Ashmore Group plc · LSE:ASHM
Ashmore — Investor Presentation (March 2023)
40 slides from Ashmore's investor presentation, March 2023
Slide 1: Ashmore Group plc Investor presentation March 2023
Ashmore Group plc Investor presentation March 2023 www.ashmoregroup.com
Slide 2: Contents
Contents Page Ashmore ‘at a glance’ 3 Three-phase growth strategy 4 Active investment processes 8 Distinctive business model 12 Focus on strategic initiatives 14 Remuneration philosophy 16 Strong balance sheet 17 Sustainability 18 Emerging Markets 19 Summary of recent financial performance 26 Append
Slide 3: Ashmore 'at a glance'
Ashmore ‘at a glance’ • A specialist Emerging Markets manager with USD 57.2 bn AuM (31 AuM: diversified by investment theme & client type December 2022) diversified across asset classes Alternatives Equities 2% 10% External debt • Active investment management delivered by committee-based 22% investm
Slide 4: Three-phase growth strategy
Three-phase growth strategy • Developed world investors hold more than USD 100 trillion of assets and are profoundly underweight Emerging Markets; target allocations are less than 10% compared with global benchmark weights of approximately 10% to 30% • The Emerging Markets investment universe contin
Slide 5: Strategy phase 1: Establish Emerging Markets asset classes
Strategy phase 1: Establish Emerging Markets asset classes Convergence: GDP per capita (indexed 1980 = 100) • Ashmore’s specialist focus means it is well-placed to exploit the significant growth potential as emerging nations develop 2021 EM = $12,800 DM = $57,100 • Large investable markets across fi
Slide 6: Strategy phase 2: Diversify assets under management
Strategy phase 2: Diversify assets under management AuM development (USD bn) AuM by client type & location 100 Intermediary Foundations / 90 retail endowments 4% 1% 80 Funds / sub- Central banks advisers 19% 70 7% 60 Corporates / 50 financial 40 institutions 23% Sovereign 30 wealth funds 19% 20 10 0
Slide 7: Strategy phase 3: Mobilise Emerging Markets capital
Strategy phase 3: Mobilise Emerging Markets capital • Investable capital pools in Emerging Markets are growing Established network of six local offices faster than in Developed Markets • Ashmore’s local offices participate in this growth trend ˗ Strong organic growth opportunity in each market and f
Slide 8: Active investment processes
Active investment processes • Specialist, active investment management is required to exploit inefficiencies in Emerging Markets • Investment committees oversee experienced teams with collective responsibility for strategies in each theme ˗ No ‘star’ culture • ~100 investment professionals covering
Slide 9: Investment themes
Investment themes Ashmore manages capital across a range of different investment themes with dedicated strategies under each theme providing either global Emerging Markets exposure or specific regional or country exposure. FIXED INCOME ALTERNATIVES (USD 49.9bn) (US$1.3bn) EQUITIES (US$6.0bn) Local C
Slide 10: Investment performance
Investment performance One year: 45% outperforming Three years: 40% outperforming Five years: 43% outperforming 100% 100% 100% 90% 90% 90% 80% 80% 80% 70% 70% 70% 60% 60% 60% 50% 50% 50% 40% 40% 40% 30% 30% 30% 20% 20% 20% 10% 10% 10% 0% 0% 0% Jun’22: 45% Jun’22: 28% Jun’22: 48% Outperforming Underp
Slide 11: Investment performance (2/2)
Investment performance (2/2) 1yr 3yr 5yr 31st December 2022 Ashmore Benchmark Ashmore Benchmark Ashmore Benchmark External debt Broad -21.8% -17.8% -8.7% -5.3% -3.8% -1.3% Sovereign -19.6% -17.8% -7.8% -5.3% -2.8% -1.3% Sovereign IG -17.8% -19.8% -4.0% -5.0% 0.4% -0.5% Local currency Bonds -7.5% -11
Slide 12: Distinctive business model
