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

Thank you for standing by, and welcome to PNI's FY 2023 Financial Results Teleconference. [Operator Instructions] I will now hand over to Managing Director, Mr. Ian Macoun. Please go ahead.

Thanks, Rachel, and welcome to everyone who's joined us on the call this morning. Thank you for your time. Thanks for your interest in PNI. As you've heard, this call is to discuss our results for the first half of the 2023 financial year. We posted with the ASX last night our formal results announcement, our interim financial report, including the audit-reviewed financial statements for the half, the Appendix 4D and our investor presentation. We'll be speaking to key parts of the presentation this morning. 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, Retail Distribution; and Dan Longan, our CFO. I'll call out the main themes and highlights of our results and also provide briefly some further context and elaborate on a few aspects that we feel are particularly important for us to explain to analysts and shareholders. We'll leave plenty of time for questions, which you're welcome to direct to any of the representatives on the call. Slide 2 is a disclaimer that is important and we would ask you to read this at your leisure. Slide 3 is an agenda. Slide 5 is a summary of our themes for the first half of the 2023 financial year as we see them. As we've said many times, we recognize that it is for our guests on this call, analysts and shareholders to form their own opinions on our performance and the outcomes we are delivering as well as our future prospects. But people ask us for our view, our opinion on how things are traveling, particularly given the market and industry context in the period under review and we're happy to do this to the best of our abilities. Core revenues, that is revenues other than performance fee revenues, have been resilient in difficult market conditions. Our earnings have certainly been impacted by the cost of Horizon 2 investment in both Pinnacle and the Affiliates as investment for future growth continues. We believe this is money very well spent and will deliver very high returns over time, but this does retard our profits in the short-term and feel particularly impactful in an environment when revenues haven't grown. During the first half of FY '23, particular market and style shifts have significantly impacted our funds under management in certain areas. The quality and diversity of our funds under management has mitigated the downside from volatile markets and from some dynamic fund flows, including the rotation from growth to more value-oriented strategies and pressure on the REIT sector during the half. We've experienced continuing success in offshore markets and in alternative strategies and these trends are ongoing. And particularly in the Australian market and in listed equities, we experienced challenging conditions for generating new business during the half. Slide 6 and 7 elaborate these themes. You see the heading, first half FY '23, difficult conditions, diversification delivering resilience and ongoing investment for future growth. Core revenues, excluding performance fees, were resilient. The cycling of outflows to higher fee rate business that we called out in our full year results 6 months ago, have continued to be evident through H1 FY '23. Revenues, excluding performance fees, was 0.6% lower than the prior comparable period despite average funds under management being 8% lower. Some revenues have not come through fully at the rates initially expected. We believe this is at least in part a short-term timing, H1 versus H2 seasonality issue, especially with metrics. And of course, Hyperion and Res Cap revenues are lower than we had expected. The key point here, I think, is that it was market movements rather than outflows that held back base revenue growth. We'll talk about performance fees in more detail shortly in Slide 14. Performance fees were surprisingly low this half. But this is a short-term phenomenon and we have every confidence in the quality of our Affiliates and their ability to perform over time. Their long-term records speak for themselves with 85% of strategies having outperformed their benchmarks over the past 5 years. Point 2, our earnings have been impacted by the higher cost base in both Pinnacle and the Affiliates as Horizon 2 investment for future growth continues. Pinnacle and Affiliates have continued to invest. This will drive strategic growth over the medium-term. However, it moderates our profits in the short-term. We estimate that about $6.5 million represented the impact on Pinnacle for our share after tax of the Horizon 2 investment by both the parent and the Affiliates in first half FY '23. These initiatives, as I said, create additional capacity and provide medium-term growth opportunities. As we've stated, we make no apology for incurring these costs. We believe strongly that they will produce very high returns in the future and we have a strong track record of delivering on this. Point 3, during the first half FY '23, market and style shifts significantly impacted funds under management in certain areas. Style shift away from high-growth stocks continue to impact up to 31st of December '22. There have been signs of a reversal during January. It is early days and we'll see what unfolds during the coming months. REIT markets also underperformed major equity markets in the half. This has also reversed during January, but again, it is early days. While most equity markets, but not global growth stocks or REITs, ended the half slightly up, there was significant volatility throughout. You'd recall that when we updated for the September quarter, market movements had detracted a couple of billion dollars of FUM and we lost some revenue as a result of that. Continuing the themes on Slide 7, point 4, the quality and diversity of our funds under management has mitigated the downside from volatile markets and from some dynamic fund flows. Affiliate quality, asset class diversity, style diversity and continuous product innovation ensures that we retain all weather relevance to investors and their preferences and the market conditions they operate -- oh, sorry, as their preferences and the market conditions they operate in change over time. This has helped us during the half and will be an ongoing theme. We've enjoyed continuing success in offshore markets and in alternative strategies. We had $650 million of net inflows from 17 countries outside of Australia, despite investors across the board remaining defensively positioned. We raised nearly $2 billion in net inflows from all markets into global equities, global emerging markets and private credit. Particularly in the Australian market and particularly in listed equities, we are confronted with challenging conditions for generating new business during the half. Whilst domestic institutional flows