London Stock Exchange Group Plc · LSE:LSEG
London Stock Exchange — Investor Day (November 2015)
48 slides from London Stock Exchange's investor day presentation, Nov 9, 2015
Slide 1: Information Services Division update
London Stock Exchange Group plc Information Services Division update 9 November 2015
Slide 2: Introduction
Introduction Xavier Rolet Page 2
Slide 3: Welcome – Agenda
Welcome – Agenda 7 Introduction Xavier Rolet - LSEG CEO Mark Makepeace - Group Director, Information Services and CEO Overview FTSE Russell FTSE Russell Integration and Jonathan Horton - Head of Integration, Governance & Risk of Vanguard Update Information Services Caroline O’Shaughnessy - Global He
Slide 4: Valuable IP / products delivering strong growth
Valuable IP / products delivering strong growth 2011 2011 Now 2015 Group Adjusted Income £578m Group Adjusted Income £1,063m(1) 9 months ended September 2011 9 months ended September 2015 Technology Technology Services Capital Services 5% Markets Other Information 7% Other 1% 24% 2% Information Serv
Slide 5: Exciting prospects for continued growth
Exciting prospects for continued growth • FTSE Russell a leading global benchmark provider with c.$10tr AuM - FTSE Russell integration – good progress being made, delivering against targets - Comprehensive offerings on international basis: for active and passive retail and institutional investor str
Slide 6: FTSE Russell – a leading international benchmark provider
FTSE Russell – a leading international benchmark provider 3 largest index providers each have c. $9.5-10tr AuM(1) benchmarked FTSE Russell - Broad range of international and domestic assets(2) FTSE Russell MSCI S&P Dow Jones 8% 4% Institutional / retail split Total benchmarked 25% 9% 30% 49% 11% ass
Slide 7: Overview
Overview Mark Makepeace Page 7
Slide 8: Information Services Division – Global management team
Information Services Division – Global management team Mark Makepeace Group Director, Information Services Donald Keith Jonathan Horton Deputy Group Director, Head of Integration, Information Services Governance & Risk Caroline Ron Bundy Mark Husler CEO Benchmarks, North Reza Ghassemieh MD, News & D
Slide 9: Extensive range of high quality businesses – strong growth outlook
Extensive range of high quality businesses – strong growth outlook Segment Description LSEG services Revenue driver YTD 2015 ISD revenue: £395m(1) • Tools to define • Equity, fixed • High retention investable universes, income, rates measure and analyse alternative and • Subscription investment risk
Slide 10: Real Time Data – New commercial models and expanded opportunities
Real Time Data – New commercial models and expanded opportunities across LSEG Real Time Data Real Time Data – Professional Terminals (000’s) • Real Time Data (RTD) - an important part of ISD 250 and supports secondary markets activity 211 205 207 207 206 203 205 • RTD remains a key offering for clie
Slide 11: Consistent track record of delivering strong revenue growth
Consistent track record of delivering strong revenue growth Information Services Revenue 2010-2015 (£m)(1) £m 600 Operating Margin 52%(2) - Margin expected to expand as synergies realised • Continue to invest for growth • Increasing cost of sales 500 395 400 373 340 71 301 92 300 81 62 73 84 187 94
Slide 12: We operate in an “opportunity-rich” environment with strong underlying trends
We operate in an “opportunity-rich” environment with strong underlying trends Global AuM by Investment Style(1) Global AuM by Region (US$tr)(1) $64tr $102tr USD tr Global Equity Alternative Global Equity 120 AuM AuM 10% Other CAGR Other 6% 102 10% CAGR: 6% 14% 2 Passive 100 7 11% Passive 23% Active
Slide 13: FTSE Russell embedded in global investment processes
FTSE Russell embedded in global investment processes ~$350bn #1 #1 Statistics in benchmarked ~$10tr US equity institutional Indexer for China A ETF assets assets benchmarked shares ETFs assets benchmarked ~$8tr #1 #2 in global institutional UK equity mutual US equity ETF assets benchmarked funds ben
Slide 14: FTSE Russell – Unique coverage and a diverse offering
FTSE Russell – Unique coverage and a diverse offering Competitive advantage – wide spread of global products Funds Tradable products Institutional funds Mutual ETPs Listed futures and OTC funds options derivatives(1) Asset classes Equity Fixed income - Alternatives - Index
Slide 15: FTSE Russell’s differentiated business model well positioned for continued growth
FTSE Russell’s differentiated business model well positioned for continued growth Strong customer Well positioned in Scalable model High quality revenue relationships and growth markets and open access sales capabilities • Strong relationships with • North America • Global presence and • Recurring,
Slide 16: FTSE Russell Integration and Vanguard Update
FTSE Russell Integration and Vanguard Update Jonathan Horton Page 16
