Sun Hung Kai & Co. Limited (86) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. On behalf of Sun Hung Kai & Co. Limited, I'd like to welcome all of you to the company's 2021 annual results investor presentation. This presentation will be conduct in English. Alternatively, you can switch to the Chinese channel and mute the original audio if you need any translation. By default, your microphone is mute during the presentation. And there will be a Q&A section afterwards. First, let me introduce to you the senior executives from the company here with us today: Mr. Brendan McGraw, Group Chief Financial Officer; Ms. Elsy Li, Group Treasurer and Head of Corporate Development and Investor Relations; and Ms. Lindsay Wright, Chief Executive Officer, Funds Management. In today's meeting, the management will talk about the company's business performance in 2021, outlook of 2022 and future plans. After the presentation, the management talk -- will take questions from participants. And now may I invite Brendan to start the presentation. Brendan, please?

Thank you. Good morning, everybody. I will start today by talking about our journey of transformation. As many of you know, the Sun Hung Kai heritage goes back to 1969 with the start of our brokerage business. Through our listing in 1983, [ through the ] acquisition of the majority stake by Allied Properties in 1996, we've continued to grow and expand our footprint in financial services. The establishment of the UA business in Hong Kong and eventually China has brought us into the consumer finance business as we expanded operations in Hong Kong to include wealth management. Starting from 2015, we began the next phase of our evolution by partnering with Everbright in the brokerage and wealth management business, launching our mortgage business and starting to build out internal investment management capabilities. In 2020, we [indiscernible] our remaining stake [ in our ] brokerage business [ and extended our ] investment management platform to include a funds management platform. In 2021, our funds management vehicle Sun Hung Kai Capital Partners was formally established; and now hold SFC type 1, 4 and 9 licenses, with 6 partnership funds across diverse strategies. While we further build out our infrastructure with an institutional-grade focus, a meaningful amount of third-party capital was successfully raised, which was a pleasing outcome across a backdrop of a challenging environment. With each step, we build on our past success. We continue on our transformation journey to becoming a leading alternative investment company. Moving on to our company overview. The group has 3 pillars of core business: financing, investment management and funds management. Our lending business provides steady cash inflow and organic growth through Consumer Finance, UAF; Mortgage Loans, Sun Hung Kai Credit; and Private Credit, which was previously known as Specialty Finance. Investment Management business focuses on strategies with risk-adjusted returns across diversified asset classes, sectors and geographies. This portfolio includes assets in public markets, alternative investments, real estate. Building on the success of Investment Management business, we built out and formally launched the Funds Management platform in 2021, which is fully licensed to manage external capital and bring additional revenue streams to the group. This will further diversify our products and strategies and create synergies with the group's other business segments and functions. In 2021, our resilient financing business performed strongly and continued to contribute solid cash flow. UAF, our Consumer Finance arm's pretax contribution and gross loan book achieved respective record highs, which was $1.6 billion at pretax profit and $12.7 billion at gross loan book size. Our Investment Management business recorded a realized gain and interest income of $3.4 billion, the highest since we commenced business in 2015. This segment continued to generate strong risk-adjusted returns during 2021. The average assets return was 14.4%. For our Funds Management business, we have achieved a strong progress in 2021. 6 partnership funds have launched. And over $100 million of third-party capital was successfully raised in less than a year. We continue to value returns to our shareholders. The Board declared a second interim dividend of $0.14 and a special dividend of $0.04 per share. Together with the interim dividend of $0.12, the total dividend for 2021 is HKD 0.30 per share. Since 2007, we have distributed $12.9 billion to shareholders through dividends and buybacks. Moving on to the 2021 annual results. The group demonstrated a robust performance and delivered a solid set of financial results in 2021 despite the ongoing disruptions arising from COVID-19, volatilities in global financial markets and intensified regulatory reforms and geopolitical tensions. We can see attributable profit at $2.8 billion, up by 10.4%; earning per share at $1.427, up by 11.2%; and book value per share at $12.7, up 11.4%. Our ROE remained strong at 11.8%. The group's gearing ratio was 49% at the end of 2021. It's remained healthy and within our comfortable range to improve capital efficiency and maintain strong liquidity amid the volatile market conditions. Looking at our earning drivers and our segment assets. The Consumer Finance recorded a record-high pretax contribution to the group at $1.6 billion, primarily driven by growth in the loan book and lower credit impairment. The segment assets stood at $19.2 billion as at the end of 2021. Mortgage Loans continued to contribute a meaningful pretax profit of $120 million, up by 6.5% year-on-year. In its sixth full year of operation, Sun Hung Kai Credit has now become a household brand name in Hong Kong and enables us to penetrate into new market segments. Private Credit recorded a pretax profit of $5.1 million compared to a loss in 2020. The newly renamed segment will judiciously increase exposure to global institutions and corporate borrowers going forward. Our Investment Management business contributed a pretax profit of $1.9 billion for 2021, driven by successful exits from a number of investments such as Fairstone and TuSimple. The segment recorded strong realized gains on financial assets and interest income of $3.4 billion. That's up from $1.7 billion in the prior year. This is the highest since we commenced business in 2015. Our Investment Management assets continued to grow to $21 billion by the end of the year. For Group Management and Support, we recorded a pretax profit of $48.3 million for 2021, which is mainly because of an increase in the fair value of financial assets that we hold for liquidity purpose. Moving on to balance sheet and capital structure. Our balance sheet remains strong. Our assets continue to grow. On the asset side, long-term loans and investment assets are well matched on the liability side by both equity and long-term funding. Our short-term loans are funded by bank loans and short-term facilities. And total borrowings were $18.2 billion at the end of the year, of which $9.9 billion or 54% were notes and paper and $8.3 billion or 45% were bank and other borrowings. Our interest cover improved in the year to 6.3x from 5x in 2020 due to our increased earnings. We continually monitor and ensure that we have enough strong liquidity in place to weather market volatilities and to capture growth opportunities. Next, I'll pass the floor to Lindsay. And she will talk you through our Investment Management and Funds Management business. Lindsay, please.

