Pinnacle Investment Management Group Limited (PNI) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome. [Operator Instructions] I'd now like to hand the conference over to your first speaker today, Managing Director, Ian Macoun. Thank you. Please go ahead.

Good. Thanks, Tara. And welcome to everyone who joined us on the call this morning. Thank you for your time, and thank you for your interest in PNI. So this call is to discuss our results for the first half of the 2021 financial year. So we posted with the ASX last night our formal results announcement, our audit-reviewed financial statements, our Appendix 4D, and importantly, our investor presentation, quite a detailed investor presentation. So we'll be speaking to the presentation this morning or at least to parts of it. The colleagues with me on the call are Alan Watson, our Chairman; Andrew Chambers, Executive Director with particular responsibility for Institutional and International Distribution; Ramsin Jajoo, who leads our retail distribution function; and Dan Longan, our CFO. And besides finance and accounting functions, Dan is responsible for IT, middle office and back office, cyber, a range of other infrastructure functions. So you have 4 key executives and our chairman on the line. So as is customary for our results calls, I'll simply call out the main themes and highlights of our results, and I'll briefly elaborate a few aspects that we feel are particularly important for analysts and shareholders. The presentation is far too detailed for us to cover fully in a call of this duration. We make it this extensive to enable people to review as much detail as they wish in their own time. And of course, we'll go into more detail in one-on-one meetings with larger shareholders. We'll leave plenty of time for questions, which you're welcome to direct to any of the Pinnacle representatives on the call. As you can see on the agenda slides, and it's kind of obvious, in any event, there are sections where the relevant executive will be Andrew or Ramsin or Dan rather than me. I'd be very surprised, to be honest, if we don't get quite a lot of questions focused on our retail and institutional and international sales, they've been so strong, and I'm sure people will be very interested in what caused that and how sustainable it is. So to the presentation. Slide 1 is a disclaimer that is important, and we ask you to read at your leisure, please. Slide 2 is an agenda. Slide 3 is titled First Half 2021 Financial Year Themes. So this sets out our opinion of the major themes for the half. Now we recognize and we strongly believe that it's for our guests on this call, analysts and shareholders, to form their own opinions of our performance and the outcomes that we're delivering. And we always value feedback from you, by the way. But nevertheless, people do ask us for our view, our opinion on how things are traveling. And we're happy to do this to the best of our ability and in good faith. So you'll see here that our view of the themes this half is very upbeat and confident. We are indeed very proud of what's been achieved this half. But we will strive to always be objective and fully realistic when we're giving this opinion on our themes. This half's themes are quite different from our opinion of the theme just 6 months ago when we released our FY '20 full year results. At that time, we said we felt we delivered a solid financial outcome in the prevailing circumstances and that it was below our expectations at the start of the year. Our profit was higher than in the previous year, but not by as much as we would have expected in the absence of the COVID crisis and the market downturn. We spoke of lower inflows, both insto and retail, and our hope that the pipeline of flows that had not materialized, particularly in March and April of 2020, was deferred, not lost. Now happily, that proved to be the case, and we've experienced very strong inflows, both retail and insto, in the first half of the 2021 financial year. So our first half themes this year areas set out in Slide 3. Strong financial outcome, strong growth in funds under management and strong net inflows. I'll go into more detail on those inflows soon. Growth in the size and breadth of our affiliate base is delivering clear benefits to shareholders. We've built greater diversification across different asset classes and investment strategies. We have substantially enhanced our performance fee potential across a range of strategies and market conditions. The growing size and diversification by client type and domicile of our client base is enabling further some growth as well as resilience to any challenges within a particular client group. We've delivered continued strong investment performance, and we are entering the second half of the 2021 financial year with the business growing rapidly, ready to take advantage of opportunities that may materialize and prepared to react to any further external adversity, noting that we have responded very well to date to the COVID-19 crisis. So those are the themes as we see them for the half that we're reporting on. Slide 4 provides the financial highlights for the half year. Net profit after tax of $30.3 million, that's up 120% on the prior corresponding period. Basic EPS $0.175, up 116% on the PCP. Diluted EPS, $0.167, up 117% on the PCP. So our profits, our EPS have a little over doubled on the PCP. Our share of the net profit after tax from our affiliates was $31.8 million, up 80% on the PCP. This