Slide 17: Significant value creation being delivered through cost and revenue synergies
Significant value creation being delivered through cost and revenue synergies Cost Revenue Targeting annual run-rate cost synergies of $78m Targeting annual run-rate revenue benefits of $30m (£51m)(1) by end of year three (£19m)(1) and $48m (£31m)(1) by end of year three and five, respectively Sal
Slide 18: Integration on track to deliver cost and revenue synergies
Integration on track to deliver cost and revenue synergies 2014 2015 2016 2017 Revenue synergies Revenue synergies to year 5 Cost synergies Pre-completion integration planning • Focus on client, business and employees • Common governance framework Front Office and Client engagement focus Index platf
Slide 19: Significant Vanguard account win created valuable long-term partnership
Significant Vanguard account win created valuable long-term partnership • In October 2012 Vanguard announced largest ever international equity benchmark switch - 6 funds (5 ETFs) and $170bn transition to FTSE indexes - now $362bn across 17 funds Reasons to switch to FTSE Long-term Partnership Gove
Slide 20: Index Growth and Future Opportunities
Index Growth and Future Opportunities Caroline O’Shaughnessy Page 20
Slide 21: Strong global sales capability enables monetisation of underlying growth trends
Strong global sales capability enables monetisation of underlying growth trends Demand for investment Underlying/secular trends products, trading strategies Sales activity and benchmarks • Increasing global wealth • Mutual funds • New products • Switch from active to • Pension funds • New customers
Slide 22: FTSE Russell business model comprises annuity and asset-based fees
FTSE Russell business model comprises annuity and asset-based fees Subscription Fees Asset-based Fees Revenue Split Index Data and Data Services IPR Licensing for Index-based Financial Products • Revenues based on user numbers and • Revenues based on AuM for tracker usage rights 55% 45% funds/ETPs a
Slide 23: Scalable sales model to address multiple growth opportunities
Scalable sales model to address multiple growth opportunities(1) 1 US Strong domestic institutional position through Russell Indexes creates opportunities to cross-sell international benchmarks and broader range of index and ISD products 2 China Opening up of domestic market creates significant oppo
Slide 24: Opportunities in the US – the largest global investment market
Complementary products and enlarged sales team create 1 opportunities in the US – the largest global investment market US is the world’s largest asset pool and leads thinking and FTSE Russell Share of US Institutional Equity AuM(3) innovation in investment strategy: – 58% of global assets(1) – 91%
Slide 25: Emerging markets are a driver of long-term growth
Emerging markets are a driver of long-term growth – 2 FTSE Russell has unique position Managed assets in China currently ~$700bn - estimated to grow to ~$3.9tr by 2020(1) Strong basis for development of further Leading position in international China ETFs international and domestic products • World’
Slide 26: Smart Beta: Pioneering investment strategies to challenge high cost active management
Smart Beta: Pioneering investment strategies to 3 challenge high cost active management What is Smart Beta? The Smart Beta opportunity • Investable products that closely track indexes weighted • Higher fees chargeable for passive fund licences on smart beta differently to traditional market capitali
Slide 27: Smart Beta: Significant growth potential
3 Smart Beta: Significant growth potential Smart Beta AuM growth ($bn)(1) Smart Beta usage outlook (next 18 months)(2) Managers with smart beta allocation Managers currently without smart beta 506 6% 409 39% 47% 200 217 61% 47% FTSE Russell c30% 2011 2012 2013 2014 Expect to make allocation Increase
Slide 28: Increased demand for fixed income indexes
4 Increased demand for fixed income indexes • 41% of Institutional Fund AuM is currently allocated to Global Mutual Funds and ETPs – AuM Split(1) fixed income asset class • Fixed income accounts for 17% of total ETF assets 9% Equity globally, growing by 13% in the first nine months of 11% Fixed Inco
Slide 29: Multiple opportunities for continued growth
Multiple opportunities for continued growth • Index business model geared towards recurring subscription based revenues and asset-based fees - high retention rates and up-selling potential • FTSE Russell has a unique position in a range of key growth areas - product development capabilities to meet
Slide 30: ETPs and Derivatives
ETPs and Derivatives Ron Bundy Page 30
Slide 31: FTSE Russell operates throughout the index ecosystem
FTSE Russell operates throughout the index ecosystem Indexes used throughout the investment and trading value chain(1) Exchanges Futures Options Liquidity Investment increases Asset owners managers Increasing AuM attractiveness and consultants creates demand of FTSE Active institutional funds Active