Thank you, Brendan. And good morning, everyone. I'm going to cover 2 topics this morning, Investment Management and funds. So firstly, on the Investment Management business. This division leverages the group's internal expertise, external network and strong financial position to seek attractive risk-adjusted returns. The segment's total assets at year-end were $21 billion. 71% was in alternatives, followed by 18% in the public markets. And real estate accounted for approximately 11%. [ We've seen ] majority of the investments made in earlier years. We've been able to monetize some of these investments. And the segment recorded a record high of realized gains and interest income of $3.5 billion, up 98% year-on-year. The gain was partially offset by a mark-to-market valuation loss of $854 million mainly due to the negative impact on our portfolio by regulatory tightening, volatile markets and U.S.-China tensions in 2021. Taking operating costs into consideration, segment contributed $1.9 billion pretax profit to the group, a slight decrease of 9% year-on-year. During the year, the previous public equity strategy and a majority of hedge funds in the investment -- in Investment Management were spun out and launched this partnership and funds on the Funds Management platform, namely East Point Asset Management and Sun Hung Kai latitude and -- alpha fund, respectively. Our Investment Management business has a very strong track record. In the last 3 years, our annual return has remained at a double-digit level consistently. For 2021, the average return on average assets was 14.2%. The segment assets have grown at a CAGR of 26.7%, with alternatives doubling its assets over the last 3 years. Looking at [ 3 segments' ] performance now. Public markets delivered an annual return of 11%. Alternatives annual return was a very pleasing 17.4%. And particularly, the private equity segment achieved a strong combined return of 23.7%. Real estate had an annual return of 3.6%. I'll go into these details over the following several pages. So firstly, let's look at the corporate holdings segment. This consisted of a mix of long-term strategic positions and other shorter-term positions. Derivatives and hedging are used both for risk management and for enhancing returns. We closed the year with a very decent annual return of 18.5% against the backdrop of COVID, regulatory headwinds, slowdown of China's economic growth and the U.S.-China tensions. We've managed to outperform the Hang Seng Index, which as you know is down, minus 14%; and the Nasdaq Golden Dragon China Index, which was down 43% over the same period. Our investment approach remains unchanged. It's based on deep fundamental research and analysis. We are looking to understand structural long-term stories that will deliver strong risk-adjusted returns. With the increased market volatility and risks elevating driven by the ongoing continuous outbreak of COVID-19, regulatory environment evolvement and interest rate hikes and the escalation of geopolitical tensions, we are very cautious about the volatility in the markets. And we'll prudently monitor our risk positions. We have reduced risk in some sectors and also look to implement shorter-term hedging strategies mainly through option structures to reduce risk and volatility of the portfolio. Secondly, let's take a look at the public credit portfolio. This consists of our actively managed global credit strategy. The macro environment for global credit markets were somewhat benign in 2021. Global central banks maintained [indiscernible] monetary environment [indiscernible] to aid the global economies to gradually come out of the recessionary environment caused by the pandemic. The low interest rate environment provided a very conducive backdrop for companies to rebuild their balance sheet, which have been previously impaired by the pandemic. However, the Chinese government announced tightening measures in the third quarter of 2021 which aim to address the housing price bubbles seen in the country. Highly levered property developers in China went into default in the fourth quarter of 2021, driving the credit default rate in China to one of the highest in its history's. Looking forward, we think that the recovery of the Chinese property bond market would be subject to a stabilization of the -- of home prices and a revival in confidence of homebuyers in China. We will continue to improve our returns through sound credit selection, portfolio diversification and appropriate hedging strategies. Now let's look at the alternatives segment. This segment consists of private equity and hedge fund strategies. Each strategy