Earnings Transcript for ABDN.L - Q4 Fiscal Year 2019

Keith Skeoch: Good morning and welcome to Standard Life Aberdeen's 2019 Full Year's Result Webcast. Even though it's a webcast, I have to show you the usual disclaimer. And I'm also joined today by Stephanie Bruce, our Chief Financial Officer; Rod Paris, our Chief Investment Officer; Campbell Fleming, our Global Head of Distribution; and Noel Butwell, the CEO of Standard Life. 2019 was another year of an intense change for our industry reiterated in early 2020 by a return to high levels of market uncertainty. 2019 for Standard Life Aberdeen was a year when we saw momentum starting to build in the business, particularly in the second half of the year. It was a strong year for investment performance with 74% of assets under management ahead of benchmark and an improving three and five-year track record. We saw encouraging momentum in gross and net flows in the second half of the year and our first quarter of positive flows since 2017 in the fourth quarter. This was mainly driven by our Institution and Wholesale clients, where 84% of funds were ahead of benchmark. We continued to see net flows across our Platforms and Wealth businesses helping to diversify our revenue streams. So, there's much to be encouraged by -- as the benefits of the heavy lifting on transformation in 2017 and 2018 started to become visible. We are also rolling out our common purpose across the business to create a shared culture. The fact that we are once again winning awards as well as new business is further evidence of progress. Beyond transformation, we realized £1.7 billion from the partial sales of our stake in our Indian JVs. So, despite the drop in adjusted profit in 2019, we strengthened our balance sheet and importantly, given what's going on in the markets, improved our financial resilience. This allowed us to maintain the dividend, continue to return additional capital to shareholders through buybacks, and lift adjusted earnings per share to 19.3p. At a time when uncertainty for the markets and industry are once again rising, the progress made on transforming the business and improving our financial strength gives us the capacity to invest in the business and the undoubted opportunities that lie in front of us. Stephanie will now walk us through the detailed financial results after which I will return to talk about the opportunities we see in asset management Platforms and Wealth and then we'll move to Q&A. Stephanie?

Stephanie Bruce: Thank you, Keith and good morning. So, our performance in 2019 has demonstrated momentum and delivered an increase in our financial strength. The adjusted profit before tax for 2019 is £584 million a reduction of 10% on the full year. Now, through the second half of the year, we improved trends in the key indicators of fee-based revenue and costs contributing to an increase of 9% in adjusted profit before tax in the second half compared to the first half of 2019. Overall, our IFRS profit before tax from continuing operations has increased by £1 billion since 2018 to £243 million. The improvement reflects management actions we have taken to strengthen our financial position including the realization of gains from our holdings in our Indian stakes offset by the accounting charge for impairment to our acquired intangibles. This improvement in profit has also generated a strong increase in our capital surplus. The resulting adjusted diluted EPS for continuing business in 2019 is 19.3p, an uplift of 8% benefiting from the actions taken on reducing the share count. Now, our business model is focused on delivering our services through four channels; Institutional, Wholesale, Strategic Insurance Partners, and Platforms, and Wealth. Each channel represents different opportunities for us, given our capabilities and current market strengths and this therefore determines the focus of our actions in realizing these opportunities. Overall fee-based revenue decreased by 13% in the year with different impacts by channel. In Institutional and Wholesale, revenue decreased by 19%, reflecting the impact of net outflows in the last three years together with inflows in 2019 into asset classes with lower margins as clients sought to change their risk profiles. In Strategic Insurance Partners, the underlying business is mature books which are naturally in runoff. There is an additional reduction in revenue in 2019 of £10 million relating to Lloyds Banking Group following the first tranche of withdrawals of £41 billion in the second half of the year. Excluding the Lloyds Banking Group movements, the year-on-year outflows are lower at £3 billion due to the benefit of net inflows of £1 billion from the Phoenix Group. In Platforms and Wealth during 2019, we have seen growth in revenue of 4% which reflects continued net inflows in this channel. Turning to the fee revenue yield, overall for the year, we have seen a decrease in the average fee revenue yield which reflects principally the volume and allocation of assets within classes. We are now seeing the benefit from our focus on investment performance as creating value for our clients and customers in turn supports the yields we earn on our investment services. Aside from normal competitive pressures, we are not seeing systemic pricing pressure on any particular asset area. Rather, we're seeing recognition of the value of investment performance in a volatile and low-yield market. For Institutional and Wholesale channels, the average fee revenue yield decreased due principally to changing mix. This particularly reflects the move in multi-asset where over 50% of new flows are into MyFolio which is lower margin, while the redemptions in multi-assets are 60% from GARS which are higher margin. In the Platforms and Wealth channel, the yield on Platforms has been broadly sustained at 25 basis points. This takes account of the price adjustment for Elevate in April which has created good positive momentum in new volumes. A similar action has now been driven in our Wrap platform, together with launching our drawdown price lock which has been well received. The decrease on the fee revenue yield is due principally to the inclusion from quarter one of the Virgin Money assets which are at a lower margin and has reduced the average by seven basis points. Now, just turning to the underlying activity on flows in our key channels. Firstly, in Institutional and Wholesale, these channels saw net outflows, but we have seen an improvement of 46% since 2018 with a 77% improvement occurring in the second half of the year compared to the comparative 2018 period. We are now seeing the benefit for both new business and retention of existing business from our active focus on two key aspects

