Regal Partners Limited (RPL) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to today's full year '25 results briefing by Regal Partners Limited. Today's results will be presented by the Chief Executive Officer, Brendan O'Connor; and Chief Financial Officer, Ian Cameron. And we also are joined today by Ilana Stringer, our Head of Strategy, who we announced today will be the incoming CFO in late March. The briefing today is being conducted by webinar and phone. The agenda for today is that Brendan will start with the results highlights; Ian will then cover the key financials and hand back to Brendan for a business update and outlook; this will be followed by a short question-and-answer. We will provide more detail on how to submit questions over the phone at that point. But for those online, please feel free to submit your questions at any time during the briefing so that we can lead with those. Please note that we have media in attendance today. I would now like to hand over to Brendan.

Thanks very much, Ingrid. As Ingrid said, my name is Brendan O'Connor, CEO and Managing Director of Regal Partners. I'm going to provide an update on Regal Partners' performance for the 12 months ended 31 December 2026 before hosting Q&A. As Ingrid said, I'm joined today by our group CFO, Ian Cameron; our Head of Strategy, Ilana Stringer; and obviously, our Head of Corporate Affairs, Ingrid Groer. Before I present our results, I'll take a minute to remind you that since listing on the ASX 3.5 years ago, the business has grown substantially. We are now a $21 billion alternative asset manager, significantly diversified across 4 alternative asset classes: hedge funds, credit and royalties, real and natural assets, and growth equity. Importantly, we also offer a market-leading multi-strategy investment capability that has been recognized by a growing number of clients domestically and offshore. At Regal Partners, we seek to be recognized as a leading provider of alternative investment strategies. We believe that we have a persistent edge in the generation of our alpha through our proprietary network of origination of assets that drives the investment returns behind our strategies. And finally, we believe that we are the benchmark of alignment. It's a key to our competitive advantage and alignment with our investors is an indelible part of our DNA and forged from our founder origins. I'll now cover the key highlights from the 12 months to 31 December 2025. It was a year of 2 halves, dominated by significant equity market volatility and Regal-specific noise, heightened macro, and geopolitical uncertainty in the first half, and robust hedge fund investment performance against the backdrop of resurgence in the resources sector in the second half. We delivered a record level of management fee revenue of over $200 million, a statutory NPAT of over $130 million, and our normalized NPAT of $160.5 million is a record for Regal Partners Limited, and that translated into a record $0.375 earnings per share. I'm also pleased to announce that the Regal Board has approved a $0.15 per share dividend, fully franked, reflecting the strong organic cash generation in the half, strong capital position, and surplus franking credits, taking the full year '25 dividends to $0.21 per share. We finished the year with $20.9 billion in FUM, which benefited from strong support from our clients with net flows totaling over $1.5 billion. I'm pleased to highlight that this strong momentum and client support has continued in the new year with a further $193 million of net flows in January. We ended the year with $14.8 billion of FUM at or within 5% of high-water mark. And obviously, that's a good leading indicator of future performance fees. And our return on equity was very strong at 19%. And we finished the year with $250 million of capital and no drawn debt. There are 6 key themes that I think that were underpinned our results, our financial outcomes for 2025. Firstly, a client-first approach. Our client base and reach is expanding and delivering results for the business. We're delivering impressive business momentum, as firstly, strong investment performance from a diverse range of strategies, as I said, is a great leading indicator of the health of the business. The diversification of the business has helped deliver resilient earnings. And our One RPL approach is creating a scalable platform to service our high-performing and differentiated investment capability. Our robust balance sheet is underpinned by our strong organic cash generation and a disciplined approach to recycling capital. And we continue to invest for growth, expanding our investment scale, investment capabilities, and distribution reach, while maintaining a disciplined approach to M&A. In summary, our resilient business model is evident through the results we delivered in 2025. In particular, over the last 3 calendar years, our NPAT is up almost fivefold, our EPS over 3x, our dividend is up 110%, our FUM up over 4x, strong net flows with gross inflows up 3.5x, and performance fee eligible FUM up almost five -- fourfold. Turning to the business update. You've heard me mention this slide before. And importantly, it remains a bedrock as to how we have grown the business over the last 3 years and where we'll focus for the coming years. The growth -- the strategy is built upon 3 key pillars: the growth and diversification of our investment capabilities, the growth and diversification of our client base, and the evolution of our centralized and scalable platform. I'm pleased to highlight that over the last 3.5 years, we have demonstrated the power of that RPL platform for we have delivered a $16.2 billion increase in FUM, including $4.6 billion from organic net flows and $5.1 billion in investment performance for clients across a broad range of investment strategies. We have delivered a significant increase in the number of clients, particularly institutional clients, which is always a great endorsement of our investment capability and our platform. And we have further diversified our FUM. We have increased our exposure to private assets while increasing our exposure to performance fee eligible hedge fund product with a fixed fee hurdle leading to more resilient earnings. Our fundraising momentum remains strong. And in particular, you'll note the rebound in net flows in January this year, in part offsetting some of the credit co-investment and management account weakness that we observed during the December quarter. Our strong investment performance is a great leading indicator of future performance fees and net flows. Our performance in 2025 has been strong, but importantly, it's been very diverse as well. And that diversification perhaps is most important when it comes to our fee earning performance fee eligible FUM. 87%, or $14.8 billion of our FUM, at 31 December is at or within 5% of high-water mark. That is steady progressive growth over the last 3 years. Importantly, over 50% of this FUM has a fixed hurdle or a high-water mark only underpinning a high recurring level of performance fees in future periods. As we have diversified the business, management fees have grown and performance fees have also grown and diversified. Importantly, while our management fee margins will vary from period to period depending upon the mix of products sold, our performance fees are far more diversified, and therefore, more persistent. Our distribution and marketing capability has expanded and diversified into every major segment of the Australian market. And with 3 staff dedicated to the offshore markets based in Singapore and North America, our offshore client base is expanding. I'll remind you that offshore distribution is a key priority for us. Offshore capital allocators typically allocate in larger size. They are less fee constrained by the fee disclosure rules, which dominate Australia's superannuation capital allocators. And we have an investment capability that is in increasing demand as the world seeks diversification. Australia is increasingly sought after as a destination for global capital allocators due to our stable democracy, low sovereign risk, and large pool of diversifying investment product and talent. Uniting all of this together is the One RPL approach. The One RPL approach means we have a standard way in which our investment capabilities coexist to drive performance and boost collaboration, deliver and execute on comprehensive strategic distribution and marketing plans, and all enabled by a scalable and institutional-grade operational spine of HR, legal, compliance, risk management, IT, and finance. The power of our One RPL approach is best demonstrated through the scale and simplicity of onboarding new institutional clients via one operational platform that services our key investment capabilities. I will now hand over to Ian Cameron to take you through the financials for the year.

