Vontobel Holding AG (VONN) Earnings Call Transcript & Summary

Welcome, ladies and gentlemen, to the presentation of Vontobel's Full Year Results 2021. I'm here together with Thomas Heinzl, our Chief Financial Officer. As usually, I will kick off with some of the key results. I will give a strategic update. Then Thomas will guide us in detail through the numbers, and I will be back very shortly with the outlook for 2022. After that, as usually, Thomas and I do look forward to have your questions, which you can then log both on the phone as well as on the chat. We're happy to report very strong results for 2021. We have very strong earnings, record net profit of CHF 384 million. This is up 48% year-over-year. Growth has been delivered across all client units. 80% of our revenues do come from Asset Management and Wealth Management, highlighting the robust repeatable business model we have built as a pure-play, buy-side global investment firm. We have delivered also very solidly on our strategic progress. We have geared up for further growth in the U.S. with bringing the fixed income boutique from Zurich at the disposition of U.S. investors and with the announcement of our acquisition of the Swiss-based U.S. business of UBS Swiss Financial Advisers. We have also completed in '21 another significant capital allocation transaction with fully acquiring TwentyFour Asset Management, bringing the net profit through to our shareholders and building a very strong fundament for further common growth. Our ESG offering keeps expanding across all asset classes. We have delivered a strong set of numbers also from a capital perspective. Our capital-light business model keeps proving itself. We delivered a return on equity of 18.8% against an increased CET1 capital ratio of 16.6%. On the back of this strong results from a capital perspective as well as on the back of confidence for 2022, our Board of Directors has decided to propose a dividend increase of CHF 0.75 up to CHF 3 per share. We are well positioned. We enter 2022 with confidence. More on that on the outlook at the end of our presentation. Let's have a look on a few key numbers. So record levels in assets under management, strong growth with 11%. Our net new money at firm level is just shy of our target range of 4% to 6% at 3.7%, composed of very strong flows from Wealth Management and Asset Management flows coming in below our target range. However, we are committed to reaching targets going forward both at the firm level as well as within the Asset Management division. Income, profit shows sound, sensible operational leverage. And the return on equity is very attractive relative to the capital base that we have built. We have delivered these numbers being guided by a very clear Lighthouse, by a very clear North Star where we want to go. We have this long-term ambition that we want to be known as one of the leading and most trusted global investment firms. We thoroughly believe that the 4 key levers to get there are to be client-centric and investment-led at the core. At the same time, we believe that technology helps us to serve our clients better. And we are convinced that people will continue to make the difference. We work towards that long-term ambition with very clear business brands and very clear priorities, and we have delivered against these priorities in 2021. We repeatedly and systematically measure feedback from our clients, and we are very proud and happy that we get very strong feedback from our clients with not only high but even increasing Net Promoter and client satisfaction scores across all client units. We also have been able to strengthen the awareness of our brand. We have been named the strongest financial brand in Switzerland. We are among the top 50 brand in Europe when it comes to investment funds and being an investment firm. So we are very happy and believe that the power of the brand will further help us to deliver growth going forward. On this step towards a pure-play investment firm, Wealth Management has delivered not only strong headline results, but if you go into the flows, 70% of these flows go directly into investment mandates, advisory or discretionary, a point we are very proud of because it shows that we can attract net new money based on the investment-led proposition. I will get back to the tipping points for growth later in my strategy update on U.S. We also kept investing in digital channels, both the Volt platform, where we have been learning over the last 2 years with families and friends, and we also taken the technology setup learnings. And we will be ready to roll this out now in '22. Great place to work. We keep being an employer of choice. We measure the feedback from our talents very regularly and systematically, and we are very happy with the strong feedback we get. People are proud and happy to work at Vontobel as they can bring themselves to work, take ownership and go the extra mile for our clients. As an investment firm, we watch our investment results very carefully. '21 has been a strong year in demand for ESG products and clean technology products on the equity side. Some of our more institutional-tilted products who are fully fundamental bottom up, highly quality-tilted have been challenged in this momentum-driven market of '21. Q4 of last year and also the first weeks of this year showed some shakeout in some of the valuations. We will stick to our style conviction, and we are convinced that we deliver added value to our clients going forward. Multi-asset had a strong year, strong performance, good inflows, strong partnerships. We're very happy with that. As we have announced, we had the one-off outflow of one low-margin mandate, but the underlying business is very sound and has also started well into the new year. Fixed income, great performance across the board. I would like to highlight 2 core capabilities: the multi-strat, multi-sector dynamic bond strategies we do out of TwentyFour, which is obviously a very interesting product for investors to navigate the current uncertain interest rate environment; and the emerging market debt franchise that we have built here out of Zurich. We are confident, given the investment quality, the performance quality that this -- both boutiques will deliver growth going forward. Let me now share 3 key drivers of the further development of the company that we see now in 2022, one being ESG. We have been early movers in this. We have launched actually our first ESG product in 1998. We have brought our first investment product that addresses the transition towards a cleaner and safer world in 2008. We have been a founding member of the major society in Switzerland in 2014. So this is really part of our history, part of our convictions. We shared today with you, the market our 6 commitments on ESG. We work on our own duties on our E by pledging a net zero by 2030 on our own investments and operations; by pledging our commitments and further developments on diversity and inclusion working on our S; and continuously deliver on our G with transparent disclosures and reporting. And we obviously believe that ESG and the transition the world is going through offers a world of opportunities to investors. Therefore, we will bring ESG solutions to our advisory clients in our offering across all client units, and we firmly believe that ESG will mainstream and become part of each and every investment process. We have also shown for you how we stack up on the institutional side against now the dominating taxonomy with Article 6, 8 and 9 fronts. Another lever of growth, very clearly, the U.S. The U.S. is the largest market in the world with 50% to 60% share on the Wealth Management, respectively, and the Asset Management side. We have been in the U.S. since '84. We have always believed in this market, stayed true to this market. Today, it's 8% of our business. We have significantly geared up our abilities to tap into these pools in '21. On the Asset Management side, we brought the fixed income boutique to the U.S. starting now in November and December with reaching out to clients and, as we speak, executing the first road shows in the U.S. In 2022, we'll bring the other Zurich-based boutiques, especially sustainable equities; and our quant manager, Vescore, to the U.S. market as well. On the Wealth Management side, we have in December announced the acquisition of the Swiss-based U.S. business of UBS. With that acquisition, which is intended to close in Q3, we'll come a cooperation with UBS Americas for our Swiss-based investment offering. So very strong lineup and a lot of potential going forward to increase Vontobel's fair share in the U.S. Third topic is reaching out to the evolving needs of our clients and enabling them to grow. Clients want to interact in different ways. Clients need to start investing earlier in their life, and it's our role to help them on this journey. We have continued to learn and develop our Volt platform, and we will be now ready in H1 of 2022 to roll this out. The positioning is very clear. It's an investment-led positioning, and it's a hybrid service offering. So we will pack not only the 300 investment experts into 1 app, we will also make it accessible both in a purely digital journey as well in a hybrid journey with giving access to expert advice. We trust this will be interesting for additional client segments, and we have also a very good experience that this platform, this technological capability lends itself nicely to B2B cooperation. That's it, ladies and gentlemen, from my side with the update on the strategy and some of the highlights. I now hand over to Thomas for the numbers.