Keith Skeoch: Thank you Stephanie. As you can see, 2019 saw building momentum across the business. We really started to feel the benefits of the heavy lifting on integration that was done in 2017 and 2018 particularly in the second half of the year. Now dealing with market uncertainty is part of our day job. But I think it's also important to recognize that the elevated level of uncertainty that's returned to markets will accelerate disruption in our industry. This inevitably brings short-run challenges and it's important as a management team that we continue to focus on what we can control. Action on costs is a key focus for me and my team. Stephanie has talked you through our plans. However, continued disruption also opens up significant opportunities providing you have as we do the capacity to invest. And it's to those opportunities I now want to turn. While many of you know our business well, I thought it's important to remind ourselves about the key revenue drivers for our business. It's pretty simple roughly 80% of our revenue comes from our asset management businesses from the Institutional, Wholesale and Strategic insurance clients in 70 countries that we serve through distribution and investment teams in 46 locations. Around 20% comes from our platforms and wealth business, which provide advisory and platform services to both intermediaries and end clients. These are largely U.K. businesses. Our associates and joint ventures in India, China and the U.K. add diversity and strength to our balance sheet and increase our potential pool of client and customer relationships. The focus on investment will be driven by three clear-cut criteria. First to expand or improve our investment capability and product sets. Second, to bring us even closer to clients. Finally, improving productivity through the actions that Stephanie identified. In my view there's plenty of opportunity in both asset management and wealth and platforms. So let me first turn to asset management. As ever the asset management industry has been driven by the roller coaster that combines the vagaries of the economic outlook with the fear and greed that drive markets. 2018 and 2019 couldn't be more different with 2018 one of the worst return years on record; and 2019 one of the best. The result on fund flows was equally dramatic as can be seen from the panel on the right-hand side of this slide. A combination of the coronavirus and the rapid market correction suggests that the same roller coaster effect could impact both 2020 and 2021 with current market levels in my view pricing in a global recession. The structural improvements in investment performance, put in place through our performance-enhancement plans is bearing fruit and we are better able to help clients. 84% of Institutional and Wholesale funds are ahead of benchmark at one year, 73% at three and 76% at five years. As I pointed out earlier, we saw positive net flows in Q4. Now it's dangerous to extrapolate too much from this given the large and lumpy nature of these flows, yet I do believe, we are witnessing from what I see in the business every day a significant improvement in our flows position. Investment performance has always been a strong driver for flows, but it's not the only one. The great advantage of our integrated distribution team is the enhanced ability to match our strongest investment capabilities with client demand. We have been able to connect clients to some of our best-performing funds

Operator: Ladies and gentlemen, we will now start the question-and-answer session [Operator Instructions] The first question is coming from the line of Haley Tam from Credit Suisse. Please go ahead.

