Ninety One PLC
LSE:N91
Earnings Call Analysis
Q2-2024 Analysis
Ninety One PLC
Ninety One, facing headwinds after a record year in 2022, reported a 7% decline in assets under management to GBP 123.1 billion for the six months ending September 30, 2023. This decrease is attributed to net outflows totaling GBP 4.3 billion combined with a fall in portfolio values. The company's resilience, rooted in a 32-year history of overcoming market cycles, is reflected in their sustained operating margin of 32.6% despite a reduction in basic and adjusted earnings per share by 5% and 9%, respectively, and a 9% lower dividend at 5.9p per share compared to the previous year.
In challenging times marked by increased interest rates, geopolitical disruptions, and risk-averse investment behavior, Ninety One has maintained focus on areas where it can build market-leading positions, especially in emerging markets, which accounted for more than half the capital managed by the firm. The company's commitment to sustainability is evident from positive net inflows in their sustainability and impact platform. Management is confident in the firm's ability to regain growth momentum when the cycle turns, backed by a no-debt, high-margin business model and a targeted investment strategy aimed at capturing a substantial share of the roughly GBP 9 trillion addressable market.
Ninety One reported a 9% decrease in adjusted operating revenue to GBP 299.6 million and a similar rate of decline in operating expenses to GBP 201.7 million, resulting in a steady operating profit margin. Management fees dropped by 10% while performance fees slightly increased. Despite lower AUM and profit figures, the firm maintains cost discipline and a robust capital position, allowing them to navigate through this downturn with strength, invest in core competencies and sustain shareholder returns through dividends and share buybacks.
Although the business experiences slower demand due to favorable yields from risk-free assets, Management remains focused on enduring client relationships and competitive investment performance. The company's firm belief in the cyclical nature of current market conditions and a consistent strategy for long-term organic growth outlines the readiness to capture opportunities once investor confidence and risk appetite return.
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Good morning, ladies and gentlemen. Welcome to Ninety One results presentation for the 6 months to September 30, 2023. Thank you for joining us here in our London offices and virtually wherever you may be. I want to highlight the key numbers before moving to the business review. Kim McFarland, our Finance Director, will then present the financial review. I will then conclude with an outlook before we take questions. Those of you who are participating through the webcast can submit questions during the presentation via the chat function at the bottom of your screen.
Assets under management have fallen by 7% to GBP 123.1 billion on the back of net outflows of GBP 4.3 billion and a fall in the value of total portfolios. Our basic earnings per share and adjusted earnings per share for the reporting period fell by 5% and 9%, respectively, compared to last year. The Board has declared a dividend of 5.9p per share, which is 9% lower than last year. We were particularly pleased to have maintained our adjusted operating margin at 32.6%. It is important to remind you about the business model, which has served us well since inception. We're a client-focused, people-centric, specialist active investment manager. We are capital light and increasingly technology enabled. We differentiate ourselves from the pack through our organically developed investment capabilities and track records and our emerging market heritage. And relative to most businesses of our size, we have substantial global reach, allowing us to engage our chosen client segment in different regions. Over the years, we've developed an owner culture, more akin to that of the enduring partnerships as opposed to that of the average public company. Our employees collectively own more than 29% of Ninety One.
All this lets us run a business with a clear purpose, namely investing for a better tomorrow. We do this by building a better firm, working to become better investors and contributing to a better world. Sustainability with substance is at the very heart of what we do.
This is a familiar slide to you since we are a long-term-oriented business, I always remind shareholders of the long-term picture. After a record year in 2022, we have faced headwinds. In times like these, it is important to draw strength from history and experience. In our 32 years, we have been through many ups and downs. And although every downturn is different, our organizational memory and resilience always helps us navigate through. I'm confident that the people of Ninety One will continue to create value for clients and shareholders over the long term.
Like the 2023 financial year, market and business conditions remain challenging. In a world where risk-free assets have become much more compelling, investor appetite for risk on strategies has been muted. In response, we have significantly sharpened our focus and doubled down on our efforts to concentrate on areas where we can build market-leading positions. We retain our growth mindset through this down cycle, but acknowledge the need for cost discipline. Our staff remain highly committed and motivated and this is evidenced by the increase in shareholding. We are confident that Ninety One will retain or regain its growth momentum in due course.
