Regal Partners Limited (RPL) Earnings Call Transcript & Summary

Welcome, everyone, to what is Regal Partners Limited's full year 2022 results. Very delighted to be here in front of you today. It's a great privilege to be managing money on behalf of our clients, and it's not something we take lightly. I'd like to start by introducing Ian Cameron to my left, he's the Group CFO, and Ian, as Ingrid said, Ian and I will be delivering the presentation today. So Regal Partners Limited aims to be the leading provider of alternative investment strategies across Australia and Asia. It's a business that formed through the merger with VGI early this year on June. And whilst it's a calendar year focused result, we're really going to emphasize the last 6 months to 31 December 2022 being the first 6 months of the merged group. I think there's a lot to be proud of in this transformative year. We have net flows of almost $700 million in the 6 months to December 2022, and our fund has grown to $5.2 billion as at 31 December, and we've started the year well with that growing at $5.4 billion. We've raised capital last year, a further $110 million added to the balance sheet. And it's not as it only provided further context around further capability on our balance sheet for further investment, but also increased the free flows. As I mentioned, we'll focus on the second half. So the actual normalized profit result for the half ended 31 December was $18.2 million. The statutory NPAT was $6.7 million, and Ian will take you through some of the differences between the statutory NPAT and why we focus on the normalized NPAT later in the presentation. We recognized $14.5 million of performance fees during the half, which I think was a strong outcome given the challenging market backdrop. The Board has announced a $0.04 fully franked dividend. And we have a robust balance sheet of over $200 million of investments and cash with no debt. So from an outlook perspective, we've had a strong start to the year, as I mentioned, with many of our funds up for the year. And we're targeting $1 billion of net flows for the 12 months to 30 June 2023, and explain more later why we have confidence to highlight that. So just to recap who we are, Regal Partners Limited, we have the scale of being of now $5.4 billion asset manager. We've got one of the largest asset management teams in Australia with over 45 investment professionals in staff across Australia, Singapore and New York. We hope to soon add to that through the acquisition of East Point Asset Management, which will ultimately be renamed under the Regal banner with staff in Hong Kong, which will be a great addition to our Asia capabilities. We're diversified across 4 key asset classes: Long-short equities, which we believe is a superior way to get equities exposure; private markets, which is encompassing our award-winning emerging company strategy led by Ben McCallum and Jessica Farr-Jones; real and natural assets, which is Kilter Rural's specialist capability in water, agricultural and ecosystem, together with Attunga's capability in carbon and energy; and finally, capital solutions in the area of business that increasingly is getting a lot of interest from our clients, both in resource royalties as well as private credit. We've got a growth-focused institutional platform. We're increasingly being approached by institutional investors looking to partner with us to grow there safely to achieve investment returns and partner with us through our investment strategies. We have a long track record of strong absolute returns and I think that, in part, has helped make the fundraising momentum that we've achieved that much easier, and that accelerating demand is occurring across a range of investment strategies. And finally, I believe we are the benchmark for alignment, not only with staff investments in our funds of approaching 15%, but also as staff are significant holders of RPL shares on the register. So through the merger with VGI no staff sold any shares. In fact, they entered into escrow agreements that extended for many years into the future. I'll turn now to focus on some of the business drivers, some of which we've started to explore and realize in the last 6 months. The first thing I'd highlight is that strong growth in funds under management. 33% growth in fund over the past 5.5 years, which really reflects strong investment performance. And undoubtedly, it's the investment performance, which is the primacy of our business. But secondly, accelerating net flows, and that's a great effort from our small but growing distribution and marketing team. And then finally, inorganic growth. So we're now diversified across 4 asset classes with additional asset classes within the alternative sphere likely in the future. Talking about net flows. Our net flows are accelerating, I think, because of 4 key factors. We have differentiated investment strategies. And so, therefore, we're talking to our clients about a product that they're not receiving elsewhere. We've got a long track record of demonstrating attractive absolute returns across a range of investment strategies and importantly, through a range of different market cycles. An increasingly challenging backdrop for investment returns from traditional portfolios of equities and bonds due to high equity valuation, higher interest rates and persistent higher inflation again, is bringing more of our clients to seek our alternative investment strategies as an alternate way to generate investment returns and reduce risk within their portfolio. And