha, they are attracting the most talent that gets more inflows and is a virtuous circle for those of us inside that mode.

The total AUM from a lot of clients is in the several trillion dollars. And so our penetration remains fairly low. And as we expand the range of program strategy solution that we provide, the ability to grab sort of market share with our clients keeps on increasing. That has been very helpful to us. There's plenty of room there.

Super. Well, with that, I think, we'll say thank you, everybody, for your time and attention today. I hope it was useful. I think we've seen all -- well, we think, Man had a great 2021 and delivered really well for our shareholders, and we think we can do that going forward. So hopefully, we'll have as good as one of these next year. Thank you, everybody. Have a good day out there.

Thank you.