Distinctive business model Structural growth opportunities Creating value through the cycle Strong long-term investment performance for clients • Consistent investment philosophy since 1992 • Significant alpha delivered through market cycles Interests aligned through employee equity ownership • Vari
Slide 13: Delivering returns for shareholders through market cycles
Delivering returns for shareholders through market cycles • Financial performance driven by high-quality revenues and highly Profitability maintained through cycles flexible cost base 100% 70% ˗ Strong bias to recurring management fee income 90% 80% 65% ˗ Disciplined control of operating costs 70% 6
Slide 14: Focus on strategic initiatives: 1. Equities
Focus on strategic initiatives 1. Equities • Strategic objective to increase % of AuM in equity funds (10% Equity AuM as % of Group AuM currently) 12% 10% • Equities AuM has three main components: 8% − global products (e.g. All Cap, or traditional GEM equity funds, and Active Equity): c.25% AuM 6% −
Slide 15: Focus on strategic initiatives: 2. Intermediary retail
Focus on strategic initiatives 2. Intermediary retail Diversified intermediary retail AuM • Intermediary retail AuM provides diversification and financial benefits, albeit with typically greater market/performance sensitivity (i.e. focus on positive beta) than institutional capital UK, 20% • Interme
Slide 16: Remuneration philosophy
Remuneration philosophy • Consistent philosophy aligned with cyclical profits and protects Clear link between pay and performance 100% returns to shareholders through market cycles 80% • Applies to all Group employees, underpins strong team-based culture and employee retention 60% • RemCo determines
Slide 17: Strong balance sheet & consistent cash generation
Strong balance sheet & consistent cash generation • Strong, liquid balance sheet benefits clients and Substantial & liquid financial resources shareholders through the cycle − no debt − high-quality financial resources, c.£700m − capacity to invest in seed capital for future growth 609.2 663.5 − con
Slide 18: Sustainability
Sustainability Integrated approach: three pillars of sustainability Consistent, coherent approach across the Group • ESG Committee includes front office, middle office & support Corporate Responsible The Ashmore functions responsibility investment Foundation Corporate Ensure the firm is Ensure Ashmo
Slide 19: Emerging Markets
Ashmore Emerging Markets eee
Slide 20: Emerging Markets: Structural growth and investment opportunities in inefficient markets
Emerging Markets Structural growth and investment opportunities in inefficient markets • Growth underpinned by powerful economic convergence Emerging Markets’ increasing significance trends with the developed world • Large investment universe, set to grow further 84% 58% ˗ US$79trn in equities and f
Slide 21: Emerging Markets: Diversification
Emerging Markets Diversification • Diverse equity & fixed income asset classes representing Large and diverse benchmark indices more than 70 countries Index Value Countries Issuers ˗ No country is more than 5% of EMBI GD (US$bn) ˗ GBI-EM GD country weights capped at 10% EMBI GD 1,080 70 160 GBI-EM G
Slide 22: Emerging Markets: Active versus passive investing
Emerging Markets Active versus passive investing Large investment universe, low index representation • EM fixed income and equity markets are inefficient − Benchmark indices are unrepresentative of the US$40.4trn US$38.4trn 17% investment opportunity 15% − Active management is critical • Structural
Slide 23: Volatile market conditions in 2022
Volatile market conditions in 2022 • Complex global macro environment Asset class returns ‒ High inflation Q1 (Sep) Q2 (Dec) 6m Emerging Markets ‒ Aggressive policy tightening by Fed / DM central banks External debt (EMBI GD) -4.6% +8.1% +3.2% ‒ Ukraine war Local currency (GBI-EM GD) -4.7% +8.5% +3.
