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Edited Transcript of JUP.L earnings conference call or presentation 30-Jul-19 8:00am GMT

Half Year 2019 Jupiter Fund Management PLC Earnings Call

London Aug 3, 2019 (Thomson StreetEvents) -- Edited Transcript of Jupiter Fund Management PLC earnings conference call or presentation Tuesday, July 30, 2019 at 8:00:00am GMT

TEXT version of Transcript


Corporate Participants


* Andrew James Formica

Jupiter Fund Management Plc - CEO & Director

* Charlotte Jones;Chief Financial Officer


Conference Call Participants


* David Leslie McCann

Numis Securities Limited, Research Division - Director & Diversified Financials Analyst

* Gregory Bickley Simpson

Exane BNP Paribas, Research Division - Financial Analyst

* Gurjit Singh Kambo

JP Morgan Chase & Co, Research Division - Head of Diversified Financials Research

* Hubert Lam

BofA Merrill Lynch, Research Division - VP

* Michael Joseph Werner

UBS Investment Bank, Research Division - Executive Director and Equity Research Analyst




Operator [1]


Ladies and gentlemen, welcome to the Jupiter Fund Management Interim Results Announcement for the 6 Months ended 30 June 2019. My name is Stuart, and I'll be the operator for your call this morning. (Operator Instructions) We're now going live to the presentation room where you may hear silence or background noise until the call begins.


Andrew James Formica, Jupiter Fund Management Plc - CEO & Director [2]


Well, good morning and welcome everyone. I am Andrew Formica, and I'm delighted to be presenting my first interim results as Chief Executive of Geographic Management. When I joined Jupiter in March, I knew was coming to a business with great many strengths. Here was a firm that was truly committed to active management as the best route for clients to achieve their long-term investment objectives. Here was a firm with a strong client-centric culture, dedicated to delivering superior performance and service across the business. And here was a firm that rather than feeling constrained or limited by its size, recognized its size meant it could be agile and nimble in its response to evolving client needs and rapidly changing market conditions. As you'll see, it is these core strengths in the face of challenging industry conditions that have helped the firm to report a resilient performance in the first half of this year.

But before I turn to our financial highlights, and hand you over to Charlotte Jones, our CFO, for a deeper dive into the numbers, I know you are also here today to hear about my thoughts on the business 5 months into my role, and how I see the business evolving in the next few years.

After Charlotte's presentation of the first half results, I will expand more fully on the strategy and priorities for Jupiter, however, I would just say that in my short time here, I've been impressed with the executive and wider team around me, which is a real ambition to get Jupiter on the front foot and drive success further, our success point of view about wholesale change. After all, Jupiter has a great track record that speaks for itself but more about evolution and making sure the execution of our strategy is as effective as possible and that we are prioritizing the results as we have on the right areas.

As part of this approach, I've been asking a lot of questions around the business, questions like how is our U.K. business doing? And has its growth been impacted by our overseas investment plans? And how successful has the buildout internationally been? What role should institutional play in our future? Where should we expand our investment capabilities? And what role should innovation and technology play in our success? These and other questions I hope to answer at the end of today's results. But before we get there, I would like to turn our financial highlights for the first 6 months of this year.

I'm pleased to report an 8% rise in our assets under management to just under GBP 46 billion from GBP 42.7 billion at the end of December. I'm pleased to say that strong investment performance remains a feature with 72% of mutual funds' assets under management above median over 3 years. While we continued to experience outflows in the period, you can see that these have slowed sharply from the first half of 2018. In particular, outflows from one of our most successful products, the Jupiter Dynamic Bond fund, have reversed and the fund is now back in net inflows. A lower average assets under management in the period has resulted in an 8% drop in net management fee revenue over the same period in 2018 though it is pleasing to see the average management fee margin remains at the same levels as at the year-end.

Underlying earnings per share declined 9% to 15.7p a share from 17.2p a year ago. Our capital management policy remains consistent with what we have declared previously and under our progressive dividend policy, this year's interim dividend is in line with our distribution in 2018 at 7.9p a share.

I'd now like to hand over to Charlotte, who will provide some further insight on our financial performance for the first half.


Charlotte Jones;Chief Financial Officer, [3]


Thank you, Andrew, and good morning, everyone. This morning, I report a solid financial performance for the first half of 2019. This is with a backdrop of challenging conditions that have persisted into 2019 for Jupiter and the industry more broadly.

Before I step through the detail, here is the overall financial scorecard. And I'll just mention a few points here. Underlying profit before tax was GBP 88.8 million, which is 9% below the first half of 2018. Statutory profit before tax was GBP 81.4 million, which is 16% lower than 2018. And I will explain the reasons for the elevated difference between the underlying and statutory measures in a few minutes.

We now highlight operating margin rather than adjusted cost/income ratio as our primary measure of operating efficiency. Our previous guidance for an adjusted cost-income ratio of around 55% roughly converts to the operating margin of around 45%. Therefore, in the first half of the year, the operating margin of 47% is in line with this guidance. And as Andrew has said, we announced an interim ordinary dividend of 7.9p consistent with the interim dividend for 2018.

Now let's turn to the progression of assets under management in the first half on Slide 4. So I'm pleased to report an improvement in AUM from the end of 2018 from GBP 42.7 billion to GBP 45.9 billion by the end of June. The majority of this progression in AUM has been driven by GBP 4.3 billion valuation gains from both investment performance and market development.

Mutual fund net outflows included an AUM transfer of GBP 0.5 billion to a segregated mandate. Excluding that, we saw net mutual fund outflows of just over GBP 1 billion. This compares favorably to net outflows of GBP 2.5 billion in the second half of 2018 and GBP 1.9 billion in the first half of 2018.

Now let's get through net flows in more detail on Slide 5. On this slide, you can see an analysis of net flows by asset class across all products. It is pleasing to report a return to positive net flows of fixed income of just under GBP 1 billion. And we experienced net outflows across other classes in the first half of around GBP 2 billion and of these, around GBP 600 million related to strategies where we have announced a change in the fund manager, specifically, European growth and U.K. smaller companies strategies.

Now moving to Slide 6 to discuss the development of underlying earnings. We report underlying earnings of GBP 88.8 million for the first half. This compares to GBP 97.2 million for the first half of last year. Now as you walk across this chart, the largest component of this difference was the GBP 16.3 million reduction in management fees. Performance fees in the period were GBP 7.3 million, which is down GBP 6.8 million compared to the first half of 2018. As a result of our continued focus and discipline on costs, operating expenses were lower by GBP 4.2 million.

