Ashmore Group plc · LSE:ASHM
Ashmore — Investor Presentation (June 2018)
41 slides from Ashmore's investor presentation, June 2018
Slide 1: Ashmore Group plc Investor presentation June 2018
Ashmore Group plc Investor presentation June 2018 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 (58%) • 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: Developed Markets events have weighed on Emerging Markets asset prices
Developed Markets events have weighed on Emerging Markets asset prices… Developed Markets issues Emerging Markets • EURUSD weak and volatile due to • No significant external shock e.g. commodity price collapse or global economic slowdown • US politics / protectionism • No read-across from country-sp
Slide 5: Significant value opportunities available
…which means significant value opportunities available • Selectively adding risk to model portfolios to reflect substantial Index returns value available after the recent market correction % 2016 2017 2018YTD Total External debt +10.2 +10.3 -4.0 +16.7 Local currency bonds Local currency +9.9 +15.2 -
Slide 6: Asset classes: valuations
Asset classes: valuations External debt Local currency Index: 67 countries, 152 issuers, 658 bonds Index: 19 countries, 19 issuers, 216 bonds 1000 12.0% 7.0% 900 10.0% 6.0% 800 700 5.0% 8.0% Yield (%) 600 4.0% 6.0% 500 3.0% 400 4.0% 2.0% 300 2.0% 1.0% 200 100 0.0% 0.0% 0 2003 2005 2007 2009 2011 201
Slide 7: Volatility and risk
Volatility risk • Active management can exploit value created by 12m alpha when entering markets during +10pts VIX spikes volatile prices in inefficient markets Active Passive History Strategy Alpha returns returns (years) • Significant alpha can be generated versus Fixed Income 3.0% 11% 8% passiv
Slide 8: 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 Benchmark indices are unrepresentative of the USD 24.5trn 18% investment opportunity 25.0 USD 20.1trn 8% Active management is critical
Slide 9: US interest rates
US interest rates • EM typically underperforms before Fed hiking cycle starts and Index returns since first Fed rate increase (2004 & 2015) performs strongly once it has begun Since Dec 2015, external debt spread has narrowed 160 125bps, delivering +19% total return vs -2% for 10yr UST 150 140 • S
Slide 10: Ashmore Group plc
Ashmore Ashmore Group plc eee
Slide 11: 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 Ashmore today • Establish investment processes and asset classes • Institutional investors underweight EM • Provide access to Emerging Markets and their rapid development opportu
Slide 12: Strategy phase 1: Establish Emerging Markets asset classes
Strategy phase 1: Establish Emerging Markets asset classes Increasingly diverse external debt index… • Emerging Markets increasingly viewed as mainstream asset 80 classes 70 60 Number of countries • Diversification is important: not a single asset class 50 40 • Wide range of risk & return profiles a
Slide 13: Strategy phase 2: Diversify assets under management
Strategy phase 2: Diversify assets under management AuM by client type • AuM is diversified by client type and by client location Central banks • Strategic ambition to increase representation of: 12% 1% 16% Sovereign wealth funds US-based clients 3% Governments Retail (third-party intermediaries
Slide 14: Strategy phase 3: Mobilise Emerging Markets capital (local network)
Strategy phase 3: Mobilise Emerging Markets capital (local network) • A key strategic initiative is to develop a network of local asset Broad network of local asset management platforms management platforms to capture domestic flows • Local offices… include distribution, independent investment com
Slide 15: Ashmore has a robust and flexible business model
Ashmore has a robust and flexible business model 15
Slide 16: Eight Emerging Markets investment themes, numerous evolving sub-themes
Eight Emerging Markets investment themes, numerous constantly evolving sub-themes Overlay/ External Debt Local Currency Corporate Debt Equities Alternatives Liquidity (USD 15.3bn) (USD 17.7bn) (USD 9.4bn) (USD 4.3bn) (USD 1.5bn) (USD 6.4bn) Global Emerging • Broad • Bonds • Broad • Global EM Equity
Slide 17: Years of successful investing in Emerging Markets
25 years of successful investing in Emerging Markets • EMLIP launched in October 1992 Superior long-term performance Annualised net return +14.4% 3,100 Substantial outperformance versus benchmark (EMBI +10.6% annualised) and 2,600 S&P (+9.8% annualised) 2,100 • EMLIP’s long-term track record del
Slide 18: 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 19: 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% 93% 80% 80% 80% 87% 82% 60% 60% 60% 40% 40% 40% 20% 20% 20% 0% 0% 0% Blended Blended Blended Corporate Corporate Corporate Equities Equities Equities Multi-asset Mu
Slide 20: Investment performance
Investment performance 1yr 3yr 5yr 31 March 2018 Ashmore Benchmark Ashmore Benchmark Ashmore Benchmark External debt Broad 4.7% 4.3% 9.6% 5.8% 5.5% 4.7% Sovereign 4.1% 4.3% 8.0% 5.8% 5.2% 4.7% Sovereign IG 4.5% 2.8% 4.1% 3.2% 3.4% 3.3% Local currency Bonds 15.1% 13.0% 7.3% 5.4% 0.2% -0.7% Corporate
Slide 21: 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 18 7 10 5 40 Local distribution Sales office in Tokyo I
Slide 22: Strong retail AuM growth