Haley Tam: Hi, good morning. Good morning, Keith, Roderick, Stephanie. So a few quick questions for me please. First of all just to make sure I understand the time line of your transformation program correctly, just to confirm that you now expect that to continue -- the period of transformation to continue until the end of 2021? Second question I'm afraid is maybe just me not understanding something. But the multi-asset revenue yield, I think it was 43.4 basis points in the first half, 41.7 for the full year. So I just wondered if that second half run rate about 39 is something we should -- is correct first of all and if it's something we should be looking for that to continue? And then I guess the final question just on the cost/income ratio target. It's obviously necessarily the outcome of an income and a cost input. Just given the focus on what you can control in a difficult market environment, is there anything you can say to help us understand perhaps an absolute level of cost target that would be great. Thank you.

Keith Skeoch: Great. Thank you Haley. I think I'll hand over to Stephanie.

Stephanie Bruce: Okay. All right. So in terms of your first question around transformation. Yes. So we are now -- we are now signaling that we will be undertaking some further work which will go into 2021, you're absolutely right. But we see ourselves still being complete in 2021. And more importantly the synergies that we are identifying, the total £400 million will still be realized in 2021, which was always the plan. In terms of the multi-asset yield, the impact in the second half of the year is really just to do with mix. I will -- I don't think we're seeing anything systemic at all in there. But I will come back to you in any of the detail that would actually have impacted that more specifically. But no we're not seeing anything that's systemic in there to suggest that that same shift from H1 to H2 would then kind of come through more in the future periods. And then in terms of the cost/income ratio target you're absolutely, right. It's made up of two elements and we are not going to put out an absolute target at this point in time. I think given current environment, as you quite rightly highlight, the top line of that is clearly in very volatile circumstances in the current markets. I think what I can absolutely say is that in terms of the focus that we have on the cost, I hope you understand and have heard from me in terms of the series of actions that we're undertaking very clear plans in terms of what has to happen both to make sure that we continue to realize the pace of cost change that we have been effecting through the business but also with very much the focus of making sure that where we are investing in the business it's the right level of cost and it's actually helping us drive that future growth. And that combination of making sure that we are getting the cost base into an appropriate process but also investing in those areas which give us sustainable growth allow us to very much focus on the cost/income ratio target that we feel is absolutely appropriate. As I said when I was going through my slides, our target is very much to -- as we come out of the transformation period to be in a much improved position than we are now. But more importantly to get back to being aligned with our industry peers.

Haley Tam: Sorry. Can I just confirm the multi-asset revenue yield, you're telling us that there might have been something unusual in the second half and maybe I should look to a full year figure as being a better guide?

Stephanie Bruce: No. I'm actually saying the reverse. I don't think there's anything unusual in the second half of the year. I think it's just a mix of the clients that's within that multi-asset grouping. And that there is no specific -- there's no systemic issue there at all. It is actually the reverse it's just a change of the mix in the clients. I will come back to you in a more specific answer on that.

Keith Skeoch: Yes. I think on that point Haley and we'll come back with the details it's worth pointing out that multi-assets I think we manage over £50 billion now and GARS is a much smaller proportion. So as that's had an impact, the mix has inevitably changed. And I would point out that we had good multi-asset performance last year, it's actually continued right up until last night.

Haley Tam: Thank you very much.

Operator: Thanks. Next question is coming from the line of Bruce Hamilton from Morgan Stanley. Please go ahead.

Bruce Hamilton: Hi, guys. Good morning. Maybe just on kind of strategic. You've got a good balance sheet. So how should we think about M&A sort of opportunities from here and where you'd be most keen to add capabilities? And then secondly, on your sort of fund launch plans, you mentioned 25 funds. What are you sort of most optimistic about in terms of the launches? And kind of linked to that I guess at the moment, I think you had a slight thing. You've got about £17 billion of sustainable funds. Can you give a bit more color on those outside of the Ethical and what more you may be planning? And then just finally, how comfortable are you running with an uncovered dividend? Would that be for one or two years or at what point does that become more challenging? Or just how do you think about that sort of uncovered situation? Thanks.