as I highlighted earlier, our small but growing team of distribution and marketing professionals are executing a strategic and client-led approach to distribution, not just in Australia but increasingly offshore. On the left-hand side of this chart, we highlight some of the longer-term investment strategies that have delivered, I think, very recognizable, strong risk-adjusted returns for many years through different market cycles. But what I wanted to highlight on the right-hand side was how we've continued to invest in new teams that therefore, capabilities and investment strategies and indeed, over the last 3 years, we have launched 7 new strategies over the past 3 years, typically seeded by the Regal balance sheet. And we now have over $1 billion of funds across those seven strategies. They range from our award-winning tactical opportunities fund and emerging company strategy through to the resources, long-short fund, the healthcare long short fund, a Attunga carbon fund, the resource royalty fund and our most recent fund, the Regal private credit opportunities fund, which as we highlighted back in January, we're very pleased to announce a prominent family offers committing over $200 million to that fund with an option for a further $100 million over the years ahead. Just unpacking the business one step further around our various pillars. So within long-short equities, it's always nice to receive some external recognition of the performance of our funds. And indeed, HFM Asia Performance Awards last year recognized the performance of our tactical opportunities fund and our market-neutral strategy. That was further backed up by us winning a large institutional mandate from a large Australian superannuation fund, and it's our largest mandate of that size that the firm has ever received. We completed the capital raise for RF1. And pleasingly, we integrated the VGI portfolio, and not just the portfolio, but the back office and risk management functions onto the Regal platform within the first 6 months. The real and natural assets category has been busy with work occurring at Kilter Rural. They have received not only their first institutional mandate, as I've previously highlighted, but that institutional U.S. investors doubled their investment with Kilter. Great testimony to the work that they're doing within the water space within Australia. Pleasingly, we've been able to invest in a dedicated head of distribution for Kilter, and we expect that, combined with the work we've done to get 2 Zenith ratings on their water funds, will lead to increased flows across their business in years ahead. And finally, I'd highlight that they made, during the year, the largest private donation of water to the environment in Australia by their award-winning Murray-Darling Balanced Water Fund, which is a joint venture they run with the U.S.-based nature conservancy. It's a very unique fund that is delivering both for the environment and investors. From a capital solutions perspective, as I've highlighted, we've got a lot of momentum within that space. We think it's an ideal backdrop to be launching private credit funds. And with the large family office commitment that we've got there, we've seen that we can accelerate the growth of that strategy. And we have set our sights on that fund being at least $400 million in size by the end of this calendar year. Two more slides before I pass to Ian and talk about the financials. I'd just like to sort of highlight again that we are very unique as an ASX-listed asset manager. We're unique across 3 key areas. Our fund is highly diversified across a range of investment strategies. And whilst 2/3 are in long-short equities, the momentum within the other asset categories is growing. Our investment strategies are skewed towards longer-term capital solutions that not only provides clients with an optimal portfolio construction because it allows the manager to take a longer-term view to generate better investment returns, but obviously, from a earnings perspective, it provides us with greater confidence as we project forward the earnings from the business. And thirdly, our client base is predominantly high net worth and family office clients, a cohort of clients that internationally and increasingly in Australia have been early adopters of alternative investment strategies. So talking about institutions and family offices, as I said, they've been early adopters of alternative investment strategies and very successful. You only have to look at the large U.S. endowments and indeed, our own future fund of the power and allocation [indiscernible] Have had to alternative investment strategies. However, retail investors have traditionally found it quite difficult to access. While we're sitting here today, Regal Partners now is managing over $1.7 billion in ASX-listed investment vehicles, providing retail investors with easy access to a range of Regal's alternative investment strategies. I'd highlight that whilst RF1, which we launched in 2019 has delivered a return of close to 20% since inception and is typically traded at or above its net asset value, since we've taken on responsibly for RG8, which is the Asian focused strategy in VG1, a global long-short strategy, their performance both in NAV and share price has [ start ] to improve. And we'd like to be able to demonstrate that, that discount to their net asset value is closed by the end of this calendar year. On that note, I'll pass to Ian who will now focus on our financials but drawing particular attention to our second half results.

