Ashmore Group plc · LSE:ASHM
Ashmore — Investor Presentation (February 2020)
36 slides from Ashmore's investor presentation, February 2020
Slide 1: Ashmore Group plc Investor presentation February 2020
Ashmore Group plc Investor presentation February 2020 www.ashmoregroup.com
Slide 2: A specialist active manager of Emerging Markets assets
A specialist active manager of Emerging Markets assets EMERGING MARKETS FUNDAMENTALS UNDERPIN LONG-TERM GROWTH • EM accounts for majority of world’s population (86%), FX reserves (76%), GDP (59%) • High growth potential: social, political and economic convergence trends with DM • Large, liquid, dive
Slide 3: Emerging Markets: Current views
Emerging Markets Current views
Slide 4: Emerging Markets outlook
Emerging Markets outlook Continued incentives to allocate to Emerging Markets Emerging Markets growth premium 6.0 • Rising growth premium: positive for currencies and equities 5.0 • Attractive real rates, benign inflation and monetary policies: local currency bonds 4.0 • Dovish DM central banks: sup
Slide 5: Historical valuations relative to Developed Markets
Historical valuations relative to Developed Markets External debt Local currency Index: 73 countries, 170 issuers, 780 bonds Index: 18 countries, 18 issuers, 220 bonds 550 8.0% 6.00% 500 7.0% 5.50% 450 6.0% 5.00% 400 5.0% Yield (%) 4.0% 4.50% 350 3.0% 300 4.00% 2.0% 250 3.50% 1.0% 200 0.0% 3.00% 201
Slide 6: Volatility and risk
Volatility risk • Active management can exploit value created by Average per annum volatile prices in inefficient markets Default episodes (cost in bps) 1998-2018 (bps) US 10yr bond 356 Argentina 2001 483 • Significant alpha can be generated versus EM net of defaults 716 Ecuador 2008 125 passive (
Slide 7: Active versus passive investing in Emerging Markets
Active versus passive investing in Emerging Markets Large investment universe, low index representation • EM fixed income and equity markets are inefficient 30.0 US$26.5trn Benchmark indices are unrepresentative of the 12% US$24.5trn 22% investment opportunity 25.0 Active management is critical
Slide 8: Ashmore Group plc
Ashmore Ashmore Group plc eee
Slide 9: Consistent three-phase strategy to capitalise on Emerging Markets growth trends
Consistent three-phase strategy to capitalise on Emerging Markets growth trends 1. Establish Emerging Markets asset class Recent developments • Ashmore is recognised as an established specialist Emerging Markets manager, • Investor allocations to Emerging Markets are increasing, and and is therefore
Slide 10: Strategy phase 1: Establish Emerging Markets asset classes
Strategy phase 1: Establish Emerging Markets asset classes GDP per capita (indexed 1980 = 100) • Ashmore’s proven investment expertise, specialist focus and 2018 EM = US$11,100 scalable distribution model mean it is well-placed to exploit DM = US$45,800 the growth opportunities across Emerging Marke
Slide 11: Strategy phase 2: Diversify assets under management
Strategy phase 2: Diversify assets under management AuM by client type • Ashmore’s broad distribution capabilities deliver AuM diversified by investment theme, client type and client location Central bank 1% 13% 12% Sovereign wealth fund 3% 7% Government AuM development (USD bn) Pension plan 120 19%
Slide 12: Strategy phase 3: Mobilise Emerging Markets Capital
Strategy phase 3: Mobilise Emerging Markets Capital • Local EM businesses offer significant growth and value potential Local platforms: contribution to Group Investable capital pools growing 3x faster than Developed Markets Group Local vs Group Opportunity for independent managers through domest
Slide 13: Ashmore has a robust and flexible business model
Ashmore has a robust and flexible business model Structural growth Distinctive business model Delivering value through opportunities characteristics the cycle Data as at 30 June 2019, per Annual Report & Accounts 13
Slide 14: Eight Emerging Markets investment themes
Eight Emerging Markets investment themes, ongoing diversification through evolving sub-themes Overlay/ External Debt Local Currency Corporate Debt Equities Alternatives Liquidity (USD 19.7bn) (USD 22.9bn) (USD 14.2bn) (USD 5.1bn) (USD 1.6bn) (USD 7.8bn) Global Emerging • Broad • Bonds • Broad • Glob
Slide 15: Ashmore fixed income investment committee process
Ashmore fixed income investment committee process • Long investment track Global macro overview Risk call record: consistent process Market exposure: add vs reduce since 1992 Long-term and tactical views Investment Country / corporate updates Updated credit views Committee • Weekly meeting to (I
Slide 16: Delivering long-term investment performance for clients
Delivering long-term investment performance for clients Long-term investment performance: % AuM outperforming One year Three years Five years 100% 100% 100% 98% 80% 80% 80% 75% 60% 60% 60% 40% 40% 40% 20% 20% 20% 24% 0% 0% 0% Blended Blended Local Equities Local Equities External Multi-asset Group E
Slide 17: Investment performance
Investment performance 1yr 3yr 5yr 31st December 2019 Ashmore Benchmark Ashmore Benchmark Ashmore Benchmark External debt Broad 14.0% 15.0% 6.4% 6.7% 8.1% 6.2% Sovereign 15.7% 15.0% 6.7% 6.7% 7.6% 6.2% Sovereign IG 15.1% 16.6% 7.7% 7.5% 6.0% 5.6% Local currency Bonds 12.8% 13.5% 7.5% 7.0% 3.6% 2.8%
Slide 18: Global distribution model