Keith Skeoch: Yes. Let me take the first question and the last question and then I'll ask Campbell Fleming, our Global Head of Distribution to come up and talk about and answer the question on funds. So as far as M&A is concerned, we've been absolutely clear that one of the things we will look to do is do bolt-on acquisitions and lift-outs that enhance and promote either our investment capabilities or indeed expand our distribution. We've also said that we're not looking to do any major transformational M&A, until such time as we complete the transformation. Obviously markets are rapidly evolving and they may well open opportunities, particularly for us to expand. So it's great that we're standing here as a result of what we did in 2020 with I believe an enhanced level of opportunity and optionality given the strength and resilience of our balance sheet. On the dividend, let me be absolutely clear

Campbell Fleming: Thank you, Keith and good morning, everyone. Perhaps Slide 23 it's best to go back to and have a look at this because it's quite illustrative of what we're up to. In that regard if you -- I think it's up now. If you have a look at what we did in 2019, I think the trend will continue for us to do more sustainable launches and more what we call alternative democratizing the alternative asset classes. For instance the HFR-I Liquid Alternatives fund was one of the largest grossing funds last year in 2019, as we take these previously sophisticated products and only accessed by institutional investors more mainstream. And in addition to that, you'll see that we continue to invest and launch more sustainable products and more impact-type products as well as continued interest in our fixed maturity pieces. As Keith said, we are seeing significant interest in our ESG practices, there's a few highlights there. But you'll see that the firm has been doing this for almost three decades, and this is coming in at a significant time where investors across the world are wanting to make sure that not only do they get a good economic return, they have proper stewards of capital and that their investments are having a social and/or environmental impact on people, and the planet, and the firm is well placed for that trend. Thank you.

Keith Skeoch: Anything Campbell, you'd pick out of the 25 funds we're launching this year?

Campbell Fleming: I think if you have a look at some of our Equity capabilities, we are shifting that to work them more into sustainable investing, which is a significant trend. And we believe the opportunity for investors who have to think far more long-term have to think about the impact on the environment on their investment outlooks and also make sure that they're satisfying stakeholders. We're well placed to meet those three trends. Indeed a survey yesterday of the top ESG firms in the world by a respected institution put Aberdeen Standard in the top 20 globally, which is very encouraging. I'm sure with our approach and our capabilities we can get to the top 10.

Keith Skeoch: I think I'd also add just to what Campbell said that, it's really important that we have a well-diversified product set that we are able to ensure that the sustainable revenue yield and revenue is -- comes in with that.

Bruce Hamilton: Thank you.

Operator: Next question is coming from the line of Arnaud Giblat from Exane. Please go ahead.

Arnaud Giblat: Yes. Good morning. It's Arnaud Giblat here. I've got a few questions please. Firstly, can I ask on the platforms? You seem to imply that you're about embark on a technology upgrade on your platforms have I understood that right? If that's the case, what have you learned from looking at your peers in terms of the usual overspend and disruption we see to flows there? That's my first question. Secondly, on costs you gave us a very clear outline as to where you're going on gross cost saves. Can you talk a bit about the investments? Can you maybe give a bit of color and quantification in terms of gross investments? So what net stage should we expect at the firm level? And my third question is on fee margins. So fee margins have dropped five basis points year-on-year. Slide 34 shows the fee margin evolution. I'm wondering, what is the run rate fee margin per asset class? Clearly you've talked about a mix shift. What is your exit run rate fee margin at the end of the year? And finally, if I can just ask, are you still considering the Phoenix stake and AMC are strategic? Thank you.

Keith Skeoch: Let me start with the last two Phoenix and AMC, the answer is yes. If I can get, Stephanie to reply to two and three and that will give Noel time to get up to the platform to answer the first question. Stephanie?