has been performing well for the year 2021, reflecting the group's unique insight into private investments and proprietary deal-sourcing network. The private equity portfolio recorded a strong combined return of 23.7% primarily attributable to the successful exit from a number of funds; and direct, co-investments made in prior years, including Fairstone Holdings and TuSimple as well as some other projects in health care, TMT, consumer and the financials sector. We will continue to review and analyze new investment opportunities, with a focus on cutting-edge technology, health care services and green technology, but remain prudent in allocating capital given the challenging investment environment. The multi-manager hedge fund portfolio has outperformed benchmark since its inception in January 2017. Building on the success [ of this ] investment program, the majority of the portfolio was transferred to a fund structure and launched its SHK Latitude Alpha Fund in July 2021. The fund and the remaining balance sheet exposure is being managed by industry veterans to further optimize the portfolio and ensure the ongoing generation of alpha. And finally, the real estate portfolio, which includes the group's interests in Hong Kong commercial real estate as well as hotels and commercial investments in global market and had a valuation at year-end of $2.36 billion. The portfolio recorded a gain of 3.6% or $87.7 million for the year despite the prolonged impact from COVID-19. In the first half of 2021, the group completed the exit of the investment in Parmaco, which is a Finnish modular housing company. Going forward, we will continue to prudently manage the existing portfolio and originate new opportunities to generate strong risk-adjusted returns for the group. And now switching to the Funds Management business. As touched by Brendan previously, 2021 was the first year of launch for the funds business formally. And we believe it will be a key driver of growth over the medium term for SHK & Co. This will be driven by growth in respect of funds under management and revenue share of management and performance fees from our seeded partnership funds. I'm very pleased to report that we're making strong progress so far on the build-out, and we'd like to share these with you. Firstly, as noted, we have established platform with the establishment of Sun Hung Kai Capital Partners with a type 1, 4 and 9 licenses here with the SFC in Hong Kong. We have completed and launched 6 partnerships and related funds, 4 of which are external and 2 of which are internal. And I'll talk about those in a moment. With total seed capital at this time of just over USD 600 million provided by SHK & Co., it's very pleasing to advise that we've raised just over USD 100 million of external capital in the first year of operation. Our strategic approach here in the funds business is based on executing on our core objective, which is to build a leading Asian-based alternatives platform. We believe we are building a very differentiated model and with -- and I think we've got the following characteristics. Firstly, our funds and partnership focus is across the entire alternatives spectrum, so both public and private equity and debt. Our model is flexible in approach. We're able to interact with managers and different groups in a variety of ways [ with getting on ] their readiness to go to market. Thirdly, our capital is patient. We're not required to recycle [ unuseful value and support ] very long-term partnerships. And finally, we're able to offer additional support to managers through working capital and [ new ] housing facilities. As I mentioned, our platform build-out is -- occurs in 2 ways. Firstly, we launch our own funds under our SFC license 1, 4 and 9. We launched 2 during the year: Multiple Capital Investment Partners, which is an APAC real estate loan fund; and SHK Latitude Alpha Fund, which is a global fund of hedge fund strategy. And the second way is developing long-term partnerships with emerging managers and providing acceleration capital to newly established managers. This is reflected in the partnerships we announced throughout 2021. We announced East Point Asset Management, ActusRayPartners, E15VC and Kernel, all of which can be found, obviously, on detail on the various slides. A key focus for 2022 will be on developing further alternative investment strategies, including customized solutions, and expanding our distribution reach, with the core objective to build a leading Asian-based alternative investment firm. Next, I'll pass this over to Elsy. She'll provide you with more details about our financing business. Elsy?