Allow me to explain the market and business conditions we experienced in the reporting period. Interest rates have gone up dramatically in the last 18 months and higher than the market had initially anticipated. In 2022, inflation reared its head for the first time in many years in the advanced economy. Geopolitics has been extremely disruptive, not just the war in Ukraine, but also growing tensions between the global superpowers and the current instability in the Middle East. Equity market performance has been extremely narrow and emerging markets have seen persistent outflows. Because of these factors, we're seeing a pronounced risk of stance by asset owners, impacting flows into the active management industry. Because we believe that these conditions are cyclical and because we have a robust and resilient business with battle hardened staff, we are confident that we will eventually regain our growth momentum.
Drilling down into some of the market factors, here is a 25-year chart showing the Fed policy rate, 10-year treasury yield and inflation in the U.S. The speed at which interest rates increased was unprecedented. Initially, this impacted asset prices. But as inflation was arrested and real yields expanded, demand for safe U.S. dollar-denominated assets surged. The other side of this trade was a sharp decline in the demand for risk assets. We've seen money market funds grow to unprecedented levels, while investors assess the situation from the sidelines.
Performance of fixed income assets has been dire, with many recording capital losses as interest rates rises work their way through. In spite of drawdowns in so-called risk-free assets, they are now attracting new money given the attractive yields on offer.
Similarly, we've seen muted returns including losses in the equity space, which do not encourage substantial inflows. The U.S. equity market has been the only real standout, but if one looks under the surface of the headline numbers, the positive performance has been driven by a narrow set of seven technology companies. The so-called Magnificent 7 saw a nearly 90% rise in share price in the first 9 months of the year, leaving the return of the S&P excluding them at a near 2%. The majority of Ninety One's client mandates are aligned with the red bars, namely MSCI ACWI and the broader market.
Turning to emerging markets. Both fixed income and equities have been in a tough period as far as flows are concerned. More than half the capital entrusted to us by our clients must be invested in emerging markets according to the mandates. It's not surprising to see capital being repatriated from emerging markets given the current low interest rate differential with developed markets. It is difficult to estimate how long this will remain. What I do know is that the situation can change very fast.
Over this period, our usual diversifier developed market equities have not been invoked. Asset owners have used public equity as their banker to upweight fixed income and meet previously contracted private markets commitments. This should change as rising cost of leverage and falling valuations will mute PE returns and the value of good publicly listed shares will become apparent again.
These conditions provide context for our results. Following from the message I gave you at the full year presentation in May, it has been more of the same. Our AUM declined in the first half due to a combination of a GBP 4.3 billion net outflow and a GBP 1.9 billion negative market impact number. We closed the period at GBP 123.1 billion under management.
Let's assess the flow picture through an asset class lens. There were net inflows in the South African fund platform and in the alternatives platform. Other asset classes saw net outflows primarily due to reduced risk appetite that we've discussed already. This is, of course, most pronounced in the demand for equities that have accounted for most of our outflow despite seeing net new wins in our sustainability equity platform.
In terms of our client group split, our South African team has again defined gravity with positive net inflows, reinforcing our market leadership there. Across other markets, the experience of a reduced level of demand for our risk on offerings has been very consistent, in line with expectations given the global market backdrop. We experienced outflows in both of our channels with a bulk of the net outflow from the institutional channel.
Let me summarize the flow dynamics of this reporting period. Last year, net outflows were largely driven by redemptions for the purposes of derisking. This year was all about slower demand or an unwillingness by clients to commit to risk when attractive yields could be harvested elsewhere. Investment performance has remained competitive in spite of challenging market conditions. Albeit somewhat weaker than in March and lower than where we would like it to be, our long-term performance is competitive against benchmarks and more so against peers. In volatile markets such as these, short-term numbers can change significantly on a monthly or a quarterly basis.
Mutual fund performance, as presented here, is a proxy of peer group competitiveness. We are satisfied with these results. Ongoing competitive performance is key to positive flow momentum when business conditions improve.
