Investec Plc · LSE:INVP
Investec — Investec Asset Management — Investor Day (November 2018)
62 slides from Investec's investor day presentation, Nov 20, 2018
Slide 1: Investec Asset Management Capital Markets Day
Investec Asset Management Global asset manager with an emerging market heritage Capital Markets Day 20 November, 2018
Slide 2: Today's presenters
Today’s presenters Hendrik du Toit Kim McFarland Founder, Investec Asset COO and CFO, Investec Management and Asset Management and Joint CEO, Investec Group Executive Director, Investec Group Background Background • Founded Investec Asset Management in 1991 • Joined Investec Asset Management in 1993
Slide 3: Agenda
Agenda 1 Introduction to Investec Asset Management 4 2 Market Context and Investment Highlights 11 3 Investment Platform 27 4 Clients and Distribution 35 5 Operating Model 43 6 Financial Performance 50 7 Break 8 Concluding Remarks 58 9 Q&A 3 Confidential | Investec Asset Management
Slide 4: The Investec Asset Management growth story
The Investec Asset Management growth story 120 100 Assets under management (£bn) 80 60 40 20 0 FY92 FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 HY19 4 Note: FY92-FY18 represent financial years ended 31 March; HY19
Slide 5: Investing for a better tomorrow
Investing for a better tomorrow Better Firm We are building a firm that aims to achieve excellence over the long-term, with a culture that encourages our people to reach their highest potential and puts our clients at the centre of our business Better Investing Long-term investment excellence is our
Slide 6: We are a people business
We are a people business 6 Confidential | Investec Asset Management
Slide 7: The numbers tell the story
The numbers tell the story ~ 28 ~ 20 ~ 170 18% years average dedicated years of tenure of employee PMs2, Analysts heritage Executive owned3 and Strategists Committee1 ~ 13 ~ 12 ~ 14 years average years average years average tenure for tenure for tenure for Investment Operations Client Group Heads an
Slide 8: Global asset manager with an emerging market heritage
Global asset manager with an emerging market heritage Founded in 1991, Investec Asset Management (“IAM”) is a leading global AUM by asset class asset manager, with assets under management (“AUM”) of £109bn Equities (£51bn) 7% 3% Fixed Income (£28bn) High conviction strategies managed by specialist i
Slide 9: Core strategic principles
Core strategic principles We offer organically- We operate globally in We have an approach to developed investment both the Institutional growth that is driven by capabilities through and Advisor space structural medium to long- active segregated through five term client demand and mandates or mutua
Slide 10: Agenda
Agenda 1 Introduction to Investec Asset Management 4 2 Market Context and Investment Highlights 11 3 Investment Platform 27 4 Clients and Distribution 35 5 Operating Model 43 6 Financial Performance 50 7 Break 8 Concluding Remarks 58 9 Q&A 10 Confidential | Investec Asset Management
Slide 11: Global asset management market landscape
Global asset management market landscape Demographic factors Rebalancing of capital flows Revenue opportunity for high High margin, capital light underpin structural growth towards global and emerging alpha products, solutions and industry with high cash markets sustainable investing conversion
Slide 12: A global asset manager with an emerging market heritage
A global asset manager with an emerging market heritage A differentiated asset manager… …with the attributes of industry leaders 1 Unique employee ownership and culture 5 Superior global reach given scale 2 Organically and sustainably built 6 Sophisticated Institutional and Advisor client base 3 Dis
Slide 13: Unique employee ownership and culture
1 Unique employee ownership and culture History of entrepreneurship and founder-owner mindset Executive Investments2 Client Group3 Operations4 Committee5 Launched in 1991 and grown organically by existing senior management team Senior management and key employees have acquired an 18% stake1 No. of p
Slide 14: Organically and sustainably built
2 Organically and sustainably built Established long-term growth track record in AUM Domestic growth phase Internationalisation phase Scaling post crisis phase £39bn of cumulative net flows since April 120 Bear market 2009, representing ~50% of total AUM growth 100 Assets under management (£bn) 80 6
Slide 15: Distinctive specialist active strategies
3 Distinctive specialist active strategies Differentiated and diversified set of sustainably built active strategies with a long-term focus and global appeal to sophisticated investors class offerings1 Core asset £ 51bn £ 28bn £ 20bn 3 £ bn Equities Fixed Income Multi-Asset Alternatives 53 19 12 36
Slide 16: Delivering robust long-term investment performance