Now within underlying earnings, we report GBP 3.5 million lower variable compensation expense, which reflects the lower overall profitability. Also as part of underlying earnings, we report other gains of GBP 7.7 million. This includes net valuation gains of GBP 6.9 million, of which GBP 3.3 million relates to our corporate seed portfolio and GBP 3.6 million from units in our [hour] funds held to hedge some of the variable compensation.

Now stepping outside the definition of underlying earnings, we have recognized an amount of GBP 7.4 million of exceptional variable compensation expense. This brings our statutory measure profit before tax to GBP 81.4 million. This GBP 7.4 million of exceptional variable compensation expense charge is principally an acceleration of expense relating to unvested deferred awards due to accounting requirements.

I'll explain this in more detail in a moment, but important for you to note here is that having taken a higher charge through 2019, there will be a reversal of most of the effect of the acceleration in 2020 and 2021.

Now I'll step through the drivers of earning development in more detail starting with revenues on Slide 7. Starting 2019 with an AUM base of GBP 42.7 billion was clearly lower than the GBP 50 billion with which we started 2018. So as a result, lower average asset values drove an 8% decline in management fees year-on-year. In the first half of 2019, the average AUM was GBP 44 billion and the first half of 2018 was GBP 48.6 billion.

Now performance fees for the year were GBP 7.3 million, and you will recall that we currently have very few assets with the potential to earn performance fees, it's around GBP 1.4 billion.

And as in the prior year, it was the performance fees on a single investment trust that drove most of this amount. Last time I'll mention it, but box profits ceased in 2018 in January as a project to deliver the single pricing on our unit trust fund range was completed.

Now moving on to management fee margin on Slide 8. So far in 2019, the net management fee margin has remained consistent with the second half of 2018 at 83.8 basis points, which is 1 basis point higher than the first half of 2018. The stability of the margin reflects the fact that a specific shift in the business and product mix has largely netted out this period. Nevertheless, we reiterate our guidance of a continued 1 to 2 basis points' decline per year over the longer term.

Now let's turn to operating expenses on Slide 9. Operating expenses were GBP 69.2 million for the year, which is down 6% year-on-year. Within this, fixed staff costs remain flat. Across nonstaff operating costs, our disciplined approach has led to a reduction of 10% compared to the first half of 2018. There has been reduced spending across categories, including marketing, professional fees, travel and entertainment.

Overall, the cost actions and discipline combined with modest continued investment has delivered a marginally improved operating margin of 47% compared to 45%. This is despite the reduced revenues.

Now let's look at the development of operating expenses in a little more detail on Slide 10. On this slide, we provide the usual bridge to show the progression in operating expenses in the first half of 2019. So compared to the second half of 2018, operating expenses are down GBP 9.9 million. As we walk across, you can see investments in the business and its operating platform has continued, and this has included enhancements to our IT and operating platform as well as headcount and fund management and distribution.

Now you may recall, within the second half of 2018, GBP 2.2 million of expenditure was incurred relating to cost actions being taken [Audio Gap] 2019, this is not repeated. But perhaps more importantly, we have seen the benefits to our 2019 run rate expense base from these actions taken as well as ongoing disciplined approach to costs throughout the business. So savings of GBP 8.2 million have been achieved across multiple operating expense categories as a result of various initiatives.

These include rationalization of our supply base, simplification of our operating platform, a very focused marketing expense. Savings and fixed staff costs as a result of these actions were GBP 1.7 million compared to the second half of 2018, excluding the impact of redundancy and other exit costs. Nevertheless, it is important to remember that our second half operating costs are usually higher than those in the first half. This, combined with other plans for the business, mean that the full year operating cost run rate expectations for 2019 that I main -- that I explained in March, remain in place.

Now let's look at variable staff costs on Slide 11. The variable staff costs taken as part of underlying earnings for the half year were GBP 37.9 million. This is down from GBP 41.4 million in the first half of 2018 as a result of lower profitability year-on-year. Nevertheless, the variable compensation ratio has increased to 31.2% for the first half of 2019.

Now it's important to remember that the variable compensation expense is an accounting charge, which is impacted by charges relating to prior year's deferred compensation and the accounting accrual relating to half a year's estimate of the current year variable compensation pool that will only be determined at year-end.

So in building the accrual for the half year, the current year component, we carefully evaluated the interest of shareholders and the need to attract and retain talent and grow the business. The accrual is the result of applying our accounting policies to a variable compensation pool of around 26% of the half year available profits, which is very much in line with historic levels.

In addition, as you know, 2019 has been a year of considerable change and transition at Jupiter. This has included CEO and other executive changes as well as an agreed succession plan for a senior fund manager. Some of these changes have created variable compensation accounting effects, which we regard as exceptional and not part of the economics of the group. Therefore they have been shown separately outside of underlying results. The amount was GBP 7.4 million in the first half, and we expect a similar though smaller charge in the second half. Now they are primarily timing impacts, which accelerate variable compensation impacts from future years into 2019. And as such, the future years will benefit from a reversal of the variable compensation expense relating to these items, the effects of which will also be shown outside underlying earnings.

You will see that we have restated the comparatives for 2018, which was not very significant in the half year for 2018, is more visible in the full year comparative.

Now let's turn to the first of our balance sheet and capital management slides by looking at the development of seed -- of the seed investment portfolio on Slide 12. We continue to be proactive in both the deployment and redemption of our seed portfolio. The use of corporate seeding is a key component of our overall capital management approach. It represents an important use of our financial resource to launch and accelerate funds to drive our business forward. Since 2016, GBP 177 million of seed investment has been deployed and of this new portfolio GBP 108 million remains. We withdraw the seed when third-party money replaces and builds on it.

In addition, we continue to review and recycle older seed. At the end of the first half 2019, only GBP 4 million of the GBP 49 million from 2016 remains. The majority of seed currently deployed is spread across 6 funds with the largest amount invested in the global flexible income fund, which is the first of our newer range of multi-asset products. Seed in this fund currently accounts for 72% of the fund's AUM as third-party assets build.

Our policy of hedging our seed portfolio has been consistently applied. We hedge the foreign currency exposure and beat the risk of seeding in equity funds. In the first half of 2019, we experienced valuation gains of GBP 3.3 million on the seed portfolio net of hedges.

Now let's look at capital management and dividends on Slide 13. Our approach to capital management is unchanged. We maintain a strong balance sheet, deploy the capital needed within the business, pay a progressive ordinary dividend of 50% of underlying EPS and return surplus capital to shareholders through special dividends. As illustrated on the left-hand side of this slide, our earnings continue to generate both healthy free cash flow and capital above the regulatory capital requirements. You'll note the capital requirements have risen slightly, which is in line with the balance sheet development, business changes and overall risk profile.