were negative, the market mix improved during the half. Our largest institutional inflows were in the private credit and global equities. Our largest inflows were from Australian equities and global REITs -- sorry, our largest outflows were from Australian equities and global REITs. Domestic retail flows were still net positive, but net inflows were much lower than FY '21 and the first half of FY '22. It feels like retail market conditions have been similar to those we experienced in the second half of the 2020 financial year. So clearly, market and industry conditions have been very subdued during the half year period under review. In fact, it's been a continuation of the conditions prevailed through the second half of last financial year. So we've now ensured them for a little over a year, following the stellar 2021 financial year, which itself was a recovery year from the 2020 pandemic-depressed market conditions. Slide 8 summarizes the financial highlights. Pinnacle is not immune to market factors, but our increasingly diversified platform provides resilience and will drive growth throughout the cycle. So starting with the right-hand side. Net profit after tax was $30.5 million for the half, down 24% on the PCP, which was the first half of the '22 financial year. Diluted earnings per share was $0.156, down 26% on the PCP. Dividend per share was $0.156, down 11% on $0.175 in the PCP. The dividend payout ratio was 100% of diluted EPS and of course, franking was 100% as usual. Back to the left-hand side, Aggregate Affiliate Funds Under Management was $83.2 billion at 31st of December, down 1% on 30th of June. Aggregate Retail Funds Under Management was $20.8 billion at 31st of December, down 1% on 6 months earlier. Aggregate Affiliates performance fees was $29.3 billion, down 3% on 6 months earlier. Aggregate Affiliate revenue was $223.6 million, down 7% on the PCP. Aggregate Affiliate base fees were $220 million, down 1% on the PCP and Aggregate Affiliate performance fees were $3.2 million for our share -- sorry, $3.2 million, down 83% on the PCP. Our share was $0.9 billion. Obviously, yes, $1 million. Obviously, this surprisingly low level of performance fees were the main reason for the overall revenue being lower during the year. And this, together with the highest costs, including Horizon 2 investment cost was the main reason for the lower profit. 31st of December, we had $15 million of cash and $164.1 million of principal investments. In terms of fund flows, retail net inflows were $300 million for the half. International net inflows were $700 million and domestic institutional had net outflows of $2.5 billion for overall net outflows of $1.5 billion for the half. And 85% of our strategies outperformed their benchmark for the 5 years to 31st of December. Now the bottom right-hand corner shows the performance of the relevant markets over the half, especially call out the Nasdaq, down 5.1% and the NAREIT market that were both particularly relevant to us with Hyperion and Res Cap and so on. Slide 9 is a reminder of the range of Affiliates that now comprise our platform together with a few highlights of examples of developments during the half. We're very happy with the progress that [ Great Dane ] is making with Langdon in Canada. Palisade's expansion is continuing with good progress with Palisade Impact, Palisade Real Assets, Palisade Americas and additional assets into the main Australian diversified infrastructure strategy. Metrics is making very good progress. There are other -- many other examples that we could have included. Slide 10 shows the growth of our NPAT and EPS since we became listed Pinnacle. We remind shareholders that it is the strength of our platform and the high-quality award-winning investment Affiliates that are the basis of us generating material earnings growth for our shareholders over time. This is something we need to remind ourselves of as we review this period where unusually we have experienced a situation where we've delivered lower earnings than in the PCP. The fundamental reasons for our growth to date have not changed. Our company is in very good shape to resume strong growth, particularly when markets improve. Nothing has fundamentally changed. We are the same company with the same strengths and competitive advantages that has delivered strong earnings growth since our inception. Slide 11 elaborates this theme of our track record of earnings growth throughout market cycles. Pinnacle Affiliate revenues are linked in part to movements in equity markets, during the half market and style shift have significantly impacted our funds under management and therefore, revenues in certain areas. Pinnacle has pursued a deliberate strategy of diversification, incubating new affiliates and strategies, enhanced by careful acquisitive growth into new asset classes and markets. This has allowed us to deliver continued growth in profitability throughout market cycles, albeit at lower rates during periods of market downturn or turbulence. Growth in funds under management and profitability were suppressed in the 2020 financial year and again during calendar 2022 due to the dislocation in equity markets. But Pinnacle has grown strongly on average over the 3-year period to the 31st of December, 2022, which encompasses both the COVID-19 crisis period and the market regime change and sell off during 2022. We've delivered an NPAT compound annual earnings growth rate of 25% over the 3-year period to 31st of December '22. Diluted EPS compound annual growth rate was 21% over the 3-year period and fund CAGR was 11% over the 3-year period. And here is our conclusion again, in case you missed it a minute ago. Since listing as a pure-play funds management business in 2016, Pinnacle has delivered strong profit growth. Whilst we make no prediction for what lies ahead, we are confident that we have the platform in place to deliver continuing earnings growth over the medium-term. Slide 12 shows some detail on the 5-year investment performance versus benchmarks. The raw numbers are in Slide 51. And Slide 52 and 53 show performance over a range of time frames from 1 year to since inception. Slide 13 shows our funds under management history. Funds under management have grown a compound annual growth rate of 22.4% per annum over the last 10 years, excluding acquired FUM, it was 20.7% per annum. Slide 14 addresses performance fees. This is always an important topic when considering our company's performance and future prospects, but particularly so this half given the surprisingly low amount of performance fees earned during the half. We say surprisingly because the probability of such a small amount of performance fees being delivered, even in the first half of a financial year, we know that second half is biased to be stronger than the first half, but even in the first half, the probability of such a low number should be very low. Only 6 of 15 strategies