Ninety One Group (N91) Earnings Call Transcript & Summary

Good morning, and welcome to the presentation of Ninety One's interim results for the 6 months to 30 September 2022. And thank you for joining us whether here in person or virtually. I will start with an update on the business. And then Kim McFarland, our Finance Director, will present the financial review. I will then cover the outlook before we move to questions. Those of you participating through the webcast can submit questions during the presentation via the chat function at the bottom of your screen. Before I move on to the first half performance, let me remind you of the key characteristics of our business model. At Ninety One, clients always come first in good times and in bad times. We have, and we continue to build long-standing relationships with our professionally intermediated clients, whom we serve locally or through our various offices across the world. Ninety One origins are in the emerging markets from which we have grown into a global investment manager, stability and owner culture are key foundations for Ninety One, and we have no intentions of undermining those foundations because of temporary market headwinds. Ninety One has a people-centric, capital-light technology-enabled business model, which is highly cash generative. Since inception, we've paid out around GBP 1.6 billion in dividends to shareholders. We're building an intergenerational business that can generate competitive returns for our clients through the cycle. It's our belief that when we serve our clients well, our shareholders will also be well served. And all of this is underpinned by our purpose of investing for a better tomorrow. We do this by building a better firm, committing to better investing and contributing to a better world. This familiar slide demonstrates the resilience of our business through many cycles. Ninety One has been organically built and sustainably built over more than 3 decades with a track record of successfully navigating a range of market conditions. This chart tells many stories and highlights the phases we have been through as a business. [indiscernible] Ninety One started when we became independently listed in March 2020. And in this short period, we have encountered 2 fully fledged bear markets. But unlike the recovery we saw post COVID, we expect the current challenging conditions to persist for the foreseeable future. Let me move on to my key messages. In May, when we presented record full year results, we signaled caution. Ninety One is a risk-on business currently operating in a risk-off environment. Ours is a predominantly long-only business, inherently exposed to the price -- the price volatility of financial assets in which we invest our client capital. Our clients are more cautious and taking more time to make investment decisions or derisking their portfolios, irrespective of investment performance. Against this backdrop, we delivered broadly flat revenues with moderate cost growth. We saw net outflows in the period due to lower volumes of new business, while outflows remained broadly stable. Our peer relative investment performance remains competitive, and we continue to focus on improving our short-term performance. In spite of these adverse market conditions, our strategy remains consistent. We will continue to apply our well-tested investment process, [ presently ] focusing on our client relevance and ensuring that our people also supported the task ahead. The substantial staff of delivering Ninety One combines the interest of our people with those of our shareholders and trades our long-term orientation. Here are the key figures for the first half, and Kim will cover the financials in more detail later. Assets under management decreased by 8% in the half to GBP 132 billion, driven by net outflows of GBP 3.2 billion and lower markets. Average assets under management increased by 1% versus the same period last year. Our investment performance remains competitive with a 3-year firm-wide outperformance at 66%. Our adjusted operating profit declined by 7%. The interim dividend of 6.5p per share, represents a payout of 71%, in line with the prior period and the stated dividend policy. The last 6 months have seen some very challenging markets. We have seen interest rising faster than anticipated from historically low levels. Central but tightening and increasing geopolitical uncertainty have provided further headwinds for both equities and fixed income. The heightened volatility and increased cost asset correlations contributed to a [indiscernible] managers. [indiscernible] clients derisking their portfolios and positioning their investment decisions are postponing their investment decisions, thus limiting our sales opportunities. We initiated a client engagement, making sure we remain