Now looking at the right-hand side of this slide, you can see our dividend progression. At the interim, we aim to pay a little over 45% of an estimate of the total ordinary dividend for the year. Therefore, in anticipation of the total ordinary dividend being in line with that of 2018, we will pay an interim dividend of 7.9p, which is also in line with 2018.

The decision on special dividends for 2019 will be made at the year-end in line with the capital management approach I've just outlined. That concludes my run-through of the 2019 interim numbers. And I'll hand back -- you back to Andrew for an update on strategic ambition and priorities.


Andrew James Formica, Jupiter Fund Management Plc - CEO & Director [4]


Thank you, Charlotte. As many of you know, this was Charlotte's final results presentation for Jupiter, before she takes on the new challenge as RSA's new CFO. I'd like to thank her for her significant contribution to Jupiter in her time here and wish her all the best for her new role.

Now as I mentioned earlier in my introduction, I am keen here to take the time to expand on my strategic focus at Jupiter over the short to medium term. The first thing to state is that the current strategy of Jupiter is absolutely correct for our future success. What is required is more a refinement to our priorities rather than a change in course. The priorities we focus on need to ensure Jupiter continues to thrive in an industry that is facing a significant number of headwinds. Our shifting regulatory landscape, changes in client behavior, disruption from new technologies, to name just a few. We're not alone in facing these challenges and from the conversations I've been having around the company in the last 5 months, the business is very much up to tackling them.

I wanted to start with this slide because it highlights 2 aspects of the company that really stood out for me, and led to me taking on the CEO role here. I have always admired Jupiter's commitment to active management. I truly believe that clients' best outcomes will be through active management and it really is a bedrock of Jupiter's DNA, it runs through the entire business.

Too many firms talk about being active but are not committed to the approach. I'm pleased to say that's not the case here. Second, Jupiter is very much a client-centric business, it's embedded in all we do. That doesn't mean there aren't ways we can improve, but the client focus is another important strand of our DNA. In my years in the industry, I know a clear purpose and a laser-sharp focus on the client are vital ingredients to success and importantly, Jupiter has both of these.

And because we're known for our active stance, it means we have created an optimum environment that acts as a magnet for talented, high-conviction managers, people of the caliber of Mark Nichols, Mark Heslop and Matt Cable, who are recent hires to our European and U.K. small-cap strategies, all with excellent track records.

It is our reputation for attracting talent and delivering superior performance that is behind our long-standing success in the U.K., which still accounts for over 75% of our business.

Our U.K. success has then been the springboard for our diversification into new products, geographies and channels, offering shareholders attractive growth opportunities. It is an impressive list of core strengths on which to build.

In fact, this solid foundation -- it's this solid foundation that has also helped us to deliver performance on a consistent basis. Some 72% of our assets under management in mutual funds is above median over 3 years. That's a strong long-term performance record we can point to when speaking to our clients.

We're also seeing good performance over 1 year with 73% of assets under management in our mutual funds above median.

Now if we look at our largest 11 funds, that are those funds with over GBP 1 billion in assets, which account for over 60% of our assets under management, there is really a good story to tell here. Over half the funds are performing better than they were at the end of 2018 and several of the funds are either first or second quartile.

Now that's great performance, but like any business, our capabilities need to continue to evolve and develop to meet client needs. I'm pleased to say we also have a pipeline in newer and somewhat smaller funds that have equally impressive performance and one of our priorities is to get these strategies up to a critical size.

If we now turn to Jupiter's strategy and focus, I'd like to have our purpose, our culture and our goals all laid out on a single slide. The strategy of Jupiter can be summed up by our strapline of delivering growth through investment excellence. This statement is nothing new. Jupiter has used it for several years now, but it really resonates with me. Delivering growth is for both our clients and our shareholders and we do that through investment excellence, going back to active management in our DNA.

Businesses with a clear purpose are businesses that usually succeed. At Jupiter, the why, as to why we exist, has a virtue of simplicity. We exist to help our clients achieve their long-term investment objectives. How do we do this? Our high conviction, active-management approach focused on finding and investing responsibly in sustainable businesses is the cornerstone that will enable us to live up to our purpose and to become a trusted partner for our clients.

Now my 25 years in the industry has taught me that no strategy can succeed if you don't have the right culture in place to support it, they go hand-in-hand.

There are 4 pillars to our culture here. On the first culture point, and at risk of sounding like a broken record, we have to put our clients first. And we have to be passionate about that. Our commitment to delivering superior performance after fees is central to why we exist as a business. Second, we at Jupiter, value our people. Knowing it's our people that set us apart from our competitors, I am a big fan of diversity in the makeup of our teams and as a business we encourage people to think differently, and we promote individual accountability. This has always been a strong point for Jupiter and one that has helped us attract some of the best talent in the industry. On the third point, I passionately believe it's only about working together as one team that we'll be able to meet our individual and business goals. Collectively, everyone is working towards achieving the same outcome, focusing on our clients, supporting our investment talent, so we can achieve our aims. And then finally, we strive to challenge ourselves. This is probably most critical to our future success. This is about us being open to new ideas, striving to be better tomorrow than we are today, about recognizing that we may have failures but looking at how we can learn from those mistakes, pick ourselves up and move on. By being agile in our thinking, we can come up with the ideas that deliver superior investment performance. So what are the goals that I've set for the business over the next 5 years? Well, they all resolve -- revolve around the client. If we are great for them in performance, if we excel in our client service, if we do all this well, assets under management growth and hence, shareholder returns, will follow. So if I take them from the top, I want to see us consistently achieving superior investment performance after fees across our strategies. When our purpose is to help our clients achieve their long-term investment objectives, consistency is key. When it comes to net new money growth, I don't want us to be middle of the pack. Currently, the industry average in net new money growth is barely above zero. I want us to be achieving top quartile net new money growth and the best firms often achieve 3% to 4% growth above the industry average, and that's where I want us to be. As for the shape of our business, you should expect our client reach, our investment capabilities and our client channels to be broader in the future than they are today. And I'll expand on this in a short while.

But I'd like to finish here by saying that together these goals would lead to a significant increase in both our client assets and hence, profitability and shareholder returns.

This slide sums up neatly how our beliefs come together to keep the client at the heart of our business. We know that it is both superior performance and service that will enable you to become a trusted partner with your clients. And to help them achieve their long-term investment objectives, we believe high conviction, active management deliver superior investment returns after fees.

We also believe that we have to adapt so that we remain responsive to changing market conditions and client needs. Our operating environment needs to be flexible, efficient and agile. To that end, we need to embrace and invest in innovation and technology to boost our competitiveness.