3 Distinctive specialist active strategies Delivering robust long-term investment performance for our clients Overall firm investment outperformance Latest firm investment outperformance1 100% 10 years ● Consistent track record of 50% 94% investment 0% outperformance across multiple market cycles2 1
Slide 17: Emerging market heritage underpins growth
4 Emerging market heritage underpins growth Ideally positioned to help clients face the structural flow of capital from developed to emerging markets By client location Emerging market heritage (today1) Limited scale of South African market necessitated early internationalisation Founded: 1991 50% £
Slide 18: Emerging market heritage underpins growth
4 Emerging market heritage underpins growth The structural growth opportunity for emerging markets is compelling Faster growth in GDP per capita1 Developed market investors typically underweight vs. global market capitalisation and global indices $16,382 27% 23% 22% $60,690 10% $1,573 5% 5% $10,184
Slide 19: Superior global reach given scale
5 Superior global reach given scale Diversified across global markets with increasing local penetration UK Europe AUM £23bn AUM £13bn Client Group Headcount 32 Client Group Headcount 20 Asia Pacific 7% 7% 22% 6% AUM £19bn Client Group Headcount 28 21% 10% Americas AUM £15bn Africa3 Client Group Head
Slide 20: Sophisticated Institutional and Advisor client base
6 Sophisticated Institutional and Advisor client base Diversified client base with less than 2% of AUM sourced from Investec Group Institutional Advisor 12% 2% Advisor 20% 12% 32% 37% 43% £74bn 8% £35bn 13% £109bn 20% AUM 33% Pension Funds Large Retail Groups Institutional 1 Public Bodies (inc. SWFs
Slide 21: Significant growth potential across existing skillsets
7 Significant growth potential across existing skillsets IAM’s specialist skillsets are fully aligned with global growth trends Global industry AUM by Global industry revenue by asset class1 asset class1 AUM CAGR $109tn $375bn (2008 – 2022E) $28bn Passive 14% IAM’s growth focus $25tn $65bn Core 3% $
Slide 22: Significant growth potential across existing skillsets
7 Significant growth potential across existing skillsets Continuing organic product evolution leveraging existing investment skillsets Global Multiple Equities examples Advisor strategies per asset class Income Solutions Broadening and internationalising Equities investment skillsets (4Factor, Build
Slide 23: Attractive financial profile with strong cash generation
8 Attractive financial profile with strong cash generation Increasing AUM, recurring revenues and cost discipline driving consistent profit growth 104 109 Total AUM (£bn) ● Long track record of increasing AUM AUM growth 29 ● Driving continued revenue growth FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY
Slide 24: Over the past 10 years, IAM has paid out £1.1bn in dividends
8 Attractive financial profile with strong cash generation Over the past 10 years, IAM has paid out £1.1bn in dividends RoE1: 91% £1.1bn 1,200 1,000 Cumulative dividends (£m) 800 600 400 200 - FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 24 Note: Excludes capital payments for purchase of minori
Slide 25: A global asset manager with an emerging market heritage
A global asset manager with an emerging market heritage A differentiated asset manager… …with the attributes of industry leaders 1 Unique employee ownership and culture 5 Superior global reach given scale 2 Organically and sustainably built 6 Sophisticated Institutional and Advisor client base 3 Dis
Slide 26: Agenda
Agenda 1 Introduction to Investec Asset Management 4 2 Market Context and Investment Highlights 11 3 Investment Platform 27 4 Clients and Distribution 35 5 Operating Model 43 6 Financial Performance 50 7 Break 8 Concluding Remarks 58 9 Q&A 26 Confidential | Investec Asset Management
Slide 27: A global integrated investment platform
A global integrated investment platform 4Factor Quality Value Fixed Income Multi-Asset Alternatives 531 191 121 361 271 211 6 Clearly defined skillsets New York London 2 Key investment centres Hong Kong with growing investment presence in other regions Singapore Windhoek Gaborone Cape Town 1 Global
Slide 28: Well balanced by asset class and investment strategy
Well balanced by asset class and investment strategy By asset class By investment strategy SA Fund Platform (£7bn) Alternatives (£3bn) 7% 3% Developed Multi-Asset Markets (£48bn) Emerging (£20bn) 19% Markets Equities 44% 46% (£61bn) £109bn (£51bn) £109bn 56% 25% Fixed Income (£28bn) 28 Note: AUM as
Slide 29: Diversified offering across all asset classes
Diversified offering across all asset classes Equities Fixed Income Multi-Asset Alternatives £51bn £28bn £20bn £3bn Asia EM Sovereign & Currency Africa (inc. SA) Specialist Commodities Regional Regional UK EM Credit UK Real Estate Regional EM Africa (inc. SA) FI EM Private Equity Europe Africa (inc.