Thanks, Brendan. Turning to Page 16, which shows our pro forma normalized profit and loss statement. What we're doing here is the statutory results are accounted for in the reverse acquisition accounting and don't represent the most accurate picture of our business. So we're normalizing the one-off costs and noncash items such as the contract asset amortization, as well as the accounting amortization on long-term variable remuneration. We've got average FUM for H2 of $5.1 billion. Now we're on the way up. We've got $5.4 billion at the end of January. That $5.4 billion excludes the announced acquisition of East Point Asset Management. It also excludes any unfunded commitments that we've announced previously. We've got average management fee percentage of 1.15%. That's on our total FUM. That equates to management fees of just under $30 million for H2. Performance fees of $14.5 million for H2, which we think is a strong result given the turbulent market conditions in H2. There were 2 key contributors to that number, which is the Regal Resources Fund and the Regal Resource Royalties Fund. There's a slight seasonality to our performance fee income weighted to 30 June relative to 31 December. Now if we just look to calendar year '21, that's a period where all of our funds earned performance fees as they're at high watermark, and shows total performance fees of $163 million. I think that shows the earnings power of the business when all of our products are doing well given that all of our products have a performance fee. We've got other income of just under $8 million, which includes the mark-to-market gains that we've made on our seed investments. The total net income for the half, $52 million. We've got employment benefits expense of $20 million. That's largely in line with H1. What's included in that number? That includes fixed staff costs such as salary and superannuation. It also includes variable remuneration, such as our bonus provision and the accounting amortization of our STI scheme. Other expenses of $8 million, it's down from just over $2 million from H1. Those savings have come from a few places, being the closure of our Japan office shortly after the merger between VGI Partners and Regal Funds Management; some savings in insurance costs, which tend to be weighted towards H1 as well as some savings in research subscriptions. The profit before income tax of $24.3 million and normalized NPAT for the half of $18.2 million. That includes the mark-to-market gains on seed investments. So cost income percentage of 53%. Turning to Slide 17, which is our balance sheet. We do have a robust and liquid balance sheet. No debt. At the end of the year, we had cash and cash equivalents of $40 million. Trade and other receivables of $23 million. That is largely management fees and performance fees for the month of December that we received in the month of January. We've got investments in financial assets of $174 million, which I'll talk to you shortly in a bit more detail. Contract assets are just under $34 million. That relates to the VG1 and RG8 IPO's offer costs, which we're amortizing over the life of the IMA contracts, which is 10 years. And we've got intangible assets of $184 million. That is largely made up of the goodwill that was recognized at the time of the merger between VGI Partners and Regal Funds Management under the reverse acquisition accounting. Just turning to the number of shares on issue. So we had a 1 to 5 [indiscernible] offer back in September, October, where we raised $110 million and issued 42 million shares, taking our total shares on issue to 253 million shares as of the end of the year. So the Board have declared a final dividend of $0.04 per share. That equates to 56% of our H2 normalized NPAT, so slightly above the stated dividend policy of 50%, franked to the maximum extent possible. The dividend will be paid on the 22nd of March, and it will also be subject to the DRP that we announced this morning. We've got surplus franking credits at 31 December at $31 million, which adjusts for any tax payable or receivable at year-end. And that equates to surplus franking credits of 6x our final dividend of $0.04 per share. Turning to Slide 18, which shows our seed capital. You can see there that we've put to work the proceeds that we've received in that [ common ] offer. We had $69 million of seed investments at 30 June. We've invested $96 million, which you'll be able to see in our cash flow statement. Investment performance of $8 million. That's the movement between balance sheet from 30 June and 31 December, such that at 31 December, we've got cash and investments of $214 million, which provides us a huge amount of flexibility to -- for our growth opportunities in distribution, marketing and technology and also anything organic growth opportunities that might come along. I'll now pass back to Brendan.