delivered performance fees during the half and this didn't include the strategies with the larger funds under management. Being based purely on alpha, performance fees on the 15 strategies should be independent of each other and of market levels. There may, however, be some common threads during this particular period, which was an unusual one in markets with the emergence of inflation after such a long absence and the resulting monetary policy regime change that has been so disruptive to markets. Perhaps this is a topic for discussion in our one-on-one meetings. We do remain confident of the prospect of large performance fees in the future and we make several relevant points in the notes beside the graph on this slide. The volume of fund with performance fee potential has increased substantially in recent years. The number and diversity of strategies with significant performance fee potential has increased in recent years, improving the annual reliability of overall performance fee revenue. The likelihood of performance fees success is generally not correlated with equity markets. It's based on performance [ relative ] to individual hurdles. The likelihood of performance fees is distinct between individual strategies. However, performance relative to benchmark can vary significantly over even particularly short periods of time and we felt it the worst over this past year that we've just been through. Several strategies, which had the potential to produce performance fees during the first half outperform their benchmarks, but earned nil or lower performance fees as they ended the period behind the relevant high watermarks. Of the now 22 strategies that have the potential to deliver significant performance fees, 15 crystallized at least half yearly with all 22 crystallizing on at least an annual basis. The performance fees crystallizing only in June each year include Metrics and Palisade. Of the 22 strategies that have the potential to deliver performance fees in the second half, 8 at their high watermarks now and a further 4 are within 2% alpha of earning performance fees. Slide 15 shows the progress we've made over the past 6.5 years in diversifying our business, both by asset class and performance fee FUM. This has enhanced the resilience of our core earnings. And as I said earlier, we plan to continue to diversify further in the future. Slide 16 updates for our most recent industry award wins. We win many awards year-after-year and these are commercially valuable for us. Slide 18 provides some further detail on the composition of our first half financial results. I'll leave it to you to review this in detail at your leisure. I've already called out the highlights. Slide 19 elaborates further. There has been continuing improvement in the average base fee rates and client diversity. We emphasized that Horizon 2 investment in growth initiatives moderate profits in the short-term, but will drive strategic growth through the cycle. Some examples are listed here in the bottom right-hand corner of the slide, these are real and they are large. They have a substantial negative impact now that will have a large positive impact on profit in future years. Key balance sheet items are listed on Slide 20, cash and principal investments of $179.1 million includes $140.2 million invested in strategies managed by Pinnacle Affiliates. The CBA facility of $120 million is fully drawn and deployed into liquid funds managed by Affiliates until required. So we have $120 million of dry powder for future opportunities. Section 3 covers the Institutional and International markets. On Slide 22, as indicated earlier, institutions have accumulated higher cash holdings and continue to rebalance away from public equities, both Australian and global. Private credit is seen as appealing. I'll leave the rest of Section 3 for questions for Andrew Chambers. Section 4, the Retail Market, again, as I indicated earlier, in the half year period under review as well as in the previous half, so all of calendar '22, conditions have been poor for flows for the entire retail funds management industry. Investor confidence has been very low with CF being the dominant sentiment. World stock markets fell, the economic and monetary policy regime change as inflation became a concern, together with geopolitics, the Ukraine war, et cetera. Slides 26 to 31 provide relative information on the retail market. Slide 33, I won't say a lot about Section 5 growth agenda, except to emphasize that nothing has changed in terms of our ambition and strategies and plans to continue to grow by way of all 3 Horizons. We look forward to resuming Horizon 1 organic growth as soon as possible. It's true that we haven't commenced a stand-alone Horizon 2 new Affiliates since Langdon, which, by the way, is going very well. Perhaps this is partly because we've encouraged so many Horizon 2 initiatives within existing Affiliates, but we have also continued to look that have not unearthed any stand-alone opportunities that have been sufficiently compelling. We've continued to add distribution capabilities, likely to add, for example, in the U.S. soon. Slides 35 to 38 provides some further detail on Horizon 2. As I said, our ambition is undiminished. In relation to Horizon 3, again, our ambition remains undiminished, but we have had to show patience and discipline and resist the temptation and our inherent bias to get on the front foot and do things. We haven't undertaken another Horizon 3 investment since 5 V, which is also going very well, by the way, but that is not for the want of trying. And it's not that we haven't kept working. We've worked very hard on several opportunities, but in the end, we've not proceeded with any as yet. We are still looking, but also still prepared to be patient and disciplined if necessary. Section 6 provides some information on our corporate responsibility initiatives. I wish I had time to go through this in some detail, but I need to leave it to you to read yourselves. We're proud of the progress we have made on so many fronts, as outlined in these slides. Finally, my conclusion is on Slides 47 and 48. Slide 47 reminds us of Pinnacle's key differentiator and source of competitive advantage. It is extremely important, particularly when markets are tough and our industry experiences significant turmoil to remind ourselves of our DNA and how we differ from some other participants in our industry. The differences may seem subtle, but in truth, they are fundamental to our success to date and our prospects for ongoing success and growth. Slide 48 sums up Pinnacle's diverse Affiliate portfolio and extensive distribution channels provide robustness while fostering multiple strong growth opportunities. That is indeed what we seek a high growth from multiple sources agenda, whilst maintaining great robustness in tough times, such as the '22 calendar year. Thank you for listening for so long, over to questions.