Thank you, Lindsay. Our Consumer Finance business is operated under UAF brand in Hong Kong and China. UAF has been a leading franchise and a household name in the region for over 30 years. It is also a consistent contributor to our group's revenue. Total revenue of UAF for 2021 was at $3.5 billion, up 6% from previous year. And pretax profit was at $1.67 billion, demonstrating strong performance with an increase of 34.5% year-to-year. As of 2021, UAF's total gross loan balance was HKD 12.7 billion, which is also a new high. About 70% of the loan were from Hong Kong, 30% from mainland China. Over the last 3 years, our loan balance has maintained strong organic growth at a CAGR of 6.8%. The net impairment loss reduced by 34% to $509.4 million due to a reduction in delinquency and charge-offs as a result of recovering economic conditions and improvement in employment situations in 2021 compared to 2020. Overall cost-to-income ratio has remained steady at around 33%. In this page, we will further dive into the performance of Hong Kong and China operations. For Hong Kong, the total gross loan increased by 5% compared to 2020 mainly due to improvement in economic conditions and employment situations in Hong Kong. Overall loan yield remained stable at 30.6% despite the low interest rate environment. Net charge-off was 5.1%, largely in line with 2020. Net impairment loss improved to 4.1%, giving recovery in job market, reduction in employment (sic) [ unemployment ] from the peak of 7.2% in February 2021 to 3.9% in December 2021. In 2021, UAF has also further enhanced its credit scoring system to better support the automated loan credit evaluation process and to facilitate credit officers to make better-quality credit judgments. We also launched a new advertising campaign to refresh UAF's brand image, which in turn has helped us to increase business volume from an intake of younger customer groups. For our China business, we saw a rebound in profitability compared to 2020 as -- the COVID pandemic being contained in China. Total gross loan balance increased by 30% mainly due to increase in the secured loan product we launched at the end of 2020 and our collaboration with various third-party online platforms such as China UnionPay and All In Pay. Charge-off and impairment ratio improved to 5.9% and 4.5%, respectively, as a result of improving employment situations and growth of a new customer base with higher credit quality. Overall loan yield reduced slightly to 26.3% as our borrower base credit profile improved. Next, I will talk about mortgage loan. Our Mortgage Loans businesses operate under Sun Hung Kai Credit. The gross loan balance increased by 13 -- 15% as the economy and property market recovered in Hong Kong -- and recorded pretax profit of $120 million. Revenue increased slightly to $306 million, the highest since the business started in 2015. Quality of the loan book remained pretty strong, and net impairment loss decreased significantly by 61%. Finance costs for the year were down by 8%, as we further diversify our funding channels. Next, I will talk about Private Credit. The Private Credit segment was renamed to -- from Specialty Finance in 2021 to reflect our refined and continued focus. During the year, we see an improvement in pretax contribution due to the decrease in net impairment loss as a result of settlements and enhancements in our collateral package. We remain open to new business opportunity but also very focused on actively managing our existing portfolio. After [ reorganization ] of the team in late 2021, we expect to judiciously increase our exposure to global institutional and corporate borrowers, leveraging our expertise and partnerships in credit. In addition to structured loans, Private Credit also holds LSS leasing, a B2B and B2C auto leasing business in mainland China. This segment also include the group's holding of preference shares of Everbright Sun Hung Kai, which was part of the consideration from the put option we executed in late 2020. In June 2021, Everbright redeemed all the preference shares, and as a result, the group received a consideration of $1.2 billion. We do not have any equity interest in Everbright Sun Hung Kai at the end of the period. I'll now pass to Brendan to talk about our risk metrics, ESG assets and future plans. Brendan, please?