Strong retail AuM growth • Strong growth in retail AuM sourced through intermediaries, consistent with Ashmore’s Diversified relationships by type… diversification strategy Total retail AuM of US$8.1bn increased 20% in six months to 31 Dec 2017 Fund of funds, Individuals, 3% 3% Other, 1% Driven
Slide 23: 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 24: High-quality diversified revenues and cost discipline deliver high profit margin
High-quality diversified revenues and cost discipline deliver high profit margin • Revenues are driven by recurring diversified High-quality revenues and increase in profitability management fee income, representing 90-95% of total 100% fees Fees as % total fees / Adj EBITDA margin 90% 80% • In H1 2
Slide 25: Strong cash generation
Strong cash generation • Business model converts operating profits to cash (109% Conservative balance sheet maintained across market cycles cumulative conversion since IPO) 700 600 500 • Cash balance has been broadly stable for seven years 400 (±£350 million) 300 200 • Principal uses of cash flow ar
Slide 26: Balance sheet strength
Balance sheet strength • Strong, liquid balance sheet benefits clients and shareholders Substantial financial resources through the cycle 600 no debt 500 high-quality financial resources liquid assets represent 75% of total balance sheet 400 capacity to invest in seed capital for future grow
Slide 27: Recent financial performance
Recent financial performance • AuM +18% over the six months Six months ended Six months ended 31 December 2017 31 December 2016 Net flows +US$7.9 billion, investment performance £m £m YoY % +US$3.2 billion AuM (US$bn) 69.5 52.2 33 • Operating revenues +1% to £136.7 million Operating revenues 136.7
Slide 28: Emerging Markets: Long-term opportunities
Emerging Markets Long-term opportunities
Slide 29: Increasing importance of Emerging Markets
Increasing importance of Emerging Markets • Emerging Markets are significant in a global GDP per capita (rebased, 1980 = 100) context, and will increase their importance further 2017 EM = US$11,800 85% of world population DM = US$49,100 59% of GDP (PPP-basis) 15-20% of index market capitalisat
Slide 30: Emerging Markets fundamentals are robust
Emerging Markets fundamentals are robust Emerging Markets growth premium 8 • Emerging Markets have endured substantial headwinds 7 Strong US dollar & significant commodity price declines 6 Capital outflows & increase in funding costs (yields) GDP growth (%) 5 4 • Unlike previous cycles, no major
Slide 31: Significant growth potential through raising institutional allocations
Significant growth potential through raising institutional allocations from underweight levels Pension fund allocations to EM debt (%) • Trend of rising allocations to Emerging Markets “paused” post 2013 10 but regaining strength now 9 8 7 • Actual and/or target allocations still at low levels 6 5 •
Slide 32: Appendix: H1 2017/18 financial results
Appendix H1 2017/18 financial results
Slide 33: Client flows and products
Client flows and products • Broad-based distribution capabilities maintaining Net flows (US$bn) diverse client mix 25 20 15 10 • Sales biased towards top-ups from existing clients, with 5 good level of new client mandates 0 -5 -10 -15 • Strong growth in retail AuM, +20% over the six months -20 H1'07
Slide 34: Revenues
Revenues • Net management fees +5%, driven by AuM growth Higher net management fee income 25.7 13.7 • Average GBP:USD rate 4% higher headwind for fees, some positive contribution from FX hedges 4.4 2.0 120.5 • Net management fee margin 50bps, stable versus H2 114.9 2016/17 4 bps lower YoY attrib
Slide 35: Continued cost discipline
Operating costs • Continued focus on controlling expenses Non-VC adjusted operating costs reduced 27.1 0.6 0.6 • Non-VC adjusted operating costs reduced by 4% 25.9 • 3% lower average headcount • Variable compensation accrued at 20% of EBVCIT H1 2016/17 Fixed staff costs Other costs H1 2017/18 6m end
Slide 36: Adjusted profits reconciliation
Adjusted profits reconciliation Adjusted Adjusted H1 2017/18 H1 2016/17 £m £m YoY % Net revenue 134.4 144.1 (7) FX translation 2.3 (8.4) nm Operating revenues 136.7 135.7 1 Operating costs ex consolidated funds (45.0) (47.7) (6) VC on FX translation (0.5) 1.7 nm Adjusted operating costs (45.5) (46.0
Slide 37: Financial results: Seed capital
Financial results Seed capital Seed capital movement (£m) • Market value £226.3 million (30 June 2017: £210.2 million) 27.7 18.7 7.1 226.3 210.2 Majority is in funds with at least monthly dealing frequency • Profit contribution of £10.5 million Market performance delivered gain of £13.5 million
Slide 38: Foreign exchange
Foreign exchange • Sterling strengthened against the US dollar over the six month Currency exposure of cash(1) period 31 December 2017 % 30 June 2017 % Period-end rate moved from 1.2946 to 1.3513 £m £m US dollar 285.3 80 241.6 57 Average rate 1.3259 vs 1.2809 in H1 2016/17 Sterling 51.7 14 149.7
Slide 39: Management fee margins
Management fee margins H1 2016/17 H2 2016/17 H1 2017/18 141 137 123 96 84 82 79 78 76 61 63 61 54 51 49 53 53 50 50 50 45 43 43 39 16 14 17 Equities Multi-asset Group Alternatives Local currency Overlay/liquidity Corporate debt External debt Blended debt Fixed income: 49bps (H1 2016/17: 50bps) (H2 2
Slide 40: Disclosures
Disclosures Page 11: - 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 2017 and with a performance benchmark are included, which specifically exc
Slide 41: 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