Thank you, Brendan. Thank you for your time this morning, and thank you for your interest in RPL. My name is Ian Cameron, and I'm Regal's CFO. We're going to spend the next 5 to 10 minutes discussing Regal's financials. However, before I do, I would like to welcome Ilana as RPL's incoming CFO. I've had the privilege to work with Ilana since October last year and greatly appreciate her input and strategic mindset brought to the group. It is very pleasing to hand over to Ilana with such great financial results. Now let's have a look at the results. The key thing to note is that RPL continues to maintain growth momentum. To show this, we will run through RPL's 2025 financial highlights, normalized or underlying P&L, balance sheet, and finally, our approach to capital management. On Page 20, I will touch on the financial highlights. We closed out the 2025 year with FUM of $20.9 billion. Average FUM was $18.5 billion, up 28% over the prior year. And that's really what drives the management fees and loan management fees of $203 million. Performance fees of $175 million is a stellar result with strong performance in 2H '25 and most of our strategies above high-water mark. As Brendan mentioned, the RPL Board have signed off on a $0.15 final dividend, representing a 54% payout ratio, which preserves balance sheet flexibility for future growth. As you can see already, RPL has got growth momentum. Slide 21 shows RPL's detailed normalized P&L. Directing your attention to the 2025 information in the column second from right, the average management fee was 109%. The change year-on-year is largely part dependent from the products inflows come into. For example, we've had very strong inflows into PMC's global strategy, which is an average management fee of circa 1%. Other income of $40 million, up 16% on the pcp, was due to the strong investment performance of RPL seed investments. Moving down the page to the expense lines. As a reminder, we have cash and deferred remuneration. Cash bonuses are contained within the employee benefits expense line of $105 million. Deferred bonuses are accounted for in the deferred grant amortization line. Variable remuneration primarily increased in 2025 due to the 108% increase in performance fee revenue. Please also note that we have changed our remuneration year to align with our financial reporting period. The impact of this change is reflected in the amortization schedule in the appendix at the back of the pack. Other expenses increased from 2024 due to the annualization of costs from acquired businesses. And it also includes approximately $4 million of project costs that were expensed in 2H '25 relating to the continued investment in the One RPL corporate platform that Brendan mentioned a short time ago. These projects were larger than usual. So whilst there might be project costs in future periods, at this stage, I'd expect those future projects to be on a smaller scale. I'd also note that we took a conservative approach by including those project costs in our normalized results. Turning to the balance sheet. Our balance sheet position remains strong with approximately $250 million in capital, which provides strategic optionality for the group. In 2025, we upgraded our credit facility from $50 million to $130 million, which was undrawn as at 31 December 2025. Moving on to the next page and drawing your attention to the left-hand side. As at 31 December 2025, we had approximately $250 million of capital, which takes the year-end balances and adjust for working capital, meaning we have included the receipt of cash from performance fees that crystallized at 31 December 2025, adjusted for accrued cash bonuses, as well as the final dividend of $0.15 per share. Directing your attention to the middle of the page, we had $120 million of seed capital at year-end, and the graph sets out the liquidity profile of those investments. Turning to the right-hand side of that page. These are some of the tools that the RPL Board and management team have to manage our capital, which now includes the on-market buyback program recently approved by the Board. Back to you, Brendan.