includes our share of performance fees earned by Pinnacle affiliates after tax of $11 million in the half. It also includes our share of Coolabah's net profit after tax from December 2019 when we acquired a 25% interest in Coolabah. Cash and principal investments stood at $51.4 million. And we've declared a fully franked interim dividend of $0.117 per share, payable on the 19th of March, and that is up 70% from the PCP. Now there are a couple of important footnotes that we should discuss. So we always net out the return on principal investments from our profit number. We sort of -- we don't think of that as part of our underlying profit. Footnote 1 does that. And excluding the principal returns, our NPAT is $29.5 million. It's still up 120% sort of rounded on the PCP. But the second footnote is important. It also adjusts for our share of affiliate performance fees post-tax. That's the $11 million that I mentioned earlier. Now if you eliminate all of that performance fee profit, then our after-tax profit is $18.5 million, up 39% on the PCP. So clearly, these performance fees, which were at a high level this half, are responsible for a lot of the profit increase on the PCP. So I would point out that the 39% increase is still a very healthy percentage increase. But we don't believe -- if you're seeking to determine what might be a normalized or a sustainable level of profit for this half, we don't believe that you should eliminate all of these performance fees because the performance fee potential of our affiliates is now large and very diversified, with 18 different strategies now having the potential to make a meaningful contribution to our profits. So this is a big issue, performance fees. We have a whole section devoted to that shortly. Slide 5 provides a little more detail on the financial results in table form. Slide 6 sets out the funds under management highlights. So the aggregate affiliates' funds under management rose to $70.5 billion. A number we're proud of, $70.5 billion, at the 31st of December. This was up $11.8 billion or 20% from the 30th of June, so over the 6 months, and up $8.9 billion or 14% on the 31st of December 2019, so a year earlier. Aggregate retail funds under management was $16.7 billion, up 28% on June on the 6 months and up 17% on the year. Equities markets rallied strongly during the period from their lows in January. Of the $11.8 billion increase in the 6-month period, increases due to market movements and investment performance was $6.3 billion, $1.7 billion of which was retail. And importantly, increases due to net inflows were $5.5 billion, a record $1.9 billion of which was retail. More detail on these very big inflow numbers in the next slide. We emphasize that we have an increasingly diverse client base with more than 190 institutional clients at the end of December, compared with only about 60 4.5 years ago before what we call the Pinnacle roll-up into the listed company. So on Slide 7, something we're very pleased about, our funds inflows for the half. So Slide 7, we are obviously delighted to have achieved our highest ever level of net inflows, both in aggregate and importantly, in retail inflows. So net inflows for the 6 months totaled a record $5.5 billion. This compares with $1 billion in the 6 months to the 30th of June and $2 billion in the 6 months to 31st of December for the PCP. Retail net inflows for the first half were a record, as I said, a record $1.9 billion, and this included no inflows from listed investment companies or listed investment trusts, which have helped lift our retail inflow numbers in past years. The $1.9 billion compares with just $19 million. So just a very tiny net inflow in the second half of FY '20, so the half immediately preceding, and it compares with $900 million of net inflows for retail in the PCP, $200 million of which was LICs and LITs. So this is an exceptionally strong result following the turbulence in the second half of last financial year. Now clearly, I think people are aware, Hyperion has been a very strong performer in retail, but there have also been significant inflow contributions from Coolabah, Firetrail, Metrics, ResCap and Solaris. Institutional net inflows for the half were $3.6 billion compared with $900 million in the second half of last financial year and $1.1 billion in the PCP. As we've previously indicated, a number of institution allocators deferred decision-making last half, given the widespread uncertainty. Happily, allocations have resumed in the half we're reporting on, and our institutional prospects remain strong. And these prospects are pleasingly from an increasingly diverse set of clients by geography and by client type. Now recognizing, as we always say, that institutional flows are lumpy, we are nevertheless encouraged by this inflow result for the half and for the prospects for coming months. You get the opportunity to ask Andrew Chambers about the insto prospects in a minute. Slide 8 sets out some further business highlights. In the interest of time, I won't go through these now. Slide 9 has some further detail on the financial outcome. Total affiliate revenues were -- have passed $200 million for the half, including $45 million in performance fees. And in the PCP, total affiliate revenues were $132 million, which is obviously large growth. Slide 10, Pinnacle Parent. I won't go through this. Revenues have grown 26% on the PCP, driven by the strong inflows in the half, which impact some distribution fees that we