Navigator Global Investments Limited (NGI) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Navigator Global Investments Limited FY '26 Annual Results [Operator Instructions]. I would now like to hand the conference over to Mr. Stephen Darke, CEO. Please go ahead.

Thank you, Ryan, and welcome to everyone joining the call this morning to discuss Navigator's full year results for the 2026 financial year. I'm Stephen Darke, Navigator's CEO. I'm joined today, as usual, by my colleague, Ross Zachary, Navigator's CIO and Head of NGI Strategic Investments dialing in from New York; and Amber Stoney, NGI Group CFO. Turning to Slide 4, the company snapshot. Navigator is the only ASX-listed company focused exclusively on partnering with leading alternative investment managers. As at 30 June, Navigator provided growth capital and strategic engagement to a diverse portfolio of 12 partner firms. This was prior to the settlement of the acquisition of the NGI Stable Growth Portfolio that closed on 2 July. At the partner firm level, Navigator's affiliates managed over USD 104 billion, up 24% over the past 12 months. This AUM is managed across 42 investment strategies invested by 242 products with 19 new products launched during the period across our portfolio. These strategies typically have low correlation to global equity and fixed income markets and to one another. Turning to Slide 5. Financial year '26 was another year of building scale across the Navigator platform. We continued to grow ownership adjusted AUM, maintained diversified earnings streams and further strengthened our balance sheet. The FY '26 results do not include any impact from the acquisition of the portfolio of 17 net revenue shares in asset managers from Stable. I'll now take you through the key operating drivers of the results, beginning with the assets under management. Turning to a summary of the financial results on Slide 6. Navigator saw strong AUM growth, but earnings lower than FY '25, in line with expectations. Ownership adjusted AUM increased 21% during the period to USD 33.6 billion, driven by both net inflows and strong risk-adjusted investment performance across both business segments. Higher management fees with steady fee rates and higher performance fees from Lighthouse, offset by lower distributions from NGI Strategic generated $206.5 million revenues, up 1%. The group's adjusted EBITDA was USD 101.9 million, a 10% decrease from last year's record result. This is at the midpoint of our May guidance, consistent with the market messaging over the last 15 months and following 2 exceptional years of NGI Strategic distributions. On Slide 7, you can see Navigator's ownership adjusted AUM growth over the last 12 months and since 2022. The consistent AUM growth over the past 5 years continues but with accelerated momentum. Over the past 12 months, we saw a 21% increase with an additional USD 5.9 billion added across the portfolio during the period. Post reporting period, an additional $2 billion of AUM was acquired and the Stable transaction closed. It was pleasing to see the AUM growth across both business segments being driven by net inflows and investment returns with aggregate net inflows of $3.4 billion plus continued strong investment performance contributing $2.8 billion. Given calendar year 2026 investment performance, recent and prospective new product launches across NGI's portfolio, more positive sentiment from capital allocators and a generally improving fundraising environment across the liquid alternatives industry, we expect to see continued net inflows across our partner firms in FY '27. Importantly, NGI continues to see minimal fee pressure in base management fee rates nor performance fee rates across our partner firms. On Slide 8, Alternative asset managers who aim to generate positive absolute returns for their investors across all market cycles have a strong alignment of interest in the economic performance of their strategies and the returns they generate. For Navigator's portfolio of managers, this is typically reflected in higher and more sustainable fee yields. In calendar year '25, both underlying management fees and performance fees were higher than CY '24 and consistent with historical ranges, although the performance fee yield was lower than prior year. Further, the ultimate distributions received by Navigator from these revenues were lower this year given our partner firms operate at different margins and due to a one-off item. Moving forward and based on sustained investment performance, steady fee rates and given the long-term track record of our partner firms, we think it's reasonable to expect performance fee revenues within this range, but on elevated AUM, providing a resilient source of recurring income for Navigator. We expect the future underlying revenue composition for Navigator to be positively impacted by the inclusion of the NGI Stable Growth portfolio. Turning to Slide 9. You can see the earnings power of the diversified Navigator portfolio over the longer term. Navigator's FY '26 earnings of $101.9 million is at the midpoint of the guidance range we provided in May and reflecting contrasting outcomes across our 2 divisions during the year. Lighthouse generated a record $45.2 million EBITDA, up 16% from prior corresponding period, driven by higher management and performance fees across the platform with consistent operating margins. Whilst earnings from NGI Strategic was 24% lower following 2 exceptionally strong years. Despite most partner firms generating strong risk-adjusted results in calendar year '25, it was mixed with subdued results from our credit and commodities managers, meaning that across the NGI Strategic segment, the portfolio had a comparatively lower investment performance relative to the prior year. Along with the impact of one-off items, this led to reduced contributions received from certain managers, which resulted in lower profit distributions compared with a strong FY '25 and a strong FY '24, as you can see on the longer-term graph on the left. Pleasingly, Navigator Private Markets Partner Firms profit distributions were up 44% year-on-year to $20.8 million. The EBITDA excludes the gain of $2.8 million received from the Bardin Hill sale during the year. Further, the results do not include any impact from the acquisition of the portfolio of 17 net revenue shares in asset managers from the Stable transaction. This portfolio is expected to bring meaningful scale, diversification and growth this year. This result is in line with our expectations as communicated through May. Over the past 5 years, Navigator has grown from owning only Lighthouse Partners and now a portfolio of 29 asset managers. During that period, earnings CAGR has been 22% and manager concentration risk continues to be mitigated with a deliberate, carefully diligenced and selected partner firm investments. We are very pleased with the recent and long-term investment performance, management, AUM growth and earnings generation by our partner firms, which continue to be some of the leading alternative asset managers globally in their respective areas of specialty. Now I'll hand over to Ross to present the NGI business update.