Thank you very much. Warm welcome, and good morning from my side as well. This year, on the P&L side, we were able to show record financial performance. Let me start with assets under management at CHF 244 billion and net new money of CHF 8.1 billion. The operating income was just about CHF 1.5 billion, an increase of 21% over last year. And with the only 12 -- 13% increase in costs, in operating expenses, that has translated into a lower cost/income ratio, which was driven by operating -- better operating leverage and a group net profit of CHF 384 million. That's an increase of 48% year-over-year. What you can see also, our capital productivity numbers are very strong at a return on equity of 18.8%, which has led to a record basic earnings per share of CHF 6.69 per share. If we go now into the details a bit more. Assets under management have grown 11%, as we said, CHF 244 billion, just shy of CHF 0.25 trillion. If you look at the assets under management development, 3.7% was the net new money, 3.7% was coming from net new money. FX for this year, we had a slight tailwind of 0.3%. And then performance contributed 7% of the 11% increase, increased from CHF 220 billion to CHF 244 billion. If you look into the assets under management and net new money, first of all, I would like to mention that we have integrated Platforms & Services and Wealth Management as we have announced at the half year results. That has been done -- that has been an economic decision to further and better serve our ultra-high clients. What you see from the numbers is -- let me start with Wealth Management, had a very strong year. The net new money has been CHF 5.6 billion, which is 6.8% for this year, clearly above our target range. And the good news is it was across all of the business areas and very steadily across the year. So we didn't have big jumps. It was a very steady development over the course of the year. Second interesting and good news is more than 1/3 was coming from new RMs, which shows 2 things. First of all, we are the employer of choice. RMs want to join us. And secondly, a functioning -- it highlights a functioning recruiting and the integration process of new relationship managers. The fly in the ointment is the net new money in Asset Management, CHF 1.9 billion. There's a couple of drivers that I would quickly want to mention. First of all, there were 2 large mandates, large mandate outflows, which together were more than CHF 3 billion. They had lower revenues, so less impact on the revenue side but a big impact here on the net new money. Secondly, TwentyFour and multi-asset have been doing very well in terms of flows. Fixed income has shown very strong performance, but in the second half of the year, we saw some more muted demand due to inflation fees coming up. And then equity could not participate in the industry-wide flows. That would explain the below-our-expectation net new money in Asset Management. If we move on to the operating income, what you can see here is, first, it has been strong growth across the board, except net interest income, which is still a function of the interest rate environment that we're dealing with. Asset Management and Wealth Management grew by 15%, and that basically reflects the fact that what I said early, the outflows in Asset Management were with low revenues so didn't have a big impact on the revenues. The strongest improvement here is obviously Digital Investing with more than 70% growth, which has been coming from significant demand from self-directed clients. And that is also a result of optimizing our distribution efforts and strategic progress that we made across our businesses. If you take a step back, if you take a look at the income composition, it is roughly 40-40-20, 40% Asset Management, 40% Wealth Management, 20% Digital Investing, which is something we consider to be efficient and is a business mix that we believe is good for value creation. What I want to mention as well here, and you'll find more details in the annual report, is we did a restatement though of commission costs into trading costs. So nothing on the top and bottom line, but within the income, we have the commission costs and trading costs changed a little bit between the 2 directions. Let's quickly talk about the margins. Asset Management margin has remained stable. There was a little bit of up and down but in only very, very small changes. We had a bit of headwind from the business mix with fixed income growing more than equity. And we had the tailwind on the other side from performance fees and the large mandates that we have mentioned earlier. But in essence, very, very small movements and a stable return on assets here. What's important to mention here is 2 things. First of all, we demand fair price for quality products. That is one of the reasons why the ROA stays where it is. And secondly, what's important to note is we did not make pricing compromises despite the pressure on the net new money that we had. On the Wealth Management side, the picture is very similar. The