close to our clients and ready to act when opportunities arise. Between [indiscernible], Treasuries and equities were also highly correlated on the [indiscernible] side. There is not much place to hide for a long-only investment manager. As I have said, many times before, [indiscernible] don't change our investments because of short-term market events. Let me remind you that we have seen net outflows in 25% of the half-year early period since 2002. Yet delivered significant growth over the last 20 years of which under half has been due to inflows and the other half due to markets. We focus on delivering good outcomes for our clients in the long term. And we will continue to do that. Our assets under management remain well diversified across asset class, client region and client type. Let us look at the flows by asset class. We achieved net inflows in our South African fund platform and marginal net inflows in alternatives, which is predominantly credit. Unfortunately, those were offset by the remaining asset classes, mainly from equities and multi-asset. The net outflows in equities were largely driven by some of our global equity strategies. The bulk of these outflows related to 2 clients derisking their portfolios, unrelated to investment performance. As I have mentioned in the past, our clients include very large, sophisticated institutional investors. And thereby -- therefore, our flows can be lumpy as we've seen in this period. Only the Africa Client Group saw net inflows in the last 6 months, largely into fixed income strategies and our fund platform business. The Asia Pacific Client Group saw the biggest net outflows in the period, driven by global equity strategies. The net inflows in the adviser channel were more than offset by the outflows in the institutional channel. The adviser channel experienced net inflows from the Africa and U.K. client groups. A combination of derisking and LDI-related liquidation towards the end of the period drove institutional outflows. Moving into investment performance. Our firm-wide aggregate asset-weighted performance remains competitive, with 66% of our strategies outperforming benchmarks over the 3-year period. Over 5 and 10 years, our outperformance as at the end of September, stood at 75% and 83%, respectively, leaving us well positioned to compete. We are aware that our short-term performance, while slightly better compared to 6 months ago, still needs improvement. Our mutual fund investment performance improved significantly since year-end. This is a good, although imperfect -- albeit it imperfect proxy for peer relative performance. We are now in a better place but we are not complacent. As ever, our focus remains on delivering competitive long-term investment performance for our clients. Over the last 2 years, we have focused our sustainability efforts on climate change. This will remain our priority for some time to come given the urgency of the issue. We have spent significant time considering how we can contribute to the thinking of our clients while achieving real-world change. Decarbonizing portfolios does not guarantee real-world decarbonization. In our sustainability mandates, we've been encouraging asset owners to invest in the climate solution providers and to support the transition of currently heavy emitting companies and countries. Working largely within the Sustainable Markets Initiative and the Glasgow Financial Alliance for net zero, Ninety One has actively contributed to the now established framework for transition finance. These will be crucial in the years to come, and we have advocated largely in our industry or for measurements that support allocations into these areas which do not leave emerging markets behind. Our target submitted to the net zero asset managers initiative were accepted by the Institutional Investor Group on Climate Change in July. This gives credibility to our transition plan, something we expect companies in which we invest in to deliver themselves. Without substantial investment in the required transition, the world will not improve. Ninety One is committed to aligning its business with this imperative. Our range of sustainable strategies have achieved positive net inflows, and we launched one additional strategy in this reporting period. In these testing times, we gain confidence from strong deeply ingrained owner culture at Ninety One, and our stable and experienced staff complement provide us with confidence. Talent density and diversity are key objectives for us. We are direct and honest with our people about the challenges we face and about the high expectations we have of them. Staff ownership in Ninety One now exceeds 28%, which is in line with our intention to build an intergenerational business. I will now hand over to Kim who will take you through the financial review.