Thank you. Now turning to our corporate risk management. The group adopts a comprehensive risk management framework. The Risk Management Committee, a standing committee of the Board, acts to oversee the group's risk management and monitors internal control. We see risk management and compliance as a responsibility of every member of the firm, and we expect everybody to take ownership of the process. The management team and Risk Committee regularly update procedures and policies to adapt to emerging risks such as those that [ were driven ] from coronavirus and the remote work environment. As you would expect, with the pivot to funds management and the required licenses to operate, risk management will continue to be enhanced and expanded to meet the respective regulatory requirements. Overall, our risk management framework is designed to enable us to achieve strong financial performance and to deliver on our strategy within the group's risk appetite. We will remain focused and vigilant on emerging risks and will proactively enhance our framework to address these risks. Moving on to some updates on ESG. We're pleased to share some updates on ESG. We believe that ESG investing is an essential part of achieving a sustainable future. In recent years, SHK & Co. has invested in a number of next-generation ESG-related technologies. And we're going to talk in detail on those in the next slide. Since its establishment in 2015, the Sun Hung Kai & Co. Foundation has been serving and strengthening our communities in need. The foundation has donated more than $50 million to the ESG initiatives. Furthermore, the Sun Hung Kai & Co. Foundation established the Sun Hung Kai Scallywag Foundation to facilitate accessibility of sailing by providing an inclusive platform that enables youth with disabilities, from disadvantaged backgrounds to pursue their sailing passion. Since then, the foundation has inspired and supported over 1,000 underrepresented youth in Hong Kong with 147 days in the water comprising free introductory sailing courses that include taster days and practical training. For corporate governance, we value a diverse workforce, as it enables us to attract the best people, access a greater range of talent and build more cohesive teams to produce impactful results for our stakeholders. We strictly prohibit any form of discrimination based on gender, race, color, nationality, religion, sexual orientation, disability, military service or marital status and any other status protected by laws. SHK & Co. has undergone a Board renewal process with addition of 2 new independent nonexecutive directors in 2021, enhancing the composition of the Board diversity in gender, nationality, skill and experience and age. The Board includes a balanced composition of executive, nonexecutive directors; and independent nonexecutive directors, so there's a strong element of independence on the Board. As I mentioned previously, we've invested in a number of areas with an ESG focus in the past years. That includes sustainable buildings, electric vehicles, energy management and digital learning. For sustainable buildings, we invested in Parmaco, a leading Finnish education infrastructure platform that builds high-quality wooden modular buildings used by schools and day care centers in Nordic countries. In the area of energy management, our investment in a technology solutions provider focuses on creating sustainable clean energy for all. The firm works with utility companies to accelerate progress towards decarbonization goals for customers to enable more energy-efficient consumption. We've also invested in an electric vehicle manufacturer. Through this investment, we aim to be an advocate for electric vehicles that could lower the world's usage of finite fossil fuels and greenhouse gas emissions. We believe that education is a necessary tool for a better future. Thus, we invest in digital teaching and a learning platform provider that aims to provide to -- aims to digitize the education process through intuitive personalized tools and software to engage students with their studies. Also, like I mentioned in the last slide, Sun Hung Kai & Co. Foundation has co-invested in NewGlobe education, an e-learning platform for students in Africa and emerging countries. This project is also backed by investors including Bill Gates and Mark Zuckerberg. Finally moving on to our business outlook and our future plans. So as we mentioned, the group has achieved a robust performance in 2021 despite the ongoing disruptions arising from COVID, volatilities in global financial markets, intensified regulatory reforms and geopolitical tensions. The strategic plan that we have previously communicated and our transformation to a leading alternative investment firm is well underway. The implementation of our pivot to funds management has strong momentum. Our financing business continues to demonstrate resilience as well. As we move forward into 2022, we remain cautious of the COVID-19 pandemic, its eventual economic impact, the aftermath of central banks' pandemic stimulus policy, the evolvement of regulatory measures and escalated geopolitical tensions. So the particular focus for each of the 3 business lines for 2022 is as follows. For Investment Management, we are confident about the future performance, as the underlying investments have strong and resilient business, yet we remain prudent in capital deployment and appropriately manage the downside risks. For Funds Management, we plan to continue to execute and build on our current partnerships, develop further alternative investment strategies and customized solutions and expand our distribution reach. And finally, for financing, we are vigilant of the current pandemic-driven risks. And we will adopt cautious approach and responsive actions to promote the lending business in order to achieve growth in times of uncertainty. Thank you all for your time today, and we look forward to your continuing support.