Stephanie Bruce: Arnaud I think, if I heard your question correctly in terms of cost you said, what is the type of gross investment that we're making in the business in terms of our costs. So in terms of where we are making additional expenditure, it is about trying to change some of the nature of our cost base, particularly in terms of investing particularly in technology in our back office activity. So for example, we have rolled out this year a new HR system which has been absolutely critical to our people in terms of all being able to be on one system. We will be rolling out a new finance system, which again allows us to streamline. So actually quite a lot of investment in the what I'd call back office operational activity, which is important but also to allow us in some cases to move to more managed service provision of areas, where actually we can work with suppliers who can actually -- it's their core competency, it's not our core competency. But actually, we can work very well with them in undertaking some of those activities. So we're making those sorts of investments as well. And then in key area around -- of our investment particularly around the investment platform our investment there in terms of our Charles -- investment in Charles River allows us to have very much a leading-edge version going forward and coming out of the transformation period, which is absolutely critical to our front office activities. That program is well advanced. We've still got a number of aspects still to move through. But where we will end up having made those investments will be very much more leading edge. In terms of the fee margin exit run rate, if I'm -- again, if I'm understanding your question in terms of obviously, as you say we've seen a decrease in fee margin during this period. As I said, it's largely relating to change in mix rather than any sense of systemic price issues that we're seeing. We're really just seeing normal competitive issues. And in particularly, we saw that change in mix occurring between H1 and H2. In other words, we've seen less of a pressure on our fee revenue in the second half of the year than we have on the first half of the year. So we're not seeing any systemic pricing changes. We do absolutely see competitive pressures in the sector I think that's well known. But -- and therefore, we would expect an element of that to continue.

Keith Skeoch: Noel?

Noel Butwell: So just to be very clear about the work that we refer to in terms of transformation this is how we decouple from Phoenix. This isn't a re-platforming exercise, which is a phrase which is used in the market and has certain connotations. What we will be doing though is continue to invest and modernize our operations, but we'll be doing that anyway. So that's business as usual for us. What I would add though is that you will expect to see us focusing more on experience for advisers and customers as a key differentiator in this market. So it's not a big technology project as you will have seen from some of our peers.

Keith Skeoch: Okay. And I should just probably add and remind people on the asset management company that, one of the things we need to do given that we IPO-ed the AMC back last August is that we have to get to a 25% minimum public shareholding, and we have until August 21 to do that and that will involve us selling down our stake from where it stands today to about 20%. And we will do that in a timely manner.

Arnaud Giblat: Sorry. If I can just follow-up very quickly. Just to be clear the £400 million of synergies you're announcing is a gross number, it's not a net number. We should take -- we should assume some reinvestment into the business. And just coming back on the fee margin, it sounds like H2 is a better level to assume going forward assuming that mix doesn't change from here?

Stephanie Bruce: Well, I think certainly on that latter point you can see the position on H2 versus H1 was different and certainly improved. And you're right, in terms of the mix impacts, I think that would be sensible at this stage. But clearly, we will need to -- and we will see different movements coming through as clients undertake different decisions during what are very uncertain times. In terms of yes, the £400 million synergies is a -- is the gross figure. That's absolutely right. And again, in terms of the waterfalls that we're showing in the various charts, again what we're identifying is the extent of the gross savings and then highlighting where we are continuing to invest in that -- in the business, either through inflation around supplier costs ongoing compensation increases to our employees and our workforce. So yes, the £400 million is the gross and we will continue to invest in our business.

Arnaud Giblat: Thank you.

Operator: Next question is coming from the line of Gurjit Kambo from JPMorgan. Please go ahead.

Gurjit Kambo: Hi, good morning. Most of my questions have been answered. Can I just ask a quick follow-up on the cost? So if we look at those waterfall charts on slide 11 and 12, if we look at the -- I guess the cost growth volume -- or investments I think it was around £134 million in -- between 2017 and 2019. It was about £114 in the last 12 months. So it clearly looks like there's been a bit of a pickup in cost growth in the last 12 months versus the last 24 months, is the last 12 months more of an appropriate kind of investment phase to look for in 2020?