[Operator Instructions] Your first question comes from Tim Lawson with Macquarie.

Just first on the base fee movement and your comment in a slide around to the timing some of the revenue. Can you maybe add some color on the sort of transactional component that base fee revenue and maybe the components that add into that?

Yes, sure. Thanks, Tim. As I mentioned, we were a little surprised that our revenues didn't grow more strongly. I mean, they were robust in the conditions, but we actually thought that'd be stronger. Metrics was a key element of that. I mentioned that some revenues, there's a bit of a H1 versus H2 issue, some of our Affiliates. And this is certainly the case of Metrics. They get stronger growth in, for example, upfront transaction fees in the second half rather than the first half. Also there was some delay that would definitely quite large fees that we expected in the first half that Murphy's Law, they've come in in January, not in the first half. So that had some impact. Also, we regard Hyperion and Res Cap as a sort of a temporary phenomenon in the last half. As I said, it's been substantially reversed in January, but it's early days.

Can you add a little color in terms of the movement and the growth you've seen in that base [indiscernible] sort of how much is coming from, say, the transaction side and how much transaction represents the total now?

Yes. So Dan might help us with this. But with Metrics, of course, their base fees are quite large, so performance fees, but the transaction fees really dominate. First of all, as their FUM -- as new FUM comes in and they deploy it, we get transaction fees on quite a large portion of it. And then also as their loans turn over, they do fairly frequently get more fees. And we didn't -- so we had large inflows sort of a year ago and they have not yet turned over. So they will come sort of some of it next half and a lot next year. Yes, so Dan.