Thank you, Hendrik, and good morning to all of you. I'm presenting a set of interim results, which reflect the current environment, as Hendrik has already summarized. The highlights are as follows: adjusted operating revenue increased by 1% to GBP 330.9 million. Adjusted operating expenses increased by 5% to GBP 223 million. And this resulted in an adjusted operating profit of GBP 107.9 million, a decline of 7%. And the increase in adjusted net interest income and the gain on the disposal of Silica in the prior year, profit before tax decreased by 16% to GBP 110.6 million. Effective tax rate for the period was 23.4%, which is pretty much in line with the prior period. The both factors result in profit after tax decreasing by 16% to GBP 84.7 million, and the adjusted EPS declining by 7% to 9p in line with the fall in adjusted operating profit, as I showed above. And consistently, I've reported adjusted operating profit by adjusting for lease interest, subletting income as well as removing the contrary impact to the reevaluation of the deferred employee benefit schemes. The adjusted operating profit margin decreased from 35.2% to 32.6%, also due to an increase in fix expenses being higher than the increase in revenues. And we quoted back in May has been a more challenging period, and we are confident that the adjusted results as referred to here, reflect the true operating position of the business for the past 6 months. So this slide provides further details on the adjusted operating revenue, which increased to GBP 330.9 million. Management fees decreased by 1% to GBP 312.8 million from the GBP 314.8 million in the first half of 2022. This compares to a decline of 2% from GBP 318 million in the second half of 2022. However, the average AUM increased by 1% in the comparable 6-month period to GBP 138.2 million. The average fee rate however declined from 45.7 bps to 45.2 bps. In the main, this is once again due to an increase in AUM on below average fee rate clients and the change in the mix of strategies held by clients, and this is predominantly in our offshore fund range. Under current market conditions, we will continue to guide cautiously to downward pressure over the period -- over the period ahead. As previously guided, performance fees decreased from the prior period by 19% but was still GBP 11 million. These fees arose as a result of relative investment outperformance and a selection of strategies. Other income primarily comprises a material foreign exchange gain of GBP 7.4 million, which was predominantly due to the translation of the U.S. dollar assets or the weakening of the pound sterling over a 6-month period, from 1.31 to 1.11 as of the end of September '22. The next slide shows the buildup of the adjusted operating expenses between H1 '22 and H1 '23. All areas showed an increase over the prior period. The total adjusted operating expenses increased by 5% to GBP 223 million. A key expense is once again employee remuneration, which reduced to 66% of the total expense base in the comparative period this was 69%. Total remuneration expense increased marginally by $1.5 million or 1% to GBP 147.3 million. And this was driven by an increase in fixed remuneration due to the annual inflation and market-related adjustments, which was largely offset by a lower accrual for variable remuneration in line with the lower adjusted operating profit. Let me remind you that over 50% of employee remuneration is variable, and overall, this resulted in a compensation ratio of 44.5%. Now turning to the business expenses. These increased by 13% to GBP 75.7 million. Let me take you through each of the business expense categories. The largest expense is client and retail fund administration, and this has increased by 8% or GBP 1.6 million, driven mainly by the weak sterling on the U.S. dollar-based expenses here. The same can be said about information expenses, which is actually included in other. Fortunately, only around 20% of our cost base is USD, with the balance being predominantly in GBP and ZAR. As I noted earlier, we did benefit from a high proportion of dollar-based revenues. Travel expenses in absolute terms have increased significantly from the prior period following the easing of COVID-19-related restrictions but do remain lower than the pre-COVID period. So expenses increased due to ongoing investment in underlying platforms, but there's nothing notable to highlight here. Overheads, also included in other increased largely with inflation plus a few one-off charges, which we are not expecting to repeat in the second half. The comparable period split of these expenses remains largely unchanged. Looking ahead, we anticipate that the business expenses will increase with the mixture of inflation and FX pressure. But at the same time, there is a strong cost discipline in the business. And as a result, we guide for a lower increase rate in the second half. We expect and guide a total remuneration expenses to be marginally flat as we inflect the variable element there. This slide simply shows the total and business expenses as a percentage of average AUM in bps over now a 6.5-year period. So this covers a period of pre the post listing in March 2020. And the key message here is the consistency of business expenses as the business has grown and developed. And I said to you earlier, the slight uptick here can be attributed largely to FX and inflationary pressures, albeit marginal. Both are out of our control, but where we can, we'll continue to tightly manage the total cost base going forward. So to summarize here, this is a graphical representation of the absolute movement in our adjusted operating profit before tax from H1'22 to H1 '23. Our total operating profit for H1 '22 was GBP 115.6 million, management fees decreased by GBP 2 million. Performance fees decreased by GBP 2.6 million, employee remuneration increased by GBP 1.5 million, and business expenses have also increased by a further GBP 8.7 million. The foreign exchange loss in the prior period were reverse to gains with the resulting impact of GBP 7.7 million. Then adjusting for the small decrease in other income items of GBP 0.6 million, the adjusted operating profit for H1 '23 was GBP 107.9 million as reflected earlier. So my final slide summarizes the Ninety One balance sheet and the capital position at the end of September '22. Ninety One qualifying capital decreased to GBP 307.9 million. Estimated regulatory requirements also decreased to GBP 111.3 million. In line with our dividend policy, the Board has declared an interim dividend of 6.5p. This is a decline of 6% from the 2021 interim dividend and is in line with the 7% fall in adjusted EPS to 9p, and translates into a payout ratio of just over 70%. Ninety One remains committed to its stated dividend policy. And after dividend payment, there will be an estimated capital surplus of GBP 136.7 million. And this will result in a capital coverage of 223%, which a Board deems prudent. Furthermore, at this time, there continues to be no plans to increase the number of shares in issue not to encumber the group balance sheet with debt. Thank you. I'll now pass back to Hendrik.