commission income has remained relatively stable, down 1 basis point. And if you adjust for the rounding differences, what you would see that most significant chunk of changes was coming from net interest income, which is a phenomenon that we will -- maybe that we have seen for a couple of years now a continuous erosion of the net interest income. But with the latest development of interest rates, we will see how that will look for the coming year. Costs. I think on the costs, we have a good story to tell as well. What you see on the cost growth is significantly less than the revenue growth, which led to a cost/income ratio improvement of 5 percentage points. The cost growth on personnel in general has been roughly 70% were variable costs, and 30% were fixed costs. The 70% on personnel had also the one-off effects that we have described in half year in there. The 30% we're hiring is mostly in the area of front units and concretely in investments, concretely relationship managers and in the digital space. If you look at the general expenses, same thing, 70% were one-off increases, 30% reflect a more normalized environment as we had it in the second half of the year with travel and entertainment expenses going back and also with marketing that has increased. If you look at the cost/income ratio, the marginal cost/income ratio has been at 45%, which is something that we want to aspire to. Of course, it was helped by the nature of the revenues with the strong increase in digital. And Digital Investing, by nature of the digital business, is -- has very low marginal costs, and that is being reflected here. The last remark I would like to make here is we are going to invest more in the next year in Volt and in the analytics, which means we increase our investments on top of our current spend, which will then also have an impact on the cost/income ratio. Capital. We have very strong capital levels. What you can see is we have grown the CET1 ratio to 16.6%. And we have grown the total capital ratio to 23.4%. So even after the pro forma of the SFA acquisition, we would be -- with 14.5% and 21.1%, we would be above the previous year. So capital generation has been very strong this year. That has to do with CET1 capital going up, obviously driven by the strong results. And secondly, we have significantly reduced the risk-weighted assets from CHF 7.4 billion to CHF 6.6 billion. That is a consequence of the new model that we have announced, which would allow us much better cross-border improvement. And also, we have slightly reduced the risk appetite into the second half of the year. The leverage ratio is at 4.9%, up from 4.6%. So if we want to take a step back briefly, so what we did this year is we have 2 acquisitions. We made 2 acquisitions. And pro forma and back of the envelope, those 2 acquisitions contributed more than CHF 30 million of bottom line to shareholders, available to shareholders, and yet we have increased the CET1 ratio from 13.8% to somewhere around 14.5%. So also, that underpins the strong capital generation that we could deliver this year. As a consequence, and Zeno mentioned this already, the Board proposes an increase in the dividend of 33% to 3% -- to CHF 3. The capital productivity numbers that we're showing here are very good: the return on equity of 18.8%; the return on tangible equity of 26%; and for comparability with other banks, we are also showing the return on CET1 ratio, which will be at 34%. If you do the math, look at cost of equity and the return on equity, we would end up at almost CHF 170 million economic value added back of the envelope, which is also a record value creation that we have shown this year. Summarizing it all up. We were below the target in net new money, yes. We had some tailwind from the market, yes. But we also made good progress on a couple of strategic initiatives, as Zeno has mentioned, and also financially with good operating leverage, with a strong capital productivity and strong value creation. We've acquired 2 firms additional, adding more than CHF 30 million to the bottom line, these are always pro forma numbers, despite increasing the capital ratios. So the -- so we have been doing very well. Net new money, as we mentioned, is below our expectations. All the numbers are doing -- are in the range or above the range. For the payout ratio, we would quickly mention that, first of all, we did 2 acquisitions this year. That's why it dropped slightly below the 50%. And we have a strong focus on sustainability of the dividend. So for the financial outlook. We are going to step up our investments in technology next year. We continue our capital efficiency work that has delivered a significant contribution to the risk-weighted assets reduction. We will further be cautious with the risks in an environment that is driven by uncertainty. And as long as the uncertainty persists, we will be cautious. And we will continue to work on being able to scale and improving our scale benefits. So that's all from my side, and I hand back to Zeno for the outlook.