What we'd just add to that, Tim. So unlike management fees, which are earned over time as soon as the final one transaction fee is the one -- first FUM during [indiscernible] and then each time the capital is recycled. So whilst there can be some uncertainty as being that timing when the revenues are booked. And then the effect has definitely become more pronounced in recent times with the large increases in FUM that generate these fees. And we'll just point out that that capital, however, is recycled regularly and reliably. So the revenue is of high quality, they just can be slightly uncertain as to when exactly they arrive.

So that all falls to the bottom line. I mean, obviously, Metrics have also increased their cost substantially last year in this half. Those cost increases are large. That's Horizon 2, a lot of that and we encourage the Metrics are growing. They are adding capability, particularly in what they call Metrics Business Finance and so on. We're seeing the cost of that and not the revenue so far, but the revenues will come. As Dan said, it's not absolutely clear the timing of that. They will come. They'll come somewhat in the second half and then big time next year and the year after. And remember that we also get a share up in the Pinnacle parent of all of Metrics revenues. And that's all been delayed in this half.

A follow-on in terms of [indiscernible], in terms of how that sort of transaction component and how you earn that as Pinnacle is impacting your sort of total service fee line in the Pinnacle sort of P&L?

Correct. Correct. So every dollar of net revenue. Yes. So as Metrics revenue grows, so will that contribution to our top line. We get a defined percentage of every dollar of Metrics revenue.

Of course, and that's not impacted by the cost increases in revenue share and profit [Technical Difficulty].

Right, it's pure revenue share.

Okay. And just to -- sorry, Dan, did I cut you off?

No, no. We're just saying that you'll see that grow. You'll see that grow a lot.

Okay. So just 2 more questions, if I can. Just in terms of the flows, there's obviously you provide a net movement, but maybe sort of gross inflow and gross outflow might provide a bit of a more clear pick chart. So 2 questions in regard to that. So in terms of the sort of mandates won and lost to call that, can we sort of sort of fully funded? I mean, how far are we through that sort of cycling of domestic [indiscernible] and obviously been winning money elsewhere?

Yes. No, absolutely. So we mentioned at our full year results and then also at the quarterly update at your conference, Tim, at the end of September. So we had quite large sort of net flow mass, what have been quite large inflows and quite large outflows. And there's been -- they've been quite different, the inflows from the outflows. The inflows have been at higher fees than the outflows. Now we quantified that sort of from last year, that even though we had net outflows last year, the net -- the revenue on the net flows was substantially positive. And then through this half, the trend has been not quite as big, while the first quarter was quite large inflows and outflows. And even though there were net outflows, that had sort of not much impact. And then again, last quarter, I think the flows were not quite as large in the last quarter. Again, the impact was negligible. So this sort of -- the revenue growth not coming through in this half, it's not as a result of the flows. What happened was that we had some market took our FUM down somewhat. And that's what caused our revenue not to grow in the way that we were expecting. Now how far are we through that? It's hard to say. My feeling is that we're through quite a lot of that. But a fair bit of the obvious FUM we were going to lose from the Aussie insto market may well have gone. We just don't know. It's hard to predict. Andrew Chambers will talk about our confidence in our inflow pipeline. We don't have good visibility on Aussie insto outflows. But that trend has been pretty strong and quite attractive. But going forward, we'll take whatever good business is on offer to us and we don't target particular fee rates. But we thought it was important to point out the sort of fee and revenue impact of those flows because if you just looked at the raw net outflows, you'd have been misled on revenue.

Yes. And then just last question for me. In terms of the spend on Horizon 2, the commentary around that is very helpful. Can I ask just a question in regard to, is it fair to talk about any sort of maturity of those investments? Obviously, you brought it up at the last result and you're talking about it again today, but is there a sort of stage or lifecycle investment that some of those investments are closer to fruition versus where we were 6 months ago or more historically?

Yes. So they do vary. We've had some that have come in very quickly, some take longer. We sort of don't do Horizon 2 if we don't think we can get a return on it within 3 years. But these are at various stages. If you look at sort of Aikya is about to pop, Langdon will take longer. But a number of the initiatives within Affiliates, I mean, Metrics, there will be revenue coming in from their initiatives in the second half, but really it will be much bigger FY '24, FY '25. Similarly, things like 5 V, they're doing a lot. They've added -- they've probably doubled the number of people they've had on since we joined with them. And that will be a '24, '25 story, particularly '25. So yes, I know we ask you to be patient and we have to be patient ourselves. But the big story will be sort of '24 and '25 and beyond.