Thanks very much, Ian. Just 2 slides to finish before I turn to Q&A, and it's really to address, firstly, the organic opportunities we have about growing the business. I think we've previously said that the business today with $5.4 billion has the capacity to be managing at least $15 billion across our range of strategies. So how do we achieve that? Well, firstly, by focusing on that diversified, scalable and growing platform. We have no client with greater than 10% of our assets under management. We've got significant relationships with high net worth and family office investors and that's growing, and they represent over 50% of our FUM. Importantly, that proprietary platform that sits behind our long-short equities is being rolled out across a range of our asset classes. And as I mentioned, we've successfully onboarded VGI onto that platform as well, further enhancing both the scale but, also enhancing our risk management. I think we play with attractive tailwinds behind the products that we're selling. There's a growing allocation to alternatives as investors seek alpha in the years ahead or alternative sources of beta in the absence of the beta being provided by traditional assets. The business has strong economics with significant earnings leverage, as Ian highlighted. And finally, from our priorities for organic growth, it is really maintaining that fundraising momentum, continuing to seed in new strategies and partnerships and continue to invest in distribution, particularly when it relates to offshore distribution. We're increasingly building a pipeline, which we expect to convert over the coming months. Keep half an eye on those inorganic opportunities and attract and retain the best talent, the talent being the basis on which future investment returns will be delivered for our clients. But I'll finish by addressing what has been a -- I guess, a pretty topical environment when Regal Partners has been mentioned. And that is simply the inorganic growth opportunities and considerations. So firstly, a couple of considerations from our perspective. We believe that there's going to be further consolidation within the asset management industry. It's highly likely both domestically and offshore. And there are probably a range, but 3 main tailwinds as to why we believe that's to occur. Firstly, in the absence of investment returns being delivered by beta in the years ahead, I think traditional asset managers are increasingly seeking new avenues for growth. Secondly, the maturity of the first generations of boutiques that particularly exists in Australia and now looking to tap perhaps the generational change. And finally, smaller and independent asset managers are increasingly looking for a platform to enable them to scale and reach a broader cohort of investors. From that background, I think Regal is well placed to participate in these consolidation opportunities. We have a -- we're an institution-grade asset manager in the high-value alternative segment. We have significant and valuable relationships with high net worth and family offices throughout Australia and starting institutionally offshore. We've got a strong balance sheet with significant firepower to be able to consider a range of inorganic opportunities. And finally, we've already taken significant investment in our operational risk and distribution capability that will allow us to grow to scale. So finally, the inorganic opportunities that we may be considering won't impact our existing runway within the group. The existing footprint has a long runway to grow. And any inorganic opportunity needs to be complementary, both from a business perspective, meaning our distribution capability, our existing platform, but importantly, diversifying our earnings as well. And finally, as significant investors in the RPL stock, we'll be very disciplined. So I'll pause there for Q&A.

Hey. I'd just like to jump in there and remind people how to ask questions. [Operator Instructions] And we also have people in the room. So I might just start with a question that's coming online, first of all, if that's okay? So Brendan, you mentioned you were talking about a target of $1 billion of flow for the year to June 2023. What gives you confidence in reaching that target?