So what are our priorities for 2019 and beyond? Our priorities here, looking at the client side, come under the following umbrella. Embedding our client-centric culture, understanding and prioritizing the key client markets we operate in and evaluating the client channels we wish to service and clarity around how we intend to do that.

So I've talked a lot about the absolute necessity of having a client-centric culture. At Jupiter, the client has always been at the core of what we do. The clients' needs change, and we need to change with them. There is more we can do to bring the whole of the firm to our clients. Achieving this will enable us to deliver on our goal to being their trusted partner. The recent Omnis win was a great example of us doing that.

Looking at our key markets, our first priority has to be to the U.K., the heart of our business. We need to refresh our focus and make sure that we remain visible and one of the leading firms. As our marketing and brand spend is being spread across all of our geographies, we must make sure it doesn't detract from the visibility in our home U.K. market. There are other parts of the U.K. market as well that we can be doing better in. For example, the investment trust side. That may come as a surprise to some of you, given we may lose a significant chunk of our investment trust assets, but as a firm, we should be a natural home for them. Investment trusts are all about active management and also our particularly British proposition, very much like Jupiter. Not only do they have a very high persistency, with some trusts you can measure it in decades, our managers appreciate the investment purity that the [close-in] nature the vehicles offer them. On the international side, our reach has grown substantially over the last 5 years, and that was absolutely the right thing to do as it opened up new avenues for growing client and assets.

It's been a profitable extension for the business. That said, we should take stock and review where we stand. For instance, of existing officers, might some do better if we allocated more resources to them? What markets should we be in that we aren't in yet? Having looked at potential other markets, we would not be rushing to enter markets like China, Korea or India anytime soon. But Australia, for instance, has a profile that looked interesting in part because of its similarity to the U.K. market. I often get asked about any planned forays into the U.S. It's certainly an interesting market and one that whilst not on our priority list right now, we may look to enter on a medium-term horizon.

Turning to client channels, a key question is about our Institutional business. At the moment, it represents about 10% of our assets under management. As a house, I think we're quite capable of reaching a point where Institutional could make up around 20% to 25% of our assets. Institutional clients are often seen as more demanding. I would argue clients with a retail or institutional are demanding more and the distinction between the 2 is blurring. Therefore, I want to achieve institutional-level standards of client servicing across our business here.

There's also the higher persistency and longevity of institutional assets, which can act as a useful diversifier to our retail book. We should not be fixated on the headline management fee margin but on the net present value of the client relationship.

If we look at investment strategies, now at the moment, we don't quite have the breadth of product to match our ambitions, so that's something we'll be working on. We have to be careful not to build out our distribution footprint ahead of our investment capabilities.

So what are our priorities around investment strategies? We remain focused on expanding our range of global funds. Global focus products have multiple appeal across several jurisdictions. And this is key if we are to maintain sales momentums in a number of the overseas markets we're in.

Elsewhere, we're looking to develop sector specialties under our broader fixed income umbrella to expand our multi-asset solutions, and we're also taking a closer look at how we can further develop our liquid alternatives offering. When it comes to ESG, it's about embedding it in everything we do and also better articulating our ESG credentials to external audiences. Our credentials stretch back decades, but we don't get the recognition because we've been a bit shy in coming forward.

On a slightly different tack, we also need to improve our product success rate. Phil Wagstaff, our new Global Head of Distribution and Stephen Pearson, our CIO, understand the need for closer cooperation between distribution and investments to ensure we have a really strong plan to get new products to [sell] quickly. It's all about having better alignment between our objective and delivery. Our product development strategy and focus is being revamped to achieve this.

Now to my third point, about innovation and technology. These need to be more deeply ingrained in how we think and operate. We need to be more agile and to consider new ways of doing business. To examine areas such as data science to improve our investment processes, to look at ways to enhance the client engagement, or to simply do things smarter and better, often cheaper than we were able to do before.

As for our operating environment, it is it time to capitalize on the infrastructure investments we have made in recent years to ensure we are being as effective as we can be in servicing our clients. It's also important to continue to embed a strong governance risk and control environment in the business to support our regulatory and shareholder responsibilities. One thing I am convinced of is that complexity kills businesses in our industry and therefore, striving for simplification in how we operate is important for us to maintain our agility and nimbleness.

And on capital management, we're proud of our strong financial discipline and reputation for it. It has been hard-earned and you should not expect it to change. Our commitment to a progressive dividend remains. And this is further enhanced either by investments in our business or otherwise through special dividends. Looking at investments we might make in the business, it does mean we may consider small bolt-on acquisitions or team with [those] with assets where they act as an enabler or accelerator of our strategic plans.

I would stress that Jupiter is a very clean, simple business and that organic growth remains our key focus. But we will not shy away from looking at opportunities to progress our plans should they present themselves. But to provide comfort on that, any deals we do make will have to be in line with our strategy, would need to be strongly aligned with our culture, would be small in relation to our overall business size and would have to satisfy a high hurdle on complexity. Only when something covers all of these criteria would it be considered.

So to sum up, as shareholders, you're investing in a great business that has been performing well in a challenging market. As I've already said, the new management team has a firm ambition to get on the front foot and deliver and drive success further. To do that, we will have to remain innovative and agile, harnessing the power of technology to simplify our business, help prioritize the customer experience and improve our investment processes and our product development. Jupiter continues to operate in a highly regulated environment, and we will always ensure we adhere to the highest standards of governance because that's what our client expects of us. I outlined a clear plan for growth but this won't be at risking our reputation for strong financial discipline. We have a robust capital position to support the needs of our business, and our [payer] policy is clear and unchanged. There will be continued focus on cost management, but it won't be at the expense of investment, which could ultimately deliver higher returns to our shareholders.

I have set out here to give you a broad sense of the direction of travel for the business. Further details are being worked on in the coming months to take priorities -- to take these priorities to clear, tangible actions. I look forward to giving you more detail at a capital markets update we are planning for later in the year. By that time, the new hires to our management team will have had time to get their feet under the table and establish their priorities for their areas of business in line with our broader strategic goals.

But as a final word, I'd like to say that delivering growth through excellence and the absolute focus on our clients through our active management approach will always be our priority. I'm confident of our ability to deliver on the business strategy that we've outlined for you today. Thanks for taking the time to listen. If you have any questions, Charlotte and I would be pleased to answer them.


Questions and Answers


Operator [1]


(Operator Instructions)

(technical difficulty)


Hubert Lam, BofA Merrill Lynch, Research Division - VP [2]


Good morning, it's Hubert Lam from Bank of America, Merrill Lynch. I have 3 questions. Firstly, on Alexander Darwall's assets, can you confirm how many assets he ran, including the segregated mandates and what do you expect in terms of outflows from that? I think you already mentioned GBP 700 million of outflows from his funds, but I was just wondering what your expectations are?