Stephanie Bruce: Yes. So I think in terms of those waterfalls that you're looking at, you're absolutely right. And I think this goes to the heart of actually the nature of what occurs in the transformation program. So obviously in the period -- in the first 12 months of the program there was clearly a number of aspects, particularly around staff and redundancies and de-duplication of particular aspects of the team. So actually, that crystallized a certain level of activity. As we always signaled a large -- a number of the areas around the operational aspects, the technology aspects, a number of the aspects around the non-staff costs where we're actually making some certain changes around managed service provision and our suppliers was always going to take longer. So actually the pattern of flows through from 2018 to 2019 is -- has been different. I think the point I would make is in terms of looking at those charts as I say we're still very clear in terms of achieving our synergy target and realization of £350 million by the end of 2020. So you can obviously therefore do the math of actually what we'll move through in 2020. And we are very clear that the £400 million that we're announcing today of the -- sorry the additional £50 million takes up to £400 million again will be fully realized in 2021. So again, you can see how that will flow through into those -- into that result.

Gurjit Kambo: And just outside of the -- so on the synergies I'm sort of the £350 million we can take -- we can make our own assumption of how much that comes through in 2020. So in terms of the outside of the synergies, so I guess moving from a gross to net cost growth. I think -- well for us just trying to understand is the growth in 2019 versus 2018 more appropriate? Or do you think the growth we saw in 2018 versus 2017 more appropriate to get to a net number in 2020 for costs?

Stephanie Bruce: I think in terms of the position in 2019 is the appropriate levels to see us in terms of again this balancing through from what we're seeing coming through from synergies together with where we're wanting to invest appropriately in the business.

Gurjit Kambo: Okay. That's fair. Thank you.

Operator: Next question is coming from the line of Gordon Aitken from RBC. Please go ahead.

Campbell Fleming: Are you there, Gordon?

Keith Skeoch: You are on mute, Gordon. Operator perhaps we can take another question there.

Operator: Next question is coming from the line of Andrew Crean from Autonomous. Please go ahead.

Keith Skeoch: We're not hearing Andrew either operator. We seem to have an issue with transmitting.

Operator: The line of Andrew is open now.

Andrew Crean: Hello?

Keith Skeoch: Andrew, hi.

Andrew Crean: Can you hear me now?

Keith Skeoch: Yes, we can. Thank you.

Andrew Crean: Yeah, good. Three questions if I can. Firstly, I think on ReAssure, could you tell us what sort of level of assets and fees you would hope to get, if that acquisition lands for Phoenix? Secondly, if I looked at the value of HDFC Life that you hold and the 6.7% sell-down of HDFC Asset Management, it's about £2 billion. What is your plans for that? Is it still largely to be used for buybacks beyond just the £400 million? And then thirdly on the Platforms. I think when you did your cost savings, you said that there was about £100 million of efficiency savings. And as I understood it at the time a lot of that say £70 million of that was coming from improving the performance, the profit performance of your Platforms and your Wealth businesses. I noticed now that you didn't even give the profits of those, but I assume that they haven't hit your profit targets. And therefore, I'm slightly wondering

Keith Skeoch: So Campbell will come up and talk about ReAssure, but if we can do the costs on the platforms first Stephanie. And I'll answer the question on HDFC.

Stephanie Bruce: Yes. So Andrew I think the £100 million of efficiency you're referring to is the £100 million announced at the time of the Phoenix transaction, which related to the savings that we foresaw at the time would arise from us moving to an integrated operating model across the business and having -- no longer having an insurance business. Part of that would have absolutely included our Platforms activity, our Wealth activity, but also in terms of our asset management activity, because it was about being able to then move to a much broader integrated operating model. So the £100 million wasn't entirely allocated in any way to the Platforms and Wealth business at that point in time. What we are highlighting now however is that when we look at in totality of our capabilities that we have great strength across our Platforms and Wealth space. We do as I said earlier on have a suboptimal cost/income ratio in that regard and we are working -- and that really is now the activity that we're undertaking Noel and Julie will be leading. But Noel has particularly as I highlighted already, the very clear plans on the Platform transformation, which will then allow us to effect those savings going forward.