We are -- now open up for Q&A. [Operator Instructions] Okay, here we have questions from [ Kevin. Kevin ] question says the company's share price seems to be constantly undervalued. Are there any considerations to encourage the share price to return to fair value such as increasing the payout ratio or share buybacks?

Okay, I will take that one. Yes, we do continue to obviously track and monitor the market value of our share price versus the book value. We also agree that we would -- obviously we would like to see the two coming closer together. We constantly monitor the dividend payout ratio versus past and also versus our peers'. And I think you've seen this year we've also put forward a special dividend, which will be increasing that payout ratio from last year. So we are aware and we are addressing.

And the next questions come from Sandy Mehta. And here we have questions here -- is -- well, the group's Consumer Finance business UA Finance has a record-high net profit in 2021. What are the main drivers behind? And under the current outbreak of the situation and also the social distancing measures that followed, do you think the momentum can continue this year?

And you're on mute, Elsy.

Thank you. I'll take the question here. The main driver of our loan origination growth and profitability last year was mainly due to a couple reason. Namely, the loan demand was up as a result of economic recovery and resumption of business. And also the personal spending was -- has recovered in Hong Kong last year. And also, as a result of the reduced employment -- unemployment, our loan loss ratio also reduced or improved substantially, which contributed to the bottom line. And in China, last year, our key driver has been the containment of the COVID pandemic and the removal of the lockdown leading to business activity and social [ sort of ] spending increase. That helps our origination. And on the same time, we also successfully rolled out a new product, which is a secured loan product which offered substantially lowered impairment and charge-off ratio that contribute to the bottom line as well. Going forward into the year into 2022, we saw the impact of Omicron, which has a reduction in business activity, social spending, personal spending. And also, I think, last night, the unemployment figure has worsened. I think, giving the -- giving our experience in the last 2 years of the pandemic, we envisage that the growth of our loan book and our business profile will be slowed down in the first half of this year giving the lockdowns and potential -- a slow -- potential restriction and social interaction. However, we remain prudently optimistic about the second half where economy will stabilize and gradually go back to a recovery track. We envisage that the potential impact might be similar to 2020, where we have a pretty slow first half and then gradual resumption in the second half. I hope that addressed the question.

The next questions go to Evaluate Research, Ketan Chaphalkar. The China business has rebound sharply in the second half of 2021. What has been the progress in the first 2 months of the first half of 2022, so far, as far as revenue and improvement in ratios is concerned? And what has led to the significant improvement in the average gross balance per loan in China?