Yes. Let's go back to Slide 10 on the presentation. Thank you. So we set ourselves the sights of $1 billion net flow at the beginning of this financial year. And pleasingly, we've achieved $694 million of flows in the half so far. If you actually exclude some of the outflows from the VGI mandates and master fund, we've actually achieved over $0.75 billion in the 6-month period. I think the thing that gives us confidence to see that the $1 billion of net flows will be achieved is really represented by the pipeline of opportunities we see domestically in offshore. Domestically, that's centered around private credit and the fact that the team has not only the capital committed, but a pipeline of over $400 million worth of assets that they see in front of them, which I think we can confidently say that, let's say, $100 million of that will be invested. I think we can sort of see a good pipeline of opportunity within our real natural assets, both through Attunga and Kilter. And importantly, from an offshore distribution perspective as we seek to launch the Cayman Islands version of our resources fund, we've got a growing pipeline of institutional clients offshore that are queuing up to access that. And so we're very confident that, that $1 billion of net flows can be achieved across our existing product set before we consider any inorganic growth.

Okay. And I guess a semi-related question is in terms of the opportunity in private credit that just launched. Can you just give us a bit more of an update in terms of how that's tracking?

Yes, certainly. So we seeded that fund with $50 million of balance sheet money ourselves, and they're off to a flying start. I'll just highlight a slide here, on Slide 6 of the pack. So there are now close to $90 million or just over $90 million worth of assets within that fund. It's diversified across those 3 pillars of loans that sponsor that companies, directly originated bilateral lending opportunities and opportunistic lending. They're broadly equally weighted. And we're generating a return of over 10% per annum to investors in that. I think that's an attractive risk-adjusted return in the current environment. And indeed, I think for the decade ahead, it's likely that we'll see strong risk-adjusted returns from that product. And so, we're increasingly seeing client interest in that strategy.

And turning to a little bit of inorganic activity. There's another question that's come through regarding the recent East Point acquisition. It is relatively small, but it sounds quite interesting in terms of the team and what it brings to the firm. Can you expand on that a bit further?

Yes. Thank you. It's a relatively small transaction from a purchase price perspective and assets under management. But importantly, I think it adds significant capability to our already sizable Asian experience. So you may recall that with the merger with VGI, we're able to close the Japanese office that VGI had and relocate that capability from the fundamental research perspective really to our Singapore office. Now with the East Point acquisition, we're inheriting a team of further 5 investment professionals who are based in Hong Kong, but travel across to Mainland China regularly. So having actually boots on the ground in the world's second biggest economy, I think, will be a great addition to the fundamental research categories we've had. And whilst Asia has generally been a challenging environment for the last 2 to 3 years, we don't believe that will sustain. And as I said, the ability to be able to have boots on the ground up in Asia, seeing what's happening will provide us a distinct advantage as we seek to generate alpha for our clients.

On the topic of the [indiscernible] . So not an RG8 briefing, but we will, I guess, touch on these briefly, if that's okay? So firstly, we had -- somebody just asking about, you hope to eliminate the discount, the RG8 and VG1 trader. And so they are asking what is the plan if they're still trading at more than 10% discount at the end of this year, for example?

Yes, great question. So I think our credibility around answering this in many respects has been built around the success of RF1. And I'll be the first to say that the first part of our closing any discount on any listed vested vehicle is performance. And I think the team has delivered a strong result in delivering performance across RF1, and therefore, it's that same laser focus on performance that will actually drive us to sort of generate strong returns going forward in RG8 and VG1. But we also supplement that with a very active and periodic communication program. And I think we've been well versed from the RF1 perspective, which apply a similar discipline around communicating to clients around RG8 and VG1, and that has started, and we've got road shows for those vehicles coming up. But thirdly, under the banner of Capital Management, and that's really twofold. One is a very active buyback program that provides an opportunity for exiting investors to get out with some liquidity but importantly, for those continuing investors, which include staff and the Regal Partners' balance sheet, it's very accretive for us to be buying stock back at this level. And the second part of that capital management is being very clear with investors the distribution or the dividend that they can expect to receive going forward. So we've walked back from a yield guidance on the product to more a consistent level of dividends coming out of those vehicles each half. It's early days, but I think there are some positive signs as to how that's going.