Keith Skeoch: Campbell?

Campbell Fleming: Thanks, Stephanie. Good morning, Andrew. Two quick things on Phoenix and ReAssure. We already work with ReAssure. We have a little bit over £20 billion in assets that we advise them on already. There's another £40 million to £50 billion to play for in that regard. But until the transaction is complete, which would happen at the midyear, it is difficult to say exactly what we might see from them during the course of 2020 or 2021 and beyond. That said, it's fair to say that the partnership with Phoenix bore fruit this year. We saw them provide more assets to us. They also picked up significant assets in the bulk purchase annuity piece. And in addition to that, we've been working very actively with them to source the various private credit and other liquid assets they need. So the performance is strong with Phoenix and ReAssure. We continue to work very closely with them and -- both firms and we look forward to continuing that partnership and continuing to do a good job with and for them.

Andrew Crean: Okay.

Keith Skeoch: And…

Stephanie Bruce : Sorry, Keith. Can I just come back on that Platforms point as well, because one thing I should just make clear Andrew, when Keith mentioned earlier on that we'll be coming back with much more detail around the Platforms and Wealth activity and we'll make sure that we pick up your point there in terms of being providing additional information so that we can see the economics of that going forward at that time.

Keith Skeoch: And on the HDFC stakes, I'd simply refer you to that statement about we will reshape the assets on our balance sheet to sustain our financial resilience and deliver financial returns for shareholder and invest in opportunities. I think we developed a pretty strong track record on that in 2019. We have a £400 million buyback out in the market at the moment, which we will look to complete and we'll update once we've completed that. And one of the things I kind of learned in 40 years in the business given what's going on at the moment is don't try and see around too many corners. We -- and our track record, I think, on building that financial resilience and deploying capital in shareholders, to shareholders' benefit I think will stand us in good stead.

Andrew Crean: Thanks, Keith.

Keith Skeoch: Operator, I don’t know whether Gordon is back. Gordon Aitken is back on the line.

Operator: He needs to participate one again, please.

Keith Skeoch: We’ll go to the next question then.

Operator: Gordon Aitken from RBC. Please go ahead.

Gordon Aitken: Hey, morning, Keith. Sorry someone cut me off. Three questions please. First on GARS and multi-asset, you mentioned that it performed better in recent months. And I can see from the January and February that the net outflows have come right back in. Do you expect the multi-asset and GARS to return to inflows in 2020 and maybe you can talk about what consultants are saying to you at the moment. Second point on U.K. DB funds, obviously, big client of yours. What proportion are they of your institutional assets? And how do you think their asset allocation shifts as they continue to mature? And just finally on -- just to follow-up on the Phoenix debate. You just mentioned that they are pushing into bulk annuities and you're doing some illiquid sourcing for them. Is that a better margin business for you than say traditional asset classes? Thank you.

Keith Skeoch: Yeah. On the latter absolutely, because by and large it goes into private market product. And the HFR index fund that Campbell mentioned is a good means of transitioning people into that as well. And then I think on GARS and the U.K. DB, we should hand over to Campbell.