Thank you, Kim. These are challenging times, and we remain cautious about the foreseeable future. That said, Ninety One is a resilient business with a diversified offering and a long track record of operating in bull and bear markets. We see ample long-term growth opportunities ahead in spite of current market conditions. We will maintain cost discipline, but we will not sacrifice long-term growth and organizational stability just to meet near-term targets. We intend to navigate the turbulence with confidence. This is not a time for distractions. More than ever, we will focus on the investment task at hand and do our best to meet the needs of our clients. By staying engaged with them and doing what they expect of us, our focus is firmly on execution. To execute well, we need a motivated, highly skilled staff complement. The people of Ninety One are up for the challenge. Thank you very much for your support. Before Q&A, I just want to pay our respects to a colleague who sadly passed on yesterday, Andre [ Rieu ], who was one of our senior fixed income portfolio managers and the previous Head of Fixed Income, passed away in London yesterday after 23 years of service with us. And cause is not clear, but he just got ill over the weekend. So I think just a second -- a few moments of silence would do. Thank you very much. Questions.

Hubert, you're always first at the block. You always take a day longer than the other analysts. And then you write more with your questions first. So go for it.

Thanks, Hendrik. Three questions. Firstly, on the operating margin. It's 33% in the first half. I think, Kim, you mentioned some headwinds in the second half around costs, inflation effects. Just wondering how we should -- any guidance around operating margin in the second half, that would be helpful. Hendrik, one for you. Firstly, in Asia, there seems to be pretty big outflows in the first half could be due to the one-off, I think, mandate losses actually. I'm just wondering if can you just talk about the dynamics there. And also, if that's a setback to your goal in terms of improving institutional growth in Asia. And lastly, I know your comments are quite cautious on the outlook. Is it both on the institutional side as well as adviser side? I noticed that your advisory flows were actually quite resilient. Just wondering if in you're also downbeat that in the second half.

I leave the operating margin point to Kim, just to say that operating margin for us is an outcome, not an object. So maybe Kim, you can just say what you expect there.

Absolutely. I think we -- we've guided the fact that we're going to have -- the costs are going to be there. We've got inflation, and we'll obviously see what the impact of the FX costs, which hit us quite hard in the first half of the year, but we will guide on it being -- it's not going to go up, it's going to be slightly down in the second half, but not by anything we're not anticipating it to be material. Again, because we're not expecting any material cost to come down -- come through.

What we're going to try and do is really contain cost growth rather than destroy capacity because we see in a number of our markets structural growth opportunities that we don't want to step away from. We're just fully invested in our North America platform. We're not going to step away, we can be 10x larger there than what we are. So if we're going to tinker now and -- so that's the balance we're trying to maintain and, therefore, not willing to commit to a particular target. I think as far as Asia is concerned, these were very specific accounts and it was related to them. So I think we're as committed to the regions we're in and essentially large asset owners and asset platforms in those regions. They behave similarly whether they're in California or whether they're in China, they actually have the same decision-making processes. And so where the pots of money are, we're actually quite optimistic about both the Australian opportunity and, of course, the Middle East where money is coming out. So economies are growing. So we're not negative on that. Clearly, some of you may ask the question, which you asked at year-end, what about China. I was very clear, until we have free travel and COVID free -- or the COVID restrictions are off, there's no point in going except serving your existing client base. And at the moment, they do business remotely, but not in large volume. And fundings are slow. So that's going to maintain for the next -- that situation is going to be in place for the next reporting period. I think as far as the outlook is concerned, we haven't seen -- and I remember, we deal with the upper end of the call it, retail market or adviser market. So our clients are wealth managers, sophisticated financial advisers, not directly with a man in the street and definitely not with the sort of small accounts that are quite heavily exposed to crypto right now. That's not our market. They have not panicked. They've behaved very similar to institutional investors. We are not sure when an economy goes into the recession that people will not need their money and call on their savings even if it is to look after family members. So we haven't seen that. Neither have we seen fear. With big movements in markets that may still come, so we haven't had the negative from that. We've actually had a fairly disciplined experience from our clients. It was more institutions repositioning, and I gave you the reasons. I think from an investment performance point of view, we've been good enough to keep the clients. But I think it's important if you really want to open the front door, you've got to have exceptional performance in your relevant strategies. That's what will determine a big year or not. And we have to wait and see how it unfolds over the next few months. But if we -- if you deliver that, and you're in the top end, and you're one of the firms that are looked at -- I mean we've won a few landmark mandates, which have funded much slower than we would have expected exactly because asset owners have been slow on the cash. When we pitched, there were very big mandates, money starting to dribble in all those saying, look, we'll take our time. Thank you. You've been selected, okay? We have to wait. That's just the game. So that's the outlook. If -- so we haven't suffered from panic selling by anyone. And that one could either say, well, actually, we had a great client base or you could say, well, there could be a risk further in the flow picture depending how you feel and more. David.