Slide 24: Emerging Markets outperforming
Emerging Markets outperforming • 2022 macro headwinds receding, several factors point to continued Attractive valuations available in Emerging Markets EM outperformance ‒ China policy stimulus will have broader positive impact 31 Dec 2022 ‒ EM inflation moderating following effective rate hikes EMBI
Slide 25: Historical valuations relative to Developed Markets
Historical valuations relative to Developed Markets External debt Local currency Index: 70 countries, 160 issuers, 929 bonds Index: 20 countries, 20 issuers, 308 bonds 800 8.00 EMBI GD spread over UST, bps GBI-EM GD yield (%) Difference: GBI-EM vs GBI global (%) 7.50 700 7.00 6.50 600 6.00 500 5.50
Slide 26: Summary of recent financial performance: H1 2022/23
Ashmore Group plc Summary of recent financial performance: H1 2022/23
Slide 27: Financial performance overview
Financial performance overview • AuM -11% over the six months, -34% YoY H1 2022/23 H1 2021/22 £m £m YoY % − Average AuM declined by 35% YoY AuM (US$bn) 57.2 87.3 (34) • Adjusted net revenue -22% Adjusted net revenue 107.7 138.2 (22) − Net management fees -25%, higher FX income Adjusted operating cos
Slide 28: Assets under management
Assets under management • Institutional de-risking and significant asset price fluctuations AuM development (US$bn) 7.0 ‒ Net outflows of US$7.6 billion include US$1.2 billion reduction in overlay ‒ Performance +US$0.8 billion; Q1 -US$3.0 billion & Q2 0.6 3.0 3.8 +US$3.8 billion 64.0 57.2 • Subscrip
Slide 29: Quarterly net flows
Quarterly net flows +8.0 +6.0 +4.0 +2.0 USD billion +0.0 -2.0 -4.0 -6.0 -8.0 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 29
Slide 30: Revenues
Revenues • Adjusted net revenue 22% lower Adjusted net revenue (£m) 138.2 33.0 • Net management fees -25% 1.9 107.7 − Average AuM -35% 0.6 − 1bp increase in net management fee margin − Lower average GBP:USD rate (+10% impact) • Margin 40bps − Net impact of large institutional account flows (+2bps) −
Slide 31: Operating costs
Operating costs • Adjusted operating costs reduced by 3% Adjusted operating costs (£m) ˗ Lower variable compensation, consistent with lower 3.2 4.8 revenues 47.8 46.2 ˗ Staff costs reflect increased headcount and impact of wage inflation ˗ Return to pre-pandemic operating environment ˗ Lower average
Slide 32: Seed capital
Seed capital • Total seed capital investments & commitments of ~£272 million Diversified across themes (% of market value) ‒ Market value £260.8 million (30 June 2022: £272.0 million) 5% External debt ‒ Undrawn commitments £11.3 million 14% 34% Local currency Corporate debt • Unrealised mark-to-mark
Slide 33: Cash flow
Cash flow • Business model generates strong cash Cash flow (£m) (1) flows through the cycle 46.2 11.3 86.9 • Operating cash flows of £46.2 million 542.0 represent 73% of adjusted EBITDA 15.6 2.4 2.9 474.9 5.9 480.8 • Significant H1 payments relate to prior year, e.g. final dividend and variable remu
Slide 34: Balance sheet
Balance sheet • Well-capitalised & liquid balance sheet Consistent balance sheet structure (£m) maintained 900 800 700 • Capital resources of £704.1 million 600 500 ˗ Board has determined Group capital 400 requirement of £84.5 million 300 ˗ Excess capital of £619.6 million, equivalent 200 to 87p/sha
Slide 35: Management fee margins
Management fee margins 148 142 134 H1 2021/22 H2 2021/22 H1 2022/23 59 57 60 47 45 44 39 39 40 38 36 36 34 34 32 27 27 28 Group External debt Local currency Corporate debt Blended debt Equities Alternatives Fixed income: 34bps (H1 2021/22: 36bps) (H2 2021/22: 35bps) 35
Slide 36: Foreign exchange
Foreign exchange • US dollar strengthened against Sterling over the period Currency exposure of cash(1) − Period-end rate moved from 1.2145 to 1.2029 31 December 2022 % 30 June 2022 % £m £m − Average rate 1.1795 vs 1.3636 in H1 2021/22 US dollar 99.8 21 238.5 44 Sterling 355.6 74 273.1 50 • P&L FX e
Slide 37: Appendix
Ashmore Appendix eee
Slide 38: Disclosures
Disclosures Page 12: - Gross performance is shown, weighted by fund AuM, to provide a representative view to analysts and shareholders of Ashmore’s investment performance over relevant time periods - Only funds at 31 December 2022 and with a performance benchmark are included, which specifically exc
Slide 39: Disclaimer
Disclaimer IMPORTANT INFORMATION This document does not constitute an offer to sell or an invitation to buy shares in Ashmore Group plc or any other invitation or inducement to engage in investment activities. Certain statements, beliefs and opinions in this document are forward-looking, which refle
Slide 40: Investor relations contact
Investor relations contact Paul Measday Telephone: +44 (0) 203 077 6278 Email: paul.measday@ashmoregroup.com Website: ir.ashmoregroup.com 40