Thanks very much, Ian. I'll just provide a brief update now from a trading perspective and highlight our priorities for 2026. I'm pleased to say we've had a strong start to 2026. From a growth momentum perspective, our FUM is now over $21 billion; our net flows for January, $193 million. Importantly, investment performance has also been strong, and we now have $15 billion or 87% of our performance fee eligible FUM at or within 5% of high-water mark. In terms of 2026, the things we're focused on and taking advantage of that would underpin the results of '26 are the following. We have a strong pipeline of domestic funds under management. January has started well, but we have a strong pipeline and feel confident about net flows for the remainder of '26. We have a strong pipeline of offshore SMAs. We will launch a Regal Partners Income multi-strategy product in the second quarter of this calendar year. We continue to build out our One RPL approach, which will lead to greater resiliency of the business model and also achieve greater scale as the business grows. We continue to pursue an active agenda of M&A but remain very disciplined from a pricing perspective. And importantly, culturally, we are building an outcome-driven team that celebrates achievement rather than effort. In summary, Regal has never been in a stronger position to achieve its strategic ambitions. I'd like to take this moment now to thank our clients and shareholders for your support. And importantly, thank you to all our staff for their hard work and achievements in 2025. And finally, before turning to Q&A, I'd like to personally thank Ian Cameron for his great service as group CFO over the past 3.5 years, a period of significant growth for Regal Partners Limited. With the finance team in great shape, I look forward to working with Ilana as Regal's new group CFO to help me guide Regal through its next phase of growth. Thank you.

Thanks, Brendan. Operator, could you now please run through the instructions for submitting questions.

[Operator Instructions] I'll now hand back to Ingrid Groer to begin taking questions.

Could I now please go to the first person on the phone line, Nick McGarrigle.

Obviously, a great result and the January trading update was good. Can you give us a sense on the flows that you had in the month, where they came from and how you're positioned to continue to grow flows into 2026? You've obviously made some good comments there about offshore. And I imagine some of the listed vehicles are looking more like they're in a position to raise versus prior years.

Thanks very much, Nick. Yes, we've had a fairly diverse contribution to flows in January, but it's been dominated by our hedge fund product. That's both a muted start from a period of capital flows just given the time of year, Australia -- a lot of Australians are on the beach, obviously, at that stage. But our products such as the Partners Fund continues to rebound in momentum. So some of the tailwinds we saw around Partners Fund flows in the back half of last year continued through. So I'd say they're the highlights in the month. And then your compound question, the second part related to...

Just the flow strategy for this year and any comments around offshore because there was, I guess, some commentary in the press release about that.

Yes. The offshore pipeline has never been stronger. I've highlighted before that the gestation period around offshore fundraising is longer. But nonetheless, I believe that we have 4 or 5 Investment Committee approved SMAs. They're just making their way through the legal process. We've completed investment due diligence. We've completed operational due diligence. I expect them to be executed over the coming months.