In tough times like these, it is critical that we have conviction across the firm. In recent months, the leadership team has spent significant time interrogating our strategy and ultimately confirming it. Our strategy is clear. We should not let the current cyclical headwinds divert us from the task at hand, which, if well executed, will reward clients, shareholders and the people of Ninety One handsomely. The depressed demand for risk assets is cyclical, and we believe that the cycle will eventually turn.
And because we operate a high-margin business with no debt on the balance sheet and a flexible cost base, we can take a long-term view. Our business model is tried and tested, and this is not the time to change that. We know that success in active management requires full commitment and minimum diversion. That's why we believe in long-term organic business building. We will stick to that -- to what we do and do it well and not be diverted into areas in which we have no edge. This is no time to chase current flow momentum.
We are clear about the opportunity available to us and are approaching the current conditions with strategic clarity, strong commitment and a sharpened focus. The price is large enough with our -- within our core investment competencies. We are currently competing in a market which is roughly GBP 9 trillion of -- or has GBP 9 trillion of assets. Capturing just 2% or 3% of that market, which we think is a reasonable estimate of what Ninety One can sustainably achieve will make a material impact on the scale of the assets we manage and the value of our firm. This is how we are going to power through the middle ground. But execution remains key. We are sharpening our focus on competencies in which we can realistically build positions of market leadership. Internationally, we are building deeper relationships with fewer asset owners to provide them with differentiated and expert solutions from our specialist equity and specialist fixed income and credit platforms. In South Africa, we intend to strengthen our market leadership.
Furthermore, our commitment to sustainability has also opened new organic growth opportunities ahead. In the first half of the year, our sustainability and impact platform defined market conditions and recorded positive net inflows. In summary, we will focus where we can win and relentlessly drive to be better and more competitive. We stay close to our clients through the cycle and are ready to capture flows when risk appetite returns.
I now hand over to Kim McFarland, our Finance Director, who will take you through the financial review. Kim?
Thank you, Hendrik. Good morning all. So once again, and in the same format as previously used, I'm presenting our interim results to September 30, 2023. The results are effective of the current environment that Hendrik has already summarized. The highlights are as follows: adjusted operating revenue decreased by 9% to GBP 299.6 million. Adjusted operating expenses decreased by 10% to GBP 201.7 million. This resulted in an adjusted operating profit of GBP 97.9 million, a decline of 9%.
After taking account of the increase in adjusted net interest income and the share scheme net expense, profit before tax decreased by 6% to GBP 104 million. There's no surprise to see the uptick in net interest income in the current market and the share scheme net expense is an IFRS 2 accounting adjustment, which we will continue to show separately. The effective tax rate for the period was 23.8%, and the key reason for this increase is a change in the U.K. corporate tax rate. The above factors resulted in profit after tax decreasing by 6% to GBP 79.3 million. The adjusted EPS declined by 9% to 8.2p in line with the fall in adjusted operating profit, as I explained above.
Consistently, I have reported adjusted operating profit by adjusting for such items as lease interest, subletting income as well as removing the contrary impact of the revaluation of the deferred employee benefit schemes. The adjusted operating profit margin held constant at 32.6% due to adjusted operating revenue and expenses declining at a similar rate. We are confident that the adjusted results as referred to here reflect the true operating position of the business for the past 6 months.
So this slide provides further details on the adjusted operating revenue, which decreased to GBP 299.6 million. Management fees decreased by 10% to GBP 282.2 million, in line with the first half -- in the first half. The adjusted AUM decreased by 9% from the comparable 6-month period to GBP 125.3 billion. The average fee rate held at 45 bps, just slightly down from 45.2 bps at 30 September '22 but at the same level as the average fee rate for the full year to 31 March '23. Performance fees increased by 10% to GBP 12.1 million and were in line with guidance and expectations. Always difficult to guide on, but we are comfortable these levels are indicative of future earnings. Other income of GBP 5.3 million consists of operating interest and the net gains on FX and investments.