And to that as well, if I just might add. So Palisade impact with a $450 million raise out of the -- $250 million target rate, they haven't really drawn any of that capital yet to start deploying. It's not reflected in our flow numbers. But that -- deploy that capital will get reflected and obviously, that will have then produce a profitable revenue line, yes, profit line.

Your next question comes from Nick McGarrigle with Barrenjoey.

Just a comment or a question around the -- around -- just a question around the dividend. So you paid out 100% payout ratio in the first half. Is there anything to read into that in terms of confidence around the second half? Or is it more about having to execute on the M&A, so you're being diligent with your capital management?

Yes. So it's probably a bit of both, Nick. But the main logic that our Board applied was we are confident this level of performance fees is just very surprisingly low. And recognizing that paying out 100% felt still pretty conservative. But yes, if you want to call it some signaling of future confidence, that's absolutely correct. We think this is a trough in earnings with those performance fees. We're always mindful that -- we like to have dry powder. We like to keep cash, but we've also said that paying out dividends because we've got all the franking credits there is a discipline on ourselves. And if we want capital, we should ask the market for it, which we've already done to some extent a year ago.

And just obviously, the management margin comments that you made at the full year around the 20% run rate that had assumed a smoothing out of the Metrics origination fees, but it's fair to say that that's more skewed to the second half. And then even more so to given some of the things that slipped period into the second half. Is that right?

That's right, Nick. So we made that comment in good faith. We don't seek to mislead. There's no mileage in that. It's always a bit dangerous. So we made the comment. It was sort of an annualized revenue comment. And yes, we didn't really -- and look, with the benefit of a hindsight, I should have called out the H1, H2 fee. But yes, it was a sort of like a per annum comment. So the Metrics H1 and H2 thing has sort of come out and embarrassed us a little bit. Also, I think Hyperion and Res Cap, that surprised us a bit, that's held back our revenue. So our revenue growth hasn't been as strong as we were fully expecting. Markets have been what they've been. They went down, they've come back up, but growth and REITs have been particularly subdued. So we're a little bit embarrassed by that comment. It's still true and we look for recovery in those revenues.

But the transaction fees to that point with Metrics tend to cluster around 3 particular periods during the course of the year at the end of December, just before Easter. And then around June before the end of the financial year to give you further context. So there tends to be more in the second half than the first half. And then we had the additional thing that some that were expected in December trickled over into January.

And just when we look at the flows, we can work out roughly that Metrics had about $1.1 billion, I think outflows for the half year. Is it -- would those have all -- I think the rough ratio is about 40%, 45% have an origination element. Would those have had originations attached to them in the first half? Or is that again adding to that balance of originations that probably slip into the second?

So some did, but yes, there's a sizable chunk will be H2.

And I mean, just in terms of the profitability of Metrics because it is growing into a larger contributor to the group, can you give us a sense on some of the Horizon 2 investments that they're making, not just in asset management, but in other parts of the credit space?

Yes. So I think it's known that they've done some things with Payright. They've moved to a controlling stake in that. I think Andrew Lockhart has been clear that they are working hard to build a, call it, nonbank lender capability which will be large, what they call Metrics Business Finance will be large. It's sort of SME lending and so on, but they're moving into sort of adjacent areas. They have big plans and those plans are being executed. And that cost them quite a lot, which is good. We're happy with it. But we're talking quite large scale.

The other 2 components would be real estate equity to have a new funds coming to market during this particular half and also impact of sustainable finance initiatives. So both ethical as well as sustainable strategies for the market as well. So those have incurred additional resources and costs as well to the business expanding in those areas.

And the additional business lines that you're looking to get into, is that the expense and then obviously, the equity accounted losses from Payright, have they been included in that $6.5 million comment for Horizon 2 invested?

Yes. Yes. There's a lot of cost in there in Metrics. They're just expensive as we do. Now I can't assure you of every dollar of the accounting, Nick, but I know there's a lot of expense. People, legal costs, all sorts of things. It's quite large.

And If we put Metrics cost step up to the side because that was about $20 million in FY '22 and obviously be annualizing an increase into '23, were there any significant incremental investments made amongst other Affiliates in the first half?

Oh my goodness, it's ongoing. There -- we set out a few examples in that slide on Horizon 2. There's so many of them, Nick. It's like every one of our Affiliates has added people and are doing new and additional strategies sort of capitalizing on the standing in the market. And it was always to plan that Spheria would add global, Firetrail would add smalls and global, Antipodes are adding additional strategies. You can just go through them all, 5 V is adding.