Thank you, Stephen, and thank you very much to everyone on the line for joining us today. Let's turn to Slide 11, where I'm proud to highlight the truly differentiated breadth and diversification of the NGI business. At our core, Navigator Partners with scaled, established but growing alternative asset management firms were leaders across a diverse range of specialized alternative investment strategies. Today, we have 12 partner firms as well as 17 in the NGI Stable Growth portfolio that deploy over $120 billion in time-tested strategies across global markets, designed and refined over long and proven track records to generate strong risk-adjusted returns. It has never been clearer that scale, proven investment edge and deep resources are table stakes that determine success in our industry. Lighthouse and our partner firms all benefit from these attributes. In addition, NGI and our partner firms have a clear competitive advantage through our partnership with Blue Owl GP Strategic Capital, who provides access to NGI to their value creation group, the global industry leader in providing strategic support and advice across such verticals as capital strategies, operational and technology best practices as well as human capital advisory. Let's continue on to Slide 12, which illustrates this diversification by partner firm and investment strategy. The charts on Slide 12 are remarkable. NGI provides our shareholders with access to earnings and enterprise value growth across a broad and diversified range of alternative investment businesses. These institutional quality leading partner firms span quantitative strategies, global macro, commodities, structured credit, private health care and artificial intelligence growth, specialized real estate and differentiated private credit, creating both a high-quality and long-term growth profile and a very resilient nature of earnings and cash flow. Not only is our company highly diversified by asset class, but it also spans the globe across broad and unique client segments and generates revenue through a wide variety of fee terms and structures. The AUM across this platform is long-term oriented, and our earnings aren't riding on any one market cycle. In fact, we should benefit in times of market volatility or following broad market downturns. Please flip to Slide 13, and we'll provide a few select highlights of activity throughout this period. You'll see on Slide 13 that our partner firms continue to be at the forefront of their respective strategies and continuously prove out why they are leaders in the alternative asset management industry globally. During the period, we have seen our partners at 1315 Capital successfully realize assets producing strong results for their clients while also deploying capital into innovative, growing health care companies in a challenging but exciting market. In addition, Marble Capital continues to illustrate their leadership position in their asset class. They have been continuously expanding their capabilities by adding high-quality talent and strategic client relationships to expand their reach and grow their platform over time. And just 4 months ago, we were excited to announce our partnership with Georgian, a leader in the AI investment space, which continues to grow in terms of its investment opportunity set and substantial client demand. We'll cover that transaction in more detail shortly. CFM, one of the partner firms acquired in the NGI Strategic Portfolio in 2021, has demonstrated their clear leadership position with extraordinary growth in the hedge fund industry. With $30 billion of firm level AUM today, their investment results have remained exceptionally strong, which you can see here continue to result in winning several industry awards this past year. We see this recognition as a strong indication of further growth. If we turn to Slide 14, we can review the components of the strong AUM growth NGI delivered to shareholders this year. On Slide 14, you'll see that even after accounting for the sale of Bardin Hill, both NGI Strategic and Lighthouse segments generated strong organic growth within the period. We're pleased to report 21% overall AUM growth in adjusted AUM. Over 12% organic growth has occurred in a year which has been one of the most challenging capital raising environments in the history of the alternative asset management. sector. This is a true testament to the quality and the differentiated nature of our partner firms