The next slide shows an analysis of the adjusted operating expenses over the comparable 6-month periods. Adjusted operating expenses decreased by 10% to GBP 201.7 million. A key expense was once again employee remuneration. Employee remuneration as a percentage of total adjusted operating expenses reduced to 65% against 66% in the comparative period. The total remuneration expense decreased by GBP 17 million or 12% to GBP 130.3 million. The key driver here was variable remuneration, which fell in line with the decline in adjusted operating profit. This alignment we have clearly articulated in the past, and we are committed to as a business. Variable remuneration remains over 50% of employee remuneration and this resulted in a compensation ratio decline to 43.5%.
And turning to business expenses. These decreased by 6% to GBP 71.4 million. All areas showed a decrease since the prior period, except for travel, which has marginally increased. We've increased the decline and this time, the exchange rates were in our favor when it came to expenses. And to summarize, inflation-linked impact of a positive GBP 2.1 million for those costs impacted by inflation. FX linked impact of a negative GBP 6.1 million with the weakening of certain currencies namely USD and ZAR, and then what we regard is actual reductions of GBP 0.3 million. This means business costs were largely held flat after taking into consideration the impact of inflation and FX.
The comparable period split of these expenses remain largely unchanged. And looking ahead, we anticipate the business expense will change with the mixture of inflation and FX pressure. At the same time, there remains a strong cost discipline in the business, even while we do continue to invest in our growth initiatives, as mentioned by Hendrik. We expect and guide for variable remuneration expense to be aligned with adjusted operating profit and for us to continue to manage our fixed remuneration and business expenses.
This slide shows the total business expenses as a percentage of average AUM in bps of a 7.5-year period, covering the period both pre and post the listing period in March 2020. And the key message here is the consistency of business expenses as the business has developed. The slight uptick can be attributed to the decline in average AUM levels. But as we noted before, remuneration expenses have declined, business expenses to a lesser degree, and we are managing closely to keep expenses below the highs seen pre-2021.
And so to summarize here, this is a graphical representation of the absolute movement in our adjusted operating profit from H1 '23 to H1 '24. Our adjusted operating profit for H1 '23 was GBP 107.9 million. Management fees have decreased by GBP 30.6 million. Performance fees have increased by GBP 1.1 million. Other income items have decreased by GBP 1.8 million. Employee remuneration decreased by GBP 17 million. Business expenses also decreased by a further GBP 4.3 million, and this resulted in adjusted operating profit for H1 '24 be GBP 97.9 million, as I reflected earlier.
My final slide summarizes the Ninety One balance sheet and capital position at the end of September 2023. Ninety One's qualifying capital decreased to GBP 300.7 million, estimated regulatory requirements also decreased to GBP 114.8 million. In line with our dividend policy, the Board has declared an interim dividend of 5.9p. The decline of 9% from the 2022 interim dividend is in line with the fall in adjusted EPS to 8.2p and translates into a payout ratio of slightly over 70% of post-tax adjusted operating profit.
After dividend payment, there will be an estimate capital surplus of GBP 132.2 million, and this will result in a capital coverage of just over 200%. During the period, Ninety One undertook two buyback programs. Noting the share price and the capital coverage, the Board considered prudent to deploy the surplus capital on the balance sheet in this manner. And in the first program to the end of July '23, we bought back just over 4 million shares, and in the second program, the number of shares in issue had declined by a further 7 million, 1.2% in total to the end of September 2022 -- '23. This resulted in a return of capital of GBP 18.8 million to shareholders.
After completion of the second program last week, a total of 15.3 million shares have been bought back for a total consideration of GBP 25.6 million, which will reduce the number of shares in issue to 907.4 million. So there's no plans to increase the number of shares and issue in order to encumber the group's balance sheet with debt.
Thank you. I'll now pass you back to Hendrik.
Thank you, Kim. In the near term, we are planning more of the same, knowing that conditions could improve rapidly once market -- the market regains confidence. These lines were written before last night. These are testing times for active managers, and this will require a combination of commitment, cost discipline on our part. It should not be left unsaid that we remain highly profitable and debt-free even in these challenging times. This provides us with the opportunity to think and act long term.
Ultimately, we expect this environment to improve, but we are not dependent on that in the short term. Interest rates will eventually peak, markets will broaden and appetite for risk will return. We will regain our growth as has happened in the past every time we faced a downturn in demand for risk assets.