received. Now look, I think the rest of the financial slides are self-explanatory. I'll move to Slide 13, our response to the COVID-19 crisis. Now you'll see a quote there. We've said in previous presentations that we believe that the reputations and future success or otherwise of investment management companies are often determined by their behavior and performance during periods of crisis. So crises tend to define fund managers, and their capacity to resume growth, emerging from a crisis, depends on the strength of their capabilities with which they emerge from such crises. So how you can go forward depends on how you emerge from a crisis. So we are truly delighted with how our affiliates and Pinnacle people responded and coped with the crisis, truly delighted. Now this slide sets out the approach that we took. I won't go through it, but we have emerged from this crisis stronger than ever. I'd like to spend just a little time on the crucially important topic of performance fees. And we have 5 slides devoted to this topic. So may I highlight some of the points that we're seeking to make. On Slide 15, performance fees, repeatability and size, we want to emphasize that the potential aggregate performance fees are both sizable and repeatable each year. So in contrast to many fund managers who have only a small number of strategies subject to performance fees, therefore, it can be sort of a bit hit or miss, year by year. And we currently have 18 strategies and growing. So we, for some years, had a deliberate strategy to seek performance fee structures as an alternative to higher base fees. We just remind everyone, these performance fees are direct substitutes for base fees. And there are means of maximizing average annual revenue, especially in capacity constrained strategies where we're rationing our capacity, or in strategies in extremely high demand. They're also attractive to many clients because they further align client outcomes with our performance. So we had a healthy mixture of base-only fees and lower base plus performance fees. And this yields optimal overall business outcomes. So we have in the group ample consistent base fee revenues, right? We've got heaps of base fee revenues, but we believe that in maximizing average annual revenue by a diversified range of substantial performance fees as well, this gives you the best outcomes. And we are absolutely delighted with the mix that we have achieved of base and performance fees, and we've done this as a deliberate strategy. So whilst we recognize that it may be difficult to estimate, and I kind of apologize to the analysts and fund managers, we know it's difficult to estimate our performance fees. But nevertheless, we believe that a substantial quantum of performance fees should be included in revenue forecasts if we want to reflect realistic, even conservative expected outcomes. So I should say, we recognize this is counter to what sort of the perceptions and sort of you might say the conventional wisdom of some in the analyst community. And there's a belief that performance fees should somehow be valued less than base fees. But we believe that's not the right approach to performance fees in the case of Pinnacle because they're so diversified and they're becoming so large. So to Slide 16. These 2 graphs on this Slide 16 help, we think, to illustrate how we have seen very large growth in both the volume of funds under management and the number of investment strategies that yield performance fees. Top graph is FUM subject to performance fees, bottom graph is number of strategies that have the potential to deliver a meaningful contribution. So the number and diversity of strategies with significant performance fee potential continues to increase, improving the annual reliability of overall performance fee revenue. So we point out that the likelihood of performance fee success is not correlated to the level of the equity market. They are instead based on performance relative to individual hurdles. And the likelihood of performance fees is distinct between each of our individual strategies. So Slide 17 shows sort of the huge increases over the past 4.5 years in the size and the diversity of our strategies that yield performance fees. So Slide 17, I'll just let you take that in. It's graphically illustrated, that increase in size and diversity. On Slide 18, the amounts of performance fees delivered by our different affiliates over this period. I'm sure you can figure out who's who in the different colors. So to Slide 19. So we would urge you to please consider the factors set out on this slide when you're estimating future performance fees for Pinnacle. Our first point, the second half versus first half split, we point out that the potential and reliability of performance fees are logically greater in the second half than the first half each year. This is because 7 out of 18 strategies that currently have the potential to deliver significant performance fees crystallize only in the second half of each year. So that 11 out of 18 strategies have the potential to deliver significant performance fees in the first half, but all 18 have such potential in the second half. So that, although, of course, the range of possible outcomes remains large every half, it's by no means guaranteed that in any particular year, the second half will exceed the first half. Still, that bias is there. Palisade, ResCap, Metrics and Solaris have annual fees that crystallize on the 30th of June each year, only once a