And you provided some new disclosure on the management fee run rates across the different lines of business. I assume that's just to help us with the mix as we move forward. Are there any movements underneath those individual FUM segments that we should think about?

No, I don't think so. I think it's, as you say, they're designed to provide a little bit more insight into the results we're delivering. Importantly, the margin that we're delivering from pure management fees, remembering that we include loan establishment fees up in that margin, so that can -- as that loan establishment fees move around period-to-period, that can create a little bit of volatility. But excluding that, just the management fees are relatively stable. And the reason they move around is simply in response to the mix of products sold as opposed to any fee discounting occurring. So just to remind you, the average fee on the PM Capital product is about 100 basis points, whereas the average fee in, let's say, the Regal multi-strategy is something like 150 basis points. So it just migrates around depending upon strength of sales.

And maybe there's a comment -- sorry, there's a disclosure there about 1.12% fees on the committed capital. But my understanding is that's not fee earning. Is that effectively what that would turn into if it does convert into AUM?

That's right.

Yes, correct.

Correct, Nick.

Could we now please go to Laf from MST.

The first one is just to get a better understanding on the accrued performance fees that haven't been paid that are payable at the end of June. Can you just give us an idea where they're sitting?

Yes. The bulk of that will relate to -- well, the largest portion of that, that's otherwise not achievable or whatnot booked as at 31 December really relates to the global long/short strategy. We're sitting with quite a large amount in-the-money today across both the listed fund and the unlisted fund. It's probably close to $100 million of accrued but not earned performance fees.

And obviously, that's related to volatility, but -- and I appreciate the update on that. Can we also go into some of the potential acquisitions you're looking at? The language is quite strong in the annual report around still -- it's still high priority. Now we'll change CFO to someone who's got a strategic background, M&A background. Can you just talk through the change in CFO? And what's the environment like for looking at acquisitions? So notably, are there particular asset classes that are high priority? What's pricing like in the market? And are you seeing enough assets?

Great question. Thanks, Laf. So firstly, just to recognize Ian's achievement. So Ian and I have worked together for the past 3.5 years since the group listed on the ASX. I think he's done a sterling job in helping steer the finance team through what has been a very busy period of growth and particularly inorganic growth. I think Ian is looking to take a bit of a well-earned break for a period before he looks for his next challenge. Ilana, I think, has wonderful credentials in coming into a role like this, particularly where Regal is poised to grow from. Undoubtedly, further M&A will be part of our growth, and Ilana will be front and center of that. But importantly, Ilana's background, I think, makes her well placed to help guide me through the strategic rollout across the organic development of the business as well. So for example, rolling out new products such as the Income multi-strategy is something that Ilana will be part of as well. On the M&A front, I would say, and I've said this consistently, over the last 12 months, we've seen an acceleration of opportunities that we're looking at. We have maintained a price discipline, which means we haven't executed on any of that. But importantly, I think there's an increased recognition of the way that Regal Partners undertakes an acquisition, and therefore, what the cultural fit would look like and what success -- what the indicated success would look like. So pricing still remains a key tension point in those opportunities, but I think there are a lot of good opportunities we've looked at. And I'd say that they would expand our fund into nonhedge fund product typically. So I'm thinking of things such as real estate or private equity-like capabilities as well as further capabilities within the broader credit sphere.

Can we now go to Olivier at E&P, please.

Congrats on what is another exceptionally strong result. Just on fund flows, commentary on your expectations around Taurus Mining Fund III in terms of when that should start to contribute. And then what are you seeing or what's the vibe around expectations on the Merricks, particularly those discretionary loan opportunities that can create a bit of noise in the flow numbers?