and Lighthouse's products, capabilities and operating infrastructure. Lighthouse continues to demonstrate their long-term proven track record of innovation by creating and offering new hedge fund products, which leverage the breadth and sophistication of their platform, meeting both existing and new institutional client demand. It is important to remember that the underlying returns of Lighthouse, our partner firms and the public markets show little correlation to one another. And therefore, not only are we excited about the continued organic growth profile of the business, but we also continue to see the potential for the strong contribution of investment returns to our revenue and earnings growth at Navigator. Please turn to Slide 15, and we can turn our attention to the acquisition activity during the year, which further enhances this growth in the years to come. Slide 15 provides an overview of our partnership with Georgian. On March 30, we announced the purchase of a 4.5% ownership interest and preferred economic interest in a $6 billion AUM leading artificial intelligence focused private equity investor for more than -- or excuse me, for $100 million of consideration to be paid over 3 years. Georgian was established in 2008 and since inception, has always been focused on the application of artificial intelligence in specific business-to-business software subsectors such as cybersecurity and application infrastructure. Through their own in-house AI lab and long-term track record of supporting some of the world's most successful founders, they have a true edge in a very competitive but important sector. This partnership represented an exciting opportunity to add additional exposure to a growth-oriented private markets business with a growing investment opportunity set and strong investor demand. Through the transaction structure, we have structured a strong alignment of interest to provide $100 million of capital, all of which will be used to fund Georgian's future growth initiatives. If we go to the next slide, Slide 16, we can cover the addition of the NGI Stable Growth portfolio. On Slide 16, we have summarized the recent transaction with Stable that is financially and strategically compelling, further enhancing NGI's unique value proposition to our shareholders. On July 2, we closed the $190 million acquisition of a diversified portfolio of net revenue share interest in alternative asset management firms that specialize in both liquid and illiquid private market strategies. Through this transaction, we have added $2 billion of ownership adjusted AUM to start fiscal '27 that is highly cash flow generative and further diversifying. In addition, our long-term strategic partnership with Stable strengthens NGI's business. This strategic acquisition was funded by a mix of cash and scrip funded through an entitlement offer, also increasing our share liquidity and increasing our market cap. The NGI Stable Growth portfolio's cash flow profile immediately improves our broader diversification and our quality of earnings. But one the most -- one of the things we're most excited about today is that following this meaningful acquisition activity in the second half of fiscal '26, NGI remains well positioned to capitalize on additional opportunities in our pipeline. Please turn to Slide 17, and we can provide a quick refresher on our approach to adding new partner firms. Today, we are completely focused on using the scale and resources of the current business to execute on future growth opportunities. We continue to look for compelling opportunities where we can provide growth capital and other partnership solutions to help scaled but growing firms capitalize on a clear and well-considered strategic growth plan. In the alternative asset management sector, we believe minority ownership interest remain the most proven mechanism to align interest and partner in a successful and lasting manner for all stakeholders. The criteria you see here on Slide 17 is informed by our deep experience in partnering with, investing in and operating alternative investment management firms for over 20 years. When evaluating new opportunities, our primary goal is to continue to increase the durability and growth profile of NGI's earnings, which in turn strengthens our competitive position to make further acquisitions over time. Thank you. Fiscal '27 could not be more exciting to be here at NGI. Amber, over to you for the financial results.