David McCann from Numis. First one, you mentioned LDI being a factor that drove some of the outflows. But obviously, when you break it down geographically, it looks like Asia Pacific is actually the main region, which isn't really where LDIs -- we're already talking about the U.K. there. So maybe you can just give a bit more color on what it was you were saying -- I'm presuming this is not directly unrelated because you don't do LDI, but more because LDI -- it depends on where you were on LDI, we're selling other assets, which you may have had some of -- so maybe just a bit more color there be useful. And obviously, given -- and second question, just given the obviously we're quarters out but you've given -- you said the foreseeable future, I mean, how long is the foreseeable future? And I mean you don't seem like the kind of operators that just kind of sit on your hands and do nothing. If the environment does stay difficult for a longer time, I mean, what do you do differently? Do you double down on particular bits of the business? Are there still things which are looking better than other parts?

David, you've listened carefully, you listened carefully to the words. Now that works -- and I'll start with that, the foreseeable future was carefully chosen. I didn't want to give an exact time frame because I don't know when the Fed will finish. I don't know when the politics will improve. I don't know how many countries are going to blow up between now and then. I don't know how big the crypto scam is going to be -- so those are things. I don't know how the -- when the illiquid guys are starting to revalue the assets lower, I don't know what the level of selling is going to be. So those are all variables which will have an impact on this. What we will do in this business is we're preparing the business and have been doing so. If you -- I wrote a staff note in -- was it June, July to people saying, look guys, sort yourselves out, let's get the costs under control. Otherwise, we'll have to help you. So we're a firm of volunteers. Our people are sensible. They will look at an easily controllable costs. So that's not the problem. And I think we've got variable flex as Kim has explained to you. We'll use it to the extent we have to. The more challenging thing is if this thing goes on longer is what is the next response. The next response is to really focus on the areas where one can make a difference to the business and start deemphasizing what -- and there are not many of that in this business. It's very easy to take a badly managed business and run it through a down cycle because you could just cut a whole lot of excess costs. We don't have a lot. But what we can do is focus our efforts and be more clear and therefore, reduced diversification down the line and say, we'll do fewer things better with more focus and then come out with a better recoil after this. That is under discussion. I'm not going to go into detail. At year-end, you'll see a more clear articulation of that if the situation persists, but there's a very active conversation here. But I go back to what I said. First and foremost, we have a client base of GBP 132 billion to look after. They pay fees, they pay decent fees, our obligation to them is first. So what we won't do is just cut for the sake of meeting a near-term target, but we must consider organizational viability because otherwise, you won't attract and keep talent. I think there's actually a big opportunity here to both tighten in areas and actually expand the aggression in some growth opportunities and make sure that we capture that while others are inward looking. So that's probably what's going to happen in the beginning of -- throughout 2023. And the real answer then, David, you can then write either a positive or a negative report in 2024, saying, these guys did it, they're in really good shape or actually, they were just too passive and missed a few tricks. But the typical risk in these downturns, and we've seen that many times, is that you pull in your horns too much and then you don't capture the opportunity, others leave on the table. And actually, there are quite a few others around us who are busy. And I had a line in there if you listened carefully about this stratas. This is no time for distraction. So investment bankers aren't going to make a huge amount of fees out of us doing all sorts of deals, particularly chasing the marginal growth opportunities that may look compelling, but will not move the dial, but will eat up our capital, eat up our bandwidths, and eat up our valuable ability -- tie up our resources, which should be serving clients. So in a sense -- I quoted something to the Board the other day and they were asking me what about all the things you do -- so well, actually, you know what, it will be -- it's quite -- if you're one of the last of The Mohicans, to quote Sir Evelyn -- the late Sir Evelyn de Rothschild who actually maintained a very good investment bank business inspired of lots of corporate activity, you can do pretty well. And I think that's roughly our strategy. LDI, I just put into -- firstly, it [indiscernible] in the latter period of the 6 months. LDI really became an issue in the last sort of 1.5 months of the reporting period, we started feeling the stress and I can't remember when that mini budget was. It's not that long ago. It feels like a world ago. But quite clearly, we saw some panic selling, and there will be more panic selling or more derisking happening. Initially, it was panic to meet derivative requirements. Now as you work the 3.2 minus the Asia number, there's still a reasonable number in there. We don't have a huge U.K. institutional business, but we saw some flows, which, quite frankly, were driven by motivations other than asset allocation. There is still, as far as I know, and some of you will know more, I see some big banks in the room here who will know more. There's still some big books out there that need to rebalance that they've met their temporary liquidity requirements, but they may not be in the shape they want to be. And I also couldn't resist but putting it in because when it started, we were very clear. We don't go into a 10 basis point business where the reputational risk is the value of our entire business. We'll not implement this or other people strategies, that's for banks to do. We are active asset managers. And I think we feel a lot better on the risk management side than being involved and things like that. So that's maybe the other hint why I raised the LDI thing. We have no interest in that market. We will serve clients who have LDI but they will deal with the existing providers. And I expect many court cases and many disputes to come out of the experience we saw in September, and we will not be part of that.