I'll go ahead with my 3 questions. Second, in terms of costs, I think Charlotte has given some short-term guidance on costs for the year, but just wondering what your medium-term guidance is on costs just given your ambitious plans in terms of investing as well as managing the cost base. So on the interim guidance and costs, if you could help us on that. Thirdly, on strategy, I think, Andrew, in your previous role at Henderson, one of your reasons for merging with Janus was due to scale. I was wondering what your views are on scale in terms of Jupiter's business. Does it need to get bigger or -- because it seems like your focus is just mainly on bolt-on M&As?


Andrew James Formica, Jupiter Fund Management Plc - CEO & Director [3]


I'm loving all of those. Well, I'll give a go at all 3 and Charlotte will probably add or correct me on a few of those as well. In terms of Alexander's assets, he had sort of at the beginning of the year roughly what? About GBP 9.5 billion, of which roughly GBP 8 billion was in the open-ended unitized funds, and GBP 1.5 billion in seg mandates, predominantly [J out] the Investment Trust was GBP 1 billion of that GBP 1.5 billion. I hope that answers the size question. In terms of -- and I don't think Charlotte's [seen] the numbers, between GBP 600 million and GBP 700 million we've seen of outflows since the announcement in the open-ended funds following the announcement of the transition to Mark Nichols and Mark Heslop. With Mark Nichols being in the building now, we're able to begin the client engagement with him. Mark Heslop joins in just under a month's time, which will enable us to get them in front of clients. So it's hard, I can't give you a prediction of where there will be further attrition or not in that. And then in regard to the investment trust itself, the first thing to stress on Alexander is he has not resigned. He is considering his options, but we wanted to be open and upfront with people around that. If through deliberations he decides he wishes to remain at Jupiter, we'd be absolutely delighted for him to do so. But we also recognize that given the transition that was going on and he -- he felt now was an opportunity to consider what that might be. You've seen the trust announcement, which is that they will -- they're considering their options. I'm sure they're talking to their shareholders. There's nothing we can add on that. And they probably won't be able to add anything until Alexander is clear exactly on what his own plans will be.

Turning to costs, you're right there is a number -- I'll let Charlotte answer some points on costs as well separately. But you're right that a number of things that I'm highlighting may require investments. What I would say is a continued focus on cost discipline, on efficiencies of business, I'd like to hope that most of those if not all of those can be done within the existing fabric of the cost base. That's my starting point. I can't be definitive on that as people like Wayne have yet to arrive, Phil's only just been here. So we need to really scope up what those plans might be, but I do believe it's really about redirecting our focus and our resources rather than a step up in costs. I would argue that as a business, Jupiter has made a significant amount of investments in the business you've seen. The new building, I'm sure you -- for those who've been coming to Jupiter presentations for a while, that this is a slightly different level compared to what they used to be in a couple of years or so ago. Investments in Aladdin and the infrastructure, for example. Charlotte mentioned some of the hit to the P&L around box profits and research costs, for example. So a lot of those were embedded in the business, and I think that's given us a platform of which we can push forward rather than a need to invest over and on top of that.

And then finally, strategy. Look, it's fun being back in a business that's small, that you can make decisions and the impacts can be made pretty much instantaneous. I really -- I have to say it's been energizing to come to a firm where everyone is 100% behind what we're trying to do. There is not a resistance to change or this is the only way to do things. There's actually a real thirst for what can we do, how can we do it differently, yes, we can do that and get on with it. So I've really enjoyed the fact of that. I think a lot of people talk about $1 trillion club. I don't think there could be anything worse. There's certainly no aspiration that we'll be $1 trillion business. There is criticisms, I'm sure, thrown at firms of our size, GBP 46 billion. That fills a big business, doesn't it Edward? I just remember it being successful when it was a lot smaller. And you've got to play to your strengths and our strengths are the fact that we can really get to know our clients, what we do, we can be really passionate about and really embed it within. It does mean that certain clients we probably can't do. Our strategies wouldn't absorb some sovereign wealth funds who would want to allocate to us, or the pricing just doesn't reflect our active management and the commitment that we need to sit there around capacity constraint. But that's okay. We're quite happy playing where we play and the way we play, and I think what I'm really -- the thing that has probably surprised me most in a positive way is the number of inbound inquirers we get from really talented people who just like the clarity of message, the focus of what we do, the fact that we do active management and we really do it, we believe in it, we -- what we do is what we say. They say, whether it's a parent going through challenges, whether there's mergers or acquisitions, it means they feel that the strategy of the firm they're sitting in is no longer aligned with the craft they are -- they're committed to. So it's great. So I'll have to say, given the conversations I had and also, when I looked before I joined Jupiter, big is not necessarily better. I say that to someone going to RSA as well. I don't know if there is anything else you want to add on.


Charlotte Jones;Chief Financial Officer, [4]


That's all good. I'm sure there'll be more cost questions in a minute, so I'll answer those.


Gurjit Singh Kambo, JP Morgan Chase & Co, Research Division - Head of Diversified Financials Research [5]


It's Gurjit Kambo from JPMorgan. A couple of questions, how you -- Andrew, how are you thinking about this sort of product versus distribution sort of strategy? Is it -- I think you mentioned that you need to get some more products out there. Are there products that you have, which perhaps aren't appealing in the future, do you -- will you streamline some of those products? So that's sort of the first question around sort of product distribution. And the second one just about the U.K. Obviously you're -- remaining the focus on the U.K. is clearly what you've just come from, but given the backdrop I guess over the next couple of years it looks quite challenging, and also you look at your outflows, 100% is from the U.K. How do you think about that in terms of will there be a short-term, perhaps, focus somewhere else to offset that?