And just one related question again. In terms of RG8, we had the transition of the portfolio management to fill Regal Funds Management. There have been some changes in sales perhaps some people have been suggesting in terms of the portfolio. Could you comment in terms of generally client feedback on the change in the team behind [indiscernible]?

Yes. Well, firstly, the strategy of the fund has remained the same. So whilst we've changed who's responsible for it, and that would move from -- or to Phil King and our broader fundamental Asian team, supplemented by executives from VGI. We're very much focused on bringing the Regal Funds Management approach to that portfolio. That means that we will tend to be a little bit more nimble at times around some of our positions. But importantly, we're pragmatic enough to be able to sort of see where there are opportunities in more Australian-centric companies, we'll invest there. Where there are opportunities in more Asia-centric, we'll invest there. And so, it's the ability to be able to identify those opportunities, whether they be Australian-based or Asia and execute that, taking advantage of the broader relationships that the Regal franchise has.

We've actually got a question on the phone. Operator, could you go to the first person, on the queue, please?

Your first question comes from Nick McGarrigle from Barrenjoey.

Just one around the way you balance potential further institutional allocations versus capacity. I presume a lot of the strategies or some of the strategies are capacity constrained and performance benefits from running a lower capacity, but how do you balance that versus institutions that you might want to allocate?

Yes, good question. I think it's a horses for courses approach. And what I mean by that is some strategies with significant capacity, such as our Australian long-short equity strategy, we welcome the addition of that large institutional superannuation fund. So whilst that came in at a lower average management fee, we're able to negotiate a higher performance fee on that investment. I think a different approach is applied to our more specialist health care and resources strategies, for example, where whilst we've seeded that strategy in Australia and being able to demonstrate the capability performance-wise, increasingly, the capacity for that product is being reserved for offshore clients who judge the strategy on its merits and performance and they're less fee sensitive.

Do you have any further question, Nick?

Yes. Maybe just a question around you called out the full year calendar 2021, I think, $160 million plus of performance fees. Can -- maybe Ian's got the numbers to hand, but was that almost every fund producing strong absolute returns and contributing? Or was there a large single contributor, like the emerging companies fund that might have wound down one of its closed-end vehicles? Just trying to get a sense of what has to go right to get back to that level of performance?

Yes -- good question. So it was spread across all of our funds. So every single fund earned a performance fee in calendar year '21. All of our listed vehicles earned strong performance fees, being VG1, RG8 and RF1. So to answer your question, we're spread pretty evenly across our fund suite.

And I think last year, when you affected the merger, you gave some detail on positioning against high watermark. I think the -- probably the funds that were hitting the most below were things like RF1, the emerging companies, maybe the small companies in Atlantic. Can you just give us an update on high watermark tracking?

Yes. We've stayed away from actually giving explicit detail on the high watermarks. And I guess I'd emphasize the fact that as we diversify the business, it's been a great case study and the sort of success of being able to diversify the business. So as I've highlighted in the past, we don't know explicitly where those performances will come from over any 6-month period. But as we diversify the business, we've got confidence that we'll earn performance fees in each 6-month period.

Okay. We've got another question coming in online. So we'll take that one next, if that's okay? So the question from online is, please elaborate on how your staff, particularly analysts, have their interest aligned with that of the corporate employer?

Yes, great question. So the first thing would be that staff, the key, in my mind, to providing the investment returns that we've built the firm on. And so they're aligned around providing a competitive salary, a bonus that is typically linked to the investment performance generated for clients. And so think of that being performance fees. Where we earn performance fees, meaning that the investor has generated a attractive return. We're sharing a portion of that performance fee with staff. And then thirdly, they have alignment through shares in Regal Partners Limited. The performance fee-related bonus, I'd say, for a larger amount, the deferred over a period of 2 years as well. So we're not only rewarding staff, but seeking to sort of encourage them to think of that longer term in their behavior and investment style to generate investment performance through the cycle, not just in any one period.

I might just check. Are there any questions in the room?