Global distribution model • Comprehensive coverage of a diversified Global distribution team structure client base Institutional Intermediary Marketing Product Total Global teams in London, New York and management Singapore hubs Headcount 24 9 6 4 43 Local distribution Sales office in Tokyo In
Slide 19: Diversified intermediary retail AuM
Diversified intermediary retail AuM • Strong growth in retail AuM sourced through intermediaries, consistent with Strong growth in intermediary AuM Ashmore’s diversification strategy 16 Total retail AuM of ~US$13bn 14 Net inflows of +US$1.9 billion in calendar year 2019 12 10 8 • Scalable mutual
Slide 20: Simple, distinctive and effective remuneration philosophy
Simple, distinctive and effective remuneration philosophy delivering retention and alignment of interests • Principal features: Strong link between performance and variable remuneration salaries capped to minimise fixed costs 100% single profit-based VC pool, capped at 25% of pre-bonus profit 80
Slide 21: Business model delivers through market cycles
Business model delivers through market cycles • Ashmore’s business model delivers through market cycles High-quality revenues delivering 67% adjusted EBITDA margin ˗ High-quality revenues driven by recurring net 100% 70% management fees 90% 80% ˗ Cost discipline including flexible remuneration polic
Slide 22: Strong cash generation
Strong cash generation • Business model converts operating profits to cash (110% Consistent conservative balance sheet structure cumulative conversion since IPO) 800 700 • Cash balance has been broadly stable, average balance 600 of ~£400 million over past decade 500 400 • Principal uses of cash flo
Slide 23: Balance sheet strength
Balance sheet strength • Strong, liquid balance sheet benefits clients and shareholders Substantial financial resources through the cycle 800 no debt 700 high-quality financial resources 600 liquid assets represent >80% of total balance sheet 500 capacity to invest in seed capital for future
Slide 24: Active seed capital programme creating value
Active seed capital programme creating value Active management of seed capital investments • Active seeding supports Ashmore’s strategy through: £770m ˗ Creating a marketable investment track record ˗ Establishing new distribution conduits £555m ˗ Providing additional scale to an existing fund to en
Slide 25: Recent financial performance
Recent financial performance • AuM +28% YoY, average AuM +24% YoY H1 2019/20 H1 2018/19 £m £m YoY % Net flows +US$5.7 billion and positive investment performance +US$0.9 billion AuM (US$bn) 98.4 76.7 28 Adjusted net revenue 177.3 148.2 20 • Adjusted net revenue +20% Net management fees +18%, ref
Slide 26: Appendix: H1 2019/20 financial results
Appendix H1 2019/20 financial results
Slide 27: Assets under management
Assets under management • Gross subscriptions of US$14.9 billion, 16% of AuM development (US$bn) opening AuM (H1 2018/19: US$8.5 billion, 12%) 14.9 (9.2) Institutional clients continue to increase 0.9 allocations across all fixed income and equity themes New clients active in blended debt, corpo
Slide 28: Revenues
Revenues • Net management fees +18% Strong growth (+18%) in net management fee income Strong growth in average AuM 30.7 2.8 5.7 3.8 168.3 Lower average GBPUSD rate • Net management fee margin 46bps 142.3 -1bp HoH, split equally between size and other effects -3bps YoY, due to mix (-2bps) and
Slide 29: Operating costs
Operating costs • Non-VC operating costs fell by 6% Operating cost development (£m) ˗ Modest (+2%) increase in like-for-like other 28.0 2.2 operating costs, of which half due to FX 0.3 26.3 ˗ Lower amortisation 0.1 0.3 • Average headcount increased 5% YoY ˗ Fixed staff costs +3% YoY • Impact of IFRS
Slide 30: Seed capital
Seed capital Seed capital movement (£m) • Total seed capital programme of £274 million 15.2 34.6 277.8 Market value £255.3 million (30 June 2019: £277.8 million) 3.1 255.3 Undrawn commitments of £18.8 million • Active management delivered realised gain of £1.5 million and total profit before tax
Slide 31: Balance sheet
Balance sheet • Excess regulatory capital of £579.7 million Consistent balance sheet structure Capital resources of £700.7 million (2) 800 700 Pillar 2 regulatory capital requirement of 600 £121.0 million 500 Excess capital equivalent to 81p/share 400 300 • Balance sheet is highly liquid (82%)
Slide 32: Foreign exchange
Foreign exchange • Sterling strengthened against the US dollar over the period Currency exposure of cash(1) Period-end rate moved from 1.2727 to 1.3248 31 December 2019 % 30 June 2019 % £m £m Average rate 1.2657 vs 1.2948 in H1 2018/19 US dollar 308.6 74 255.6 55 Sterling 77.1 18 157.8 34 • P&L
Slide 33: Net management fee margins
Net management fee margins 134 H1 2018/19 H2 2018/19 H1 2019/20 131 127 98 84 80 72 70 68 58 54 52 49 47 50 48 49 46 46 42 41 39 39 39 16 16 16 Group External debt Local currency Corporate debt Blended debt Equities Alternatives Multi-asset Overlay Fixed income: 45bps (H1 2018/19: 47bps) (H2 2018/19
Slide 34: Quarterly net flows
Quarterly net flows +8.0 +6.0 +4.0 +2.0 US$ billion +0.0 -2.0 -4.0 -6.0 -8.0 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 34
Slide 35: Disclosures
Disclosures Page 16: - 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 2019 and with a performance benchmark are included, which specifically exc
Slide 36: 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
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