Thank you Ross, starting with Slide 19, I'll begin with the headline numbers. Fees & Distributions for the year were $206.5 million, up 1% on the prior comparable period. Lighthouse management fees grew 11% and performance fees were $45.5 million for the year, up $9.8 million. Distributions from our strategic partner firms was $63.7 million against $80.1 million last year, a moderation after 2 exceptionally strong years. Adjusted EBITDA was $101.9 million, down 10%. And with revenue steady, this reflects a $10.4 million rise in employee expenses, about half from the larger bonus pool tracking Lighthouse performance fees and a $5.2 million increase in other operating costs. Net assets at balance date are $930.3 million, up 17%. Turning to Slide 20. So this slide reconciles the statutory and the adjusted view of earnings. Statutory revenue grew 8% to $470.5 million. However, statutory EBITDA fell to $55.1 million and statutory NPAT was $21.2 million, down 82%. The principal driver was non-cash fair value movement, a negative $40.1 million this year compared with a positive $31.5 million last year through the P&L, which is a $71.6 million swing year-on-year. Our NGL Strategic Partner Firm investments are carried at fair value and remeasured at each reporting date. We utilize an external valuer with significant expertise in this field to assist in updating valuation and taking into account partner firm specific end market assumptions. Fair value movements through the profit and loss can therefore be significant in either direction as assumptions and outlook change. FY '25 resulted in $31.5 million net gain, while FY '26 booked a $40.1 million net loss with the majority of this net loss recognized in the first half. These movements do not represent cash received or paid in the period, but they do flow through statutory earnings. Excluding that volatility and other adjustment items, adjusted EBITDA was $101.9 million, the midpoint of our guidance range and adjusted NPAT was $75 million. On the next slide, we break earnings down by segment and this shows why diversification matters. NTR Strategic contributed $58.7 million at a 92% margin, down from $76.2 million as distributions moderated on prior year, partly offset by a 44% year-on-year increase from private market asset. Lighthouse grew to $46.7 million from $41 million, holding a 33% margin driven by both management performance fee growth. Employee expenses rose with the performance-linked bonus and headcount. Corporate costs were broadly flat at $3.5 million. Group margin moved from 56% to 49%, reflecting a lower contribution weighting from the NGI Strategic segment this year and the investment needed to support continued growth initiatives. The chart on Slide 22 shows the shape of our revenue over 5 years. Lighthouse management fees have compounded steadily from $73.5 million in FY '22 to $96.5 million in FY '26 and the performance fees have stepped up sharply, $45.5 million this year against $35.7 million last year and under $12 million in FY '24. NGI Strategic distributions of $63.7 million in FY '26 are down from an elevated $80.1 million in the prior year. This is a moderation from a high base, not a deterioration of underlying performance. Distributions move mid-year with investment performance, strategy mix, fee realization and timing. The increase in private market contribution is also important to highlight. These partner firms representing 33% of total distributions received this year. These private market partner firms are a growing share of NGI strategic distribution, broadening the sources of cash flow beyond the more established liquid portfolio alternatives. The mix that should continue evolve as the newer investment scale and supporting greater diversification of strategy and return cycle. Moving to the next slide. Our balance sheet continues to grow with NGI Strategic Investments now totaling $755 million. Valuation movements on investments measured through profit and loss affect statutory earnings and while movements on investments designated at fair value through other comprehensive income are recognized in reserves and equity rather than impacting NPAT. The table brings those 2 categories together and shows how each of the movements contributed to the change in net assets and how they largely offset each other in FY '26. We also strengthened our debt funding capacity during the year. In May, we increased our senior secured facility by $90 million from $100 million to $190 million capacity and extended maturities to May 2031. This gives us greater flexibility to fund commitments to future growth opportunities. Following the settlement of the NGI Stable Growth portfolio, our balance sheet remains conservatively positioned. On a pro forma basis, including the settlement cash outflow on 2nd of July 2026, net debt to adjusted EBITDA is approximately 0.8x compared to the target ratio of approximately 1.5x. The Stable acquisition was deliberately funded through a combination of equity raise from shareholders and scrip issued to the vendor rather than maximizing the use of the expanded debt facility. While debt capacity was available, using equity alongside scrip preserved meaningful facility headroom, maintained leverage discipline and retain flexibility to fund further partner firm investments from a robust opportunity pipeline. The scrip component also created long-term alignment with Stable with a substantial majority of those shares subject to either 12 or 24-month escrow. The funding mix was therefore a capital allocation decision, balancing shareholder dilution against balance sheet resilience, strategic alignment and the ability to continue executing growth opportunities. On dividends, as announced on the 15th of November 2025, the Board determined that the best current use of capital is growth and dividend has been [ suspended ] following the final payment in September 2025. Finally, Slide 24 sets out the economics I see [indiscernible]. NGI Strategic, on a pro forma basis, including the recently acquired NGI Stable Growth Portfolio has $15.3 billion in AUM as at 30 June 2026, an average management fee rate of 1.23% per annum. 82% of AUM is earned in performance fees at a 17% average rate. Converting this revenue into distribution for NGI is estimated at a 35% to 45% indicative margin and then applying a distribution payout rate of between 90% to 100% of underlying earnings. Lighthouse AUM at balance date was $20.3 billion at 54 basis points per annum with 88% of AUM able to earn performance fees at 13% performance fee rate. 23% of AUM for Lighthouse is at or above high watermark -- sorry 88%. Got those around, and 30% to 35% indicative margin. Together, these are the levers that covert AUM into growing profits. And with that, I'll hand back to Stephen.