Yes. So let's take the second part first, if that's okay. So from a Merricks perspective, you're absolutely right, there can be some -- from the credit co-investment I highlighted a little bit of volatility coming through there. So importantly, the broader Regal Credit team led by Adrian is -- and Royalties is a team of about 50 staff that have great capability in originating attractive product that is in demand by institutional investors. So notwithstanding a more muted environment for some of that deal origination going into our funds, the institutional market remains very much open to purchasing the deals that the Regal Private Credit and Royalties team are originating. And so, that typically comes through as either managed accounts or co-investment opportunities, and they will move around from quarter-to-quarter, but obviously, continues to demonstrate a capability that is in demand, particularly by institutional investors offshore. To your first question, Taurus, Taurus Mining Finance Fund is -- if you have a look on Slide 14, you can see that the Taurus Mining Finance Fund II has delivered an IRR to date of about 23% post all fees. We expect that fund to probably wind up and complete by the end of '27, roughly. And we're raising money for the third mining finance fund at the moment. Given that backdrop of a strong resources sector and in particularly the strong performance of Fund II, we're expecting a very strong first close to that fund, which will occur before 30 June, at this stage, probably around May. And we're expecting that to be at least USD 500 million.

Is there any more color you can give us on the Merricks contribution just on the management fee -- dilution to fees? Like what was the actual impact on a basis point, so to speak, if you strip that out?

I can come back to you on that if that's separate or just confirm the numbers and maybe chat to you later about that, if that's okay.

Yes. No, that's perfect. And then last one for me. I may have missed it. So you mentioned there were some project fees or costs that were included as part of the One RPL. You probably mentioned it on the call, but I was trying to do 4 things at once, so I missed it. What was the -- what were those nonrecurring expenses that you conservatively put through the underlying results?

Yes. No problem. So I noted that in the other expenses line of $49 million, there's project costs of about $4 million. I noted that our expense in the second half of '25 that those projects were larger than usual. I also noted that whilst we would expect projects to occur in future periods, those projects would be on a smaller scale. And in terms of what those projects related to, they relate to the continued investment in that One RPL corporate platform that Brendan mentioned earlier in the call.

So we can expect -- I mean there's going to be an ongoing expense line, but it will probably not be $4 million a half effectively.

That's correct.

We now might move to a couple of questions online. So the first question is, are you monitoring events in the U.S. for Blue Owl's Evergreen fund? And is that making you reconsider whether the wealth channel is ready to invest in private assets and whether managers are prepared for the reputational risk associated with offering these types of fund structures?

Yes, that's a great question. So we're absolutely monitoring what's happening in the U.S. I was speaking to our Head of Distribution in the U.S., Rob only this morning highlighting that. There are probably 2 things I'd highlight about what's happening in the U.S. private credit market that's quite different to at least our exposure in private credit domestically. The first thing I'd say is that we have no exposure to the type of software exposure -- AI-driven software private credit exposure that the U.S. market has consumed in large amounts, particularly over the last 2 to 3 years. So that is a big point of difference. I'd remind you that the Merricks business and now the Regal business capability from a private credit perspective is defined as being a hard asset investment specialist, whether it be real estate, infrastructure, or agriculture, in particular, and now by combining with Regal corporate credit as well. The second thing I'd say is that the U.S. market is particularly dominated by a level of leverage that just doesn't exist in the Australian marketplace. And so, you could have leverage of anywhere from 50% to 100% in U.S. private credit, whereas our investment returns in private credit are almost exclusively being delivered without any leverage at all. So we're returning double-digit returns to investors, without leverage is the broad playbook there. So I think they're 2 important difference. The second thing I'd say is that the evergreen structure is obviously highlighting some challenges at the moment because of this mismatch in liquidity expectations. As I highlighted, we continue to see strong demand from institutional clients for the private credit and royalty deals that we are originating. But there are pockets of I guess clients, perhaps within the wealth channels as you suggest, that have overestimated the liquidity that exists in these products. At the end of the day, private credit is harvesting a level of illiquidity, which means it's not suited for regular quarterly withdrawals. They're more better suited to a longer, medium-term investment horizon.

And the next question is probably more for the investment team, but I will read it out. I believe one of your funds has an investment in Firmus. What is your expectation from that? Do you have any conviction in its future and its claims about sustainability?

We're excited about our investment in Firmus. The Emerging Company strategy holds an investment there. We're hopeful that with IPO markets opening up that, that can IPO later this year, and we're very excited for its prospects.

Great. There's currently no other questions in the queue. So would you like to make some concluding remarks, Brendan?

No, I think a very strong result, further proof of the business model that we are building and diversifying here at Regal Partners. Thank you, shareholders, for your support, and I look forward to speaking to our shareholders over the coming weeks. Thank you.

Thanks, Brendan, and thank you, everybody, for joining the call. You may now disconnect.