Sure. I will take that question as well. I will assume that you are -- the China business you are referring to is the China consumer business. Yes, indeed, for the first and second month, I will say we see a relatively steady tracking of our China portfolio and China businesses giving that Chinese New Year will be a 14-day holiday for most of the Chinese population. I think the -- at the second half of -- the first half of February probably slightly slower due to the effect of that, but we have seen a positive tracking. The momentum continues in our China business for the first 1.5 months, 2 months of the year. And what contributed to the increase in the average loan size in China is due to a product switch. As mentioned in our last interim report, we noted that, in China, UAF rolled out a new product which is a secured loan product lending to a group of customers with a stronger and -- stronger credit profile and affordability. Hence, that loan group also enjoy a slightly bigger loan size, giving their financial position. So that contributed to majority of the growth in China in 2021 and also, as a result, leading to an increase in the average loan size.

We have one -- more questions from Ketan. Are there any fund launches expected [ in the near terms ] on the Funds Management platform, please?

I'll take that question. As I think you will have heard from our reporting, we launched 6 funds in 2021, 4 through partners and 2 on our own platform. And as you're probably aware from the slides, the 4 partner funds was in Asia Pac long, short through East Point; European [ quant ] market neutral through ActusRayPartners; [ the tech ] VC fund through E15VC; and a market-neutral [ crypto hedge ] strategy through Kernel. And then on our own license, we launched the APAC real estate loan fund through Multiple Capital Investment Partners and the global fund of hedge fund with the launch of the Latitude Alpha Fund. Our broad objective here is to build out a diversified portfolio, which I think, as you can see from what we did in 2021, we're certainly achieving that. And I'd like to bring your attention particularly to the global fund-of-fund portfolio. That's providing significant diversification on our product range because that's got underlying [ 22 ] managers. So to specifically ask -- answer your question. We continue to evaluate both new partnerships and the launch of their respective funds and also looking at particular strategies that we would launch under our type 9 license. That process continues. In terms of expectations here for 2022, obviously there are still a lot of research and analyses going on, but we would probably expect to launch another 2 to 3 either through a partnership model or under our own license through 2022.

Well, are there any more questions from any of you? [Operator Instructions] All right, here we have a -- questions from [indiscernible] from [indiscernible]. "I have a question for PE investment exits. Any guidance and plans for PE investment, especially given the recent volatile market condition in TMT sector?"

Okay, yes, I will take that one, yes. I mean I think you can see that we have a -- if you look at the MDA and the analysis, we obviously do watch this quite closely. The PE part of our business has been growing, so we do look at distributions and contributions and plan them quite closely. So we will be watching in 2022. We are aware that TMT could be impacted by higher interest rates and market volatility, and so we do watch that pretty closely. And we will diversify the portfolio both geographically and across segments to make sure we manage that prudently.

And the next questions come from [ Yu Tin Ye ]. Regarding UAF, are the branches in Hong Kong still operating in normal or has been closed due to the current severe COVID situation in Hong Kong at the moment?

Sure. I will take that question. With regard to our branch operation in Hong Kong, which are scattered around -- all the 19 districts of Hong Kong, at the moment, we are still fully in operation. And we have been rotating our team members alternately throughout the entire branch network to ensure that we can service our customer continuously.

So if there is no additional questions, we will now have final questions from -- okay, how did the regulatory measures impact your IM's portfolio, please?

Okay, I will take that one. The -- for the IM portfolio, obviously there was various regulatory headwinds in the second half of 2021, as you know, for the education sector, for example, but our exposure to that was immaterial. So that was good, but the wider impact of -- or on [ technology companies, ADRs ], yes, we have had some impact from that. And luckily for us, we've had some good distributions through the year before a lot of those headwinds built up. And then we've reduced positions going into 2022.

Thank you, Brendan. And thanks again for all the questions. If you have any additional questions that you -- haven't been addressed, answered, please contact Ms. Shirley Zhang, Vice President, Investor Relations, of Sun Hung Kai & Co.; or us, Hill+Knowlton Strategies. The contact information is on the last slide of the deck. Please get in touch with us, and we will be happy to follow up. And this concludes the investor presentation. Thank you, everyone, for tuning in today. Thank you.

Thank you.

Thank you.

Thanks.

Goodbye. Bye.