Thank you, Amber. In terms of the outlook for Navigator for financial year '27 on Slide 26. NGI expects our portfolio of partner firms to continue to perform across market cycles as it has done historically at both management company and investment strategy level. Unlike other listed asset managers that may benefit from a sustained risk-on period for equity and bond markets, NGI's public markets focused partner firms show resilience in more difficult time periods or those exhibiting greater volatility, which can provide strong diversification. We anticipate the recent momentum on net inflows to continue given investor appetite globally for alternatives and the appeal and track record of our investment strategy. In terms of execution of our growth strategy, we are focused on continued and measured acquisitive growth in FY '27 and adding established, growing and differentiated partner firms that meet our investment criteria and further diversify our earnings. We are seeing a robust pipeline of new opportunities. In terms of funding those opportunities, FY '26 marked the second consecutive year of generating over USD 100 million in net operating cash flow across our business segments, which we are proud of. During the year, we extended and expanded our senior secured facility, as Amber mentioned, with the 2031 maturity. This provides significant flexibility to fund future partner firm investments from this year. That facility is undrawn. In accordance with NGI's capital management framework and post the suspension of the dividend, we will proactively and continually assess capital management opportunities when there is excess capital. Turning to Slide 27. The Stable growth portfolio is expected to meaningfully increase FY '27 earnings. As Ross noted, the portfolio of 17 asset managers now has $17 billion aggregated firm level AUM, up 19% this calendar year to June and $2 billion ownership adjusted AUM growing in accordance with our expectations from both investment performance and net inflows. The average AUM per manager is now $1 billion, up from $834 million at the end of calendar year '25 and is exhibiting growth at a higher rate as we would expect from scaling high-quality alternative managers. Pleasingly, the portfolio is generating strong risk-adjusted performance ahead of our expectations with an average 11% net returns year-to-date to June. 90% of that AUM is subject to performance fees with an average 17% performance fee rate, consistent with the broader NGI strategic portfolio and higher than the Lighthouse segment of 13%. Strategically, the inclusion of this portfolio broadens our addressable market and improves the key financial metrics, as Amber just outlined. It also enhances the organic growth outlook as described on our deal announcement. And importantly, it's a valuable addition to diversify Navigator across investment strategy, investor base and adds even higher predictability and stability to cash flows. The bottom line is that the stable growth portfolio is performing in line with expectations for FY '27 in terms of AUM, revenue and earnings contributions. Before I conclude and open to questions, on Slide 28, I outline why Navigator is unique and compelling investment proposition for shareholders as the only pure-play alternative firm on the ASX that's diversified. The 4 key elements on this slide have and should continue to lead to Navigator generating strong earnings across all market cycles, and we are focused on future growth opportunities that will enhance that result. Number one, NGI has some key advantages. Being permanent capital structure as an ASX-listed company, our proprietary sourcing channel for new opportunities, our innovative partnership structures as evidenced by the Georgian transaction and a model of supported independence with aligned incentives, which we believe is gathering support and confidence by the market globally as the right way to partner as an alternative asset managers. Number two, we have a scalable and fast-growing platform from not just consistent investment performance, but net inflow momentum and accretive acquisitions. Navigator now has USD 7.9 billion higher ownership adjusted AUM to start FY '27, including the Stable deal, a 29% increase over the past 12 months. Navigator is focused on diversification, is number three, of earnings generated from a portfolio of high-quality alternative asset managers and reducing the dependence on any single partner firm. Post the Stable transaction, we have 29 asset managers across our portfolio across public and private markets, across multiple asset classes, investment styles, geographies and investors. Each of Navigator, our portfolio of partner firms, our strategic partner Blue Owl, and our recent strategic partner Stable Asset Management have deep global expertise across diverse sectors of the alternative industry and established track records of generating high risk-adjusted returns for their investors. Both of our partners are potential avenues for future new partner firm relationships. And number four, going into FY '27, we have a resilient earnings base with recurring management fee revenues and consistent performance fee revenues over a long period, supported by a diversified product offering with those 19 new products launched during the period. Since FY '22, our earnings have grown at a 22% CAGR. And according to a UBS report last year, Navigator's performance fee revenues against -- across NGI Strategic exhibited only 14% variability, the lowest of peers. Given the absolute return nature of our strategy and the performance fee mechanics as outlined at our Investor Day, this is no surprise. I believe that 2027 will be a watershed year for Navigator with the flywheel we outlined at our Investor Day coming online. This should be driven by: one, the expected earnings contributions from our latest acquisition; two, the AUM growth over the past year, yielding higher base and performance fee revenues; three, the continued growth of our partner firms; and four, the execution of additional partnerships. Finally, at our Investor Day in November 25, we set out the aspiration of growing NGI's to [ higher ] fee paying ownership adjusted AUM to more than $45 billion by 2030. With our most recent transactions with Georgian and the NGI Stable Growth Portfolio as well as positive investment performance and fund flow momentum across our partner firms, we continue to make very strong progress towards that goal. Thank you for your time, everyone. I'd now like to open the call to questions. Ryan?