Andrew James Formica, Jupiter Fund Management Plc - CEO & Director [6]


Yes, good questions. Product distribution, I'll look at the product side. I'd have to say one observation in my 5 months here is I don't think we've been as disciplined around product strategy and product development as I'd be used to or I'd expect, if I'm honest. I think one of the things you need to do is make sure that your corporate strategy and your product strategy are absolutely aligned. And I think they weren't operating in that level of strategic basis. Some of the regulatory changes around life cycle of funds and the like has meant that some firms, and Jupiter is in this category as well, have got stuck in the regulatory agenda and not elevated themselves up and looking much more longer term around what a client needs changing, what are their requirements. That then -- and then also that needs to link into your investment capabilities and your investment set. And -- it's actually relatively easy to change. The first thing I'd say is the seed pool that we have available us is great. For a firm of our size, it's a real strength for us. It increased about, what, about 18 months ago from GBP 75 million to GBP 150 million. It doesn't need to go up anymore. It's absolutely rightsized for our needs and for what we need to do. We have added -- had some new talent, for example, Talib Sheikh has been here a year, doing a fantastic job so far. I think there is some more, we can broaden out that multi-asset capability across some other funds, to make sure his funds are also available in all our jurisdictions. Alejandro on emerging market debt, for example, coming up for his 3-year track record, real exciting opportunity. Jason Pidcock has gone through 4 years, great opportunity. Dan Carter on Japan. There's a number of investments that we've made in products that look great. I just don't think we've been as structured and aligned around that. There has to be a discipline not just on new products, it's also about what existing products you've got, are they fit for purpose, do they need to change their remit, do you need to close it totally. Interestingly, the regulator makes it easier to launch new funds than to close funds and so that's a continual challenge from an efficiency point of view. We also need to make sure that our recognition just simply that as we've now moved into overseas markets, every time we launch a new capability, we've probably got to launch 2 funds, a unit trust for the U.K. marketplace and a C-cap for the overseas markets. Mark Heslop, European smaller companies, not a strategy we've offered before but a real exciting opportunity for us to do so. So when he joins, you should expect us to see making a new fund to him. And then there's the opportunity to just add new investment capabilities aligned to that corporate strategy our client needs and as that, product will come from it.

If we were a much larger firm, those $1 trillion firms probably have product as a third leg next to distribution and investments. I can see why and understand that because it's often the bridge between investments and distribution, it's bringing the firm together. For our size we don't need that. But it is about making sure that myself, Stephen Pearson the CIO, and Phil Wagstaff sit over the top of that strategic product group to make sure that what our clients are saying, what our investment capabilities are doing, and what our corporate message are absolutely aligned. That hasn't been the case, that will be the case going forward.

To your point on the U.K., in quite a long distant past, I used to actually to be a fund manager, I used to cover a few retailing. And Tesco was one of the stocks I loved and admired, but a big fear of Tesco, and it proved to be the case, was -- and its international expansion at the expense of their home market. And you see that come back in to roost and has been a challenge for Dave Lewis, and he's sort of addressing that. So one of my obvious questions when I got here was, as we successfully moved overseas, what do we -- is that at the risk of damaging our U.K.? It doesn't have to be, but it's a question. My answer to that is no, but there are some signs that if we aren't really clear and really refocus on the U.K., it could be the case. So there's absolutely no evidence to date that it has damaged our position here. To your point about, well is the U.K. really an attractive market, what's going on, growth has been much lower. Look, it's going through a challenge in Brexit, the -- there is no investor who likes uncertainty. Our end client really hates uncertainty, it just makes it a challenge. That will pass. I don't know what the answer will be, I'm not here to give you a prediction on Boris' policy and where Brexit might be, but what I will know is whatever the outcome, when certainty is there, we'll be able to position the portfolios, we've got to reengage with those clients, and the U.K. will be a great business for us. Jupiter punches above its weight in the U.K., its brand, its reputation, people see us as the active manager that they really trust and go to. You don't want to lose that. It's taken decades to build that up. We need to maintain that, we need to exploit that and we need to exploit it from a position of strength not a, well it doesn't look good at the moment, so should we redirect and hide over here? Absolutely not. Stick to what we do here, prove it here, equally then enable us to springboard into other markets because they see the commitment we give and the long-term nature. We expect our clients to invest with us for the long term, we have to make the same in decisions in the markets we're in.


Operator [7]


(Operator Instructions)


Michael Joseph Werner, UBS Investment Bank, Research Division - Executive Director and Equity Research Analyst [8]


Mike Werner from UBS. 2 questions. First one for Charlotte. It seems like the tax rate came down quite a bit in the first half of this year, at least on a statutory basis, so I was just wondering if you can provide a little bit of information on that. And then one for Andrew. In terms of the build-out into the institutional space, given that you are coming in with a fresh set of eyes, where do you see the biggest challenge for Jupiter in terms of potentially addressing that market? And do you see the demand for institutions for targeted alpha rather than for scale?


Charlotte Jones;Chief Financial Officer, [9]


Okay. Let me start with the tax question. So the -- throughout the period, and it's the same last year, this year, the actual corporation tax rate that's effective is 19%. Clearly, if you dive into the finance, the income tax expense note of the interim financial statements, you will see the tax expense for the period was 13.7%, which is lower than 19% -- I think it's about 16%, 17%. In any period, you've obviously got deferred tax and assets or -- and they're either building or releasing, some of which is obviously timing differences. In a period where you have also share vestings in a period where share price is moving, that can give you additional tax benefits in working out your tax calculations. So it's a blended mix of effects, some of which will potentially reverse a bit during the second half, some of which won't. So I mean I look at it -- it's still always around 19% and this period because of those effects, it's come down a little.


Andrew James Formica, Jupiter Fund Management Plc - CEO & Director [10]


On the institutional side, what are the challenges? A couple of challenges. Our capabilities or products that's often capacity-constrained and our -- ones most sought by clients in the institutional space, have generally been able to fill up at a much higher rate in the past. Things that have changed over the last couple of years, I think we've got more institutional-caliber, institutional-quality-type products such as like Talib or Alejandro, what we're building there. That gives -- and they've also got significant scale, which means we don't hit the capacity constraint that we may in other strategies. I don't think as a business we've really been open for business with the institutional world as much. If I'm fair, it's been an addition to what we did rather than something that we're committed to. To be in the institutional market, I spoke about the sort of the demanding requirements, not just obviously around scale, pricing, everything, but actually just around the client reporting and the level of what you do, the engagement and level. To be honest, that's the expectation I have for every client. So one of the messages internally and externally is we should be adhering to the highest possible client service engagement level, we just must. We are paid well for what we do, we enjoy what we do, we believe it is what for the client we should do, and for that do expect and deserve a level of service that puts you to the highest [paces]. So I think one of the things is the retail marketplace has probably had a lower level of -- low and demanding level of client service, and we have to say that's irrelevant. What's actually happening is that retail client base is becoming more institutional anyway. You look at the large platforms, the large advisory networks and the like here, they are more or as much an institution as some of the other areas. So I think that we've got to improve that. And new system commitments enable us to do that, the Aladdin systems and the like enables us to improve our data management, our client reporting. We have to get to a -- one of the works going on at the moment is to get to a single [source of data] to make sure the databases in the firm really deliver the consistent reporting across the organization and the like, which we just haven't had, but the investments we made enable us to get there, and we'll get there pretty quickly. So that's the real -- to me, it's about making sure the investment strategies we have are of that -- have that appeal and the new people where -- we've recruited and the new talent we will recruiting, you should expect to be able to address that and to make sure that everything we do, whether it's a client reporting, whether it's the RFPs, whether it's the look and feel of our documents and everything needs to raise a level.