Jonathon Higgins [indiscernible] from Shaw and Partners. We've got a couple. I'll ask the first one. [indiscernible] net flows target, you've given a target through to June, slightly more than, I think, $300 million in sort of [indiscernible]. You previously announced with the private credit strategy. I think you've got committed capital of that, circa $200 million. Can you talk about the phasing of that $200 million, what's sort of in that number and where we should sort of expect to be sort of bucketed at this stage?

Yes. As I said, I think there's a pipeline of over $400 million worth of assets that private credit team are looking at the moment. That's not probability weighted. So I think the ones that we'll ultimately end up doing is at least $100 million. So if you think about getting to that $1 billion from the $694 million now, I'd say that 1/3 of that difference comes from private credit conservatively before 30 June. I'm hoping that it's small, but I think we've got good line of sight to at least $100 million of that coming from product growth.

Just how much roughly around what you've announced on the bulk transition?

Sorry, what do you mean bulk transition?

So the $200 million that's been committed, of the target is sort of [indiscernible]?

I see. I see. So I think today, with a fund at about $90 million, that investor has about 30% of that, and I think that will quickly grow. They'll grow in that fund, pari passu with other investors as they're coming in, both third-party and RF1. RF1 will be, as previously announced, seeking to invest in the private credit strategy as well.

All right. Great. Just another one from us. You sort of mentioned in the accounts, the actual accounts is talking towards just the institutional flows that you're expecting to close before the June period. You also sort of called out around the Cayman strategies and offshore interest. Can you give us an update on when I think Regal Resources is launching the Cayman strategy and what that sort of institutional interest does look like, where it's coming from?

Yes, I'll get a bit of a nudge here from the corner of the room. But I think we're on track to launch the Cayman version of the resources fund in early April. I think there's a pipeline that's growing there of several hundred million U.S. dollars. It's possible that, that may be anchored by some institutional clients. It'd probably too premature to sort of say how much or who they are at this stage. But we've got confidence that, that pipeline will be converted. And they will invest progressively over time, but at least a portion of that invested before 30 June.

Yes. Maybe just on the option for a further $100 million from that [indiscernible] just maybe anything around [indiscernible] expiry or potential for that to come through [indiscernible].

I think pragmatically, just stepping back from the term sheet we've signed with this -- with the family office is whilst there's good opportunities that they're seeing, they would deploy the other $100 million. They see this, like ourselves, as a very attractive time to be putting capital work in private credit, and they're very motivated to actually get that to work.

And last one for me just around the potential for the new launches [indiscernible] traditional category. Sort of any color around what areas that would be potential timing [indiscernible]?

Yes, I won't give any away around timing, but suffice to say that we believe that being a leading provider of alternative investment strategy, there are other pillars within alternatives that we're not focused on at the moment or we don't have within our sort of kit bag. Infrastructure could be a good example. Private equity could be another example, even sort of fringe real estate could be another one. So too premature to give further color there. But think of the traditional sort of sources of alternative investment strategies, there are things that we've been looking at.

Apologies for hogging the microphone. Just 2 more for me just quickly, just on the seed investments. You've got sort of a significant amount of cash and investments on that. Can you talk about how you move them around over time?

Yes, that's a good question. So the first one, as we highlighted as part of our capital raise was part of the raise on [indiscernible] to the capital raise was actually to seed the private credit strategy. So no surprise. A large part of that capital raise went into private credit. But where we don't want to have a lazy balance sheet. So where we've got surplus cash, we'll deploy that into strategies that we think can provide attractive returns but are also liquid. So part of it, you'll see we put into long-short equities. That was principally around our long-short strategy, [indiscernible] long-short equity strategy and the small company strategy. Both of those strategies offer daily liquidity, and so we can quickly pivot that into other strategies as opportunities arise. But the raise on [indiscernible] again for that seed capital is really to seed new strategies to provide them a start in life that will then attract third-party capital as we start that and importantly, generate new fee streams for the business.