Thank you very much, Thomas. And then let's move into the outlook for 2022. So as we have seen, we delivered very strong financial results but which has seen more important, going forward, strong strategic progress. And we increased significantly our abilities going forward to deliver organic and inorganic growth. We enter 2022 with confidence. We are aware that we have inflationary uncertainty. We have geopolitical risks. And despite some, I would say, very, very strong light at the end of the tunnel, hopefully, obviously, the pandemic is still with us. We will focus in 2022 on a number of things. One is we intend to scale further our ESG offering and make that more prominent in the part at the point of sales to our clients. We continue to work very successfully globally with the global banks partners, and we think we can do more together. We will bring all the boutiques to the U.S. marketplace and have them online in the U.S. market. We reach for completion of the SFA integration by Q3 and also aim to kick-start then this cooperation with UBS Americas. And we are now ready to bring Volt to the Swiss marketplace in Release 2.0 in H1 of this year. How did the year start? We had a robust start into 2022. We had a robust start both on revenues as well as on the flow side. So the year has started in an acceptable way and in a robust way for us. That's my update on outlook. And Thomas and I are happy to have your questions. Again, log on the telco or on the chat as you prefer, and I will try to manage both channels. And Thomas and I are happy to answer your questions.

So we have a first question on the chat that somebody may only be logged in by phone. I propose to read the question out, so that then everybody can digest the answer. So it's a question from [ Peter Berger ] from the Basler Kantonalbank. First of all, he congrats us for the numbers. Thank you very much, Peter. And then he has a question on custody assets which went down in 2021 and asks for a bit of color around that. I would say that this still relates to -- in 2004 when we deepened the cooperation with Raiffeisen, we not only deepened it on the investment side, where we still are cooperating very successfully, and we are very happy about that cooperation, and that goal is also still significantly into the future, but we also provided some custody services to Raiffeisen. And during the last year or in 2020 and in 2021, part of these custody services have been moved to a specialized custody providers, which is fine for us. Any other questions, ladies and gentlemen? I think we have a question from UBS on the phone. Nemes, please go ahead.

Yes. I have a couple of questions, please. Firstly, on Wealth Management and Wealth Management gross margins. We've seen quite a significant drop in the second half of the year versus first half, if I'm not mistaken, about 9 basis points. Could you perhaps give us a bit more color on what has contributed to that perhaps beyond the obvious high base effect in the first half? And secondly, going into 2022, what sort of gross margin level do you deem realistic? And I heard your comments regarding a robust start to the year. If you could help on that one. Secondly, I've noticed that RWAs decreased quite significantly, if I'm not mistaken, about 11% year-on-year. From the annual report, I've read this is the result of partly collateral optimization on Lombard loans and also perhaps shifting into higher quality, lower risk-weighted assets in your securities portfolio. I'm just wondering if you could give us a bit more details on that. What does that actually mean? Have you shifted your financial portfolio almost completely to government bonds and whether this process is still ongoing or this is largely done now? Third question on costs and investments. Thomas flagged that we should expect technology investments in 2022. And I believe you're also hiring at least on the Wealth Management front. If you could clarify what impact we should expect from these on your cost base in 2022 and also perhaps a very quick update on the technology investments that you're making. These 3 questions.

Yes. Thank you very much, Nemes. And I propose, as it is very linked, Thomas, we have also a question on the chat from Michael Kunz, who asked for RWA from lending are down while loans on balance sheet are up. Is it just a new model or is there something else? Perhaps we could weave that in. So I would just state 2 principal or 2 general remarks on the questions, and then I would gladly hand over to our CFO to go through the 4 questions more in detail. Perhaps on the margin outlook, we stick to our targets. So we think that the quality we deliver allows us on the Asset Management side to ask for 40 basis points on average. And it also allows us to ask for 70 basis points as a target on the Wealth Management side. We stick to these targets. And despite then the second half developments, we see no reason why we could not match these 2 targets. And on RWA, there is a lot of technicalities and a lot of work around that. I'll leave that to Thomas. But obviously, it was one of our overarching goals when we shift -- I mean, this is a process now over years to shift to ever more capital-light businesses. And part of what you see now is simply that we say what we do that we deliberately shift to more capital-light business models to increase the capital efficiency of our whole investment firm. But with these 2 general statements, I leave it at that, and I hand over to you, Thomas. Is that fine?