Gregory Bickley Simpson, Exane BNP Paribas, Research Division - Financial Analyst [11]


It's Greg Simpson from Exane here. Just 2 questions. The first will be on fees, 91 basis points in mutual funds in the half. Could you give us a bit of color particularly around your comments around the retail market becoming more institutional? What you're seeing in terms of client behavior around fees. And in your view, does strong fund performance translate into inflows as it used to do? And then the second question would be on manager and team hires. Beyond the names you've mentioned, is there a pipeline you have of people that could join? And any particular strategies or products that you'd really like to add to Jupiter?


Andrew James Formica, Jupiter Fund Management Plc - CEO & Director [12]


Do you want to pick up on the fee point or do you want me to? Go for it.


Charlotte Jones;Chief Financial Officer, [13]


Yes. So look, on the fees, it's constantly important that we deliver value for money for our clients after fees. In any particular period, as we see historically or perhaps at a price slightly higher, which tends to be equity versus the fixed, and as we see that mix, you see a change in that overall margin. But product by product, the real question is, how are the returns and the value for clients being generated and if they understand, which we make every effort to make sure they do understand what they're investing in and therefore, what the fees are. The question is more about the returns and the product and the risk, that it is specifically about the price. But of course, there is questions on price, and you see that as our channels have moved from the smaller IFAs to the larger wealth managers, the purchasing power of those distribution channels puts some pressure on the price. But we're obviously interested in the higher volumes and the cost of servicing, that type of distribution channel is lower than it is serving a whole army of our phase. So the question around pricing and what's value for clients is always in the forefront of the way we deal with clients.


Andrew James Formica, Jupiter Fund Management Plc - CEO & Director [14]


In terms of manager team hires, obviously, I'm not in a position to be able to say who. There are a number of conversations we're having, and I expect on our 12-month view, you'll have seen us just add to the investment strategies. And to me, it's just the caliber of conversations we're having that I'm excited about. In terms of main areas, I mentioned in my prepared remarks, the biggest thing we're looking at is capabilities that have broad appeal across jurisdictions. So it tends to be more global capabilities, a global growth equity capability, for example. Global equity just generally would be great because we can sell it [inside] our jurisdiction. Global small cap is an area of interest, those sort of areas I think. Talib's done a great job in the multi-asset space so that we could broaden the capabilities that he has, so adding to him, it's a relatively small team, I think there is more we can do there. So it's really looking at that, at fixed income, Ariel's numbers have been fantastic in a dynamic bond and strategic bond-type capabilities. We've had great success with emerging market debt and coming in as a sort of sleeve of that, expanding then things like high-yield, global high-yield could help on that. But it really is about capturing capabilities that have -- now that we've got a broader distribution reach, I think the capabilities and the managers we can talk to who are looking for not just wanting to be sold in a single channel, but knowing that the institutional channel and the retail channel through what we operate and represent helps them and through the geographic -- geographies that we're in helps them on that as well. So I think it just opens up the talent pool that -- the conversations that we can have. So it takes a while for these conversations to happen, but on a 12 months' view I think you'll see new talent. But don't underestimate when you look back at Jason Pidcock or with Alejandro 3 years ago, with Talib, these -- there's been a continued investment in new people, but we just can't stop there, we just have to keep going and building it up.


David Leslie McCann, Numis Securities Limited, Research Division - Director & Diversified Financials Analyst [15]


David McCann from Numis. Andrew, when you were at Henderson, going back a few years now, one of your key priorities there was kind of doubling the AUM in 5 years. I mean, appreciate market conditions are different, just different size, different underlying markets to some extent. Do you feel that -- those kind of growth rates are plausible and realistic at Jupiter at this high level rather than specifically? And then just delving down into a bit more detail, how much of that growth, as you've been -- can the growth, do you think, can come from kind of the core of current U.K., European retail product strength can we have? And how much of that growth comes from the newer areas you've outlined such as international, more institutional markets? And then I guess finally, bringing it all together, what would that have implication-wise for kind of revenue kind of growth compared to the asset growth? Just one question.


Andrew James Formica, Jupiter Fund Management Plc - CEO & Director [16]


You want me to write your model for you. Well, actually I would say that Jupiter had a policy of doubling its assets over a 5-year period, which they delivered on. Wasn't it 50/50 in 5? So I wasn't the only one. And look, at the end of the day, AUM targets are not -- and it was never back then at Henderson and it isn't here. It's not -- it's that that's sort of outcome of doing what we do right. So to me, what I always try and say about -- what's the asset growth? It's a pretty simple business that we're in. We get paid based on market levels, you can put your own assessment of market levels. What I would argue if you look back over -- since the financial crisis, actually asset class returns have been very high. You're talking double digits in every asset class. If you were to put that in your model, you're welcome to, I think that's unrealistic and certainly not something I'd be budgeting on. I think low single-digit return from asset classes going forward from here is a more realistic estimate. We are active managers. Hopefully we can do a bit better than that and add a couple percent above that based on our returns, but you're still talking about mid-single-digit returns from asset classes that we're in. I've mentioned organic growth in the past. There's been periods where organic growth at the industry level -- the norm used to be 5%. The new normal feels like it's zero, it may even be negative in some areas. I think the best managers can still get positive return above that. The top quartile managers typically are about 3% to 4% above that. So maybe you can get another 3% or 4% -- let's say we could get 4% growth from new business on top of a mid-level market growth, You're sort of getting around 10% growth. That won't get you to doubling your assets in 5 years. You need to get to about 15% to do that. How would you change that if industry growth rates' new business went back to normal levels of 5%? You could probably reasonably expect 8%. If market levels were more like closer to double digits rather than mid to low, you'd get there. But I can't predict either of those. I can't change those dynamics. What I'm trying to say is focus on a client means we will do better than others out there. Our active management capabilities will deliver a better growth prospect than other asset managers if we do what we're doing. That's my priority. Whatever the AUM that comes in, that's what it comes in. There is no target for AUM, I don't think AUM is helpful. In terms of where it might come from, I do think the international office. I mentioned earlier that institutional should be more like 20%, 25% of the group. It's not getting to be dominant of the group or back to half of the group. I think international, that 25% of the business, should be more like a 40/60, maybe even 50/50 in time probably. That's a big reach to get to 50/50 from here in the next 5 years, but not unrealistic, so somewhere between 40% and 50%. But I don't want to do that at the expense of the U.K. This isn't about ignoring the U.K. to get there. So you're trying to grow every part of your business but accepting the fact that in some of the new markets we're in because of where we're starting from, we're laying the foundation for the client and the brand and everything we can do. We can probably accelerate much easier there than in the U.K. marketplace given our existing book of business and the structural challenges the U.K. faces. But I still say it's an attractive market. So your honest answer is we just do our best by focusing on our clients and we think we'll get really healthy returns. I think the cost discipline side, absolutely you should expect to see there. This is not about paying for growth, this is about measured growth, cost discipline is important and that will obviously, I think businesses throw off a lot of cash. You should expect that cash to come back to your shareholders. If we're investing it in the business, we're doing it if we genuinely believe you're going to get a much better return. Through that, the financial discipline associated with whatever we do. Otherwise, you can have it back. I'm not someone who wants to build a war chest in the hope that something might come along. If I've got something I want to do that I think is right for the business, I'm very happy to go to shareholders and explain it and ask for their permission to do that at that point. So the focus on payout ratios of 90%-plus through special dividends, absolutely. If we can't use the money, you should have it back.