Last one from us. Just you talk towards an end of calendar year $400 million private credit sort of target, which is substantial amount in 12 months. With Regal resources, I mean, there's a fair amount of liquidity involved in resources in big market globally. Maybe you could talk towards just your ambitions for how big that fund could get over time?

Yes. The resource royalties is a very unique and differentiated strategy. Just to remind everyone, what you're doing there is you're earning a percentage of top line revenue and being revenue, you're getting exposure to both the commodity price as well as the volume generated in the production of that resource royalty. And so you're achieving all the good parts of the capital structure without being held back by the OpEx or CapEx. Those deals are typically bilaterally negotiated. It's not like there's a secondary market generally to actually purchase those deals. So they take a little bit longer to put together. But we'd like to see ourselves stretching the existing 3 deals that we've got in that strategy to maybe one per quarter. And I think we're increasingly seeing opportunities in the resources space to be able to put capital to work.

[indiscernible] maybe you can give some more color [indiscernible] opportunities [indiscernible]?

Yes. So it probably would be wrong of me to mention anyone specifically by name, but fair to say that we're keeping an eye on a number of asset managers, both listed and unlisted. What that means is really having a look at their business, understanding whether they're complementary to our business, understanding the valuation, understanding where there's a broader strategic fit, and where it makes sense, have conversations with those groups at the right time.

Do you have to acquisition as well?

Certainly. I mean, again, as I said, I think Regal's playing within that attractive space or alternative asset managers. We have demonstrated growth. I think we'll deliver $1 billion worth of net flow growth in the financial year to June '23. I think that's unique for many asset managers who have got a traditional product offering.

So I guess, long-term vision, how big you would like Regal to get?

Yes, that's a good question. And again, in the asset management industry, a lot of people would sort of point to an asset management figure as being what they're aiming for. And whilst we highlight sort of we've got the capacity to run $15 billion as a business, we recognize that the ultimate goal for our business is to deliver strong risk-adjusted returns for our clients. So if we're achieving $15 billion but we're failing on the investment performance, we've failed. So we want to make sure that we're identifying investment strategies where we can generate long-term attractive returns in scale. So I'm not trying to avoid your question, but I do think generally that we've got capability today to be a $15 billion asset manager, but first and foremost, from our perspective, is delivering investment returns for our clients.

Brendan, I had a question on private credit. It seems like a big growth area. We saw from the [ Pinnacle ] results, something that came through was that when it comes to private credit, which is also a big part of their business, that I think that the CEO made on a comment along the lines of, "Well, management and performance fees, we get measurement performance fees from private credit. The main gain is transaction and origination fees." So I just wondered, and that in of itself is not a universal agreement as to what the right way to split transaction fees are between the unitholder and the management company. Just wondered what's -- and noticing a [indiscernible] lending is 1 of the 3 that [indiscernible] going to do. Is that going to be -- is it going to be similar for Pinnacle's private credit fund? Is there going to be a lot of transaction fees that will flow through to the managers and to shareholders? Or is it something that's still being worked out? I think it's an interesting part of the private credit space, which is very popular and lucrative at the moment?

Yes, absolutely. And so we tried to simplify that question by saying we're going to earn a management fee and a performance fee when a return is above a certain level, but any other income that is generated goes to the investor. So you're right. In particular, sponsor backed lending, there are often upfront transaction fees. And if we earn those fees, that goes to the investor. It doesn't come back to the manager. But as a significant investor in the fund, we participate alongside of those investors.

Are there any other questions in the room? Okay. So I think that we're coming up to time. So Brendan, I'd like to hand back to you for closing remarks, if that's okay?

Well, thank you, everyone, for your interest. Thank you for your support of Regal Partners. We're really 6 months into a journey that I think a lot of work ahead of us, but I think we've made a strong first start in the 6 months. We're very excited about what lays ahead, not just the organic growth, but a number of the other initiatives that we're looking at and looking forward to providing you an update in the year ahead. Thank you.

Thank you.