On Wealth Management, on the gross margin, as you see on -- let me start on top with the net interest income. Let me go to -- let me start with the net interest income. Net interest income, what we're seeing is the U.S. dollar effect now for the whole year, which last year we had only part of the year. And the second thing that you would see there as well is on the credit provision side, on the credit provision side, last year, we have released credit provisions. This year, we had to build credit provisions, which also explains part of the difference. The other reason why there is a certain pressure, as we have said it all along the way, we're pushing towards ultra-high clients, getting into the ultra-high client segment, and that naturally comes with a slightly lower margin. So it's not yet that this would have a significant impact, but we're starting to see this. So that's what you would see then in the trading results. Overall and also in the second half, we had a bit of seasonality. The trading result in the second half was -- there was more active trading than in the -- sorry, in the first half, there was more active -- customer activity, client activity, more active trading than in the second half of the year. Then on the -- let me quickly jump to the RWA. On the RWA, that what we have done and what we have said is we started already 1.5 years ago, 2 years ago, we have started a program called capital light, which basically means we're looking towards how can we better use our risk-weighted assets and where can we deploy them better. What you have mentioned on the credit side, that is one of our specific efforts to go through the book very, very consistently and see that we can do, for example, Lombard lending, upgrade the collateral. We were working with the clients to upgrade the collateral to reduce our risk-weighted assets across the board. By the way also, if you take a look and if you compare the number, the credit volume in the second half has grown only very, very slowly. That goes in line with what we said a bit earlier that we have been careful with risk-taking in the second half of the year. For the other things is -- what we have done is we have upgraded our holdings on the treasury and bond books. And what we have done is we have built up our HQLA buffer. That is something that most people -- most banks are doing or working towards. That goes in line with FRTB and other regulatory developments but also with a focus of us trying to understand or trying to better balance out is what's the risk-weighted assets versus the return that we're willing to take. The question then there was the loans. That, I have answered already.

Yes, I think. And then on costs, yes.

And on the costs. On the costs, the investment is -- the investment in Volt and what we said is in analytics. So currently, we're estimating that we -- first of all, what's really important is we cannot take significant investments in Volt and analytics and choke off the investments we want to do in the other business because the other business is developing very well, is showing strong growth, so we have to put that on top. Those, I can give some broad numbers, which are in the range of CHF 20 million to CHF 25 million that we are planning to invest for next year on top of the investments that we are already taking on the IT side, the general investments for running the bank and furthering the bank in other areas. So those would be the tech investments that we are foreseeing.

Great. Then any other question? Yes, we have another questions on the chat channel from Anne. About your American strategic move, one, will you target onshore clients? Second, how much do you see the contribution of the U.S. in the bottom line at the end of '22, '23 and '24? Anne [indiscernible], the very tough and detailed questions. First, the answer to will you target onshore clients, it's no from the offering side and then, of course, from the regulatory side. Talking to Swiss headquartered wealth managers, it's usual to ask us, is it offshore or onshore. We should just never forget that I think Vontobel has shown that we have never forgotten, there is no offshore with the U.S. regulator. U.S. regulation for SEC-registered companies and U.S. regulation for U.S. citizens works globally. So there is never such a thing as an offshore U.S. client. And the operations we also run here out of Switzerland are fully SEC-licensed and fully no single difference towards operating geographically on U.S. soil or in another part of this world. The second -- but the second aspect is on the offering side there. Yes, we will remain completely different. The U.S.-based typical offering is obviously heavily tilted towards U.S. investment, and it's also heavily tilted towards advisory and brokerage. We will not go there. We stick to our core capabilities, which is bringing global diversification, global investment portfolios and preferably in a discretionary manner to those clients. So we are the global diversifier to U.S. clients. And that's also why this cooperation between UBS Americas, which is 1 of the top 4 wirehouses, and us as a niche boutique provider for a very specific global diversification need makes sense. And then on the second question, we show assets. And per key market, we will continue to report that we will not start disclosing profitability bottom line for single regions. Then we have other question again from the call. We have a question from Mediobanca.

I have one on target, a couple on Asset Management flows, and then I just want to dig into Volt a little bit more. On targets, clearly, you're not moving around the 72% cost/income, the return on equity group target either. I get you've got a bit of cost inflation and spending to do this year, but you'd assume some growth in revenues opposite that. So why not move the target? Is there a bit of a question mark about sustainability of some of the Digital Investing revenues? Secondly, Asset Management flows. Clearly, the robust comments year-to-date is helpful, but the top-down commentary is that equities has been a bit slow. Fixed income has kind of dropped off in just the second half. I mean can you give us the timing of the mandate -- single mandate outflows in fixed income, just so we can phase that 1H versus 2H, but also just comment on the outlook there and how you see the balance of flows, Asset Management versus Wealth Management? And then finally, on Volt, very interesting. I think, clearly, a very larger peer has been talking about a similar offering in their U.S. platform. I mean how far through the investment cycle there? How much more cost is there to build it out? How do you see the P&L developing over the next couple of years on that specific business line? Just a bit of an idea of where you are and how you think that could drive growth in the Wealth Management franchise.