[Operator Instructions] Your first question comes from Phil Chippindale from Ord Minnett.

Firstly, Stephen, just on flows, you mentioned confidence in the outlook for flows. Could you just give us a highlight a few of the key partner firms where you would expect this positivity in terms of flows to continue? And could you specifically make a comment around Lighthouse? That's obviously had a pretty good calendar '22 so far on flows. So just interested in the outlook for that one as well.

Yes. Thanks, Phil and appreciate you joining the call. What I might do is I might just address Lighthouse upfront and then pass on to Ross to talk across the broader portfolio NGI Strategic. On the Lighthouse side, yes, you're right. I mean, it was very pleasing to see strong net inflows. It's worth pointing out that $1.5 billion of net inflows across the Lighthouse platform during the period was into the managed account services, so at a lower fee yield. So no investors should assume that those net inflows went directly to the higher fee-yielding hedge fund segment of it. However, it was pleasing to see the flows across hedge funds as well -- and also the customized solutions and the managed account services. When I speak to Sean, which is on a regular basis and ask where the pipeline and investor interest is in the product offering, I would rank them probably as follows: the new -- relatively new Fortress Beacon product is seeing significant interest, it continues to perform well, and we would expect additional flows that are committed in the pipeline at least over the coming 2 quarters and look forward to talking more about that. We've obviously seen flows during the year into that, which was pleasing. There were, I would say, delayed versus original expectations of early last year. These are complicated products. But Jack and his team are performing well. And we're seeing that pipeline, I would say, accelerate into the end of the calendar year. Of course, there's always a risk that those flows don't eventuate, but I understand that there are -- that at least I see commitments around that. We will see. Other products, interestingly, is a relatively smaller product called Penglai Peak, which is a Japanese multi-manager product, and we've spoken about these, so I won't delay the call too long. We can talk about it perhaps in the Ord Minnett session, Phil. But just with the active management and alpha generation opportunities in Japan that I understand is also benefiting long-only active managers, Sean is seeing quite significant performance and interest from investors in that geographic region. And Penglai Peak, I understand, is one of only a small number of multi-manager hedge funds that has that sort of focus. And even though it's relatively small, I believe, between 300 and 400 AUM at the moment, you would expect actually that to have meaningful growth over the course of the next few quarters. I believe there's still some existing interest in the North Rock platform with another client, a large account in the pipeline. So North Rock continues to perform well, as you can see in our performance slide. I think macro has been started the year very strong, but it's a bit more difficult in the last couple of months, and we can address it more broadly with the industry. But the macro strategy isn't necessarily seeing the sort of traction that the equity products are seeing at this time in the year. So, hopefully, Phil, from a Lighthouse perspective, that gives you some color. I would say that actually there's a number of customer accounts, RFPs that are underway according to Sean, and we feel good about actually Lighthouse winning those accounts. So we'll see where the growth is in that customized going through the next 6 to 12 months. And then on managed account solutions, it's less important from an earnings perspective, but I think they're doing a great job in that business, providing a solution. You're seeing a lot of flows into that. And even though it might be a little volatile, I would continue to expect to see flows. So if you add all that up, a great year last year, and we have a degree of confidence that, that will continue, subject to market conditions. Ross, do you want to talk perhaps about the rest of the portfolio?