year in the second half. And the second half also includes some that are in what we call the sort of higher reliability category, like Palisade and Metrics. Higher reliability in the current environment, that is, and you can form your own view about that likelihood of achieving those performance fees. So secondly, the size of performance fees, and that depends on 3 main factors: firstly, the size or volume of FUM with performance fee potential. We've got 18 strategies at the moment that can deliver meaningful fees. Now slide 40 elaborates this. Secondly, the size of alpha, which is the outperformance of the affiliate versus their benchmark or their hurdle; and thirdly, the extent to which a strategy is currently at or below the high-water mark. And the diversity of strategies greatly enhances reliability year by year. And the variety of strategies with performance fee potential is now large and growing. And the performance fees of virtually every strategy are uncorrelated with every other strategy because they're derived from independent alpha sources. So -- and then look finally and very importantly, the last point, funds under management subject to performance fees are expected to grow. When you look at the points under there, Hyperion Global, ResCap retail, for example, are experiencing strong growth. We'll have growth in a number of affiliates, Aikya, Longwave and Reminiscent, new affiliates. New strategies in Firetrail, Spheria Global, Solaris Australian Equity Income, a few examples. And we have very large capacities in Antipodes; in both the credit affiliates, Metrics and Coolabah, very large additional capacity that hasn't yet seen performance fees. And a couple of large FUM capacities, Antipodes and Firetrail High Conviction, are yet to regain their high-water mark. So look, thanks, everyone, for bearing with me on the performance fee topic. I hope this section on the importance of performance fees in understanding Pinnacle's earnings potential was helpful and made sense to everybody. Now just quickly, I'm running out of time, some data that people look for in each of our reports. Our Slide 21 shows the historical growth of our FUM up until this 31st of December level of $70.5 billion. Note that retail flows have been increasing, even within this last half. It was $600 million for the first 3 months, so $200 million a month, and then $1.3 billion in the last 3 months. So that's averaging double the rate for that 3-month period. Now Andrew Chambers can elaborate that our institutional pipeline remains strong and diversified, with large inflows from both onshore and offshore. Slide 22, people look for. It shows the full detail by affiliate by 6-month period of the funds under management of all of our affiliates. Slide 23 is the classic 5-year and over long-term performance that we always produce. Pleasingly, 86% of our affiliates that have a track record -- of our affiliate strategies that have a 5-year track record or more have exceeded their benchmarks over the 5-year period. The next 2 slides show shorter-term performance, 1 year performance. Overall, our performance is good. There will always be a small number of affiliates which, for the time being, are underperforming for various reasons, which we can go into in the one-on-one meetings. Now the final section that I want to cover very briefly is titled Growth and Resilience. So I'll leave it to you all to review these slides at your leisure, but they seek to make a couple of very key points. So in our recent previous presentations, we've talked a lot about how we've been building resilience and robustness in the business. You'll recall that we talked about the diversification of our affiliates and strategies, the increased diversification of those, the increased diversification of our client base by type, by geography and so on, including offshore. You've heard us talking about the increased diversification of performance fee potential, which we've gone into in a lot of detail today. So we really hope that it's clear we've been very deliberately building robustness and resilience. But we've also had a deliberate strategy to, at the same time, build multiple sources of continual growth based on an extremely strong platform. Now the word platform is overused, but we believe we've built a platform with a reputation, a distribution capability, an infrastructure capability that lends itself to future major further growth. So just on Slide 28, we've summarized this. We believe that we have now provided clear evidence of the success of our execution of this strategy. Growth and resilience have been simultaneously delivered. And we have an exceptional platform in place to enable us to move ahead with sustained growth from a proven business model and a proven business philosophy. So we just say to you, the outcomes you're seeing now are not just an accident. We've had a very clear strategy that's got us to this point, and we believe that it can take us a long way further from this $70 billion thumbmark that we've reached. The following slides elaborate this. I'll refer you to Slide 32 in particular, which tries to explain what we mean by our platform for further growth. Now look, there's more information in the slide pack. We'll cover probably some of these in questions, especially about our institutional and retail distribution or in the one-on-one meetings, or please read this at your leisure. Can we now please move to questions? And thank you so much for bearing with my monologue.