Slide 30: Our investment approach
Our investment approach We firmly believe in the power of specialisation Well-articulated investment philosophies, well-defined investment processes and clear team leadership Developed organically over time, resulting in experienced and stable teams Diverse teams with a culture of collaboration, gen
Slide 31: Our model: Well positioned active investment platform
Our model: Well positioned active investment platform Key components to our active manager construct Equities Fixed Income Thematic The ‘core-satellite’ approach adopted by • Global Equity • EM Debt • Sustainability Specialist / High Alpha many Institutional asset • Regional Equity • EM Credit owner
Slide 32: Proven investment performance track record
Proven investment performance track record Overall firm outperformance Latest outperformance1 Mutual funds outperformance2 100% 10 years 10 years 87% 50% 94 % 0% 100% 71% 5 years 5 years 50% 69 % 0% 100% 60% 3 years 3 years 50% 57 % 0% 100% 66% 1 year 1 year 50% 62 % 1st quartile 2nd quartile 0% FY0
Slide 33: Key takeaways
Key takeaways ● Building differentiated skills patiently over time, focusing on Specialist / High Alpha and Outcomes ● Across skillsets, continuing to evolve our strategies in a disciplined manner ● Favourably positioned towards structural transitions: ‒ Rebalancing of global investment portfolios ‒
Slide 34: Agenda
Agenda 1 Introduction to Investec Asset Management 4 2 Market Context and Investment Highlights 11 3 Investment Platform 27 4 Clients and Distribution 35 5 Operating Model 43 6 Financial Performance 50 7 Break 8 Concluding Remarks 58 9 Q&A 34 Confidential | Investec Asset Management
Slide 35: Global distribution reach
Global distribution reach Close to clients with 21 Client Group offices around the world UK1 Europe Industry AUM $6tn Industry AUM $16tn o/w Institutional 78% o/w Institutional 69% IAM AUM £23bn IAM AUM £13bn o/w Institutional 52% o/w Institutional 70% 21% of IAM total 12% of IAM total Asia-Pacific2
Slide 36: Institutional distribution channel
Institutional distribution channel Well diversified with no single client representing more than 5% of revenues By geography By client type By asset class Investment in Europe Mutual Funds Alternatives 13% 12% 3% Multi-Asset Africa 18% 33% Corporates Equities Americas 12% Pension 46% 16% Funds 43% £
Slide 37: Advisor distribution channel
Advisor distribution channel Well diversified and built on strength of products and long-term partnerships By geography By client type By asset class Asia Pacific1 Other 2 Fixed Alternatives 8% SA Fund 2% Income 3% Americas Platform Large Retail 9% 9% 20% Groups 37% Equities 47% Africa Europe 41% SA
Slide 38: Sources of gross flows
100% Sources of gross flows 90% Well diversified by channel and region and relatively stable over time 80% 70% Gross flows by channel Gross flows by region 60% 50% 13% 19% Europe 21% 21% 21% 33% 29% 35% 35% 38% 40% 45% 42% 15% Advisor 20% 14% 19% Americas 22% 30% 13% 13% 7% 17% 10% 1 13% 13% Asia Pa
Slide 39: Client Group snapshot by region
Client Group snapshot by region AUM1 Presence2 FY18 net flows4 Channel split1 Asset mix Outlook £39bn Since 1991 ● Market-leading position Africa £0.2bn 37% 63% 36% of total 55 FTEs3 ● Advisor growth opportunity ● Competitive in Advisor market £23bn Since 1998 ● Well-positioned competitor in sub- UK
Slide 40: Fund ranges
Fund ranges Well structured product platform enabling IAM to serve clients globally Europe and Africa UK Asia Pacific Americas International Cross-Border South Africa Australia USA Luxembourg ● OEICs ● US 40 Act funds ● SICAVs ● Unit trusts ● Investment trusts ● Unit trusts ● LLCs ● AIFs ● Pooled li