Yes. No, happy to. And Phil, thanks so much for the question. What we saw this last year in the NGI Strategic segment was that it was really a mix between the private market firms and the liquid alternatives, probably with the private market firms driving a majority. And as we've talked about, this year, we've had Invictus, Marble and 1315 out at different stages, but out raising their next vintage fund as well as kind of associated separately managed accounts and co-investment vehicles. Invictus has wrapped up a very successful fundraise, which really contributed to this last year and Marble and 1315 continue on at different stages, but we should see both of them contribute to this next year. I think the more exciting point, though, is as kind of some of the drivers behind what Stephen said as well, it really is clear that hedge funds are an increasingly valuable tool for institutional investors. We talked about it over the last year, but they've become almost like a black sheep to now a priority for the largest investment boards and investors around the world to get access to. And it's the type of firms on our portfolio -- excuse me, on our platform that are gaining flows. Some of the data we follow showed that 86% of all flows in 2025 went to firms with $5 billion or more of AUM. So Navigator is where the market is going in many respects. And obviously, we see the NGI Stable Growth portfolio and those firms are also growing because they're specialized, exciting and they get a lot of access through Stable's network. But predominantly, firms like Capstone, CFM, MKP that partners almost exclusively with large institutional investors and others are out raising money. So it's hard to say given how lumpy those time lines are. But given the strong performance and just given the role of those portfolios being prioritized, we're very excited about the outlook there.

Sorry Phil, I just going to point everyone to Slide 34. Just to outline Ross' point very well. I can't recall in recent history, seeing that sort of uptick of investor appetite for hedge funds that you've got sort of Barclays strategic coming out saying that in the second half plans for allocation, investors are up by sort of 6% from this time in the prior year in terms of interest in hedge funds. That seems to be coming at a bit of a sacrifice of some of the private market strategies. And my view just quickly is that I think people have been underpricing liquidity risk here. And now that they can see that hedge funds can provide the right risk-adjusted returns with liquidity, there's a greater interest in that product. And I think we're seeing that reflected across the platform. And I don't think anyone sees the current world global volatility going away. And so we feel confident about that. And sorry to cut you off, Phil but I think Slide 34 helps illustrate Ross' point.

No, I understand. That's really useful. Just trying to sort of triangulate expectations for FY '27. If we look at '26, the one area that perhaps was a more modest contributor was the NGI Strategic portfolio, that's sort of the 5 key sort of original partner firms. What's the outlook do you think in terms of FY '27 for that business? Clearly, Stable is going to be making contribution coming on board. Lighthouse, we can look at that base management fee level and have some expectation on performance fees. But private markets aside, it's that NGI Strategic portfolio 5 and just sort of our expectation into '27. How should we be thinking about that?

Yes. Ross, do you want to take that first, and I'll follow up with any further comments.

Yes, absolutely. Great question, Phil. So what I would say there, and please do jump in if it's not quite giving you the insight that you're looking for. But the way we think about it is, as Stephen highlighted in his remarks, 2 of the firms in that portfolio certainly had more subdued years on the performance side in 2025, which led to lower overall distributions. We monitor the performance closely, but there are so many products and so many business lines in these platforms. It really depends on which products perform, what margins each business runs at to really determine the ultimate distributions to us. So the way we're thinking about it right now is that this upcoming year will be a stronger year, but certainly not what we're expecting to hockey stick or bounce back to what was 2 very exceptional years, the 2 -- not overly impossible years, but just exceptional across the 5/6 firms that are in that portfolio at the same time. One data point, which may be helpful, but like anything in the market, is subject to change, we don't emphasize it at this point in the year. But if you flip to Slide 32, which shows the investment performance of the composite of those 5 firms, you'll see that calendar '26 year-to-date, they're at about 3.6%. If you were to look at our August results last year, it was about 1.9%. So they are tracking ahead this year of last year, but it's going to depend on which firms. The great news is that we don't see anyone in outflow. We don't see any of the performance that was subdued last year being damaging to the enterprise value or really the management fee-driven side of the business, and they are growing. So directionally, all things are quite positive. It's just hard to have these big scale firms bounce back super quickly and repeat what was our fiscal '25. So hopefully, that helps.

Yes, that's really useful. I don't know if Stephen has anything he wants to add there.