[Operator Instructions] Our first question comes from Tim Lawson at Macquarie.

Just first question on the flows. Can you comment on the gross flows, just to understand on top, particularly in the institutional side?

Yes. So that will be a question for Andrew Chambers. I would just make the broad point, Tim, which I know you're very aware of, and others are as well, that our market is a constantly moving feast, and there's changes occurring constantly, which means you will always have outflows, often due to reasons beyond your control. So you need to be growing. If you're not growing, you're going backwards. So Chambers, would you like to take that question?

Sure. So the gross flows are substantially probably larger than, obviously, the net flows. The really big feature which impacts those gross flows, or rather moving back to a net number, is effectively client rebalancing rather than necessarily terminations going on within the business. So the first component is institutional investors, both here in Australia but also featured abroad as well, is that our institutional investors are becoming much more systematic about the way they add and trim to asset classes based on market returns. So they set a strategic target weight for every single asset class. And as particular asset classes rally or underperform, they now both add to those asset classes or they take money away from it based on the feature of the markets, and these are the components weigh to the excess returns delivered by the manager. So it's adding or trimming managers back to tighter weights based on their excess returns. Now we saw that case in the case of Hyperion, where they were trimming off their exceptional excess returns over and above their benchmarks back to strategic weights within portfolios. And on the market return side, we saw that in global REITs, where global REIT didn't rally to the same degree as other market sectors within global equities, and so you're seeing a lot of new money being put to work in that space. So the gross returns are substantially higher but often reflects a lot of you on the manager per se, but if you are on the asset class and also systematic target weights as well, that's a really strong feature which is becoming more pronounced, both domestically here but also with large institutional plan sponsors.

Okay. That's helpful. Can you maybe sort of link that commentary to how that's allowing you to sort of manage capacity where you may be constrained? And more generally, just the sort of the outlook given the channels of -- or geography of growth and the mix of retail versus insto?

Yes. So the observation that I'd make is we've built and continue to build a lot of talent density within our affiliates, distribution team and management team. So this places us in a very competitive position to partner with the winners in the Australian institutional consolidation race as asset owners attempt to both premiumize and also rationalize their active exposures in an environment where the herd of global asset management options are actually thinning. So if you're a high performing, for example, Australian equity manager, you have a lot more pricing power in the negotiation because there are a few options available to you in the market and the market is trying to embrace those best-performing managers. It also empowers a firm like ourselves to the degree we don't want to take on more capacity with a particular fund to recycle that capacity to its highest and its best use. So the optionality provided by our retail, institutional and international channels to repurpose capacity and sell it into different channels to improve the yield of the business is substantially improving. You saw a lot of that in Hyperion with a lot of the rebalancing which occurred as the institutional market was recycled into retail is probably the best example we have to describe exactly that.