Slide 41: Key takeaways
Key takeaways ● Focus on large pools of capital in developed markets ● Established global distribution in two channels (Institutional and Advisor) ● Experienced and well established local teams, close to clients ● Well developed infrastructure to reach clients and flexible product wrapping ● Proven
Slide 42: Agenda
Agenda 1 Introduction to Investec Asset Management 4 2 Market Context and Investment Highlights 11 3 Investment Platform 27 4 Clients and Distribution 35 5 Operating Model 43 6 Financial Performance 50 7 Break 8 Concluding Remarks 58 9 Q&A 42 Confidential | Investec Asset Management
Slide 43: Operating model strategy and benefits
Operating model strategy and benefits 2002 – strategic decision to outsource operations across back / middle office, transfer agent, fund accounting Achieved by partnering with leading global service providers Enables IAM to focus on investment platform and servicing its clients A single global inte
Slide 44: Operating platform overview
Operating platform overview Single global platform, best of breed systems Investment Client Data Management Management Management … underpinned by a long-term, stable outsource partner Back and Middle Office Service … and supported by one internal globally integrated operations team Information Fina
Slide 45: Proven ability to scale
Proven ability to scale 70% 30% c.1m c.900k c.2,500 positions institutionally Average AUM outsourcing trades per reconciled managed growth1 cost growth1,2 annum monthly portfolios Outsourcing cost vs. AUM3 growth Outsourcing cost vs. recurring revenue growth FY14 FY15 FY16 FY17 FY18 HY19 FY14 FY15 F
Slide 46: Harnessing technology to support growth
Harnessing technology to support growth Investment focus on technology as an enabler and to enhance our East / West capability Initiatives delivered Technology priorities Centralised data architecture Enhancing East / West capability Client reporting and marketing automation New investment risk
Slide 47: Relationship with Investec Group
Relationship with Investec Group Limited, as IAM operates independently; no material incremental costs In preparation for the demerger, a services and transitional agreement will be put in place for: ● Payroll services ● Networks and communication ● Cyber and IT security ● Software licenses and trad
Slide 48: Key takeaways
Key takeaways ● Single global operating model with global leadership in place ● Well-embedded outsourcing partnerships with industry leaders ● Established operational backbone which has been built for growth ● Experienced and knowledgeable operations team ● Disciplined approach to growth 48 Confiden
Slide 49: Agenda
Agenda 1 Introduction to Investec Asset Management 4 2 Market Context and Investment Highlights 11 3 Investment Platform 27 4 Clients and Distribution 35 5 Operating Model 43 6 Financial Performance 50 7 Break 8 Concluding Remarks 58 9 Q&A 49 Confidential | Investec Asset Management
Slide 50: Attractive financial profile
Attractive financial profile Increasing AUM, recurring revenues and cost discipline driving consistent profit growth 104 109 Total AUM (£bn) ● Long track record of increasing AUM AUM growth 29 ● Driving continued revenue growth FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 HY19 + Total net reven
Slide 51: AUM development over time