It's Rahim Karim from Investec. Three questions, if I may. One, just to get some guidance perhaps on performance fees because they held up relatively well in the half. And then a question on the Africa business, I mean flows, as you highlighted, were particularly robust. Could you give us a sense of what was driving that? And obviously, there's some exchange kind of regulatory changes that are going on. Could you just help us understand how that plays out and whether there was an impact in the period.

The JSE changes?

Yes. And then third was just to get a sense of whether competitors are acting in an irrational way to try and protect flows from a pricing perspective and what you're perhaps seeing in that regard?

Let me -- I'll ask Kim to answer the performance fee question because we don't really know, but we can answer.

Yes. Well, I think the key point on the performance fees, I think it was higher than I think a lot of the consensus actually saw there. I think back in May, we did say that we would only see performance fees coming from relative not absolute performance, because there wasn't any. It is slightly higher. There was a one-off performance fee in those particular numbers. So we're guiding to being -- don't take the figure, multiply by 2 and assume that's what the performance fee is going to be for the year. It will actually -- there will be a performance fee in the second half of the year, but it will be down relative to what you saw in the first half.

And I think it's important to note that -- at a point when a fee crystallizes, sometimes your alpha looks great and a month or 2 later, the alpha backward doesn't look as great. This one was a sort of a slight positive surprise. But I do want to make you aware that absolute -- we may get even if we're in a flat market, we may get some of the absolute or cash plus benchmark start to deliver again. Remember, they were all off the table. That's one of the reasons why Kim cautioned.

They're cautioning you on the light side.