Yes. Thank you very much for these questions. So first of all, targets, no, we will not move them. We stick to our -- I would say, our pattern that we try to run this company very long term, very systematically. We have this 10-year ambition. And then we do 2-year business plans against which we report. These targets will stick around until end of '22. I think we have shown in the past that we are not shy of beating targets. And also you should know that this is all disclosed in the annual report, but there is absolutely no financial incentive for senior management on performance relative to targets. All the incentive schemes are linked to performance relative to actual numbers. So you should get no slowdown in our ambition to do better from not changing targets. Then perhaps we also do not guide for revenues or concrete numbers, but perhaps you asked about the sustainability and kind of the conviction about the ability to maintain revenues. I would say the dividend is quite a nice guidance to that, as Thomas has already stated. And I can only reinforce that there is a strong, strong commitment to us to repeatability and sustainability of dividend levels. In fact, we have now a more than 10-year history of dividends never going down, and we have absolutely no intention to break that pattern. And therefore, the significant increase of that shows you that the Board shares the conviction that we will -- that we have a revenue base that will allow us to make even a CHF 3 dividend a repeatable one. That's probably the best guidance or the best color I can give you to what we think about the repeatability on the revenue side. Perhaps another aspect on digital revenues, yes, of course, it was a strong demand from self-guided investors. But I would also allude to that we have significantly and very systematically improved how we work with this type of clients, how we interact with them, how we speak to them, where we find them. And our abilities to do that has broadened and stabilized heavily. Then on the Asset Management flows, I don't know, Thomas, can you give details to the timing of the 2 outflows?

Yes. The first one happened in Q1. We've already announced this in the half year that was -- half of it, CHF 1.5 billion outflow, that was part of an acquisition that we did where this was already included. The second one happened in Q3. There was an outflow in the multi-asset area, very large mandate, also had some overlay mandates which we count in the ACA, as you can see, the advised client assets. So those were down as well. But that is this one mandate that had a mandate and ACA a part of it where we had an outflow. They were both relatively low single-digit basis points. That's why you won't really see that in the revenue numbers.

Then on a bit of color on flows. Again, fixed income, we have a very broad, strong offering, highlight a few core capabilities, multi-sector bond strategies, asset-backed securities, asset-backed investment strategies, then the emerging market debt franchise, which is a top 10 franchise on a global basis, and also our corporate credit offerings. We do performance-wise very strong. People do not regularly allocate into rising interest rates. However, we believe and we also see that our flexible bond strategies, the multi-sector offering will work also in that kind of environment. So we have seen a similar pattern in '21. The first quarter in '21 was very slow in fixed income, net new money, and then the whole year was very strong. So we're not getting nervous with a few weeks of people need to digest where interest rates will truly go. We, as a firm, do not believe that this is the start for 2-, 3-, 4-year significant and regular world of increasing rates. So that's on fixed income. Multi-asset class, strong performance last year, return of the quant strategies, strong interest from institutional clients, good interest from partners, distribution partners. We think the need to look for highly diversified, active multi-asset class strategies will only grow as expected returns on many asset classes continue to come down. We see that perhaps also when we look at Wealth Management flows, where 70% goes directly into mandates, which I think is a very strong sign that even on average, more sophisticated, high-net-worth to ultra-high-net-worth individuals ask for more systematic advice and for mandate solution. Then on the equity side, '21 was really the 2 main equity strategies we run both suffered from the momentum environment. At least for the emerging market piece, which we run out of the mtx franchise, Q4 and January has been a significant turnaround as markets are looking for a more rational assessment of fair valuations. Let's see. I mean we are convinced that what we do in the portfolios and what we own is fully style consistent and is what clients want us to own. And things do turn -- can turn very fast. Let's see. We do not guide for quarter-to-quarter net new money, but I see no indication that we would not, through time, both on the Wealth Management side as well as on the Asset Management side, deliver against this 4% to 6% target. Then on Volt, perhaps one thing is we profit here also from all the investments we have done over the last years. So this is not done kind of in a start-up sandbox environment, but that taps fully into the infrastructure of our whole investment firm, meaning that client onboarding, compliance, investment control, all this stuff can be done out of the existing infrastructure, which I think is a testimony to the systematic investments we did over the last years. Thomas guided you for the additional investments. We think that this guidance is enough to build a tech stack and to go to the market. I would also like to say a very important point. Long term, we believe that the way how Wealth Management clients want to interact with a wealth manager will go hybrid and more digital anyway. The next generation will be there anyway. So we need to invest in this journey. And we also believe that our brand and our investment capability will help us to build a client base. We're not interested in buying clients and then selling off this business. This is a part of our strategic journey. Is this answering your questions?

Yes.

Good. Then we move on to [ Daniel ] from Credit Suisse also from the phone, please.