Ours is a proven model for long-term value creation. Our people have adequate skin in the game and are highly motivated and engaged. They are truly invested for long-term success. We have a clearly defined strategy and the performance to win business in areas where we can compete. And finally, we have deep client relationships globally, and those are becoming even deeper and more enduring. Our track record of business building over several decades gives us the confidence to face the future.
We can now move to questions and answers.
We will take questions in the room first and then from the webcast. [Operator Instructions] So any questions? Rahim?
It's Rahim Karim from Investec. Two or three questions, depending on how you want to...
You guys always got 3 at a time, but that is fine.
The first was just on management fee margin that held up better than I had expected, especially given the mix of assets. So I don't know if you could provide some comment around any of the specific moving parts there and how you see pressures across the industry in the current environment possibly impacting that in the medium term?
The second question relates to the buyback and the capital return that was done in the period, obviously very welcome. Give us a sense of how we should think of ad hoc buybacks going forward? What are the triggers for that? And what specifically the Board saw as particularly attractive point? And then I guess associated to that, the accretion to the shareholders -- to the employee holding that comes as a result of that buyback takes you to close to 30% now. Is that effectively the limit? What do you do beyond that to help further align the employee base with the shareholder base?
So maybe I'll ask Kim to deal with the buyback question, and I'll just talk about the fee dynamics. Remember, a big part of the book shifts and in this case, however, this last 6 months, it wasn't because we were selling necessarily higher-margin offerings and losing low margin that that's some impact. But we haven't felt the kind of -- and I've been signaling that to you for about two years, the kind of fee pressure, which is just okay, get the cost down before we start talking.
We found a rational client understanding percentage of alpha and being comfortable that fee levels in the active management industry are approaching value for money levels. Noting that we are primarily institutional business, these are negotiated very specifically. Ninety One is very disciplined in terms of agreeing to fees. We don't just cut for volume. And I think that's reflects in the book. It's more important for us to keep the integrity of the book than do volume and show flows at all costs. And I think that's been reflected.
But my sense is which I've -- again, I've been saying that for about 5 years is interest rates have a big, big influence over nominal fee levels. And as interest rates normalize, that extra basis point becomes less of an issue. And I think focus is going to shift to -- with a big alternative holdings now on the institutional and focus will shift to the cost of those holdings and those investments rather than the last basis point in active.
Having said that, I do believe that we haven't seen the end of the slow downturn in fees. We haven't quite bottomed. It's just probably a slower decline maybe than before, and always has been very consistent because we've negotiated in a very disciplined way to make sure that we can afford the job our clients want us to do.
Kim, on the buyback?
Sure. I think coming to the buyback, as you know, over a period of time, we have very little capital on the balance sheet. And since the listing, we've been building the capital base up. I think a few times, I said we've been trying to get it up to the 200% coverage position. Back when we did the final results, we were pushing over those numbers. We said we were looking to -- we were questionable what we're going to do with the capital. So the trigger was very much we were over that 200% coverage position we were trying to look at.
Talking to the Board, we saw what we considered, weakness or softening in the share price. And those are probably the 2 triggers that led the Board to say, let's take some of that capital excess -- surplus cap that we see off the balance sheet and deploy it into the market with the share prices all sitting at that particular point. It was very much 2 programs that were actually undertaken. As I mentioned, the last one actually finished last week, and purely coincidental, nothing to do with doing results today.
Looking ahead, would we do additional -- those would be the same trigger points again. Looking at surplus capital on the balance sheet and then considering what we consider to be what the correct value, value point of the actual share price are as well. So that's probably -- those are largely the 2 triggers.
And the point about -- you're right, it does improve the position from the employee point of view. I think you got to be careful -- we got to be careful when we quote the 29% because that includes the staff share schemes as well. So when we look to the 42.2, the staff share structure that we actually have, that's closer to being less than 27%, so it's closer to this 26% position. So there is headroom as far as that's concerned.
