Ashmore Group plc · LSE:ASHM
Ashmore — Investor Presentation (March 2019)
37 slides from Ashmore's investor presentation, March 2019
Slide 1: Ashmore Group plc Investor presentation March 2019
Ashmore Group plc Investor presentation March 2019 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 (85%), FX reserves (66%), 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 • 2018 market weakness due to temporary factors EM price weakness in 2018 inconsistent with economic backdrop 6.0 +3.9 -5.7 -14.9 +9.9 +15.2 -6.2 • EM GDP growth is high, accelerating vs DM (ytd) GBI-EM GD returns (%) 5.0 • Low inflation, well-controlled by central banks • D
Slide 5: Historical valuations relative to Developed Markets
Historical valuations relative to Developed Markets External debt Local currency Index: 72 countries, 167 issuers, 733 bonds Index: 19 countries, 19 issuers, 219 bonds 550 8.0% 6.00% 500 7.0% 5.50% 450 6.0% 5.00% 5.0% Yield (%) 400 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 (bps) 356 Argentina 2001 483 • Significant alpha can be generated versus EM net of defaults (bps) 716 Ecuador 2008 1
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 35.0 US$28.9trn Benchmark indices are unrepresentative of the 30.0 19% investment opportunity US$24.3trn 25.0 9% Active management is criti
Slide 8: Ashmore
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 scalable distribution model mean it is well-placed to exploit 2017 EM = US$11,800 the growth opportunities across Emerging Markets DM = US$49,1
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 Central bank location 1% 14% 15% Sovereign wealth fund 4% Government AuM development (USD bn) 8% Pension plan 90 14%
Slide 12: Strategy phase 3: Mobilise Emerging Markets capital (local office network)
Strategy phase 3: Mobilise Emerging Markets capital (local office network) • Investable capital pools in Emerging Markets are growing 3x faster Broad network of local asset management platforms than in Developed Markets (+11% CAGR over past decade) • Ashmore’s local offices participate in this growt
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 13
Slide 14: Eight Emerging Markets investment themes, numerous constantly evolving sub-themes
Eight Emerging Markets investment themes, numerous constantly evolving sub-themes Overlay/ External Debt Local Currency Corporate Debt Equities Alternatives Liquidity (USD 15.5bn) (USD 17.5bn) (USD 10.8bn) (USD 4.4bn) (USD 1.6bn) (USD 6.1bn) Global Emerging • Broad • Bonds • Broad • Global EM Equity
Slide 15: Over years of successful investing in Emerging Markets
Over 25 years of successful investing in Emerging Markets • EMLIP launched in October 1992 Superior long-term performance Annualised net return +13.5% 3,100 Substantial outperformance versus benchmark (EMBI +10.0% annualised) and 2,600 S&P (+9.8% annualised) 2,100 • EMLIP’s long-term track recor
Slide 16: 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 17: Delivering long-term investment performance for clients
Delivering long-term investment performance for clients Long-term investment performance One year Three years Five years 100% 100% 100% 97% 80% 92% 80% 80% 60% 60% 60% 40% 40% 40% 30% 20% 20% 20% 0% 0% 0% Corporate Blended Corporate Blended Equities Multi-asset Equities Multi-asset Group Group Exter
Slide 18: Investment performance
Investment performance 1yr 3yr 5yr 31st December 2018 Ashmore Benchmark Ashmore Benchmark Ashmore Benchmark External debt Broad -5.0% -4.3% 8.3% 5.2% 5.5% 4.8% Sovereign -4.6% -4.3% 6.2% 5.2% 5.4% 4.8% Sovereign IG -2.0% -2.4% 5.4% 4.5% 4.6% 4.3% Local currency Bonds -6.3% -6.2% 7.8% 5.9% 0.1% -1.0%
Slide 19: 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 20 9 5 4 38 Local distribution Sales office in Tokyo In
Slide 20: Strong retail AuM growth, 14% of Group AuM
Strong retail AuM growth, 14% of Group AuM • Strong growth in retail AuM sourced through intermediaries, consistent with Strong growth in intermediary AuM Ashmore’s diversification strategy 12.0 16% Total retail AuM of >US$10bn 14% 10.0 Strong net inflows of +US$3.1 billion in calendar 2018 12%
Slide 21: 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 22: Business model delivers through market cycles