And also from my side, congratulations to the strong results. I have, let's say, 2 more or less straightforward questions and then 1, let's say, a little bit of cluster of questions about -- around your margin guidance. Maybe the first question is on the U.S. And obviously, the U.S. is kind of a cornerstone in your growth ambitions. Can you maybe elaborate a bit more what exactly you see in terms of opportunities in the U.S. markets? Obviously, it is one of the largest and one of the fastest-growing markets but also, at least from what I hear, one of the most competitive markets. But where exactly is your sweet spot where you see your advantage compared to your competitors in the U.S.? And then maybe the second question, again, a little bit around Digital Investing. Can you maybe give me some kind of breakdown of the top line or what exactly is driving the results in digital? Obviously, structured products was a significant driver. I understood that. But how much was this in terms of year-on-year change attributable to structured products and what was the rest? Or I just try to get a little bit of sense or I still struggle to see what is the, let's say, long-term potential of Digital Investing, yes. And then the third question around margins in Wealth Management and Asset Management. And thank you for the clear guidance with the 70 basis points in Wealth Management and 40 basis points in Asset Management. I just wondered a bit, what is exactly baked in, in the 70 basis points in Wealth Management business? Is this based on, let's say, normalized interest rate environment? Or is this based on the current interest rate environment? If you just could elaborate a bit on this.

Good. I propose that I start with the U.S. and Americas. And Thomas, can you take the next 2?

Yes.

Yes. Good. So the U.S., I mean it's surely the deepest financial market in the world. We all know that. It's the biggest, the deepest, but it's also the one -- the sophistication also brings demand for differentiation. So even what looks from a global perspective on the U.S. market as something very small is a significant opportunity for somebody like us. I think one of our key advantages we have is we don't try and we don't have to be everything to everybody. We can focus on what we do best and try to leverage that. And that's exactly what we try to do in the U.S. So I give you a few examples. So for example, what do we bring from a fixed income perspective? From a fixed income perspective, how are U.S. investors invested today? They are heavily -- I mean, everybody has reached out to higher yields and higher carry. Where this -- does this come from? For the typical U.S. investor, it comes typically from high-yield bonds. When you deep-dive into high-yield bonds, it has a huge allocation to the U.S., and within the U.S. allocation, a huge allocation to the energy sector. Now we bring a similar level of carry with completely different underlying business risks. We bring a similar carry with emerging market exposure, or we bring a similar carry with our multi-sector bond funds with a global/European exposure. So we bring diversification benefits without compromising on yield. Now you can tell me, well, okay, but this is the only 2% allocation when the U.S. invested diversifies out of high yield and energy into a little bit of emerging market. I say, yes, that may only be a 2% allocation, but it's a 2% allocation within 60% of the global fee pool. So this is the logic. We are very differentiated, very narrow in areas where we know we belong to the best from a global basis. And there, we try to bring a benefit in regards to the current offering to U.S. investors. Same is true on the Wealth Management side. It's only a very limited number of U.S. Americans that think about having part of their money run globally diversified in different currencies and booked in Switzerland. But as you see, these are significant numbers. We have bought [ 6 billion ] plus from UBS. We already [ won 4 billion ]. We are now the #1 in this segment. So niches and clear positioning do offer significant scale to us in the U.S. market. But it's competitive, it's tough, but what I -- we appreciate as well in the U.S. market, it's not only the professional level, but it's also the willingness to pay for quality. When I look at return on assets, we realize with U.S. investors that take a conviction call for an active investment partner, they pay for quality. And that is something we appreciate a lot. So these are the reasons that attracts us to the U.S. market, and that's the kind of the core logic how we address that market. Thomas, some color on digital and margins.

On digital, what's important is we can't and we will not guide on the revenues and the revenue development. What I can say here is, basically, as you know, it is structured products and leverage products. We have seen this year more demand from the leverage product side than we had before. We said that also in half year, there was a return over the whole course of 2021 that we saw much more retail investors coming into the market, taking positions and being more active in trading after they've been absent basically since 2008. That is something that we can see. There's a couple of other effects that played a role in the good results. One of them was we made significant progress in Hong Kong. Also, that is something that we have said in half year strategic progress. Market share has grown significantly. And then last year, don't forget we had the -- we have -- on the hedges, we had quite some hedging costs driven by the 2020 March decline, where we decided to derisk very quickly. This has normalized over the course of this year and also contributed to what we have -- what I've said earlier to the derisking of the portfolio in general. Those were the main drivers. I mean, retail investors, we see on the structured products, we also see good demand. And that's the situation, and that's what we can currently speak to.

And I think there was another leg of the question on margins.

Yes. The other one was the margin. The last one was the margins. We can still see the margins here. Look, we have guided to the 70% that, that is what we're trying to aspire. On the net interest income, it is difficult to say. We would expect from the recent developments that we do see, let me call it, an easing of the environment -- of the interest rate environment. So towards higher interest rates, which would basically mean we should see some recovery on interest rate income. On the commission income, the situation is such. It was -- 2021 was also a good year. We're mostly -- as you know, we have -- most of our revenues are coming from recurring fees. That part that comes from really nonrecurring and strictly transaction-based income, that is rather a small part that we have in Wealth Management. And that may -- that we will see how this year is going. In general, any form of volatility is helpful. So if it's up volatility, it's good. If it's down volatility, sidewards moving, markets will be a bit more difficult to do here. But we believe the 70% should be okay. And we're not particularly guiding towards massive increase in interest rates. We don't believe that this is going to happen, in particular, not over the whole year. But we believe the 70% from the composition of the margins, as we see today, that's a number that we would feel comfortable to aspire to. It doesn't mean that it can't go slightly below, but in the long term, we believe that's what we want to achieve.