Campbell Fleming: Good morning, Gordon. So GARS year-to-date performance on the 5th of March was 2.8% and to the 12 months from that data was 8.1%. So a very strong one-year number, a good five-year number, good 10-year number and an improving third-year number as I understand it. We are having conversations with clients about them returning to GARS. We have had clients top up GARS. We have had many consultants sustain their rating in GARS and indeed our consulting ratings over the financial year increased from 43 rated strategies to 46 which I think is a pretty good result showing given the merger was only two years ago. In relation to what we're seeing, we are seeing interest in private credit and liquids as people seek different diversified sources of higher yields. We still see because of various solvency requirements and things various plans not investing in equities which always intrigues me. And then finally, we are, of course, helping them with those alternatives. And you'll see that there's been some good wins in that regard, especially around the advisory pieces that Keith and Stephanie referred to. The big trend that is happening in that play -- in that space is the shift to sustainability. That's partly driven by prudential and government mandates now, but it's also very driven by stakeholders who want to do the stewardship points that I touched on early much earlier. And if you look at what we're seeing both in the United Kingdom and across the globe is an interest in ESG and sustainable in all asset classes. And our credentials are well-placed. There's significant number of wins last year from AIIB, Holland, across the globe as we do more for that trend. So, better margins, more alternatives, more high-yield and more sustainability. And the firm is well-placed from a performance and capability perspective in those regards.

Keith Skeoch: We have about £160 billion in pure institutional mandates. We'll come back to you about how much of that is U.K. DB. I would also just add the ESG criteria. One of the things that we are increasingly having conversations with about with DB schemes and particularly local government schemes is our ability to manage their money and report back on ESG characteristics. So, last year I think for the first time in a long time we won a U.K. equity mandate for a U.K. DB scheme because of our ESG credentials.

Gordon Aitken: Thanks very much.

Keith Skeoch: You're welcome.

Operator: Next question is coming from the line of Hubert Lam from Bank of America. Please go ahead.

Hubert Lam: Hi, good morning. Most of my questions have been asked. Just one question on your surplus capital position, you mentioned £1.7 billion at the end of the year. How much buffer would you say you need? Or is that a net of the buffer position of £1.7 billion? And of the remaining true excess capital position, how would you prioritize the potential use of capital between supporting the dividends buybacks and M&A? Thank you.

Keith Skeoch: Stephanie?

Stephanie Bruce: So in terms of our surplus capital as you say, it's increased up to £1.7 billion in this period. We don't think of it in that way in terms of true excess, over excess, over access to be honest at this time and you wouldn't -- I don't think you'd expect us to do so, given the current environment. Clearly we are very focused on making sure -- as Keith says we're getting that balance of making sure that we're investing in the business, plus also creating the shareholder return. We have said previously that once we're through the transformation period and we are affecting the sustained performance that we want, we would again look to see actually in terms of actually, what is that level of surplus capital and how we would then want to deploy it thereafter.

Keith Skeoch: I would just add in these uncertain times, what we have is a very high level of financial resilience because of that capital strength and it gives us a degree of optionality to both invest in the business and return capital to shareholders and look at those bolt-ons and lift-outs. So it's opening up I think a lot of opportunity for us and we will remain focused on making sure that whatever we do is for the benefit of our shareholders.

Hubert Lam: Okay. Thank you.

Operator: Next question is coming from the line of Mike Werner from USB. Please go ahead.

Mike Werner: Thank you. It's Mike Werner from UBS. Just a quick follow-up as most of my questions have been asked. I guess you provided a very detailed performance data for the GARS fund. I was just wondering if you could provide some incremental data for the rest of your AUMs from a performance perspective maybe through the end of February year-to-date? Thank you.

Keith Skeoch: I've got Rod Paris our CIO there. I think our performance has held up reasonably well Rod, across the asset classes?

Rod Paris: Yes. Good morning. We entered into this period actually not being particularly long risk as a house. We have a bias to quality and our equity and credit portfolios which is actually coming through very, very strongly in this environment. Total return funds, not just GARS we have many total return funds across many different asset classes are also in positive territory. And so far markets are not particularly disorderly and so we're able to manage our risks appropriately. So I think we're navigating hitherto this environment quite well. But as being open about it, this still has some time to run. But the breadth of our capability set and the bias towards quality I think is exactly what you want in this environment.

Keith Skeoch: I think we've -- thank you for all your questions. I know that there's a lot going on today both in terms of results and in terms of the market. So, on behalf of myself, Stephanie, Campbell, Rod and Noel thank you for your time. Thank you for your questions. And with a bit of luck, we'll see you all in person before too long. Thank you very much.