And Tim, we have a very conscious policy when we're running out of capacity in a particular strategy, and we have a number of those. Like, we love our institutional clients. We will always work with them. But we recognize there's so much change in the institutional market, mergers and in-housing of investment management and so on. But we will, from time to time, get some capacity back from capacity-constrained strategies, and we love to take that capacity and sell it into the retail market, where, obviously, we get higher fees, and it's a diversification of our client base.

Okay. That's very helpful. Just maybe a question on the performance fee capability. I'm not sure whether you're willing to sort of discuss this. But if you were sort of thinking about it sort of through the cycle base fee equivalent that you think you're effectively -- I mean not giving up, probably not the right word, but what you're sort of trading off to get those performance fee -- that performance fee potential? What do you think it would equate to at a base fee level?

Yes. So Tim, we've deliberately decided not to give our sort of forecast of performance fees and so on. We thought we'd give you all the information and then that it's up to the judgment of investors and analysts such as yourselves to decide. But you're right. Whenever we agree a performance fee with a client, the base fee will be substantially lower than it would have been if it was base fee-only. Now we're only going to do that if our expectation is that on average, we would earn higher fees from the performance and the base fee together than we would have in a base fee-only situation. And I wouldn't put a number on it, but at least sort of 30% would be our expected higher fees. Now that won't be in every period, but on average, that's what we would expect. So you can look at the $23 billion of fund that we have subject to performance fees, go through that and say what's the normal base fee that would normally be charged if it was base fee-only on that strategy. And you can say, well, however much lower the base fee will be, and it's often substantially lower, but we always have a -- usually have a base fee as well. Add a margin to that base fee foregone, if you like, to get our expected average performance fees. So it's got to be material when you're talking $23 billion subject to performance fees. Our base fees have floated up. So base fees, excluding any performance fees, have floated up in recent times, notwithstanding the performance fee pressure that people talk about, because we've grown our retail FUM. And to be honest, our overseas FUM like-for-like is at higher fees than domestic insto. Our average base fee rate is floating up, but our performance fee potential is much larger on top of that.

Okay. That's very helpful. Just a couple of quick questions to finish for me. You called out the fact that there was obviously no LICs or LITs in terms of current conditions. But do you feel -- what are you looking forward for that? Obviously, you do have enough, again, on that on the retail side.

I think it's still fairly early days since the payment of commissions, if you like, on LICs -- on LIC IPOs was banned. So it remains to be seen on what sort of replaces that. The one thing I would say, we have a number of very large and successful LICs out there. And I would expect that we should be able to do top-up some of those. So this is like PL8, Plato Income, Metrics LICs and so on. But I'd say the jury is still out a little bit, to be honest. We're all furiously sort of merging our listed and unlisted or some of our listed and unlisted funds. Magellan have been very public about that. We're doing that to some extent as well. But my own view, and I'm not sure whether Ramsin would have a different view on this, but my own view is that it remains to be seen how that will all go going forward. We are very clear there's demand for listed. We're launching a Hyperion Global ETF because there's very strong demand for that. So listed won't go away. It will be growing as well as our unlisted, but it remains to be seen, Tim, I think. We've also -- I just sort of mentioned, our Palisade have launched into retail. So retail investors have wanted to get access to infrastructure. And they've offered a new retail fund that will be a couple of hundred million dollars. But that's in an unlisted form at this stage, but I think you'll see a lot of innovation in listed.

Yes. And then just last question for me. There's been a few sort of small changes in the ownership percentage of PNI in the affiliates. Probably not surprising, there's not that much movement at the moment. But just any comments on the outlook and the way those economics work?