Unidentified Analyst, [17]


[David Wahi from Santander]. Sorry, you might have elaborated on this. On the product side, what about -- and I can see you're going out to 2024 on your slides. What about private assets? Is that something you're thinking about? Is that demand from, say, your retail clients perhaps? And just second question on the innovation front. Is there -- what are you doing exactly on that on distribution or product management?


Andrew James Formica, Jupiter Fund Management Plc - CEO & Director [18]


In terms of private markets, you're right. At the moment, we're in public markets, and that's our core strength. It definitely is right that clients are considering an important part of their portfolio -- increasingly a part of their portfolio is coming into private markets. And as we know, even those of us who operate in the public markets are noticing more and more issuance moving off to private markets and the challenge that the investor will pool for us, shifts. So I think it'd be -- it has to be something we should consider and keep in mind. As we sit here today, there is no priority to do that, I don't think there's any change -- if it was a change tactic I'd be quite clear about it. But it'd be wrong to just totally dismiss it and say we're not there. That said, culture is really important to what we do. The cultural aspects of bringing in new teams or areas that we haven't operated in just worry -- would worry me. And I'd have to be really comfortable how we did it. We'd probably have to do it either through an acquisition or a significant team lift-out because it's just a skill set we have today and to me it's -- there's so much else we can do that we should do it. So notwithstanding the fact that I know clients invest there, our focus is about saying what do we do for clients, not what the clients need and we'll do everything. And that's why you won't see us move into passive and equally at the moment, you won't see us move into private markets, but we probably need to keep an open eye for that, but it's probably not a -- our priority just now. Your other question I forgot now what it was.


Charlotte Jones;Chief Financial Officer, [19]




Andrew James Formica, Jupiter Fund Management Plc - CEO & Director [20]


Innovation, yes. Look, I think one of the huge opportunities at some -- a firm like Jupiter is we can be nimble and technology and other changes out there means we can do things and adopt things far quicker than others. One of the great things I came to Jupiter to discover was the investment in the cloud, that Jupiter's done that many other firms that I've looked at, I just find it really struggled to move their legacy systems up there, but Jupiter was able to do that. And that's given us so much more flexibility. I was horrified when I first walked in the door expecting that Jupiter was going to have the worst IT system. Paul was at the back sort of going where am I going to go with this? Because I used to hear stories when I came into the Jupiter offices, and they used to say it to me, people like Edward would say to me that if we're investing third quartile in IT, then we're too much. We need to put it more into marketing spend and fund managers. And so I was really dreading what it might look like. I have been so impressed at how the systems work, how we can do that. There's so much we can do and there's so much happening out there in the fintech space, and there are some of the best investment -- some of the best innovative minds who could really help what we do don't want to come and work for people in suits with ties on in an office like this. And we need to recognize that, and we need to tap into them. They're not going to come and find us, we have to find them. [Mitesh] Patel who just joined us in Corporate Strategy, he's done a lot -- he's been embedded in lot of this in previous experiences and we want to bring that insight. And to me, it should help us first in our investment process insights. Beginning this year we've hired [Sam Livingston] to build out our data science capability. Really, really interesting what he's doing, the way -- what he's been able to bring. Managers are really interested in some of the stuff that he is able to share with them, and I think it's helping us with managers. Equally that client experience, there's so much ways. I said to us we need to improve client reporting and the engagement with our clients, but we don't just need to do what others are doing. We can use technology to take it to a different level, and we need to do that and then constantly we're finding ways to do things cheaper but better. We've just got to be open to that. Some of the best industry -- the problem now industry has is we have too high operating margins in the sense that, that means innovation doesn't become as important. When you've got a 1% wafer-thin operating margin, you actually think really carefully about what you can do to save money, so some of the best industries are some of the old industries that have to sit there and adapt, and we need to look at that. We're not trying to say we're turning ourselves into Amazon or into Apple or Google, that's not at all what I'm saying. But what I'm saying is we need to be smart. And we need to be smart by looking at what's out there. Our client base is changing, millennials, ESG. Before it used to be part of the model of what you'd have to do and talked about. Great at dinner parties but no one ever invested on it. Now if you don't have that properly embedded in everything you do, you are not able to get business from certain client bases and that client base that won't do it is increasing. Great thing is we've always had it as a part of what we've done. As I said earlier, we haven't really invested as much in getting that message out. So these are sort of changes that we just have to be alert to, and we're small enough to do it. Our biggest risk will be that we try and operate like Schroders or BlackRock, they have to operate a certain way because of their size, we don't. We've got to play a different game on a different field. And that's the opportunity for us and technology innovation enables us to do that. Sorry, a long answer.

Okay. I think thankfully, we've exhausted all your questions. Hopefully, you can see the -- at the heart of it, there is not a change to what has made Jupiter successful to this point and this direction we're going, but equally, there is a definite shift in terms of prioritization, focus, energy, to what we can deliver. And I look forward to be able to explain that a bit more to all of you, hopefully get a chance to go and meet you individually to talk about that. I mentioned earlier that we're looking to do a capital markets update later in the fourth quarter. I think that means some of the work that's here, what that tangibly means, just some of the questions around product priorities, geographies and the like we'll be able to give you much greater granularity on that. I didn't want to do it today, given there's some of the people who will have to live with those decisions have yet to really own those. But we are -- I can assure you we're working pretty heavily through a lot of those, and we'll be able to do that in the few months' time. So thank you, and thank you, Charlotte.


Operator [21]


Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.