We have -- as you know, we are people who take things -- we take a long-term view and we move slowly and deliberately. So -- and we don't believe in excessively aggressive moves where you guess where our share price would be. So there's time to resolve that question. If we think employees would be better aligned with more, we will have to [indiscernible]. But our current alignments are a lot better than 10 years ago when we had no shares or 11 years ago. And trust me, in tough times, this really works because people have something to defend, something to look through, something to treasure and not just a monthly paycheck to look forward to, particularly when bonuses only .
I think it's the alignment point, that's what you've really got with the staff internally, the alignment on the success of the business.
We're all pointing in the same direction. And our clients appreciate that. Any other questions?
Hendrik, it's Piers Brown from HSBC. I mean, you referenced last night. I'm just wondering whether we sort of reached peak negativity or what would it take in your conversations with clients for them to become more risk-on in their stance? Is it peaking interest rates, peaking inflation? Or is it geopolitics? Just any sort of color you can shed on that would be interested to hear.
And then maybe a more micro sort of point just on the cost performance, which remains very impressive, the ability to adjust to the pressures we're seeing on the revenue side. I mean, the biggest element of that is the compensation reduction. I think that was down 12% year-on-year. So the obvious question is, is that putting any pressure on retention and we've seen some quite frequent press coverage about some of the big packages being offered by some of the multi-manager platforms or whether there's any pressure starting to creep in from that side?
And I think last I heard those guys are -- the multi-management platforms, they have very different career horizons from us. And maybe people will go there or not, but I think culture also matters and long-term value creation matters, but you are right. If you're going to keep cutting, keep cutting, keep cutting, at some point, it will have an impact on talent. We haven't seen that. In fact, we've seen the opposite. Because of the equity position and the stability, organizational strategy and structure, we've had more approaches than we could cope with because clearly, it's not a time to upload people but we have very, very fruitful conversations with very interesting people coming forward saying they would like to join us and we said, well, actually, you know what, business is tough. So at the moment, it's the opposite. But who knows?
And I think everyone else out there is feeling the same pressure. So it's not as if -- and if you look at our profit performance, it's probably ahead of peer group. So I don't think we are that pressure. We're just very honest about it. No one here gets paid what they didn't earn or achieve for the shareholder. And that is not directly aligned with some -- it's not aligned to a make-believe world, which I think our industry from time to time gets the habit of getting into, and it doesn't happen here. But yes, if you're really good in this business and if you can generate alpha in these markets, you're going to be valuable.
Kim, I don't know what you -- is there anything else on cost?
So I think it's a point about alignment which we were raising earlier about. The staff are actually aligned and they understand it. And we are very transparent with the reductions and how the variable remuneration is linked to the profitability of the organization. So it's -- there are no secrets. People are aware, we're really communicating into the business. And I think when you're holding -- you've got you say, close to 30% held by the company, everyone's -- people actually help us, [indiscernible] the company by the staff, people are very much on the same path there.
And Officers Eat Last at Ninety One. So as long as [indiscernible] cats on the 9th floors, they're earning a lot of money when the troops -- it's actually -- your problem is in the young space where you -- people have to pay mortgages, people have to make it -- they have to pay their living costs. There, we try to be far less hard than further up when there's alignment through possibly dividend flow and other things.
But I think on the risk point, I was actually thinking about UPS, I was in Hong Kong last week when the Hong Kong Government invited lots of people from the financial industry to be together. And sometimes, perceptions and reality are slightly different. When a Chinese Vice Premier really welcomes the market people of the West and is really keen to build business, we don't often -- sometimes don't get the same feeling right here. And the perception that Hong Kong has fallen off the earth is entirely wrong. It's the Greater Bay Area as large as India. You know that better than I do. [indiscernible] tells the world the whole time.
But there's a huge amount of action happening in the world. And right now, emerging markets are starved of external capital. You've seen even China FDI being negative for the first time since I can remember. And so when these perceptions change, there are massive opportunities, there are big capital flows about to happen. And people will forget that they never wanted to spread capital around the world and keep it all in U.S. treasuries. So it's going to happen.