Okay. But the 70 basis points I think you were talking about, this is based on the current interest rate environment and not already including any hikes in interest rates in the U.S., for example?

No. No, it doesn't include any hikes. But on the other side, we had good -- we had now 2 relatively good years in terms of transaction-based income. So we shall see how that will balance out over the course of the year.

Good. Then perhaps to just weave in into your answer, I had on the chat another question from Michael from ZKB asking for some flavor on Digital Investing products from the regions. Actually, all regions have been doing well, but we made really significant progress both in Germany as well as in Hong Kong, where the more systematic approach to the business. And also now in Hong Kong, the multiyear tenure in the market has helped us. Then he asked the one million dollar question, do you think activity will remain high there in 2022? We had a robust start into the year. Again, it's not only -- we are not only receivers of activities. We're also systematic developers of our business. It's early days. Let's see where the year goes. Then I would propose that we give the last question to Anne from Octavian on the phone. And after that, ladies and gentlemen, I would have to close the session. Anne, last question belongs to you.

Yes. I have a question on the Asset Management opportunity. As you mentioned, you have -- you are transferring -- integrating your Asset Management on the State Street platform, and we discussed a lot on the U.S. But since it's a global platform, how do you see your growth opportunity maybe in Asia using this platform? And maybe a second question would be on the -- on your platform, cosmofunding. I mean, on the credit side, you mentioned that you are always very cautious. And now with the platform, like cosmofunding, you're like in between and participating in the private debt opportunity. So what's your growth ambition in that field? And how much do you think it can contribute to your operating income going forward?

Yes. Thank you very much for these 2 questions. I take the Asset Management State Street data question, and Thomas will answer your cosmofunding question. So we are migrating our investment boutiques on the State Street Alpha platform. A couple of reasons, a, when we run a multi-boutique setup, but multi-boutique predominantly means independent investment teams, and we have one global sales force, and we also try to have, to the degree, sensible and possible one global operational platform. And State Street offers an end-to-end solution starting in the middle office to portfolio management, to risk management support. And their acquisition of some strong portfolio management tools has helped us, so that is predominantly an investment into the scalability and the operational quality. And it was also a prerequisite to introduce this system for the Zurich-based boutiques in order to answer some of the U.S. regulation that we need in order to export Zurich-based boutiques to the U.S. So that is the background. And that just is a very strong investment commitment into our boutiques and into our Asset Management scalability. In Asia, we do not see trigger points from this introduction. The trigger points were towards the U.S. We can access Asia with the current system environment. Perhaps 2022 will be surely a key point for what we have been doing now in Japan. We have been doing a fly-in, fly-out model with partners in Japan for the last 10 years. Last year, we decided to go onshore. We set up a business in Japan. Japan is the second largest market in the world on the institutional side, as we all know, also a very strong wholesale market. We are having -- entertaining interesting talks. Japan takes time. We are committed to that. We have the advantage of our controlling shareholders that give us time, but I would not exclude that Japan brings some strong contributions on Asset Management development over the next years in Asia. Thomas, a bit of color to cosmo?

Yes, cosmofunding. Cosmofunding, a couple of remarks before -- you mentioned that we are being very careful with risk. I would rather say we're cautious. That basically means we're not hitting or slamming the brakes on taking risk. We're just careful and getting ready in case the market is turning down, it might get more difficult. It can be strong interest rate rise or whatever that is. And just step-by-step, we're starting to be very careful. Cosmofunding is a start-up. It's currently doing mostly business that is coming from outside. Cosmofunding is one of our key initiatives as well. They show this classical exponential growth until now, basically doubling every 9 to 12 months, doubling the operating income every 9 to 12 months. And so for the time being, we don't see a slowdown there happening. One of the things that we have mentioned a couple of times is we want to use cosmofunding also more to provide financing to our wealth management clients. It's about larger real estate and so on. We're currently hooking that up and linking this together. We have done deals in that regard, and they have been very successful. So that is one of the areas for us to go towards a capital-light model, i.e., we keep the client, we have the discussion with the client. But the financing is not taken on the balance sheet. It goes out through cosmofunding to other partners or other interested parties. So that's the key thing what we're driving towards. Cosmofunding is these 2 areas. First of all, it will help us ease our balance sheet development and the risk-weighted assets. And secondly, it is also a business in its own right that is developing very nicely and, we believe, will continue to develop very nicely.

Good. Thank you very much for your interest in Vontobel, for your engaging questions. We appreciate the dialogue with you. We learned from it, and it helps us to improve continuously. Thank you very much, and have a successful day.

Thank you.