AUM development over time Strong AUM growth, significantly driven by net flows; 10 year average torque ratio of 7% Torque 5% 4% (1)% 6% 4%2 ratio1: +1 109 +4 +3 104 +5 +20 95 +3 +7 78 76 - 68 +3 (5) (1) FY14 Markets / FY15 Markets / FY16 Markets / FY17 Markets / FY18 Markets / HY19 Net flows Net flo
Slide 52: Consistent and diversified flows
Consistent and diversified flows Substantial and diversified net flows Net flows by channel (£bn) Net flows by asset class (£bn) 5 5 4 4 3 3 3 3 3 3 (1) (1) FY14 FY15 FY16 FY17 FY18 HY19 FY14 FY15 FY16 FY17 FY18 HY19 Advisor Institutional Equities Fixed Income Multi-Asset Alternatives SA Fund Platfo
Slide 53: Reported financials
Reported financials £m, unless stated FY17 FY18 % Change HY18 HY19 % Change Closing AUM (in £bn) 95 104 9% 90 98 109 11% Management Fees 435 495 14% 242 264 9% Management Fee Rate (bps) 51 50 50 50 Performance Fees 28 18 (34)% 4 5 18% 1 Silica Revenues 16 18 15% 9 9 (3)% Non-Operating Income2 20 8 (
Slide 54: Analysis of costs
Analysis of costs Analysis of cost growth (£m) Breakdown of non-staff costs1 (FY18) 6 2 362 13% 21 Fund Administration 333 Non-staff costs 7% 33% Systems Accommodation 8% Promotional 70% Staff costs Information 70% 11% Travel Overheads 16% 12% FY17 Staff costs Systems & Other FY18 information 8 200
Slide 55: Track record of cash generation
Track record of cash generation Over the past 10 years, IAM has paid out £1.1bn in dividends RoE1: 91% £1.1bn 1,200 1,000 Cumulative dividends (£m) 800 600 400 200 - FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 55 Note: Excludes capital payments for equity stake Confidential | Investec Asset Ma
Slide 56: Key takeaways
Key takeaways ● Consistently strong net flows supported by client and geographical diversity ● Substantial management fee growth ● Limited dependence on performance fees and other income ● Focused on cost discipline, yet continuing to invest to support long-term growth ambitions ● No financial lever
Slide 57: Agenda
Agenda 1 Introduction to Investec Asset Management 4 2 Market Context and Investment Highlights 11 3 Investment Platform 27 4 Clients and Distribution 35 5 Operating Model 43 6 Financial Performance 50 7 Break 8 Concluding Remarks 58 9 Q&A 57 Confidential | Investec Asset Management
Slide 58: Long-term focus for sustainable growth
Long-term focus for sustainable growth 1 2 3 4 Concentrate effort Capture the next Scale offering Continue to deepen on existing offering wave of flows, North through our global and strengthen where we have differentiated strategies and + distribution model in Institutional and Advisor channels + Am
Slide 59: A global asset manager with an emerging market heritage
A global asset manager with an emerging market heritage A differentiated asset manager… …with the attributes of industry leaders Unique employee ownership and culture Superior global reach given scale Organically and sustainably built Sophisticated Institutional and Advisor client base Distinctive s
Slide 60: Agenda
Agenda 1 Introduction to Investec Asset Management 4 2 Market Context and Investment Highlights 11 3 Investment Platform 27 4 Clients and Distribution 35 5 Operating Model 43 6 Financial Performance 50 7 Break 8 Concluding Remarks 58 9 Q&A 60 Confidential | Investec Asset Management
Slide 61: Q&A
Q&A 61 Confidential | Investec Asset Management
Slide 62: Disclaimer
Disclaimer This presentation (the “Presentation”) has been prepared by Investec plc and Investec Limited (together, the “Company”) and their subsidiaries from time to time (the “Group”) solely for use at investor meetings held in November 2018. By reading the Presentation, you agree to be bound by t
Investec Asset Management — Investor Day (November 2018) on 6ix