My gut feel and someone asked me this morning, and it's not a forecast, and there are far more learned people in Ninety One who work with very complicated models. We initially said interest rates will peak at 4% and not at 5.25%. I just know Jerome Powell doesn't want to be Arthur Burns. They don't want inflation to come back. Central Bank is extra conservative. Therefore, we've got to prepare for a little longer of the same. Maybe last night was right, maybe it's an early indication of what can happen. We're not planning our company on a point in time when the world will be hunky dory again. But I think it's closer rather than further away.
And that's why we've taken the strategic posture we have because if you chase yesterday's asset, yesterday's flow stories today, you typically do it at a very high cost. We all could have bought credit boutiques and things that inflated prices and then not necessarily be sure we can harvest it. So what we're trying to do is be clean, stay in our space, wait for it. But under the surface, be as entrepreneurial and as creative as possible to be relevant to our clients. And I think that bit, we probably could have done better. I think there's always stuff you learn.
And the good thing about a downturn or a downdraft like this is you stop believing all your own propaganda. You actually start rebuilding the business bottom up saying, how can we make it better, how can we be more competitive? And that's how Ninety One would like to use this period rather than promising good outcomes to say we are going to be so much fitter and better by the time we're out of this so that actually we can let the growth fall to the bottom line.
Anything else? Any questions there?
Yes, we have one question from a private investor called [indiscernible].
Herman from [indiscernible]. I know him. He's a very good analyst by the way, so watch out. He's going to ask a good question.
It's a good one. Who says, Hendrik, can you expand on your growth initiatives, especially in the U.S., that was a key focus some time ago?
Herman, it is still a key focus. We have 50 people in the U.S. waiting, preparing for the -- capturing some of the international flow, which has started, but in a very small way, both into emerging markets and into international equities. Those are the 2 areas we play. And it's obviously emerging market equity and debt. And we think a number of searches have already been launched or are underway, but asset owners and in our case, we play at the upper end of the institutional and financial institution market where it is slower institutionally intermediated decisions rather than individual decisions by individual shareholders or mutual fund holders.
And we sense that is something to do with when the dollar peaks and when risk perceptions improve, but what we do have, we've been building up a very competitive track record on the equity front, which is just going through 5 years, our international franchise track record which is aligned with our quality equity. Our capability is ready, locked and loaded. Our emerging market offering is ready. And I think we will be competing for substantial assets.
So that is a very, very clear growth -- potential growth rocket for this business. I think where we've had very -- everyone had a very tough time is in the U.K. because we had quite a big U.K. equity book a few years ago. U.K. equities have gone unfashionable. We just haven't distributed maybe as well as others because we're dependent on third party. The pension market has essentially closed twice in the last 18 months with the initial LDI liquidity problem that caused fire sales in the previous financial year of perfectly well-managed risk assets, some of the U.K., some international, but in our case, some in the U.K.
We've now seen in this period with interest rates shooting up, the final derisking of many of these schemes. We actually [indiscernible] fine. Thank you very much. We could buy [indiscernible] we don't need people like you, and we're ready to sell to pension corporation or other buyout firms. So that is over. So in a sense that the drawdown we had from the U.K. is kind of over. The U.S. or North America -- I would say, U.S., North America, it includes Mexico and Canada. The North American action has started trickled, but not enough because we also had risk-based redemptions people took actively.
When I showed you the fixed income picture, emerging market local debt was the only part of fixed income actually made a positive return. Ironically, you would have thought that Trump has another name for some of those countries and currencies. They actually did better with a yield. But the perception was very negative, and therefore, no money. People actually withdrew capital in spite of benchmark relative performance. So I think we -- that is on. Then there are other opportunities as asset owners globally rerisk. And we will talk at the end of the year about what we're doing in the Middle East and other areas, and we will see.
The big disappointment for us, if you've listened to our growth story, it was 5 years ago, we were really locked and loaded to take an enormous amount of capital from the West into China, that has dried up completely because of geopolitics and because of interest rate dynamics. That may come back, but it's going to take a far longer time and therefore, it's not a growth driver, but it is a business that we -- it's an area we will continue to invest in because China is such an important part of the emerging market universe.
Any other question?
No more questions.
Going, going, gone. Thank you very much. Thank you, ladies and gentlemen.