Slide 32: The rapid expansion of the ETP market has increased index provider visibility
The rapid expansion of the ETP market has increased index provider visibility and is a significant growth driver ETP Market Growth(1) ETP AuM by Asset Class(1) (In US$bn) Commodities Other 3,000 2005-14 Regional CAGRs 2,797 2,778 1% 4% • US: 23% • Europe: 26% 2,396 2,500 • Asia Pacific: 19% 1,944 Fi
Slide 33: FTSE Russell combination – an accelerator for strategically important ETP business
FTSE Russell combination – an accelerator for strategically important ETP business Greater Scale: FTSE Russell integration creates a global leader in ETPs • Top 3 in global ETP assets at $351bn (diversified across North America, EMEA, Asia-Pacific) • Strong ETP flows with $20.5bn (continuing new bus
Slide 34: A global derivatives business
A global derivatives business Europe North America Asia Africa FTSE 100, FTSE 250, MIB, Russell 1000 & 2000 FTSE China A50, Eurofirst 80/100, series, FTSE 100, FTSE 100 JSE Top/40 FTSE China 50 Over 96m contracts traded in Over 57m contracts traded in Over 41m contracts traded in 2014 by our partner
Slide 35: Strong demand for FTSE Russell derivatives licences
Strong demand for FTSE Russell derivatives licences Continue to expand as leading derivatives exchanges globally introduce index-based futures and options based on FTSE Russell indexes CME CBOE SGX • Futures Products • Cash Options • Futures • Options on Futures Key • New contract launches • New con
Slide 36: ‘Open access’ model helps index derivatives expansion
‘Open access’ model helps index derivatives expansion Broader Derivatives Offering: Early synergy success through derivatives licensing agreements • Investors and clients increasingly looking for more global set of derivatives products • FTSE Russell can now offer a much broader set of index exposur
Slide 37: UnaVista and SEDOL
UnaVista and SEDOL Mark Husler Page 37
Slide 38: UnaVista and SEDOL – Leading trade reporting mechanism and global security identifier
UnaVista and SEDOL – Leading trade reporting mechanism and global security identifier Middle Settlement Investment Primary Trading and Back Clearing and Office Depository London Stock Exchange, Borsa Italiana LCH.Clearnet Monte Titoli Turquoise SEDOL CC&G globeSettle FTSE Russell FTSE Russell Real t
Slide 39: Innovative identification and reporting services
Innovative identification and reporting services • SEDOL: universal unique security identification number - embedded in trade messages/processing systems for automation of middle/back office UnaVista MiFID Transaction Volume m 2000 • UnaVista platform: provides regulatory reporting services - 1500 e
Slide 40: Multi-asset platform for global operational and regulatory risk management
Multi-asset platform for global operational and regulatory risk management Regulation Risk and Controls Data and Analytics • Regulatory Reporting • Reconciliations • Confirmations • Data #1 MiFID Approved Reporting Cash and Stock Broker/Buy- SEDOL Masterfile and Corporate actions Mechanism (AR
Slide 41: Further growth from underlying secular drivers and enlarged sales capabilities
Further growth from underlying secular drivers and enlarged sales capabilities Leveraging ISD Global Sales Regulatory Change Product Expansion Capabilities • MiFIR • Further high value software • Low cost market entry for platform sales, e.g. SIX, UnaVista and continued • G20 Derivatives Reporting M
Slide 42: MiFIR – Fundamental regulatory changes will drive further adoption of UnaVista
MiFIR – Fundamental regulatory changes will drive further adoption of UnaVista UnaVista is well positioned to benefit from this Key growth drivers opportunity • Go-live set for 2017 • The only combined ARM and EMIR trade repository, giving access to large number of • Removal of existing buy-side rep
Slide 43: Summary
Summary Mark Makepeace Page 43
Slide 44: Information Services well positioned for continued growth
Information Services well positioned for continued growth Strategic Priorities Business Focus Growth Investment • Multiple growth drivers • Synergies • Expansion of global sales and client servicing • IP rich • US • Increased product innovation • Realisation of cost and • China revenue synergies • C
Slide 45: Information Services Division update - Q&A
London Stock Exchange Group plc Information Services Division update - Q&A
Slide 46: Appendix
Stock Exchange Group Appendix
Slide 47: Our partners
Our partners Stock Exchanges Products Page 47
Slide 48: FTSE Russell - Locations
FTSE Russell - Locations London Seattle Toronto Paris Boston Milan San Francisco Beijing Chicago New York Tokyo Dubai Shanghai Hong Kong Singapore Rio de Janeiro Sydney Page 48
London Stock Exchange Group — Investor Day (November 2015) on 6ix