Yes. So we put a lot of emphasis on succession and long-term planning for succession, and the bringing through of younger people and being ready for when a founder might be ready to retire. We've done that several times. So from time to time, the opportunity comes up for some equity to be available. And oftentimes, we will buy that. Now we're also -- we're very happy to sell it to emerging executives when the time is right. But sometimes, they feel they would be happy for us to keep some of that equity. So over time, as the value of executive equity goes up and we recycle, you need less percentage equity to have the same incentive impact for individuals. So it's quite possible that over time, our equity interest will float up. But we are very, very happy with the price we pay when we do that. And we'd love -- we'd always love to own some more of our affiliates, but we don't ever want to pressure the executives for us to take more. We love executives having lots of equity in affiliates because they're so incentivized to do a great job. And we all prosper together. But you'll see those percentages move around as that process continues, Tim. The other thing that could happen, several of our affiliates are looking to expand with some acquisition opportunities, so you could see us being a capital provider to an affiliate to buy something. And in that case, we'd be likely to buy extra equity in the affiliate and our equity percentage could go up. So we'll do that. We'll look at those opportunities as they make sense.

Our next question comes from Scott Murdoch from Morgans.

Ian, just a couple, if I can. Just firstly interested in the band of 6-or-so managers that are still early stage or loss-making. Are there any there which you can point to that are getting some traction, I guess, from the distribution side and close to sort of getting some flows?

Absolutely. Thanks, Scott. And I think people are aware that this is something we do a lot. We love building new affiliates because we think we get a fantastic return on the early cost to us. And we do have a range of those. To some extent, a couple of them have probably been held back by the COVID crisis. But still, we're very pleased with the way they're going. So I would call out Aikya, only very new, sort of less than a year old. We've got our early -- I think it's in the tables there, over $200 million of FUM already for them. They're -- that means they're away, that's very early, that's fabulous. Chambers' team have done a great job. The Aikya team are very well respected. So that's a new affiliate build that's away already. And Longwave has its early FUM already in and early ratings. And it's clearly on a trajectory to go very well. So -- and we've got other prospects for the Riparians and so on. So yes. As always, watch this space for our emerging, not-yet-profitable affiliates to get to that point of profitability.

Okay. And just a couple of questions around the flows. I guess the insto pipeline, you've stated that it remains strong. You've said that in the past and it's come through. So just understanding conversion timing is definitely unknown, but just interested in how that pipeline compares to previous periods. And if you can give us a little bit of a snapshot on the couple of funds that are attracting the most attention.

So Andrew Chambers is best to answer that.

Yes. So I'd certainly highlight that conversion times certainly, probably around April this year, have started to accelerate with stimulus in the markets. As mentioned before, a component of our pipeline was deferred and then now crystallized probably across the board. There's still a substantial component of that pipeline which is still yet to be realized. If you look at the sales pipeline, you look to be looking at a period around up to 3 years. And so there are things which we started 2 years ago which is still yet to crystallize in any shape or form. But the pipeline remains as strong as I've ever seen it as a business on the institutional side. We also have more institutional salespeople in different jurisdictions around the globe. So I would expect that number to also be larger. But we also have more affiliates as well adding to that. So my view is that we should continue to see sustained growth across the institutional book, both domestic but also international channels. The real feature of growth for our business has been the rise of our international business. If you look at our net flows over the last half, 50% of the flow came from Australia and 50% came from outside of Australia. If you look at our international FUM today, it's up 275% over the last 3 years. So over $6 billion across 28 countries outside Australia, top 5 being U.S., U.K., United Arab Emirates, New Zealand and South Africa as well. So with such a large contestable market, I think that we have reasonable confidence for our capacity to continue raising capital with global products with global investors, notwithstanding the challenges in the domestic institutional markets.

Andrew, I might just follow-up question on that offshore presence that you mentioned there because it's really interesting. Is the investment in offshore distribution, and I guess maybe for Ian, I guess, focus on affiliates that are located offshore? Is that largely done? Or is there -- are we going to see a lot more focus in offshore markets going forward?