Business model delivers through market cycles • Ashmore’s business model delivers through market cycles ˗ High-quality revenues driven by recurring net management fees ˗ Cost discipline including flexible remuneration policy High-quality revenues delivering 67% adjusted EBITDA margin supports adjust
Slide 23: Strong cash generation
Strong cash generation • Business model converts operating profits to cash (110% Consistent conservative balance sheet structure cumulative conversion since IPO) 700 600 • Cash balance has been broadly stable, average balance 500 of £375 million over past nine years 400 300 • Principal uses of cash
Slide 24: Balance sheet strength
Balance sheet strength • Strong, liquid balance sheet benefits clients and shareholders Substantial financial resources through the cycle 700 no debt 600 high-quality financial resources 500 liquid assets represent 78% of total balance sheet 400 capacity to invest in seed capital for future
Slide 25: 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: £676m ˗ Creating a marketable investment track record £490m ˗ Establishing new distribution conduits ˗ Providing additional scale to an existing fund to en
Slide 26: Recent financial performance
Recent financial performance • AuM +10% YoY, average AuM +17% YoY H1 2018/19 H1 2017/18 £m £m YoY % Net flows +US$2.4 billion in H1 AuM (US$bn) 76.7 69.5 10 • Adjusted net revenue +8% Adjusted net revenue 148.2 136.7 8 Net management fees +18% to £142.3 million driven by diversified AuM growth A
Slide 27: Appendix: H1 2018/19 financial results
Appendix H1 2018/19 financial results
Slide 28: Assets under management
Assets under management • Gross subscriptions of US$8.5 billion, 12% of AuM development (US$bn) opening AuM (H1 2017/18: US$15.0 billion, 26%) 8.5 (6.1) Bias towards existing clients 0.1 0.3 New mandates focused on local currency, blended debt and equities Retail momentum continues, 21% of net
Slide 29: Financial results: Revenues
Financial results Revenues • Net management fees +18% with +17% average AuM Strong growth (+18%) in net management fee income growth 3% YoY benefit from lower average GBP:USD rate 22.9 11.1 3.3 142.3 2.2 4.4 • Net management fee margin 49bps 1bp increase HoH, due to retail growth and Ashmore Ave
Slide 30: Financial results: Operating costs
Financial results Operating costs • Like-for-like fixed cost growth of £0.5 million, of Operating cost development (£m) which £0.3 million is due to weaker GBP:USD rate 0.3 28.1 0.5 0.2 1.2 • Other increase of £1.7 million attributable to: 25.9 ˗ Ashmore Avenida (mostly staff costs) ˗ MiFID II and p
Slide 31: Financial results: Seed capital
Financial results Seed capital Seed capital movement (£m) • Total seed capital programme of £238.3 million 30.7 42.0 Market value £213.4 million (30 June 2018: £228.3 million) 228.3 3.6 Undrawn commitments of £24.9 million 213.4 • Realised gain of £1.0 million offset by marking-to-market losses,
Slide 32: Financial results: Balance sheet
Financial results Balance sheet • Excess regulatory capital of £523.7 million Consistent balance sheet structure Financial resources of £643.2 million (2) 700 600 Pillar 2 regulatory capital requirement of 500 £119.5 million 400 Excess capital equivalent to 73p/share 300 200 • Balance sheet is
Slide 33: Foreign exchange
Foreign exchange • Sterling weakened against the US dollar over the six month Currency exposure of cash(1) period 31 December 2018 % 30 June 2018 % Period-end rate moved from 1.3200 to 1.2736 £m £m US dollar 220.5 53 317.0 74 Average rate 1.2948 vs 1.3259 in H1 2017/18 Sterling 175.9 42 77.2 18
Slide 34: Management fee margins
Management fee margins 137 H1 2017/18 H2 2017/18 H1 2018/19 131 125 83 79 80 76 72 70 60 58 58 53 50 48 49 50 45 47 46 43 41 45 39 19 15 16 Group External debt Local currency Corporate debt Blended debt Equities Alternatives Multi-asset Overlay Fixed income: 47bps (H1 2017/18: 49bps) (H2 2017/18: 46
Slide 35: 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 35
Slide 36: Disclosures
Disclosures Page 17: - 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 2018 and with a performance benchmark are included, which specifically exc
Slide 37: 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