No-- and I'm saying this is both sides, but we -- for this period it's still low. But the part that hasn't fired is the absolute ones, and at some point they will come back. But performance fee is not big in our lot. So that's the first one. Then the Africa business, the reason why it's done well -- or South Africa, in particular, is because the Central Bank there was ahead of the curve. And they've been used to some kind of -- the kind of inflation we're panicking about in the U.K., they've been used to for years. So there wasn't this panic in the world. They're used to real interest rates. They had it all along. Assets were priced accordingly. And therefore, there wasn't in the savings market, the kind of panic -- I wouldn't call panic, but the kind of shock that we saw in the developed world. Neither was it a frontier market where you had major issues on the balance of payments or on the capital account. So it was just because commodities were doing quite well. I mean if you look at the contrast of the South African budget to sort of the U.K. budget, you'll see the difference, in spite of other issues in that society that may blind you. So the financial ecosystem is robust, healthy and stable. And that's why -- and we are a leader there, and therefore, -- but it's not a bull market by any means. It's a marginal positive flow. The JSE has gone through major changes and particularly as far as listed companies are retaining our discussion with the team is talk to -- we hope that we could synchronize with the rest of the world and not add small differentiations to what -- for example, one of the big requests we have is that we just all do go to the ISSB and we don't complicate our sustainability reporting. At the moment, the exchanges, regulators are all thinking -- they're thinking originally, maybe we should start thinking together, maybe it's a G20 thing. But right now, one of the cost areas in our industry is that the world is becoming multipolar, it is the -- it's not just Brexit. It's all over the world where regional regulators are doing their own thing. I mean, even in the U.S., you've got to understand the state in which you operate now, not just the federal system to know exactly what to do. And so there is a burden on cross-border businesses like ourselves, which is probably underestimated. And I think that was probably, Rahim, what was at the behind your question. But we have a very good relationship with the Johannesburg Stock Exchange, and we have a good engagement -- we're a large player in that market. We're pretty comfortable about how things are unfolding. What we don't see is a booming growth in the savings market relative to the rest of the world. In fact, we probably see -- we'll probably look for growth into the Americas or Asia. Is that -- those are all your questions, right?

Just on competitive pricing and...

Pricing. Kim, you sit on the pricing forum -- so it was pricing.

Just to see if there have been any kind of irrational behavior by competitors.

There are irrational guys out there. There are people going -- it's pricing to get business. We've seen that. We walk away if it's -- what we do, do though is we adjust for persistency. So in other words, really high-quality relationships that stay the course and don't rank your capacity for 3 years, deserve a better price than those who just rank your capacity for a limited -- so it's not just price, it's quality of price. But we have seen people willing to really work at extremely low fees. What we do is we walk away. And typically, the kind of clients we work with, and I've repeated that point. I've said it in the past, given that there's been such a big shift to passive, they actually have bigger, not smaller fee budgets. And most of them just come out of the room, having been dealing -- having dealt with private market operators who are multiples above us. So they're not that shocked by our prices. It's really moved on. They look at the quality. They want to understand what you're going to do for that price, and there's no doubt that everyone in the investment management business is doing more for the same fee. That's probably the bigger erosion rather than the fee level. You have to be more -- you have to be better.

Yes, [indiscernible] hits your cost basis, Yes.

Yes. And that's why our costs are less elastic or less flexible to the downside excluding variable remuneration than you think because the technology requirements that our clients have, the immediacy of looking into our portfolio is much higher in years gone by. Any more disagreements.

Even -- any questions at all?

Where are the questions from?

There are none. Are they going to give us hard questions in the one-on-one meetings there.

[Operator Instructions]

Phone us on our mobile here, if the chat function doesn't work. We've got that here. I think just one last point to the sell-side guys here in London. So a lot of our leading sell-side people. I think it's really important you understand this bet we have in our business. We think at our scale, the long-only business is a large market for us. And to an extent, related and ancillary alternatives business, which, in our case, is credit, okay? We want to build a proper positioning in credit in a world where duration is not necessarily going to be your friend, okay? We think at our scale of $150 billion or GBP 130 billion. We have ample opportunities if we're good enough. Without deploying capital, taking a little more volatility on the revenue stream or the earnings stream and sticking to it and gaining scale, as Kim showed you in her cost basis point cost chart over time is a rational and a sensible thing to do and becoming a haven for talent. I mean I didn't mention to you, but you'll know if you're in London, we hired 2 very significant, very well-known investors across to us because they wanted to be here, not because we went out there with mad recruitment ideas. And I think if we build that base carefully, solidly, we get back into the good times this business will do as well as it's ever done. And so we are not part of this very negative narrative on the industry. It's always been an industry where the losers got taken out. It's always been an industry where the winners won. You just got to try it, but the optionality -- or the odds are so stacked in favor to try that we think it's worth trying and not becoming capital-heavy by buying all sorts of businesses in ancillary areas in order to hope that we can manage them better than other people. And I think that's the key part of this model and what -- why are we comfortable about that? Because we've built the underlying diversity into our revenue streams we can live through regional hiccups as we've just seen in the U.K. or here some regions your mandates may not compete into us. So that's the message I just want to leave with you at half year stage. Let's talk detail at the full year, and I'm sure you're going to send a lot of questions to us, please do. Thank you very much. Thank you.