No, I was just thinking, but I don't think so, Phil, I think that's probably -- I think Slide 32 is indicative. Just while we're on that though, look at the level of consistency across the ownership adjusted strategic portfolio over 1, 3 and 5 years, that also is largely mirrored across a number of the Lighthouse products. The Stable growth portfolio has a higher risk return to it, as you can see across those metrics. But to see this portfolio return really to those long-term averages would be certainly part of our expectation. And as Ross said, we're a couple of hundred basis points, which doesn't sound like a lot. But when you've got the performance fee mechanics and the way that the base fees work, you see some inflows that can make a big difference. So I'd like to -- you'd like to think that we have a bounce this year. I mean Amber highlighted the distribution slide historically on 22. On the left-hand side of 22, we used to refer to 3- to 5-year averages for this portfolio. I think the 5-year average is actually 71%. It will be very disappointing if, for example, a 63% didn't rise by 10% to 15% to be ahead of that 5-year average. But it's very difficult to be able to say that right now as we sit here in August. I do know in discussions with Ross in terms of how the managers are going, even at early stage July and August, it's really promising. So I sort of agree with Ross' characterization. But for people to think the $80.1 million is immediately going to be an uplift, unless we have a big private market contribution, I think it's probably difficult. So an uptick, but not $20 million, $30 million.

Your next question comes from Tim Lawson from Macquarie.

Just one to start. Just in terms of the pipeline of M&A and particularly I ask because you've obviously talked about the capacity, the medium-term funding deal and the cash flow generated by the business. So can you maybe combine those 2 sort of pipeline and capacity to fund the outlook and maybe talk to a pro forma leverage ratio if possible?

So maybe Ross can address the pipeline and Amber can address the funding and net leverage.

Yes. No, happy to. Tim, thanks so much for the question. As I said in my remarks, we have never been more active in the pipeline for a mix of reasons. I'd say the first one is that our track record continues to be recognized in terms of being supportive value-add and creative partners to these firms, especially with 1315 and Georgian transactions kind of being successfully completed. In addition, in the sector, the most -- what I would say is focused and growth-oriented firms are really seeking partners more and more. So the quality of the pipeline has also improved. And so we are very much looking at adding hopefully 1 -- at least 1 partner firm this year that would further diversify. Most of the pipeline is private markets, just given the objectives that we're talking about as well as things outside of our core portfolio today. So the pipeline has things in, call it, specialized areas of real estate investing in the private markets, other areas of real assets that are either kind of scalable, but focused. We do have a couple of things in liquid alternatives that we think either from a global or strategy perspective are very institutional quality, but could be diversifying. And as we've seen, certainly can add to the growth profile and the cash flow yield of our overall business. And then we continue to look at what we call specialized private equity. So you think of other sector specialists like you've seen us partner with or other very specialized strategies that we think will kind of be on that one side of the barbell in private markets that is growing and is generating good returns for clients. So it is really active. It's always hard, as we always say, it's hard to say if we can convert. But I think our strategic positioning as well as the overall volume of opportunities is as active as we've ever been.

And just on the leverage ratio, we have a target net debt to adjusted EBITDA ratio of about 1.5x. We do look at that, and for us also it's interesting and keep in mind that we still have deferred consideration that comes into that mix. And so it's not just all about debt. It's also deferred consideration. We still have to pay out on the existing investments. So the funding is really -- it's a case-by-case decision. It depends on the size of the transaction. It depends on the terms and the size of tranching over time, particularly on private markets. And we just weigh that all up in those overall decisions in terms of managing our target ratio.

Do you think there's any pro forma leverage?

Well, I mean sort of our covenant leverage and then there's like the pro forma is we're currently at 0.8x and we would stick around that target of 1.5x when we're looking at a transaction. And it could go slightly above it if we had to structure something depending on the deal.

And I'm certainly the least qualified, but just an observation on this. I would say that obviously, with an undrawn debt facility and as we start to get stable, predictable -- forgive the term, but more stable, predictable cash flow from the Stable deal, 4x a year revenue shares, much clearer when we're going to get it. There's no margin that is really effectively applied to that. So we get the cash flow, it's like a royalty stream 4x a year. As they start to come online, we're going to really be increasing the cash flows.

Yes. But we still will have cyclical cash flows. We're still getting quite a large amount of it in that March quarter based on calendar year performance. So, just to keep that in mind.